TÜRKİYE İŞ BANKASI A.Ş.
Notes to the Unconsolidated Financial Statements for the Year Ended
31 December 2012
ANNUAL REPORT 2012
VI. Explanations on Interest Rate Risk
Interest rate risk is the risk that the value of the Bank’s interest sensitive assets, liabilities and off-balance sheet operations will decrease
because of change in market interest rates. The method of average maturity gap according to the repricing dates is used for measuring
the interest rate risk arising from the banking accounts, whereas the interest rate risk related to interest sensitive financial instruments
followed under trading accounts is assessed within the scope of market risk.
Potential effects of interest rate risk on the Bank’s assets and liabilities, market developments, the general economic environment and
expectations are regularly followed in meetings of the Asset-Liability Committee, where further measures to reduce risk are taken when
The Bank’s on and off-balance sheet interest sensitive accounts other than the assets and liabilities exposed to market risk are monitored
and controlled by the limits above the average maturity gaps according to the repricing periods determined by the Board within the scope of
asset-liability management risk policy. Moreover, scenario analyses formed in line with the historical data and expectations are also used in
the management of the related risk.
Interest rate sensitivity:
In this part, the sensitivity of the Bank’s assets and liabilities to the interest rates has been analyzed assuming that the year end balance
figures were the same throughout the year. Mentioned analysis shows how the FC and TL changes in interest rates by one point during the
one-year period affect the Bank’s income accounts and shareholders’ equity under the assumption maturity structure and balances are
remain the same all year round at the end of the year.
During the measurement of the Bank’s interest rate sensitivity, the profit/loss on the asset and liability items that are evaluated with market
value are determined by adding to/deducting from the difference between the expectancy value of the portfolio after one year in case
there is no change in interest rates and the value of the portfolio one year later, which is measured after the interest shock, the interest
income to be additionally earned/to be deprived of during the one year period due to the renewal or repricing of the related portfolio at the
interest rates formed after the interest shock.
On the other hand, in the profit/loss calculation of assets and liabilities that are not evaluated by the current market prices, it is assumed
that assets and liabilities with fixed interest rates will be renewed at maturity date and the assets and liabilities having variable interest
rates will be renewed at the end of repricing period with the market interest rates generated after the interest shock.
Within this context, ceteris paribus, the possible changes that may occur in the Bank’s profit and shareholders’ equity in case of 1 point
increase/decrease in TL and FC interest rates on the reporting day are given below.
%Change in the Interest Rate
Effect on Profit/Loss
Effect on Equity
1 point increase
1 point increase
1 point decrease
1 point decrease
The effects on the profit/loss and shareholders’ equity are stated with their before tax values.
The effect on the profit/loss is mainly arising from the fact that the average maturity of the Bank’s fixed rate liabilities is shorter than the average maturity of its fixed rate assets.
The effect on the shareholders’ equity is arising from the change of the fair value of securities followed under Financial Assets Available for Sale.
Due to the reason that the LIBOR rates were at low levels in both of the periods, the negative shock imposed on FC interest rates in some maturity brackets remained below the aforementioned