The question of today is how 2010 will be. Let us start without wasting time: 2010 will be the year where the resistance of banks and non-bank corporate sector will be tested. Here, "resistance" is directly related with the "size of caches" of firms, according to the concise expression of Honorable Prime Minister of Turkey. First the meaning of the term cache must be well understood. Then, the testing of the resistance of firms must be dealt with. The first question to be answered is why the year 2009 passed along in a relative tranquility. Did the government introduce any measure or something?

Once you say "What can be the main trend determinant on the year 2010?" I come up with the term "resistance." I believe it was this term what determined the year 2009. Let me open it up a little. How did Turkey manage the global crisis between 2008 and 2009? What is the source of the relative tranquility? The source of this relative tranquility is banks in any case. First, with the banking reform implemented after the 2001 crisis, Turkey improved the resistance of the economy towards a crisis. That in the aftermaths of the crisis financial system of Turkey were not diversified much; i.e. its "inferior" structure from this angle, have protected Turkey. The first conclusion from this story seems to be that underdevelopment is not always a bad thing. The important thing is what "development" means. In an environment where "development" is considered as recklessness and insatiableness, it is good to remain inferior; particularly considering the banking sector.

Second point directly follows from the first: 2008 crisis at the core did not initially hit Turkey through banks' balance sheets. The crisis was conveyed to countries like Turkey through the fall in export demand and fund flows. Thus in such milieu banks were solid whereas firms where vulnerable. Remember; back then I began to write "a country with damaged firms cannot have solid banks." Here lies the main difference between the 2008 and the 2001 crisis: In 2001, banks were damaged first and this rapidly spread to balance sheets of firms. Today, however, firms' balance sheets are harmed first and the damage tends to spread toward the banking system. The situation cannot be analyzed without noting this difference. The way to maintain banks' balance sheets healthy is to treat those inside well and to be more picky when taking newcomers in. In fact, this is exactly what is going on now.

And the third point: With the January 23, 2009 dated Amendment in Reserves Regulation by Bank Regulation and Supervision Agency (BRSA), banks have improved intentionally and voluntarily the resistance toward the crisis of the firms they extended credits to (I would like to remind that the mentioned regulation was one of the rare decisions of the Erdoğan government appreciated at this column). Banks behaved particularly well to firms they bore on their balance sheets. This automated "balance sheet greening" operation enabled Turkey to live the year 2009 with tranquility. Turkey should thank to banks. While improving the resistance of the firms in their balance sheets, banks in fact protected their balance sheets in themselves. They chose to restructure and activate credits rather than keep provisions for non-performing loans. And those who could not take place in balance sheets of banks were unlucky. However, we cannot let this damage our gratitude to banks. During 2009, banks seemed to be aware that "if the firms in the balance sheet are in trouble, banks in that country cannot maintain a solid condition." And what enabled banks to take an active and conscious attitude was the BRSA regulation effectuated when Nazım Ekren was the Minister of Economy. So the BRSA as well as the Honorable Minister must also be added to the list of gratitude. It is good to be loyal. And this is the third point to mention.

Fourth one is related with the timing of the BRSA regulation. The term of the regulation ends in March 2010. If the regulation is to stay in effect, firms and banks will again stand on their own feet without waiting to hear a long-waited step for solution from the government. As proven by experience; there is no other concrete action. Of course there is the ban on smoking; but it has no direct relation with our issue. This analysis takes us directly to how important for 2010the resistance of firms is.

Let us finish the fifth conclusion of today along with a series of questions. As the recovery trend in the world suggests, the economic climate we are facing will not recover radically in 2010. This is exactly what attaches to the resistance of firms importance for 2010. Is the cache of firms able to endure for another year? Or what we call cache is just a "favor" banks do to a limited number of firms? Then, what would banks do now? Is it possible to improve the resistance of firms?

This is the first trend that will shape 2010.

We will continue with this subject.

This commentary was published in Referans daily on 24.12.2009