Turkish Residents to Notify The Central Bank of their FX Positions
In line with the recent amendments to the Decree No. 32 on Protection of the Value of Turkish Currency (“Decree No. 32”), the Central Bank of the Republic of Turkey (“CBRT”) has enacted the Regulation on the Principles and Procedures regarding the Monitoring of Transactions Affecting Foreign Exchange Position by the Central Bank of the Republic of Turkey (the “Monitoring Regulation”) (published in the Official Gazette dated February 17, 2018 and numbered 30335) with a view to enable the CBRT to monitor the foreign exchange positions (“FX Positions”) of Turkish resident individuals and legal entities.
New Restrictions in the Turkish Foreign Exchange Legislation on Foreign Currency Loans
A decree and a communiqué amending the Decree No. 32 on Protection of the Value of Turkish Currency (published in the Official Gazette dated August 11, 1989, No. 20249) issued by the Council of Ministers under the Law No. 1567, (the “Decree No. 32”) and the Communiqué on Decree No. 32 on Protection of the Value of Turkish Currency (published in the Official Gazette dated February 28, 2008 and numbered 26801) (“Communiqué No. 2008-32/34”), are published by the Council of Ministers in the Official Gazette dated January 25, 2018.
Türk Yabancı Para Mevzuatında Döviz Kredilerine İlişkin Yeni Sınırlamalar
Bakanlar Kurulu tarafından 1567 sayılı Kanun uyarınca düzenlenen Türk Parası Kıymetini Koruma Hakkında 32 Sayılı Karar’da (11 Ağustos 1989 tarihli ve 20249 sayılı Resmi Gazete’de yayınlanmıştır) (“32 Sayılı Karar”) ve Türk Parası Kıymetini Koruma Hakkında 32 Sayılı Karara İlişkin Tebliğ’de (28 Şubat 2008 tarihli ve 26801 sayılı Resmi Gazete’de yayınlanmıştır) (“2008-32/34 Sayılı Tebliğ”) değişiklik yapılmasına ilişkin Bakanlar Kurulu kararı ve buna ilişkin tebliğ 25 Ocak 2018 tarihli Resmi Gazete’de Bakanlar Kurulu tarafından yayınlanmıştır.
Q4/2017 Amendment to the Regulation on the Procedures and Principles Regarding Fees to be Collected from Financial Consumers
The Banking Regulation and Supervision Agency (“BRSA”) amended the Regulation on the Procedures and Principles regarding the Fees to be Collected from Financial Consumers (published in the Official Gazette dated October 3, 2014 and numbered 29138) on December 23, 2017.
The amendment provides for an upper limit for fees charged (“Service Fee”) in return for transactions performed by financial consumers via third party ATMs (i.e. ATMs that belong to any financial institution in Turkey other than the respective financial consumer’s contracted institution at which the financial consumer’s relevant bank account is held (“Account Institution”). As such, the Service Fee is not to exceed 115% of the amount paid by the Account Institution to the third party institution, in return for the services provided via third party ATMs. The amendments also stipulate that the Service Fee will (i) be determined and specified under the framework agreement between the Account Institution and the financial consumer or (ii) be collected with the financial consumer’s consent during the transaction.
Q4/2017 Increase of the Invoice Value to be taken as a Basis for the Determination of a Loan Amount to the Vehicle Value Ratio
For the purpose of revising the limitations in loan amount to be extended to consumers under vehicle loans, asset backed loans secured with vehicles or financial leasing transactions related to vehicles (“Vehicle Financing”), the BRSA amended the Regulation on Loan Transactions of Banks (published in the Official Gazette dated November 1, 2011 and numbered 26333) and the Regulation on the Principles for the Incorporation and Operations of Financial Lease, Factoring and Financing Companies (published in the Official Gazette dated April 24, 2013 and numbered 28627) on December 12, 2017 with immediate effect.
Due to these amendments, the maximum loan under Vehicle Financing will be determined based on the invoice amount for the relevant vehicle. As such, the loan amount is not to exceed 70% of the final invoice amount of the respective vehicle if the final invoice amount is equal to or less than TRY 100,000. If the final amount is over TRY 100,000, the loan amount will not exceed the sum of 70% of the portion amounting to TRY 100,000 and 50% of the remaining portion exceeding TRY 100,000 under the respective invoice amount.
Q4/2017 Amendments to Central Bank Law and Cheque Law
The Law Amending Certain Tax Laws and Other Laws (Law No. 7061) (published in the Official Gazette dated December 5, 2017 and numbered 30261) (the “Law No. 7061”) has introduced certain amendments to the Law on the Central Bank of the Republic of Turkey (Law No. 1211) (published in the Official Gazette dated January 26, 1970 and numbered 13409) (the “CBRT Law”) and the Cheque Law (Law No. 5941) (published in the Official Gazette dated December 20, 2009 and numbered 27438) (“Cheque Law”).
Under the amendments to the CBRT Law, the Central Bank of the Republic of Turkey (the “CBRT”) is granted the authority to request any kind of information and documentation from individuals and legal entities, to be determined at the sole discretion of the CBRT, in order to monitor transactions that would impact the FX positions of the same. The Law No. 7061 stipulates that persons acting in violation of the procedures to be determined by the CBRT for these purposes shall be subject to judicial monetary penalty.
Furthermore, Law No. 7061 has also amended Provisional Article 3 of the Cheque Law. which prohibits the submission of future-dated cheques to banks for payment. The amendment aims to extend the duration of the prohibition on submission of future dated cheques until December 31, 2020.
Q4/2017 Amendment to the Regulation on the Merger, Transfer, Demerger, and Share Transfers of Banks
The BRSA amended the Regulation on the Merger, Acquisition, De-merger, and Share Transfers of Banks (published in the Official Gazette dated November 1, 2006 and numbered 26333) (the “Merger Regulation”) on November 16, 2017 with immediate effect.
The amendment allows an exception in the application of the Merger Regulation for the partial de-merger transactions of banks. In particular, the amendment to the Merger Regulation sets forth that partial de-merger transactions of banks where part of a bank’s assets are transferred to a third party without dissolution of the bank. In the exchange of shares and rights in the transferee, in a manner forming a subsidiary to the de-merging bank, it will not be subject to the provisions of the Merger Regulation. It should be noted that under the amended Merger Regulation, if the paid-in capital of the de-merged bank becomes less than the minimum capital requirement set forth under the Banking Law (Law No. 5411) (published in the Official Gazette dated November 1, 2005 and numbered 25983), the respective bank’s shareholders are to undertake to increase such paid-in capital of the de-merged bank within three months.
Q4/2017 Amendment to Secondary Legislation regarding Financial Lease, Factoring, and Financing Companies
The BRSA has amended the Regulation on the Principles for the Incorporation and Operations of Financial Lease, Factoring and Financing Companies (published in the Official Gazette dated April 24, 2013 and numbered 28627) (the “Financial Lease Regulation”) on October 21, 2017 with immediate effect.
The amendment aims to set forth certain requirements for interest-free operations of, financial lease, factoring or financing companies (the “Companies”).
In addition, the amendments provide that in order for the loan agreements entered into by the Companies operating on an interest-free basis to be taken into consideration as subordinated loans, the respective loan agreements are to comply with the interest-free basis.
In line with the amendment to the Financial Lease Regulation, other secondary legislation relating to the operations of Companies have also been amended to provide for the references made to “interest” is to be read as “profit share” with respect to the Companies operating on an interest free basis.
Q4/2017 Amendment to the Regulation on Procedures and Principles in relation to Factoring Transactions
The BRSA has amended the Regulation on Procedures and Principles in relation to Factoring Transactions (published in the Official Gazette dated February 4, 2015 and numbered 29257) (the “Factoring Regulation”) on October 6, 2017 to be effective as of its publication in the Official Gazette.
The amendment focuses on the use of e-invoices and e-archives (as defined under the amending regulation) in factoring transactions, elaborates on the verification of e-invoices through e-archives and stipulates that factoring institutions are required to meet the Revenue Administration to verify e-invoices and e-archive practices.
In addition, the amendment also provides that with respect to the guaranteed export and import factoring transactions, requirements that (i) the last endorser of the bills of exchange obtained in return for the receivables and which will be assigned to the factoring institution will be the creditor under the respective invoice and (ii) the issuer or the previous endorser of the same will be the debtor under the respective invoice that the bill of exchange relates to will not apply provided that there is an exclusive agreement between the factoring institution and the debtor, setting forth all relevant information related to (x) the bills of exchange issued or endorsed by the invoice debtor and obtained by the factoring institution and (y) the invoice or the underlying agreement between the exporter and importer out of which the receivables subject to factoring transaction arises.
The Banking Regulation and Supervision Agency has introduced the Regulation on Outsourcing of Valuation Services by Banks and Authorization and Activities of Entities to Provide Valuation Services to Banks (published in the Official Official Gazette dated January 12, 2017 and numbered 29946) (the “Regulation”) , in order to regulate the procedures and principles on (i) outsourcing of valuation services by banks, (ii) authorization and activities of entities to provide valuation services to banks, and (iii) abolishment of their respective authorizations. The Regulation entered into force immediately upon its publication in the Official Gazette and abolished the Regulation on the Authorization and Activities of Entities to Provide Valuation Services to Banks (published in the Official Gazette dated November 1, 2006 and numbered 26333).
According to Article 4 of the Regulation, valuation service is defined as independent determination of the fair value of banks’ (i) assets and liabilities booked in their respective balance sheets; (ii) collaterals provided to banks for loans and other receivables; (iii) rights and obligations arising from agreements to which the respective bank is a party, rights and obligations or shares subject to mergers, demergers or share transfers; (iv) incomes or expenses arising from activities other than those listed in Article 4 of the Banking Law; which are not traded on a regulated market or of which the fair value cannot be determined for any reason.
As per the Regulation, during the valuation activities, valuation agency’s shareholders, directors and valuation experts are required to avoid any conflict of interest, to prevent from any interaction which may affect their impartialness and to express their respective opinions on the valuation activity without considering their own benefits. Article 6 of the Regulation further lists certain specific situations where the independence is deemed to be removed. Additionally, the Regulation provides in its Article 7 that persons providing valuation services shall perform professional care and diligence while planning, conducting and finalizing the valuation services and preparing the report. Similarly, the banks are under obligation, inter alia, (i) to develop written internal policies and procedures related to their activities to be performed with valuation agencies; and (ii) not to conduct activities which may create pressure over the valuation agencies or may hamper the independence and bank reputation.
Furthermore, the Regulation regulates rules and principles related to the procedure of authorization of the valuation agencies; by envisaging the minimum requirements to be satisfied by the valuation agencies for the authorization and the required documents and information which the valuation agency shall submit to the Banking Regulation and Supervision Agency together with the authorization application. As per Article 11, valuation agencies which are deemed appropriate by the Banking Regulation and Supervision Agency shall be authorized to “provide valuation services for immovables, immovable projects and rights and benefits arising from immovables”.
Pursuant to the Regulation, in order for the banks to outsource the valuation services, a report evaluating whether any situation which may prevent independence of the relationship between the bank and the valuation agency occurred or not shall be submitted to the bank’s board of directors and a written agreement, which shall include, inter alia, (i) subject matter, scope, purpose and duration of the valuation service; (ii) a fee arrangement against the services to be provided; (iii) rights and obligations of the parties; and (iv) a covenant to buy a professional liability insurance against any damages arising from valuation services, shall be executed by and between the bank and the valuation agency. As per Article 15, valuation agencies are required to buy a professional liability insurance having the minimum policy amount of TL 500,000.
Finally, the Regulation lists under Article 18, certain cases of violation as a result of which the authorization of the valuation agency shall be abolished. That being said, the Banking Regulation and Supervision Agency may abolish the authorization of the valuation agency for a temporary period upon consideration of violation’s nature and aggravation of the parties’ faults.