General Guidance for Developing Differential Premium Systems

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October 31, 2011 10. Turkey Saving Deposit Insurance Fund (SDIF) is the unique deposit insurer of Turkey. It is as well an autonomous legal entity. Membership in the Deposit Insurance Scheme is compulsory for all foreign and domestic deposit- and participation fund-taking institutions. On the basis of a protocol signed between BRSA (Banking Regulation and Supervision Agency) and SDIF, SDIF uses the database of BRSA for the determination of differential premiums where the database essentially contains financial statements of the banks including the outstanding saving deposit and participation fund balances, and information such as ratios used in the differential premium system. In Turkey deposit insurance premium rates of the banks are not publicly available. However financial statements of the banks are disclosed quarterly to the public including some essential banking ratios. SDIF started to use a differential premium system first in 2005 and revised the system and introduced the current differential premium system in 2009. SDIF uses for all its member institutions (deposit and participation banks) the same ratios while calculating the scores and the premium rates of the banks. The differential/ risk adjusted premium system evaluates banks according to their risk profile and takes higher premiums from high-risk banks and lower premiums from low risk-banks. The differential premium system categorizes member institutions into four premium categories depending on the total score between the lowest “0” and the highest “100”. Each category corresponds to a premium ratio (11, 13, 15 or 19 basis points) determined by SDIF. Deposit insurance premiums are the major revenue source of SDIF. The 14 evaluation factors of the differential premium system include both qualitative and quantitative factors. While adopting the premium system SDIF took into account comments from BRSA, the Central Bank and the Treasury Under secretariat and utilized experiences of countries like Canada and the USA. 69
October 31, 2011 The premium system is effective in distributing banks into appropriate risk categories and encourages banks to have a strong risk management 25 . The differential premium factors are based on the following five areas: Capital adequacy Asset quality Profitability Liquidity Other factors Risk Factors and Scoring Scale Risk Factors Maximum Score 1. Capital Adequacy 25 1.1. 1.1.1. 1.1.2. 1.1.3. 1.2. Capital Adequacy Ratios Capital Adequacy Standard Ratio (CAR Solo) Consolidated Capital Adequacy Standard Ratio (CAR consolidated) Initial Capital Adequacy Ratio (Initial CAR Solo) 20 5 Asset Capital Multiplier 2. Asset Quality 20 2.1. Group Loans Ratio 5 2.2. 2.3. Cash Loans Concentration Ratio Non-Performing Loans Ratio 5 5 2.4. Average Growth Rate 5 3. Profitability 10 3.1. Profitability Ratio 5 3.2. Efficiency Ratio 5 4. Liquidity 10 4.1. Average Maturity (Days) of Deposits/Participation Funds 5 4.2. Insured Deposit/Participation Fund Ratio 5 5. Other Risk Factors 35 25 SDIF revised the Differential Premium System as of September 2011, and replaced the Free Capital Ratio with Average Maturity of Deposits/Participation Funds, and Ratio of Free Float with Other Information based on the validation process. 70
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General Guidance for Developing Dif
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October 31, 2011 I. Executive Summa
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October 31, 2011 Transparency, dis
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October 31, 2011 III. Background So
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