FRSGlobal : Risk Analysis and Regulatory Reporting

Regulators in Turkey

The supervisory and regulatory framework in Turkey consists of:

• Banking Regulation and Supervision Agency (BDDK)
• Central Bank of the Republic of Turkey (CBRT)

FRSGlobal in Turkey

2010 saw a faster than expected recovery in economic activity due to the stability in the financial system, with the economy continuing to perform well into 2011 by comparison with other countries including emerging markets and even a number of the larger EU zone members.

The Turkish banking sector in particular notably avoided the problems and capitalisation issues which affected major international banks in a number of the world’s G20 countries. This was mainly due to a combination of the strong banking system with well capitalised structures, ability to manage risks, as well as benefiting from continued high levels of Foreign Direct Investment.

Having managed through past crises notably in 2001 when the Turkish banking sector witnessed the collapse of around 20 banks - banking regulations in Turkey were significantly strengthened and new structures, including improved risk management, were put in place as measures to avoid future failures.

This complete overhaul, which has been evolutionary over the past 10 years, included a re-design of banking regulations which has led to the current more stable, structurally sound, and continuously improving system which has been a major contributing factor to Turkey’s economic position.

Turkey’s continuing progress towards some harmonisation with the European Union, their membership of the G20 improved ratings and forward outlooks from the credit rating agencies, as well as being seen as a politically stable nation, have all contributed to the positive market sentiment and the endorsement of the positive outlook for the Turkish economy.

Regulatory Environment — Turkey

The ultimate objective of the regulatory framework is to further enhance the already risk-aware culture of the Turkish banking sector and to ensure ongoing stability, financial strength, and high standard of management of the banking sector.

Financial

The financial reporting framework in Turkey is set as per Turkish Accounting Standards. With the recent implementation of the new Commercial Code there is closer alignment with the requirements of IFRS.

Balance sheet reporting
Balance sheet reporting provides information on financial statements positions and is required by the Banking Regulation and Supervision Agency (BDDK) on a monthly and quarterly basis. Under this type of reporting all banks in Turkey are required to submit reports on position of assets and liabilities, memorandum accounts, income statement, consolidated own fund change statements, cash flow statement and dividend distribution statement on a periodic basis.

Prudential

Capital adequacy reporting
Capital adequacy reporting ensures that banks hold adequate capital on consolidated and non-consolidated basis as hedging against potential losses. Banks need to report credit risk, market risk, and operational risk to the BDDK on a quarterly basis.

The initial implementation of Basel II RWA calculation and Reporting covers the Standardised Approach.

Liquidity reporting
Liquidity reporting regulates procedures and principles for suspension of activities and voluntary liquidation of banks.

Transactional

Equity transactions reporting
Banks can transact in equities within defined limits and have to check the sums of equity and consolidated equity. This needs to be reported to the BDDK on a monthly basis.

Leasing
Banks transacting in financial leasing need to report establishment and operation licenses, amendments made to articles of association and share transfers, managers, contracts to be drawn up, transaction limits, cancellation of operation licenses, mergers, transfers, divisions and liquidation, accounting, reporting and audits concerning financial leasing companies, factoring companies and financing companies, etc. to the BDDK on a quarterly basis.

Foreign currency transaction reporting
Banks need to report the net general position /equity standard ratio to ensure that there is a balance established between foreign exchange assets and liabilities and to check if the foreign exchange position banks hold are in harmony with their own funds.p>

What’s coming up: Turkey

Basel

The BDDK (BRSA) has mandated Basel II equivalency starting in July 2011, with full implementation of Basel II reporting to be mandatory for all banks in 2012.

As part of this directive, banks will need to report in line with the designated Basel II requirements as well as specific national discretions issued by the Regulator.

The initial implementation of Basel II RWA calculation and reporting covers the Standardized Approach only at this stage, although a number of banks are also planning for future IRB approaches as a means of extracting greater competitive advantage and optimized use of capital.