Turkey has promised the International Monetary Fund further banking-sector reforms in its latest letter of intent under a $19 billion loan pact.
The IMF released a $495 million loan payment on Friday after approving a latest review of economic reforms Turkey has promised the fund. The letter of intent, sent to the IMF on April 2, was released late on Friday after the IMF meeting.
Rehabilitating the banking sector is a cornerstone of the IMF pact. A weak banking system was at the heart of a financial crisis in 2001 that unleashed Turkey's worst recession since World War Two and necessitated the record IMF bailout.
Turkey said in the letter of intent it would conclude a review of the country's banking act by the end of April and submit amendments to bring the legislation in line with the standards of the European Union, which Turkey aspires to join, before parliament goes into summer recess.
Areas in the law to be improved include toughening the criteria for bank ownership, introducing more on-site inspections and outlining the responsibilities of state banking regulators, the letter said.
Turkey also said it would make public by the middle of June a timetable for privatising state-owned Halk and Ziraat banks.
"The strategy would aim to increase the operational efficiency of these banks while ensuring a level playing field for competition in the banking sector," the letter said.
Turkey has already promised the IMF it will sell Halkbank, the country's sixth-largest bank specialising in loans to small businesses, by the end of the year. It also plans on merging failed private bank Pamukbank with Halkbank before the sale.
"We have already announced that Pamukbank will be integrated with Halkbank. The integration will be completed by end-September 2004. If needed the Treasury will provide securities to facilitate the integration," the letter said.
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