Regulation on Loan Operations of Banks and Regulation on Determination of Risk Groups and Credit Limits

The Regulation on Loan Operations of Banks (Loan Operations Regulation) and the Regulation on Determination of Risk Groups and Credit Limits (Risk Groups Regulation) (together Regulations) are published in the Official Gazette dated 21.12.2023 and numbered 32406. The Regulations will mostly enter into force on 01.01.2024. The relevant amendments introduced by the Regulations are summarized below:

• The Loan Operations Regulation clarifies the obligation of banks to measure the risks arising from their loans, to regularly analyze and monitor the financial strength of the counterparty, to provide the necessary information and documents, and to determine the principles regarding these risks.
• Under the Loan Operations Regulation, banks are obliged to obtain documentation of account status from customers for cash and non-cash loans over TRY 5,000,000.
• All banks that have a credit relationship with the relevant customer shall continue to obtain the additional documents required to be obtained by banks, for a total of five consecutive accounting periods, including the accounting period in which they were first obtained, provided that the credit relationship continues. 
• Under the Loan Operations Regulation, the maximum limit of the loan collateral ratio for housing, vehicle and certain other consumer loans will be determined by the Banking Regulation and Supervision Agency.
• Details on risk groups and credit limits were removed from the Loan Operations Regulation and reorganized in the Risk Groups Regulation. 
• Loans, which are already limited to the equity of banks as per the Banking legislation, have been limited to the equity and capital of banks with the Risk Groups Regulation. Accordingly, the sum of the risk amounts of loans that may be extended by banks to a natural or legal person or a risk group cannot exceed twenty-five percent of the capital and equity. The sum of the risk amounts of the loans that may be extended to the risk group to which the bank belongs cannot exceed twenty per cent of the capital and equity.
• The Risk Groups Regulation includes provisions on the calculation of the risk amount of trading and banking accounts; the risk amount of securities with collateral; the risk amount of investments in collective investment undertakings, securitization positions and other structured financial instruments. Transactions not subject to credit limits were clarified.