PASHA_BANK_ANNUAL REPORT 2022

General Information Financial Information and Risk Management Review Information on Management and Corporate Governance Principles INFORMATION RELATED TO UNCONSOLIDATED FINANCIAL POSITION AND RISK MANAGEMENT (Continued) c. Explanations on reconciliation between amounts in the statement of information on equity items The main difference between the amount of ‘Equity’ given in the statement of equity and the amount of ‘Equity’ in the unconsolidated balance sheet arises expected credit losses. The expected credit losses are considered as contribution capital in the calculation of the ‘Equity’ given in the equity table. In addition, operating lease development costs, intangible assets, and some other accounts determined by the Board are taken into account in calculating the ‘Equity’ amount in calculations as deductions. II. EXPLANATIONS ON CREDIT RISK a. The Bank takes into account the Banking Law as far as the limits applied to a single obligor or a risk group is concerned. Limits are determined to avoid sectoral concentration, and the compliance to these limits are monitored on transaction basis. Regarding daily credit and security transactions, compliance to limits and concentrations are monitored ad reported by the risk management unit. Besides, the compliance of credits to their limits are followed by operations, marketing and internal control units. Credits and other receivables are re-evaluated at least once a year by the credit allocation unit. Ratings are calculated by using models specifically developed for this purpose. Including the necessary documents, credit allocation activities are also subject to controls by the internal control unit, which is independent from business units. b. According to TFRS 9 Financial Instruments Standard and Regulation on the Procedures and Principles for Classification of Loans by Banks and Provisions, loans are classified as overdue loans that are not have performing loan specifications. The accounting and provisioning police have been disclosed in section 3. c. Bank does not carry any forward or option positions or similar positions based on other agreements on the organized markets. d. The Bank, as an active participant in the national and international banking market, compared to the financial activities of other financial institutions, is not exposed to high volumes of credit risk, which may necessitate mitigation through futures or options. As credit risk increases, usage of such derivative instruments may be relevant. e. The Bank does not have any non-cash loans that were transformed into cash. If such loans exist, they are going to be applied the same risk weight as the cash loans. 149 PASHA Bank 2022 Annual Report Notes to Unconsolidated Financial Statements at 31 December 2022 Pasha Yatırım Bankası A.Ş. (Amounts are expressed in thousands of Turkish Lira (“TL”) unless otherwise stated.) Convenience translation of publicly announced unconsolidated financial statements originally issued in turkish, see note I of section three