Recent Development
The Banking Regulatory and Supervisory Authority (the “BRSA“) previously issued certain flexibilities on credit defaults in its decision dated March 17, 2020. We summarized these measures in our legal alert dated March 18, 2020.
The BRSA has now taken additional measures regarding the COVID-19 outbreak with its decisions dated March 19, 2020 and no. 8949 and 8950. Furthermore, the Turkish Banks’ Association (the “TBA“) issued certain advisory decisions on Turkish banks’ activities.
BRSA’s Measures
- The 90-day default period for financial institutions to set aside special provisions is now 180 days for factoring and financing companies and 240 days for financial leasing companies.
- The 90-day default period for financing companies to set aside general provisions in respect of consumer loans other than housing loans is now 180 days.
- The above measures will be valid until December 31, 2020, and applicable to all financial institutions setting aside provisions in accordance with the expected loan loss model under TFRS 9 and receivables that are not monitored under the “bad debt account”.
- For receivables that are not transferred to the “bad debt account” in spite of the 90-day default, financial institutions will continue to set aside provisions in accordance with their own risk models.
- The BRSA increased the loan-to-value ratio from 80% to 90% for (i) loans secured by mortgage; and (ii) housing loans in respect of properties valued at or below TRY 500,000.
TBA’s Advisory Decisions
Pursuant to the TBA’s advice, Turkish banks, at their own discretion, will be able to:
- be flexible in determining its working and customer hours by informing their customers;
- take the necessary measures to prevent crowding and close contact; and
- temporarily close their branches that have the highest risks and the highest foot traffic.
In addition to the above, the TBA has advised Turkish banks to (i) continue providing digital banking services without any disruption; and (ii) set the working and customer visit hours as 12:00-17:00 for the branches and service units that provide direct services to customers.
Conclusion
While the BRSA aims to soften the expected disruptions in economic and commercial activities that COVID-19 might cause by updating financing conditions and credit defaults, the TBA champions a less physically interactive banking environment to suppress the spread of COVID-19.
Please refer to our coronavirus desk at https://www.esin.av.tr/coronavirus-desk/ for our client alerts regarding the legal consequences of COVID-19 on the finance sector and other areas.
