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Türkiye Vakıflar Bankası Türk Anonim Ortaklığı
Unconsolidated Financial Report as at and
For the Year Ended 31 December 2013
(Currency: Thousands of Turkısh Lıra (“TL”))
(Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Section 3 Note I)
Approach adopted under internal capital adequacy assessment process for monitoring the adequacy of internal capital for current and
future activities
In order to identify the internal capital adequacy assessment process and capital adequacy policy “Document on Internal Capital Adequacy Assessment
Process” has been constituted and approved by Board of Directors on September 2012. The document includes planning of the capital, procedures and
principles on emergency capital and risk reducing plans. The underlying objective of the internal capital adequacy assessment is continuous monitoring
and maintaining of the varieties, components and distribution of capital required for eliminating actual and potential risks the Bank faces or might face.
In this process, the effect of market conditions and probable changes in economic environment on capital is evaluated, additionally loan expansion
expectations, funding resources, liquidity opportunities issues and risk profile and risk appetite of the Bank are considered in accordance with the
strategies and objectives of the Bank. Capital adequacy is evaluated in terms of strategic plan and growth expectations of the Bank for the year 2014
and accordingly capital increasing actions has taken in the year 2013.
In assessment process of internal capital requirement, credit risk, market risk, operational risk, interest rate risk arising from banking accounts, liquidity
risk, reputation risk, residual risk, concentration risk, counterparty credit risk, sovereign risk and settlement risk are considered, and policies and
implementing procedures for assessing and managing these risks are defined and approved by Board of Directors. Assessment process of internal
capital requirement is handled as a developing process, action plans according to aforementioned policies and implementing procedures are formed and
studies are in progress.
II. Credit risk
Credit risk is defined as the counterparty’s possibility of failing to fulfil its obligations on the terms set by the agreement. Credit risk means risks and
losses that may occur if the counterparty fails to comply with the agreement’s requirements and cannot perform its obligations partially or completely
on the terms set. It covers the possible risks arising from futures and option agreements and other agreements alike and the credit risks arising from
credit transactions that have been defined by the Banking Law.
In compliance with the articles 51 and 54 set forth in Banking Law and ancillary regulation, credit limits are set by the Bank for the financial position
and credit requirements of customers within the authorization limits assigned for branches, regional directorates, lending departments, assistant general
manager responsible of lending, general manager, credit committee and board of directors and credits are given regarding these limits in order to limit
credit risk in lending facilities.
Credit limits are determined separately for the individual customer, company, group of companies, risk groups on a product basis. In accordance with
the related Lending Policy, several criteria are used in the course of determining these credit limits. Customers should have a long-standing and a
successful business past, a high commercial morality, possess a good financial position and a high morality, the nature of their business should be
appropriate to use the credit , possess their commercial operations in an affirmative and a balanced manner, have experience and specialization in
their profession, be able to adopt themselves to the economic conditions, to be accredited on the market, have sufficient equity capital, possess the
ability to create funds with their operations and finance their placement costs. Also the sector and the geographical position of customers, where they
operate and other factors that may effect their operations are considered in the evaluation process of loans. Apart from ordinary intelligence operations,
the financial position of the customer is mainly analysed based on the balance sheets and the income statements provided by the loan customer,
the documents received in accordance with the related regulation for their state of accounts and other related documents. Credit limits are subject to
revision regarding the overall economic developments and the changes in the financial information and operations of the customers.
Collaterals for the credit limits are determined on a customer basis in order to ensure bank placements and their liquidity. The amount and type of the
collateral are determined regarding the creditworthiness of the credit users. The Bank holds collateral against loans and advances to customers in the
form of mortgage interests over property, other registered securities over assets, and guarantees.
The Bank has risk control limits for derivative transaction (futures, options, etc.) positions, which effects credit risk and market risk.
For credit risk management purposes, Risk Management Department operates in
• the determination of credit risk policies in coordination with the Bank’s other units,
• the determination and monitoring of the distribution of concentration limits with respect to sector, geography and credit type,
• the contribution to the formation of rating and scoring systems,
• the submiting to the Board of Directors and the senior management of not only credit risk management reports about credit portfolio’s distribution
(borrower, sector, geographical region), credit quality (impaired loans, credit risk ratings) and credit concentration but also scenario analysis reports,
stress tests and other analyses,
• the studies regarding the formation of advanced credit risk measurement approaches.
VAKIFBANK ANNUAL REPORT 2013
129