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NEW TURKISH LIRA Compliance Activities in Banking Sector

NEW TURKISH LIRA Compliance Activities in Banking Sector. Leman Türkoğlu The Banks Association of Turkey TRY(YTL) Work g roup Leader. Agenda. Overview of Regulations effecting the Banks E ffects on Products / Services Project Approach Activities performed by TRY Workgroup

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NEW TURKISH LIRA Compliance Activities in Banking Sector

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  1. NEW TURKISH LIRA Compliance Activitiesin Banking Sector Leman Türkoğlu The Banks Association of Turkey TRY(YTL) Workgroup Leader

  2. Agenda • Overview of Regulations effecting the Banks • Effects on Products / Services • Project Approach • Activities performed by TRY Workgroup • Critical Success Factors

  3. Overview of Regulations effecting the Banks • New monetary unit TRY • 1.000.000 TL = 1 TRY • 2 digits after the comma will be New Kuruş • 10.000 TL = 1 New Kuruş • Current banknotes and coins will be in circulation till 2006 • Accounting • Records for 2004 and before will be kept as they aresince they provide a basis for balance sheet and financial information • Starting from 2005, all transactions requiring accounting will be kept in TRY • Labeling, Rates and Price Lists • Without effecting the rates, prices and commissions will be published inboth units (TRL and TRY)

  4. Overview of Regulations effecting the Banks • Legal Aspects • Documents dated before 1.1.2005 will not be required to be renewed • Credit Agreements Payment Plans • Security Letters/Collaterals Insurance Policies • Units requiring sensitivity will operate in line with regulations set by authorities • Foreign Exchange Investment Funds Stocks • Treasury Bonds Government Bonds • Rounding Rule : 5.000 TL and over will be accepted as 1 New Kuruş, amounts below 5.000 TL will be accepted as “zero” • 123.625.000 TL = 123,63 TRY 123.625.128 TL = 123,63 TRY • 123.624.998 TL = 123,62 TRY

  5. Agenda • Overview of Regulations effecting the Banks • Effects on Products / Services • Project Approach • Activities performed by TRY Workgroup • Critical Success Factors

  6. Effects on Products / Services • Accounts • Balances of all TL accounts and their limits, if any, will be converted to TRY based on the conversion rate in the law. • Account No.s and account books can be changed or kept same depending on bank’s system • Interest accruals as of the end of 2004 will be realized as TL • Following January 1st, 2005, amounts visible on all slips will be TRY, no further change is expected for the amount.

  7. Effects on Products / Services • Deposits / Withdrawals • TL and YTL will be deposited to and withdrawn from ATMs during year 2005 and transactions will be recorded as YTL. • Collection / payment instructions performed via banks • Instructions pertaining to year 2005 given prior to 1.1.2005 (water, electricity, natural gas, telephone etc. invoice collections, automatic payment / collection products, tax / SSK insurance payments etc.) will be processed in TRY at their maturity date • All invoices to be sent to banks from relevant institutions until January 1st, 2005, will be in TL • Invoices following January 1st, 2005, will be submitted as TRY

  8. Effects on Products / Services • Checks / Promissory Notes • Checks and Promissory Notes, which are due in 2005, are not required to be in TRY. Those issued in TL will be automatically converted by banks • TRY cheque books will be issued to bank customers following January 1st, 2005. • TL cheque bookscan be used in 2005 by correcting the monetary unit • TL Checks presented in 2005 will be converted and processed in TRY. • Promissory Notes issued in 2004 and due in 2005 will be transacted in TRY after 1.1.2005

  9. Effects on Products / Services • Credit Cards • Current limits will be converted to TRY based on the conversion rate at 31 December 2004 • Whilst statements for December will vary according to the bank; • Transaction details will appear in TL • Minimum payment and total due payment will appear in TL and TRY • Statements for year 2005 will be printed in TRY • Payments may be done in TL or TRY banknotes during 2005 • Currentautomatic payment instructions will be converted to TRY at the night of 31 December 2004, payment instructions in year 2005 will be in TRY

  10. Effects on Products / Services • POS devices • Depending on the decision of banks; • Original amounts in POS slips and ATM receipts for the period 01.10.2004 - 31.12.2004 will be in TL, alternative amounts will be usable in TRY • Original amounts for the period 01.01.2005 - 31.12.2005 will be in TRY, and, depending on bank’s discretion, TL will be usable in alternative amount presentations. • Following 01.01.2006, all POS and ATM receipts will be issued in only TRY • Standard for entering Kuruş digits in POS devices has been decided • (000) button on POS device will be deactivated on 01.01.2005

  11. Effects on Products / Services • MerchantApplications • File and data transfers will be in TRY, • Merchant reporting will in TRY • Merchant blockages due for 2005 will be converted to TRY • Internet Banking • Year 2004 will be viewed in TL, and year 2005 will be viewed in TRY • All functions will be TRY compatible • Future dated transactions assigned to be processed in 2005 will be converted in TRY based on the conversion rate valid in the law at the night of 31 December2004 • Other Advantages • Point calculations provided in various products and calculations for consequent advantages will be in TRY

  12. EFT/EMKT Systems Development activities for Electronic Funds Transfer/Electronic Securities Transfer systemsare completed. Testingactivities will be launched in October Foreign Exchange Buying / Selling Transactions Foreign exchange sensitivity will be expressed in 5 digits Those having value over 1 TRY will be expressed in 4 digits, Those having value below 1 TRY will be expressed in 5 digits For example; Foreign Exchange Currency Buying Selling 1 US Dollars 1,4880 1,4950 TRY 1 Denmark Crone 0,24352 0,24432 TRY Effects on Products / Services

  13. Stocks Regulation currentlyapplied as per 1.000.000 TL nominal = 1.000 units =1 lot is changed to 1,00 TRY nominal = 1 unit =1 lotin the new system In İMKB Stock Market , transactions will be executed over 1 unit / nominal TRY and its multiples, stock prices will be announced for the stock with 1 TRY nominal value and 2 digits will be used after the point. Remainder transactions will be abolished within the Stock Exchange following 01.01.2005 Due to TRY conversion activities , no transaction will be executed in Stock Market between 30-31 December 2004 Stocks entrusted to the customer will be converted to TRY by dividing each unit to 1.000 For example; Amount of stocks entrusted a customer, who owns 15.626 units of X stocks which has a market value of 8.950 TL, following 01.01.2005 will be 15,626 units, and in line with this, the price of this stock in the Stock Market will be announced as 8,95 TRY. Following TRY conversion, 15 units will be sellable in the Stock Exchange and 0,626 will not be transactedin the Stock Exchange since it the remained. Effects on Products / Services

  14. Investment Funds Prices will be announced in TRY with 6 digits Current price of the Investment Fund : 6.365.697 TL Price to be shown after 01.01.05 : 6,365697 TRY Treasury / Government Bonds Prices currently announced over 100.000 TL nominal will be announced over 100 TRY nominal starting from 1 January 2005 Nominal values of treasury bonds and government bonds will be converted by dividing to 1.000.000 TL For example; The account of an investor who holds a 10.000.000.000 TL nominal discount bond due on 26 January 2005 will be 10.000 TRY nominal after conversion and the investor will get 10.000 TRY after the maturity ( on 26.01.2005) Effects on Products / Services

  15. Repo Will be divided by 1.000.000 and entered into accounts after roundation For example; A repo transaction which has a net return amount of 1.250.356.500 TL on 05 January, will be reflected to the account of relevant customer as 1.250,36 TRY Effects on Products / Services

  16. Agenda • Overview of Regulations effecting the Banks • Effects on Products / Services • Project Approach • Activities performed by TRY Workgroup • Critical Success Factors

  17. Project Approach • Participation of all critical Business and AdministrativeUnitsis essential. Following BUs are leading ; • Banking Operations • Accounting and Finance • Treasury – Funds Management • Technology • Auditing • Project Management disciplines ; • Programme/Project Planning, Monitoring, and Reporting • Risk Management • Communication Management • Test Management • Change Management /Configuration Management • Quality Management

  18. Project Approach • Milestones ; • Planning and Budget Approval • Inventory gathering and Impact Analysis • Establishment of Test Methods and Test Environments • Plan and Budget approval • Application Development/Testing • Detailed Analysis, Coding, Unit Testing, Integration Testing, User Acceptance Testing • Conversion • Modifications in data structure/tables • Conversion programs and tests • Production Roll-out (Phased/D-Day implementation) • Training • D-day (31.Dec.2004) Activities

  19. Project Approach • Budget Requirements • Human Resources • Technology (internal and external source utilization) • Participation of business units in User Acceptance Tests • Hardware and Tools • Technology (Mainframe, Distributed Systems, Test Branches, code remediation tools) • Physical Money • Adaptation of banknote counting machines • Coin counting and packaging machines • Training / Stationary /Preprinted Material & Brochures • Staff Customers • Correspondent Banks Investors • Affiliates/Subsidiaries

  20. Agenda • Overview of Regulations effecting the Banks • Effects on Products / Services • Project Approach • Activities performed by TRY Workgroup • Critical Success Factors

  21. Activities performed by TRY Workgroup • Objective • Information sharing on common problems and issues among banks , related corporates and authorities • Preparing banks as well as their employees and customersfor a successful migration to TRY • TRY Workgroups /Subgroups • Project Monitoring and Communication • Securities • Relationship management with Corporations • Legal • Accounting • Total of 50 people have participated in the activities

  22. Activities performed by TRY Workgroup • 150 questions and recommendations which are compiled from all banks are classified and evaluated in relevant Workgroups • Correspondence and meetings with critical entitiesare held (Utility Companies, Authorities, SSK, Ziraat Bank, BKM.VISA , Mastercard etc.) • Since 19 December 2003following meetings are held : • 4 TRY Supreme Workgroup • 9 Project Monitoring and Communication Sub-Workgroup • 9Securities Sub-Workgroup • 11 Corporations Sub-Workgroup • 4 Legal Sub-Workgroup • 3 general (with the participation of all banks, private finance institutions and authorized superior bodies ) • Turkish Banking Association Board of Directors closely monitors the activities • www.YTL.gen.tr site offers a discussion platform for members • Information to Press & Media is supplied when requested

  23. Activities performed by TRY Workgroup • Meetings with Public Relations Outsource Company of Central Bank are held • Standard letter text providing information to customers of banksis prepared • Deadline for the completion of tests between utility companies and banksis agreed to be end of October 2004 • A standard is establishedfor files mutually exchanged between banks and their corporate customers (Example:999999999999.99) • Applicationsare submitted to legal authorities and institutions for issues on which resolution is expected. • Cash register / POS integration, completion of preparations by cash register firms by 31.12.2004 • Postponing new nation-wide projects • Plans for TRY transitionin Cyprus • Enforcing TRL and TRY codes in SWIFT after January 1st • Certification tests and self-test facilities with BKM, VISA and Mastercard

  24. Activities performed by TRY Workgroup • Information aimed to monitor project progress in banksis consolidated by TBB and shared with Central Bank and Banking Regulation and Supervision Agency (BDDK)at the end of each month starting from March 2004 • General Questions : • 1. Is there a TRY Project Coordinator in your bank? • 2. Is there a TRY Steering Committee? • 3. Is there a General Work Plan for TRY Project? • 4. Are contracts in regards to TRY migration finalized with software vendors ? • Milestones : • Date of Analysis / Development Completion • Realization Percentage (%) • Test Completion Date

  25. Activities performed by TRY Workgroup • Applications with Interfaces to other Banks/Data Processing Centers • EFT/EMKT • POS Applications • Check / Bond Applications • SWIFT • Credit Cards • Bank SpecificApplications • Deposits • Credits • Foreign Operations • Accounting and Financial Control • Treasury and Securities • Other Institution Payments/collections • Alternative Distribution Channels (Non-Branch Banking ) • Payment /Collection Systems

  26. Agenda • Overview of Regulations effecting the Banks • Effects on Products / Services • Project Approach • Activities performed by TRY Workgroup • Critical Success Factors

  27. Timely receipt of official notifications and communiqués from Authorities (eg : the Ministry of Finance, SPK, IMKB, TCMB ) Readiness of Bank customers and other institutionsand performance of mutual tests Obtaining support which is ought to be provided by software and data provider firms with no delay Amount fields in spreadsheets (i.e. excel files ) Teamwork and inter-institutional coordination Critical Success Factors

  28. Thank you..

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