RESTRICTIONS FROM BRSA FOR BORROWING COMMERCIAL LOANS IN TURKISH LIRAS
With its decision No. 10250 and dated June 24, 2022 (the “Decision”), the Banking Regulatory and Supervisory Authority (the “BRSA“) has introduced a restriction for borrowing cash commercial loan in Turkish Liras for non-financial institution companies subject to independent audit (“Companies“).
Pursuant to the Decision, the companies’ borrowing Turkish Lira cash commercial loans will be subject to various restrictions depending on the amount of their foreign exchange assets. For any company to be evaluated under the scope of this Decision, it must meet the 3 conditions listed below cumulatively.
1- It must be a company subject to independent audit,
2- TRY equivalent of the companies’ foreign exchange cash asset must exceed TRY 15 million,
3- TRY equivalent of the companies’ foreign exchange cash assets must exceed either total assets or 10% of the net sales revenue of the last 1 year (the higher one will be taken as basis).
The aforementioned calculation will be made over the consolidated balance sheets for the companies that must prepare consolidated financial statements.
EXEMPTION FROM THE CREDIT TRANSACTIONS LIMITATION
1- Companies that are not allowed to borrow foreign currency loans and having foreign currency net position deficit within the three-month period following their loan application made to the bank
These Companies will be able to borrow Turkish Lira cash commercial loans limited to their position deficit of the three-month period following their application date, provided that the position deficit has been determined pursuant to the examination to be made on the most recent financial statements prepared by the authorized independent audit firms and these companies have applied to the bank with the documents approved by such firms.
2- Assets that cannot be evaluated within the scope of foreign currency
Foreign exchange assets include;
* Effective exchange including gold,
* Foreign exchange deposits in the banks,
* Foreign currency denominated securities and stocks issued by non-residents and
* Other monetary assets such as reverse repo with non-residents.
However, other monetary assets of the Companies, consisting of securities issued by issuers resident in Turkey and debt instruments such as Eurobonds, will not be considered as foreign exchange assets.
3- Companies whose TRY equivalent of foreign exchange assets do not exceed TRY 15,000,000
Companies whose foreign exchange cash assets do not exceed TRY 15 million will not be included in the loan limitation within the scope of the Decision. However, these companies are required to provide the following issues as of the date of the application for the loan. These companies can borrow Turkish Lira commercial cash loans;
* Provided that their current foreign exchange assets, net assets and net sales revenue of the last 1 year pursuant to the most recent financial statements have been determined by an independent audit firm,
* They have declared and undertaken that the Turkish lira equivalent of their foreign exchange assets will not exceed TRY 15 million; if it exceeds such amount, it will not exceed 10% of their net assets and their net sales revenue of the last financial year (the higher one will be taken as basis) during the term of the loan that they will borrow,
* To ensure that the aforementioned declaration and commitment is controlled by the bank, the companies must submit to the bank (i) the current value of the total currency exchange assets within the first 10 working days of each month which is based on previous month-end balance sheet, and (ii) the last 12 months' net sales revenue as of the end of the previous month.
The calculation of the foreign exchange assets will be based on the foreign exchange buying rate of the Central Bank of the Republic of Turkey on the date of the calculation.
Evaluation
In the statement made by the BRSA, it was indicated that although some companies do not have foreign currency debt or foreign currency liabilities and even have an excess foreign currency position, they purchase foreign currency by obtaining TRY loans and hold their foreign currency positions. In this respect, it is expected that this Decision will have a positive impact in terms of strengthening financial stability, using resources in more efficient and productive areas, operating the credit system effectively and ensuring that the loans are used in accordance with their purpose.