Two new regulations1 were published in the Official Gazette on 30 November 2021, with certain provisions entering into force on 01 January 2022.
Both the Amendment and the Communique offer a more in-depth regulation for Islamic Finance departments of Turkish banks. Additionally, both introduce some major changes to the transparency requirements of banks, with the aim of achieving better customer protection.
The Amendment sets forth more rigid rules on potential members of the advisory committees of banks, precluding them from adopting a role in the committee if, inter alia, they have participated in the operational and executory departments within the past year – thus aiming to minimise any potential conflict of interest. Moreover, it is now compulsory for the chairman of the advisory committee to reside in Turkey.
The Communique stipulates the principles of customer notification. In this regard, banks are obliged to provide their potential customers prior to the signing of the initial contracts, information about their interest-free services and products offered by the bank. Customers shall either state in handwriting that they have indeed been verbally informed in person of the product or service being offered, or in case the product or the service is being offered via means of distant communications, declare their intention to conclude such a contract – whose recording shall be stored by the bank.
Lastly, all banks subject to these regulations shall explicitly notify the public of the principles and standards of interest-free banking on their respective website. This includes the products and the services offered within the scope of the decisions of the advisory committee, and the functioning of such products and services vis-à-vis the contracts and the rights & obligations of the parties. Moreover, for the purposes of customer notification, the following information shall be available to the public on the website of the banks:
- The products of interest-free banking and their purpose.
- The status and the rights of parties in relation to the contracts applied to the interest-free banking transactions.
- The principles and standards of interest-free banking concerning the specified products and services
- Information on the advisory committee and its members.
- The bank and its assets, obligations, revenue and expenditure that are not in line with the principles and standards of interest-free banking.
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1The Amendments to the Communique on Compliance to the Principles and Standards of Interest-Free Banking (“the Amendment”) and the Communique on Procedures and Principles of Notifying Customers and the Public in the Context of the Principles and Standards of Interest-Free Banking (“the Communique”)