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The major derivative instruments of the Bank are swaps and currency forwards. There are no embedded derivatives originated by the Bank.
The Bank classifies its derivative instruments as held for “Hedging” or “Trading” in accordance with Communiqué 1 on the Accounting Application Regulation “Accounting of Financial Instruments’’ (“AAR”). All derivative financial instruments are classified as held for trading. Even though certain derivative transactions, while providing effective economic hedges under the Bank’s risk management position, do not qualify for hedge accounting under the specific rules in AAR 1, and are therefore treated as derivatives held for trading.
Derivative instruments are measured at cost on initial recognition and the related transaction costs are included in the initial measurement. Payables and receivables arising from the derivative instruments are followed in the off-balance sheet accounts on their contractual values.
After initial recognition, derivative instruments are measured at their fair values and the fair values are included in the balance sheet under either “Accrued Interest and Income Receivable” or “Accrued Interest and Expense Payable” depending on whether they are positive or negative. Differences due to the measurement of the fair value of trading derivative instruments are included in the income statement.
As of 31 March 2004, fair value of derivatives of the Bank amount to TL59,568. (TL199,306 as of 31 December 2003)
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