Begum Durukan Ozaydin, Furkan Ergun
Restrictions by the Banking Regulation and Supervision Agency on Loan Utilization Effective Today
In order for the loans to be utilized in line with their intended purpose, the Banking Regulation and Supervision Agency ("BRSA"), had decided to restrict the companies subject to independent audit from obtaining Turkish lira cash commercial loans contingent on the companies’ Turkish Lira equivalent of the foreign currency cash assets as per the BRSA Decision dated 24.06.2022 and numbered 10250 ("Decision No. 10250”) and BRSA Decision dated 7 July 2022 and numbered 10265 ("Decision No. 10265”). With its latest decision dated 21.10.2022 and numbered 10389 which entered into force on 01.11.2022 ("Decision No. 10389"), the BRSA has decided to tighten the loan utilization restrictions by reducing the TL equivalent of the foreign currency cash assets thresholds as explained below.
Principles and Conditions
Pursuant to BRSA Decision No. 10250, companies are not allowed to utilize TL denominated cash commercial loans if the following three conditions are present cumulatively. The conditions are as follows:
1. Being a company subject to independent audit in accordance with the Decree Law No. 660 and related regulations.
Whether a company is subject to independent audit is determined in accordance with the Decree Law No. 660 and the Decree of the Council of Ministers No. 2018/11597, which was adopted pursuant to Article 397 of the Turkish Commercial Code, and other relevant legislation. In this connection, real persons and real person shareholders of companies are not included in the scope of the loan utilization limitations.
2. As of the date of the loan application, the TL equivalent of the company's foreign currency cash assets being above TL 15 million.
The BRSA announced in its Decision No. 10265 that (i) effective foreign currency, including gold, (ii) foreign currency deposits in banks, (iii) assets other than Eurobonds issued by the Republic of Turkey, consisting of securities/equities issued in foreign currency by residents or non-residents, (iv) participation units of the stock investment funds indexed to gold or foreign currency or following indexes related to gold or foreign currency indexes, (v) reverse repo transactions with non-residents in foreign currency and (vi) within the scope of swap transactions with banks, foreign currency assets given to banks (including gold) in order to obtain TL on spot are deemed foreign currency cash assets of the companies, as well.
With the recent BRSA Decision No. 10389, the BRSA has decided to lower the threshold to be applied to the TL equivalent of the company's foreign currency cash assets from “TL 15 million” to “TL 10 million”.
3. Companies’ foreign currency cash assets exceeding 10 percent of their total assets or net sales revenue of the last 1 year, whichever is higher, according to the most up-to-date financial statements.
The Central Bank’s foreign currency buying rate on the calculation date is used to calculate the TL equivalent of foreign currency cash assets. In accordance with the BRSA Decision No. 10389, the BRSA has decided to reduce this ratio from “10 percent” to “5 percent”.
For the avoidance of doubt, these amendments to the thresholds entered into force as of 01.11.2022
pursuant to the BRSA Decision No. 10389.
As an exemption to the foregoing, companies that are not allowed to use foreign currency denominated loans as per the Decree No. 32 on the Protection of the Value of the Turkish Currency and the relevant legislation, may use TL denominated cash commercial loans, provided that it is limited only to the position deficit in the 3-month period following the date of the loan application, if they certify to the bank that they have a foreign currency net position deficit within the 3-month period following the date of application for the loan, as approved by an independent audit institution.
On the other hand, as per the BRSA Decision No. 10265, (i) companies subject to independent audit whose foreign currency cash assets do not exceed TL 15 million or (ii) even if foreign currency cash assets exceed TL 15 million; companies whose foreign currency cash assets do not exceed 10 percent of their total assets or net sales revenue of the last 1 year, whichever is higher, according to the most up-to-date financial statements or (iii) companies that are not allowed to use foreign currency denominated loan and apply for a loan limited only to the foreign currency net position deficit in the 3-month period are required to submit a Declaration and Undertaking Form to the relevant bank stating that the company will continue to fulfill these conditions during the utilisation period in case of a loan application, as attached as Annex-1 to the BRSA Decision No. 10265. However, due to changes in the mentioned thresholds above, the BRSA has announced in its latest Decision No. 10389 that an additional declaration and undertaking in line with the new thresholds are required to be obtained from the customers as of 01.11.2022.