Banking & Finance Law in Turkey

Five days before the end of 2025, the Turkish government quietly extended one of the most consequential tools available to financially distressed companies in the country, the out-of-court debt restructuring mechanism that has kept thousands of viable businesses out of formal bankruptcy since 2018. This is exactly the kind of development that should sit at the centre of any current banking and finance guidance, and yet most of what is published online about Turkish banking law still reads as a general description of the regulatory architecture, accurate in its broad strokes but silent on the specific developments that determine what a company in financial difficulty, or a bank extending it credit, can actually do right now.

This guide covers the legal and regulatory framework for banking in Turkey, the December 2025 extension of the financial restructuring mechanism, lending and security over Turkish assets, foreign currency lending rules, and the practical points that matter most for foreign businesses and lenders operating in the Turkish market.

Legal Notice: This page provides general legal information for educational purposes only. It does not constitute legal advice. For guidance specific to your situation, please consult a qualified attorney.

The Legal and Regulatory Framework

Turkish banking is governed primarily by Banking Law No. 5411, together with a wider body of related legislation: Turkish Commercial Code No. 6102 and Turkish Code of Obligations No. 6098 for the underlying contract and corporate law, Law No. 1211 on the Central Bank of the Republic of Turkey, Capital Markets Law No. 6362 for securities and capital markets aspects, Law No. 1567 on the Protection of the Value of Turkish Currency for foreign exchange matters, Law No. 6493 on Payment and Security Settlement Systems, Payment Services, and Electronic Money Institutions for payment services and e-money, and Law No. 6361 on Financial Leasing, Factoring, Financing, and Savings Finance Companies for non-bank lending institutions.

The lead regulator is the Banking Regulation and Supervision Agency (BDDK/BRSA), established as a public legal entity with administrative and financial autonomy under Article 82 of the Banking Law, meaning its regulatory and supervisory decisions are made independently and are not subject to discretionary review or instruction from other government bodies. The Savings Deposit Insurance Fund (SDIF) insures savings deposits and participation funds held by individuals at credit institutions, and takes over and restructures any bank that becomes insolvent or falls below required financial strength thresholds. Banks are required to be members of the Banks Association of Turkey, and participation (Islamic) banks of the Participation Banks Association of Turkey, both established as public professional organisations under the Banking Law.

The December 2025 Restructuring Extension: What Changed and Why It Matters

This is the single most consequential current development for any company carrying meaningful bank debt in Turkey, and the one piece of recent regulatory news every distressed-debt conversation should start from.

The Mechanism

Provisional Article 32 of Banking Law No. 5411, introduced by amendments on 19 July 2019 in the aftermath of the 2018 currency crisis, established a framework for out-of-court financial restructuring of debts owed to the financial sector. Under the implementing Regulation on the Restructuring of Debts Owed to the Financial Sector, debtor companies facing temporary financial distress, but not insolvency in the formal sense, can renegotiate their obligations with multiple lenders simultaneously through standardised framework agreements developed by the Banks Association of Turkey, rather than negotiating separately and sequentially with each creditor bank.

The practical advantages over an ordinary bilateral renegotiation are real and specific: Framework agreement restructurings benefit from exemptions from banking and insurance transaction tax (BSMV) and stamp duty that would otherwise apply to a renegotiated facility, and bank officials negotiating debt forgiveness within this framework benefit from a 2017 amendment to Article 160 of the Banking Law that specifically exempts qualifying partial debt forgiveness from being treated as embezzlement, addressing a real institutional reluctance that existed before this protection was introduced, since bank officers had previously been understandably cautious about agreeing to debt forgiveness at all given the criminal exposure that could otherwise attach.

The December 2025 Extension

The restructuring mechanism under Provisional Article 32 has always been time-limited, originally for two years from its initial introduction, with the law providing that this period could be extended for further two-year terms by Presidential Decision. Presidential Decree No. 10765, published in the Official Gazette dated 25 December 2025 (No. 33118), extended the mechanism for a further two years, effective from 28 December 2025. Without this extension, the mechanism would have lapsed at the end of December 2025, a date that came and went only days before the renewal was published, underscoring how operationally important this tool remains to Turkish corporate lending more than seven years after the crisis that originally prompted it.

Practical implication: Companies currently negotiating, or considering, a restructuring of bank debt now have certainty that the framework agreement mechanism, with its tax exemptions and the protections it affords negotiating bank officers, remains available through at least December 2027. For lenders and borrowers who had been working against the assumption of an approaching deadline, this removes a real source of time pressure from ongoing or contemplated restructuring negotiations, and reopens the mechanism as a live option for companies that had not yet engaged with it.

Bank Licensing and Establishment

Establishing a bank in Turkey, or a Turkish branch of a foreign bank, requires a licence from BDDK, subject to extensive fit-and-proper requirements for founding shareholders. Direct and qualified indirect real-person founding shareholders must demonstrate, among other things, that they have not been sentenced to imprisonment exceeding three years for offences under the Turkish Penal Code (with exceptions for negligent offences), have not been convicted under the banking, capital markets, or lending-related legislation specifically referenced in the Banking Law, and have not been convicted of disqualifying offences including embezzlement, bribery, fraud, breach of trust, money laundering, or crimes against the prestige of the state. Acquiring a qualified shareholding in an existing bank similarly requires BDDK approval, being a change-of-control mechanism analogous to, though procedurally distinct from, the approval requirements covered in our Energy Law and Corporate Law guides for licensed assets in other regulated sectors.

For foreign financial institutions, Turkey does not impose blanket restrictions on foreign ownership of Turkish banks, though the licensing and fit-and-proper review applies equally regardless of the applicant’s nationality, and the practical process benefits considerably from early, well-prepared engagement with BDDK given the scope of documentation involved.

Lending and Security Over Turkish Assets

Commercial lending in Turkey, whether by a Turkish bank, a foreign bank lending cross-border, or a non-bank financing company under Law No. 6361, is structured through facility agreements governed by Turkish Code of Obligations No. 6098 for the underlying contractual relationship, with security typically taken over real estate through a mortgage (ipotek) registered with the relevant Land Registry, over movable assets and receivables through a pledge (rehin), including the commercial enterprise pledge mechanism that allows a pledge over a business’s operating assets as a going concern rather than itemised individually, and over shares through share pledges registered in the company’s share register. Cross-border lending into Turkey, which is common for larger corporate facilities and project finance, layers Turkish security and enforcement mechanics onto financing documentation that otherwise follows international, frequently English law, market practice for the broader facility terms.

Non-performing loan resolution: Outside the framework agreement restructuring mechanism described above, the Banking Law’s Article 53 write-off provisions and BDDK’s Non-Performing Exposures Workout Guidelines (first published in 2021) set out the classification and resolution framework banks follow for distressed exposures, distinguishing restructured-but-performing loans (commonly tracked as “Stage 2” under the relevant accounting and supervisory classification) from genuinely non-performing exposures requiring more active workout or write-off treatment.

Foreign Currency Lending Rules

Foreign currency lending and borrowing in Turkey is governed by Law No. 1567 and the implementing decrees and Central Bank communiqués issued under it, which have, particularly since 2018, restricted Turkish-resident companies without foreign currency income from taking on foreign-currency-denominated loans above defined thresholds, representing a policy response to the currency mismatch risk that contributed to the 2018 corporate distress wave the restructuring mechanism above was originally designed to address. The specific exemptions, thresholds, and permitted structures in this area are adjusted periodically through Central Bank circulars, including changes referenced in capital movements circular updates as recently as November and December 2025, and should be checked against current Central Bank guidance for any specific proposed financing rather than assumed static from general market knowledge.

Payment Services and Financing Companies

Law No. 6493 governs payment institutions and electronic money institutions, a licensing framework increasingly relevant given the growth of fintech payment platforms operating in or into Turkey, layered alongside, but distinct from, the crypto-specific regulatory developments covered in our Crypto & Fintech Law guide. Law No. 6361 governs financial leasing, factoring, and financing companies, which are the principal non-bank lending channels for businesses that access credit outside the traditional banking sector, each requiring its own BDDK licence and operating under sector-specific prudential rules distinct from, though coordinated with, the bank licensing framework above.

Participation finance: Turkey’s participation (Islamic) banking sector operates under specific compliance principles, with a dedicated Communiqué on Compliance with Participation Principles having entered into force as part of the broader 2025 regulatory updates, being relevant for both domestic participation banks and foreign institutions structuring Sharia-compliant facilities into the Turkish market.

Corporate Distress: Restructuring Outside the Banking Framework

Where the Provisional Article 32 framework agreement mechanism is not available or not the appropriate tool, Turkish law provides two principal formal mechanisms under the Enforcement and Bankruptcy Law (originally enacted in 1932 and amended extensively since): concordat (konkordato), a court-supervised process allowing a debtor facing financial hardship to apply to the Commercial Court of First Instance for approval of a restructuring plan, debt reduction, or payment deferral agreed with creditors, and formal bankruptcy (iflas), which is the liquidation process for a debtor genuinely unable to meet its obligations. The choice between an out-of-court framework agreement restructuring, a concordat, and other available routes depends heavily on the company’s creditor composition, the nature of its distress, and whether genuine going-concern viability exists, representing an assessment best made early rather than after options have narrowed.

Frequently Asked Questions

Is the Turkish debt restructuring mechanism for companies still available?

Yes. Presidential Decree No. 10765, published 25 December 2025, extended the Provisional Article 32 framework agreement restructuring mechanism for a further two years from 28 December 2025, meaning it remains available through at least December 2027.

What is the advantage of restructuring through a framework agreement rather than negotiating directly with each bank?

Framework agreements allow simultaneous, coordinated negotiation with multiple lenders rather than sequential bilateral talks, and benefit from exemptions from banking and insurance transaction tax (BSMV) and stamp duty that would otherwise apply, along with protections for bank officers negotiating debt forgiveness within the framework.

Who regulates banks in Turkey?

The Banking Regulation and Supervision Agency (BDDK/BRSA), an independent public legal entity established under Article 82 of Banking Law No. 5411, with the Savings Deposit Insurance Fund (SDIF) responsible for deposit insurance and resolution of failing banks.

Can a foreign bank or investor own a Turkish bank?

There is no blanket restriction on foreign ownership of Turkish banks, though establishing a bank or acquiring a qualified shareholding requires BDDK licensing approval and fit-and-proper review, applied equally regardless of the applicant’s nationality.

Are there restrictions on foreign currency loans to Turkish companies?

Yes, depending on the borrower’s foreign currency income position and the loan amount, under Law No. 1567 and related Central Bank regulations, which have specifically restricted foreign-currency borrowing for companies without matching foreign currency income since 2018. Current thresholds and exemptions should be checked against current Central Bank guidance.

What is the difference between a framework agreement restructuring and a concordat?

A framework agreement restructuring under Provisional Article 32 is an out-of-court mechanism specifically for debts owed to the financial sector, coordinated through the Banks Association. A concordat is a court-supervised restructuring process under the Enforcement and Bankruptcy Law, available more broadly and not limited to financial sector debt. The appropriate route depends on the company’s specific creditor composition and circumstances.

Working With Aslan Attorney

Aslan Attorney advises banks, financing companies, borrowers, and investors on Turkish banking and finance matters. Our services cover lending and security documentation, debt restructuring under the Provisional Article 32 framework agreement mechanism, BDDK licensing and regulatory matters, foreign currency financing structuring, and coordination on concordat and formal restructuring processes where the financial sector framework is not the appropriate route.

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