Turkish Banking System Overhauls Senior Management Oversight and Remuneration Requirements
The Turkish banking sector has implemented significant reforms aimed at strengthening senior management oversight and remuneration requirements.
Senior Management Oversight
According to a recent update by the Banking Regulation and Supervision Authority (BRSA), the appointment or dismissal of board members or senior executives is not specifically regulated under the Banking Law. However, joint stock companies are subject to the provisions of the Turkish Commercial Code (TCC).
Appointment and Notification Requirements
- The BRSA requires banks to notify it within seven business days of selecting or appointing directors or senior managers.
- The notification must include several documents providing information required for the position.
Oath-Taking Requirement
- Following their election or appointment, members of the board of directors and chair and members of the board of managers are obliged to take an oath before starting their duties.
- The oath is taken at the commercial court, and the document issued after the oath is sent to the BRSA.
Remuneration Requirements
On March 31, 2016, the BRSA published the Guide on Good Remuneration Practices in Banks to provide guidance on remuneration policies. The guide requires banks to establish a remuneration committee and ensures that remuneration policies are in line with ethical values, strategic objectives, and internal balances of the bank.
Principles for Directors and Senior Executives
- Ensure transparency in corporate governance
- Observe customer rights
- Detect problems in risk management, internal control, and internal audit systems
AML/KYC Requirements
Turkey has implemented anti-money laundering (AML) and countering the financing of terrorism (CFT) measures to fight illicit finance. The country is a member of the Financial Action Task Force (FATF) and has adopted strict AML/CFT regulations to shield its financial framework from illegal money flows and combat terrorist funding.
Requirements for Financial Institutions
- Have policies, procedures, and internal controls in place to detect and prevent money laundering and terrorist financing
- Identify and report suspect activity or transactions
- Develop internal checks to determine the effectiveness of their AML/CFT procedures
Depositor Protection Regime
The Turkish banking sector has also implemented a depositor protection regime aimed at protecting depositors’ interests. The regime provides for the establishment of a deposit insurance fund, which will provide compensation to depositors in the event of bank failure.
Eligible Deposit Accounts
- Eligible deposit accounts are insured up to a certain amount
- Depositors with insured accounts can claim compensation from the deposit insurance fund
Conclusion
The reforms aim to strengthen the Turkish banking sector’s resilience and ensure that it is better equipped to withstand economic shocks. The measures also aim to enhance depositor protection and prevent money laundering and terrorist financing activities.