Recently, a sixth participation bank, Emlak Participation, has been licensed in 2019, to operate

in Turkey. With its contribution, not only the market share of the participation banks will go

beyond the 5% mark, but their total assets and total financing will be also much larger and will

have greater impact on the economic growth and development of the country. Furthermore, the

Takaful

industry is expected to expand further, since the motor distribution channel for

Takaful

in Turkey is the Banca

Takaful

6.3.2. Legal and Regulatory Framework

The Turkish financial markets are regulated mainly by four institutions; the Central Bank of

Republic of Turkey (CBRT), the Banking Regulation and Supervision Agency (BRSA), the Capital

Market Board (CMB), and the Ministry of Treasury and Finance

. Among these, CBRT has an

important but limited role in the market, which is to regulate the types and maturities of deposit

for both conventional and Islamic banks as well as liquidity regulations and legislations on

preserving the value of the Turkish Lira (TRY). On the deposit side, Savings Deposit Insurance

Fund of Turkey (SDIF) has a supplementary role in regulating the deposit insurance premiums.

On the other hand, BRSA used to be a department of Ministry of Treasury and Finance until 1999;

however, afterwards, it became separated under the banking act number 4389. Since then, it has

been regulating, supervising, and licensing the whole banking sector—e.g., conventional,

participation, development and investment banks under the Banking Act (No. 5411), as well as

financial leasing, factoring under the Financial Leasing, Factoring and Funding Companies Law

(No. 6361), payment services, electronic money institutions and other financing companies

under the Law on Payment and Securities Settlement Systems, the Payment Services and

Electronic Money Institutions Law (No. 6493) and associated regulations.

Turkey does not have a separate law for Islamic banking sector. The Banking Law No. 5411

regulates the distinction between conventional and Islamic banks only in terms of licensing and

fund collection. However, with the recent sub-regulations, the regulations required by the

participation banking sector have been made to a large extent. With these sub-regulations, the

financing methods of participation banks have been defined in a broad and detailed manner.

Fund collection were added to the fund collection by proxy; profit distribution calculations and

profit balancing reserve were reorganized; the regulation on the

Shari'ah

governance

framework was issued; development and investment banks were allowed to operate in Islamic

ways; Central Advisory Board for banking was established within PBAT. These regulations were

put into practice, as a result of the efforts of the Islamic banking department established in 2015

within the BRSA. The Islamic banking department also carries out legal applications from the

licensing to liquidation of participation banks (BRSA, 2018). Recently, however, the Turkish

government issued a new decree number 30888 on 14

September 2019, to regulate the

activities of the

Shari'ah

Boards in the Turkish IFIs.

Previously, the Ministry of Treasury and Finance was known as Undersecretariate of Treasury