TURKEY Law and Practice Contributed by: Sera Somay, Merve Kurdak and Doğa Pınarlı Dedebaş, Paksoy
the responsible party remains the licensed institution, and the institution should comply with the applicable legislation to prevent any execution issues. 4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities Under Turkish legislation, loans can be classified as commercial loans or consumer loans, based on their utilisation purpose. Consumers may be either individ - uals or legal entities; the decisive factor is the nature and the intended utilisation purpose of the loan. To be classified as a consumer loan, the intended use must not be commercial. In addition, loans denominated in foreign currency are subject to numerous restrictions and must be extended in compliance with the appli - cable regulatory limitations. Consumer Loans Pre-contractual information obligations and the man - datory content of consumer loan agreements are reg - ulated in detail. The legislation differentiates between fixed-term and indefinite-term loan agreements. Provi - sions such as consumer rights, early repayment, the right of withdrawal, collaterals and events of default are regulated. Interest rates, the number of instal - ments, collateral ratios and payment terms are subject to regulatory caps. In line with this regulatory frame - work, market practice includes consumer loan types such as personal loans, vehicle loans and mortgage loans. Commercial Loans Most of the provisions of commercial loan contracts may be freely agreed by parties. Certain matters, such as the fees that banks may charge, are regulated. Small and medium-sized enterprises (SMEs), as well as certain sectors, may benefit from various state incentives, including interest support, provided that the relevant regulatory conditions are met. Loan inter - est support mechanisms for SMEs are regulated by the SME Loan Interest Support Regulation issued by the SMEs Development and Support Administration (KOSGEB) and further secondary legislation. Consist -
ent with these regulations, loan offers tailored specifi - cally for SMEs are commonly encountered in practice. In addition to commercial and consumer loans, the Financial Leasing, Factoring, Financing and Savings Financing Companies Law No. 6361 establishes a separate regulatory framework governing alterna - tive financing methods, including financing company transactions and financial leasing arrangements. 4.2 Underwriting Processes Regulatory Framework Turkish banking regulations impose strict require - ments on underwriting processes. Banks must measure lending risks, regularly analyse counterparty financial strength, obtain necessary information and documents, and establish governing principles. Loans exceeding TRY5 million require account statement documents, while larger loans above BRSA-deter - mined thresholds require audited financial reports and independent audit reports. Certain loans require credit ratings from authorised institutions. Systemical - ly important banks must prepare sectoral and financial analysis reports for concentrated credit risk sectors and maintain them for regulatory review. Banks also face strict AML, KYC and digital onboarding require - ments under separate regulations. Loan Approval Authority Loan approval authority fundamentally rests with the bank’s board of directors (BoD), which must establish loan approval policies and ensure their effective imple - mentation, monitoring and enforcement. The BoD may delegate its approval authority to the loan committee or general management. All loan approvals require a written proposal from general management. Propos - als must include the applicant’s financial analyses and intelligence reports. 4.3 Sources of Funds for Fiat Currency Loans The recognised sources of funding for loans can be summarised as follows: • Deposits: Scope of deposits, deposit banks and licensing requirements are subject to strict regula - tory requirements and supervision of the BRSA. No individuals or legal entities other than credit institu - tions and those authorised under special laws may
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