RULES ON DETERMINATION AND FIXING OF
TURKISH LIRA REFERENCE INTEREST RATES
Article 1- These Rules are made and issued for the purpose of determination and fixing of two separate Turkish Lira reference interest rates, just as a recommendation, for use in the transactions conducted among the banks or by the banks in the name of their clients.
Article 2- Banks which satisfy the criteria set down in the Decision 24, dated 16 April 2002, of the Board of Directors of the Banks Association of Turkey and which have a minimum 5 percent ratio for both TL loan/asset and TL deposit (individual + institutional)/asset ratios in terms of TL instruments as of year-end have agreed to act as the “participating banks” and in accordance with these Rules.
The criteria stated above are necessary but not sufficient for participation. The Banks satisfying these criteria send their participation demand together with their reasons to the Banks Association of Turkey to be voted by the Management and Arbitration Committee. Banks will be accepted to the system for a term of one year of 1 July – 30 June.
Article 3- In accordance with these Rules, the participating banks will, acting in conformity with the principles of transactions, ensure determination and fixing of reference interest rates for Turkish Lira on daily basis at maturities up to one year in the interbank market in the daily sessions participated by them.
Determination of reference interest rates by taking and calculating the average of quotations in certain intervals during a session is called “fixing”.
The interest rates determined as above will be published by the Banks Association of Turkey.
Name of the reference interest rates determined as above are the Turkish Lira Interbank Offer Rate (TRLIBOR) and Turkish Lira Interbank Bid Rate (TRLIBID)
Principles Of Transactions
a) Fixing will be published on the pages, named TRYIBOR= and TRYIBID=, of the data givers at 11:15 hrs in Turkish time every day, and deleted at 09:00 the next day by the Banks Association of Turkey.
b) Fixing will be made over the market interest rate based on cash money clearing and in accordance with the rules of the cash money market. Value date of the transaction is the transaction day.
c) Participating Banks are responsible to enter a quotation by using the data givers’ software between 10:30 and 11:15 hrs in Turkish time. The Banks Association of Turkey will, after 10:45 hrs, randomly take the quotations entered into the TRYIBOR and TRYIBOS page 5 times, and remove the highest three and the lowest three quotations at each maturity, and publish the arithmetical average of the sale (offer) side of the remaining quotations up to 4 digits after comma and as overnight, 1 weekly, 1 monthly, 2 monthly, 3 monthly, 6 monthly, 9 monthly and 12 monthly rates. The Association repeats the same procedure for the bid side. Execution of transactions at a certain maturity or formation of a certain minimum transaction volume is not necessarily needed for fixing and publishing of reference interest rates as above.
The Banks Association of Turkey is responsible for this transaction to be automatically performed with a program which is developed by the Association and also responsible for keeping this system running without any interruption. During the fixing session, participating banks do not have any permission to intervene to this operation.
d) Banks participating the fixing will by 10:00 hrs the next day report to the Banks Association of Turkey the number and value of transactions executed during the session, without sharing the counter party’s information. And the Banks Association of Turkey will declare the market depth figures on daily basis. Every past data about the number of transactions and the transaction volume on each maturity date can be screened from the TRLIBOR web page. But the name of the banks is not reported and published.
e) If the maturity of quotation coincides with a holiday, the following business day will be accepted as the due date. If the following business day is in the next month, last business day of the previous month will be taken and accepted as the due date.
f) The difference between the bid and offer quotation rates can not be more than five percent (5%). Other details of quotation will be set down and determined by the Management and Arbitration Committee defined in article 7 of these Rules.
g) Banks participating the fixing will separately and mutually inform each other in writing of the transaction limits and the maximum maturity to be processed. The information about the transaction limits and the maximum maturity to be processed between two banks must be known only by these two banks, and this information is not shared with any other third party, including the Banks Association of Turkey. Participating banks should have a minimum transaction limit of 2 million TL for each other in overnight maturity. Participating banks should recognize a minimum transaction limit of 10 million TL for each of:
- at least 4 banks up to 3 months’ maturity (3 months included) and
- 3 banks other than those 4 banks up to 1 year maturity (1 year included).
This information will be exchanged in the format as shown in the sample letter attached hereto when the banks are entitled to participate the fixing session. Likewise, any change in limits will also be reported to the counterpart bank before the start of the next session. The said limit does not cover the limits defined for any risk relating to the non-cash money market transactions.
In the transactions, it is a must to enter a 2 million TL quotation and to transact over this transaction size.
h) Fixing is not effected in the days when the banks work half-time in Turkey.
i) If at least 2/3rd of the banks participating the fixing fail to enter a quotation between 10:30 and 11:05 hrs at any maturity, it will be considered and treated as an extraordinary situation, and the whole Fixing session will be held as an “Extraordinary Situation Fixing Session”, and it will be duly notified by the Banks Association of Turkey to the participating banks by 11:15 hrs. Under these conditions, the Extraordinary Situation Fixing Session will be organized between 11:30 and 11:40 hrs. Quotations will be entered irrespective of the conditions relating to purchase-sale quotation range, but the obligation to effect transactions will remain in force. In this case, the Banks Association of Turkey will take arithmetical average of purchase and sales quotations, and by considering the range described in paragraph (f) hereof, publish
• TRLIBOR by multiplying this arithmetical average with (1 + the range)
• TRLIBID by multiplying this arithmetical average with (1 – the range)
Decisions in respect of maintenance and continuity of the extraordinary situation will be the responsibility of the Management and Arbitration Committee.
j) If the extraordinary situation is because of technical reasons, each reference interest rate is calculated by taking the arithmetical average of rates, after the elimination of three best and worst rates.
Changes In The Principles Of Transactions
Article 5- Changes that may be proposed by the participating banks in the principles of transactions will be evaluated and assessed by the Management and Arbitration Committee.
Article 6- Banks that are found eligible for the Fixing sessions in accordance with Article 2 hereof will be accepted to the session upon signature of a protocol with the Banks Association of Turkey.
Management And Arbitration Committee
A Management and Arbitration Committee is formed representing the participating banks for the purpose of issuing technical regulations and making administrative suggestions on the Fixing System and of resolving the probable disputes among the participating banks of the Fixing System.
B- Formation of The Committee And Qualifications Of Bank Representatives
All the participating banks are members of the Management and Arbitration Committee.
A bank can not be represented by more than one member in the Committee. Secretariat services of the Committee will be performed and given by the Banks Association of Turkey.
Banks owned by the same person or group of companies cannot be represented by more than one member in the Committee.
Committee members will serve on honorary basis.
The Committee will with majority of votes elect a chairman and a vice chairman from among its own members. In the case of a vacancy in the chairmanship for any reason whatsoever, the vice chairman will deputize the chairman until the next meeting of participating banks.
Bank representatives must have a minimum past experience of 3 (three) years in the money markets and must still be in office. Information will be given to the Board of Directors of the Banks Association of Turkey about the member banks of the Committee.
The Committee will meet with presence of at least 6 members and take its decisions with majority of votes.
C- Duties Of The Committee
a) The Committee will, upon demand, organize meetings with presence of representatives of all banks participating the Fixing. The minimum quotation limits will be determined in that meeting.
b) The Committee will, on technical and administrative issues, make and present suggestions on the structure, modus operandi and rules of the system to the Board of Directors of the Banks Association of Turkey.
c) The Banks Association of Turkey is responsible for following the implementation of rules. If a participating bank fails to meet the quotation requirements between 10:40-11:15, it should explain its excuse in written to the Association until 14:00. The Banks Association of Turkey declares these banks on its encrypted internet web page every evening. If a bank fails to enter during sessions (or fails to meet the quotation requirements and rules) for three (3) days during a month without an excuse, The Association sends a notice of breach of protocol to that bank. If the bank is warned three times a year, its participation in the session is forfeited by a decision of the Management and Arbitration Committee. The Committee will organize quarterly voting among the banks participating the Fixing in order to determine whether the system participation level of participating banks is adequate or not. Banks whose participation level is found dissatisfactory by a majority of 3/5th of the participating banks will be granted a time of 3 months to correct their default. If the participation level of the same bank(s) is again found dissatisfactory by a majority of 3/5th of the participating banks in the next voting held 3 months later, the bank(s) who fail to fulfill and perform their obligations will be expelled by a decision of the Committee. An expelled bank cannot participate the Fixing before the end of 1 (one) year after the date of expulsion even if it satisfies the participating bank criteria in the mean time.
d) The Management and Arbitration Committee will check and audit compliance of the banks participating the Fixing with these Rules, and consider and evaluate complaints of the participating banks. The Committee will take defense of the complained banks, and if and when required, grant an additional time of 3 months to the complained banks for remedy of their default. If the complained act is not remedied, that participating bank will be expelled from the system by vote of minimum 5 members of the Committee. An expelled bank cannot participate the Fixing before the end of 1 (one) year after the date of expulsion even if it satisfies the participating bank criteria in the mean time.
e) The Committee will at the same time serve as arbitrator for resolution of the disputes that may arise between the banks in connection herewith.
f) A Committee member cannot vote on issues affecting the bank he represents in the Committee.
g) The Committee may decide to cancel a Fixing session due to force majeure events which may also include technical failures, or to allow a certain bank upon its demand and application not to participate certain sessions again due to force majeure events.
h) All arbitration awards of the Committee will be final.
Article 8- The participating banks hereby agree and undertake to act in accordance with the good faith principles and in dignity and discipline as required in banking business, in and for determination and fixing of reference interest rates as an indicator.
Setoff Of Payments
a) Parties to a transaction executed within the frame of these Rules will pay to each other the net balance of all of the mutual placement and borrowing transactions effected in any value date during the reference interest rates Fixing session for the same due date (maturity).
b) Parties to a transaction executed within the frame of these Rules will pay to each other the net balance of all of the mutual placement and borrowing transactions effected in any due date (maturity) during the reference interest rates Fixing session for the same value date.
Right Of Lien And Pledge
Article 10- Banks participating in the reference interest rates session hereby acknowledge, warrant and declare that their counterpart will have the rights of lien, pledge, offset and deduction on the credit funds of the relevant party held with them as a security for repayment of credits extended to each other, subject to the limitation of the transactions effected in that session and of the amount of indebtedness.
Change In The Technical Data
Article 11- The system should allow more flexibility for entering the quotations.
Article 12- Together with the fixing session, participating banks enter quotation up to 1 year between 10:00-16:00 hours in the TRLDEPO page of Reuters.
Article 13- These Rules will become effective as of 14nd of November, 2016.
Annex: Limit Notification Letter Sample
Limit Notification Letter Sample
We, as ………….. (Bank name), hereby agree and undertake to recognize and apply a transaction limit of TL ……………….. to …………………. Bank until (including) the maturity date of ………………. with effect from …………………….
With our best regards,