BRSA: Prudent risk weights on retail and housing loans removed

The Banking Regulation and Supervision Agency took new decisions in the capital adequacy calculation of banks.

In the statement made by the Agency, it was reminded that within the scope of the coordinated macroprudential measures taken to ensure confidence and stability in financial markets and the effective functioning of the credit system, more prudent risk weights were applied to retail loans and housing loans in banks' capital adequacy calculations compared to international minimum standards.

The statement read as follows:

“The banks have applied more prudent risk weights to vehicle loans for the acquisition of passenger cars and vehicle collateralized loans and financial leasing transactions to be made, general purpose loans, personal credit cards and the consumer itself, 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 for the loans collateralized by residential real estate mortgages extended to these persons for the purpose of housing them if they have at least one residence owned by their spouse or children under the age of 18, were repealed and it was decided to apply the risk weights determined in the Regulation to the said loans. ”

Additional risk weighting was imposed

On July 31, 2023, the BRSA decided to increase the risk weights taken into account in the calculation of capital adequacy standard ratios in terms of general purpose loans, personal credit cards, vehicle loans and vehicle secured loans and financial leasing transactions with consumers.

In the event that the standardized approach was used in these transactions, banks' risk weights would be applied at 150 percent, which would lead to an increase in loan interest rates and thus limit the demand as well as the supply of loans. It also limited domestic demand.

Return to previous rates

With the latest decision, the BRSA returned to the rates previously used in this regulation.

Prior to the regulation, the risk weights were 100 percent for credit cards with maturities of 1-6 months and 150 percent for maturities longer than 6 months, 100 percent for general purpose loans with maturities of 1-12 months and 150 percent for maturities longer than 12 months, and 75 percent for vehicle loans.