Turkey has a deep-rooted banking tradition that goes back to the 19th century. Before the establishment of official banks in the 19th century, İstanbul had been one of the major money centers for non-Muslim brokers since the 16th century. Turkish banks and other financial institutions are now trying to catch up with the modern world of finance. Their task is to overcome all the handicaps of an isolated and closed economy. Until five years ago the Turkish banking community was mostly inward looking, with few transactions and little co-operation or integration with the world money markets. This meant the banks were very vulnerable to domestic economic and political developments, lacking the tools for flexibility to compensate for negative market conditions. The process of liberalization and the transition towards a free market economy first gained momentum from the financial sector. Foreign banks were attracted to the potentially lucrative Turkish market after 1981, initially cautiously, but by 1985 they equaled in number the Turkish private banks. This flood of mostly western banks, contrary to expectations, encouraged eve n the most conservative Turkish banks to modernize their activities, adopt new techniques, and discover new market areas and practices. The boom in foreign trade and new monetary policies all helped Turkish banks to become more competitive. Auditing and Central Bank supervision have become more effective, and with these rapid developments, bank, have undergone an enormous change. They have become more automated and efficient, along with their western counterparts.

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