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TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Consolidated Financial Statements for the Year Ended
31 December 2014
181
İŞBANK
ANNUAL REPORT 2014
FINANCIAL INFORMATION AND
RISK MANAGEMENT
The Group’s internal capital adequacy assessment process (“ICAAP”) is comprised of not only internal capital adequacy assessment process, but also determining the risks that the
Group 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 Group’s risk profile in addition to the mentioned risks .
II. Explanations on Consolidated 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 Group.
Banks and financial institutions affiliated to the Group, carry out their placement activities in accordance with the credit limitations stipulated by legal regulations of the countries in
which they operate.
The Parent 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
Parent Bank’s Risk Group, including the Parent 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 calculated on a bank-only and consolidated basis.
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, and the Deputy Chief Executives responsible for loans, the CEO, the Credit Committee
and the 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.
The Parent Bank and its financial affiliates give utmost importance 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)
Conditional and unconditional exposures to central governments or central banks
71,360,034
69,145,055
Conditional and unconditional exposures to regional governments or local authorities
39,793
42,242
Conditional and unconditional exposures to administrative bodies and non-commercial undertakings
181,818
178,760
Conditional and unconditional exposures to multilateral development banks
1,660
1,549
Conditional and unconditional exposures to international organizations
Conditional and unconditional exposures to banks and brokerage houses
15,564,509
15,103,929
Conditional and unconditional exposures to corporate
126,104,300
118,084,525
Conditional and unconditional retail exposures
52,291,137
48,469,414
Conditional and unconditional exposures secured by real estate property
13,038,213
11,997,672
Past due items
694,796
620,046
Items in regulatory high-risk categories
17,817,392
16,268,915
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
187,831
196,048
Other items
13,812,265
12,787,205
(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.
2.
There are certain control limits on forward transactions in terms of counter parties, and the risks taken for derivative instruments are evaluated along with other potential risks
resulting from the market fluctuations.
3.
As a result of the current level of customers’ needs and the progress in the domestic derivatives market in this particular area, the Parent Bank uses derivative transactions either
for hedging or for commercial purposes.
Derivative instruments with a remarkable volume are monitored with consideration that they can always be liquidated in case of need.
4.
Indemnified non-cash loans are considered as having the same risk weights as unpaid cash loans.
The rating and scoring systems applied by the Parent Bank, includes detailed company analysis and enables rating of all companies and loans without any restrictions regarding
credibility. Loans and companies, which have been renewed, restructured or rescheduled, are rated within the scope of this system. Specialized loans are evaluated by a special
rating system, which is based on the credibility of the counterparty as well as the feasibility and risk analysis of the cash flows created mainly by the projects undertaken or the asset
financed.