Legal Framework of Banking Law

Banking Law - An Independent Branch

• Banking law, in its broadest sense, regulates the corporate structure of banks, internal audit mechanism, independent external audit and the relations of banks with third parties. Banking law, in its limited sense, is related to banking contracts.

• Banks are enterprises which are established by an authorized public authority. These enterprises can only enter into transactions which are regulated in banking code art. 4 called banking transactions. And only banks can make these transactions. So we can say, banks have limited sole trade (monopoly) authorization. This authorization gives the bank public character but does not make these institutions public law legal persons.

• Banking law belongs to mixed law branch. There are some transactions which are subject to private law such as banking contracts, guarentees of credit (bail, mortgage...), check, letter of credit.... There are some transactions which are subject to public law such as rules of Central Bank of Turkish Republic, BRSB..

International Law

• In international law, there is no multilateral international convention relating to supervision and the integrity of banking law, except for some standarts such as IFRS (International Financial Reporting Standarts), ISA (International Standart on Auditing), Basel I and Basel II....

Basel Standarts

• These standarts are created by representatives of countries including the representatives of USA, Canada and Japan.

• Basel comitee is a special comitee. This comitee is established in 1974 by the presidents of central banks of countries of G-10. The rules are based on risk and risk management.

• These standarts are accepted by many countries and become one of the core tools of banking regulation and supervision. For this reason, it is accepted that these standarts have an international character.

• BASEL I : is based on capital accord. The important function is providing the standarts of sufficiency of capital in international banking.

• BASEL II : is based on the discipline of market. In the terms of bank, it means to be able to confide (trust) banks.

• Turkish Banking Code contain provisions which are consistent with Basel I and Basel II. Such as art. 29 (internal system, internal risk management and internal audit system), art.33 (independent audit firms), art.48 (loans) regulations about risk group.

• In European Community, there are many directives about banking sector and these are ever changing.

National Sources of Banking Law

• Main codes– The Code of Central Bank of Republic of Turkey

(number 1211, 1970)– Banking Code (number 5411, 2005)Other related codesTurkish Commercial CodeCapital Market CodeCode of ObligationsLeasing Code...

• Other sources• 1. By laws and decisions of administrative

authorities which are ever changing (for example, factoring, leasing, checks, free region zones...)

• 2. Customary Rules are also applied in banking law. Customary rules are objective rules of law.

• If there is no written rule about the case, judge decides according to customary rules.

• To be able to decide according to these rules, such rules must be accepted as a customary rule. The duty of determination is given to chamber of commerces and industries.

• 3. General transaction clauses of banks

• 4. Court Decisions and Doctrine