PASHA BANK ANNUAL REPOT 2024

EXPLANATIONS ON ACCOUNTING POLICIES (Continued) VII. EXPLANATIONS ON EXPECTED CREDIT LOSS (Continued) The ratings of financial assets subject to PD calculations are reviewed and updated annually (unless there is a significant improvement in the credit risk of the counterparty). In the case of delay over 30 days, which is the main criteria for transition from Stage 1 to Stage 2, the rating of the financial asset is revised. For transition between stages, certain criteria have been defined by taking into account the relevant regulations/circulars of the BRSA and the notifications issued. In case of following criteria; if the principal or interest/commission collection delays exceed 30 days or the credit rating falls down to two grades relative to the country rating, or restructuring of loan due to debtor has difficulty on payment, the transition criteria from Stage 1 to Stage 2 is applied. The fact that the principal and interest/commission collection delays of 90 days or more is also applied for the transition to Stage 3. In addition, in case the Bank management considers that it is appropriate, the Bank will be able to transfer between stages whether not to meet with criteria. The expected loss provision for the assets in Stage 1 are presented under the “12 Months Expected Credit Losses (Stage 1), expected loss provision for the assets in Stage 2 are presented under the “Significant Increase in Credit Risk” and expected loss provision for financial assets in Stage 3 are followed as “Credit-Impaired (Stage 3)”. Due to the deterioration in the credit risk between stages, there may be downgrade transitions as well as improvements between stages. In accordance with the Bank’s internal policies, the TFRS 9 models are reviewed once a year. The internal rating model is validated annually to confirm that its discriminative power is at an acceptable level, and necessary revisions are made if needed. VIII. EXPLANATIONS ON OFFSETTING FINANCIAL ASSETS Financial assets and liabilities are offset and the net amount is reported in the balance sheet when the Bank has a legally enforceable right to offset the recognised amounts and there is an intention to collect/pay related financial assets and liabilities on a net basis, or to realise the asset and settle the liability simultaneously. IX. EXPLANATIONS ON SALES AND REPURCHASE AGREEMENTS AND SECURITIES LENDING TRANSACTIONS Securities subject to repurchase agreements (“Repo”) are classified as “Financial assets at fair value through profit or loss”, “Financial assets at fair value through other comprehensive income” and “Financial assets measured at amortised cost ” according to the investment purposes of the Bank and measured according to the portfolio to which they belong. Funds obtained from repurchase agreements are presented under “Money Market Payables” in balance sheet and the difference between the sale and repurchase price is accrued over the life of repurchase agreements using the effective interest method. Funds given against securities purchased under agreements (“Reverse repo”) to resell are accounted under “Receivables from Reverse Repurchase Agreements” on the balance sheet. The difference between the purchase and determined resell price is accrued over the life of repurchase agreements using the “effective interest method”. 148 PASHA Yatırım Bankası A.Ş. Notes to the Unconsolidated Financial Statements As of and for the Year Ended 31 December 2024 (Continued) PASHA Bank 2024 Annual Report (Convenience translation of publicly announced financial statements originally issued in Turkish) (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.)