Turkey's banking and financial services sector is well-regulated, stable and competitive, and the local capital marketboasts relatively high liquidity. The country's asset management industry continues to underperform its Emerging Market peers,however. Such conditions helped Turkey climb to 60th position in the World Bank's Ease of Doing Business report in 2018. However,the industry cannot sustain the growth it has enjoyed more recently without reliance on foreign funding, much of which has beenshort-term in nature making the country's banking sector vulnerable to risk. The sector's loan-to-deposit (LTD) ratio has risen rapidlyin the last decade as cheap foreign capital flooded into Turkey, driving robust rates of domestic credit growth and a widening currentaccount deficit. Large FX exposure implies that a severe FX shock or prolonged economic downturn could lead to a steady rise innon-performing FX loans, weighing on banks' profitability and capital ratios. The government's increasing intervention in monetarypolicy, as well as a deteriorating fiscal position over the coming years, will weigh on sentiment towards the banking sector andconfidence in the economy more broadly. In response to these issues, the state established a sovereign wealth fund (the TWF) inQ417. The TWF will support the industry by providing external mandates to asset managers operating in the country and improvinggovernance standards. Furthermore, Turkey reportedly has plans to establish its own credit rating agency in 2018, a move whichwould help to improve transparency in the market.