2018 Annual Report CONTENTS Summary of 2018 Operations 2 Summary Board Report Presented to the General Assembly 78 Message from the Chairman 4 Information on Human Resources Practices 80 Message from the CEO 6 Information Related to Transactions the Bank Performs with Milestones 8 its Risk Group 80 Summary Financial Data on the Operating Results for the Accounting Information on the Areas of Activity in Which Support Service Period 10 Is Received and the Persons and Entities From Whom Such Service Is Received, Pursuant to the Regulation on the Bank’s Procurement of Historical Development of the Bank and Amendments in the Articles Support Services and the Authorization of Such Service Providers 80 of Association, if any, in the Accounting Period 10 Corporate Governance Principles Compliance Statement 81 Bank’s Organization, Capital and Shareholding Structure, and Any Related Changes in the Accounting Period; Information on Titles and Information on the Audit Committee’s Assessment of the Internal Shares of Real or Legal Persons Holding Qualifying Shares 11 Control, Internal Audit and Risk Management System, and on Their Operations in the Accounting Period 92 Information on Shares Held by the Bank’s Chairman and Board Members, CEO, and Executive Vice Presidents 14 Independent Auditor’s Report on the Board of Directors’ Annual Report 94 Explanations about the Bank’s Number of Employees and Branches, and the Bank’s Functions and Areas of Operation, and the Evaluation of the Financial Status, Profitability, and Solvency and Assessment of the Bank in the Industry Based on this Data 15 Achievement of Strategic Targets 95 Vision, Mission and Values 18 Information regarding Risk Management Policies based on Risk Type 95 Information Technology, Project Development, and Related Operations 26 Takasbank’s Ratings by International Credit Rating Agencies 98 2018 Developments 36 Five-Year Summary Financial Information, Including Name and Last Name, Term of Office, Areas of Responsibility, Education, the Statement Period 98 Professional Experience, and Meeting Participation Information regarding Dividend Policy 99 the Chairman and Board Members, Audit Committee Members, the CEO and Executive Vice Presidents, and Internal System Department Explanation Regarding Bank’s Own Shares Acquired by Itself 99 Managers; and Information on the Extraordinary General Assembly 62 Explanations Regarding Lawsuits Against the Company With Structure and Formation of the Board of Directors 75 a Possible Effect on Its Financial Status and Operations, and Their Possible Outcomes 99 Explanations Regarding Private Audit and Public Audit Conducted in the Accounting Period 75 Information on the Expenses Made regarding Donations Charities, and Social Responsibility Projects 99 Information on the Credit Committee; On the Operations of the Committees That Report to the Board of Directors or That Were Created Information Related to Financial Position 99 to Assist the Board of Directors in Accordance with the Risk Management Unconsolidated Financial Statements and Independent Auditor’s Systems Pursuant to the Regulation on the Bank’s Internal Systems Report for the December 31, 2018 Accounting Period 100 and Internal Capital Adequacy Assessment Process; On the Committee Members’ Participation in Meetings Held in the Accounting Period; and on the Name, Last Name, and Fundamental Duties of the Chairman and Members of These Committees 76 INTRODUCTION INFORMATION ON THE STATEMENT PERIOD AND THE BANK’S TRADE NAME, ADDRESS, TELEPHONE AND FAX NUMBERS, AND EMAIL ADDRESSES FOR THE MAIN OFFICE OR HEADQUARTERS Report Term: 2018 Annual Report The Bank’s Commercial Title: İstanbul Takas ve Saklama Bankası Anonim Şirketi The Bank’s Trade Name: “TAKASBANK” or “TAKAS ISTANBUL” Headquarters Address: Reşitpaşa Mahallesi, Borsa İstanbul Caddesi, No: 4 Sarıyer 34467, Istanbul Telephone: +90 212 3152525 (pbx) Fax: +90 212 3152526 (pbx) Trade Registry No: 276870 MERSIS No: 0481002693100015 Email Addresses: Investor Applications [email protected] General Information [email protected] Member Information [email protected] Registered Electronic Mail (REM) [email protected] ABOUT TAKAS İSTANBUL Takas İstanbul (Takasbank) provides clearing, settlement, transactions that occur on Borsa İstanbul. Commitments to custody, central counterparty, and banking services to its deliver and receive securities arising from trading by Borsa members in the Turkish capital markets through its central İstanbul members and payment commitments in return for settlement and clearing and banking licenses. securities are settled on account by Takasbank. Takasbank provides a reliable, fast, and low-cost cash transfer service and Takas İstanbul is a central clearing and settlement organization acts as an intermediary between money and capital markets that is authorized to conclude cash and securities settlement as well as providing settlement services online with organized and clearing of markets in a fully automated environment for the markets • equity, operating at Borsa İstanbul within the framework of capital market and Borsa İstanbul legislation. • debt securities, • foreign capital market instruments, • derivatives, • and precious metals 1 INTRODUCTION SUMMARY OF 2018 OPERATIONS We continued our multifaceted contributions for the expansion and... SETTLEMENT BISTECH R&D SETTLEMENT AND USE OF CAPITAL MARKETS SYSTEM Borsa İstanbul Our R&D Center CLEARING LOAN PRIVATE CONGRESS Takasbank has A.Ş. Takasbank has undergone and The CBRT approves TERMINALS Main sponsor been authorized by now provides cash passed an audit the Settlement Members begin support for the the Central Bank clearing, settlement by the Ministry and Clearing Loan trading by using Capital Markets of the Republic and collateral of Industry and and considers their own terminals Congress. of Turkey (CBRT) management Technology. it a special loan from the free as the Securities services in the mechanism from current U.S. dollar Settlement System Precious Metals and the beginning of and Euro accounts operator pursuant Precious Stones 2019 as per the at Takasbank. to Law No. 6493 Market, as well Article 23 of the on Payment as settlement, Regulation on and Securities clearing, the Operations Settlement collateral, and of Payment Systems. risk management and Settlement services in the Systems. Borsa İstanbul Debt Securities Market, on the BISTECH system. FX SWAP MARKET CHECK CLEARING GOLD TRANSFER NATURAL GAS SECURITIES TAKASBANK Borsa İstanbul AND SETTLEMENT SYSTEM MARKET LENDING MARKET MONEY MARKET FX SWAP Market SYSTEM The Gold Transfer The Organized A new order type Asset-Backed was initiated with It was resolved System, developed Wholesale Natural (special order) that Securities (ABS), the CCP Service in that the CBRT may by Takasbank, Gas Sale Market involves borrowers bank bills and October 2018. resolve that the started to serve went live on and lenders making bonds, gold and electronic check participating banks September 1, 2018. an agreement lease certificates clearance under and their customers with each other have been added to the Interbank by implementing before taking the assets that are Check Clearing transfer from their transaction accepted as eligible House (BTOM) be person to person, to the SLM and collateral in the conducted through on July 16, 2018. arrangements that Takasbank Money another organization allow expired SLM Market. The initial within the framework contracts to roll margin rate in the of Article 8 (1) of over have been Takasbank Money the Law on Checks put into practice in Market was revised No. 5941. In this order to develop to cover the total respect, our Bank the SLM. amount of principal has qualified as an and interest and Organization by reduced from 110 which settlement percent to 105 and clearing percent. operations may be conducted from July 2, 2018, under the Regulation on Check Clearing and Settlement Operations published in the Official Gazette No. 30446 dated June 9, 2018. 2 TAKAS İSTANBUL 2018 Annual Report We continued our multifaceted contributions for the expansion and... ...development of the capital markets. TAKASBANK MONEY MARKET RTGS DVP SYSTEM PRIVATE PENSION SYSTEM Total trading A total transaction The total fund 41% volume in the volume of size in the private TMM increased 756.71 756.71 billion TRY 17% pension system growth by 41 percent billion TRY was achieved growth rose by 17 percent compared to the in the Equity to 93 billion TRY. previous year. Market –RTGS DVP System. The number of private pension 15% system participant growth accounts grew by 15 percent to 13.25 million. SECURITIES LENDING MARKET SETTLEMENT AND CLEARING LOAN GLOBAL CUSTODY SERVICE Total SLM trading Settlement and The member base volume rose by clearing loan daily of global custody 9.7% 9.68 percent. 58.5% average grew by 20% services grew by growth growth 58.50 percent to growth 20 percent and the 2.9 million TRY. custody balance reached €5.13 billion. TEFAS ACCOUNT CONTRACT NUMBERING SERVICE The average annual Contracts 31,436 ISINs were trading volume signed for 350 31,436 provided for 8.3% in the Turkey 350 accounts; services capital markets growth Electronic Fund units provided to 1,640 units instruments, and Trading Platform institutions and LEIs were allocated (TEFAS) rose by 3,845 active users. to 561 legal 8.3 percent. entities. EXIST ELECTRICITY MARKET Trading volume in the Electricity 58% Market has grown growth by 58 percent compared to year- end 2017. INTRODUCTION 3 INTRODUCTION ACCOUNTING