The Banking Regulatory and Supervisory Authority has taken measures regarding COVID-19
Summary
The World Health Organisation has formally declared the COVID-19 outbreak a pandemic. While it is still expanding all over the world, it has become inevitable for relevant institutions to take certain actions for the affected sectors. Therefore, The Banking Regulatory and Supervisory Authority (“BRSA”) has published decisions numbered 8948, 8949 and 8950 (“BRSA Decision”) in order to reduce the negative influence of the epidemic.
Please find our summarized explanations regarding the BRSA Decisions as follows:
- Default period for the classification of non-performing receivables of the loans are extended (BRSA Decision numbered 8948)
Regarding the negative influence of the COVID-19 towards the economy and business operations, following mesaures are taken by the BRSA:
- Default period of 90 days causing loans to be classified as non-performing loans under Article 4 and 5 of the Regulation on Procedures and Principles for Classification of Loans and Provisions to be Set Aside is extended by 180 days for the First and Second Group loans.
- Despite the 90-day default, banks may continue to set aside provisions according to the their own risk models in the calculation of the expected loan loss within the scope of Turkish Accounting Standarts 9 for the loans that are classified in the Second Group.
- Loans which are classified as performing loans due to the restructuring and whose principal and/or interest payments are delayed more than 30 days or restructured once more during this monitoring period will not be required to be classified in the 3rd group.
This measure taken by the BRSA regarding all kinds of loans and other receivables will be valid until 31.12.2020.
- Default period for the Financial Institutions subject to BRSA are extended (BRSA Decision numbered 8950)
Following mesaures are taken by the BRSA regarding the Regulation on Accounting Applications and Financial Statements of Financial Leasing, Factoring and Financing Companies:
- The 90-day default period specified in the clause stipulating that 20% of the receivables shall be allocated as allowance is extended. The period will be 180 days for the financing and factoring companies and 240 days for the financial leasing companies.
- The 90-day default period determined for financing companies in order to allocate allowance quarterly for consumer loans other than mortgage loans is increased to 180 days.
The new periods will also be applicable to the companies which have allocated expected loan loss under Turkish Accounting Standarts 9 and to the receivables which have not been tracked in the “Receivables in Liquidation” account as of 19.03.2020.
Despite the 90-day default, these companies may continue to set aside provisions according to their own risk models for their receivables which are not transferred to the “Receivables in Liquidation” account yet, and within this scope there will be no obligation for additional provisions.
- The ratio of loan amount to the value of the housing is increased in mortgage, vehicle and consumer loans (BRSA Decision numbered 8949)
Regarding another measure taken by the BRSA within the scope of the Regulation on the Credit Transactions of the Banks, the ratio of loan amount to the value of the housing is increased from 80% to 90% for the mortgage loans with houses having a value below 500.000 TL.
