Weekly Reporting Requirement for Some Turkish Borrowers Imposed by the Central Bank of the Republic of Turkey

In 2018, the Central Bank of the Republic of Turkey (“CBRT”) introduced the requirement for some Turkish real and legal persons to report transactions which affect the foreign exchange positions (“FX Positions”) to the CBRT. Pursuant to the 2018 Regulation for Monitoring the Transactions Effecting the FX Positions (“Regulation”), Turkish companies with foreign currency debt of over USD 15 million are required to report the abovementioned transactions to the CBRT quarterly. The Regulation was introduced for the purposes of monitoring, amongst others, the FX Positions, cash flow and usage of derivative products.

It is reported that several Turkish borrowers that satisfy the USD 15 million threshold received an official letter from the CBRT on 8 June 2020 that expands the quarterly reporting obligation and the CBRT now requires these borrowers to report any transactions affecting FX Positions weekly, starting from 16 June 2020. It is assumed that the CBRT’s letter is sent to all Turkish borrowers with a reported foreign currency debt of over USD 15 million.

While the quarterly reports are submitted in accordance with the International Financial Reporting Standards (“IFRS”), the letter sent by CBRT informs the Turkish borrowers that a simpler form can be used for the weekly reports. This is interpreted as CBRT easing the burden placed on the Turkish borrowers by the weekly reporting requirement by reverting to a standard of reporting that does not satisfy the IFRS.

The CBRT’s letter does not address the consequences of the failure to submit the weekly reports, however, if those for the quarterly reports are to be applied by analogy, then the officers or concerned parties of the Turkish borrowers may face monetary penalties. Under the relevant legislation, the failure to report is considered as a criminal act instead of an administrative breach. Thus, in the event of a failure to report totally, partially or accurately will trigger a criminal investigation upon the complaint by the CBRT and the possible monetary penalty is to be calculated pursuant to the Turkish Criminal Code.

The critics of the new requirement focus on two main potential problems that may arise; one of which is the heavy burden that weekly reporting will put on the Turkish borrowers. It is argued that weekly reporting requires an infrastructure and the technical and accounting capacity that many Turkish borrowers do not have. The Turkish Chamber of Certified Accountants urged the CBRT to reconsider the weekly reporting requirement and stated that it is so burdensome that the requirement did not conform with the companies’ ordinary course of business.

Another issue is the ambiguity whether the weekly reporting requirement will also trigger a notification requirement to the Public Disclosure Platform administered by the Capital Markets Board of Turkey. So far the Capital Markets Board is silent on whether the publicly traded companies with a foreign currency debt of over USD 15 million that are now required to submit weekly reports to the CBRT are also required to make special circumstances disclosures to the Capital Markets Board.

The CBRT’s letter is undoubtedly a requirement that needs to be addressed by foreign lenders and lessors during financing or refinancing dealings. We will continue to inform our clients and friends of the firm of any developments and please do not hesitate to contact our banking and finance team if you have any queries or if we can be of any assistance to you.

Emre Erosy

Hazal Ornekol