PASHA_BANK ANNUAL REPORT 2021

71 Annual Report 2021 PASHA Bank 3. After the recent foreign currency mobility, in order to reduce the impacts of foreign currency changes on capital adequacy ratio, BRSA issued its Resolution No: 9996, dated 21 December 2021. Based on this resolution; · As stated on the Agency’s Resolution No: 9795, dated 6 September 2021, it has been decided that, for the calculation of credit risk exposure in accordance with Regulation on the Measurement and Evaluation of Banks’ Capital Adequacy (Capital Adequacy Regulation), out of monetary and non‑monetary assets, measurement of items other than foreign currency items that are measured at historical cost, in accordance with Turkish Accounting Standards and related specific provision amounts, simple arithmetic average of foreign currency buying rates of last 252 business days issued by the Central Bank of Turkey will be used, unless otherwise indicated by the Agency. Accordingly, as of 1 January 2022, simple arithmetic average of Central Bank buying rates for the last 252 business days as of 31 December 2021 will be used in this calculation. · As of the date of the Resolution, if net measurement differences of the Banks’ securities classified under ‘‘Fair Value Through Other Comprehensive Income’’ portfolio are negative, these differences may be omitted in the equity amount to be used in the capital adequacy ratio calculated in accordance with the Regulation on Equity of Banks. For the securities under ‘‘Fair Value Through Other Comprehensive Income’’ portfolio purchased after the date of the Resolution, current rulings of the Regulation will be applied. 4. The following changes were made to the Capital Adequacy Regulation: · Threshold at the definition of Small and Medium‑sized Enterprises (SME) at the Article 3, first paragraph, item (vv) is determined as TL 220,000,000 for domestic SMEs. · Retail credit limit as per the Article 6, second paragraph, item (c), first sentence is determined as TL 10,000,000. For SMEs residing at foreign countries, it was decided that SME definition of the related foreign country’s capital adequacy regulations issued by its banking authority should be used. Extraordinary General Assembly Meeting held during the year, if any An Extraordinary General Assembly meeting was not held in 2021. Information on Audits In accordance with the Banking Law no.5411, the Bank is subject to limited reviews at each quarter and a full scope audit at year ends by an Independent Audit Firm. Audit reports are approved by the Audit Committee and the Board of Directors. Moreover, based on Article 65 of the same Law, the Bank is under continuous oversight and audit of Banking Regulation and Supervision Agency and other regulatory agencies and authorities. In 2021, an audit of our Bank was performed by an inspector from the Central Bank of Turkey. Activities within the Scope of Prohibition of Competition Board of Directors Members were given the permission by the General Assembly to act within the scope of Article 395 of the Turkish Commercial Code numbered 6762 ‘‘Prohibition of doing business with the Company and loans from the Company’’ and Article 396 of the same Law, ‘‘Prohibition of competition’’. However, the members of the Board of Directors did not have any activities on their or other parties’ behalf or any act within the scope of prohibition of competition within the frame of this permission granted by the General Assembly.