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10 January 2020
The Communique on Compliance with Principles and Standards of Interest-Free Banking, published by the Banking Regulation and Supervision Agency, entered into force following its publication in the Official Gazette (30888) on 14 September 2019.
The communique aims to regulate the procedures and principles regarding the structures and processes to be established by participation banks and development and investment banks which finance their clients in accordance with the Regulation on Financing Transactions of Banks (published in the Official Gazette (26333) on 1 November 2006).
As per the communique, banks that are under the scope of the communique must establish an advisory committee which will work under the supervision of their boards of directors (advisory committee) to ensure their compliance with interest-free banking principles and standards. The advisory committee must be composed of at least three members, which will be elected for three years. The criteria for advisory committee members are further detailed in Article 5 of the communique. The duties of advisory committees are to:
It is important to ensure the independence of advisory committees and the communique states that advisory committees will adopt their decisions independently without the influence of upper management or any other relevant party. Further, the communique sets out ground rules for banks.
Under the communique, banks that are under the scope of the communique must also form an advisory committee secretariat by hiring a sufficient number of personnel to enable the advisory committee to fulfil its obligations. The secretariat's main duties are to:
The compliance activities include checks of:
The communique also establishes obligations for boards of directors of banks that are under the scope of the communique, including:
The communique also states that the obligation of development and investment banks to set up an advisory committee can be outsourced, provided that the institution to provide such services has been approved by the Turkish Participation Banks Association.
For further information please contact Irmak Yensel at Selvi & Ertekin by telephone (+90 212 236 12 12) or email (firstname.lastname@example.org). The Selvi & Ertekin website can be accessed at www.selviertekin.com.
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