First-step analysis: fintech regulation in Turkey

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Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

The Legislative Proposal to Amend the Law on Payment and Security Settlement Systems, Payment Services, and Electronic Money Institutions and Other Laws (the Amending Law) was published in the Official Gazette No. 30956 on 22 November 2019 and entered into force on 1 January 2020. On the effective date of the Amending Law, the powers of the Banking Regulation and Supervision Agency (BRSA) set forth under the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions (Law No. 6493) were transferred to the Central Bank of the Republic of Turkey (CBRT). Accordingly, the CBTR has the authority to monitor legal relations to which the payment service providers are a party owing to their activities in order to determine issues and areas for development. The Amending Law also grants the CBTR the authority to determine the rules and procedures of the legal relations therein and form working committees if it deems the relevant activities harmful to the area of payments. Finally, the CBRT is entitled to issue payments, e-money and system operator licences pursuant to the Law No. 6493, the Regulation on Payment Services and Electronic Money Issuance and Payment Institutions and the Communiqué on the Management and Supervision for Information Systems of the Payment E-Money Institutions.

In addition to the CBRT, the Turkish Financial Crimes Investigation (MASAK), which acts as Turkey’s financial intelligence unit, effectively fights money laundering and terrorist financing (AML). MASAK checks whether financial institutions meet the requirements of AML regulations and laws. Therefore, fintech companies, such as payment service providers, cryptocurrency trading platforms and crowdfunding platforms, must fulfil their AML obligations.

Sale and marketing of financial services and products may fall under the supervision of the Turkish Capital Markets Board (CMB) or the Banking Regulation and Supervision Agency (BRSA). CMB’s Communique on Principles on Investment Services and Activities and Ancillary services numbered III-37.1 and BRSA’s Regulation on Bank’s Procurement of Support Services impose certain restrictions on financial service providers as well as the vendors providing the sales and marketing of financial services in Turkey.

Article 6 of the Regulation on Establishment and Activities of Asset Management Companies sets forth that asset management companies must obtain authorisation from the CMB prior to their establishment to carry out their activities. According to the Banking Law and the Financial Leasing Law, only entities with a licence granted by the BRSA may legally conduct lending activities. However, following the entry into force of the Amending Law, new licences will be granted by the CBRT as of 1 January 2021.

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

A large number of financial services and activities are regulated in Turkey. Some of these activities, which trigger licensing, authorisation or registration requirements in Turkey, include, and are regulated by, the following.

  • The Central Bank of the Republic of Turkey authorises payment services, invoicing services, e-money services and system operator services.
  • The Banking Regulatory and Supervisory Agency issues licences for banking and finance activities, such as banking services, factoring and financial leasing services.
  • The Capital Market Authority is responsible for authorising equity and lending-based crowdfunding platform services, trading and carrying out intermediation activities in securities and other capital markets instruments.
  • The Ministry of Treasury and Finance authorises insurance activities.
  • The Central Securities Depository of the Turkish Capital Markets provides its members with registration (public offering, etc), settlement and custody services.
  • The Risk Center established within the Banks Association of Turkey collects risk data and information of clients of credit institutions and other financial institutions to be deemed eligible by the Banking Regulatory and Supervisory Board, ensuring that such information is shared with said institutions or with the relevant persons or entities themselves, or with real persons and private law legal entities if approved or consented.
  • Kredi Kayıt Bürosu (KKB) conducts all operational and technical activities through its own organisation as an agency of the Risk Center of the Banks Association of Turkey and provides data collection and sharing services to financial institutions that are members of the Risk Center.

Consumer lending

Is consumer lending regulated in your jurisdiction?

Consumer lending is regulated within the scope of the Banking Law, the Law on Bank Cards and Credit Cards, the Regulation on Credit Operations of Banks and by the Ministry of Commerce through the Consumer Law, the Regulation on Consumer Loan Agreements and the Regulation on Housing Finance Agreements.

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

In Turkey, in principle, loans can only be provided by bank and credit institutions, which do not include payment service or e-money institutions. These banks and credit institutions must be established and authorised by the Banking Regulation and Supervision Agency. Additionally, loan-based transactions are subject to the Turkish Banking Law and regulations. Transferring a loan by way of novation (ie, discharging the original debt) will have the effect of extinguishing the Turkish law-governed security. In these cases, there is a requirement to re-establish the security for the new lender. A parallel debt structure may be a way of preventing the fall of the accessory security as a result of novation. The transfer of debts is also possible and made by an agreement between the transferor, the transferee and the debtor. The agreement does not have to be in writing. However, security providers for these debts should provide their consent in written form as well. There are no registration requirements with the authorities in Turkey for a transfer or assignment to be effective.

On the other hand, debt instruments, which can only be provided by the above-mentioned institutions, can be purchased and sold in the secondary market under the Capital Markets Law and regulations.

Borsa İstanbul AŞ (BIST) is the most active and organised DIBS secondary market in Turkey. The bonds and bills markets are outright purchase and sales and repo and reverse-repo markets. Intermediary institutions and banks can participate in these markets, and the rules of BIST are valid. In BIST, of which the Central Bank is also a member, participants send their requests and proposals to the BIST system with all the necessary details. When the best demand and offer are met in the system, transactions are carried out within the framework of the determined operating rules. Law No. 7222 on the Amendment of Banking Law and Some Other Laws (the Amending Law), which was published in the Official Gazette dated 25 February 2020 and numbered 31050 and came into force on the same date, introduced the concept of crowd-lending by an inclusion made to Law No. 6362. With regard to crowdfunding, with the amendment made in the first paragraph of article 35/A of Law No. 6362, the CMB is empowered to make determinations regarding crowdfunding activities that collect money from the public based on partnership or lending; hence, establishing the leg
al basis of the lending-based crowdfunding model. As per the Amending Law, the provisions of the banking legislation shall not be applied for the financing provided through lending-based crowdfunding and shall not be considered as deposit or participation fund acceptance. Regulations regarding lending-based crowdfunding affect the situation of the trading of the funds in the secondary market, which will be provided through a lending-based crowdfunding platform, although, a communiqué for these platforms has not yet been prepared by the CMB. According to the Economic Reforms Action Plan, crowdfunding applications based on equity and lending will be implemented quickly for innovative companies’ access to finance.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance…

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