Recent Development
- The Banking Regulatory and Supervisory Authority (the ”BRSA”) granted certain reporting exemptions for banks’ liquidity requirements through its decision dated March 26, 2020 and numbered 8967.
- The BRSA introduced the following measures, which are applicable until December 31, 2020:
- Pursuant to Article 32 of the Regulation on the Calculation of the Liquidity Coverage Ratio of Banks (the ”Regulation”), if a bank’s total and foreign exchange liquidity coverage ratios are less than, or expected to fall below, the minimum ratio required in the Regulation, the bank is obliged to report the reasons for the shortfall and its response measures to the BRSA. The shortfall related to the unconsolidated total and foreign exchange liquidity coverage ratios must be resolved within two weeks after it occurs. The Regulation limits the number of times that a bank can fall short of this ratio in one calendar year to six (including the shortfall cured) in respect of unconsolidated total and foreign exchange liquidity coverage ratios and two (including the shortfall cured and provided that two shortfalls are not in a row) in respect of consolidated total and foreign exchange liquidity coverage ratios. Turkish deposit and participation banks will be exempt from the above obligations under Article 32 until 31 December 2020. However, as per Article 31 of the Regulation, they will continue to report their liquidity coverage ratios on a weekly basis to the BRSA whereas development and investment banks will be exempt from the obligation to report liquidity coverage ratios to the BRSA.
- Article 15 of the Regulation on the Calculation and Evaluation of the Liquidity Adequacy of Banks (”LA Regulation”) sets forth that if a bank does not meet the minimum liquidity adequacy ratio required in the LA Regulation, it must report the reasons for the shortfall to the BRSA and cure the shortfall related to weekly ratios within two weeks after it occurs. Further, the LA Regulation restricts the number of times that a bank can fall short of this ratio in one calendar year to six (including those cured) and allows maximum two shortfalls in a row. Turkish development and investment banks will be exempted from the above obligations. However, they will continue to regularly report their liquidity adequacy ratios to the BRSA within the scope of Article 14 of the LA Regulation.
Conclusion
The BRSA’s continuous administrative measures provide Turkish banks with flexibility in order to ensure their financial health as key players of the financial markets. The measures attempt to minimize the operational and financial burden created by the COVID-19 outbreak on banks.
