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Banking and Finance Law

Banking and Finance Law in Turkey: A Comprehensive Overview

Turkey's banking and finance sector has undergone significant changes and regulatory developments in recent years. In this article, we will provide a thorough overview of the banking and finance laws applicable in Turkey, highlighting the key legal instruments, regulatory bodies, and important considerations for fintech companies operating in the country.

Regulatory Bodies

Turkey has several regulatory bodies responsible for overseeing the provision of fintech products and services. The Central Bank of the Republic of Turkey (CBRT) plays a crucial role in monitoring legal relations related to payment service providers, determining areas for development, and issuing licenses for payment services and electronic money institutions. Additionally, the Turkish Financial Crimes Investigation (MASAK) is responsible for combating money laundering and terrorist financing, ensuring that fintech companies comply with anti-money laundering (AML) obligations.

The Turkish Capital Markets Board (CMB) and the Banking Regulation and Supervision Agency (BRSA) are also involved in supervising the sale and marketing of financial services and products. The CMB regulates equity and lending-based crowdfunding platforms, while the BRSA issues licenses for banking and financial activities. It is important for fintech companies to adhere to the regulations imposed by these regulatory bodies to ensure compliance and maintain the integrity of the financial system.

Licensing Requirements

Various activities in the banking and finance sector trigger licensing requirements in Turkey. The CBRT authorizes payment services, e-money services, and system operator services, while the BRSA grants licenses for banking services, factoring, and financial leasing services. The CMB is responsible for authorizing crowdfunding platform services, and the Ministry of Treasury and Finance authorizes insurance activities. It is essential for fintech companies to obtain the necessary licenses and authorizations from the relevant regulatory bodies before engaging in these regulated activities.

Consumer Lending Regulation

Consumer lending in Turkey is regulated under the Banking Law, the Law on Bank Cards and Credit Cards, and various regulations related to consumer loan agreements and housing finance agreements. Fintech companies involved in providing consumer lending services must comply with these regulations to ensure consumer protection and fair lending practices.

Secondary Market Loan Trading

In Turkey, there are restrictions on trading loans in the secondary market. Only banks and credit institutions authorized by the Banking Regulation and Supervision Agency can provide loans, and payment service or e-money institutions are prohibited from engaging in lending activities. However, debt instruments provided by authorized institutions can be purchased and sold in the secondary market under the Capital Markets Law and related regulations.

Collective Investment Schemes

The regulatory regime for collective investment schemes in Turkey is primarily governed by the Capital Markets Law and its related regulations. Investment funds must comply with the principles and rules set forth by the Capital Markets Board (CMB). Fintech companies providing alternative finance products or services, such as crowdfunding platforms, may fall within the scope of collective investment scheme regulations and should ensure compliance with the applicable laws.

Peer-to-Peer and Marketplace Lending

Lending activities in Turkey are highly regulated by the Banking Regulation and Supervision Agency. Only entities with a license granted by the BRSA can legally engage in lending activities. Peer-to-peer lending, although not specifically regulated under PSD2, falls under the scope of lending-based crowdfunding platforms, which are regulated under the Capital Markets Law and related regulations. Fintech companies involved in peer-to-peer and marketplace lending must comply with these regulations to ensure fair lending practices and consumer protection.

Crowdfunding Regulation

Crowdfunding in Turkey is regulated under the Capital Markets Law and related regulations. Equity-based and lending-based crowdfunding platforms are subject to licensing and supervision by the Capital Markets Board (CMB). The CMB determines the rules and principles for crowdfunding activities, and authorized platforms can conduct crowdfunding activities based on partnership or lending. The regulations aim to provide financing opportunities for innovative projects and companies while protecting the interests of investors.

Invoice Trading

The trading of invoices in Turkey is primarily governed by the Law on Financial Leasing, Factoring, and Financing Companies. Factoring companies play a crucial role in invoice trading, facilitating the transfer of accounts receivable. However, the establishment of platforms for providing information and services related to electronic invoices is not specifically regulated in Turkey.

Payment Services Regulation

Payment services in Turkey are regulated under Law No. 6493. The Central Bank of the Republic of Turkey (CBRT) is responsible for authorizing and overseeing payment services, including the operation of payment accounts, payment transactions, issuing or acquiring payment instruments, and money remittance. Fintech companies offering payment services must comply with the regulations and obtain the necessary licenses from the CBRT.

Open Banking and Data Sharing

Turkey has introduced regulations to promote competition and enable open banking services. The Banks' Information Systems and Electronic Banking Services Regulation defines open banking and sets out requirements for sharing data via application programming interfaces (APIs). Fintech companies can utilize open banking services for digital identity, remote identification, and digital onboarding. The Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers also requires payment service providers to offer their services to other commercial customers and payment service providers under similar conditions.

Conclusion

Turkey's banking and finance laws provide a robust regulatory framework for the industry, ensuring consumer protection, fair lending practices, and financial stability. Fintech companies operating in Turkey must navigate these regulations, obtain the necessary licenses, and comply with the requirements set out by the relevant regulatory bodies. By adhering to the regulatory framework and promoting transparency and integrity, fintech companies can effectively contribute to the growth and development of the banking and finance sector in Turkey.

FAQ

Q: Can fintech companies sell or market insurance products in Turkey? A: Fintech companies that sell or market insurance products in Turkey must obtain authorization from the Ministry of Treasury. They should be aware of the regulations governing insurance services and ensure compliance with the requirements.

Q: Are there any restrictions on providing credit references or credit information services in Turkey? A: The provision of credit references or credit information services in Turkey is regulated under the Law No. 5411. The Risk Center of the Banks Association of Turkey collects and shares risk data and information with credit institutions and other financial institutions. Fintech companies must comply with the regulations and ensure the confidentiality and accuracy of the credit information they provide.

Q: Is there any regulation related to open banking and data sharing in Turkey? A: Yes, Turkey has introduced regulations to promote competition and enable open banking services. The Banks' Information Systems and Electronic Banking Services Regulation defines open banking and sets out requirements for data sharing via APIs. Fintech companies can utilize open banking services for digital identity, remote identification, and digital onboarding.

Q: How are payment services regulated in Turkey? A: Payment services in Turkey are regulated under Law No. 6493. The Central Bank of the Republic of Turkey (CBRT) is responsible for authorizing and overseeing payment services. Fintech companies offering payment services must comply with the regulations and obtain the necessary licenses from the CBRT.

Q: What are the licensing requirements for fintech companies in Turkey? A: The licensing requirements for fintech companies in Turkey vary depending on the specific activities they engage in. Different regulatory bodies, such as the CBRT, CMB, and BRSA, issue licenses for various financial services and activities. Fintech companies must obtain the necessary licenses and authorizations from the relevant regulatory bodies to operate legally in Turkey.

Q: Are there any specific regulations for peer-to-peer lending in Turkey? A: Peer-to-peer lending is not specifically regulated in Turkey in a manner synonymous with the definition found under PSD2. However, lending-based crowdfunding platforms, which can be considered peer-to-peer lending, are regulated under the Capital Markets Law and related regulations. Fintech companies involved in peer-to-peer lending must comply with these regulations to ensure fair lending practices and consumer protection.