BRSA eased Turkish Lira borrowing restrictions on Turkish Lira loans
On July 7, 2022, the Banking Regulation and Control Authority (the “BRSA“) issued a new decision No. 10265 (the “Decision“) to clarify the implementation of the decision of BRSA Decision No. 10250 of July 24, 2022 (“Restriction decision“) introducing Turkish lira borrowing restrictions for non-financial institutions subject to independent audit and to ensure the effective implementation of the restrictions under the restriction decision.
You can refer to our legal alert of June 27, 2022 regarding the restriction decision.
With this decision, the BRSA extended the scope of the decision in order to increase the effectiveness of the restrictions, while providing some flexibility to the restrictions specified in the restriction decision.
Companies with foreign currency assets (“FX assets”) exceeding TRY 15,000,000
- The restrictions with regard to these companies remain the same with a few clarifications. The financial statements used as the basis for determining whether these companies can borrow a loan in Turkish lira will be the financial statements prepared in accordance with the Tax Procedure Law and submitted as attached to the tax declarations (including temporary tax declarations) to the tax authority (including temporary tax periods).
- If these companies are required to prepare consolidated financial statements, the assessment will be made on the basis of financial statements audited by independent auditors. However, foreign subsidiaries and affiliates will not be included in this assessment.
Companies not authorized to borrow in foreign currencies having a net position in foreign currencies in deficit for the period of three months following their loan request
- The restriction decision required these companies to submit to the bank documents approved by the approved independent auditing firms in order to borrow cash loans in Turkish Lira. Following the decision, these documents no longer need to be submitted on the date of the application. Instead, these companies will be able to borrow new loans if they claim to have a net currency position gap by providing the amount of the position gap limited only to the net currency position gap in the three-month period. following the loan application date. Declarations and commitments must be confirmed by independent auditing firms or chartered accountants (“PCA“) and documented at the relevant bank at the close of business on the last business day of the month following the end of the quarterly calendar period.
Businesses whose foreign exchange assets do not exceed TRY 15,000,000, or do not exceed 10% of the greater of their net assets and net sales income for the last financial year during the term of the loan they will borrow
- With the restriction decision, these companies were required to submit the information regarding the present value of their foreign exchange assets, net assets and net sales income during the last 12 months at the end of the previous month in accordance with the balance sheet end of previous month. within the first 10 working days of each month. This was in addition to the statement and undertaking to be provided by these companies stating that the Turkish lira equivalent of their FX assets will not exceed TRY 15 million, and if it exceeds this amount, it will not exceed 10% of the higher of their net assets and their net turnover for the last financial year during the term of the loan they are going to borrow.
- The decision relaxed this requirement and hence such companies will be able to borrow Turkish lira loans, if they provide the above-mentioned declaration and undertaking as of June 30, 2022 and submit the supporting documents to the relevant bank before the closing of business. offices of the last activity. day of the month following the end of each quarterly calendar period.
- The most recent financial statements submitted to the tax authorities (including temporary tax periods) will serve as evidence of these problems. Companies that are required to prepare consolidated financial statements will be able to use the most recent consolidated financial statements audited by independent auditing firms, without the requirement of submission to the tax authorities, and the foreign subsidiaries and affiliates of these companies will not be included in the calculation.
Determination of companies subject to independent audit
- Companies subject to independent audit and whose audit obligation will begin at the end of 2022 for the first time will be exempt from the regulation under the decision.
- Although a company applying for a loan declares and undertakes not to be subject to an independent audit or its audit obligation began at the end of 2022 for the first time, if the bank has doubts about this, the company will have one month to prove this fact with documents approved by CPAs or independent audit firms. However, the loan will be extended depending on the representation of the applicant company.
Penalties for failure to provide required information and documents
- If the companies do not submit the information and documents to the bank as approved by the independent audit firm or CPA within the specified timeframe, or if it is determined that they are subject to the borrowing restrictions in Within the framework of the decision in accordance with the information and documents submitted, (i) no new commercial cash loans will be granted to these companies and (ii) a risk weighting of 500% will apply to Turkish lira cash loans granted to from 30 July 2022 to these companies, regardless of the method used to calculate the amount subject to credit risk, as well as credit risk mitigation techniques, credit ratings and immovable mortgages, for the calculation of the capital adequacy ratio as notified by the company in accordance with BRSA procedures and principles.
Status of leasing, factoring and financing companies
The restriction decision regulated restrictions on Turkish Lira cash loans to be granted only to banks. With the Decision, loans to be granted to these companies by leasing, factoring and financing companies from August 1, 2022 are now in scope. The obligations imposed on banks under the decision will also apply to these companies.
Loans exempted from the Decision
- Loans used through corporate credit cards, excluding cash withdrawals
- Loans converted to cash via the direct debit system (Dogrudan Borclanma Sistemi)
- Supplier financing credits and other loans qualified as irrevocable term commitments and for which banks grant payment guarantees to third parties other than the company who are customers of the loan, and paid to suppliers by crediting the company as ‘Buyer
- Non-monetary loans that are indemnified and converted into Turkish lira cash loans
- Loans restructured in accordance with a framework agreement or loans which are used in this restructuring with the exception of loans which are not restructured in accordance with a framework agreement and which are renewed by an amendment to the existing loan agreement after the date of Decision to either extend to partially or fully refinance existing loans will be considered new disbursements.
- Status of Affiliates and Subsidiaries: If it is determined that the company (the parent company) is not eligible for the disbursement of a loan in Turkish lira under this decision, the loan restriction provided for by this decision will only apply to the parent company. For loans to be granted to other subsidiaries and affiliates of the parent company subject to consolidation, it will be determined whether they are subject to the loan limitation by considering the provisions laid down in the decision separately for each affiliate and subsidiary.
- Loans granted by offshore branches: The decision will also be applicable in case foreign branches of Turkish banks grant the loans.
- The scope of FX assets: Equity shares of exchange-traded funds that are indexed to gold or foreign currencies held by the companies or track these indices are also included in the scope of FX assets.
- The scope of Turkish lira cash loans: As part of the swap transactions carried out by the companies with the banks, the sums borrowed in Turkish lira by lending foreign currencies (including gold) on the spot will also be considered as a spot commercial loan in Turkish lira.
- The status of commercial loans and existing loans: The company’s obligation to submit documents regarding commercial Turkish lira loan disbursements in cash to be made on the date of the decision through credit operations such as revolving accounts, overdraft accounts (“KMH “) or corporate credit cards will also be executed in accordance with this decision.
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