Developed countries implemented a loose economic policy after the global crisis, which encouraged huge capital inflows into the emerging markets. After the global crisis, the Turkish banking system took advantage of such foreign capital inflows and experienced significant credit growth. This paper focuses on non-core liabilities, which are the sources of the credit growth in the Turkish bankingsystem. It seems that the Turkish banking system has depended more on non-core liabilities since the beginning of 2011. Most of the non-core liabilities of the Turkish banking system are largely foreign exchange denominated and the average term structure of foreign exchange liabilities is relatively medium-term. Foreign exchange non-core liabilities of the Turkish banking system have been more sensitive to international liquidity shocks. Non-core liability growth and its medium-term foreign exchange structure are a warning signal for the Turkish banking system.
