Financial Crime World

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Turkey’s Banking Sector: A Comprehensive Overview

In an effort to ensure the stability and soundness of Turkey’s banking sector, the country has implemented a range of regulations and guidelines to govern its financial institutions.

Registration and Oversight of Senior Management

While the Banking Law does not specifically regulate the appointment or dismissal of board members or senior executives, Turkish banks are required to comply with the provisions of the Turkish Commercial Code (TCC).

  • Pursuant to Article 370 of the TCC, the board of directors may delegate its representation authority to one or more managing directors or third parties as directors.
  • The board must also appoint at least one member authorized to represent the company.
  • The Regulation on Directors of Banks requires that the selection or appointment of directors or senior managers be notified to the Banking Regulation and Supervision Agency (BRSA) within seven business days.
  • Following their election or appointment, members of the board of directors, chair and members of the board of managers are obliged to take an oath before starting their duties.

Remuneration Requirements

To ensure that remuneration policies are aligned with the interests of banks and do not encourage excessive risk-taking, the BRSA has published a Guide on Good Remuneration Practices in Banks.

  • The guide sets out principles and minimum standards for determining all kinds of material benefits to bank employees and managers.
  • Systemically important banks must adopt more detailed policies, processes and practices, including:
    • Deferring at least 40% of variable remuneration for three years or more
    • Paying at least 50% with non-cash financial instruments
    • Establishing malus and clawback provisions
  • All banks are required to establish a clear and written remuneration policy that takes into account the impact on financial soundness indicators such as capital and liquidity.

AML/KYC

Turkey has implemented anti-money laundering (AML) and countering the financing of terrorism (CFT) measures to combat illicit finance and terrorist funding.

  • The country’s AML/CFT regulations are governed by Law No 5549 on the Prevention of Laundering Proceeds of Crime in Turkey.
  • Financial institutions, including banks and designated non-financial organizations, must:
    • Identify and report suspicious transactions
    • Maintain policies, procedures and internal controls to prevent money laundering and terrorist financing
  • Designated non-financial business and professions (DNFBPs) such as lawyers, accountants, realtors and gemstone vendors are also subject to AML/CFT requirements.

Depositor Protection

Turkey’s depositor protection regime is designed to protect depositors’ interests in the event of a bank failure.

  • The country has implemented a range of measures to ensure the stability and soundness of its banking sector, including the establishment of a deposit insurance fund.
  • In the event of a bank failure, depositors may be eligible for compensation up to a certain amount, which is currently set at TRY 100,000 (approximately USD 15,000).
  • The deposit insurance fund is managed by the Turkish Deposit Insurance Fund (TDF) and is designed to provide a safety net for depositors in the event of a bank failure.

These are just some of the key regulations and guidelines that govern Turkey’s banking sector. By ensuring the stability and soundness of its financial institutions, Turkey can promote economic growth and stability, while also protecting the interests of its citizens.