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PART III: FINANCIAL HIGHLIGHTS AND RISK MANAGEMENT
CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED UNCONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE NOTE I. OF SECTION THREE
TÜRKİYE VAKIFLAR BANKASI TÜRK ANONİM ORTAKLIĞI
UNCONSOLIDATED FINANCIAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2015
(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
SECTION THREE
ACCOUNTING POLICIES
I. BASIS OF PRESENTATION
The unconsolidated financial statements are prepared within the scope of the “Regulation on Accounting Applications for Banks and Safeguarding of
Documents” related with Banking Act numbered 5411 published in the Official Gazette no.26333 dated 1 November 2006 and other regulations related
to reporting principles on accounting records of banks published by Banking Regulation and Supervision Agency and its circulars and interpretations
(together referred as BRSA Accounting and Reporting Legislation) and in case where a specific regulation is not made by BRSA, Turkish Accounting
Standards, within the scope of reporting Turkish Accounting Standards and Turkish Financial Reporting Standards (“TFRS”) and related appendices and
interpretations (referred as “Turkish Accounting Standards” or “TAS”) put into effect by Public Oversight Accounting and Auditing Standards Authority
(“POA”).
The preparation of financial statements requires the use of certain critical estimates on assets and liabilities reported as of balance sheet date or
amount of contingent assets and liabilities explained and amount of income and expenses occurred in related period. Although these estimates rely on
the management’s best judgment, actual results can vary from these estimates. Judgments and estimates are explained in related notes.
The accounting policies and valuation principles applied in the preparation of these financial statements are explained in detail below.
Additional paragraph for convenience translation to English
The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries,
in which the accompanying unconsolidated financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”),
may have significant influence on the accompanying unconsolidated financial statements. Accordingly, the accompanying unconsolidated financial
statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted
in such countries and IFRS.
II. STRATEGY FOR THE USE OF FINANCIAL INSTRUMENTS AND INFORMATION ON FOREIGN CURRENCY TRANSACTIONS
Strategy for the use of financial instruments
Core operations of the Bank, are based on retail banking, corporate banking, private banking, foreign exchange operations, money market operations,
investment security transactions, and international banking in accordance with the requirements of its economic development while utilizing foundation
resources. As a result of the nature of its operations, the Bank intensively utilizes financial instruments. The Bank accepts deposits consisting various
maturities as the main source of funding with deposits being in high return as well as carefully utilizing them in high quality financial activities.
The most important fund sources of the Bank other than the deposits are its equity and medium and long-term borrowings obtained from foreign
financial institutions. The Bank pursues an effective asset-liability management strategy by securing balance between funding resources and
investments so as to reduce risks and increase returns. Accordingly, the Bank gives great significance to long-term placements bearing higher interest
rates.
It is essential to consider the maturity structure of assets and liabilities in liquidity management. The essence of asset liability management is the keep
to liquidity risk, exchange risk, and credit risk within reasonable limits; while enhancing profitability and strengthening the shareholders’ equity.
Investments in marketable securities and lending loans generate higher return than the average rate of return of the Bank’s operating activities on
the basis of maturity structures and market conditions. When bank placements are considered, they have short term maturity in terms of liquidity
management and have lower return. The Bank can take various positions on short-term foreign exchange risk, interest rate risk and market risk in
money and capital markets, by considering market conditions, within specified limits set by regulations. The Bank hedges itself and controls its position
against the foreign exchange risk being exposed due to foreign currency available-for-sale investments, investments in other portfolios and other
foreign currency transactions by various derivative transactions and setting the equilibrium between foreign currency denominated assets and liabilities.
Within the legal limitations and the regulations of the bank’s internal control, the foreign currency position is being followed, the foreign currency
position is established according to the basket equilibrium that is determined by taking into account current market conditions.
In order to avoid interest rate risk, assets and liabilities having fixed and floating interest rates are kept in balance, taking the maturity structure into
consideration.
