Recent development

On May 12, 2015, the Turkish Banking Regulatory and Supervisory Authority ("BRSA") granted Ziraat Katılım Bankası A.Ş. an operating license, making it the first state-owned Islamic bank in Turkey.

T.C. Ziraat Bankası A.Ş., Turkey's largest bank, was granted an incorporation license by the BRSA on October 10 last year to establish a Turkish Islamic bank with share capital of the Turkish lira equivalent of USD 300 million.

The bank is now Turkey's fifth Islamic bank and is expected to aggressively tap the Turkish Islamic banking market by hiring 3,000 bankers. Another state-owned bank, Halkbank, had previously announced its intention to establish a participation bank and obtained an establishment license from the BRSA earlier this year. Vakıfbank is also on track to set up its Islamic banking unit.

Furthermore, according to market rumors, Turkbank and Emlak Bankası, both of which were liquidated in 2001, are expected to return to the market as Islamic banks.

Conclusion

The move of Turkey's state-owned banks toward Islamic banking demonstrates the government's commitment to increasing the breadth and depth of Islamic financial services and to ensuring a more diverse range of financing sources to investors beyond traditional products.