New BRSA Condition on the Use of TRY Commercial Loans

From the Banking Regulation and Supervision Agency:

Decision of the Banking Regulation and Supervision Board

Decision No.: 10250 Decision Date: 24.06.2022

At its meeting of 24.06.2022, having examined letter No. E-24049440- 010.99[4/5]-54316 of 24.06.2022 and its annexes, the Board decided, on the basis of Article 93 of Banking Law No. 5411 and as part of coordinated macroprudential steps to strengthen financial stability and ensure that the credit system operates effectively by using resources more efficiently, to apply the following after the date of this Decision until a Board Decision to the contrary is taken:

• For companies other than banks and financial institutions that are subject to independent audit under Decree-Law No. 660 and the related regulations (the Company), if the Turkish lira (TRY) equivalent of their foreign currency (FC) cash assets (including gold, foreign banknotes and FC deposits with banks) exceeds TRY 15 million as of the date of their loan application, and these FC cash assets exceed 10 percent of the greater of their total assets according to their most recent financial statements or their net sales for the last 1 year, no new TRY-denominated cash commercial loans shall be extended to such Companies; for Companies obliged to prepare consolidated financial statements under the accounting and financial reporting standards published by the Public Oversight, Accounting and Auditing Standards Authority, this assessment shall be made on the basis of the consolidated balance sheets,

• As an exception to this rule, and limited to Companies that cannot use FC loans under the relevant legislation, TRY-denominated cash commercial loans may be extended to such Companies only for the 3-month period following the application date and only up to the amount of the identified position gap, provided that they have an independent audit firm authorised by the Public Oversight, Accounting and Auditing Standards Authority (the independent audit firm) determine, through a review of their most recent financial statements, that they will have a net foreign currency short position within the 3-month period from the date of their loan application to the bank, and that they apply to the bank with documents approved by that firm,

• Companies whose FC cash assets do not exceed TRY 15 million in TRY equivalent shall be exempt from this practice, provided that they have the independent audit firm determine their existing FC cash assets, their total assets according to their most recent financial statements and their net sales for the last 1 year as of the loan application date; that they declare and undertake that the TRY equivalent of their FC cash assets will not exceed TRY 15 million throughout the term of the loan; and, to enable the bank to check this declaration and undertaking,

that within the first 10 business days of each month they submit to the bank the current values of their FC cash assets and total assets according to the balance sheet at the end of the previous month, and of their net sales for the last 12 months as of the end of the previous month,

• Under this practice, the Central Bank of the Republic of Türkiye's foreign exchange buying rate on the calculation date shall be used to calculate the TRY equivalent of FC cash assets,

• This Decision shall be communicated to the Associations of Institutions and published on the Agency's website.