Banks And Financial Institutions in Turkey
Banks
The establishment of banks and the commencement and undertaking of banking activities in Turkey are regulated by the Banking Law which entered into force on 1 November 2005, and the secondary legislation which entered into force thereunder. The Banking Law is (among others) applicable to
(i) banks established in Turkey,
(ii) branches of foreign banks in Turkey,
(iii) representative oices of foreign banks in Turkey, and
(iv) inancial holding companies.
The regulating authority for the banking sector in Turkey is the Banking Regulation and Supervision Agency (BRSA), a public legal entity with administrative and inancial autonomy which was established in June 1999 and started its operations in 2000.
In accordance with the Banking Law, only certain types of banks can be established in Turkey. These are deposit banks, participation banks, and development and investment banks. Both the establishment and the commencement of operations of a bank require permits from the BRSA.
In order to establish a bank, irstly an opening permit approving the establishment needs to be obtained from the BRSA. The Banking Law and its secondary legislation provide the terms and conditions for the establishment of a bank. For instance, a bank can only be established as a joint stock company, must meet capital adequacy requirements, and must satisfy speciic eligibility criteria in relation to its shareholders and board members.
Once the opening permit is issued by the BRSA, a second application needs to be submitted to the BRSA within 9 months for obtaining an operation permit in order to commence operations in Turkey.
Foreign banks may open a branch in Turkey. The establishment of a branch by a foreign bank is very similar to the establishment of a bank in Turkey. A branch of a foreign bank is entitled to conduct all banking activities stated under the Banking Law and it is treated as if
it is a Turkish bank licensed by the BRSA.
A foreign bank can also open a representative oice in Turkey instead of a branch; however, this requires a speciic license from the BRSA. A representative oice is not allowed to enter into commercial transactions or engage in revenue generating activities in the Turkish market. Currently, there are ifty-one banks in Turkey, a list of which can be found on BRSA’s oicial website at the following link:
https://www.bddk.org.tr/Institutions-Category/Banks/22
Financial Institutions
Other than banks, inancial institutions subject to the Banking Law are as follows:
(i). Leasing Companies (234)
(ii). Factoring Companies (57)
(iii). Financing Companies (14)
(iv). Financial Holding Companies (0)
(v). Asset Management Companies (20)
(vi). Electronic Money Companies (14)
(vii). Payment Companies (34)
(viii). Auditing Firms (38)
(ix). Corresponding Oices of Foreign Banks (44)
(x). Credit Rating Institutions (135)
(xi). Authorized Rating Institutions (1)
The rules and principles governing the establishment and operation of those institutions are very similar to the rules and principles applicable to the banks. For instance, similar to the requirements for banks, a inancial leasing, factoring or inancing company can only be established as a joint stock company, capital adequacy requirements must be met, and there are eligibility criteria which must be satisied in relation to the shareholders and board members.
Currently, there are over 400 inancial institutions established in Turkey, lists of which can be found on BRSA’s oicial website at the following link:
http://www.bddk.org.tr/Institutions
One particular institution is the inancial holding company which is an investment vehicle to invest in inancial institutions. The BRSA is entitled to specify the scope of inancial holding companies, to oblige the establishment of a inancial holding company, and to set the principles and procedures in relation to capital adequacy, internal systems, consolidated supervision and the coordination of supervision of the inancial holding companies. For instance, if a parent company which is established in Turkey as a joint stock
company has at least one subsidiary operating as a credit institution and meets all of the conditions provided for in the Regulation on Financial Holding Companies, such parent company will be deemed to be a inancial holding company and must therefore
comply with the Regulation on Financial Holding Companies and the banking legislation referred to therein. However, subsequent to the amendment introduced on 6 June 2017 on the Regulation on Financial Holding Companies setting out a condition regarding
total assets of credit institution subsidiaries, all inancial holding institutions in Turkey have lost their activity permits, and there is currently none operating.