Regulation on Digital Banking and Banking as a Service
On 29 December 2021, Regulation on Digital Banking and Banking as a Service was published in the Official Gazette. With the mentioned Regulation, the fundamental principles and procedures regarding the activities of the banks that provide only electronic banking services without having any physical branch, and the provision of these previously mentioned services to financial technology companies and other enterprises have been determined.
Unless otherwise is clearly stated, digital banks may perform all the activities that credit institutions can perform, depending on whether they are deposit or participation banks. Accordingly, digital banks’ credit customer portfolio is limited to financial costumers and SMEs.
Furthermore, it is forbidden for digital banks to open a physical branch. It is worthwhile to note that it is not possible for digital banks to provide safe deposit boxes and depository services as well as custody services, excluding the services performed in electronic environment.
Even though digital banks are clearly prohibited from establishing physical branches, it is mandatory for them to establish at least one physical office to handle customer complaints.
It is important to state that establishment and operation conditions of digital banks are subject to the general provisions specified in the Regulation on Transactions of Banks Subject to Permission and Indirect Shareholding. However, with this new Regulation, some additional conditions have been introduced. In the event that the controlling shareholders of the applicant are legal entities that provide technology, electronic commerce or telecommunication services, then, the Board may stipulate that those holding the control of the legal entity must be resident in Turkey. Additionally, it may be requested that an information exchange agreement to be signed with the Risk Center for them to share their risk data.
In order for digital banks to obtain an operation license, they must have a minimum paid-in capital of one billion Turkish Liras. It is worthwhile to note that this said amount can be increased by the Board.
In addition to digital banking, the Regulation also sets the principles of banking as a service model. Accordingly, the service bank is able to provide service model banking only to domestic interface providers and only within the framework of its own activities. Finally, banks cannot be interface providers.