With a view to ensure harmonization and compliance with prevailing international standards and best practices across the financial sector;
The draft legislative proposal dated 02.06.2020 and numbered 98 which will bring substantial amendments to the Banking Law Numbered 5411 has been submitted to the attention of Turkish Grand National Assembly and is expected to be adopted "as is" maybe with only some slight amendments.
Among others, the proposed amendment aims to ensure that the products and services extended by participation banking system are compatible with international examples, enhance reliance and stability within the financial sector and increase the deterrence effect of administrative fines to be imposed in case of any breach.
The most important changes set forth at the Legislative Proposal is strengthening of cash capital structures in incorporation of factoring companies and increasing their institutional capacity, changing the law in a way to meet daily needs of the banking sector and finally increasing the competitiveness within the sector.
The bulk of the Proposal consists of measures to strengthen the prevention mechanism. Accordingly;
- Administrative fines have been updated and more severe and aggravated sanctions have been set forth as a measure.
- Punishment for information abuse, market fraud and manipulation crimes have been increased.
- The measure of temporarily suspension of the signatory powers of the bank members who jeopardize the banking system has been set out.
- With the introduction of the amendments, Banks will be obliged to draft prevention plans, besides in the existence of a situation identified right after the audits which might lead to deterioration in financial structure, Banking Regulation, and Supervision Agency will be entitled to take necessary precautions without awaiting the Bank to take the necessary actions.
In the Legislative Proposal, it was proposed to broaden the powers granted to Capital Market Board and the Banking Regulation and Supervision Agency, respectively, with an aim to achieve the purpose of the Amendment and increase the control at financial sector. Accordingly;
- In the event of introduction of new financing tools. Banking Regulation and Supervision Agency has been authorized to determine whether these methods will be deemed as loans.
- The Banking Regulation and Supervision Agency has been granted with the authority to request programs from banks in case of a risk.
- In order to avoid irreparable damages, it is set out that access to the websites to carry out unauthorized activities can be blocked. In this regard, the Banking Regulation and Supervision Agency has been equipped with the authority to apply to the prosecutor's office and to file a criminal complaint.
- Central Bank of Republic of Turkey has been authorized to determine all fees, expenses and commissions received by banks.
- The Capital Markets Board has been given the authority to set different procedures depending on the nature of publicly traded corporations.
- Central Bank of Republic of Turkey has been authorized to determine the period to disclose maximum contractual interest rate and default interest.
Apart from the aforementioned issues, the Legislative Proposal also aims to explain the Banking Law No. 5411 in crystal clear manner without leaving a room for different interpretations on the provisions. It is also aimed to resolve the potential conflict with local and international laws. In this regard, the new concepts and arrangements expected to be incorporated into Banking Law are as follows;
- The concept of "Security Trustee" which is also called as "Trust" has been incorporated into Turkish Law. To ensure fulfilling of the obligations arising out of capital market instruments in due course, the assets to be identified by the Capital Market Board might be used as a security. Accordingly, these assets might be assigned to "Security Trustee" which is in the nature of an investment company, and an in rem right over these assets will be established. The Legislative Proposal regulates the obligations of the Security Trustee, Security Management Contract, and measures that could be taken in case of any violation of the pertinent contract.
- "Housing financing funds" and "wealth financing funds" which lack of legal personality will be treated as legal persons in registration, cancelation and similar transactions at all registries including land registry and trade registry.
- "Investment Funds", which do not have any legal personality will also be treated as legal persons when it comes to registration, amendment, cancelation and similar transactions at all registries including land registry and trade registry.
- Turkey Assets Fund Management Joint Stock Company, Turkey Wealth Funds or transactions concluded with funds belonging to them, debt instruments issued by them or bonds and similar debt instruments payment for which have been guaranteed by them will not be subject to any credit limitations.
- Areas where development and investment banks can provide funds have been expanded.
- In line with the Law on Protection of Personal Data No. 6698, the character of the trade secret and the conditions for the transfer of personal data have been regulated.
- Manipulation and misleading transactions were counted in financial markets and it was regulated that administrative fines will be in question in these cases.
- Flexibility has been provided to equity crowdfunding method.
- Investment firms have been granted with the authorization to operate in the area project financing, extend credit for the same and set up project finance funds.
- In the establishment of factoring companies, the capital amount to be paid in cash has been increased from twenty million TRY to fifty million TRY.
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.