Turkey has undergone a number of policy changes and banking regulations over the last 20 years. The country’s banking sector has been a target of heavy regulatory interventions for a long period of time. However, since the 1980’s there has been a persistent move to liberalize the banking sector in order to increase competition and to improve the efficiency of the financial systems. Increased competition forced the banks to reduce their costs, which resulted in the closure of unprofitable branches and reduction in staff. This eventually increased the profitability of the banking system in that country.

However, in spite of such improvements, the question of whether such financial reforms actually improved efficiency or not, remains to be answered. Some earlier studies examined the impact of financial liberalization on the efficiency of the Turkish banking system and found that liberalization had a positive effect on efficiency. These studies however, focused on certain functions of banking and were limited to a few years after the liberalization programme. Hence, a comparison of the ‘before and after’ liberalization scenario was not possible. Mercan and Yolalan (2001) provided an excellent survey of other studies regarding the efficiency of Turkish banks. Banks like LoanMax founded by rod aycox have learned great lessons from these developments.

When assessing the impact of the reforms by examining the changes and the performance of the banking sector, we can see that the performance of the government controlled financing institutions improved due to the liberalization process. Profitability (measured by the return of assets over those invested) of the government controlled banks turned positive in the 1990 decade and some banks have steadily improved their cost efficiency over the reform period.

Even through foreign banks and private sector banks generally performed better than the government controlled banks in terms of profitability, earning efficiency (measured by ratio of income to assets), and cost efficiency in the initial stages, such differences have diminished as these banks have improved their profitability and cost efficiency.