During financial downturns, banks and financial institutions are usually faced with the problem of non-performing loans. One way to deal with them is to create asset management companies (AMCs). The two pieces of legislation in the Turkish legal system regulating AMCs are Law No 4743 on the Restructuring of Debts in the Financial Sector and Amending Certain Laws and the Regulation on the Establishment and Operation of Asset Management Companies. Law No 4743, which was enacted as a result of the two financial crises in November 2000 and February 2001, introduced the concept of AMCs to the Turkish legal system.
The function of an AMC is to purchase, restructure and sell the assets and receivables of banks, special financial institutions and other financial institutions. The creation of AMCs is subject to the permission of the Banking Regulatory and Supervisory Authority (BRSA), and they must have paid in share capital of at least TL10 trillion ($6.9 million). The incorporators of AMCs must also possess certain qualifications, which are set out in the Regulation. For example, they must never have been declared bankrupt, nor own more than 10% of any bank or financial institution and must not having committed a criminal offense regulated by the Banking Law or the Capital Markets Law.
The Regulation sets forth an exhaustive list of the activities that AMCs may carry out. Thus, an AMC may: (i) buy or sell the assets or receivables of banks and other financial institutions, collect these purchased receivables and liquidate and restructure the purchased assets; (ii) provide consultancy services regarding the purchase, sale and restructuring of assets and receivables; (iii) operate and issue securities pursuant to the Capital Markets legislation subject to obtaining necessary permission; (iv) purchase subsidiaries; (v) invest in securities issued by other asset management companies; and (vi) provide consultancy services to companies regarding corporate and financial restructuring.
The Savings Deposit and Insurance Fund (SDIF), a body within the BRSA, is said to hold the biggest portfolio of non-performing loans in Turkey. On June 30 2003, the SDIF announced that it will sell through a tender process corporate and commercial receivables worth approximately $250 million, which have been transferred from the banks taken over by the BRSA. According to the schedule, the final date to submit bids was December 15.
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