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VAKIFBANK
2011
ANNUAL REPORT
114
Management Policies Applied
According to Risk Types
In 2011, risk management efforts were performed in parallel with the risk management policies, approved by the
Board of Directors, legal legislation and international practices. As from July 2011, calculations based on Basel II-based
capital adequacy adjustments were also made in parallel with the Basel I-based capital adequacy calculations, being
applied officially. Furthermore, new regulation drafts of the Basel Committee, called as “Basel III”, were closely traced
and studies were made on its possible effects on the Bank’s capital adequacy ratio.
Apart from these studies, scenario analysis studies on the effects of economic developments and expectations on
capital adequacy ratio were also carried on in 2011. Structural interest rate risk has been also closely monitored
through Gap/duration analyses and standard interest rate shock analyses. All analyses are presented to the Audit
Committee and the Bank’s Executive Management for their perusal and discussed at the meetings of the Asset –
Liabilities Management Committee.
Operational Risk Policy and Implementation Principles document and the Operational Risk Frame have been reviewed
and updated. Besides, studies on setting a new Value at Risk (VaR) model to replace the existing VaR model taking
into consideration the development in the Bank’s portfolio composition and possible changes in national and
international regulations and VaR calculations have been initiated using Parametric, Historical Simulation and Monte
Carlo Simulation.
As part of operational risk management, the Bank collects operational risk loss and potential risk data that will allow
the application of advanced measurement approaches. Currently, the Bank has collected operational risk data for last
nine years. Operational loss data were analyzed in order to identify the risk factors, and the findings were reported to
the management levels of the Bank.
The “Impact Analysis” studies are in progress, which cover the Head Office departments and seek to take operational
risks under control by identifying in effective and unsatisfying controls and taking necessary measures through the
analysis of the business processes by the Risk Management Department.
The operational risk management approach of the Bank is to create a forward-looking control culture that encourages
all employees to identify and evaluate the risks involved in their tasks, to report the risk-related issues to their
managers, and to take necessary steps towards enhancement of the control function. The “Impact Analysis” studies
are performed at working group meetings, using the self-evaluation method for the employees.
Apart from the impact analysis, studies are carried out to define alternative systems with recovery time objective
(RTO) and recovery point objective (RPO) and to examine the effects of possible risks, as regards to the information
systems used in business processes, as part of the information systems risk management.
Reports and reformative action plans, issued upon completion of aforesaid studies, are reported to the relevant unit,
the Audit Committee, the Executive Management, the Board of Internal Auditors and the Internal Control Department.
Action plans determined and approved to be implemented are monitored to ensure whether they are implemented in
the determined manner. It is planned to repeat the study at certain intervals.
Studies are going on to assure the compliance with Basel II and the European Union Capital Adequacy Regulations and
to develop the risk management applications in accordance with international best practices.
Market Risk:
The Bank is exposed to market risk depending on potential changes to occur in foreign exchange rates,
interest rates and market price of stocks, resulting from the fluctuations in the financial market. The market risk
arising from the Bank’s trading activities is measured and monitored using the standard method and internal models
paralleling with the local and international practices.
The market risk measurement results, that are calculated as of the end of each month on unconsolidated basis and
in quarterly periods on consolidated basis, using the standard method under the provisions of the “Regulation on the
Measurement and Evaluation of Banks’ Capital Adequacy” are reported to the Bank’s executive management and the
Banking Regulation and Supervising Agency.