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Establishment Conditions and Operation Permissions A. Mandatory Type: Corporation Banks should be established as a joint stock company, Its paid-up capital,

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Presentation on theme: "Establishment Conditions and Operation Permissions A. Mandatory Type: Corporation Banks should be established as a joint stock company, Its paid-up capital,"— Presentation transcript:

1 Establishment Conditions and Operation Permissions A. Mandatory Type: Corporation Banks should be established as a joint stock company, Its paid-up capital, consisting of cash and free of all kinds of fictitious transactions, should not be less than 30 million New Turkish Liras, Its shares should be issued against cash and to name,

2 Nationality of shareholders is not important. Foreigners can establish a bank in Turkey, in this case it is a Turkish bank.

3 Establishment and going into operation process Establishment of Corporation * establishment according to TCC * authorization from BRSA Going into Operation

4 B. Permissions Establishment of banks requires various permissions. Also establishment of branches by foreign banks needs permission. Turkish Banking Regulation and Supervision Board (BRSB) has authority of permissions.

5 Permissions must be granted if the authorization conditions are fulfilled. Permission for establishment or opening branches and representative offices in Turkey Banking Code Art. 6 - The establishment of a bank in Turkey or the opening up of the first branch in Turkey by a bank established abroad shall be permitted upon affirmative votes of at least five members of the Board provided that the establishment conditions laid down in this Law are fulfilled.

6 And also BRSB has discretionary power. This power especially used in determining necessary financial strength and respect honesty and competence of founders required for the business (Banking Code art. 8/e, f).

7 Rejection of applications for permission The permission applications filed the Agency as per the provisions of this Law shall be rejected in case it is deemed that there are direct and indirect relations that prevent the efficient supervision of such institutions or that the conditions, qualifications, eligibility required for the activity subject to permission have been lost or could not be fulfilled during the application for permission or within the evaluation process. The decisions for rejection shall be notified to relevant applicants together with the reasons for such rejection (Banking Code art. 21).

8 Qualifications of founders According to art. 8 of Banking Code, the founders of banks shall; a) Not have been declared bankrupt within the framework of the provisions of the Execution and Bankruptcy Law No. 2004, not be in possession of a certificate of bankruptcy, not have an approved application for restructuring through reconciliation or not have been issued a decision for postponement of bankruptcy, b) Not have qualified shares or not hold control in banks that have been subjected to Article 71 of this Law or that have been transferred to the Fund before the effectiveness of this Law,

9 c) Not have qualified shares or not hold control in banker subjected to liquidation, and in other financial institutions subject to liquidation, excluding voluntary liquidation, in development and investment banks whose operating permissions have been revoked, or in credit institutions whose shareholder rights except dividends and management and control have been transferred to the Fund or whose permission to conduct banking transactions and accept deposits and participation funds have been revoked, before the transfer of aforementioned credit institutions to the Fund or before their permission and authorization for accepting deposit and participation fund have been revoked.

10 d) Have not been sentenced to heavy imprisonment or imprisonment of more than five years pursuant to the repealed Turkish Penal Code No. 765 or other laws, even though pardoned, with the exception of negligent offenses, have not been sentenced to imprisonment of more than three years pursuant to the Turkish Penal Code No or other laws or have not been convicted of the violation of the provisions, that require imprisonment, of the repealed Banking Law No. 3182, of the Banking Law No which is repealed by this Law, of this Law, the Capital Market Law No and of the legislation on lending transactions, or have not been convicted of infamous crimes such as embezzlement, extortion, bribery, theft, swindling, forgery, breach of trust, fictitious bankruptcy, smuggling offenses other than those arisen by the acts of using and consuming, fraudulent acts in official tenders and trades,

11 money laundering or crimes committed against the prestige of the State and unveiling State secrets, offenses committed against the sovereignty of the state or the prestige of its organs, offenses committed against the security of state, offenses committed against the constitutional order or the functioning of the constitutional order, offenses committed against national defense, offenses committed against the secrets of the state and espionage, offenses committed against relations with other states as well as tax evasion or have not been engaged in such offenses under the repealed Turkish Penal Code No. 765, Turkish Penal Code No or other laws.

12 e) Have necessary financial strength and respect f) Have the honesty and competence required for the business, g) In case of a legal person, have a transparent and open partnership structure together with the risk group.

13 Requirements for the opening of a branches in Turkey by banks headquartered abroad Any bank established abroad that will operate in Turkey by opening branch within the framework of the principles and procedures set by the Board should to meet the following conditions (Banking Code art. 9): a)Its primary activities must not have been prohibited in the country where they are headquartered, b)The supervisory authority in the country, wherein the headquarters of the bank is located should not have negative views regarding its operation in Turkey, c)The paid-in capital reserved for Turkey should not be less than the amount indicated in Article 7,

14 d) The members of the board of managers should have adequate professional experience to be able to satisfy the requirements laid down in the corporate governance provisions and to perform the planned activities, e) It must submit an activity program indicating work plans for the fields of activity covered by the permission, the budgetary plan for the first three years as well as its structural organization. f) The group including the bank must have a transparent partnership structure. An application for operating permission cannot be granted for the activities prohibited due to the violation of the local legislation in the country where such institutions are headquartered.

15 Operating permission Article 10- The banks that are permitted to be established in Turkey or permitted to open up branches in Turkey within the framework of the provisions of Article 6 of this Law shall be obligated to receive permission for operation from the Board.

16 The permissions granted shall be issued in the Official Gazette. The decision regarding the permission shall be made within three months, the latest, following the date of application for permission.

17 The Agency shall give a certain period of time, which shall not be more than six months, for those who do not bear the conditions laid down in this Law and the regulations issued under this Law so that they can make the necessary arrangements and eliminate the deficiencies. Those applications not approved as a result of the review conducted upon such re-applications filed within due course shall be notified, in writing, of the result and the establishment permission that has been issued shall be revoked.

18 The banks that have received establishment permission shall be required to meet the following criteria in order to commence their operations: a.Their capital should have been paid in cash and must be at a level that enables the execution of planned activities, b.Minimum one fourth of the system entrance fee, equivalent to ten percent of the minimum capital requirements indicated in Article 7 of this Law, should have been paid to the account of the Fund and the related document submitted to the Agency by the founders, c. Their activities should be in compliance with corporate governance provisions and should have the required personnel and technical infrastructure, d. Their managers should bear the qualifications set out in the corporate governance provisions, e. The Board should comment that they bear the qualifications required for executing the activities.

19 Opening domestic branches Article 13 - On the condition to comply with the principles to be determined by the Board and with the corporate governance and protective provisions set forth in this Law and providing that the Agency is notified thereof, banks may open branches within Turkey. Cross border activities Article 14- Banks established in Turkey may open branches or representative offices abroad, including off- shore banking regions, on the condition to set up undertakings or participate in existing undertakings comply with the corporate governance and protective provisions set forth herein and to comply with the principles to be established by the Board;

20 Distinction between establishment and operation Turkish banking system follows two –step approach. First entity applies for an establishment permission and in a second step, it will be granted the operation permission. This is a common approach practiced in many countries including United States.

21 What are the advantages of this system?

22 Operation permission is not a procedure matter, it is a part of the general system. In case the operation permission of a bank is revoked pursuant to the provisions of this Law, its management and supervision shall be transferred to the Fund.

23 The establishment permission of a bank shall be revoked by the Board decision taken through the affirmative votes of minimum five Board members, in case of failure to get operating permission.

24 Revocation of establishment permission Article 11- The establishment permission of a bank shall be revoked by the Board decision taken through the affirmative votes of minimum five Board members, in case of one or more of the following conditions: a. The permission is based on non-factual declarations, b. Failure to apply for operating permission within nine months following the issue of establishment permission, c. Clearly stating the decision to waive the establishment permission, d. Losing the eligibility qualifications for permission until commencement of operation, e. Failure to get operating permission, f. Voluntary waiver from the whole activities listed in Article 4 of this Law, or completion of voluntary liquidation, g. Completion of the merger and disintegration procedures of transferred banks, h. Completion of liquidation or bankruptcy proceedings under Article 106 of this Law.

25 Revocation or restriction of operating permission In cases where a bank; 1. has received the operating permission on the basis of non-factual declaration or 2. has failed to commence the activity within six months after getting the operating permission or 3. failed to perform the activity for an uninterrupted period of six months within one year following the start of activity, The operating permission of such bank shall be revoked (Banking Code art.12)

26 . In cases where a bank has not become a member of the relevant association of institutions within one month after receiving the operating permission or has failed to pay the remaining portion of the system entrance fee to the account of the Fund and has failed to fulfill these obligations despite the warning of the Agency, such bank’s fields of activity other than those covered by sub-paragraphs (a) and (b) of the first paragraph of Article 4 of this Law may be individually restricted by the Board.

27 In cases where the operating permission of any bank established abroad and having branch in Turkey has been revoked, its activities have been suspended, it has been decided to be declared bankrupt or liquidated and it has declared bankrupt in the country of establishment, the Board shall revoke the operating permission of the branches of such bank in Turkey (art.12/III).


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