On October 16, 2019, "Proposal on Law Amending the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions" ("Proposal") has been published on the "Law Proposals" webpage of the Turkish Grand National Assembly (Link for the Proposal).1 It is understood that there are 3 main points aimed with the amendments when the general preamble of the Proposal is considered:
- Answering the sectoral needs of the payment and electronic money institutions,
- Eliminating the dual structure which consists the Central Bank of the Republic of Turkey ("Central Bank") and Banking Regulation and Supervision Agency ("BRSA") and positioning the Central Bank as the sole regulatory and supervisory authority and
- Ensuring the compliance of Turkish legislation with EU regulations (especially PSD22)
Laws including Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions numbered 6493 ("Law No. 6493")3, Banking Law numbered 54114, and Bank and Credit Cards Law numbered 54645 have been amended to accomplish the 3 aims which have been stated above.
- With the amendments foreseen under the Proposal, BRSA's supervisory and regulatory powers over payment service providers and electronic money institutions will be transferred to the Central Bank. In addition, the Central Bank is given the authority to issue secondary regulations in the payment and e-money issuance sectors.
- The exchange and settlement operations for debit and credit cards will no longer be under the BRSA's authority. It is ensured that the exchange and settlement operations, which are essentially are payment system operating activity, will be carried out under the authority of the Central Bank and there will be no bilateral authority for these operations within the framework of the singularization of the regulatory authority.
- It is envisaged that the payment and e-money institutions compliance to FCIB6 legislation will be supervised by Central Bank rather than BRSA. Central Bank auditors will carry out audits within the scope of FCIB regarding the amendment on Law on the Prevention of Laundering of Crime Proceeds numbered 5549.
- Scope of the supervision activities over payment and securities settlement systems will be extended and it is clearly stated that all parties closely involved in the operation of the system will be subject to supervision within the scope of the supervisory authority of the Central Bank. It is envisaged that the audit operations of the Central Bank on the system will cover all parties that are closely related to the operation of the system such as the system operator, system participants, reconciliation institution, other related systems and external service providers regarding the amendment. Central Bank will be able to request instant and transactional information from all these parties regarding all transactions they perform.
- It is stipulated that, in order to ensure the continuous operation of the systems, the Central Bank can become a shareholder of an already established or to be established system operators which have systematic importance.
- The article regarding the collateral received by the operator for the smooth functioning of the payment systems is detailed. System operators may demand collateral from participants in case the transactions in the system could not be finalized for any reason or the participants fail to fulfil their obligations in the system and these collaterals will be monitored in a separate account according to the amendment. In addition, if these collaterals are provided as capital market instruments, no prerequisites will be applicable prior the liquidation of these collaterals.
- The scope of the services
that are considered as a 'payment service' has been
- "Payment order initiation service provided for a payment account which is in another payment service provider" and
- "Providing consolidated information over online platforms regarding one or more payment accounts of payment service user's which are in payment service providers"
will be regarded as 'payment services' that are regulated and subject to the supervision of the Central Bank. These two services, respectively, may be considered as equivalents of 'payment initiation services' and 'account information services' defined under PSD2. Accordingly, there will be an obligation to obtain licenses/permits to offer these two services defined in the Proposal.
The nature of this license/permit to be acquired is no different from the license/permits already granted under the law- i.e. no different and separate license status from the already existing payment service provider license/permit is envisaged. However, the license/permit requirements of institutions wishing solely to "provide services regarding only consolidated information on online platforms" have been lowered; accordingly, such institutions are exempt from the requirements of having their shares issued against cash and being fully registered in name and the minimum capital requirements.
- In addition to the newly defined payment services listed above, it is envisaged that other transactions and services that exceed the level to be determined by the Central Bank in terms of its total volume and impact area may be considered as payment services. Currently in Law No. 6493, "payment services" are clearly listed and no other services are regarded as such and be subjected to the provisions of the law. With this sub-clause added to the Proposal, any activity in the field of payments could be considered as "payment services" if they reach adequate impact or volume to be determined by the Central Bank and thus become subjected to the Law no. 6493 even if they are not listed therein. In other words, the total volume of any payment related service will become as important as the business model itself.
Lastly, as it appears, the financial and impact area limits required to be considered as a payment service will be determined freely by the Central Bank.
- The Central Bank is authorized to determine the qualifications, maximum amounts, and rates of fees and commissions to be paid in return of the provision of payment services. In the current state of the law, payment institutions can freely determine the fees they will receive in return for the payment services they offer.
- It is envisaged that the procedures and principles regarding the legal relations to which the payment service providers become a party due to their operations within the scope of Law no. 6493 shall be regulated by Central Bank under certain conditions. According to the amendment, within the scope of the legal relations of payment service providers that falls under the scope of the law, if the Central Bank determines that there are practices that may adversely affect the development of payments area, it will be authorized to issue regulations to regulate these relations.
From the term "Legal relationship" mentioned in the relevant Article, it cannot be understood exactly what kind of relations are meant and no explanation is given in the reasoning of the Article. Considering that the term "Legal relationship" is used deliberately and if the term is interpreted extensively; it can be understood that it covers relationships with both payment service end users and suppliers providing services to payment service providers. Therefore, it can be deduced that it is being desired to give the authority to intervene in relations in both directions to the Central Bank.
- Within the scope of (i) "payment order initiation service" and (ii) "provision of consolidated information service" mentioned above, it is regulated that the Central Bank may determine the principles and procedures for sharing data from one payment service provider to another. In the event that the authorization contained in the amendment is exercised, An obligation to open the application programming interface (API) keys to licensed payment service providers , which will enable the tracking of the transactions in the bank accounts and issuing transfer orders, in particular for the banks (as in PSD2), may be imposed. However, the present text of the amendment does not explicitly impose such an obligation. The introduction of such an obligation shall be at the discretion of the Central Bank.
- The exception regarding the prepaid instruments used only on the own store network of institution issuing electronic money, used for purchasing a certain group of goods or services or used only on a certain service network as a result of the agreement made being exempt from the law (limited network exemption) will be subject to certain limitations. Accordingly, if the transactions made with the prepaid instruments issued while benefitting from this exemption reach to a certain level to be determined by the Central Bank in terms of total size and area of influence, the Central Bank may pull these instruments back under the scope of Law no. 6493 and thus subject them to regulation and supervision. With this amendment, it could be possible that prepaid instruments such as prepaid food cards or transportation cards which are widely used and have high transaction volume, although they previously benefit from abovementioned exemption, can be subjected to the requirements of the Law no. 6493.
- It is regulated that the obligation of banks to block the funds deposited by electronic money institutions with the Central Bank will be lifted.
- It is clearly regulated that the banks will be subject to the supervision of the Central Bank in relation to their provision payment service and e-money issuance operations. Banks covered by the Banking Law will be audited by the Central Bank for their operations within the scope of Law no. 6493 and will be obliged to provide the Central Bank with the necessary information and documents within the scope of these audits.
- Administrative fines to be imposed in case of violation of Law no. 6493 or its secondary regulations are increased from 20.000TL - 500.000TL to 40.000TL - 900.000TL.
- The Proposal also envisages the establishment of a new body; Union of Payment and Electronic Money Institutions of Turkey ("Union") as a professional organization with public institution status. Payment and e-money institutions that have obtained their licence are obliged to become a member of the Union within one month at most from the date of receiving their licence. In the Proposal, the duties and authorities of the Union are listed as follows:
a) To implement training, promotion and research activities in order to improve the profession,
b) By defining the professional principles, to ensure that the members work in accordance with the needs of the economy within the discipline and unity required by the profession,
c) To determine the professional principles and standards to be followed by the members of the member institutions,
d) To announce to the members the decisions taken in accordance with the relevant legislation and the measures to be taken by Central Bank,
e) To take and implement all kinds of measures to prevent unfair competition among its members,
f) To determine the terms and conditions to be followed by the members in their announcements and advertisements by type, form, quality and quantity,
g) To file a lawsuit with respect to the decisions of the board of directors on matters concerning the common interests of its members,
h) To ensure cooperation between its members on joint projects,
i) Without prejudice to the rights granted by the provisions of the Law on Consumer Protection and other laws, to form an arbitration body in accordance with the procedures and principles approved by Central Bank to ensure that the disputes between the members of the Union and their individual customers are evaluated and resolved,
j) To fulfil the other duties listed in Law no. 6493.
It is also explicitly regulated that the members of the Union must comply with the statute of the Union and the decisions and measures to be taken by the Union.
- Transitional provisions in case of adoption of the Proposal are also specified. According to the provisions of the temporary article,
- The BRSA's regulations will continue to be implemented until secondary legislation on the implementation of amendments made by the Proposal are enacted by the Central Bank. In other words, even if the Proposal is put into force, the regulations issued based on Law no. 6493 will remain valid for some period.
- It is envisaged that the regulations in line with the amendments in the Proposal will be prepared by the Central Bank within one year.
- It is regulated that the organizations that offer at least one of either (i) "payment order initiation" or (ii) "presentation of consolidated information" services, which are regarded as payment services under the Proposal, shall obtain the necessary licenses within one year starting from the publication date of the relevant regulations to be issued by the Central Bank.
- The payment institutions that are already actively operating will be obliged to become a member of the Union within one month following the commencement of the Union.
1 Proposal is currently at the Turkish Grand National Assembly Commission.
2 Payment services (PSD 2) - Directive (EU) 2015/2366: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32015L2366