Turkey: Regulation on Measurement and Assessment of Capital Adequacy of Banks

How can banks maintain their capital adequacy requirements?
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This regulation issued by the Banking Regulation and Supervision Board (BRSB), articulates about the measurement and assessment criteria for capital adequacy of banks.It states that the purpose of the regulation is:

  • To ensure that banks maintain an adequate amount of capital against losses that may result from existing and potential risks, on a consolidated and unconsolidated basis.

The document is divided into chapters and the different articles of the regulation outline the following aspects of capital adequacy of banks:

  • The principles to be followed while calculating capital adequacy standard ratio for consolidated and unconsolidated financial statements;
  • The principles to be employed to calculate the market risk, while also stating the risk measurement models the banks are to use for calculation;
  • The reporting principles to be followed, while also prescribing that it has to be a combination of internal models as well as the standardized methodology which most of the banks follow;
  • The maximum time period the banks are allowed to rectify their violation of ratio limits.

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