The Future of Türkiye's Banking System

Executive summary

The base thesis is that balance-sheet intermediation will remain central, while value creation migrates toward real-time transaction banking, trusted data infrastructure, capital-markets distribution and transition finance. Starting buffers are supportive, but credible disinflation, funding tenor and cost, delayed credit risk, technology concentration and climate investment must be managed together. The report uses three judgmental planning scenarios, assigns no probabilities and identifies a common no-regret investment package for banks and policymakers.

Key findings

1. 01

   Türkiye's banking system is more likely to change function than to shrink by 2030; balance-sheet intermediation remains central while value creation shifts toward transaction banking, trusted data infrastructure, capital-markets distribution and transition finance.

2. 02

   June 2026 sector assets were TRY52.73 trillion, loans TRY26.79 trillion and deposits plus participation funds TRY30.11 trillion; nominal expansion must not be mistaken for real capacity growth.

3. 03

   The NPL ratio rose to 2.77%, but NPLs plus Stage 2 loans at 11.5% show why arrears, restructuring and migration indicators are needed alongside the headline ratio.

4. 04

   The 16.59% capital adequacy ratio remains above bank-specific minima, while part of the 2026 decline reflects the expiry of temporary calculation flexibilities rather than pure economic loss.

5. 05

   The main macro risk is the quality of disinflation and rate cuts: premature easing could weaken the currency, deposit pricing and credit quality at the same time.

6. 06

   External funding is resilient, but rollover volume alone is insufficient; tenor, spread, currency and investor concentration determine funding quality.

7. 07

   Open finance, FAST, digital banks and real-time payments are changing distribution economics while raising fraud, 24/7 liquidity and third-party concentration risks.

8. 08

   Competition is broadening from bank-versus-bank rivalry to competition across deposits, funds, custody, wealth management, payments and corporate finance.

9. 09

   CBAM, emissions data and physical climate risk are becoming credit-file variables for exporters, SMEs and their banks.

10. 10

    Across all three judgmental scenarios, the no-regret package is integrated balance-sheet analysis, real-time fraud and liquidity control, high-impact AI governance, diversified funding tenor and stronger capital-markets income capacity.

June 2026 balance-sheet anchors

Source: Percent of total assets. Asset-side and funding-side ratios are shown together for orientation and should not be added across categories.

Starting point: a large balance sheet, changing intermediation

From end-2018 to June 2026, assets increased from TRY3.87 trillion to TRY52.73 trillion, loans from TRY2.39 trillion to TRY26.79 trillion and deposits plus participation funds to TRY30.11 trillion. Exchange-rate and inflation effects mean this extraordinary nominal expansion cannot be read as real-capacity growth.

Loans represented 50.8% of assets, securities 14.6% and other assets 34.6%. On the funding side, deposits represented 57.1% of assets and accounting equity 8.7%. The strategic constraint is therefore not deposit volume alone, but deposit tenor, beta, currency and the interaction of credit, interest-rate and sovereign risk.

Resilience: credit risk, profitability and capital

The NPL ratio rose from 1.60% at end-2023 to 2.77% in June 2026, with 76.1% coverage. March 2026 evidence placed NPLs plus Stage 2 loans at 11.5%, showing that an NPL-only view can be delayed and incomplete. Banks should monitor restructuring, 30-plus days past due, debt-service coverage and customer-level retail exposures alongside NPLs.

Sector capital adequacy was 16.59% in June 2026. The decline from end-2025 contains a definitional break because temporary calculation flexibilities expired on 1 January 2026. Resilience is real but heterogeneous; downside analysis should apply cost of risk, bond valuation, RWA and external-funding spread shocks together.

Macro regime: how disinflation reaches bank balance sheets

June 2026 CPI inflation was 32.11% year on year, the policy rate was 37% on 23 July and first-quarter growth was 2.5% year on year but only 0.1% quarter on quarter. Current 2026 growth forecasts ranged from 2.8% to 3.5%, while end-year inflation expectations differed materially across institutions and the market survey.

The report recommends testing at least three branches: delayed rate cuts, faster but credible cuts and renewed tightening. Deposit beta, net interest margin, credit demand, cost of risk and economic capital should be modelled in the same scenario rather than through separate planning exercises.

Funding, FX liquidity and the sovereign-bank nexus

Banks' 12-month long-term external-debt rollover ratio reached 151.5% in March 2026 and liquidity ratios remained above legal minima. These are supportive observations, but a high rollover ratio can still be weak when it is expensive, short-dated or concentrated by currency or investor.

The phase-out of FX-protected deposits returns currency confidence and deposit pricing to direct TRY/FX choice, reserves and interest rates. Treasury issuance, securities duration and FX exposure must be linked to economic value, collateral capacity, capital and private-credit allocation in one ALCO view.

Digital, open finance and distribution economics

Active digital customer records at TBB-reporting banks rose from 94.4 million in December 2022 to 129.5 million in March 2026. The records are not de-duplicated across banks, exclude participation banks and may reflect changes in the reporting panel, so they are not a clean count of unique people or penetration.

ÖHVPS 2.0, FAST and digital-bank models can lower switching costs and pressure transaction fees while supporting cash management, embedded finance, identity and fraud-prevention income. Competitive advantage depends less on app downloads than on explainable use of permissioned data, 24/7 liquidity control, secure modular APIs and regular safe usage.

Competition, participation finance and capital markets

Banks' share of financial-system assets fell from about 88% in 2020 to 73.6% in the first quarter of 2026 as funds, insurance and other non-banks expanded. Banks remain central, but deposits, investment funds, custody, wealth management and corporate finance increasingly compete for the same customer budget.

The report treats capital markets as a second balance sheet and fee engine rather than only as deposit leakage. Participation finance growth depends on product standardisation, profit-share transparency, liquidity instruments, sukuk depth, SME project capacity and governance, not volume targets alone.

Artificial intelligence, cyber risk and operational resilience

AI can lower unit costs in contact centres, document processing, software, fraud detection, early warning and pricing. The same foundation model, cloud or critical service provider used across banks can also turn an idiosyncratic failure into a correlated sector event.

Boards should maintain inventories of high-impact models and critical third parties, require independent validation, test bias, drift, explainability and human override, map critical operations and measure provider concentration, exit time, recovery performance and major incident loss.

Climate transition, CBAM, SMEs and physical risk

The EU CBAM definitive period began on 1 January 2026. For carbon-intensive exporters, verified emissions, carbon cost and transition investment plans should be connected directly to debt-service capacity, pricing, collateral and covenant design.

SME credit assessment should combine permissioned cash-flow data with natural FX income, energy and carbon sensitivity, physical-risk location and investment needs. Model evidence on climate risk and investment requirements shows the direction of risk, not realised bank loss.

2026-2030 judgmental planning scenarios and 2035 signposts

The report uses three judgmental planning paths rather than probability-weighted forecasts: credible disinflation and gradual normalisation; uneven disinflation with volatile funding and credit quality; and renewed macro-financial stress. Scenario movement depends on joint signals from inflation expectations, energy and the current account, external-funding conditions, asset-quality migration and operational incidents.

Structural signposts to 2035 include deeper capital-markets intermediation, more real-time and open-finance infrastructure, data-intensive credit decisions, climate-linked investment and a larger role for common technology providers.

Stakeholder action agenda

Banks should combine macro, funding, sovereign, borrower, technology and climate risks in one scenario architecture; recalibrate deposit behaviour; expand Stage 2 and cash-flow monitoring; complete high-impact AI and third-party inventories; and diversify funding tenor and fee-income capacity.

Regulators should improve comparable data on Stage 2 loans, restructurings, cyber incidents and provider concentration. Corporates and SMEs should connect FX income, energy and carbon costs, debt-service coverage and transition investment plans before refinancing needs become urgent.

Early-warning and pivot dashboard

The dashboard links inflation expectations, deposit beta, net interest margin, Stage 2 migration, restructuring, external-funding cost and tenor, securities duration, FX-income mismatches, digital fraud, critical-service outages and emissions-data readiness to explicit management actions.

No universal threshold is imposed. Escalation should depend on correlated movement across indicators and on each institution's business model, customer mix, capital headroom and risk appetite.

Conclusion: from resilience to transformation capacity

Sustainable advantage toward 2030 will be built across three balance sheets: the bank balance sheet of credit, deposits, capital, liquidity and sovereign risk; the customer balance sheet of cash flow, FX income, carbon and maturity resilience; and the ecosystem balance sheet of funds, payment rails, technology providers and critical public networks.

The strongest bank will not simply be the fastest-growing institution. It will be the bank that can measure trust, identify risk early, preserve capital through multiple shocks and choose the right balance-sheet or capital-markets channel for the customer.

Data sources, scope and limitations

Data sources

• BRSA/BDDK monthly banking-sector bulletins and regulatory publications
• CBRT/TCMB financial-stability, monetary-policy, survey, payment-system and EVDS data
• TurkStat/TÜİK inflation and national-accounts releases
• Treasury and Finance/HMB and Strategy and Budget Presidency/SBB publications
• IMF, BIS/BCBS, FSB, World Bank, OECD, EBRD and EU institutional sources
• Banks Association of Türkiye/TBB, Participation Banks Association/TKBB and Central Securities Depository/MKK data

Limitations

Sector aggregates conceal differences by ownership, business model and bank size. Comparable public bank-level data are limited for Stage 2 loans, restructuring, critical technology providers, AI use and material cyber losses. Digital customer records are not unique persons and reporting panels may change. Some climate and concentration evidence uses older portfolios or September 2025 data; dynamic source pages may revise after the 2 August 2026 cut-off. Institution-specific decisions require internal data and separately calibrated stress models.

References and related links

• BRSA/BDDK - Monthly Banking Sector Data (advanced bulletin)
• CBRT/TCMB - Financial Stability Report, May 2026, Volume 42
• CBRT/TCMB - Survey of Market Participants, July 2026
• CBRT/TCMB - Electronic Data Delivery System (EVDS)
• Banks Association of Türkiye - March 2026 Digital Banking Statistics
• European Commission - Carbon Border Adjustment Mechanism definitive regime
• World Bank - Türkiye Country Climate and Development Report highlights
• Basel Committee - Principles for operational resilience