On June 26, 2015, the Turkish Banking Regulation and Supervision Authority ("BRSA") amended the Regulation on Accounting Principles and Financial Statements of Financial Leasing, Factoring and Finance Companies and the Regulation on Establishment and Working Principles of Leasing, Factoring and Finance Companies, lowering the provisioning requirements for financing companies, and, for certain types of financial companies, adding a portion of provisioned amounts to shareholder equity.
New provisioning requirements for finance companies
The amended regulation has reduced finance companies' general provisioning requirements for consumer loans (other than mortgage loans):
- 1% for loans not in default or in default less than 30 days, down from the previous 4%,
- 2% for loans in default for 30 to 90 days, down from 8%, and
- if a finance company's ratio of the sum of non-performing non-mortgage consumer loans and uncollectible receivables to the sum of its non‑mortgage consumer loans exceeds 8%, (i) 4% for loans not in default or in default less than 30 days, and (ii) 8% for loans which are in default for 30 to 90 days.
Provisioning partially included in shareholder equity
The amendment also changes the calculation of shareholder equity for financial leasing, factoring and finance companies. Provisions set aside for loans made available to the customers, up to 1.25% of the total loan portfolio, are now included in shareholder equity.