Foreign Exchange Position Reporting Requirement from the CBRT

Our brief explanations on the subject are given below:

• Persons subject to the notification obligation have been determined

As per the Instruction, the legal entities, metropolitan municipalities and other municipalities, affiliated businesses and administrations of municipalities and business enterprises in which municipalities own more than half of their capital individually or jointly, public economic enterprises and legal entities with the qualifications of higher education institutions whose total of Turkish Lira and foreign currency cash and non-cash loan amounts utilized through domestic banks corresponds to TRY 5 million or more shall fill out the relevant Report and notify the CBRT within the first 10 business days of each month. It is stated in the Frequently Asked Questions document that legal entities operating in free zones will also be subject to the aforementioned notification obligation. On the other hand, banks and financial institutions defined in the Banking Law No. 5411 have been excluded from the scope of the notification obligation.

In addition, in the months when the total loan balance falls below TRY 5 million, the relevant notification is not required. Moreover, loans used from banks abroad will not be considered within the scope of notification obligation.

• It is stated that entities who currently have a foreign currency cash loan balance of 15 million US dollars or more and have already notified the Central Bank of the Republic of Turkey (CBRT) must also fill out the Report and submit it to the CBRT

According to the Regulation on the Principles and Procedures regarding the Monitoring of Transactions Affecting Foreign Exchange Position by the Central Bank of the Republic of Turkey, persons whose total of foreign currency or foreign currency-indexed loan amounts utilized from domestic and/or foreign sources corresponds to 15 million US dollars or more, are required to make monthly reporting through the Systemic Risk Data Tracking System. In the Frequently Asked Questions document, it is stated that the entities who have been making this notification are also required to fill out the relevant foreign exchange position report and submit it to the CBRT.

• It is stated that leasing and factoring loans should also be taken into consideration within the scope of notification obligation

According to the Frequently Asked Questions document, leasing and factoring loans obtained from banks should be taken into consideration when calculating the total loan amount. However, since the document mentioned that non-bank financial debts do not need to be considered when calculating the total loan amount, it is understood that leasing and factoring loans obtained from non-bank financial institutions (such as financial leasing companies, factoring companies) should not be considered when calculating the total loan amount.

• It is stated that interest amounts should not be taken into consideration when calculating the total loan amount

In the Frequently Asked Questions document, it is stated that only the principal amounts will be taken into account and the interest amounts will not be taken into account when determining whether legal entities have a reporting obligation.

• It is stated that debts to related institutions and debts to non-bank financial institutions should not be taken into account when determining whether legal entities have a reporting obligation

The Frequently Asked Questions document states that only loans obtained from banks or loans for which banks act as intermediaries or provide guarantees should be taken into account when determining whether legal entities have a reporting obligation. Thus, it has been clarified that debts to related institutions and non-bank financial institutions should not be taken into account when determining whether legal entities have a reporting obligation.

• It is stated that foreign currency loan amounts should be converted into the Turkish Lira when calculating the total loan amount

According to the Frequently Asked Questions document, when filling out the report, the US dollar, Euro, and other foreign currencies should be converted to Turkish lira using the exchange rates announced by the Central Bank of the Republic of Turkey on the reporting date, and the total of such amounts should be written in the relevant fields.

• It is stated that the foreign exchange position at the end of the month and in the following three-month period should be taken into account

According to Frequently Asked Questions document, when reporting, foreign exchange position at the end of the month in which the reporting obligation arises and foreign currency assets and liabilities in the following three months should be taken into account. It has also been underlined that the position status in all maturities should be reported for information purposes.

• The first reporting will be carried out for March 2023

According to Instruction, if the credit risk exceeds the aforementioned limit as of the end of March, legal entities that meet the specified conditions must complete the reporting procedures within the first 10 business days of April. In the following months, if the credit/finance balance exceeds the reporting threshold, the reporting for the relevant month will be carried out within the first 10 business days of the following month.

• Persons who are authorized to carry out the reporting procedure on behalf of the relevant legal entity have been specified

According to the Frequently Asked Questions document, reporting procedure can be carried out by the authorized representatives of the company registered in the Central Registration System of the Ministry of Commerce of the Republic of Turkey ("MERSIS") and/or other users authorized in the system by such representatives of the company.

• It is stated that sanctions will be applied if the notification is not made properly

The Frequently Asked Questions document states that the notification obligor legal entity is responsible for submitting the Report on time and correctly. In case the notifications are incomplete, inaccurate, or not made duly, judicial fine ranging from one thousand to two thousand days will be imposed on the officials and other responsible persons of such legal entities.

Additionally, if the total loan balance of the notification obligor legal entity is TRY 5 million or more, banks have an obligation to notify the relevant legal entity and direct them to fill out the Report. The Frequently Asked Questions document states that the responsibility for such notification lies primarily with the bank with the highest risk weight.

We would also like to point out that, if necessary, the CBRT may conduct an audit for the obligors.