• Presentation
  • Türkiye Finans in Brief
  • Our Vision, Our Mission, Our Corporate Values
  • Corporate Strategy
  • Strategic Priorities and Basic Initiatives for 2013
  • Awards and Recognitions
  • Summary Financial Information
  • Amendments to the Articles of Association and the Justifications for Them
  • Capital and Shareholder Structure
  • Shares Held by the Members of the Board of Directors and Managers
  • Chairman's Message
  • CEO's Message
  • Customer Constitution
  • Macroeconomic Outlook and Sectoral Developments
  • An Assessment of the Bank's Position in the Sector in 2013
  • An Assessment of Türkiye Finans' Activities in 2013 and their Results
  • Türkiye Finans's Plans for 2014
  • Research & Development; New Services and Activities
  • Compliance Opinion on the Annual Report
• Management and Corporate Governance Practices
  • Board of Directors and Audit Committee
  • Executive Vice Presidents
  • Unit Managers within Internal Systems and Directors
  • Organization Chart
  • Governing Bodies and Committees at the Bank, Participation of Bank Directors and Committee Members in Meetings
  • Information About General Meetings Held in 2013
  • Annual General Assembly Meeting Agenda
  • Summary of the Board of Directors Report Presented to the General Assembly
  • Information about Human Resources Practices
  • Information about the Related Party Transactions, the Bank Enters
  • Information about Consolidated Affiliates
  • Other Information
  • Activities for Which Support Services are Outsourced and the Persons and Organizations from Which They are Obtained
• Financial Information and Assessment on Risk Management
  • Audit Committee's Assessment of Internal Audit, Internal Control, Risk Management and Regulatory Compliance Functions; Committee Activities During the Reporting Period
  • Declaration Concerning the 2013 Annual Report
  • Independent Auditors' Report
  • The Unconsolidated Financial Report of Türkiye Finans Katılım Bankası A.Ş. For the Year Ended 31 December 2013
  • Independent Auditors' Report
  • The Consolidated Financial Report of Türkiye Finans Katılım Bankası A.Ş. For the Year Ended 31 December 2013
  • Information About the Bank's Dividend Policy
  • Assessment of Financial Position, Profitability and Solvency; Asset Quality and Profitability
  • Information About Risk Management Policies by Type of Risk
  • Information About Credit Rating Agency Rating Assignments and the Nature of Such Ratings
  • Summary Financial Information Pertaining to the Five-Year Period Including the Reported Period
  • Appendix: Amendments to Articles of Association
  • Directory

Information About Risk Management Policies by Type of Risk

Credit Risk

The Risk Management Center is responsible for maintaining data in the credit risks that Türkiye Finans is exposed to on account of its loans, and for quantifying and analyzing such risks. Additionally, the center also monitors compliance with credit limits and criteria as prescribed by credit policies and reports the results its risk monitoring, measurement, and analysis activities to the Board of Directors, the Audit Committee and to members of the senior management. In addition, all credit products, customers, terms, and sector and country limits and concentrations are periodically checked for their compliance with lending policies as prescribed by applicable laws and regulations.

Credit risk is measured using the simple-method standardized approach set forth in the “Regulation on Measurement and Assessment of Capital Adequacy of Banks”.

To ensure that credit risk exposure arising from personal loans and credit cards is measured reliably and effectively, policy- and rule-based decision support systems are consistently employed, as are a variety of portfolio-specific, statistics-based scoring models (in which policies and business rules are systemically managed for Personal Financial Support and Credit Cards) that have been developed.

In the case of loans extended to small-business, commercial and corporate customers, credit risk quantification and grading the Center employs rating models which are both appropriate for the sector and compliant with international standards, and which make use of portfolio-specific statistical methods. These rating models not only come up with ratings for individual customers but also provide an estimate of a customer’s probability of default (PD).

In addition to these rating models, small-business, commercial and corporate customer credit risk measurement and grading also involve the use of a suite of “Target Market and Risk Acceptance Criteria” that allow judgments on individual customers’ ratings based on their sectoral, financial and market performance, market expectations, ratings and appetite for risk.

Loans taken for close monitoring as well as non-performing loans are analyzed and recommendations are tabled to the Board of Directors, the Audit Committee and to members of senior management such that risk-mitigating measures may be taken based on the specific market, sector, customer, and product risk exposure as well as being in accordance with the Bank’s own practices and processes.

The risks associated with new products are analyzed based on a quantification of their potential impact on the Bank’s loan portfolio and the Bank’s financial structure.

In addition to its risk monitoring, quantification, and analysis functions, the Risk Management Center also keeps the Board of Directors, the Audit Committee, and members of senior management informed of risk-related issues through monthly and quarterly reports in which it sets forth its findings and analysis of the Bank’s loan book dimensions, quality, noteworthy changes and compliance with lending policies; it may additionally submit recommendations concerning changes in lending policies and processes as, based on its own judgment, it deems necessary. The center also monitors compliance with lending limits and restrictions as prescribed by the Banking Law and respective legislation.

The credit limit is systemically held to stress tests on a regular basis in order to estimate how credit risks would be affected by possible crisis scenarios. As per the stress tests being conducted, any changes in currencies, guarantee structures and repayment potential in line with defined scenarios are reported, along with the possible impact of these developments on the Bank’s standard capital adequacy ratio.

Market Risk

The factors contributing to Türkiye Finans’ market risk exposure and to the potential impact of those risks are measured and reported to the BRSA on a regular basis.

Market risk is measured using the simple-method standardized approach set forth in the “Regulation on Measurement and Assessment of Capital Adequacy of Banks”. Türkiye Finans includes its trading accounts in its market risk calculations.

The Risk Management Center monitors, checks, and reports compliance with specified limits on a daily, monthly, and yearly basis.

Stress tests are conducted in order both to observe the impact which market volatilities may have on the Bank’s financial standing and to determine ways in which to mitigate potential risks.

Within the scope of scenario analyses, stress tests are conducted in order to quantify the impacts of changes in market risk factors on the Bank’s financials. Possible losses that may arise because of the Bank’s FX position are measured by estimating the possible exchange rate levels in economic crises, as per defined scenarios.

Liquidity Risk

Türkiye Finans makes use of such strategies as diversifying its resources, obtaining longer-term funding and matching the maturities of its assets and liabilities in order to protect itself against exposure to liquidity risk.

The Risk Management Center has formulated liquidity risk quantification methodologies and methods aimed at measuring, analyzing, reporting and managing Türkiye Finans’ exposure to liquidity risk.

Türkiye Finans has formulated and published a “Liquidity Risk Management & Contingency Plan” which sets out the actions and measures to be taken in the event of a shortage of liquidity, whether in the markets or in the Bank itself. The plan also defines those who are responsible for taking such actions and the measures to be taken, along with those who would be held accountable for their actions.

Operational Risk

Türkiye Finans currently quantifies its operational risk exposure using the “Basic Approach” prescribed by regulations pertaining to the calculation of capital requirements. The Bank is currently collecting loss data in order to quantify operational risk exposure using the “Alternative Standard” or “Advanced Measurement” approaches as appropriate.

In order to abide by internationally recognized approaches in the management of operational risk, Türkiye Finans has adopted a risk terminology that is compatible with Basel II documentation. The use of such a common terminology ensures the consistency of operational risk-related understanding and of communication throughout the Bank. Software solutions are being used to create a database of operational risk losses and to report such losses in order to formulate a standardized framework for operational risk management.

Risk control assessments (RCA) are performed periodically at Türkiye Finans as a basic requirement of Basel II operational risk practices.

These assessments are carried out on the one hand to identify which business processes at the Bank are exposed to operational risk and, on the other, to limit the impact of such risks through measures aimed at better supervising those responsible for the conduct of such processes.

Insurance is used as a way of mitigating and/or offloading operational risks. In some cases, especially support services, operational risk management is achieved by outsourcing the services to an external service provider. Türkiye Finans has published an “Emergency and Contingency Plan” to deal with situations such as earthquakes and fires which are beyond the Bank’s control. The effectiveness of this plan is tested by conducting drills.

Regulatory Compliance (MASAK- Financial Crimes Investigation Board)

Türkiye Finans’ regulatory compliance department is responsible for both ensuring the regulatory compliance of the Bank’s products and services and for complying with the rules and guidelines of the Financial Crimes Investigation Board (MASAK). In the case of product and service regulatory compliance, the department considers all of the Bank’s existing and proposed activities (including new processes and products) from the standpoint of their compatibility with applicable laws and regulations, with the Bank’s own policies and rules, and with ordinary banking practices. As of 31 December 2013, the Türkiye Finans Regulatory Compliance Department was staffed by ten people consisting of one department head, six MASAK analysts, and three product and service compliance control analysts.

Under the heading of MASAK compliance, activities are carried out so as to ensure that the Bank is not in violation of any laws, regulations, or administrative provisions or of any international regulations or standards as may be applicable to the prevention of money-laundering and of financing terrorism. In the conduct of such activities, Türkiye Finans takes a risk-based approach to ensure the complete satisfaction of the Bank’s regulatory compliance policy. The head of the Regulatory Compliance Department is responsible for reporting any transaction or situation which is deemed to be suspicious in light of MASAK rules and regulations.

During 2013, 51% of Türkiye Finans’ personnel received training specific to MASAK-related issues and 90% received Code of Ethics Policy training.