COVID-19: Turkey's BRSA issues further measures to fight financial fluctuations
On 23 March the Banking Regulatory and Supervisory Authority (''BRSA'') announced certain measures to facilitate the calculation of capital adequacy ratio (''CAR'') and net foreign currency positions in bank balance sheets due to financial market fluctuations caused by the coronavirus pandemic (''Press Release'').
The BRSA introduced the following measures to be applied until December 31, 2020:
- Banks will be entitled to use the year-end buying exchange rate of 2019 ( 5.9400) in calculating the amount subject to credit risk as per the Regulation on the Calculation and the Evaluation of Banks' Capital Adequacy for certain cases.
In this respect, banks may use the abovementioned rate for the calculation of:
- the valuated amounts as per the Turkish Accounting Standards; and
- the relevant reserves to set aside
related to its cash and non-cash assets, excluding the assets in foreign currency measured in historical cost.
- Banks may calculate the equity amount to be used for CAR in accordance with the Regulation on Banks' Equity, by disregarding the negative net valuation differences related to the securities these banks held in their "Securities whose fair value difference is reflected on other comprehensive income'' portfolio before March 23, 2020. However, these securities acquired after March 23, 2020 will not be subject to the above exception.
- Banks may calculate their net foreign currency position by disregarding the value decrement of the securities they held in their portfolio before March 23, 2020. However, the portfolios acquired after March 23, 2020 will not be subject to the above exception. Banks may use the equity amount set out in paragraph 2 above for this calculation.
The Press Release announced measures that aim to mitigate the macroeconomic risks likely to occur due to the pandemic. This Press Release also demonstrates that the BRSA may continue to take measures in parallel with other regulatory authorities to minimize the economic reflections of the COVID-19 pandemic on the banking sector.