Türkiye İş Bankası A.Ş.
Notes to the Unconsolidated Financial Statements
for the Year Ended 31 December 2015
110 İşbank
Annual Report 2015
Information on the Bank’s internal capital requirements within the scope of the internal capital adequacy assessment process in order to evaluate the adequacy of the
approach in terms of current and future activities:
On-balance sheet and off-balance sheet financial risks and activities arising from financial assets and liabilities, against damage caused by exposure to financial risk that are necessary
to determine the level of capital and the determined level, taking into consideration the specified minimum levels of statutory and internal continuity of the supply and monitoring
process “Capital Adequacy Policy” implemented within the framework by the Bank.
Capital adequacy level is; monitored and analyzed taking into consideration the possible changes on economic conjuncture, risk factors, balance sheet structure and size, profitability
and, the dividend policy by the Bank. As for the level of capital adequacy with a view to a forward-looking analysis and projection studies affect the Bank’s planning and decision
processes.
The Bank’s internal capital adequacy assessment process (“ICAAP”) is comprised of not only internal capital adequacy assessment process, but also determining the risks that the Bank
faces on an internal perspective, including prospective internal capital requirements, capital structure, targets; and strategies are assessed considering its operations and risks. This
internal capital adequacy assessment process also includes the actions taken into account under different conditions and stress scenarios.
During the of internal capital adequacy assessment process, in addition to risks in regulatory capital adequacy (credit risk, market risk and operational risk) assessment of capital
requirement is calculated within the principle of proportionality by using the risks that may affect the Bank’s risk profile in addition to the mentioned risks .
II. Explanations on Credit Risk
1.
Credit risk is defined as the possibility of incurring loss where the counterparty in a transaction, partially or completely fails to meet its contractual obligations in due time in an
agreement with the Bank.
The Bank’s position against the credit risk limits defined by the current legislation is monitored by the Board. Within this framework, loans extended to Risk Groups and the Bank’s Risk
Group, including the Bank; loans in high amounts and limitations regarding the shares in participations are monitored according to the limits determined in connection with the size of
the shareholders’ equity.
Credit risk limits of customers are determined depending on the financial situation and loan requirements of the borrowers, in strict compliance with the relevant banking legislation,
within the framework of loan authorization limits of Branches, Regional Offices, Loan Divisions, the Deputy Chief Executives responsible for loans, the CEO, the Credit Committee and
Board of Directors. These limits may be changed as may be deemed necessary by the Bank. Moreover, all commercial credit limits are revised periodically, provided that each period
does not exceed a year. Furthermore, the borrowers and borrower groups forming a large proportion of the overall placement are subject to risk limits in order to provide further
minimization of potential risk.
The geographical distribution of borrowers is consistent with the concentration of industrial and commercial activities in Turkey.
The distribution of borrowers by sector is monitored closely for each period and sectoral risk limits have been determined to prevent concentration of risk in sectoral sense.
The credit-worthiness of customers is monitored on a consistent basis by using company rating and scoring models specially developed for this purpose, and the audit of statements
of account received is assured to have been made in accordance with the provisions as stipulated by the relevant legislation.
Utmost importance is given to ensure that loans are furnished with collaterals. Most of the loans extended are collateralized by taking real estate, movable or commercial enterprise
under pledge, promissory notes and other liquid assets as collateral, or by acceptance of bank letters of guarantee and individual or corporate guarantees.
Non-performing and impaired loans has classified in accordance with the Regulation on Identification of and Provision against Non-Performing Loans and Other Receivables (the
Provisioning Regulation) published on the Official Gazette no.2633 dated 1 November 2006. The detailed descriptions of these methods correspond with accounting practices, are
included in Section Three Note VIII.
Credit risk is the risk reduction effects without taking into consideration the total amount of exposures after offsetting transactions with different risk classes according to the types
and amounts of disaggregated risks are listed below the average for the period.
Exposure Categories
(1)
Current Period
Risk Amount
Average
Risk Amount
(2)
Exposure Categories
Conditional and unconditional exposures to central governments or central banks
75,661,717
74,185,710
Conditional and unconditional exposures to regional governments or local authorities
46,399
34,573
Conditional and unconditional exposures to administrative bodies and non-commercial undertakings
243,344
183,003
Conditional and unconditional exposures to multilateral development banks
523
643
Conditional and unconditional exposures to international organizations
Conditional and unconditional exposures to banks and brokerage houses
9,027,518
9,062,991
Conditional and unconditional exposures to corporates
127,380,334
128,346,696
Conditional and unconditional retail exposures
37,604,577
38,026,835
Conditional and unconditional exposures secured by real estate property
33,481,268
27,505,795
Past due items
897,136
734,554
Items in regulatory high-risk categories
14,222,168
15,149,546
Exposures in the form of bonds secured by mortgages
Securitization positions
Short term exposures to banks, brokerage houses and corporates
Exposures in the form of collective investment undertakings
246,213
Other items
17,995,971
16,323,303
(1)
Includes total risk amounts before the effect of credit risk mitigation but after credit conversions.
(2)
Average risk amounts are the arithmetical average of the amounts in quarterly reports prepared.
