FINANCIAL INFORMATION AND RISK MANAGEMENT
TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Unconsolidated Financial Statements for the Year Ended
31 December 2012
ANNUAL REPORT 2012
XVI. Contingent Assets
The contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic
benefits to the Bank. Since showing the contingent assets in the financial statements may result in the accounting of an income, which
will never be generated, the related assets are not included in the financial statements. Nevertheless, the developments related to the
contingent assets are constantly evaluated and if it has become virtually certain that an inflow of economic benefits will arise, the asset and
the related income are recognized in the financial statements of the period in which the change occurs.
XVII. Liabilities Regarding Employee Benefits
1. Severance Indemnities and Short-Term Employee Benefits
According to the related regulation and the collective bargaining agreements, the Bank is obliged to pay termination benefits for employees
who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or (for the female
employees) who have voluntarily quit within one year after the date of their marriage. Within the scope of “TAS 19-Employee Benefits”, the
Bank allocates seniority pay provisions for employee benefits by estimating the present value of the probable future liabilities. The Bank
also allocates provision for the unused paid vacation.
2. Retirement Benefit Obligations
Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (“İşbank Pension Fund”), of which each Bank employee is a member, has been established
according to the provisional Article 20 of the Social Security Act No. 506. As per provisional article numbered 23 of the Banking Law
numbered 5411, it is ruled that Bank pension funds, which were established within the framework of Social Security Act, will be transferred
to the Social Security Institution, within 3 years after the publication of such law. Methods and principles related to transfer have been
determined as per the Cabinet decision dated 30 November 2006 numbered 2006/11345. However, the related article of the act has been
cancelled upon the President’s application dated 2 November 2005, by the Supreme Court’s decision dated 22 March 2007, numbered
E.2005/39, K.2007/33, which was published on the Official Gazette dated 31 March 2007 and numbered 26479 and the execution decision
was ceased as of the issuance date of the related decision.
After the justified decree related to cancelling the provisional article 23 of the Banking Lawwas announced by the Constitutional Court on
the Official Gazette dated 15 December 2007 and numbered 26731, Turkish Grand National Assembly started to work on establishing new
legal regulations, and after it was approved at the General Assembly of the TGNA, the Law numbered 5754 “Emendating Social Security
and General Health Insurance Act and Certain Laws and Decree Laws”, which was published on the Official Gazette dated 8 May 2008 and
numbered 26870, came into effect. The new law decrees that the contributors of the bank pension funds, the ones who receive salaries
or income from these funds and their rightful beneficiaries will be transferred to the Social Security Institution and will be subject to this
Lawwithin 3 years after the release date of the related article, without any need for further operation. the three-year transfer period can
be prolonged for maximum 2 years by the Cabinet decision. However related transfer period has been prolonged for 2 years by the Cabinet
decision dated. 14 March 2011, which was published on the Official Gazette dated 9 April 2011 and numbered 27900. In addition, by the
Law “Emendating Social Security and General Health Insurance Act”, which was published on the Official Gazette dated 8 March 2012 and
numbered 28227, this period of 2 years has been raised to 4 years.
On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional Court for the annulment
and motion for stay of some articles, including the first paragraph of the provisional article 20 of the Law, which covers provisions on
transfers, was rejected in accordance with the decision taken at the meeting of the afore-mentioned court on 30 March 2011.
The above mentioned Law also states that;
• Through a commission constituted by the attendance of one representative separately from the Social Security Institution, Ministry of
Finance, Turkish Treasury, State Planning Organization, Banking Regulation and Supervision Agency, Savings Deposit Insurance Fund, one
from each pension fund, and one representative from the organization employing pension fund contributors, related to the transferred
persons, the cash value of the liabilities of the pension fund as of the transfer date will be calculated by considering their income and
expenses in terms of the lines of insurance within the context of the related Law, and technical interest rate of 9.8%will be used in the
actuarial calculation of the value in cash,
• And that after the transfer of the pension fund contributors, the ones who receive salaries or income from these funds and their rightful
beneficiaries to the Social Security Institution, these persons’ uncovered social rights and payments, despite being included in the trust
indenture that they are subject to, will be continued to be covered by the pension funds and the employers of pension fund contributors.
In line with the new law, the Bank had an actuarial valuation made for the aforementioned pension fund as of 31 December 2012. In the
financial statements for the related period provision was set aside for the amount of actuarial and technical deficit in the actuarial report
dated 30 January 2013 and the amount of the related provision was kept in the financial statements for the current period. The actuarial
assumptions used in the related actuarial report are given in Section Five Note II-i.
Up to now, there has not been any deficit in Türkiye İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı (İşbank
Members’ Supplementary Pension Fund), which has been founded by the Bank employees in accordance with the rules of the Civil Code and
which provides subsequent retirement benefits; and the Bank has made no payment for this purpose. It is believed that the assets of this
institution are capable of covering its total obligations, and that it shall not constitute an additional liability for the Bank.