The Regulation containing amendments below to the Regulation on Banks’ Equities, required by the Banking Regulation and Supervision Agency (BRSA) has been published in the Official Gazette dated 14 March 2018.
Pertaining to that, article 8/2 (a) regarding the requirement of debt instruments to be included in the calculation of secondary capital being issued by the bank, registered by the Capital Markets Board and its value to be collected completely in cash; article 8/12 concerning the inclusion of general reserves to the secondary capital for participation banks and consideration of general reserve amounts reflected to expense accounts have been repealed. Sub-clause 11 of the same article has also been amended as “The portion of the positive amount reached after the calculation indicated in 2nd clause of Article 8 within the Communique Regarding the Calculation of the Amount Taken as Basis to Loan Risk with Approaches Based on Internal Rating exceeding 6 per thousand of the total risk weighted amounts of receivables that were subject to approaches based on internal rating in line with the same Regulation”.
Through the Article 3 within the Regulation, concerning the implementation on reserves set aside by banks operating under TFRS, the temporary article provided below has been proposed to be added to the Regulation on Banks’ Equities:
Implementation on reserves set aside by banks operating under TFRS
Temporary Article 5 – (1) Over the portion of the surplus between total predicted loan loss amount calculated as of the date that reserves started to be set aside for predicted loan losses within the scope of TFRS and the total reserve amount calculated prior to the implementation of TFRS 9 after deducting the tax arising from surplus; 80 % for the first year, 60 % for the second year, 40 % for the third year, 20 % for the fourth year may be added to the core capital.
(2) In the implementation of the first clause, as per the Regulation for Measuring and Evaluating Banks’ Capital Adequacy Ratios, in case an approach based on internal rating during the detection of the amount taken as basis to loan risk is preferred, the absolute value of the negative amount reached after the calculation indicated in 2nd clause of Article 8 within the Communique Regarding the Calculation of the Amount Taken as Basis to Loan Risk with Approaches Based on Internal Rating is deducted from the surplus mentioned in 1st clause before being added to the core capital.
(3) In the implementation of this article, amounts that are added to the core capital are not taken into account during the calculation of secondary capital.
(4) Banks preferring the implementation within this article should notify BRSA of their situation as early as the first reporting date. The banks which did not adopt the practice of transition period as of the date that the provisions for loan loss were started to be reserved within the scope of TFRS will not be able to switch afterwards.
(5) Deferred tax assets resulting from temporary differences calculated over the amounts added to the core capital during the transition period are not considered in the calculation of core capital.
The Regulation has been enacted as of its promulgation date with Article 2 effective from 1/1/2020 and other articles effective from 1/1/2018.