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11/09/2021 https://www.esin.av.tr/wp-content/themes/esin/images/esin.jpg

Updates on Turkish Banks’ Utilization Fees and Prepayment Fees

Legal Alerts
Banking & Finance
Financial Institutions

Recent Development

The Communiqué Amending the Communiqué on the Procedures and Principles Regarding Fees Banks Can Charge Commercial Clients (“Amendment“) entered into force following its publication in the Official Gazette No. 31410 dated March 1, 2020. The Amendment updated the utilization fees and prepayment fees that banks can charge their commercial clients.

What Does the Amendment Say? 

Pursuant to the Amendment, the upper limit for utilization fees that banks can charge commercial clients is now 1.1% (up from 1%).
Moreover, the maximum amount of prepayment fees for loans extended after March 1, 2020 will be subject to the following ceilings:

  • For TRY loans with a remaining maturity of 24 months or less, 2% of the amount to be prepaid by the client (which must be calculated after making the applicable discounts due prepayment); and
  • For TRY loans with a remaining maturity of more than 24 months, banks may increase the above-mentioned base amount by 1% for each year remaining over the initial 24-month period.

    The time period remaining over the 24-month period will be regarded as a full year. For example, for a credit with a remaining maturity of 25 months, the bank may charge 3%, and for a loan with a maturity of 49 months, the bank may charge 5% as an early termination fee.

  • For FX or FX-indexed loans, a one hundred basis points-increase will be applied to the results obtained by using the above-mentioned calculation method.

Conclusion

The Amendment increases the ceilings for utilization and prepayment fees that banks may charge their commercial clients.

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