Recent Development
The Banking Regulatory and Supervisory Authority (''BRSA'') issued a decision dated April 18, 2020 with no. 9000 (''Decision''). Accordingly, as of May 1, 2020, Turkish banks will be required to calculate their ''asset ratio'' (''AR'') on a weekly basis utilizing the formula introduced in the decision.
What's New?
- Pursuant to the Decision, banks must calculate their AR weekly utilizing the following formula:
Asset Ratio (AR) = [Loans + (Securities x 0.75) + (Central Bank Swaps x 0.5)] / [TRY Deposit + (FX Deposit x 1.25)]
- The terms in the numerator of the AR formula have the following
meaning:
- ''Loans'' means the total amount of loans extended by banks to retail and commercial clients, excluding non-performing loans;
- ''Securities'' means the total amount of the private sector bonds and bills, and lease certificates (excluding securities and share certificates issued by foreign residents and purchased by banks), Eurobonds and all kinds of debt instruments issued by the treasury of the Republic of Turkey; and
- ''CBRT Swap'' means the Turkish lira (''TRY") equivalent converted at the buying rate of the Central Bank of Republic of Turkey (''CBRT'') of the total value of the foreign currency given by banks to the CBRT via swaps.
- The terms in the denominator of the AR formula have the
following meaning:
- ''TRY Deposit'' means the total amount of all TRY deposit/participation funds, excluding bank deposits; and
- ''FX Deposit'' means the total amount of deposit/participation funds held in banks in foreign currency, including gold and precious metal accounts.
- Pursuant to the Decision, the monthly average AR for the relevant month cannot fall below 100% for deposit banks and 80% for participation banks.
- Banks whose AR is below the above rate will be subject to an administrative fine up to 5% of the non-compliance amount calculated in accordance with the provisions of the Decision.
Conclusion
The BRSA Decision aims to accelerate the injection of financing sources into the real sector in order to minimize the economic effects of the COVID-19 outbreak. In this respect, while the BRSA invites banks to take a more active role in the fight against COVID-19, it also ensures a functional financial support mechanism through administrative sanctions.
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.
