VKF_FRAE_2017

319 VakıfBank Annual Report 2017 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 EXPLANATIONS AND NOTES RELATED TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) III. CONSOLIDATED FOREIGN CURRENCY EXCHANGE RISK Foreign exchange risk that the Parent Bank is exposed to, estimation of effects of exposures, and the limits set by the Board of Directors of the Parent Bank for the positions monitored on a daily basis The Standard Method which is also used in the legal reporting is used in measuring the currency risk of The Parent Bank. The Parent Bank’s and all consolidated financial subsidiaries’ foreign currency assets and liabilities and the forward foreign-currency transactions are taken into consideration in calculating the capital obligation for the consolidated currency risk. The net long and short positions are calculated in Turkish Lira equivalent of the each currency. The position with the biggest absolute value is determined as the base amount for the capital obligation. The capital obligation is calculated at that amount. The magnitude of hedging foreign currency debt instruments and net investment in foreign operations by using derivatives As at December 31, 2017 and December 31, 2016, the Group does not have derivative financial instruments held for risk management purpose. Foreign exchange risk management policy Risk policy is based on the transactions within the limits and keeping the currency position well-balanced. In the light of the national legislations and international applications, a foreign currency risk management policy that enables to take position between lower and upper limits determined in respect of the current equity profile. Speculative position is not held. The effective exchange rates at the date of balance sheet and for the last five working days of the period announced by the Parent Bank in TL are as follows: US Dollar Euro The Bank’s foreign currency purchase rate at the balance sheet date 3.7800 4.5230 Foreign currency purchase rates for the days before balance sheet date; Day 1 3.7757 4.5106 Day 2 3.8241 4.5514 Day 3 3.8073 4.5139 Day 4 3.8037 4.5177 Day 5 3.8190 4.5271 US Dollar Euro Last 30-days arithmetical average rate 3.8678 4.5781