Over the long term our view on Turkey's banking and financial services market is positive based on the market being wellregulated, stable and competitive, and with the local capital market boasting relatively high liquidity. We note that there are plenty ofnear-term headwinds facing the four markets we track, with downside risk growing within each. We point to the lira remainingvulnerable to market jitters and policymakers risking exacerbating imbalances and pushing the economy onto a unstable growthpath as key factors shaping this view. In the banking sector conditions are becoming increasingly challenging, and we expect to seethe sector continuing to deleverage as financing conditions remain unfavourable. This has seen the government becomeincreasingly proactive in order to address the sector's fragile funding structure by speeding up the recovery in public banks’ balancesheets. A significant development this quarter has seen Turkey's plan to establish its own credit ratings agency realised through theacquisition of JCR Eurasia. We see the larger non-life market continuing to enjoy far greater premiums growth in the insurance arena,the asset management industry remains largely underdeveloped and the Borsa İstanbul exchange is continuing to struggle inattracting new listings.
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