Turkey's Banking Regulation and Supervision Agency
("BRSA") has introduced a system for measuring and
evaluating capital adequacy in banks which are "too big to
fail". Principles and procedures are outlined to ensure
domestic banks hold sufficient equity to balance damages related to
probable risks. The Regulation is the latest in a series of Turkish
banking regulation changes, which collectively develop a more
compatible regulatory structure with the Basel standards. The
Regulation on Measuring and Evaluating Capital Adequacy for Banks
("Regulation") was published in Official Gazette number
29633 on 23 February 2016.
The global financial crisis highlighted the necessity of close
monitoring for systematically important banks ("SIB").
The paradigm shift came at the expense of "deregulated
approach" that had become the modus operandi of financial
markets and competent regulatory authorities in the pre-crisis era.
Consequently, it became widely understood that measures to bailout
and save SIBs would involve serious costs at a global and domestic
level in the event of a crisis or financial difficulties. These
entities are accordingly deemed "too big to fail". Within
this context, Basel III standards include provisions to define SIBs
and to suggest introducing additional capital adequacy requirements
for global banks. In parallel, G-20 Leaders and The Basel Committee
have emphasized the necessity of the additional capital adequacy
and other safety mechanisms for domestic SIBs. The Regulation
determines systematically important banks in Turkey, as well as
their additional liabilities.
The Regulation outlines an indicator-based measurement approach
for determining whether an entity qualifies as a SIB. Indicators
and sub-indicators consider an entity's:
Lack of service substitutes.
The Regulation establishes a threshold system for each variable,
with the threshold values established and adjusted by the Banking
Regulation and Supervision Board (within the BRSA). Banks which
have a general score exceeding the relevant thresholds, are deemed
to be systematically important. SIBs are then categorized into
three groups based on their overall general scores, calculated
according to specified weightings of the indicators noted above.
Different levels of capital adequacy will apply depending on this
Banks undergo the SIB assessment each year, based on
consolidated data from the previous December.
Banks which qualify as systematically important must maintain
additional loss-absorbency for the following year, in the form of a
capital buffer. Additional loss absorbency is calculated according
to additional core capital, measured under the Regulation on
Capital Maintenance and Countercyclical Buffer, as well as the
ratios for each group settled by Regulation.
During the implementing period, the first assessment will be
conducted according to consolidated data from December 2014. Banks
which are deemed to be SIBs must meet the additional liabilities
until 31 March 2016.
Please see this link for full text of the new
Regulation (only available in Turkish). The BRSA published related
amendments in October 2015 (more) and January 2016 (more).
Information first published in the
MA | Gazette, a fortnightly legal update newsletter produced by
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