New decision regarding loans and credit cards: BRSA announced

The Banking Regulation and Supervision Agency (BRSA) has removed the additional risk weights applied to consumer loans and housing loans in the calculation of banks' capital adequacy.

The following statements were included in the announcement made by the BRSA:

“As is known, within the scope of coordinated macroprudential measures taken to ensure trust and stability in financial markets and to ensure the effective functioning of the credit system, more prudent risk weights were applied to consumer loans and housing loans in banks' capital adequacy calculations compared to international minimum standards.

As a result of the evaluations made, with the Board Decision dated 19/9/2024 and numbered 10964, in accordance with the Regulation on the Measurement and Assessment of Capital Adequacy of Banks (Regulation), in the calculation of capital adequacy standard ratios;

For personal loans,

For individual credit cards,

For vehicle loans and vehicle-collateralized loans granted to consumers for the purpose of acquiring passenger vehicles, and for financial leasing transactions to be carried out,

For loans collateralized by residential real estate mortgages granted to consumers for the purpose of acquiring housing, in cases where the consumer, their spouse, or their children under the age of 18 already own at least one residence, it has been decided to repeal the Board Decision dated 31/7/2023 and numbered 10630, and the Board Decision dated 24/8/2023 and numbered 10655, which determined more prudent risk weights, and to apply the risk weights determined in the Regulation to these loans."

WHAT WAS DECIDED PREVIOUSLY?

With the regulation it made on July 31, 2023, the BRSA had decided to increase the risk weights taken into account in the calculation of capital adequacy standard ratios for personal loans, individual credit cards, vehicle loans and vehicle-collateralized loans, and financial leasing transactions to be carried out with consumers.

Since the risk weights were applied at 150 percent for banks when the standard approach was used in these transactions, it was a practice aimed at increasing loan interest rates and thus limiting demand, just as it had limited credit supply. It had also restricted domestic demand.

RETURNED TO PREVIOUS RATES

With the latest decision, the BRSA has returned to the rates previously used in this regulation. Before the regulation, risk weights were at 100 percent for credit cards with a maturity of 1-6 months and 150 percent for maturities longer than 6 months; for personal loans, they were at 100 percent for maturities of 1-12 months and 150 percent for maturities longer than 12 months, while the risk weight for vehicle loans was at 75 percent.

News Source: 12punto