102
include the improvement of all logistical areas, such as the legal framework and the
arrangements for arbitration, and the building of new infrastructures, such as over-the-counter
(OTC) derivatives market, specialised commodity exchanges and energy and carbon emission
exchanges. Takaful is one of the main components of the IIFC project (SBB, 2019).
The Public Oversight Authority in Turkey has recently taken steps to contribute to the
development of the Islamic finance industry in 2019. In this context, AAOIFI's management,
accounting and auditing standards and ethical principles have been introduced into Turkish
legislation. In addition, AAOIFI Shari'ah standards have been translated into Turkish language
by Istanbul Sabahattin Zaim University in cooperation with PBAT.15
Legal and Regulatory Institutions
Turkey remains a leading OIC member country to set the pace for new markets. Turkey had set
the ground rules for Takaful penetration. From the policy perspective, Turkey would serve as a
good case study to examine the implications of policy directions on businesses.
Since Turkey is a secular country, Islamic finance is governed under the existing conventional
legislative structure. So, the legal and regulatory institutions are the same for conventional and
participation financial institutions. Its legal and regulative structure covers the financial sector
in three main groups (banking, capital, and insurance) and for each group there is, generally,
only one primary regulator.
The Turkish banking sector is mainly regulated by BRSA. According to the Banking Act No 5411
issued by BRSA, the main function of BRSA is to ensure the implementation of the Banking Act
in the Turkish economy. Besides supervising the industry, the mission of BRSA is to develop both
conventional and Islamic banking sectors by its regulations. As aforementioned in the
discussions, BRSA is responsible for all processes between establishments of banks, leasing,
factoring, and forfeiting companies and resolutions of them.
Similarly, CMB is the central authority on capital markets regulations. IFIs and instruments are
also regulated and supervised by CMB. Like BRSA, the primary function of CMB is to ensure the
implementation of Capital Market Act No 6362. Parallel to BRSA, CMB’s supervisory mission is
supported with developing capital markets by regulations on introducing new institutions and
instruments.
The General Directorate of Insurance of the Ministry of Treasury and Finance is principally
concerned with monitoring the insurance sector, licensing reinsurance and pension companies,
allowing insurance intermediaries, assessing capital adequacy through offsite reports,
reviewing insurer technical reserves and financial performance, assessing the financial controls,
and initiating the enforcement measures, including those associated with strengthening the
15