“Regulation on Principles for the Activities of Digital Banks and Service Model Banking” (“Regulation“) was published in the Official Gazette dated 29.12.2021 and numbered 31704, and entered into force on 01.01.2022.
Scope of the Regulation
The Regulation provides the definition of digital bank, and prescribes that digital banks may perform all the activities that credit institutions can perform with certain exceptions.
Service, credit and organizational restrictions:
- Persons who can receive credit services from digital banks are limited to financial consumers and SMEs.
- The minimum capital requirement for the establishment of a digital bank has been determined as one billion Turkish Lira, on the condition that such amount be paid in cash and free of any collusion.
- In case the minimum paid-in capital amount is 2.5 billion Turkish Lira or more at the time of application or later, digital banks may be decided to be fully or partially exempted from operating restrictions upon application.
- Digital banks were prohibited from organizing and opening physical branches other than the head office and affiliated service units of the main center. Units to be established to deal with customer complaints are exempted provided that such units may not operate as a branch , and it has been made compulsory to establish at least one (1) physical office in order to provide solutions to customer complaints.
- It was regulated that digital banks can establish their own ATM networks or provide services to their customers through existing ATM networks.
- The total amount of unsecured cash loans that can be extended for a client, who is in the capacity of financial consumer, was limited to four times the average monthly net income of such certain client, and to ten thousand Turkish Lira if the client’s average monthly net income could not be determined.
Regulation introduced the concepts of service model banking, service bank and interface providers.
- Providing support services to a service bank as an interface provider is subject to the approval of the Banking Regulation and Supervision Agency (“BRSA“).
- The service bank will only be able to provide service model banking services to domestically resident interface developers. Interface providers must be established as a limited liability company. It is also regulated that the banks are not allowed to be interface providers.
- The interface provider and the service bank will be jointly and severally responsible for ensuring that the interface provider’s mobile application or internet browser-based interface complies with the authentication and transaction security obligations regarding electronic banking services.
- In order for the service bank to provide banking services to the interface developer’s customer, a banking services contract must be concluded between the said customer and the service bank.
The status of existing banks has been adjusted.
- It was regulated that banks other than digital banks that have obtained operating license will not need to make a separate application in order to transfer their activities to digital platform. If such banks plan to close their existing branches in order to move their activities to digital platform, the said banks may only close their existing branches within a plan to be deemed appropriate by the BRSA.
Conclusion
It is aimed to develop the financial sector through digital banks and service banking that will only serve through digital channels without a branch.
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