The determinants and dynamics of cross-border bank loans in Turkey

Official URL: http://risc01.sabanciuniv.edu/record=b1628597 (Table of Contents)

In this study, I identify the determinants and dynamics of cross border bank loans in Turkey. The used dataset includes the cross border loans of all banks in Turkey between December 2002 and December 2014. Firstly, I determine the dynamics of cross border bank loans on the basis of bank-speci c, national and global liquidity indicators. According to results, banks that have large size, high return on asset ratio, more credit in their portfolio and low deposit ratio are borrowing more. Non-performing loan ratio and capital structure of banks do not have significant effects on cross border bank loans. Only BIST repo o/n interest rate among national variables has signi cant effect on cross border bank loans. Real credit growth of banks in US and Euro Area, money supply growth rate of four financial centers(US, EA, UK, Japan), and the balance sheet size of Fed are the global determinants of cross border bank loans in Turkey. Secondly, the lender banks' characteristics are important with regards to vulnerability and a liated loans have less vulnerable structure than non-a liated loans. Thirdly, I show that the sensitivity of cross border bank loans to some global factors decreased after the last quarter of 2010 and hence macro-prudential policies in Turkey have been successful to increase the resilience of Turkish economy to cross-border bank ows. Lastly, I analyze the effects of Fed's balance sheet, which is the indicator for quantitative easing or expansionary monetary policies, on cross border bank loans in Turkey. Cross border bank loans have increased signi cantly as a result of Fed's quantitative easing policies. These policies also have significant effect on each cross-border bank loan types. The types of credit, repo, deposits, syndicated and securitization are a ected more by quantitative easing policies, respectively. Moreover, banks that have relatively small asset size, weak capital structure, low return on asset ratio and liquid asset ratio have been affected more positively by the Fed's quantitative easing policies. I conclude that they could not borrow at the desired level during illiquid period due to their underwhelming ratios, however they started to search for yield and borrow more easily during liquid period due to the Fed's quantitative easing policies.