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Financial Information and Risk
Management
İş Bankası
Annual Report 2013
TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Consolidated Financial Statements
for the Year Ended 31 December 2013
XI. Explanations on Risk Management Objectives and Policies
In addition to banking activities, activities of the entire the group as a whole is exposed to financial and non-financial risks which are
required to be analyzed, monitored and reported within specific risk management principles of the Bank and with the perspective
of Group risk management. The risk management process is organized within the framework of risk management and serves
the creation of a common risk culture in corporate level; which brings “good corporate governance” to forefront, business units
that undertaken risks and the independence between the internal audit and surveillance units are established, risk is defined in
accordance with international regulations and in this context measurement, analysis, monitoring, reporting and control functions
are carried.
Risk management process and the functions involved in the process is one of the primary responsibilities of the Board of Directors.
The Risk Management Department, which operates under the Board of Directors has been organized as Asset-Liability Management
Risk Unit, Credit Risk and Economic Capital Unit, Operational Risk and Model Verification and Subsidiary Risk Unit.
The Bank’s risk management process is carried out within the framework of risk policies which are set by recommendations of
Risk Management Department and issued by the Board of the Directors and written standards which contains risk policies and
implemented by executive units.
These policies which are entered into force in line with the international practices are general standards which contains; organization
and scope of the risk management function, risk measurement policies, duties and responsibilities of the risk management group,
procedures for determining risk limits, ways to eliminate limit violations and approval and confirmation to be given in a variety of
events and situations. The scope and content of the Parent Bank’s risk management system is given by the main risk types.
Credit risk
Credit risk is defined as the risk of the failure to comply with the requirements or failing to fulfill its obligations partially or totally
of the counter side of the transaction contract with the Parent Bank. The methodology and responsibilities of the credit risk
management, controlling and monitoring and the framework of credit risk limitations specified with the credit risk policy.
The Bank defines measures and manages credit risk of the all products and activities. Board of Directors review the Parent Bank’s
credit risk policies and credit risk strategy on an annual basis as a minimum. Key Management is responsible for the implementation
of credit risk policies which are approved by Board of Directors.
As a result of loans and credit risks analysis all findings are reported to Board of Directors and Key Management on a regular basis. In
addition to transaction and company based credit risk assessment process, monitoring of credit risk also refers to an approach with
monitoring and managing the credit as a whole maturity, sector, security, geography, currency, credit type and credit rating.
In the Parent Bank’s credit risk management, along the limits as required by legal regulations, the Parent Bank utilizes the risk
limits to undertake the maximum credit risk within risk groups or sectors that the Board of Directors determines. These limits are
determined such a way that prevents risk concentration on particular sectors.
Excess risk limits up to legal requirements and boundaries limits are considered as an exception. The Board of Directors has the
authority in exception process. The results of the control of risk limits and the evaluations of these limits are presented by Internal
Audit and Risk Management Group to Key Management and Board of Directors.
The Bank uses credit decision support systems which are created for the purpose of credit risk management, lending decisions,
controlling the credit process and credit provisioning. The consistency of the credit decision support systems with the structure
of the Parent Bank’s activities, size and complexity is examined continuously by internal systems. Credit decision support systems
contain the Risk Committee assessment and approval of Board of Directors.
Asset and Liability Management Risk
Asset-liability management risk defined as the risk of Bank’s incurring loss due to managing all financial risks, that are inflicted from
the Bank’s assets, liabilities and off-balance sheet transactions, ineffectively. Trading book portfolio’s market risk, structural interest
rate risk and liquidity risk of the banking portfolio; are considered within the scope of the asset liability management.
All principles and procedures related to the generating and management of asset and liability structure and “Risk Appetite” related
to the capital to be allocated, are determined by the Board of Director. Complying the established risk limits and being at the limits
that stipulated by the legislation are the primary priority of Asset-liability management risk. Risk limits are determined by the Board
of Directors by taking into consideration of the Parent Bank’s liquidity, target income level and general expectations about changes
in risk factors and risk appetite.
