The Turkish Banking Regulation and Supervision Agency (the “BRSA”) has recently made changes to the Regulation on Bank Equity Capital (the “Regulation”). The amendment was published in Official Gazette No. 30121 on July 11, 2017 and entered into force on the same date.
Overview of the Amendment
Article 9 of the Regulation regulates the deductions to be made while calculating the shareholders' equity of a bank in Turkey. Previously, the banks were required to deduct the following from the core capital and secondary capital:
- the portion of the net book value of the properties exceeding 50% of the bank's shareholders' equity; and
- net book value of the commodities and properties acquired as a result of the enforcement of bank claims and not sold during the following three years.
These items will no longer be deducted from the core capital or the secondary capital of Turkish banks, having a positive effect on the capital adequacy.
Turkish banks property portfolio relatively enlarged due to the increase in non-performing loans in the last two years, The BRSA has taken this measure in order to avoid any negative impact such development might have on banks' capital adequacy.