Recent development 

In an effort to increase the market penetration of Islamic financial services and to ensure a competitive Islamic banking market, on February 11, 2016, the Turkish Banking Regulation and Supervision Authority (the "BRSA") granted Vakıf Katılım Bankası A.Ş. an operating license, making it the second state-owned Islamic bank and the sixth Islamic bank in Turkey. This follows the opening of Turkey's first state-owned Islamic bank, Ziraat Katılım Bankası A.Ş., on May 12, 2015.

The bank will become operational on February 26, 2016, following an opening ceremony of its headquarters at which the president of Turkey and other high-ranking state officials are expected to attend.

On February 27, 2015, the BRSA granted an incorporation license to Vakıf Katılım Bankası A.Ş. The bank's current share capital is TRY 805 million (~USD 270 million); its shareholders are the General Directorate of Foundations, operating under the Prime Ministry and other perennial foundations. Although their majority shareholder is the same, Vakıfbank and the Islamic bank will have separate governance structures to ensure the latter's independence.

The bank will start its operations with around 120 employees but this is expected to increase to 500 by the end of 2016, accompanied by 30 new branches in Turkey's major cities. The bank has high ambitions, with a target of 100 branches and 1,200 employees by 2019.

Conclusion

Turkey is proactively seeking to become a regional and international financial center, as outlined in the current government's program. Islamic finance plays an important role in this project and is expected to increase and diversify available financial products and financing sources in Turkey. Considering Turkey's recent actions, such as the incorporation of the Islamic Finance Coordination Committee, the bank reflects the country's commitment to develop Islamic finance and is expected to play an important role in attracting funds from abroad by creating investor confidence as a state-owned entity. Furthermore, the bank, along with Ziraat Katılım Bankası A.Ş., is expected to increase competition in the underdeveloped Turkish Islamic banking market, although over-capacity concerns remain.