Turkey Unveils Overnight Credit Tightening as Central Bank and Regulator Clamp Down on Lending

Summary:

Turkey’s central bank and banking regulator announced a sweeping package of overnight tightening measures targeting consumer credit, credit cards, overdraft accounts, and housing loans, signaling a renewed push to curb excessive borrowing and strengthen financial stability. The coordinated steps aim to align household debt with income levels, limit unused credit lines, and reinforce Turkey’s tight monetary stance amid persistent inflation risks.

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Coordinated Overnight Move Signals Policy Resolve

Turkey’s financial authorities launched a broad set of macroprudential tightening measures late at night, with the Banking Regulation and Supervision Agency (BDDK) and the Central Bank of the Republic of Türkiye (TCMB) simultaneously announcing new restrictions on consumer lending and bank balance sheets.

The measures cover credit cards, personal loans, overdraft accounts, mortgage lending ratios, restructuring rules, and reserve requirements, underscoring Ankara’s determination to rein in domestic demand and restore financial discipline.

In a statement, the BDDK said the new framework was designed to ensure that financial resources are used more efficiently to support lower-income groups, improve the effectiveness of the credit system, and strengthen overall financial stability.

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Regulator Targets Income-Compatible Borrowing

The BDDK emphasized that the regulations aim to protect financial consumers by aligning household indebtedness with income levels and promoting sustainable repayment behavior.

Authorities also highlighted efforts to curb fraud and illegal gambling by limiting the misuse of unused credit card and overdraft limits, while bringing Turkey’s regulatory framework closer to international standards.

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Major Changes to Mortgage Lending Rules

New and Second-Hand Distinction Removed

One of the most notable changes concerns mortgage lending. The BDDK eliminated the distinction between new and second-hand homes when calculating loan-to-value (LTV) ratios.

Under the revised rules, mortgage lending will be based on a simplified framework that applies to all residential properties, with additional incentives for energy-efficient housing.

Homes built after 2010 that meet the minimum C energy efficiency standard are now included in the group eligible for favorable LTV ratios. Properties rated A or B remain eligible for the highest borrowing limits.

The regulator said the move aims to encourage purchases of energy-efficient and relatively earthquake-resilient homes, while supporting first-time homebuyers.

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Tighter Rules for Multiple Homeowners

The BDDK maintained stricter treatment for borrowers who already own property. If a borrower, their spouse, or their children under 18 own at least one residential property, the applicable LTV ratios will continue to be reduced by 75%, significantly limiting leverage for second-home purchases.

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Mortgage Loan-to-Value Ratios by Property Value

Under the new framework, mortgage borrowing limits are set as follows:

• Homes valued up to TRY 5 million:

  • Energy class A–B: up to 90%

  • Energy class C: up to 80%

  • Other homes: up to 70%

• TRY 5–7 million:

  • A–B: 80%

  • C: 70%

  • Other: 60%

• TRY 7–10 million:

  • A–B: 70%

  • C: 60%

  • Other: 50%

• TRY 10–20 million:

  • A–B: 50%

  • C: 40%

  • Other: 30%

• Above TRY 20 million:

  • A–B: 50%

  • C: 40%

  • Other: 30%

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Credit Card and Personal Loan Restructuring

The BDDK also introduced a new restructuring mechanism for distressed retail borrowers.

Under the regulation, credit card balances that are partially or fully unpaid, as well as personal loans overdue by more than 30 days, may be restructured under certain conditions.

Borrowers who apply within three months of the restructuring date will be allowed to restructure eligible debts for up to 48 months, easing short-term repayment pressure.

The regulator said the measure aims to support financially strained households while preserving systemic stability.

Additional conditions include:

• Monthly installments will be added to the card’s minimum payment amount.

• Credit card limits will not be increased until at least 50% of the restructured balance is repaid.

• If the restructured balance exceeds the card limit, the excess will not be treated as a limit breach.

CBRT Warns: Disinflation Loses Momentum as Prices Stay Sticky

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New Limits on Credit Card Exposure

The BDDK tightened enforcement of income-based credit card limits, reinforcing existing legal thresholds.

Under current law:

• In the first year, total credit card limits cannot exceed twice the cardholder’s average monthly income.

• From the second year onward, the cap remains four times average income.

Under the new framework, only documented monthly or annual income will be considered when issuing new cards or increasing limits.

Cardholders with total credit card limits exceeding TRY 400,000 may see partially unused limits reduced, based on the account statement date with the highest spending in the past year.

Banks must ensure that all credit card limits are aligned with income levels by January 1, 2027.

The BDDK said the objective is to preserve low limits for low- and middle-income customers, while adjusting unused high limits to realistic income levels.

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Overdraft Accounts Face New Caps

The regulator also introduced stricter controls on overdraft accounts (KMH).

Under the new rules:

• Overdraft limits may not exceed twice the customer’s documented three-month average income.

• Overdraft limits allocated for education payments under agreements between banks and educational institutions are exempt.

In addition, unused overdraft limits will now carry higher risk weights in banks’ capital adequacy calculations.

Starting April 1, 2026, a 10% credit conversion factor will be applied to unused overdraft limits when calculating capital adequacy ratios. The regulator reserves the right to raise this factor up to threefold if necessary.

The move is intended to encourage more conservative balance sheet management by banks.

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Central Bank Tightens Monetary and Macroprudential Framework

Cap on Interest Rates for Restructured Credit Cards

In parallel, the TCMB amended its regulation on maximum interest rates applied to credit card transactions.

Under the new rules, the monthly contractual interest rate applied to restructured credit card balances may not exceed the officially announced monthly reference rate.

If restructured debts fall into arrears, the maximum applicable late-payment interest rate will remain capped at the current statutory ceiling.

For participation banks, the same restrictions will apply using profit-share and late-payment penalty terminology instead of interest.

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Reserve Requirements and Growth Limits

The central bank also tightened reserve requirement rules to reinforce its restrictive monetary stance and safeguard macrofinancial stability.

Key changes include:

• The eight-week growth cap on foreign currency loans was reduced from 1% to 0.5%.

• A new eight-week growth cap of 2% was introduced for overdraft limits allocated to consumers.

The TCMB said the measures are designed to contain excessive credit growth and limit risks stemming from foreign currency exposure.

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Clear Message to Markets

The overnight tightening package represents one of the most comprehensive macroprudential interventions in recent months, extending beyond policy rates to directly target credit behavior, leverage, and bank balance sheets.

While the measures may constrain short-term credit access and weigh on domestic demand, policymakers appear determined to reinforce monetary tightening through regulatory channels.

Analysts say the move sends a clear message that Turkey’s authorities are prioritizing financial stability and discipline, even at the cost of slower credit growth.