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FINANCIAL HIGHLIGHTS AND RISK MANAGEMENT
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Moreover, VaR (Value at Risk) calculations are made on a daily basis and reported accordingly. VaR is calculated on a daily basis via historical simulation and
the Monte Carlo simulation using a one-sided 99% confidence interval. The VaR calculated for one day is scaled to 10 business days on the basis of the square-
root-of-time rule. The historical observation period used for VaR calculation is one year.
The Bank performs daily back testing analyses in order to test the reliability and performance of the model results. Furthermore, scenario analyses and stress
tests are performed to support the standard method and internal models.
With the aim to restrict the market risks, the overall bank limit and VaR-based limit practices are applied and monitored on a daily basis.
Structural Interest Rate Risk:
Interest rate risk, which the Bank may be exposed to due to maturity mismatch on its balance sheet, is managed pursuant to
the “Structural Interest Rate Risk Management Policy Document.” The standard ratio of the interest rate risk on the banking book is calculated on a monthly
basis and reported to the BRSA; in order to monitor the ratio and to take the required precautions, these calculations can be performed on a weekly basis. In
addition, liquidity-gap analysis and duration results are analyzed. All analyses are reported to the Board of Directors, the Audit Committee and the Bank’s senior
management.
Furthermore, studies were launched for setting limits on the basis of maturity segments.
Liquidity Risk:
The Bank’s liquidity risk is managed in accordance with the “Liquidity Risk Management Policy Document.” The Bank’s approach for liquidity
risk management is to monitor liquidity risk throughout the day on a continuous basis. To this end, cash inflows and outflows in both Turkish lira and foreign
exchange are tried to be kept under control at any moment, long-term cash flow tables are prepared, and scenario analysis and stress tests based on the
experiences and expectations are performed in order to determine the Bank’s strength against sudden crises. The Bank also complies with liquidity-related
regulations as established by regulatory authorities.
Operational Risk:
Operational risk refers to the likelihood of damage, including legal risk, which may arise from inadequate or failed internal processes,
people and systems or from external events. The management of operational risks is performed in accordance with the “Operational Risk Framework,” which
was created for the determination and definition of all the significant risks faced by the Bank in comprehensive categories and which is a common dictionary
containing examples of these risks, and the Bank’s “Operational Risk Management Policy and Implementation Guidelines” document.
The evaluation of the operational risks is carried out by Audit Board and Internal Audit Departments. In the management of operational risk, the Bank collects
operational risk loss and potential risk data, which also enable the implementation of the advanced measurement approaches. The Bank analyzed operational
loss data in order to identify the risk factors; the findings were presented to the Bank’s senior management.
Within the scope of the project carried out within the framework of the Corporate Risk Management Principles, transfer of operational risk loss and collection
data and Impact Analysis studies to the integrated infrastructure (built with the relevant project) was launched.
The Risk Management Department continued to conduct Impact Analysis studies, which cover the Head Office departments. These studies seek to take
operational risks under control by identifying inefficient and inadequate controls and taking necessary measures through the analysis of the business processes.
Studies on the Impact Analysis were repeated based on changing business processes and are almost complete.
With the “Findings Tracker”, evaluation of changing or new process within the scope of Impact Analysis continues.
Risk assessments related to the new products are made within the scope of the “New Product Development Regulation.”
Moreover, risk assessments related to the purchase of the support services are made within the scope of the “Regulation on Procurement of Support Services
by Banks” and the “Risk Management Program.”
RISK MANAGEMENT
POLICIES APPLIED
BY RISK TYPE