Globalization of Financial Markets and Reflexion to Turkish Small and Medium Scale Enterprises: Basel II

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INTRODUCTION

In global capital world, international capital investments increase quickly. In this process, all of the national economies want to take interest from financial resources which circle the globe. This demand gets within the charm area of economic systems which hadn't integrated to global markets or been in this process. The countries which are fascinated by global capital movements need to modify their financial systems in order to take interest from this resource.

At this point, the economies need to follow the global rules in order to expand in global markets. In this context, these countries need to make arrangements and act with the context of Basel II which can be respected as the global rules of financial markets.

In this study, we will examine the arrangements that economic systems need to make in financial markets and the possible effects of these arrangements to economic systems.

THE MEANING AND SCOPE OF FINANCING CONCEPT

The purpose of financing function is to get the funds in optimum conditions that firm needs and provide the usage of these funds effectively.

As from the early 20th Century in USA and Europe, significant improvements had materialized in the field of financial management. In conjunction with industrialization, fund demand of developing enterprises had increased and meeting these demands had become a significant problem. In spite of excessive fund demand, the transfer of small savings into major enterprises wasn't easy. Financing had been understood as creation of currency and provision of funds by reason of excessive fund demand. In other words, financing concept is known only as providing funds until 50's. Growth of enterprises and improvements of incorporated businesses had added weight to provision of financing. In this context, it is considered that the basic duty of financial management is to provide adequate and low-cost funds for enterprises on time (Ceylan, 2003: 4).

BASEL COMMITTEE AND NEW CAPITAL ADEQUACY ARRANGEMENT

Bank for International Settlements (BIS) is an international enterprise that had been formed by central banks of various countries in 1930. A working group called "Basel Committee" had been formed within BIS in 1974 in order to make studies about banking. The purpose of committee which is formed by 12 members including USA, Germany, Belgium, France, Holland, Sweden, Switzerland, England, Italy, Japan, Canada and Luxemburg is to monitor the possible crisis in banking and exchange markets and provide a common standard in banks' working. Basel Banking Control and Audit Committee within BIS have initially published Basel Capital Accord in 1988. According to Basel I, capital adequacy of banks must be at least %8. The rate of capital to risk assets had been considered in calculation of capital adequacy (Pinelli, 2005: 3).

In recent days, significant improvements had materialized in banking, risk management application and techniques and control approach. Committee had prepared a new draft arrangement in order to substitute 1988 dated arrangement and committee had announced this draft as Basel II principles in 2004. These principles have been accepted by all banking sectors and it is expected that the arrangements will be activated in many countries between 2007 and 2009 (Rodriguez, 2003: 120).

Over two hundreds opinions had been delivered by interested parties about new arrangement which has more risk sensitivity. In project, draft standards in 1999 had been accepted as risk weight of countries. As for the risk weights of countries, the criteria of the ris weight's applied to bank being a degree more than the country's and weighing according to the bank's rating from outer leveling institutions and also risk's period had been determined to be appropriate.

Purposes and Essential Elements of New Arrangement

Basel II principles had been formed with a view to restructure the banking sector. …