Purpose and Scope
Article 1 — Purpose
(1) The purpose of this Communiqué is to regulate the procedures and principles regarding the structures and processes that participation banks and development or investment banks providing finance to their customers under paragraph 10 of Article 19 of the Regulation on Banks’ Credit Transactions (published on 01/11/2006 in the Official Gazette No. 26333) must establish in order to operate in compliance with interest-free banking principles and standards.
Legal Basis
Article 2 — Basis
(1) This Communiqué is prepared on the basis of Articles 29 and 93 of the Banking Law No. 5411 dated 19/10/2005.
Definitions and Abbreviations
Article 3 — Definitions
(1) In the implementation of this Communiqué:
a) “Association” means the Participation Banks Association of Türkiye (TKBB).
b) “Advisory committee” means the interest-free banking advisory committee.
c) “Advisory Board” means the Advisory Board under TKBB.
ç) “Audit committee” means the committee regulated under Article 24 of Law No. 5411.
d) “Interest-free banking” means the operations of participation banks and development/investment banks under paragraph 10 of Article 19 of the Regulation on Banks’ Credit Transactions, when they provide financing to customers, in line with interest-free banking.
e) “Interest-Free Banking Principles and Standards” means the principles and standards determined by the Advisory Board and general decisions adopted by it.
f) “Board” means the Banking Regulation and Supervision Board.
g) “Institution” means the Banking Regulation and Supervision Institution (BDDK).
ğ) “Regulation” means the Regulation on Internal Systems and Internal Capital Adequacy Assessment Process of Banks, published on 11/7/2014 in the Official Gazette No. 29057.
Interest-Free Banking Advisory Committee
Article 4
(1) Banks are obliged to establish an advisory committee within themselves to ensure that their operations comply with interest-free banking principles and standards. This advisory committee operates under the board of directors.
(2) The advisory committee must consist of at least three members. At least two-thirds of the members must be resident in Türkiye. Members are appointed by the bank’s board of directors and submitted for approval to the first general assembly.
(3) The term for advisory committee members is three years. Membership ends upon the expiry of the term, death, severe illness, disability preventing performance, loss of necessary qualifications, resignation, or removal by decision of at least two-thirds of the board of directors. Members whose terms have expired may be reappointed.
(4) The advisory committee elects a chair and, if absent, a vice chair from among its members.
(5) Banks must employ sufficient personnel and establish a secretariat for the advisory committee to effectively carry out its duties. The secretariat function may be fulfilled by a unit or personnel indicated in Article 9, paragraph 4.
(6) At minimum, the secretariat performs the following:
a) notifying meeting agendas and times to committee members, distributing related documents,
b) preparing meeting minutes and managing the process of their signing,
c) communicating committee decisions to the compliance unit or personnel in charge of interest-free banking activities,
ç) upon internal or external requests, drafting opinions of the advisory committee on matters within the scope of interest-free banking principles and standards, and conveying them to relevant parties and the compliance unit.
Qualifications for Advisory Committee Members
Article 5
(1) At least two-thirds of the advisory committee members must have at least a bachelor’s degree in theology or an equivalent field, or a master’s/doctoral degree in interest-free finance, and at least three years of professional experience in interest-free finance. The Board (or the institution) may, if necessary, require all members to meet these conditions.
(2) Committee members must possess competence, reasoning ability, integrity, and reputation.
(3) Persons who do not satisfy the conditions in subparagraph (d) of Article 8(1) of Law No. 5411 cannot serve as advisory committee members.
(4) Candidates must submit documents showing they meet the requirements; unless the Institution raises a negative opinion within fifteen business days, appointments can proceed.
(5) Provided they meet the conditions in this Communiqué, a person may serve on the advisory committees of at most two banks.
(6) Banks shall determine objective criteria and an evaluation process to assess whether the advisory committee and its members perform their duties effectively, and take those results into account when deciding whether members continue in office.
Independence of the Advisory Committee
Article 6
(1) The advisory committee shall make decisions independently, free from influence of senior management or any interested party. Banks shall take measures to ensure members avoid conflicts of interest in their duties.
(2) Members must not during the last year (including the assignment date):
a) have been a board member, executive or employee of the bank or its consolidated affiliates,
b) hold qualified shares in the bank or its affiliates,
c) hold qualified shares in or serve as executives or board members in commercial entities having significant receivables or payables with the bank or its affiliates,
ç) be spouse or up to second-degree kin of the bank’s controlling shareholder, its board members, or general managers,
d) receive any income from the bank or affiliates beyond their committee compensation or profit-based payments,
e) their spouse or children be employed in senior positions in the bank or affiliates and satisfy the qualifications in subparagraphs (a), (b), (c).
Functions and Authorities of the Advisory Committee
Article 7
(1) The advisory committee has the following duties and authorities:
a) to adopt bank-specific decisions on interest-free banking principles and standards and their implementation,
b) to review internal bank regulations within the framework of interest-free finance compliance,
c) to evaluate and approve standard contracts and their annexes for the bank’s products and services in terms of interest-free banking compliance,
ç) to submit periodic reports of its decisions to the Advisory Board,
d) to provide opinions to internal or external service providers of the bank or consolidated affiliates on interest-free banking principles and standards,
e) to be included in the bank’s annual report with a summary of its activities and assessments about compliance with interest-free banking.
(2) Banks must ensure advisory committee members have access to necessary information and documents.
(3) The advisory committee may not adopt decisions contrary to the principles, standards, or general decisions of the Advisory Board.
Working Procedures and Principles of the Advisory Committee
Article 8
(1) The Advisory Committee convenes at least twice a month and, when necessary, upon the call of the chair. Meetings may be held with members physically present or with some or all members participating electronically.
(2) The meeting agenda and time are determined by the chair. The agenda and time, together with the information and documents relating to the agenda items, shall be notified to all members no later than three (3) business days prior to the meeting date. At least two members may propose additional items to be placed on the agenda.
(3) Depending on the agenda items, relevant bank managers or employees, as well as other subject-matter experts, may attend Advisory Committee meetings.
(4) The Advisory Committee convenes with no less than two-thirds of all members. In all cases, resolutions shall be adopted by an absolute majority of the full number of members. Resolutions are signed by the members. Members in disagreement shall submit their dissenting reasons within fifteen (15) days from the date of the resolution. Each resolution shall be recorded with a summary of the matter reviewed and discussed, the grounds and legal basis of the decision, and any dissenting opinions. Members who do not sign the resolution and do not submit a dissenting opinion within the prescribed time shall be deemed absent without excuse.
(5) The necessary process flows shall be established to ensure that Advisory Committee resolutions are communicated to the relevant persons and units within the bank and are taken into account in internal control activities.
(6) The Advisory Committee shall not evaluate transactions or matters that are subject to ongoing or finalized judicial proceedings.
Interest-Free Banking Compliance Activities
Article 9
(1) The purpose of compliance activities is to ensure that existing or planned transactions and new products, services, contracts, internal regulations, financial statements, disclosures, marketing, reporting, and relationships comply with interest-free banking principles, standards, and advisory committee decisions.
(2) Compliance reviews include checks on services offered, investments, contracts, internal policies/procedures, financial reporting, marketing, decisions of authorized bodies, organizational relationships, etc.
(3) The board of directors and relevant personnel must be informed promptly about principles, standards, and committee decisions and their effects.
(4) Compliance activities should be carried out by the unit, personnel or dedicated compliance function under relevant regulation,
(5) The unit/personnel must report at least quarterly to the audit committee,
(6) Compliance policies and procedures must be approved by the board after consulting the advisory committee.
Interest-Free Banking Audit Activities
Article 10
(1) Audit activities aim to guarantee compliance of bank operations with principles, standards, and committee decisions, and the adequacy and effectiveness of the compliance function.
(2) Audits evaluate whether compliance activities are sufficient and effective, and whether operations conform to interest-free banking obligations.
(3) Audits are carried out by the internal audit unit per Article 22 of the Regulation,
(4) Audit reports are submitted to the audit committee at least quarterly; these may overlap with reports under Article 31(4) of the Regulation. The audit committee must forward the report and its views to the board within ten business days.
(5) The audit committee must meet at least twice yearly with the advisory committee to discuss findings and corrective actions.
Personnel
Article 11
(1) Personnel in compliance, audit, or advisory committee secretariat must either have served at least three years in participation banks and completed certified training in interest-free finance, or hold master’s/doctoral degrees in interest-free finance.
(2) Personnel must perform duties impartially and independently; they must report conflicts of interest and resign if necessary.
(3) Banks are obliged to ensure every employee is adequately knowledgeable and equipped to perform duties in accordance with interest-free banking principles, standards, and committee decisions.
Customer Information and Individual Requests
Article 12
(1) Banks must adequately and effectively inform their customers about how products and services operate under interest-free banking principles, contract terms, rights and obligations. Procedures for customer information in scope of principles, standards, and committee decisions are determined by the Association in consultation with the Institution.
(2) Disputes between bank and customer in areas under interest-free banking principles may be submitted by customer’s written request to the advisory committee, which must resolve it within 30 days from the request date. The customer may take the committee’s decision to the Advisory Board for review within 15 days. The Advisory Board may annul, modify, or uphold the committee’s decision, and may consolidate similar disputes and issue joint decisions.
Public Disclosure
Article 13
(1) Information about the advisory committee and its members must be published on the bank’s website.
Responsibilities of the Board of Directors
Article 14
(1) Within the scope of this Communiqué, the board is responsible for:
a) defining structures, job descriptions, responsibilities, processes, reporting channels for compliance,
b) ensuring relevant personnel are effectively informed on principles, standards, and committee decisions,
c) determining roles and responsibilities for personnel’s compliance with interest-free banking,
ç) taking measures to avoid conflicts of interest,
d) ensuring access to necessary information and documents,
e) setting up training processes, timely updates on legislation changes, and promoting knowledge sharing,
f) halting non-compliant transactions, informing committee and preparing remediation plan,
g) defining customer information policies, contractual and product disclosure consistent with principles,
ğ) establishing disclosure policies on committee decisions and public communication,
h) ensuring committee members, secretariat, compliance personnel are informed about obligations under Article 73 of the Law from the start of their duty.
(2) The board may establish committees to fulfill these functions.
Provisions for Development & Investment Banks
Article 15
(1) Development or investment banks providing finance to customers under Article 19 of the Regulation shall be subject to this Communiqué for those financing activities only.
(2) They may fulfill advisory committee obligation via outsourcing from approved institutions; in that case, relevant articles (4,5,6,7,8,12, and 14(h)) apply by analogy.
(3) For these banks, reporting frequencies in Articles 9(5) and 10(4) are applied at least annually.
(4) The three-year experience requirement in Article 11(1) is not mandatory for them.
Transitional Provisions
Provisional Article 1
(1) Banks under this Communiqué must comply within six months from the effective date.
Provisional Article 2
(1) The Association shall determine procedures for customer information under Article 12(1) within one year after the Communiqué becomes effective.
Entry into Force
Article 16
(1) This Communiqué enters into force on its date of publication.
Enforcement
Article 17(1) The provisions of this Communiqué are enforced by the Chairman of the Banking Regulation and Supervision Institution (BDDK).