Turkish Banks Urged to Adopt Conservative Approach Amid Capital Adequacy Threats

Ensuring Financial Stability in a Changing Global Landscape

Istanbul, Turkey - As the global financial landscape continues to evolve, Turkish banks are being urged to adopt a more conservative approach to ensure they remain solvent and meet their capital adequacy requirements.

Corporate Governance and Remuneration Policies

Under the Regulation on Corporate Governance, bank directors and senior managers are responsible for ensuring that remuneration policies align with ethical values, strategic objectives, and internal balances of the bank. Additionally, Turkish banks are required to establish a remuneration committee to oversee compensation practices.

• Key responsibilities:
  • Ensure remuneration policies align with ethical values
  • Align remuneration policies with strategic objectives
  • Maintain internal balances within the bank
• Establishment of a remuneration committee:
  • Oversees compensation practices
  • Ensures transparency and accountability

AML/CFT Efforts Boosted

Turkey has strengthened its efforts to combat money laundering and terrorist financing by implementing anti-money laundering (AML) and countering the financing of terrorism (CFT) measures. The Financial Action Task Force (FATF) requires countries to implement strict AML/CFT regulations to prevent illegal financial flows.

• Key initiatives:
  • Law No 5549 on the Prevention of Laundering Proceeds of Crime
  • Roles and tasks for key players like banks, designated non-financial organizations, and government agencies
  • Financial institutions play a crucial role in detecting and preventing money laundering and terrorist financing

Depositor Protection Regime Ensures Stability

The Banking Regulation and Supervision Agency (BRSA) oversees the depositor protection framework under Banking Law, ensuring the stability and integrity of the banking system. The regime protects depositors up to TRY400,000 at each bank, with foreign currency deposits covered based on the exchange rate determined by the Central Bank of the Republic of Turkey.

• Key features:
  • Deposits protected up to TRY400,000 per bank
  • Foreign currency deposits covered based on exchange rates
  • Funded through contributions from banks, recovery efforts, investments, and loans

Bank Secrecy Requirements in Place

The BRSA has established a Regulation on Sharing of Secret Information, which outlines the requirements for bank secrecy. Banks are prohibited from disclosing confidential information without proper authorization, ensuring the confidentiality and integrity of customer data.

• Key principles:
  • Confidentiality of customer data
  • Prohibition on disclosure of confidential information without proper authorization

Conclusion

As Turkey’s banking system continues to evolve, it is essential that banks prioritize capital adequacy, implement robust AML/CFT measures, protect depositors, and maintain bank secrecy to ensure financial stability and trustworthiness.