VKF_FRAE_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.) PART III: FINANCIAL HIGHLIGHTS AND RISK MANAGEMENT 348 VakıfBank Annual Report 2017 c) Credit risk under standardized approach Qualitative disclosures on banks’ use of external credit ratings under the standardized approach for credit risk The external rating grades of the counterparties of Fitch Ratings international rating agencies and Islamic International Rating Agency are used in determining the risk weights for the risk classes specified in Article 6 of the Regulation on Measurement and Evaluation of Banks’ Capital Adequacy. When an international rating is taken into account for the entire risk category of central government or central banks, the centralized and central banks that are not rated by the Islamic International Rating Agency are based on the country risk classification issued by the Organization for Economic Co-operation and Development (OECD). The following table shows that the rating scale of the credit rating agency corresponds to the credit quality levels reported in the annex of the Regulation on the Measurement and Evaluation of Banks’ Capital Adequacy. Ratings Matched Credit Quality Rank Fitch Ratings Long Term Credit Ratings 1 Between AAA and AA- 2 Between A+ and A- 3 Between BBB+ and BBB- 4 Between BB+ and BB- 5 Between B+ and B- 6 CCC+ and below Short Term Credit Ratings 1 Between F1+ and F1 2 F2 3 F3 4 F3 and below 5 - 6 -