With its decision No. 10250 and dated June 24, 2022, the Banking Regulatory and Supervisory Authority (the “BRSA“) has introduced a Turkish lira borrowing restriction for non-financial institution companies subject to independent audit (“Companies“).
Pursuant to the Decision, the Companies’ borrowing of Turkish lira commercial cash loans will be subject to various restrictions depending on the amount of their foreign exchange assets (the “FX Assets“). The FX Assets will include gold, foreign currency cash as well as foreign exchange deposits and foreign currency denominated securities and stocks issued by non-residents and other monetary assets such as reverse repo with non-residents. The FX Assets will not include other monetary assets such as foreign currency denominated securities and debt instruments (e.g. Eurobond) issued by issuers resident in Turkey.
Companies whose FX Assets exceed TRY 15,000,000:
These Companies will not be able to borrow Turkish lira cash commercial loans in case their FX Assets exceed 10% of the higher of their net assets and their net sales revenue of the last financial year pursuant to their most recent financial statements as of the date of the application for the Turkish lira loan.
The aforementioned calculation will be made over the consolidated balance sheets for the Companies that must prepare consolidated financial statements.
Companies that are not allowed to borrow foreign currency loans having foreign currency net position deficit for the three-month period following their loan application made to the bank
These Companies will be able to borrow Turkish lira commercial cash loans, limited to their position deficit of the three-month period following their application date, provided that the position deficit was has been determined pursuant to the examination to be made on the most recent financial statements prepared by the authorized independent audit firms and these Companies have applied to the bank with the documents approved by such firms.
Companies whose FX Assets do not exceed TRY 15,000,000
These Companies can borrow Turkish lira commercial cash loans, provided that their current FX Assets, net assets and net sales revenue of the last year pursuant to the most recent financial statements have been determined by an independent audit firm; they have declared and undertaken that the Turkish lira equivalent of their FX Assets will not exceed TRY 15 million; if it exceeds such amount, it will not exceed 10% of the higher of their net assets and their net sales revenue of the last financial year during the term of the loan that they will borrow; and they submit information regarding the current value of their FX Assets, net assets and net sales revenue of the last 12 months as of the end of the previous month pursuant to the previous month-end balance sheet to the bank within the first 10 business days of each month, in order to ensure that the bank is able to monitor the aforementioned declaration and undertaking.
The calculation of the FX Assets will be based on the foreign exchange buying rate of the Central Bank of the Republic of Türkiye on the date of the calculation.
Turkish banks’ liability
With the press release dated June 26, 2022 in relation to the Decision, information and documents that must be obtained from clients by Turkish banks have been clarified. Accordingly, the BRSA will not publish any standard form for the documents to be submitted by clients to banks. However, banks will be required to receive documents from their clients to monitor the use of proceeds, including an undertaking that “the client will submit any information and documents to the bank so that the bank can confirm that the proceeds of the loan have been used in accordance with its purpose” and/or to amend the agreements with their clients to pave the way for this, and bring their business processes in line within this legal framework.
Commercial cash loans subject to these restriction and outstanding loans
- Any increase in the balance of Turkish Lira cash credit transactions such as revolving loans, overdraft accounts (kredili mevduat hesabı) (“KMH“) and corporate credit cards as at the end of each month will be considered new disbursements. Thus, in case of such increase compared to the end of the previous month, the client will submit the aforementioned documents approved by independent audit firms to the bank until this calculation to be made as of the end of the month.
- In case of overnight loans, if that there is any outstanding balance risk as at the calculation date at the end of each month f, the client will have to submit these documents approved by the independent audit firm to the bank until the aforementioned calculation to be made as of the end of the month.
- Spot commercial cash loans in Turkish Lira, in respect of which an agreement has been executed but which has not yet been disbursed before the date of the Decision, and disbursement of which will take place within the week starting from June 27, 2022 will not be affected by the Decision.
- Non-cash loans such as direct debit system do not fall under the scope of the Decision unless they convert into cash loans.
- Loans restructured in accordance with a framework agreement (please refer to our legal alert dated July 27, 2021 for the Turkish financial restructuring regime) after the decision date will not be considered new disbursements. However, the loans that are not restructured in accordance with a framework agreement and are renewed through an amendment to the existing loan agreement after the date of the Decision or extended to partially or completely refinance existing loans will be considered new disbursements.
With the Decision, the Companies having excess of FX Asset are now expected to dispose of such excess supporting the financial stability as well as increasing the value of the Turkish Lira.