The Banking Regulation and Supervision Agency (the “BRSA“) amended its Regulation on Banks’ Transactions Subject to Approval and Indirect Shareholding (the “Amendment”).
- Currently, Turkish banks must obtain approval from the BRSA to establish new subsidiaries in Turkey or abroad; to acquire any shares of domestic or foreign companies; or to open offshore branches or representative offices abroad.
- The Amendment introduces a new exemption to the requirement of the BRSA’s approval for banks’ acquisitions of domestic companies’ shares. Accordingly, participation banks (also known as Turkish Islamic banks) will not need to obtain the BRSA’s approval for financing provided to domestic companies as capital contribution under the investment partnership model pursuant to Article 19 of the Regulation on Banks’ Loan Transactions.
- With the Amendment, banks incorporated in Turkey can conduct the below activities without being required to obtain the BRSA’s approval, provided that they observe the corporate governance principles and prudential provisions under the Banking Law No. 5411 and notify the BRSA at least 30 days prior to the relevant activity.
- The banks will be able to acquire foreign companies’ shares if such acquisition is mandatory under the laws of the relevant jurisdiction and the bank’s total shareholding therein does not exceed 0.3% of the bank’s equity. The bank must submit a report to the BRSA explaining the area of activity of the target company in detail as part of the 30-day prior notice to be made to the BRSA.
- Banks will be able to open additional branches in a jurisdiction where they previously obtained the BRSA’s approval for branch opening, if the ratio of the total branch size in that jurisdiction to bank’s assets does not exceed 10%.
The facilitation of Turkish banks’ share acquisition in existing or new foreign companies and offshore branch openings will contribute to the Turkish banks’ cross-border growth. Additionally, the number of participation banks’ financings through capital contribution will likely increase.