The paper estimates the competitive conditions and concentration in the Turkish banking sector during the period 2002-2009. This paper also reports the results of two common measures of concentration, which are the concentration ratio and the Herfindahl-Hirschman index using Turkish banking system data which cover from 2002 to 2009. We can conclude that the Turkish banking sector is almost non-concentrated. The highest concentration was found in the Turkish deposits market, which it is possible characterize as slightly concentrated. The Panzar-Rosse model is used for testing the competition in the Turkish banking industry. Specifically, we use a panel with data for most of the Turkish banks to estimate the H statistics. We concluded that the Turkish banking industry can be characterized as a monopolistic competition which is close to a monopoly. The result implies the Turkish banks do not operate in a competitive environment and enjoy monopoly rents. It can be concluded that competitive conditions were decreasing during the analysed period.
Key words: Turkish banking sector, concentration, concentration ratio, competition, Herfindahl-Hirschman index, Panzar-Rosse model
JEL codes: D40, G21