Recent Developments
The Banking Regulatory and Supervisory Authority (the “BRSA”) amended (the “Amendment”) to the Regulation on the Restructuring of Debts Owed to the Financial Sector (the “Regulation“).
The Amendment entered into force with its publication on the Repeating Official Gazette No. 30886/1 dated September 12, 2019.
What’s New?
- The Amendment brings the Regulation in line with Provisional Article 32 of the Banking Law No. 5411 (the “Provisional Article“), which entered into force earlier this year and is the basis for financial restructurings.
- In accordance with the Provisional Article, the definition of “creditor” also includes non-resident banks and other financial institutions that directly extended loans to a Turkish resident borrower; multinational banks and institutions that directly invested in Turkey; SPVs established by these institutions to collect receivables; and investment funds established for this purpose.
- As also set forth under the framework agreement, non-resident banks and other financial institutions that directly extended loans to a Turkish resident borrower, multinational banks and institutions that directly invested in Turkey can join the framework agreement without being subject to the consent of the creditors or any decision quorum.
- The Amendment clarifies that the purpose of financial restructurings is to enable debtors to regain their ability to repay their debts within a reasonable time. Any financial restructuring conducted without this objective will not fall within the scope of the Regulation and the framework agreements. Accordingly, these transaction will not benefit from tax exemptions and assurance in respect of embezzlement and provided for restructurings under framework agreement.
- Any financial restructurings conducted outside of the framework agreement executed before the Provisional Article’s entry into force will not be within the scope of the Regulation and the framework agreements. Therefore, those financial restructurings will not benefit from assurance in respect of embezzlement or from the tax exemptions.
- Lastly, all information related to the financial restructuring process and the debtors will be submitted to the BRSA upon its request.
Conclusion
The Amendment brings the Regulation in line with the Provisional Article and the changes that have been made to the framework agreement since August 2018.
