Central Bank of the Republic of Turkey (the “Bank”) issued a new regulation titled “Regulation on Monitoring the Transactions Affecting the Foreign Currency Position by the Central Bank of the Republic of Turkey”, which was published in the Official Gazette dated 17 February 2018 and numbered 30335 (the “Regulation”).
Any legal entity resident in Turkey shall be affected by the Regulation if the aggregate of its foreign currency cash loans and foreign currency indexed loans (“FX Loans”) is USD 15 million or more (or equivalent in any other tradable currency) as at the last business day of a financial quarter (the “Obliged Entity”).
It is worth mentioning that this threshold of USD 15 million complements the recent changes under the Decree No. 32 on the Protection of the Value of Turkish Currency (“Decree No. 32”), which introduced certain restrictions/limitations for legal entity residents in Turkey to borrow in foreign currency, as explained in our e-Alert of 5 February 2018.
Obliged Entities must (i) inform the Bank on a quarterly basis about their outstanding FX Loan amounts as at the last business day of the relevant financial quarter, (ii) have independent auditors to audit the accuracy of such notifications and (iii) if so requested by the auditor, revise and/or amend any inaccurate information as previously notified to the Bank.
These requirements shall apply regardless of whether an Obliged Entity obtained the FX Loans from a bank and/or financial institution in Turkey or from abroad and cease to be applicable by the end of the relevant financial year in which the FX Loan balance falls below USD 15 million.
Method of notification
An Obliged Entity is required to submit an online data form to the Bank through the Systemic Risk Data Monitoring System (the “System”) established by the Bank. The submission needs to be made within a month as from the end of relevant financial quarter (i.e. 31 March, 30 June and 30 September) and within three months as of from the end of the relevant financial year (i.e. 31 December).
Although the Regulation entered into force on 17 February 2018, the website of the System (www.tcmbveri.gov.tr) is not operational, and the Bank is yet to announce further details in terms of registration and notification submission through the System.
Sanction for non-compliance
As per the Law on the Central Bank of the Republic of Turkey, Law No. 1211, if the notification is not duly made within the periods provided under the Regulation, or the documents and/or information provided by an Obliged Entity and/or independent auditor is not accurate; the officials/representatives of any Obliged Entity and/or the independent auditor may be criminally charged and sentenced to an administrative fine between TRY 20,000 and TRY 200,000.