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PART III: FINANCIAL HIGHLIGHTS AND RISK MANAGEMENT
CONVENIENCE TRANSLATION OF PUBLICLY ANNOUNCED CONSOLIDATED FINANCIAL STATEMENTS ORIGINALLY ISSUED IN TURKISH, SEE IN NOTE I. OF SECTION THREE
TÜRKİYE VAKIFLAR BANKASI TÜRK ANONİM ORTAKLIĞI AND
ITS FINANCIAL SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT AND
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 consolidated 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 effects or differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in
countries, in which the accompanying consolidated financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”),
have not been quantified in the accompanying consolidated financial statements. Accordingly, the accompanying consolidated financial statements are
not intended to present the financial position results of operations and changes in financial position and cash flows 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
The Parent Bank’s core operations 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 Parent Bank intensively utilizes financial instruments. The Parent 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 Parent Bank other than the deposits are its equity and medium and long-term borrowings obtained from
foreign financial institutions. The Parent 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 Parent Bank attaches 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
the liquidity risk, interest rate risk, exchange rate risk and credit risk within reasonable limits; while enhancing profitability and strengthening the Parent
Bank’s 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 Parent 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 Parent 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.
