The Communiqué on Calculation of Risk-Weighted Amounts Concerning Securitization (“Communiqué”) was published in the Official Gazette number 29511 on 23 October 2015. It was published by the Banking Regulation and Supervision Agency and will enter into effect on 31 March 2016. The Communiqué outlines procedures and principles for calculating risk-weighted amounts arising from bank securitization positions. The Communiqué introduces more detailed securitization procedures and calculation methods. 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 issued to prevent insufficiency of liquidity caused by risky loans. Member states are expected to harmonize domestic law with Basel III provisions by 31 March 2019.
The Communiqué addresses principles for securitization, the content of the banks’ liability for discretionary funds, as well as calculation principles for risk-weighted amounts and credit risk transfers.
The Communiqué introduces the following provisions and changes:
- Definition for the scope of assets which can be subject to securitization. The new definition includes credits, undertakings, asset based securities, mortgage based securities, debt instruments and equity securities and similar assets.
- Rules and requirements for implicit support by banks.
- Detailed procedures and rules which apply if a call-back option exists in a securitization.
- Increased detail for principles regarding credit scores made by credit scoring agencies, scoring conditions, usage principles and credit quality matchings for credit scores.
- Increased details for provisions regarding calculating risk-weighted amounts.
- Banks which establish securitization must now “tread carefully” when issuing credits for the purpose of securitization. The Communiqué requires such banks to act as if they will monitor the credit in their own balance sheets. Banks must take into account the Banking Regulatory and Supervisory Authority’s Manual on Credit Management by the Banks when approving, renewing and re-structuring credits to that effect.
- New rules and principles for credit risk reduction techniques concerning securitization positions.
The Communiqué on Calculation of Risk-Weighted Amounts Concerning Securitization number 28337 will be repealed when the Communiqué enters into effect on 31 March 2016. Please see this link for full text of the new Communiqué (only available in Turkish).