PASHA BANK ENG 20

PASHA Yatırım Bankası A.Ş. Notes to Unconsolidated Financial Statements at 31 December 2020 (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) (Convenience Translation of Publicly Announced Financial Statements Originally Issued in Turkish, See Note I of Section Three) EXPLANATIONS ON ACCOUNTING POLICIES (Continued) 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. As a mentioned in the important estimates and judgments note used in the preparation of the financial statements, the Bank reflected the possible effects of the COVID-19 outbreak as of December 31, 2020 with the best estimation method for the estimates and judgments used in calculating the expected loan losses. The Bank has revised its macroeconomic expectations and reflected the calculations made as of 31 December 2020 in the light of these data, taking into account the values of default probabilities and the loss of default. In thıs context, the Bank has measured the impact of the change in gross domestic product on frozen receivables within different scenarios and reflected the increase coefficient, which is considered to reflect the current situation in the NPL ratio, to loan parameters, by reflecting on the loan parameters. This approach, which is preferred in reserve calculations for 2020, will be revised by taking inti consideration the impact of the epidemic, loan portfolio and future expectations in the following reporting periods. Classification of Loans and Provisions for reserves to be set aside from 17 March 2020 mainly due to the COVID-19 outbreak due to the decisions of BRSA numbered 8948 dated March 17, 2020 and numbered 8970 dated March 27, 2020. Within the scope of Articles 4 and 5 of the Regulation on Procedures and Principles regarding provisions to be allocated, the first 30 days delay period envisaged to be applied as 90 days until 31 December 2020 for the loans monitored in the first group and the 90 days delay period for the classification of loans and 180 As of March 17, 2020 Board Decision, 90 days delay period envisaged for the period to be applied is 180 days until June 30, 2021 for the loans monitored in the second group. In this context, - Temporarily, the practice of the classifying receivables which cannot be collected up to 90 days and 180 days in the first group and second group has been established, respectively. - For customer who do not want to be delayed in overdue installments, the installment of installments has started within the framework of these deadlines without breaking the existing configuration contracts. - In the completion of the “Garame” banks protocols, the time to be given to time-consuming operations was extended with a joint agreement. - Ultimately, it was concluded that the provisions to be set aside for such receivables will continue according to their own risk models used by banks to calculate expected loan losses under TFRS 9. 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 accounted under “Funds Provided under Repurchase Agreements” in liabilities 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”. Annual Report 2020 PASHA Bank Year-End Financial Report 127