(*) Of the “Amount subject to market risk”, only TL142,407 (8% of TL1,780,091) is used in the calculation of the market risk related to the capital adequacy ratio which is given in Section four, note II. TL142,407 is the minimum amount of capital that can hedge the mentioned risk.
V. CURRENCY RISK
The difference between the Bank’s foreign currency denominated and foreign currency indexed assets and liabilities is defined as the “Net Foreign Currency Position” and is the basis of currency risk. Foreign currency denominated assets and liabilities, together with purchase and sale commitments, give rise to foreign exchange exposure. This risk is managed by using natural hedges that arise from offsetting foreign currency denominated assets and liabilities and the remaining open foreign exchange exposures are hedged on a portfolio basis with derivative financial instruments that include primarily forward foreign exchange contracts and currency swaps. The Board, taking into account the recommendations by ERC, sets a limit for the size of foreign exchange exposure, which is closely monitored by ALCO.
The Bank’s foreign exchange bid rates as of the date of the financial statements and for the last five days prior to that date:
USD EURO Yen
Balance Sheet Evaluation Rate TL 1,330,000 TL 1,626,457 TL 12,804
1. Day bid rate TL 1,290,000 TL 1,571,220 TL 12,213
2. Day bid rate TL 1,295,000 TL 1,565,396 TL 12,266
3. Day bid rate TL 1,307,000 TL 1,585,391 TL 12,361
4. Day bid rate TL 1,300,000 TL 1,578,980 TL 12,287
5. Day bid rate TL 1,290,000 TL 1,590,570 TL 12,088
The simple arithmetic average of the Bank’s foreign exchange bid rates for the last thirty days preceding the balance sheet date for major foreign currencies are shown in the table below:
USD : TL 1,301,033
EURO : TL 1,606,328
Yen : TL 11,994
As of 31 December 2003:
USD EURO Yen
Balance Sheet Evaluation Rate TL 1,427,500 TL 1,784,660 TL 13,346
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