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T HE BANKS A SSOCIATION OF T URKEY FRAMEWORK AGREEMENT ON FINANCIAL RESTRUCTURING PROGRAM PRESENTATION BY WORKING GROUP ON FINANCIAL RESTRUCTURING May.

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Presentation on theme: "T HE BANKS A SSOCIATION OF T URKEY FRAMEWORK AGREEMENT ON FINANCIAL RESTRUCTURING PROGRAM PRESENTATION BY WORKING GROUP ON FINANCIAL RESTRUCTURING May."— Presentation transcript:

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2 T HE BANKS A SSOCIATION OF T URKEY FRAMEWORK AGREEMENT ON FINANCIAL RESTRUCTURING PROGRAM PRESENTATION BY WORKING GROUP ON FINANCIAL RESTRUCTURING May 24, 2002

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4 Creditor Institutions & Supporting Organizations in the Agreement Saving Deposit Insurance Fund (SDIF) BAT member banks Special Finance Institutions (SFI) Emlak Bank of Turkey in Liquidation Process Other Financial Institutions Union of Chambers and Commodity Exchanges of Turkey -UCCET (TOBB) Turkish Industrialists’ & Businessmen’s Association-TIBA- (TUSİAD) SUPPORTING INSTITUTIONS CREDITOR ORGANİZATIONS 1

5 Purpose of the Agreement 1.Following the financial restructuring, the achieving ability of efficient working of the producer firm, hence creating a favorable business environment for small and medium size enterprises, which are suppliers and buyers, 2.Ensuring that both the corporate sector and the financial sector institutions have regular, sound and transparent balance sheets through compliance with the arrangements based on the provisions of the Agreement hereby, 3.Providing the firms that have the capacity to add value in the corporate sector become effective in the economy, increasing the capacity utilization, improving the national welfare through increasing production and employment. 2

6 Definitions Large Size Firms  Employing permanently > 100  Annual export > $  Annual turnover > TL 25 trillion  The assets in the audited balance sheet > 15 trilyon TL Medium and Small Size Firms The firms and groups of firms except for the criterias defined for “Large Size Firms” On the condition that having capacity to add value to the economy, the firms who will satisfy at least two of the mentioned criteria and produce risks for financial sector at an amount more than USD 10 million shall be concerned as “Large Size Firms ” 3

7 Framework Aggreement General Quarum Conditions Provisioning Regulations Loan Classifications 1st Group–Loans-Standard Performing 2nd Group–Loans-Under Special Follow-Up 3rd Group–Loans-Limited Collectibility 4th Group–Loans-Collectibility Uncertain 5th Group–Loans-Uncollectable 4 Classified Date Jan 31th, 2002 Prerequisite: As of Jan 31st, 2002 categorized in any of these 3 categories at any bank Arbitration Commitee (Large Size Firms) No Yes (55-75 %) Decision Acceptance Rate % 90 % 75 P.S. : In the following slides, process is presented according to 75 % rule. If the related company that will be included in the FRP, is not classified in any of the 3rd, 4th or 5th categories at any bank then for the rest of the presentation, the ratio stated as 75 % must be taken into consideration as 90 % and it must be taken into account that for large scale companies it will not be possible to apply for the Arbitration Committee.

8 Organisational structure FIRM SUBJECT TO FINANCIAL RESTRUCTURING LEADER BANK CONSORTIUM OF CREDITOR BANKS COORDINATION SECRETERIAT 1 coordinator and sufficient number of technical and administrative staff appointed by Board of Directors of BAT ARBITRATION COMMITEE (For large scale firms 3 persons appointed by the Board of Directors of BAT and BRSA observer 5

9 Process (For Large Size Firms) One of the 3 banks who has the biggest risk can initiate the process Small creditor banks who own %25 of total risk can apply for one of the 3 big creditor banks to initiate the process The bank who initiates the process, shall receive the letter of undertaking from the company and apply to the CS in two business days CS inform other creditor banks and invite all banks and the company to the first meeting In first CCB meeting (*) -CCB members shall be identified -Leader bank shall be identified -Agenda of negotiation process shall be identified -Conditions are reviewed and working plan is prepared Second CBC meeting are held two days following the first meeting. after the within 2 days in the second CBC meeting, if necessary, rules of standstill process shall be identified 1-a 1-b 2345 (*) CCB Consortium of Creditor Banks 6

10 Process (For Large Size Firms) Negotiation process -Between CCB and company -Among CCB members For subjects of disagreement; Apply to AC through CS, AC get written opinion of sides, announce decision within 5 days. This decision will be put in practice by CCB Apply for Arbitration Committee No agreement with the firm CCB agreement between 51% - 75 % CCB agreement more than 75% Full agreement with the firm CCB agreement less than 50% Financial Restructuring IMPOSSIBLE FR contract signed Monitoring process CS and through CS BRSA are informed

11 Process (For Medium & Small Size Firms) At least two banks who represents 51% of total risk come together to start the process Banks who initiate the process, get the commitment letter from the firm and give application to CS in two business days. In this situation will start the process In first CCB meeting; -CCB members are defined -Leader bank is decided -Conditions are reviewed and working plan prepared -Consultation process agenda is defined Second CCB meeting Within 2 days in the second CCB meeting, if necessary, rules of standstill process are defined 8

12 Process (For Medium & Small Size Firms) Consultation process -Between CCB and company -Between CCB members disagreement with the company CCB agreement more than 75% Full agreement with the company CCB agreement less than 75% Financial Restructuring IMPOSSIBLE FR contract signed Monitoring process Send a copy of the agreement to CS and BRSA 9

13 REGULATIONS RELATED TO FRP All papers, agreements, colleterals arranged during the process should be fund, legal fee and tax exempt Problems coming from priority and privileges of state receivables’ should be removed Legal preparations about foreign currency mortgage should be completed If companies can not close their export commitments (related to the loans that were taken within the framework of this program) during the program, sanctions should be postponed until the end of the program Public Sector Banks, Emlak Bank of Turkey in Liquidation Process and SDIF should be able sign this agreement The construction of the organizational structure Necessary amendments to provisioning regulations Funding possibilities for Asset/Liabilities term mismatches and interest risk removal Regulations intended to speed up the enforcement process of claims under the Enforcement and Bankruptcy Law" Realized Regulations on the Agenda 10

14 Expected results of the program from view of point Real Sector Problem loan Negotiation FR contract HEALTHY GROWTH IN REAL SECTOR Debt and corpoate restructuring Efficiency Productivity increase Healthy cash flow Efficient relations with Finance Sector Employment increase Increasing tax payment capacity Healthy Relations with Financial Sector 11

15 Expected results of the program from view point of Financial Sector Problem loan Negotiation FR contract GROWTH IN FINANCIAL SECTOR Funding from international institutions Funding Possibility BRSA provisioning regulations Tax, duty,fees Healthy relations with the firm Strengthening the financial structure Improving asset quality Improving maturity composition, decreasing interest rate risk 12

16 Expected results of the program from whole view point of economy HEALTHY GROWTH IN WHOLE ECONOMY STATE BUDGET FINANCIAL SECTOR REAL SECTOR Following the FR contract Healthy and efficient relations Healthy cash flow through SME’s Increasing revenues Employment increase Healthy balance sheets, reliable financial sector Increasing productivity and export Implementable regulations Increasing GNP Adaptation to international norms Successful financial program Stability and reliability Improving in the country rating Decreased funding cost Inflow of foreign capital Strong economy 13


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