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.
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.
The Banking Regulation and Supervision Agency has amended the Regulation on Calculation of Liquidity Coverage Ratio of Banks (published in the Official Gazette dated March 21, 2014 and numbered 28948) (the “Regulation”). Pursuant to the amendment to the Regulation, for the purpose of paragraphs 3 and 4 of Article 4 of the Regulation, consolidated total liquidity coverage ratio and consolidated foreign exchange liquidity coverage rate shall be calculated as of the last day of month until January 1, 2018. Additionally, Consolidated Liquidity Coverage Rate Notification Table has been replaced with another table as attached to the amendment to the Regulation on Calculation of Liquidity Coverage Ratio of Banks.
The Banking Regulation and Supervision Agency has amended Provisional Article 2 of the Communiqué on Financial Statements to be Disclosed by Banks and Statements and Footnotes Related Thereto (published in the Official Gazette dated January 20, 2016 and numbered 29599) and regulated that until January 1, 2018, basic arithmetic average of last 3-month’s data calculated as of the last day of each month shall be used for the submission of data in the consolidated liquidity coverage ratio table as per paragraph 2 of Article 13 thereof.
The Banking Regulation and Supervision Agency has amended the Communiqué on Credit Risk Reduction Techniques (published in the Official Gazette dated September 6, 2014 and numbered 29111) on March 2, 2017 with immediate effect. The amendment mainly focuses on the role of financial collaterals in the evaluation of credit risk and application of credit risk reduction techniques. Pursuant to the amendment, banks shall systematically record financial collaterals obtained as security for credit transactions, the time period for which such financial collaterals will be under pledge or subject to assignment as the case may be, for which credit such financial collaterals have been provided and the risk amounts in relation to which such financial collaterals have been taken into account in credit risk reduction calculations and the date of such calculations.
The amendment also envisages that in cases where banks obtain financial collateral for a specific credit, such match-up (between the respective collateral and the credit) shall continue during the protection period, or in cases where the relevant collateral is provided for a period extending beyond the maturity of the relevant receivable, until the maturity date of the respective receivable. In addition, banks can obtain a collateral to stand as security for a client’s multiple risks provided that matching such collateral with more than one risk will not cause a retroactive maturity mismatch with respect to the prior risk such collateral has been matched with.
Furthermore, the amendment envisages that the value of the collateral rendered ineffective in credit risk reduction calculation due to a reduction in the credit amount can be released or re-used in credit risk reduction.
The Banking Regulation and Supervision Agency has amended the Regulation on Outsourcing of Support Services by Banks (published in the Official Gazette dated November 5, 2011 and numbered 28106) (the “Outsourcing Regulation”) on March 4, 2017 with immediate effect. Prior to the amendment, the Outsourcing Regulation envisaged that the (i) collection, (ii) counting, (iii) distribution and (iv) delivery services in relation to negotiable instruments can only be conducted by companies incorporated and operating pursuant to the Law on Private Security Services (Law No. 5188) (published in the Official Gazette dated June 26, 2004 and numbered 25504). However, with the amendment, the Outsourcing Regulation now allows banks to outsource the abovementioned services listed under limbs (i) to (iv) from service providers duly authorized by Information and Communication Technologies Authority in accordance with the Law on Postal Services (Law No. 6475) (published in the Official Gazette dated May 23, 2013 and numbered 28655) as well, in addition to the companies subject to the Law on Private Security Services (Law No. 5188).
The Ministry of Customs and Trade (the “Ministry”) and the Undersecretariat of Treasury (the “Treasury”) have introduced the Communiqué on Implementation of Barcode Checks (published in the Official Gazette dated December 31, 2016 and numbered 29935) (the “Communiqué”) in order to regulate the procedures and principles on (i) the definition and content of the barcode and MERSIS number to be inserted into the check leafs; (ii) establishment of the Barcode Scanning and Information Sharing System (the “System”); and (iii) disclosure of data maintained within the System to third parties. As per Article 1 of the Communiqué, checks printed by Turkish banks and Turkish branches of foreign banks are under the scope of the Communiqué.
The Communiqué introduces the Barcode Check Report which shall be furnished via the System and pursuant to Article 4 of the Communiqué, the Barcode Check Report shall contain information related to, inter alia, the identity of the check account holder, serial number of the respective check and other checks owned by the check account holder (i.e. formerly paid or unpaid checks; or whether there is any injunction on such checks etc.).
According to Article 5 of the Communiqué, the System shall be maintained and operated by Turkish Banking Association Risk Centre (the “Risk Centre”) and the Risk Centre is entitled to share the data processed in the System (including the Barcode Check Report) with certain entities authorised to exchange data (the “Authorised Entities”) to which the Risk Centre is entitled to provide information or from which the Risk Centre is authorised to receive information in accordance with the provisions of the Banking Law (Law No. 5411).
As per Article 6 of the Communiqué, the banks are required to register the real persons and legal entities which open a check account within such bank, as well as the authorised representatives of such legal entities, with the System. Additionally, Article 7 of the Communiqué indicates that real persons and legal entities for which a barcode check is issued shall register their checks with the System before the presentation date of the respective barcode check. Finally, Article 8 of the Communiqué sets forth the rules and the procedure to be applied for protection by the Risk Centre of data maintained within the System and the legal responsibilities of the Risk Centre and the Authorised Entities for the protection of data processed in the System.
The Communiqué envisages that the banks shall no longer print and deliver any check leaf which does not bear a barcode as of December 31, 2016.
Finally, Articles 4, 6 and 8 of the Communiqué entered into force as of January 1, 2017 and Article 7 of the same shall enter into force as of December 31, 2017.
The Communiqué on Uniform Accounting Plan and Prospectus (published in the Official Gazette dated January 26, 2007 and numbered 26415) (the “Communiqué”) which sets forth the accounting system to be adopted by banks (other than participation banks) was amended on 22 December 2016 to enter into force as of 1 June 2017.
The amendment introduces, changes and removes certain accounts within the scope of the uniform accounting plans to be adopted by banks (other than participation banks) and listed under Article 8 of the Communiqué. Additionally, the amendment introduces three new accounts: (i) Electronic Money Funds; (ii) Payment Funds Protection Account; and (iii) Turkish Lira Funds Accepted by Participation and Investment Banks, allocated to (a) amounts collected in respect of electronic money issued by duly authorized electronic money institutions or banks , (b) to amounts collected as payment funds as defined under the Regulation on Payment Services, Electronic Money Issuance and Payment Institutions and Electronic Money Institutions (published in the Official Gazette dated June 27, 2013 and numbered 29043), and (c) to amounts collected as debtor funds as per Article 60 of the Banking Law (Law No. 5411) (published in the Official Gazette dated November 1, 2005 and numbered 25983), respectively.
For a detail list of the accounts added to or removed from the uniform accounting plans of banks (other than participation banks), please refer to the Communiqué.