Interest rate risk remains high for banks because of a duration mis- match between deposits relative to banks’ holdings of government securities and certain housing loans. Exchange rate risk is less of a concern as banks have only a small net foreign exchange position and hedges are generally considered to be with strong institutions. In addition, large Turkish corporates have high foreign-exchange (FX) liabilities, often to foreign lenders, more willing to provide financing as markets stabilised after the crisis in 2001. 3 There has been an upsurge in Turkish private sector borrowing since 2005: from USD 30 bn to USD 89 bn.
