Banking Regulation and Supervisory Agency of Turkey (the
"BRSA" or the "Banking
Authority") has finally cleared the way for the
public offering and private placement of Turkish Lira denominated
bonds and bills by deposit banks through its resolution dated
30.09.2010 and numbered 3875 (the
"Resolution"). The step taken by the
BRSA is expected to let deposit banks secure longer maturity
funding and cope with the maturity mismatch risk affecting their
As stated in our Legal Alert dated 25.03.2010 and numbered
10/06, Capital Markets Board of Turkey issued amendments to the
legislation governing debt instruments with a view to broaden the
issuer base of bank bonds which was solely limited to investment
banks. Based on this initiative, Finansbank A.S, a private Turkish
Bank, was the first deposit bank to make a filing for public
offering of bank bonds in the local private bond market (the
"Market"), but rejected by the BRSA
which was then of the opinion that it was not appropriate for
deposit banks to conduct any type of bond offering in the Market.
Since then, the BRSA has only paved way for deposit banks'
foreign exchange denominated bond offerings conducted in
international markets, but has always declared that it would be
possible for those banks to tap into the Market when conditions are
The BRSA, after considering the recent developments in the
Turkish bond market, has finally decided to change its perspective
and ruled that deposit banks can also issue Turkish Lira
denominated bills and bonds. However, the Banking Authority has
envisaged certain requirements for deposit banks and investment
banks intending to conduct public offering or private placement in
the Market. Below are the key aspects of the new set of
Banks seeking to issue bonds and bills must have a capital
adequacy ratio of at least 12% when they make their
Retail investors shall be informed that funds to be paid to the
banks in return for bills and bonds are not under the insurance
coverage of Saving Deposits Insurance Fund.
Banks, before conducting the public offering/private placement,
shall provide a report to the BRSA which should consider the risks
arising from the issuance of bonds and bills and which should
describe the procedures to be used for monitoring, measuring and
controlling such risks.
Banks, before issuing bonds and bills, shall secure that they
comply with the corporate governance principles and other
protective provisions stated in the Banking Law.
Issuance of bonds and bills are subject to certain limits which
shall be calculated in accordance with the principles stated in the
Resolution. However, such limits are not applicable for investment
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.
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