TBY talks to Vedat Akgiray, Chairman of the Capital Markets Board of Turkey, on the new capital markets law and regulations for investment funds.
TBY What are the key points of the new capital markets bill that international investors should be aware of?
VEDAT AKGİRAY The new Capital Markets Law will probably be the most up-to-date securities law in the world. The new bill has two major contributions. Since the crisis in 2009, the protection of consumers and investors has become a key issue—if institutions go under, people get hurt. In this regard, the new draft law has a very broad coverage and a very clear statement as to what is a capital market crime and what should be done to correct any issues. The law is very clear and not open to interpretation. Part of the law involves a very strong code in terms of corporate governance, meaning transparency and accountability. The second major theme in the bill is that it is very open to financial innovation. We have tried to define financial assets and financial institutions in a way that facilitates the process. For both domestic and international investors, be they institutional or retail oriented, I think the bill will be very accommodating. The Capital Markets Board is very active in international organizations, especially as part of the International Organization for Securities Commissions (IOSCO), and we are chairing a number of committees. Through the IOSCO, we are active on the Financial Stability Board (FSB). For the last three years during my term in office we have mainly discussed the crisis; why it happened and what we should do. We recognize the problems in our country and in other developed, emerging, and undeveloped areas. This has been a source of information for us. The current law is about 25 years old, and although it has been revised from time to time, our core values remain the same. Hopefully, with the new law and the follow-up secondary regulations, the Turkish financial markets will be very interesting and beneficial to a variety of investors. Despite our efforts, the share of the unregulated market in the overall landscape has increased significantly. This means that the markets are moving fast, but governments and regulators are operating slowly. This could be the forecast for a new crisis not too far off from now, and that is why we are aiming to pick up the pace in Turkey.
What is the anticipated impact of the new regulations for investment funds in Turkey?
Unfortunately, the funds industry in Turkey is undeveloped. It represents 1% of GDP, which is not acceptable, and it should grow by at least 10 times. We have approved many secondary regulations to help expand the funds industry, and this new law will make it even more pronounced. There is interest from many investors from other countries. We have seen interest from London, New York, the Gulf, China, and the Far East, as people visit Turkey and ask us questions about how to do things and what is possible. There is also some activity in the marketplace. A number of brokerage companies in Turkey have been sold out to international institutions. A number of countries in Europe have applied to our board to issue securities in the Turkish market.
How would you characterize the development of funds in Turkey?
The funds industry in Turkey has historically been dominated by commercial banks, which is not good because their business is different. For example, a fund owned by a commercial bank cannot invest in a fund owned by another commercial bank because they are competitors. We have done everything possible to get the banks out of this business, and it has started to work. We have to show people and investors that there are successful funds. The only way that we can convey this opinion is to let the funds demonstrate how successful they are. We hope that successful small fund managers become more popular. The year 2012 will be a transition period for the funds industry, which we expect grow very fast by the end of the year and the beginning of 2013. However, funds are only part of the game; the Istanbul Stock Exchange (ISE) is working on a new structure for exchanges in Turkey. We want to tie them together under one technological platform, so that investors will be able to access the Turkish exchanges more easily: stock exchange, gold exchange, commodities exchange, and energy exchange. Investors will have access to everything through one screen, platform, and interface. This will offer people a more diverse range of products and a more liquid platform.
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