Turkey: Regulation Published For Measurement And Evaluation Of Capital Adequacy Of Banks In Turkey

The Regulation on Measurement and Evaluation of Capital Adequacy of Banks was published in Official Gazette number 29511 on 23 October 2015 ("Regulation"). The Regulation was prepared by the Banking Regulation and Supervision Agency and enters into effect on 31 March 2016. The Regulation outlines principles and procedures to ensure banks hold sufficient equity to balance the damage related to probable risks. 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 Regulation was prepared based on Articles 43, 45, 47 and 93 of Banking Law numbered 5411. These articles regulate maintenance of equity, capital adequacy, as well as excess limits and rates related to equity.

Significant matters stipulated by the Regulation include:

• Determining amounts based on credit risk.
• Determining amounts based on market risk.
• Determining amounts based on operational risk.
• Ratios for capital adequacy.

The Regulation on the Measurement and Evaluation of Capital Adequacy of Banks (Official Gazette number 28337, 28 June 2012) will be repealed when the new Regulation enters into force on 31 March 2016. Please see this link for full text of the new Regulation (only available in Turkish).

Information first published in the MA | Gazette, a fortnightly legal update newsletter produced by Moroğlu Arseven.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.