Source: https://turkishlawblog.com/read/article/59/handbook-for-foreigners-to-conduct-a-banking-business-under-turkish-legal-system-establishment-of-a-subsidiary
Timestamp: 2020-06-03 03:07:40
Document Index: 493389830

Matched Legal Cases: ['Art.3', 'Art. 332', 'Art.7', 'Art.8', 'Art.165', 'Art.15', 'Art.15', 'Art.15', 'Art.33', 'Art.7', 'Art.66', 'Art.39', 'Art.22', 'Art.22', 'Art.22', 'Art.22', 'Art.332', 'Art.10', 'Art.17', 'Art. 29', 'Art.30', 'Art.29', 'Art.45', 'Art.45', 'Art.45', 'Art.43', 'Art.1', 'Art.43', 'Art.43', 'Art.43', 'Art.38', 'Art.5', 'Art.13', 'Art.46', 'Art.23', 'Art.23', 'Art.8', 'Art.23', 'Art.23', 'Art.27', 'Art.24', 'Art.24', 'Art.10', 'Art.10', 'Art.10', 'Art.11', 'Art.44', 'Art.127', 'Art.12', 'Art.4']

﻿ Handbook for Foreigners to Conduct a Banking Business Under Turkish Legal System: Establishment of a Subsidiary
Handbook for Foreigners to Conduct a Banking Business Under Turkish Legal System: Establishment of a Subsidiary
Yaman Gürsel/ University of Fribourg
29 January, 2019 203252
Abstract: This article essentially aims to present the conditions for foreigners in establishing a banking business in Turkey. To this end, Turkish Code on Banking Law numbered 5411 (hereinafter “TBC”) shall be elaborated along with other necessary codes, ordinances and circulars, subjecting the major type of the institution as subsidiary. Admittedly, almost every national banking system has been in a change in the aftermath of the last global financial crisis emerged between the years 2007/08 in United States of America. The said financial crisis has been spread throughout the world with its devastating results, so to speak. Thus, every country’s banking system has had its own part in terms of a change. In fact, concerning certain fields of the banking system, in the context of a requirement, the alterations were pretty substantial. Nevertheless, a foreigner can set up its banking business in the form of four types of establishments such as banking subsidiary, branch, agency and representative office, generally speaking. However, setting up a subsidiary to maintain its business in such an exclusive field could be deemed as most challenging and multifunctional type. Plus, it generates the adequate creditworthiness in the market, which usually enhances the amount of business. This fundamental way of establishment for banking corporations to orchestrate and run their business, has its own obligatory and characteristic conditions to be met. As it might be imagined, in operating such a critical market, the conditions usually have higher standards than the adequate ones. Major amendments under Turkish banking legal system have been made by the Turkish Banking Regulation and Supervision Agency (hereinafter “Turkish Supervision Agency”) in the aftermath of the domestic banking crisis held in 2001. And of course, some minor changes have been accorded after the last global financial crisis.
Keywords: banking subsidiary, branch, compulsory conditions, license/authorization, capital and liquidity requirements, financial crisis, equity standards, corporate governance.
1. General Information on the Turkish Banking System
To begin with, Turkish banking law was strictly regulated after the last banking crisis in 2006. The authorities worked diligently on drafting regulations to ensure a secure and transparent banking system. They also had working sessions on the rules that allow foreign banks to establish a branch, a representative office, and agency in order to conduct banking activities in Turkey[1]. Nevertheless, all these changes have been determined by the international organizations such as Financial Stability Board, Basel Committee on Banking Supervision, International Monetary Fund OECD, etc. Whereas the impact of the international organizations cannot be denied, Turkish banking system has a different feature in comparison with other countries regarding the damage amount, which had been received due to the aforementioned crisis. Insofar, Turkey is one of the less influenced countries during the crisis, since the major amendments had been already made during the banking crisis held in 2001 in Turkey. After the crises to recover the wounds, Turkish Supervision Agency has made such effective alterations that during the last financial crisis Turkish banking system was fully protected from the domino effect, carved out due to the failures of the global banking corporations.
Regarding the main actor of this paper, foreign entities that aim to operate a bank by virtue of setting up a subsidiary are subject to the same rules as banks based in Turkey. Indeed, according to Arts.10 and 48 of Turkish Constitution (Constitution of Republic of Turkey)[2], equal treatment must be applied to banking entities established in Turkey, regardless of capital, or headquarters in the case of a subsidiary[3]. This is also supported under Art.3 of the Code on the Foreign Direct Investment[4].
TBC numbered 5411 is the main piece of legislation concerning this study, as aforementioned. Although this research utilizes various ordinances and circulars, it will frequently refer to the main code of the banking sector in Turkey as TBC. As mentioned before, the crisis in Turkey led lawmakers to a different understanding regarding the provisions and procedures. First, the Turkish Supervision Agency was founded as a quasi-independent authority working for the financial sector mostly focused on banks[5].
Moreover, banks must be established in the form of joint stock companies in accordance with Turkish Commercial Code numbered 6102[6][7]; therefore, they must transition to the registered capital system. Transition to the registered capital system is mandatory for publicly traded corporations according to the Turkish Code of Capital Market Law numbered 6362[8] in light of Art. 332 of Turkish Commercial. This new obligation also concerns non-publicly traded entities[9].
2. Conditions for a Foreign Banking Subsidiary under Turkish Legal System
Here we start with the requirements to be fulfilled when petitioning the Turkish Supervision Agency regulated under Art.7 of TBC[10] are as follows:
It is mandatory to be established as joint-stock company
The share structure of the joint-stock company must be provided including cash and all should be named; in other words, its shares should be issued against cash and to name
Founders must have the required characteristics described in TBC
The board of directors must be as described in TBC in terms of corporate governance, including the abilities and experience to perform
Stipulated operational subjects must be in compliance with the planned fiscal and management plans
The capital contribution of no less than 30.000.000 Turkish Liras, must be in cash and must be free of any collusion
Articles of association must be accorded with TBC’s provisions
Organizational structure of the entity must be transparent and open for an efficient supervision to be implemented
There must not be anything preventing consolidated supervision
A report on the budget plan for the first three years including the structure plan of the corporate body, risk management, internal supervision plan along with the business plans on the stipulated operations, fiscal structure of the establishment including the capital adequacy features of the corporate body must be provided[11].
There are other elements concerning the co-founders of the banking entity to be taken into consideration. These elements that will be listed below are mandatory for the founding partners. Art.8 of TBC lists these requirements. In brief, the founding partners must not be connected to any insolvency case or be declared insolvent according to Art.165 of the Code of Turkish Bankruptcy and Enforcement numbered 2004[12][13].
Furthermore, they should not have any qualified share in banks already transferred to the Fund[14]. Concerning the liquidation process, they should not have any qualified shares in any banking entity that is in liquidation, and they should have the controlling power in maintaining these entities. More importantly, concerning any piece of legislation on penalty law, they should not have been convicted for crimes related to the operations of their bank. It should be indicated that any claim regarding their performance would lead to sufficient doubt on the part of the Turkish Supervision Agency and result in a refusal[15].
Co-founders must have adequate fiscal capabilities along with a solid reputation. Additionally, they must also be considered as honest and trustworthy as required by this particular field of business. Importantly, if a legal entity is a founding partner, this legal entity itself should have a transparent and proper corporate structure[16]. This requirement also includes the proof of the proficiency of the internal auditing, risk assessment, level of internal control and most importantly, fiscal plans based on the contemplated activities and expenses to be made in the future[17], which have to be added to the letter of application for the authorization[18].
As per Art.15 of TBC, a reference has been made to independent external audit companies in terms of the supervision of banks established in Turkey. This additional supervision is subject to the approval of the Turkish Supervision Agency, which will authorize an independent auditing firm. The obsolete article has been amended to include not only the supervisory firms, but also rating and support firms in the text of the aforementioned provision[19]. In Art.15 of TBC, supervisory activities that could be maintained by independent external auditing firms are regulated such that they could be executed upon the authorization of the Turkish Supervision Agency in order to prevent the loss of reputation of banks and the market. Besides, the performance demonstrated by these independent external auditing firms must be impartial and realistic, in particular on the fiscal measures and features of the banking entity at hand[20]. Nevertheless, regarding the reasoning of Art.15 of TBC, empowerment of the independent external audit companies shall be made in accordance with Art.33 of TBC[21].
The successful auditing of the banking entities not only prevents the distortion of the market, but also it enhances the credibility of the country’s sources and provides a more efficient distribution of resources for the country. This successful performance would also increase the efficiency of the competition in the banking sector[22].
Certain statements in Art.7 of TBC are crucial, since they mention the relation between the drafting history of the article and the international laws and principles in common. For instance, it is explicitly stated that while keeping the rules provided under the obsolete banking code numbered 4389, they have tried to incorporate the elements of the EU directives and the principles of the Basel Committee on Banking Supervision into the article at stake[23]. Particularly, they applied those elements and principles while determining the operations of a bank—i.e., sphere of these activities, organizational structures of the banks, and management and fiscal bodies of the banks; and lastly, they tried to prepare the banks’ structure to enable consolidated supervision, which is specifically regulated under Art.66 of TBC[24]. Another crucial piece of information is that Turkish lawmakers raised the capital adequacy required to establish a bank up to 30.000.000-Turkish Liras in order to increase competition with the foreign banking industry[25].
Further, in spite of the obligation to set the banking entity up as a joint stock company, the petitioner must obtain a Certificate of Trade Registry, and make the payments regulated under under Art.39 of the Turkish Code on the Protection of the Competition numbered 4054[26]. Nevertheless, since the aforementioned provisions are in the obsoleted codes, the new relevant articles must be accorded under this obligation. Ultimately, the banking entity wanting to be established in Turkey must apply to Turkish Commercial Registry, in order to fulfill the declaration condition[27].
Features of the Corporate Governance to Represent in Setting Up a Banking Company under Turkish Legal System
Today, the impact of practicing good corporate governance is crucial for enhancing the efficiency of the work that a firm is executing, as shown by the analytical and statistical results provided by international organizations such as the OECD. The principles and elements of successful corporate governance will be mentioned, but from a Turkish legal literature perspective, which is coherent with the international legal literature.
Under the Turkish legal system, the principles of corporate governance concerning the banks are regulated under Art.22 of TBC numbered 5411 along with the Turkish Ordinance on the Principles of Corporate Governance of the Banks[28][29]. As per Art.22 of TBC, the principles of corporate governance are determined by the rulings of the Turkish Supervision Agency, taking into account the view of the Stock Exchange Commission among others. The Stock Exchange Commission imposes the principles of corporate governance over publicly traded companies. Nevertheless, by the enactment of Art.22 of TBC, these principles have become obligatory for all types of banks under the Turkish legal system[30].
Art.22 of TBC reveals the impact of the soft laws drawn up by international organizations such the spearheading OECD[31]. The principles on the implementation of the corporate governance adopted under Turkish law strictly comply with the principles of the OECD on the matter at hand. Investors do not only look into the fiscal charts and potential of the profitability of the targeted companies anymore; they look for the sustainability of these economical features through the execution of successful corporate governance[32]. In this respect, in particular in developing countries, the best practices in the corporate governance aim to attract more investors so that the countries can improve their business sector.
According to the reasoning of the mentioned article, most of the bankruptcies of the banks in the recent years were due to a lack of good corporate governance. Indeed, this could be explained by the bad behavior and decision making of the controlling shareholders, which happened due to their limitless discretion[33]. Therefore, the Turkish Supervision Agency, which has a greater impartiality in conducting business, has been tasked with drafting the regulation on the principles of corporate governance[34].
The principles that are drawn up by the Turkish Supervision Agency are important in a discussion of non-publicly traded banks regarding the registered foreign banking corporations in Turkey. Before going through each principle of corporate governance, it should be indicated that these principles had taken their last shape regarding the seize, types of structuring of the banks established in Turkey, and of course considering the provisions of the relevant codes and ordinances[35]. To begin with, to observe and to supervise the compliance with the principles of corporate governance of a bank, it is mandatory to create a “Committee on Corporate Governance” under the leadership of a non-executive member of the board of directors[36].
To continue with the principles of corporate governance necessary for a banking entity to be established in Turkey; first of all, corporate values and strategic goals must be established by the bank and be disclosed to the public in line with a transparency policy. Secondly, the scope of the responsibilities and duties must be clearly determined for the Committee on Corporate Governance. Thirdly, they must be aware of the importance of their duty and responsibilities in conduct their business successfully. Furthermore, according to the third principle, they also must operate the bank with an objective perspective[37]. The fourth principle repeats the previous principles from a broad perspective. It claims that the senior management of the bank must be capable to perform their task and be aware of the importance of their duties and responsibilities[38]. The bank must undergo inspections by independent external audit firms as well, while running its banking business as per the fifth principle of corporate governance. The sixth principle of corporate governance requires harmony and consistency among the policies related to the salaries and the ethics and strategies of the bank. Lastly, transparency must be established in the corporate governance of the bank[39].
Capital Adequacy Level for a Bank to be Approved under Turkish Legal System
In general, for the establishment of a non-public joint stock company in accordance with Art.332 of Turkish Commercial Code, the amount of the minimum capital to be registered is 50.000 Turkish Liras; however, for setting up a bank in Turkey in accordance with TBC’s relevant provisions, this minimum amount is substantial more and stands at 30.000.000-Turkish Liras[40]. This amount must be registered in terms of the capital in-paid. Also, the Turkish Supervision Agency could increase this minimum amount based on the planned operations of the banking company at hand[41].
Once a bank receives authorization for establishment from the Turkish Supervision Agency, it faces an additional requirement related to the type of capital to be registered while applying for authorization to commence its operations. This requirement explicitly states that the amount of the paid capital must be registered in cash according to Art.10, para.2, subpara(a) of TBC[42]. Thus, the Turkish Supervision Agency also looks for a balance between the planned activities to be done and the amount of the paid capital registered in cash[43]. The Turkish Supervision Agency has substantial discretion on this matter[44]. For example, a bank might register only the minimum amount of capital prior to applying for authorization to establish, and afterwards receive a request to increase the amount of paid capital to 50.000.000 Turkish Liras, to better balance out its planned operations.
It is extremely important to underline the fact that this requirement specifying the amount of paid capital is only applicable to banks that apply for the authorization to the Turkish Supervision Agency after the enactment date of TBC numbered 5411. Banks that already have all of the necessary authorizations from the relevant authorities do not need to enhance their capital adequacy to the updated levels. This is might be the case only if the shareholders of the bank agree increasing the capital[45].
In addition to above, the capital of the bank must free of any collusion[46]. This rule might be regarded as a general rule of law under the Turkish legal system. One cannot use the term “collusion” and not discuss the Turkish Code of Obligations. As per the Turkish Code of Obligations’ relevant provisions on the evaluation and the cases for the implementation of the term, in the event that collusion is detected in the legal relationship, the transaction, which contains collusion shall be considered void[47]. Nonetheless, under Turkish Commercial Code, there is no reference to what shall be applied in the event that collusion is found in evaluating the required paid capital for the establishment of a joint stock company, yet Arts.26 and 27 of Turkish Code of Obligations expressly indicate that any collusion detected in the paid capital of the company render the application void.
Furthermore, Art.17 of TBC regulates the capital increase of the banks established in Turkey. Like the registration of the paid capital, while requesting authorization to establish and commence operations, the amount of the capital increase of bank must also be free of any collusion. The amount decided for the capital increase must be paid in cash, without tapping into the internal resources of the bank. Eventually, the capital increase to be registered to the Turkish Commercial Registry must be conveyed to the Turkish Supervision Agency, in order to receive approval for the completion of the capital increase process[48].
According to Art. 29, para.2 of the Turkish Ordinance on the Measurement and Assessment of the Capital Adequacy (hereinafter “Turkish Ordinance on the Capital Adequacy”)[49], the original capital adequacy ratio must be kept and maintained at 6%, at minimum. In addition, the consolidated original capital adequacy ratio must be reserved and maintained at 6%, at minimum, as per Art.30, para.2 of the Turkish Ordinance on the Capital Adequacy. Lastly, the standard rates of capital adequacy must be kept and keep holding at 8%, at minimum, pursuant to Art.29, para.1 of the Turkish Ordinance on the Capital Adequacy[50].
Moreover, concerning capital adequacy as regulated under Turkish law, Art.45 of TBC also emphasizes the importance of the type of capital that has to be registered—i.e., in cash[51]. The impact and decisiveness of the Turkish Supervision Agency on the determination of the rate of capital adequacy has been emphasized in the first paragraph of Art.45 of TBC. As seen through the end of Art.45, para.1 of TBC, the rate determined for capital adequacy for banks established in Turkey is 8%[52]. Further, the aforementioned article underlines the attempt to comply with the principles set forth by the Basel Committee on Banking Supervision[53].
Art.43 of TBC also mentions capital buffers and the protection of the capital. However, thorough explanations have been made under the Turkish Ordinance on the Capital Adequacy, which was published in the Official Gazette numbered 29511, dated 23 October 2015. The aim of the aforementioned ordinance is not only giving a definition on the obligations relying on the protection of the capital, but also pointing out the procedures and merits in the event of not being able to fulfill the requirements of the additional core capital with the protective capital buffers, according to Art.1 of the aforementioned ordinance in question[54].
Ultimately, a foreign investor dealing with the banking business in their own country must take great care to fulfill this particular requirement, which actually consists of two stages of capital adequacy under the Turkish legal system. They should not only focus on fulfilling the minimum amount but also be prepared to grant more depending on their business plans.
Equity Requirements and Standard Rates under Turkish Legal System
Regarding the equity requirements regulated under Turkish banking law, Art.43 of TBC must be taken into consideration. It is important to note that the title of the provision is protective measures/provisions, which reveals the reason for its existence under TBC. As it was already pointed out under the explanation of the Turkish Supervision Agency, the first paragraph of Art.43 begins by defining the scope of the Turkish Supervision Agency’s work and its capabilities with respect to supervising banks. The supervision of the equity requirements also must be maintained in accordance with the principle of consolidated supervision, since it is closely related to the fiscal charts and implementation of the subjected banks, thereby enhancing the inalienability of performing consolidated supervision, to ensure detection of risk and inefficient practices[55].
Art.43 of TBC was inspired and guided by the Basel Committee on Banking Supervision’s rules and recommendations[56]. It does not provide a proper definition for equity and standard rates to apply. The rate relying on the equity and standard rates must not exceed 20% to be in compliance with the consolidated financial charts[57], whose requirements are regulated under Art.38 of TBC and drafted in compliance with the principles and standards of the Basel Committee on Banking Supervision[58]. This rate is an outcome of the calculation of the foreign exchange net general position / capital standard ratio, in accordance with Art.5, para.1 of the Turkish Ordinance on the Consolidated and Unconsolidated Basis for Application of the Foreign Currency Net General Position/ Equity Standard[59][60].
Arts.43 and 46 of TBC as well as the Turkish Ordinance on the Measurement and Evaluation of the Liquidity Adequacy of Banks[61], contain guidance related to liquidity requirements[62]. However, the requirements are updated almost each year; thus, the most updated version of the liquidity figures might be found in the relevant Official Gazette published, for instance in 2019.
The required percentages for banks established in Turkey are regulated under Art.13 of the Turkish Ordinance on the Measurement and Evaluation of the Liquidity Adequacy of Banks, which is published by the Turkish Supervision Agency[63]. It provides that the liquidity coverage ratio in total in the first maturity segment basic arithmetic average in accordance on a weekly basis and the liquidity coverage ratio in total in the second maturity segment must not be less than 100%; and the foreign exchange liquidity coverage ratio in the first maturity segment, which is calculated based on the basic arithmetic average in accordance on a week basis and the foreign exchange liquidity coverage ratio in the second maturity segment must not be less than 80%[64].
In addition to the above, as per Art.46 of TBC, the banks established in Turkey must comply with the procedures that have been determined by the Turkish Supervision Agency taking into the advice of the Central Bank of the Republic of Turkey. As it was also mentioned above, the most important issue related to the liquidity requirements is the calculation and the maintaining the calculated number.
The Mandatory Characteristics of a Board of Directors of a Banking Entity under the Turkish Legal System
Art.23 of TBC discusses the characteristics necessary for a board of directors[65]. These requirements should not only be evaluated in light of TBC numbered 5411, but also from the perspective of a joint stock company regulated under Turkish Commercial Code numbered 6102. To begin with the requirements set forth under Art.23, para.1 of TBC; first of all, the board of directors including the general manager of a banking entity established in Turkey cannot be fewer than five people[66]. The general director is a natural member of the board of directors[67] and in his absence; his attorney is to be a natural member of the board of directors of the banking company[68]. The vice general directors are not permitted to be members of the board of directors according to the decision numbered 2651, dated 12 June 2008[69], rendered by the Turkish Supervision Agency[70]. In addition, the agreed number for the members of the board of directors must be drafted in the articles of association[71].
Furthermore, managing members of the board of directors must bear the required conditions as per the aforementioned provision. There is a reference to Art.8, para.1, subparas.(a), (b), (c), and (d) of TBC, in terms of the fulfillment of the conditions designated for the members of the board of directors[72]. It is also necessary to refer to the establishment of a branch of foreign banking entity under the Turkish legal system under this particular sub-chapter, since Art.23, para.2 of TBC regulates the formation of board of director in for foreign banks opening a branch in Turkey[73].
It is true that setting up the branch of a foreign banking entity does not require the establishment of a board of directors, in terms of Turkish Commercial Code; nevertheless, pursuant to Art.23, para.2 of TBC, branches of banks with headquarters abroad must compose a management board, which must comprise at least three members including the manager of the central branch, and have the same executive powers and responsibilities as the board of directors of a banking company[74]. There is no obligation for the members of the management board of branch to be citizens of the Republic of Turkey[75]. Lastly, these individuals on the management board must take an oath before the Turkish Commercial Court lest they start to conduct their business pursuant to Art.27 of TBC[76].
One more than half of the members of the board of directors must have experience of minimum 10 years in this particular profession. The elected board directors’ documents that are prove their competency must be submitted to the Turkish Supervision Agency within seven days of their election in accordance with the article’s association of the banking entity[77]. This article is an attempt to comply with the elements of EU Directives, the principles of Basel Committee on Banking Supervision along with the rules recommended by the OECD[78].
The Characteristics of an Audit Committee of a Banking Entity Established in Accordance with the Turkish Legal System
One of the most important requirements for banks is to establish well-functioning auditing and supervision systems in their internal structures. The necessary elements and the recommended principles have been explained above, so this section will only provide clarification on the relevant article of TBC.
Having said above, Art.24 of TBC should be taken into consideration, in terms of this general knowledge on the rule set forth under Turkish legal system over the banks. As per Art.24, para.1 of TBC, banks established in Turkey must create an auditing committee inside of the banking entity, in order to control and to supervise the acts of the board of directors, particularly relying on their executive decisions in running the company. At least two non-executive members of the board of directors must be assigned for this auditing committee[79].
In Turkey, the branches of a foreign banking entity are also subject to this obligation. In the same paragraph of the article it is stated that in creating the auditing committee, a non-executive member of the management board must be nominated in connection with this important duty[80].
Overall, after the completion of the nomination process for the audit committee either in a banking entity or in a branch office of a foreign banking company, information of those selected persons must be announced to the Turkish Supervision Agency within seven business days starting from the nomination process[81].
3. Application for the Authorization to Launch the Banking Operations
Once the requirements above have been met and a bank in terms of either a banking entity or a branch of foreign banking company is authorized by Turkish Supervision Agency to establish a business in Turkey, it must then apply for permission conduct business, as well[82]. But first, applicants must petition the Turkish Commercial Registry for registration and declaration related obligations[83]. These conditions to be met are listed in to Art.10, para.2 of TBC as follows:
The capital of the banking company must be paid and should be sufficient to cover operations planned,
25% of the 10% of the minimum paid capital known as the entrance fee into the system, must be paid to the Fund by the founding partners, a bill or receipt for which should be received as proof,
Targeted operations must be in line with the standards of the corporate governance, and the banking company must have adequate employers and technical equipment,
Managers and directors must bear the abilities indicated under the principles and standards of the corporate governance,
Turkish Supervision Agency must reach the conclusion that the banking entity will be able to conduct business in this particular sector[84].
The third paragraph of this article should be noted since it is related to the subscription of the entrance fee to the system. According to Art.10, para.3 of TBC, if part of the entrance fee to the system has not been paid, it is mandatory to provide a written engagement stating that the missing payment shall be made in accordance with the plan to be designated by the Turkish Supervision Agency to the Fund, after receiving the license of execution. And the shareholders of the bank will be liable for the remainder[85].
The article reveals the effort of Turkish lawmakers on TBC numbered 5411, in particular for authorization of establishment and of operation, to ensure they are in compliance with the EU Directives and with the principles of Basel Committee on Banking Supervision[86]. Returning to the provisions of Art.10 of TBC, the application to request authorization for operation must be made within nine months after receiving the authorization to establish the bank, as per the cross-reference with Art.11, para.1, subpara.(b) of TBC[87]. One difference that sets this procedure apart from the establishment authorization is that in granting the license to operate, only a simple majority of the Committee, in the sense of quorum, of the Turkish Supervision Agency comprising seven members is necessary[88].
As previously described under the procedure for applying to establish a bank, while applying for the license to commence business activities, there may be approvals to requested from certain Governmental authorities such as the Stock Exchange Commission, the Central Bank of Republic of Turkey or Under-secretariat of Treasury[89]. For the requirement on capital adequacy, as already explained previously, while applying to the license of operation, the indicated amount of capital must be paid in cash, and must be free of any collusion, which is also supported under Art.44, para.1 of TBC as to define the term “paid-capital”[90]. This brings up another difference from the implementation of Turkish Commercial Code. According to Art.127 of Turkish Commercial Code, there is no such obligation related to the capital adequacy saying it must be paid in cash; however, the TBC, in order to be on the safe side, sets forth stricter condition for banks.
If the minimum paid cash limit set at 30.000.000 Turkish Liras is found too low by the Turkish Supervision Agency for a certain bank based on their plans, the petitioning entity can provide another letter of engagement indicating that they will decide on the capital increase as soon as possible[91]. Moreover, it is crucially important for the prospective bank to make the required the payment of 10% of the subscribed capital to the Fund. This requirement, in fact, could be regarded as the most important condition to be met, since this provides insurance coverage as per the Fund’s business definition[92]. As a last important remark, in applying to the license of operation, every operation must be made in Turkish language[93]. To demonstrate an example, authorization on the commencement of the operations has been granted to Bank of China Turkey A.Ş., under the decision/decree of the Turkish Supervision Agency numbered 7612, dated on 1 December 2017.
Finally, possible reasons for the rejection of an application are given under Arts.11, 12, and 21 of TBC. Art.12 of TBC describes the circumstances under which prospective banks may be refused a license of establishment or commencement of operations[94], as well as the cancellation, withdrawal and limitation of the official authorization. However, these stages are out of the scope of this comparative study and could be explored in another.
To exemplify certain foreign banks establishment authorization, the decision of the Turkish Supervision Agency numbered 5314, dated 9 May 2013, published on 14 May 2013 in the Official Gazette numbered 28647 is a good example related to the implementation. Also, according to the decree of the Turkish Supervision Agency numbered 5461, dated on 1 August 2013, in the Official Gazette numbered 28727, dated 3 August 2013, RABOBANK INTERNATIONAL HOLDING B.V. and the other partners were allowed to establish a bank with capital amounting to 300.000.000 USD in light of the Arts.7 and 8 of TBC and Art.4 of the Turkish Ordinance on Indirect Shareholdings and the Permitted Banking Conducts[95][96].
Nonetheless, a business-friendly situation in comparison to other types, only in case of establishing a subsidiary, which means a legal entity, is there an opportunity to have separate legal personalities. A banking subsidiary is quite different than a branch or a representative office. These days, the importance of the liabilities of a debt arising from your sub-body established in a different country or dealing with another business sector, in terms of commercial relations is undisputable, whereas bankruptcy of the mother company is controversial and turbulent. Hence, merchants prefer when one is less affected by the other, in the sense of keeping their business unaffected by the liabilities caused by a subsidiary, or from the bankruptcy of the mother company. Yet, it is always possible to pursue the liabilities by piercing the corporate veil. In the case of a branch or a representative office, this is a non-issue, since they are not entitled to have independent legal personalities in the first place.
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6. List of Statutes
Code of Turkish Bankruptcy and Enforcement Law – numbered 2004, dated 9 June 1932
Turkish Code of Capital Market Law – numbered 6362, dated 30 December 2012
Turkish Code on Banking Law – numbered 5411, dated on 19 October 2005
Turkish Code on the Foreign Direct Investment — numbered 4875, dated 17 June 2003
Turkish Code on the Protection of the Competition – numbered 4054, dated on 7 December 1994
Turkish Commercial Code – numbered 6102, dated 14 February 2011
Turkish Ordinance on Indirect Shareholdings and the Permitted Banking Conducts – published in the Official Gazette numbered 26333, dated on 1 November 2006
Turkish Ordinance on the Consolidated and Unconsolidated Basis for Application of the Foreign Currency Net General Position/ Equity Standard – published in the Official Gazette numbered 26333, dated on 1 November 2006
Turkish Ordinance on the Measurement and Evaluation of the Liquidity Adequacy of the Banks – published in the Official Gazette numbered 26333, dated on 1 November 2006
Turkish Ordinance on the Measurement and the Assessment of the Capital Adequacy – published in the Official Gazette numbered 29511, dated on 23 October 2015
Turkish Ordinance on the Principles of the Corporate Governance of the Banks – published in the Official Gazette numbered 26333, dated on 1 November 2006
7. List of Cases and Decrees
Decree of the Turkish Supervision Agency, numbered 7612, dated on 1 December 2017, published in the Official Gazette dated on 7 December 2017, numbered 30263
[1] BAŞAK, Levent, Yabancı Bankalar ve Türkiye (BETA Yayınları, İstanbul, 2012) p 6.
[2] Constitution of Republic of Turkey No 2709; Dated 7 November 1982.
[3] ÖNAL, Ali, Türk Hukukunda Yabancı Bankaların Durumu ile Bankaların Kuruluş Faaliyet ve Sona Ermesi (Yetkin Yayınevi, Ankara, 2015) p 56.
[4] Code on the Foreign Direct Investment Law No 4875; Published in the Official Gazette No 25141; Dated 17 June 2003.
[5] TAŞDELEN, Selim Servet, Bankacılık Kanunu Şerhi, 1st Volume, 2nd Edition (Adalet Yayınevi, Ankara, 2015) p 96.
[6] Turkish Commercial Code No 6102, Published in the Official Gazette No 27846; Dated 14 February 2011.
[7] TAŞDELEN pp 118-119.
[8] Turkish Code of Capital Market Law No 6362, Published in the Official Gazette No 28513; Dated 30 December 2012
[9] REISOĞLU, Sezai, Bankacılık Kanunu Şerhi, 1st Volume, 2nd Edition (Yaklaşım Yayıncılık, Ankara, 2015) p 514.
[10] Turkish Code on Banking Law No 5411, Published in the Official Gazette No 25983; Dated 1 November 2005.
[11] BAŞAK p 58; GÜNDOĞDU, Aysel, Türkiye’de Bankacılık Sisteminin Yasal Düzenlemeleri (Seçkin Yayıncılık, İstanbul, 2014) pp 43-44; GÜNDOĞDU, Aysel, Bankacılık Hukuku, 3th Edition (Seçkin Yayıncılık, İstanbul, 2015) p 46; GÜNEY, Ali, Banka Hukuku, 4th Edition (BETA Basımevi, İstanbul, 2017) pp 24-25; ÖNAL pp 104-115; PEHLIVAN, Pınar /YURTSEVER, Hatice, Türk Bankacılık Sektörü ve Mali Yükümlülükleri (Legal Yayıncılık, İstanbul, 2016) pp 30-31; REISOĞLU p 421; TAŞDELEN p 116; TEKINALP, Ünal, Ünal Tekinalp’ in Banka Hukuku Esasları, 2nd Edition (Vedat Kitapçılık, İstanbul, 2009) pp 135-136.
[12] Code of Turkish Bankruptcy and Enforcement Law No 2004, Published in the Official Gazette No 2128; Dated 19 June 1932.
[13] GÜNEY p 24; ÖNAL p 107; REISOĞLU pp 429, 436-437; TAŞDELEN pp 124, 133-144; TEKINALP pp 139-140.
[14] ÖNAL p 109.
[15] REISOĞLU p 429; TAŞDELEN pp 131-132.
[16] GÜNDOĞDU 2015 pp 46-47; REISOĞLU pp 429-430, 434; TAŞDELEN pp 124, 133-144.
[17] TAŞDELEN pp 124-125.
[18] REISOĞLU pp 430, 434.
[19] TAŞDELEN p 196.
[20] REISOĞLU p 500.
[21] TAŞDELEN p 196.
[22] REISOĞLU pp 500-501.
[23] TAŞDELEN p 117.
[24] TAŞDELEN pp 127, 784-785.
[25] ÖNAL p 113; REISOĞLU p 422.
[26] Turkish Code on the Protection of the Competition Law No 4054, Published in the Official Gazette No 22140; Dated 13 December 1994.
[27] BAŞAK p 59.
[28] Turkish Ordinance on the Principles of Corporate Governance of the Banks, Published in the Official Gazette No 26333; Dated 1 November 2006.
[29] GÜNEY p 36; REISOĞLU p 590; TAŞDELEN p 301.
[30] REISOĞLU p 588.
[31] TAŞDELEN p 301.
[32] REISOĞLU p 589; TEKINALP pp 169-171.
[33] REISOĞLU p 589.
[34] REISOĞLU p 589.
[35] REISOĞLU p 597.
[36] REISOĞLU p 598.
[37] GÜNEY p 37; REISOĞLU pp 599-600; TEKINALP p 172.
[38] REISOĞLU pp 600-601; TEKINALP p 172.
[39] GÜNEY p 38; REISOĞLU p 602; TEKINALP p 172.
[40] PEHLIVAN/YURTSEVER p 48; TEKINALP p 138.
[41] REISOĞLU p 430.
[42] REISOĞLU p 122.
[43] REISOĞLU p 430.
[44] ÖNAL p 103.
[45] REISOĞLU p 431.
[46] TAŞDELEN p 125.
[47] REISOĞLU p 431.
[48] REISOĞLU p 519.
[49] Turkish Ordinance on the Measurement and the Assessment of the Capital Adequacy published in the Official Gazette No 29511; Dated 23 October 2015
[50] PEHLIVAN/YURTSEVER p 49.
[51] REISOĞLU p 845; TAŞDELEN p 544.
[52] REISOĞLU p 845; TAŞDELEN p 549; TEKINALP p 217.
[53] REISOĞLU pp 845-846; TAŞDELEN pp 545-546.
[54] REISOĞLU p 825.
[55] REISOĞLU pp 817-818; TAŞDELEN p 516.
[56] REISOĞLU p 818; TAŞDELEN p 517.
[57] TAŞDELEN p 520.
[58] TAŞDELEN p 483.
[59] Turkish Ordinance on the Consolidated and Unconsolidated Basis for Application of the Foreign Currency Net General Position/ Equity Standard, Published in the Official Gazette No 26333; Dated 1 November 2006.
[60] REISOĞLU p 824; TEKINALP pp 209-210.
[61] Turkish Ordinance on the Measurement and Evaluation of the Liquidity Adequacy of Banks, Published in the Official Gazette No 26333; Dated 1 November 2006
[62] TAŞDELEN pp 552-553; TEKINALP pp 217-218.
[63] REISOĞLU p 858.
[64] REISOĞLU pp 860-861.
[65] GÜNEY p 42; ÖNAL p 114; TAŞDELEN pp 307-308.
[66] GÜNEY p 42; TAŞDELEN p 310; TEKINALP p 174.
[67] TAŞDELEN p 312.
[68] REISOĞLU p 604.
[69] Decree of the Turkish Supervision Agency, numbered 7612, dated on 1 December 2017, published in the Official Gazette dated on 7 December 2017, numbered 30263.
[70] REISOĞLU p 609.
[71] TAŞDELEN p 310.
[72] GÜNEY p 42; REISOĞLU p 604; TAŞDELEN pp 124, 317.
[73] TAŞDELEN p 220.
[74] BAŞAK p 79; REISOĞLU pp 604, 606; TAŞDELEN pp 308, 328-330; TEKINALP pp 176-177.
[75] REISOĞLU p 622.
[76] BAŞAK p 79.
[77] REISOĞLU p 607.
[78] REISOĞLU pp 605-606; TEKINALP pp 138-139.
[79] GÜNEY pp 43-44; REISOĞLU p 643; TAŞDELEN pp 346-347; TEKINALP pp 178-179.
[80] REISOĞLU pp 643, 647, 652.
[81] TAŞDELEN p 353.
[82] BAŞAK p 64.
[83] BAŞAK p 64; TAŞDELEN p 154.
[84] BAŞAK p 59; GÜNDOĞDU 2015 pp 48-49; GÜNEY pp 26-27; ÖNAL pp 145, 148-156; PEHLIVAN/YURTSEVER pp 33-34; REISOĞLU p 450; TAŞDELEN pp 152-153; TEKINALP p 142.
[85] TAŞDELEN pp 156-157.
[86] ÖNAL p 145; REISOĞLU p 451; TAŞDELEN p 153.
[87] TAŞDELEN p 155.
[88] TAŞDELEN p 155.
[89] REISOĞLU p 453.
[90] TAŞDELEN pp 155-156, 525-529; TEKINALP p 210.
[91] REISOĞLU pp 455, 457-458; TAŞDELEN p 156.
[92] REISOĞLU p 455; TAŞDELEN pp 156-158.
[93] TAŞDELEN p 161.
[94] GÜNEY pp 29-30; PEHLIVAN/YURTSEVER p 35; REISOĞLU p 585; TAŞDELEN pp 162, 166.
[95] Turkish Ordinance on the Indirect Shareholdings and the Permitted Banking Conducts published in the Official Gazette No 26333; Dated 1 November 2006
[96] REISOĞLU pp 408-409.
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Benan İlhanlı, Partner
ILHANLI/BASER Law Firm
Cemre Apaydın
Cemre Şahin
Deniz Mina Küpana
Dila Şen
Ece Sürmen, Associate
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Statu Legal Law
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Öykü Dalgıç
Eralp Law Office
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