PASHA_BANK ANNUAL REPORT 2021

167 Annual Report 2021 PASHA Bank (Convenience Translation of Publicly Announced Financial Statements Originally Issued in Turkish, See Note I of Section Three) (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) PASHA Yatırım Bank A.Ş. Notes to Unconsolidated Financial Statements At 31 December 2021 INFORMATION RELATED TO UNCONSOLIDATED FINANCIAL POSITION AND RISK MANAGEMENT (Continued) b. Information on centralization grade of liquidity management and funding strategy and its functionality among Bank and its affiliates There is no structured liquidity management requiring centralization between bank and its affiliates. c. Information on funding strategy of the Bank including policies related to diversity of funding sources and periods The main funding sources of the Bank are provided by domestic and foreign banks, repo transactions, money market transactions and issued marketable securities and diversification of aforementioned sources are made in order to minimize liquidity risk. Financial Institutions Department carries out studies which are required to relate supplying of long term foreign source. d. Information on liquidity management based on currencies forming at least 5% of total liabilities of the Bank Almost all the liabilities of the Bank consists of TL, USD and EUR and equities mainly forming the TL sources. TL liquidity of the Bank is managed through funds provided from domestic and foreign banks via repo transactions made in BIST using high quality (premium) securities. TL and foreign currency cash flow of the Bank in scope of Balance sheet management is monitored separately. Risk Management Unit reports to ALCO weekly and Board of Directors on a monthly basis. e. Information on liquidity risk reduction techniques Liquidity limits are determined in order to keep the risk regarding liquidity risk in defined limits and to monitor liquidity position. The aforementioned limits have been determined in accordance with “Regulation on Measurement and Evaluation of Bank’s Liquidity Adequacy” in Risk Appetite Statements and approved by Board of Directors. f. Disclosure regarding use of stress test Liquidity stress test regarding adverse effects in the Bank’s liquidity due to fluctuations in capital markets is applied by Risk Management Department and reported to Risk Management Committee. In the stress scenarios created, the problems to be experienced on the funding side and the inability to collect the receivables expected to be collected are analyzed. In the liquidity planning process of the bank, an assessment of the situation is made by evaluating the cumulative maturity mismatches according to the maturities under different severity scenarios. g. Information related to emergency and unexpected situation plan for liquidity “Emergency and unexpected situation plan for Liquidity” is approved by the Board of Directors and established in order to manage possible liquidity crisis and required actions for losses which can occur in extraordinary conditions are determined with preventing mechanisms and liquidity squeeze scenarios. The scope of the aforementioned plan is to pre-determine applicable scenarios, measurement of liquidity risk and the actions which shall be taken towards those risks. Regarding the sectors affected by COVID-19, the analysis published by foreign rating agencies and shared with the public were used. The sectors that are expected to be affected the most are ranked from high risk to low risk, and all customers in our Bank were separated by risk groups, evaluated in monitoring activities, stress test analyzes, sectoral concentration analyzes and these evaluations will continue in the coming periods. h. Liquidity Coverage Ratio The liquidity coverage ratio is calculated by proportioning the high quality liquid assets owned by the bank to net cash outflow in a one month maturity. Significant balance sheet items that determine the ratio can be listed as required reserves at the CBRT, securities that not subject to repo/collateral, foreign funds and receivables from banks. As of the balance sheet period, 66% of the high quality liquid assets of LCR subject bank accounts with the Central Bank, and 31% of the issued securities is composed by the Treasury of Republic of Turkey. The main funding sources of the Bank are loans received, debts due to money markets and securities issued.