The Regulation on the Operating Principles of Digital Banks and Service Model Banking (“Regulation”) was published in the Official Gazette dated 29 December 2021 and numbered 31704; the Regulation entered into force on 1 January 2022.
What Does the Regulation Aim?
With the Regulation, it is aimed to accelerate the development of the technology-oriented radical transformation in the finance sector, which has an impact in areas such as banking, insurance and investment consultancy, and to open a regulatory door to new technologies.
What is Regulated in the Regulation?-
Digital Banking services and operating principles is regulated. Accordingly, Digital Banks ;
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It will be able to carry out all the activities that credit institutions can perform.
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It will be able to offer its Loan services only to financial consumers and SMEs - excluding certain exceptional cases, such as the use of foreign currency loans listed in the Regulation.
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Will not be able to establish an organization under any name, such as correspondent, agency, representation office, other than the general directorate physically and service units affiliated to the general directorate, cannot open a physical branch, cannot make the service units affiliated to the general directorate use like a physical branch for any other purpose and will not be able to check something in and to provide safe deposit boxes, custodian services to its customers, except for those that will be carried out in the digital environment.
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Is obliged to establish at least one physical office to handle customer complaints without being used as a branch.
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Except for the expenditures and cash withdrawals made with credit cards and overdraft accounts, it will not be able to provide unsecured cash consumer loans to its customers that exceed four times their average monthly net income and exceed 10 thousand Turkish Liras in cases where the average monthly income cannot be determined.
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It will be able to provide services to its customers through ATM networks or other ATM networks they will establish, and through workplaces that have made an agreement with them to accept payment instruments to be issued.
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It can be established with an operating permit to be issued by the Banking Regulation and Supervision Agency (“BDDK”) upon fulfillment of the additional requirements set forth in the Regulation as well as the establishment and operating permits of other banks.
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The minimum paid-in capital amount is one billion Turkish Liras, paid in cash and free from any simulation.
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Service model banking services and operating principles are regulated. According to this;
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Service model banking, is defined as a service model in which customers can perform banking transactions through the service bank by connecting directly with the systems of service banks through open banking services, by means of the interface offered by the interface providers.
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Interface provider is defined as companies established as equity company that enables their customers to perform their banking transactions by accessing the banking services offered by the service bank through the open banking services of the bank via its mobile application or internet browser-based interface.
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The service bank will only be able to provide service model banking services to domestic interface providers and only within the framework of its own operating permits; it will not be able to serve as the interface provider.
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Banks will not be interface providers.
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Interface providers, in any of their transactions, will not be able to use payment service provider names, such as banks or payment institutions and electronic money institutions, to use expressions that would create the impression that they are operating as a non-bank payment service provider, that they are collecting deposits and participation funds such as banks or that they are raising funds, such as a payment service provider.
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The service bank shall establish a contractual relationship with the customer in question so that the interface provider from which it receives service can provide banking services to its customers.
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The service bank will be jointly and severally liable with the interface provider in terms of compliance with the identity verification and transaction security obligations regarding electronic banking services in the internet-based interface used by the interface provider against its customers and the sharing of confidential information with the interface provider and the transactions initiated by the customers from the systems of the interface provider will be considered within the scope of the Regulation for Disclosure of Confidential Information.
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The Service Bank will provide information on the scope of its services on the website, showing the list of all interface providers it serves and which banking services it provides and will send a copy of each service contract it has signed with the interface providers and each contract amendment that stipulates a change in the scope of the services it will provide to the interface provider, within one week following the signature date, to the BDDK in writing.
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With the enactment of the Regulation, the situation of existing banks has been regulated. According to this;
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In case banks that have obtained an operating license other than digital banks wish to provide services in person or under the same legal entity, limited to the scope of their current operating license, under a different brand name, through electronic banking services distribution channels, they will not be required to make a separate application within the framework of the Regulation and the provisions of the Regulation regarding digital banks will not be applied to these banks.
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In this context, the said banks will only be able to close their branches within the framework of a plan deemed appropriate by the BDDK.
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These banks; if they want to carry out their activities only through electronic banking services distribution channels, they are obliged to obtain the appropriate opinion of the service unit in charge of on-site inspection of the information systems of the institutions subject to the supervision and control of the BDDK.
To access the full text of the Regulation, please click
here.
Bilge Binay Kanat, Managing Associate
Burak Batı, Associate
Deniz Yontuk, Trainee Lawyer