Essays on bank networks and the Turkish banking crisis

Abstract

This series of essays examines the role of bank networks before, during and after the Turkish banking crisis of 1999--2001. The analysis focuses on different aspects of bank interaction, such as payment and settlement systems, mergers and acquisitions and technology sharing. After a short introduction of the roots and causes of the crisis, the first essay investigates whether banks have been able to realize cost savings during and after the, crisis through sharing their ATM networks with each other. The third essay looks at the consolidation wave that has followed the crisis and argues that mergers and acquisitions have allowed banks to increase their competitiveness while reducing their excess capacity. Finally, the second essay suggests that network effects arising from the high level of interaction between banks may have played an important role in allowing unsound banking practices to flourish before the crisis. Overall, these results provide insights into the complicated interactions between banks and dynamics of distress in the banking sector. Some of the insights gained through these essays are crucial in understanding micro-foundations of banking crises and effectiveness of policy responses.