The Turkish Banking Regulation and Supervision Agency (“BRSA”) has made a series of amendments to a range of banking-related Regulations and Communiqués. Changes apply to banks’ internal systems, capital adequacy, liquidity coverage ratio, equity, as well as disclosures related to credit risk reduction techniques and risk management statement. Building on the regulatory overhaul introduced with the changes published in Official Gazette number 29511 on 23 October 2015; the amendments contribute to establishing a more compatible regulatory structure with Basel standards than previously existed in Turkey and were published in Official Gazette number 29599 on 20 January 2016.
The amendments introduce changes to secondary legislation which collectively 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, including Turkey, are expected to harmonize domestic law with Basel III provisions by 31 March 2019.
Significant changes introduced by the amendments include (source documents only available in Turkish):
- The Amendment Regulation on Internal Systems of Banks and The Evaluation of Internal Capital Adequacy makes Banks’ Executive Orders incumbent upon keeping sufficient capital for the risks incurred, as well establishing and implementing an internal capital adequacy assessment process.
- The Amendment Regulation on Measurement of the Liquidity Coverage Ratioempowers the BRSA to specify the liquidity coverage ratio for development and investment banks, subject to approval by the Central Bank of the Turkish Republic (“Central Bank”). When the BRSA and Central Bank determine liquidity squeeze throughout the financial market, the BRSA can decide (if approved by Central Bank) to keep the liquidity coverage ratio less than the ratio set forth in the article, provided premium liquidity assets are used.
- The Amendment Regulation on Equity of Banks settles the items for determining additional capital stocks.
- The Amendment Regulation on Measurement and Evaluation of Capital Adequacy of Banks amends the methods for measuring a bond’s amount with regard to immovable, while assessing the risk-weight amount and changes the definition of “pledge margin”.
- The Amendment Communiqué on Disclosures Statements On Risk Managementschange the definitions of “Consolidated Supply” and “Non-consolidated Supply” to be disclosed with regard to liquidity risk.
- The Amendment Communiqué on Disclosures related to Techniques on Decreasing Credit Risks modifies the risk weights of commercial immovable to be disclosed.
- The Amendment Communiqué on Techniques of Decreasing Credit Risks allows banks to choose the method (including simulation or historic reference methods) for setting volatility, provided the method covers all risk.
- The Amendment Communiqué on Measurement of Principle Amount For Credit Risk according to Internal Rating based Approach introduces new principles for classifying risk volatility and commercial immovables.
- The Amendment Communiqué on Evaluation of Risk Assessment Models and Measurement of Market Risk introduces a new and detailed technique for measuring the yield curve to show volatility changes related to interest rates.
Further information and details of related amendments can be found in Edition 10 of the MA | Gazette.
Information first published in the MA | Gazette, a fortnightly legal update newsletter produced by Moroğlu Arseven.