VKF_FRAE_2018_uyg11

VakıfBank Annual Report 2018 351 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 FOR THE YEAR ENDED DECEMBER 31, 2018 (Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) Stage 3: Stage 3 includes financial assets with objective evidence of impairment as of the reporting date. Lifetime expected credit loss is recorded for these assets. The Parent Bank’s methodology for loans at this stage is similar to loans classified in Stage 2, but the probability of default is considered 100%. Loss given default is calculated considering the period the loan waits in the non-performing loans and an aging curve formed from the historical data. Significant Increase in Credit Risk The Standart requires the assessment of whether there is a significant increase in the credit risk of financial assets by the date of initial recognition based on the information available without excessive effort and cost as of the reporting date. The factors that show a significant increase in credit risk under TFRS 9 are as follows: - Past Due Date; significant increase in the credit risk since the granting date in the case of loans overdue more than 30 days. - Restruction: Classification of financial assets under the stage2 as a result of the emergence of privileges and financial difficulties in the case of restructuring of financial receivables. Qualitative Criteria: Implementation of set of qualitative criteria set by The Parent Bank in accordance with the information obtained. Quantitative Criteria: As of the reporting date, the default risk for the borrower and the default risk as of the date of the initial allowance are compared with the change in the grade / score information as a result of the application of statistically determined threshold values. The Parent Bank has accounted for the effect of applying the new provisions at the date of January 1, 2018 by recording a reversal in the opening records of previous years’ profit and loss accounts. The primary impact is due to changes in the allowance for credit losses in accordance with the new impairment provisions and the tax effects of the corresponding provisions. Default Definition The Parent Bank takes into account the requirements of TFRS 9 and the relevant BRSA in order to determine the default situation in accordance with the definition of default and its indicators included in the Communiqué on the Calculation of Provisions Regulation and the Amount Based on the Internal Risk Based Approach of the Credit Risk.   In terms of the default definition, the bank has set the following criterias; - Over 90 days delayed collection of principal and / or interest amount, - The customer has been bankrupt or has been found to apply for bankruptcy, - The customer’s creditworthiness is impaired, - It is decided that the principal and / or interest payments of the borrower will be delayed by more than 90 days since the collaterals and / or borrower’s own funds are insufficient to cover the payment of the receivables at maturity, - It is decided that the principal and / or interest payments of the customer will be delayed by more than 90 days due to macroeconomic, sector specific or customer specific reasons. Write off Policy According to The Parent Bank’s financial asset is completely write-off from The Parent Bank financial statement. If there is a process that the financial asset has reached its default status and does not have any expectation that it will be recovered. Partial write-off means that its is agreed that a financial asset will be repaid by the debtor at a certain rate and the amount remaining after the payment of such amount is deducted from the financial statements.