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Legal Alerts

28/10/2020

New Steps Towards Normalization: Asset Ratio Rule, Easier to Comply With

Legal Alerts
Banking & Finance
Financial Institutions

Recent Developments
The Banking Regulatory and Supervisory Authority (“BRSA“) change the formula of the asset ratio (“AR“) formula with its decision dated October 26, 2020 and No. 9238.

What’s New?

The BRSA initially defined the AR formula as:

AR = [Loans + (Securities x 0.75) + (Central Bank Swaps x 0.5)] / [TRY Deposit + (FX Deposit x 1.75)]

The “Loans” item in the AR formula was defined as “the total amount of loans extended by banks to retail and commercial clients, excluding non-performing loans.” The BRSA further clarified the scope of this item with its decision dated April 30, 2020.

With its latest decision dated October 26, 2020, the BRSA decided that foreign currency loans extended by resident banks to resident banks with a maturity of more than one year and syndicated loan facilities extended by resident banks to resident banks be included in the “Loans” item of the AR formula as of November 1, 2020, with a coefficient of 1.00.

In this respect, Turkish banks will include foreign currency loans with a maturity of more than one year in the calculation of AR, in the amount they have disbursed, and syndicated loan facilities in the calculation of AR, in the amount they have contributed to the syndication.

Conclusion

The BRSA continues to take solid steps as part of the normalization process by facilitating Turkish banks’ compliance with AR.