PARTICIPATION BANKS 2014 PARTICIPATION BANKS ASSOCIATION OF TURKEY Participation Banks Association of Turkey in Brief “Entering its 40th year in The Participation Banks Association of Turkey with banking regulations principles and rules, (PBAT), headquartered in Istanbul and estab- to work for the healthy growth of the banking the world, “interest free lished in accordance with the Banking Act, is a system and development of the banking pro- banking”, or “participation professional public institution of legal person- fession, increase competitiveness, ensure nec- ality. essary decisions are taken for the creation of banking” as we call it, is 30 a competitive environment and prevent unfair years old in Turkey.” The foundations of the PBAT, the umbrella or- competition, and implement and demand the ganization of the participation banks operat- implementation. ing in Turkey, were laid in 2001 by the Associa- tion of Special Finance Institutions. The title of In accordance with the legislation, participa- V. Derya GÜRERK the Association was amended as Participation tion banks become members of the Participa- Chairman, Participation Banks Association of Turkey Banks Association of Turkey in 2005. tion Banks Association of Turkey within one month of being granted their permission to The aim of the PBAT is to defend the rights operate. As of the end of 2014, four partici- and interests of participation banks within pation banks were operating in Turkey, all of the framework of a free market economy and which were members of the PBAT. the principle of full competition in accordance www.tkbb.org.tr Participation banks of Turkey- Key indicators (2014) Funds collected Funds allocated Total assets TL 66.8 billion TL 70.0 billion TL 104.1 billion Shareholders’ equity Number of personel Number of branches TL 9.3 billion 16,270 990 PARTICIPATION BANKS 2014 CONTENTS PARTICIPATION BANKS ASSOCIATION OF TURKEY MESSAGE BY THE CHAIRMAN OF PBAT WORLD ECONOMY ESTABLISHED IN V. Derya GÜRERK “The slowdown in global 2002 “Participation banking is economic activity” 30 years old” MEMBERS 04 06 PARTICIPATION BANKS OPERATING IN TURKEY CHAIRMAN V. Derya GÜRERK Türkiye Finans Katılım Bankası A.Ş. BOARD MEMBERS Albaraka Türk Katılım Bankası A.Ş. Asya Katılım Bankası A.Ş. Kuveyt Türk Katılım Bankası A.Ş. Türkiye Finans Katılım Bankası A.Ş. SECRETARY GENERAL Osman AKYÜZ TURKISH ECONOMY TURKISH BANKING SECTOR AUDITORS Turkey continued to grow in 15.1% growth in the Turkish Süleyman SAYGI - İsmail GERÇEK 2014, succeeding in difficult banking sector circumstances. HEAD OFFICE 16 26 Kısıklı Caddesi No: 22 Altunizade 34662 Üsküdar/İstanbul PHONE 0216 651 94 35 (Pbx) FAX 0216 651 94 39 WEBSITE www.tkbb.org.tr E-MAIL [email protected] GLOBAL INTEREST FREE BANKING SPECIAL REPORT: SUKUK The global interest free The rise of sukuk in global financial system sustains financial markets 32 continues its rapid growth 38 PARTICIPATION BANKS 2014 CONTENTS PARTICIPATION BANKS INTERVIEW WITH THE GENERAL ALBARAKA TÜRK SECRETARY OF PBAT Overview of Participation of Osman AKYÜZ Dr. Fahrettin YAHŞİ Banking in 2014 “More than enough resourc- “Into our thirtieth year with 46 52 es to achieve growth” 60 excitement” BANK ASYA KUVEYT TÜRK TÜRKİYE FİNANS Aydın GÜNDOĞDU Ufuk UYAN V. Derya GÜRERK “A new organization “Kuveyt Türk celebrates its “Increasing support for the appropriate for its financial 25th year of operation in national economy and the 66 size” 72 2014” 78 real sector” FINANCIAL DATA FINANCIAL STATEMENTS BRANCHES Sectoral financial data Financial statements of Branch coordinates of 85 and graphs 92 participation banks 100 participation banks PARTICIPATION BANKS 2014 Participation banking is 30 years old The most important development in recent years in terms of products has been the work done MESSAGE BY THE CHAIRMAN OF PBAT THE CHAIRMAN BY MESSAGE in the area of sukuk. Four banks have issued lease certificates in various amounts; moreover, the Turkish Treasury has issued both TL and FX denominated lease certificates. In fact, as of the end of 2014, the lease certificates issued by our banks, the Treasury and the private sector had amounted to TL 18 billion. V. Derya GÜRERK Chairman-Participation Banks Association of Turkey The establishment of Entering its 40th year, “interest free banking”, or which had been referred to as Special Finance “participation banking” as we refer to it, is now Houses until then, to tell the public and their an Association for the 30 years old in Turkey. This new interest free counterparts that what they do is banking. participation banks and banking model has begun with the two banks established by Gulf capital in our country in Before Turkey’s political and economic stabili- the necessary changes 1985 under the name of “Special Financial In- zation of the last 12 years, participation bank- made to the Banking Law stitutions”, and has been designed through the ing had faced stiff challenges in prior periods. have provided a healthy use of examples in the world, achieving posi- The 1980’s could be considered as a period of tive results in a short period of time. establishment, rising and recognition while structure for participation the 1990’s were years spent dealing with the banks. Four years later, a new bank was established economic crises in various parts of the world, with Gulf capital. In this regard, inspired by the including the Far East, Russia and, in particular, success of foreign capital, three new institu- in our own country. In this period, the partic- tions with domestic capital joined this caravan; ipation banking system had still been strug- one in 1991, another in 1995 and one in 1996, gling to grow with the new players joining in and the number of participation banks (or spe- the system. cial financial institutions, as they were known then) increased to six. Later, as a result of the The most critical period for participation bank- merger between two local institutions and the cancellation of another institution’s registra- ing in Turkey was the period marked by the tion, the number was reduced to four by the most severe economic crisis, which started end of 2005, as it has remained since then. At in 2000 and continued in 2001. During these the end of 2005, the new Banking Act came years, participation banking was fighting for its into force and “Special Finance Houses” were survival under very adverse conditions; thanks transformed into “Participation Banks”, gaining to its solid principles and internal dynamics, the “bank” status which has enabled this sys- the sector emerged from this period relatively tem to grow more rapidly. That is to say, it has unscathed. Participation banking in this period become easier for these financial institutions, remained under fire from three sides; 4 PARTICIPATION BANKS 2014 • The crisis of confidence in the sector, creat- since 2005, while the total banking sector grew a joint workshop with the Banking Regulation ed by a special finance house being ejected by 20%, the participation banking sector grew and Supervision Agency (BRSA) and prepared from the system in February 2001, by 30%. an action plan aimed at the rapid development • The absence of assurances in participation of participation banking in the next 10 years, funds collected such as those offered to de- This stabilization period was marked by in- and to increase its share in the banking sector posit banks, and creased awareness of participation banking, to 15%; this plan has been added to the Istan- • Other disadvantages caused by the crisis. the development of a basket of products and bul International Financial Center Strategy and OF PBAT THE CHAIRMAN BY MESSAGE the development of domestic and internation- Action Plan within the 10th Development Plan After the 2001 crisis, necessary amendments al relations through means such as promotions, drafted by the Ministry of Development as the were made to the Banking Law on issues such publications, conferences, forums and achiev- 7th component. as an insurance fund facility for savings, and the ing satisfactory levels. establishment of an Association for the partic- Thus, the public sector has taken the role of ipation banks. These have provided a healthier During this period, the most important devel- control and supervision in the development infrastructure for participation banks. As a re- opment in terms of products in Turkey was the process of participation banking. In addition to sult of the 2002 elections, which brought po- developments in the area of sukuk, known as this action plan, our Association has also em- litical and economic stability to our country, lease certificates, an important financial tool ployed an international research organization our industry, along with the economy, enjoyed of this banking model. Indeed, until 2010, the to prepare the Participation Banking Strategy a period of stable and satisfactory growth. In- name and origin of this instrument caused Document, and these subjects have entered deed, the share of participation banking sector hesitation; but with the communiqué issued in the process of establishing a synergy com- in the banking sector, which had fallen to 1% 2010, it gained a legal basis, and it has shown bined with those of the action plan. due to one institution closing down, had in- rapid development since 2011. Since this date, creased to 2.4% by the end of 2005 as a result four banks have also realized the issuance of As a result, participation banking reveals a of the stability. lease certificates of various amounts, and the banking model which is more flexible and se- Turkish Treasury has also issued both TL and cure compared to fixed income commitment, FX denominated lease certificates. In fact, as of The main development in participation bank- given that the distribution of income for sav- the end of 2014, lease certificates issued by our ing, however, took place after 2005 where these ings is based on the profit and has a liability banks, the Treasury and the private sector had institutions gained the title and status of being structure which is sheltered from future trou- amounted to TL 18 billion.