At present, the Turkish banking sector has up-to-date technology and is equipped with highly qualified personnel to compete in the international arena. The result is a more transparent and well-functioning banking sector whose players have been progressively modernizing their operations in line with the developments in the global banking community. There is a significant growth potential in the Turkish banking sector. Banks will have to compete in an increasingly challenging environment. In the coming years, strategically and technically well-positioned banks will be able to utilize the growth potential of the sector. However, increasing competition and squeezed profit margins are expected to force banks to be more cost conscious. In order to increase profitability and efficiency, mergers and strategic alliances with foreign banks will be on the agenda of the sector. The integration process with the EU will bring new challenges for Turkish banks to increase their efficiency and quality of their services by improving their distribution channels. Additionally, increasing compliance with the internationally accepted standards and other structural changes made in line with the integration process with the European Union will attract foreign banks, which in turn will intensify the competition in the sector. Another significant step taken by Turkish authorities was the introduction of the recent disinflation program and the other restructuring efforts. Turkey has suffered from chronically high inflation for years and our economy is the last high-inflation economy among the OECD countries. High level of public deficits and fiscal imbalances, together with self-fulfilling inflationary expectations are the main causes of the inflation process.

I, personally, consider globalization to be both a beneficial and a challenging, inevitable, irreversible process for the world economy and the international financial system. Globalization and liberalization of financial markets bring a variety of changes, presenting opportunities as well as risks both in economies and financial systems throughout the world. One fact is quite clear: the undeniable benefits of globalization are only available to the countries that best manage their economies. (1)  One obvious benefit of globalization is that active international capital flows improve the efficiency of the allocation of world financial resources. As the world market economy has become more globalized, we have witnessed rapid growth in world trade, leading to a higher standard of living during the 1980s and 1990s. In plain language, competition, productivity gains, lower trade barriers and lower cost of external financing on a worldwide basis are the key factors that have led to growth in world trade and rising standards of living. (2)  Globalization also has increased and enhanced competition worldwide. There are several factors behind this consequence. (a)  Firstly, the integration of world markets and rapid technological change led to efficiency gains and growth driven by the lower transaction and information costs. These in turn increased competition through lower costs and higher market efficiency, higher productivity, lower barriers to entry, and new investment opportunities. Geographic distance is no longer a factor that limits the provision of goods and services. Hence, competition both in the industrialized and developing countries has reached almost the same level.