With its decision No. 10248 dated June 23, 2022, the Banking Regulatory and Supervisory Authority (the “BRSA“) has taken a measure discouraging derivative transactions of the non-financial institution residents in Turkey with non-residents.
Prior to the new measure, the risk weighting applied for the calculation of the capital adequacy for commercial cash loans varied between 20% and 150%, depending on the loan customer’s rating, regardless of whether the customer has carried out derivative transactions with non-residents. Pursuant to the BRSA’s decision No. 10188 dated April, 28 2022, with several exceptions, this ratio, which was applied for the calculation of the capital adequacy for commercial cash loans, was increased to 200%.
This time, in accordance with the new measure, the BRSA decided to apply a risk weighting of 500%, regardless of the method used to calculate the amount subject to credit risk, as well as the credit risk mitigation techniques, credit ratings and real estate mortgages, for the calculation of the capital adequacy ratio for Turkish lira and foreign currency commercial cash loans in to be made available to non-financial institution residents that enter into derivative transactions with non-residents after June 23, 2022.
With the new measure, the funding cost of Turkish residents that enter into derivative transactions with non-residents would increase guiding these borrowers towards derivatives transactions with Turkish resident financial institutions.