The Communiqué on Calculating Market Risks Using Risk Assessment Models and Evaluating Risk Assessment Models (“Communiqué”) was published in Official Gazette number 29511 on 23 October 2015. It was issued by the Banking Regulation and Supervision Agency (“Agency”) and enters into effect on 31 March 2016. The Communiqué outlines principles, procedures and standards for risk assessment models for banks when calculating and assessing market risks. It represents a more compatible regulatory structure with the Basel standards than previously existed in Turkey.
The Basel Committee on Banking Supervision (“Basel Committee”) frames general bank supervision and regulation worldwide. The Communiqué introduces amendments to align Turkish regulation with the standardized approach introduced in 2012 by the Basel Committee’s Regulatory Consistency Assessment Programme, particularly the Third Basel Accord (Basel III). Basel III was developed to prevent insufficiency of liquidity caused by risky loans. Member states, including Turkey, are expected to harmonize domestic laws with Basel III provisions by 31 March 2019.
Under the Communiqué, banks must obtain the Agency’s consent to calculate general market risks, specific risks, currency risks and commodity risks via a method other than the standard risk assessment method. Permission may be granted as a permit which includes all risk types, or a partial permit which applies only to certain risk types (adopting the standard method for risk types not covered by the partial permit).
The Communiqué addresses use of market risk assessment models. It includes minimum requirements for banks to be allowed to use certain market risk assessment models.
The Communiqué also addresses measurement of specific risks against exposed value and internal validation standards. These include principles, comprehensive risk capital requirements and internal validation standards.
The Communiqué on Calculating Market Risks Using Risk Assessment Models and Evaluating Risk Assessment Models (Official Gazette number 28337, 28 June 2012) will be repealed when the new Regulation enters into force on 31 March 2016. Please see this link for the full text of the new Communiqué (only available in Turkish).