213 / 272
213
Convenience Translation of Publicly Announced Consolidated Fınancial
Statements Originally Issued in Turkish, See Note I of Section Three
Arap Türk Bankası A.Ş.
Notes to Consolidated Financial
Statements at 31 December 2014
(Amounts expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)
General Information
Corporate Management
Financial Information
III. INFORMATION ON CONSOLIDATED MARKET RISK
Whether the Parent Bank within the financial risk management objectives hedges itself against market risk, the precautions
taken by the Board of Directors for market risk, the methods used for measuring market risk and time intervals for
measurement of market risk
The Parent Bank’s operations about risk management are carried out complying with “Regulation on Bank’s regulation about internal
systems” and “Regulation on Measurement and Evaluation of Capital Adequacy of Banks”.
To be in compliance with governances, The Parent Bank has regulated its operations about market risk management within the
scope of “Regulation on Internal Systems of Banks” and “Regulation on Measurement and Evaluation of Capital Adequacy of Banks”
published in Official Journal No 28337 as of 28 June 2012 lastly.
To implement methods of risk managements’ policy, strategy, implementations that approved by board of directors; to report bank’s
potential important risks to board of directors on time and accurately, internal control about units, to evaluate risk and internal auditing
reports and to correct risks, faults, inadequacies occurred in those units or to take necessary measures and to be incorporate into
process of determining risk limits are in charge of senior management.
Board of Directors is reviewing efficiency of risk management systems through the agency of auditing committee, other relevant
committees, senior management and also in consideration of various risk reports and evaluations made by auditing committee.
Risk policies and methods of implementations which are determined for market risk that the parent bank is exposed to, is approved
by board of directors and being reviewed regularly. Market risk is managed by the way of measuring, limiting risks in compliance with
international standards and putting capital aside according to those results.
Risk Management Department is analyzing and calculating bank interest rate in consideration of various dimensions within the scope
of market risk management operations.
Interest rate and currency risk is being measured within the scope of market risk that calculated according to standard method and
included to calculation of capital requirement standard ratio.
Besides of standard method, value at risk method (VRM) is used for calculating changes in risk factors and its’ effects on bank portfolio.
Subjected method is tested by retrospective test method.
Stress tests are made to analyze the possible effects of Interest and rate fluctuations on bank on a monthly basis.
Moreover, scenario analyses are made to classify expectations of possible changes at risk factors based on various interest rate and
exchange rate level expectations.
Board of Directors determined limits to evaluate the results of standard methods and daily value at risk method results. Also limits are
determined for credit risk and capital requirements ratio by Board of Directors.
The Parent Bank’s market risk is calculated on a monthly basis using the “Standard Method”. Interest rate risks and exchange rate risks,
factors of the market risks, are periodically analyzed using different methods (ratio analysis, duration, gap, sensitivity, etc.).
With stress testing methods, the effect of extraordinary fluctuations of risk factors on the Bank is measured on a monthly basis and in
case the necessity arises. Different scenarios based on changes in risk factors are measured with scenario analysis. All the analysis
mentioned above are tested in a retrospective manner to ensure the reliability of the tests.
The Board of Directors has determined limits at the level of risk factors in order to restrain the market risk. The ratio of the
Market Risk/Equity rate can be maximum 50% and for limiting daily VAR results, the amount under daily risk/equity rate can be
maximum 1%.