The Regulation on Banking Credit Transactions Came into Effect on January 1, 2024

The Regulation on Banking Credit Transactions outlines key rules pertaining to the granting of credit, including the delegation of credit approval authority to the board of directors, prevention of conflicts of interest, the role of credit committees, credit limitations, risk measurement, and documentation.

The Regulation on Banking Credit Transactions (“Regulation”), published in the Official Gazette dated December 21, 2023, with number 32406, and set to be effective from January 1, 2024, introduces numerous new regulations specifically related to granting loans, approval processes, and other administrative policies. These changes aim to establish policies, ensure their implementation, and monitor them concerning credit issuance and approval procedures.

The Regulation will be implemented by the President of the Banking Regulation and Supervision Agency (“BRSA”).

Notable amendments, introduced with the Regulation are as follows:

Banks are now required to obtain account status documents from customers for both cash and non-cash loans exceeding 5 million TL. Previously, this requirement applied only to loan requests not exceeding 2 million TL.

Except for consumer loans, if the loans to be granted exceed the threshold amount of 5 million TL, account status documents related to these loans will continue to be obtained within 9 months following the fiscal year. Domestic banks may be exempt from obtaining account status documents for transactions between them with no maturity exceeding 3 months.

Banks will be responsible for measuring the risks associated with loans, regularly analyzing and monitoring the financial strength of the counterparty, obtaining necessary information and documents, and establishing the principles related to them.

From customers monitored as live receivables, it is now mandatory for banks to obtain, during the loan allocation stage, the most recent audited financial statements and independent audit reports, an analysis table prepared based on the information included in the financial statements specified in the Regulation, and the assurance report of the independent audit institution. For publicly traded companies, compliance with corporate governance principles report is also required.

For loans determined by the BRSA, it is now a requirement to obtain a credit rating note from an authorized institution.

Maximum limits for credit collateral ratios in mortgage-backed loans, and for vehicle loans used for acquiring passenger cars, as well as maximum maturities for consumer loans and the restructuring of consumer loans will be determined by the BRSA in consultation with the Strategy and Budget Presidency and the Ministry of Treasury and Finance.

In the valuation of second-hand passenger vehicles, the basis will be the insurance value. The BRSA will have the authority to determine or impose additional limitations in this regard.

Those with credit approval authority will not be allowed to participate in the evaluation and decision-making stages of credit transactions in which they or their spouses and dependent children, or other individuals or entities constituting a risk group with them, are parties.

The CEO or board members of the bank will not be subject to this provision regarding those within the risk group only due to their status within the bank.

Transactions with the risk group to which the bank belongs and individuals specified in Article 50 of the Banking Law; conditions required in lending and other transactions, including allocation, payment, and collateralization, cannot differ from market conditions at all stages.

The full text of the Regulation can be reached via this link. (Only available in Turkish)