2022 Integrated Annual Report Together we are We are in deep sorrow and heartbreak due to the earthquake disasters in February 2023, in which we suffered immense losses as a country. We wish God's mercy to our valuable colleagues, elders and all our citizens we lost, and we extend our condolences to their relatives and our nation. We are Together, You are not Alone... Islahiye-Gaziantep Branch Retiree Antakya-Hatay Branch Retiree Antakya-Hatay Branch Küçük Sanayi Sitesi- Kahramanmaraş Branch Antakya-Hatay Branch Islahiye-Gaziantep Branch Samsun Branch Retiree Kahramanmaraş Retiree Küçük Sanayi Sitesi- Kahramanmaraş Branch Çukurova Regional Directorate Retiree Kahramanmaraş Branch Retiree Kahramanmaraş Branch İskenderun-Hatay Branch Retiree Kahramanmaraş Branch Retiree Çukurova Regional Directorate Retiree You are in our hearts... 4 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 5 Content 5 6 8 10 11 Introduction About the Report An Overview Of İşbank Corporate Profile Our Vision, Values, Strategic Goals and Strategy 12 Why İşbank? Highlights in 2022 14 İşbank from 1924 to Today 16 Messages from the Executives 20 Looking Into the Future Global Tendencies, Risks, Opportunities and Forecasts 23 28 Message from the Sustainability Leader 30 Management Evaluation and Analysis 31 How Do We Create Value? Sustainability at İşbank Sustainability Management 32 Our Business Model 34 35 Our Stakeholders 38 Materiality Process at İşbank 46 47 50 İşBank's Sustainability Journey Initiatives Supported in the Field of Sustainability Contribution to Sustainable Development Goals 52 Reliable Financial Actor An Inclusive and Robust Economy Financial Performance and Profitability İşbank and its Activities in 2022 İşbank's Subsidiaries Customer Centricity Responsible Products and Services Financial Literacy Financial Inclusion Climate Action Climate Change Risk Management Environmental and Social Risk Management in Loans Products and Services Contributing to a Green Economy 54 57 59 64 65 68 71 72 76 78 82 84 88 Next-Generation Banking 90 99 Digital Banking Information Security at İşbank 102 Responsible Operations Employee Loyalty and Satisfaction 104 Reducing Negative Impacts of Operations 108 Environmental Impact Management 109 Environmentally Friendly Buildings 110 Responsible Procurement 114 Decent Work 117 118 Employee Rights 119 The Future of Business and New Working Models 121 Equal Opportunity, Diversity and Gender Equality 124 Compliance with Operating Principles 125 Employee Health and Safety 125 Preferred Employer 126 Talent Management 128 Good Corporate Citizen 130 Transparent and Ethical Management 133 Management Structure 134 Board Member Matrix 136 Board of Directors 140 Executive Board 142 Organization Chart 144 144 149 Information on Board of Directors Meetings in 2022 İşbank Committees Information on Risk Management Policies Applied per Risk Types 153 Managers of Internal Systems 154 Audit Committee’s Assessment on the Operation of Internal Audit, InternalAudit, Compliance and Risk Management Systems, and its Activities in the Reporting Period 160 Business Ethics 161 Anti-Bribery and Anti-Corruption 162 Corporate Governance Principles Compliance Statement 162 Corporate Governance Compliance Report 166 Corporate Governance Information Form 174 Sustainability Principles Compliance Framework Annual Meeting Documents 179 Dividend Distribution Policy 180 Summary Report of the Board of Directors 181 Ordinary General Assembly Meeting 182 Profit Distribution Proposal 184 Contribution to Social Welfare 186 Projects in the Education Field 188 Projects in the Environmental Field 188 Projects in the Culture and Art Field 190 Financial Report 198 Non-Consolidated Financial Report 306 Consolidated Financial Report 418 Annexes Introduction Preparing to celebrate its 100th anniversary in 2024, İşbank has adopted the principle of providing continued support to the country's economy and generating solutions to social problems since the day it was founded. In the 2022 Integrated Annual Report, making its stakeholders feel that they are part of a big family by utilizing all its means in all kinds of difficulties, İşbank has presented to all its stakeholders what type of value it creates for our country with the slogan "Together we are". İşbank 2022 Integrated Annual Report summarizes the value created by the Bank for its stakeholders in four main sections. "How Do We Create Value?" "Reliable Financial Actor" section explains İşbank's value creation process through İşbank Banking, which manifests the Bank's integrated sustainability approach. This section includes the sustainability priorities revised with the “double materiality” approach in 2022, sustainability initiatives supported, communication with stakeholders, and contribution to the United Nations Sustainable Development Goals. section presents the role that İşbank plays as a financial organization for an inclusive and robust economy. This section includes İşbank's goals for a sustainable financial performance, the customer experience that İşbank considers while presenting its products and services, and its performance in inclusion, financial literacy, and raising savings awareness. İşbank’s roles and goals in climate action and the Bank's digitalization journey are also reported under this heading. "Responsible Operations" "Good Corporate Citizen" section sets out the projects and practices developed by İşbank to minimize the negative environmental impacts of its operations and spread the working standards it has adopted throughout the supply chain. The section also reports on İşbank's employer approach, working life practices, and how İşbank employees are prepared for the future of business. section summarizes the Bank's corporate governance structure, ethical and principled banking approach, effective risk management for short and long-term threats, and management principles and performance. The “Social Investments” section summarizes İşbank's vision of social responsibility and social welfare projects realized with this vision. Various voluntary and compulsory performance disclosures to which İşbank is subject are included in the “ANNEXES” section. Although 2022 was a challenging year for both our country and the global economy, İşbank completed this turbulent period with successful results. The Bank shall continue to observe the economic, social, and environmental dimensions of its actions together and take responsibility for the country's economy as a reliable institution. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 6 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 7 About the Report İşbank’s 2022 Integrated Annual Report has been prepared to demonstrate the Bank’s performance in line with its strategies and the value created for its stakeholders. The report also includes İşbank's contribution to the United Nations Sustainable Development Goals. See Contribution to Sustainable Development Goals İşbank’s annual report set Structure and content of the report The second integrated annual report of İşbank provides up-to-date information about the Bank's efforts undertaken within its approach focusing on creating sustainable and shareable value by considering financial and non-financial capital elements as a whole. The 2022 Integrated Annual Report includes İşbank’s 2022 performance in line with its strategies, the value created for all its stakeholders with this performance, and the risks and opportunities it faced in the value creation process. Period and scope of the report İşbank 2022 Integrated Annual Report presents the Bank's performance for the period between January 1st, 2022 and December 31st, 2022. The Integrated Annual Report, which includes consolidated and unconsolidated financial statements and independent audit reports, comprises İşbank's activities in Türkiye and abroad. The activities of the Bank's subsidiaries are excluded from the scope of reporting. However, a brief summary of subsidiary performance is included in the report. See İşbank's Subsidiaries Compliance and legislation İşbank, the shares of which are publicly traded on the Istanbul Stock Exchange, ensures that the Bank's 2022 Integrated Annual Report is in compliance with the minimum requirements of the Banking Regulation and Supervision Agency (BRSA) and the Capital Markets Board (CMB) on annual reporting. The İşbank Integrated Annual Report has been prepared in compliance with the Integrated Reporting Framework (Framework) of the International Integrated Reporting Council (IIRC) and GRI Universal Standards 2021 published by the Global Reporting Initiative (GRI). See GRI Standards Content Index While creating the report; ᆔThe Provisional Standard for Commercial Banks Guide released by the Sustainability Accounting Standards Board - SASB, ᆔUnited Nations Environment Program Finance Initiative (UNEP FI) Principles of Responsible Banking guideline (PRB), ᆔCarbon Disclosure Project’s (CDP) Climate Change and Water Security Programs guidelines, ᆔWorld Economic Forum (WEF) Stakeholder Capitalism Metrics, ᆔBloomberg Gender Equality Index Indicators and ᆔTask Force on Climate-related Financial Disclosures (TCFD)’s recommendations were utilized in developing the content. İşbank, a signatory of the United Nations Women's Empowerment Principles (UN WEPs), has prepared a more detailed performance summary on gender equality. See Women's Empowerment Principles Progress Statement Audit The financial statements included in İşbank's 2022 Integrated Activity Report have been audited by Güney Bağımsız Denetim ve SMMM A.Ş. See Compliance Opinion KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. has provided limited assurance on selected non- financial information. See Independent Assurance Report İşbank's Environmental Management System has been audited within the scope of ISO 14001: 2015 standard under DAkkS accreditation by TÜV SÜD. Senior management responsibility statement In the opinion of İşbank's top management, this report includes all the subjects in terms of value creation for the Bank's stakeholders while presenting a holistic evaluation of the Bank's financial and non-financial performance for the period between January 1st, 2022 and December 31st, 2022, and its plans for the future. The statement of responsibility regarding this report has been prepared as per the relevant legislation and presented on the KAP platform. The statement can be found on the Bank's corporate website. Contact The integrated annual report, which we aim to make accessible to all our stakeholders, can be accessed via the Public Disclosure Platform (KAP) and on www.isbank.com.tr. Please send your opinions and suggestions on the report tosustainability@isbank.com.tr. Report’s Navigation The ✓mark represents the non-financial data that passed the independent audit. ✓⃝symbolizes completed projects, symbolizes ongoing projects. You can go back to the “Table of Contents” page of the report with the The symbol refers to information on the website, while the symbol refers to information in another section of the report. symbol. Integrated Annual Report: This report summarizes İşbank's performance, strategies and targets, and financial and non-financial components from an integrated perspective. Capital Markets Board – Sustainability Principle Compliance Framework: This report summarizes İşbank's sustainability strategy, management structure, performance and targets within the scope of CMB requirements. Capital Markets Board – Corporate Governance Compliance Report: This report shows that İşbank conducts its operations in compliance with the compulsory principles of the Corporate Governance Communiqué published by the Capital Markets Board. Carbon Disclosure Project (CDP) Climate Change Program Report: This report summarizes İşbank’s targets and strategies developed for climate action and its annual performance within the framework of CDP Climate Change Reporting indicators. Carbon Disclosure Project (CDP) Water Security Program Report: This report summarizes İşbank's water risks, its targets and strategies in this area, and its annual performance within the framework of CDP Water Security Reporting indicators. All annual reports published by İşbank are available at www.isbank.com.tr or by contacting the Investor Relations and Sustainability Division. UNEP-FI Principles for Responsible Banking Report: This report presents the impact assessment of İşbank's portfolio within the scope of the Principles for Responsible Banking, of which İşbank is a signatory. UN Global Compact - Communication on Progress Report (CoP): This is the report in which İşbank transparently shares its commitment to the 10 principles of the United Nations Global Compact and its social and environmental performance. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 01 An Overview Of İşbank 10 Corporate Profile 11 Our Vision, Values, Strategic Goals and Strategy 12 Why İşbank? Highlights in 2022 14 İşbank from 1924 to Today 16 Messages from the Executives 10 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 11 Corporate Profile İşbank is a leading financial institution in its sector, operating for 98 years in line with its vision of developing innovative products, services and applications that meet the banking expectations of the future with its strong financial structure. As of the end of 2022, with its 23,309 employees providing services to 22.8 million customers, İşbank is the largest private bank in Türkiye, with a total asset size of TL 1,408.3 billion. İşbank is amongst the most highly respected institutions of the banking sector with its products and services in corporate, commercial, SME, retail and private banking. İşbank provides services to its customers with 59 Regional Directorates and 1,110 branches in Türkiye, in addition to the Head Office in Istanbul, Tuzla Technology and Operations Center (TUTOM), Tuzla Atlas Data Center, and Ankara Operations Center (ATOM). Providing services through its branches and digital channels developed as a result of huge investments, İşbank continues to create value for its stakeholders through our Internet Branch, İşCep (the mobile app), Call Center, 6,169 ATMs, and 611,429 POS devices (including online POS) in Türkiye, TRNC, and abroad. İşbank operates its cross-border banking activities with 2 branches in Iraq, 2 branches in Kosovo, 2 branches in England, 1 branch in Bahrain and 14 branches in Northern Cyprus as of the end of 2022. The Bank has 2 representative offices, one in Shanghai (China) and one in Cairo (Egypt). İşbank operates its banking activities via its subsidiaries in Germany, Russia, and Georgia. İşbank Group is an integrated organization with domestic and international subsidiaries operating in many fields. As of the end of 2022, İşbank has direct and indirect subsidiaries with 136 companies. The number of companies controlled directly or indirectly by the Bank is 113. See İşbank's Subsidiaries You can find the history of İşbank here. İşbank’s Shareholding Structure** See Amendments to the Articles of Incorporation Atatürk's Shares* 28.09% Free Float: 34.60% 22 .8 mıllıon ✓ Customers 23,309 ✓ Employees TL 1,408.3 Bıllıon The largest private bank in Türkiye with its total asset size Türkiye İş Bankası A.Ş. Members' Supplementary Social Security and Charity Fund Foundation 37.31% * These shares belong to Atatürk and are represented by the Republican People's Party in accordance with Atatürk's will. Since the dividend income of these shares was left to the Turkish Language Association and Turkish Historical Society in accordance with Atatürk's will, dividend payments are made to the aforementioned institutions within the framework of the will and legal legislation. **The shareholding structure has been included as of 31.12.2022. (31.12.2021: Foundation: 37.26%, Atatürk's Shares: 28.09%, Free Float: 34.65%). Our Vision, Values, Strategic Goals and Strategy Our Vision Our Values Our Strategy Becoming the bank of the future, creating sustainable value with an inclusive and participatory approach Innovation, Solidarity, Common Sense, Reliability, Sincerity, Transparency guided by the principles of "Intelligence, diligence, integrity, technical and methodical work" Managing our balance sheet to ensure sustainable and value added growth while using our internal and external resources in accordance with the priorities of the country's economy and getting prepared for the future by continuously improving our business model in synergy with our group companies and all our business partners in the period of technological transformation. Our Strategic Goals Commitment to our country � Strong and sustainable financial performance � Effective risk management � Flawless customer experience � Value creating technology and innovation leadership � Happy and productive human resources � Ethical and responsible banking, compassionate towards people, society and environment An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 12 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 13 Why İşbank? Highlights in 2022 52.0% increase TL 1,408.3 billion Asset Size TL 759.3 billion Cash Loans 53.9% increase 56.3% increase TL 931.1 billion Deposits TL 191.4 billion Shareholders' Equity 120.4% increase 48.4% increase TL 423.4 billion Demand Deposits LEADER AMONG PRIVATE BANKS TL 61.5 billion Net profit TL 127.7 billion Market value TL 6.15 Profit per share 22.8 million✓ customers 1,110 domestic, 21 foreign branches 6,169 Bankamatik ATMs, the largest ATM network among private banks 13 million✓ digital banking customers Commitment to phase-out coal and natural gas First Turkish Bank that does not finance gold mining activities using cyanide 30% Club membership 25.4 million users served by Bankamatik ATMs, including customers of other banks 4,371 million customers interacted with İşCep Expenditures area 2.7 million social media followers 1.90%✓ employee turnover rate 43✓ hours average training time per employee 97.09% ratio of Local Suppliers 2.8 million Maximum Mobile users 73.2% share of İşCep in transactions conducted through all channels 11.9 million İşCep users 96.2% ratio of transactions out of total transactions made through non-branch channels at İşbank 27,994 person*hours✓ sustainability training provided to employees 97.5%✓ unionization rate 30,000 chess classes opened in schools in total 55%✓ ratio of female employees 42.6%✓ ratio of women in management 99.7%✓ ratio of return from maternity leave 75% renewable energy projects/ Energy generation portfolio TL 2.3 billion sustainable investment fund 9% ratio of female and male salary gap (according to female/male median values) 98.1 million MWh the amount of clean energy generated through the projects financed by İşbank in the last 3 years International commitment to transition to a carbon- neutral economy: Net-Zero Banking Alliance (NZBA) Diversity Policy under the ownership of Board of Directors CDP Climate Change Report Score “A-” CDP Water Security Report Score “B” Sustainalytics ESG Risk Rating 18.6 Low Risk Listed in the Bloomberg Gender Equality Index İşbank is in the BIST Sustainability 25 Index Ranked 4th among 1,097 global banks in Refinitiv reporting by the end of 2022 One of the two companies in Türkiye Participating in the UN Global Compact “CoP - Early Adopters Program” An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 14 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 15 İşbank from 1924 to Today 1920s-1930s İşbank, the first national bank of the Republican era, was established on August 26, 1924, in line with the decisions taken at the Izmir First Economics Congress with Atatürk's directives. Beginning to expand into a country- wide branch network upon its foundation, İşbank was the first Turkish bank to establish branches abroad, with the first international branches opened in Hamburg, Germany and Alexandria, Egypt in 1932. 1950s The Bank developed its portfolio of subsidiaries. As the Bank's subsidiaries became the driving force of Turkish industry, the Bank invested in and financed a number of industries, with a focus on manufacturing. 1980s In the 1980s, İşbank increased the number of its overseas branches. At İşbank, the 1980s were characterized by the growing importance of multichannel banking, and the Bank started offering an even broader range of products to its customers. In 1982, İşbank introduced the first ATMs to Türkiye, and its ATMs named "Bankamatik" became a brand. 1960s-1970s In the 1960s and 1970s, İşbank focused on extending its branch network. 1990s İşbank further solidified its position as the sector's pioneer in alternative distribution channels when it launched "Mavi Hat (Blue Line)" in 1991 and the first online banking branch in 1997. 2010s Initiating the customer-centered Digital Transformation Program with the vision of becoming "Türkiye's Best Digital Bank", İşbank founded MaxiTech, its subsidiary, in Silicon Valley, the USA in 2016 to support digital transformation. İşbank advanced one step further in the innovation universe with the opening of the Shanghai Innovation Center. With TekCep service, Türkiye's first open banking app, the Bank offered an opportunity to track account activity at different banks via İşCep. The "Workup by İşbank" Entrepreneurship Program was initiated in order to support high potential and technology-focused initiatives (Startups). By committing to invest in the Maxis Innovative Venture Capital Fund established within the İşbank Group, the Bank started to invest in technology-focused startup ventures. In addition, the "Innovation Committee" was established at İşbank in order to extend the innovation culture and ensure the continuation of innovation processes. In 2018, İşbank continued to consolidate its leadership in digital banking by integrating the personal assistant application Maxi into the service platform, which quickly achieved a record number of customer contacts. 2000s Maintaining strong and stable growth, İşbank relocated the Bank's headquarters from Ankara to Istanbul in 2000. In 2006, İşbank initiated the Customer- Oriented Transformation Project and aimed at restructuring a customer- focused approach in line with its strategic goals. As a result, the Bank successfully completed many projects, which was referred to as a structural revolution. In light of rapid advances in technology, İşbank continued to improve the innovative multichannel banking network, allowing customers to utilize the most suitable channel to perform all banking transactions conveniently, quickly and reliably on a 24/7 basis. İşbank joined the United Nations Net-Zero Banking Alliance (NZBA) and committed internationally to increase its support for the transition to a carbon neutral economy. In line with its vision of being the bank of entrepreneurship and entrepreneurs, the Bank launched entrepreneurship branches, the first startup-focused branch service model in Türkiye. İşbank played an active role in the establishment of the Arya Venture Capital Fund, which aims to invest in gender-balanced startups and the FounderOne Venture Capital Fund, which aims to invest in startup impact initiatives and joined the Funds by making an investment commitment. Nays, a mobile finance application that enables users to perform their daily financial transactions with an easy and enjoyable experience and constantly rewards them, was launched. 2020s In this extraordinary period under COVID-19 pandemic conditions, İşbank demonstrated its support to households and companies through special product and service applications. The Bank maintained funding from international markets and further increased its support to the Turkish economy. Agriculture-focused activities gained momentum. You can access the history of İşbank here. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 16 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 17 Message from the Chairperson Esteemed Stakeholders, We started 2023 with great sorrow due to the earthquakes that shook our country deeply. As a nation, we feel the deep pain of losing our citizens in the successive disasters that affected a vast area. Unfortunately, our six colleagues working in branches in the region lost their lives in this tragic disaster. In this period when our greatest wish is to quickly heal our wounds, we, as the İşbank Group, have utilized our means and unveiled a strong aid package to provide comprehensive assistance to all those impacted by the disasters.. I would like to take this opportunity to once again share my wishes for the recovery of our country, wish Allah's mercy on our citizens who lost their lives, and express my condolences to their relatives and our nation. In 2022, the risks and uncertainties caused by the Russia-Ukraine war on the world economy, especially on European countries, were at the top of the agenda. While the disruptions in supply chains for basic needs such as energy and food due to the war increased global inflationary pressures, major central banks took steps to tighten their monetary policies faster than expected to combat inflation. These steps led to a loss of momentum in economic activity in the last months of the year, causing global recession concerns to be expressed. In addition, as the global risk appetite decreased in 2022, portfolio investments in emerging economies followed a fluctuating course during the year. In 2022, Turkish economy grew by 5.6% on an annual basis with the strong contribution of consumption expenditures and moderate contributions of exports and investments. On the other hand, the rise in global commodity prices, particularly energy, caused the current account deficit to widen despite the rapid recovery in tourism revenues and inflationary pressures to increase. Annual CPI inflation hit its highest level of the last 24 years in October and then started to decline due to the high base effect. The Turkish banking sector maintained its strong outlook and continued to support economic activity despite the rising volatility in financial markets. Despite the global economic turmoil and the challenging economic conjuncture, as İşbank, we completed 2022 achieving successful results and reaching our targets. The most important component of our solid financial performance is our long-term perspective, in which we consider both financial and non-financial capital elements together. As we prepare to celebrate our 100th anniversary in 2024, we work with the responsibility of being a reliable companion for all our stakeholders. We are an organization that has integrated sustainability into all processes, turned it into a corporate culture, and performed at international standards in this field. We continue to operate with an integrated sustainability approach at every stage, from product development to recruitment and promotion, from audit to social responsibility initiatives and procurement processes. We evaluate the social, environmental, and economic impacts of all our projects together and make solid cost and benefit calculations. As a result of the performance achieved with this holistic perspective, our Bank continued to gain the appreciation of various domestic and international organizations in 2022 as well. We were honored with the “Bank of the Year in Türkiye” award by The Banker Magazine published by “The Financial Times,” one of the world’s leading financial and economic media. Our strong financial performance, as well as our constant innovative service approach focused on creating value for customers in the field of digitalization and innovation, and the initiatives we undertake for society were effective in winning this award. We were also named the best digital bank in Central and Eastern Europe by Euromoney, one of the most prestigious publications in the field of global finance and banking. In 2022, we fulfilled our commitments in the field of sustainability and added new ones to our existing commitments. We committed internationally to support the transition to a carbon neutral economy by becoming a member of the Net-Zero Banking Alliance (NZBA), established by the United Nations to ensure that member banks align their portfolios with net-zero emission targets in line with the Paris Climate Agreement by 2050. For 98 years, İşbank has been an institution that fulfills its social responsibilities without interruption, regardless of economic and social conditions. In 2022, we signed an important collaboration and became the official supporter of the Turkish National Olympic Committee for the 2024 Paris Olympics. With this collaboration, we aim to provide young people with more opportunities to prepare for the Olympics, as well as to give children the habit of sports, to introduce children to Olympic values at an early age, to have more young people represent our country at the Olympics, and to increase our achievements. We are very happy to support this important organization, which coincides with the 100th anniversary of our Bank and aims to be climate positive and contribute to gender equality. We believe that together we will achieve successes that will make us all proud and happy. In 2022, we sponsored the Marmara Sea Symposium to become part of the solution to marine pollution, one of the most significant environmental issues in our country. At the Marmara Sea Symposium organized by the Turkish The 100th anniversary of the Republic means more than this for İşbank. It is an institution that meets on the common ground of independence with our Republic and that will experience the enthusiasm of its 100th anniversary one year apart. Adnan Bali Chairperson Marine Research Foundation (TÜDAV), topics such as mucilage, pollution, biodiversity, fisheries, earthquakes, the Turkish Straits, and maritime transport were discussed comprehensively by experts from different disciplines, and solutions were presented. Another of our prominent initiatives in the field of environment is the “Deniz Kâşifi (Sea Explorer)” project. In cooperation with the Middle East Technical University (METU) Institute of Marine Sciences to support scientific and academic studies on life in the seas, a specially produced unmanned underwater glider device called “Deniz Kâşifi”, was provided to and will be used for the first time in Türkiye by the Institute of Marine Sciences at METU. The device, which will support scientific and academic studies on marine pollution in Türkiye, will enable scientific and academic studies on the seas to be carried out more efficiently and on a larger scale. We extended our cooperation with the Turkish Chess Federation (TSF), which we have been supporting as the main sponsor since 2005, for another 5 years in order to introduce chess to more children in our country and to make chess widespread and easily accessible. Under the Bank’s sponsorship, chess has become the sport with the highest number of licensed players in the country. As a result of our partnership, which started 17 years ago, in addition to achieving countless international achievements, hundreds of thousands of our children and young people were introduced to chess and brand new worlds were created by reaching disadvantaged groups. In the upcoming days, in addition to the chess classes opened in primary and secondary schools across Türkiye, by including the preschool program within the scope, we aim to introduce chess to our children starting their education life. Esteemed stakeholders, In 2023, our Republic, which was founded by Gazi Mustafa Kemal Atatürk and his fellow fighters by rising from the ashes of a nation struggling for existence, will be a century- old sycamore. The 100th anniversary of the Republic means more than this for İşbank. It is an institution that meets on the common ground of independence with our Republic and that will experience the enthusiasm of its 100th anniversary one year apart. İşbank and its subsidiaries are a large community that supports Türkiye’s sustainable growth and development with the products and services they offer for export and production as well as the employment they create. Our Bank supports the real sector and households with its nationwide service network and digital contact points. In our second century, our Bank will continue to use its resources for Türkiye with determination. İşbank will continue to be a reliable companion for its customers, business partners, and all stakeholders in a period when the global economy becomes more fragile and complex, income inequality is increasing day by day, and the negative impacts of climate change and loss of biodiversity are being felt more and more. Our Bank will continue to support the real economy and households by bringing the strength it derives from its deep-rooted history and principles together with up-to-date technologies. On behalf of the Board of Directors, I would like to thank all our stakeholders, especially İşbank employees, who are the architects of our success with their efforts. Yours sincerely, An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 18 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 19 Message from the CEO Esteemed Stakeholders, Following the Kahramanmaraş-centred earthquake disasters that devastatingly affected many surrounding provinces, we are living through very difficult times in which we are deeply shaken up as a country and put to the test with human life. I believe that we can overcome these difficult days of great pain only by joining hands together, and I would like to take this opportunity to once again express my condolences and best wishes for our nation. The solidarity we have shown since the first day, and every helping hand we extended to those struggling to survive, gladden our hearts to some extent. As İşbank, we shoulder the responsibility for our country today, as in the past, and we are helping to heal the wounds with a very comprehensive aid package. I believe that united together, we will overcome these diffucult days that our country is going through after the earthquakes as soon as possible. The year 2022 was marked by an increase in global commodity prices, especially energy, and consequently rising inflation worldwide, with the impact of the tension between Russia and Ukraine. The world economy, which recovered rapidly after the pandemic in 2021, grew at a slower pace than anticipated throughout the year as the tension between the two countries turned into a hot conflict in February 2022. International organizations revised their global growth forecasts downwards and inflation expectations upwards during the year. According to IMF data, the slowdown trend in the world economy, which is estimated to have ended 2022 with a growth rate of 3.4%, is predicted to continue in 2023 due to the tightening steps taken by major central banks to fight inflation. In 2022, the Turkish economy continued to grow, albeit losing momentum compared to the previous year, thanks to strong domestic demand and moderate contributions from net exports and investments. In this period, global inflationary pressures, as well as the lagged impacts of the depreciation in the Turkish lira, caused inflation to remain high. Despite the strong performance in tourism revenues, the widening in the foreign trade deficit in parallel with rising commodity prices on a global scale led to a rapid increase in the current account deficit. On the other hand, the robust course of economic activity and the high inflationary environment led budget revenues, particularly tax revenues, to increase sharply, keeping the budget deficit below the year-end target. In 2022, when risk perception followed a volatile course, the Turkish banking sector continued to support economic activity by successfully managing risks with its robust financial structure. Having the pioneer position in the sector, İşbank consolidated its position in the sector by realizing a performance that significantly exceeded its targets in 2022, when uncertainty was at the forefront. In 2022, our asset size reached TL 1,408.3 billion with an increase of 52.0% compared to the previous year; the cash loans we extended in the same period increased to TL 759.3 billion and non-cash loans to TL 246.7 billion, and our total contribution to the economy was TL 1 trillion in the same period. While leaving behind a successful year, in addition to the soundness of our financial structure, we addressed digitalization, sustainability, competent human resources, customer experience, and subsidiary strategy as a whole with an integrated perspective. Together to Our 100th Anniversary In 2023, our Republic, founded by the Great Leader Mustafa Kemal Atatürk, will turn 100 years old. One year later, İşbank will celebrate the 100th anniversary of its foundation. We continue to create value for all our stakeholders in line with our vision of “becoming the bank of the future, creating sustainable value with an inclusive and participatory approach”. We have set the theme of our Integrated Annual Report for 2022 as “Together to our 100th anniversary,” in which we aim to transparently explain how we created value from our activities as well as our goals for the future. Accordingly, we will continue to support the national economy by resolutely implementing a healthy growth strategy with the support of our robust financial structure and quality service delivery. We are building the bank of the future with our business model, organization and branch structure, service approach, the competence of our employees, and our technological infrastructure. Corporate Commitments for Sustainability In 2022, our efforts to fight climate change, which is one of the leading global problems, have continued at an accelerated pace. We added a new one to our international commitments in this area, and as a signatory of the Net-Zero Banking Alliance established by the United Nations, we committed to aligning our loan portfolio with net-zero emission targets on a scientific basis by 2050 in line with the Paris Climate Agreement. In order to reach net-zero targets, we also added to our goals to support our customers' transition processes to a net-zero economy by focusing our 2030 targets on carbon-intensive sectors and to report and publish our progress in emission targets on an annual basis. Joining the Net-Zero Banking Alliance will further increase our effectiveness in fighting climate change. We evaluate climate change topics not only in terms of reduction and adaptation but also in terms of the opportunities created for green transformation. In this regard, our Bank continues its efforts to offer its customers both product and service packages, as well as to provide consultancy. Until 2026, we are committed to contributing to the green transformation of the economy by providing sustainable financing amounting to TL 300 billion. We support women's participation in business life and continue to offer the necessary financial and non-financial solutions to women entrepreneurs, who are an important dynamic in sustaining economic and social development. Starting from 2023, we are committed to providing financing support of TL 100 billion to our women entrepreneurs within 5 years. In 2022, we launched a new project called WeLead (Leading Women Entrepreneurship for Accelerating Development) in cooperation with TÜRKONFED and with the support of UN Women to improve the capacities of women entrepreneurs and strengthen their communication networks. Within the project, our efforts to provide training support to entrepreneurial women will continue regardless of sector and scale in 2023 as well. As an indication of the importance our Bank attaches to gender equality, we became a member of the 30% Club, a cooperation in which the chairpersons of the board of directors and general managers aim to improve the gender balance at all levels of their organizations and to increase the ratio of women in the boards and senior management to 30%. In the field of agriculture, we support sustainability in agriculture with digital solutions to create a positive impact on food safety and resource efficiency. In line with our Bank's targets within the framework of the effective use of agriculture, finance, and technology together, and the theme of sustainability, we established the Agricultural Banking Advisory Board, which is comprised of experts who have made a difference in agriculture and related fields, under the leadership of our Bank. To share our perspective on agricultural banking with farmers and to establish more effective communication with them, we launched agriculture specialized branches. We held the first Imece Workshops, which Preparing to celebrate its 100th anniversary, as an institution with deep-rooted corporate values and always looking out for the interests of its country, our Bank has turned its compass towards the principle of sustainable profit for all in these turbulent times. Hakan Aran Chief Executive Officer aim to bring together different stakeholders of the ecosystem under agriculture-specific topics and develop solutions together to the problems identified, with the theme of “Water” in October 2022 and the second one in December with the theme of “Wheat”. In 2022, we continued to increase the financial and digital literacy of our farmers and support their agricultural activities with our mobile application İmeceMobil, which has become a platform specific to the agricultural sector. Bank of the Future As part of our efforts to build the Bank of the Future, we continue to invest in technology, digitalize our processes, and offer our customers easy, fast, and secure experiences. With this approach, the number of İşCep users exceeded 11.9 million, and the rate of digital transactions exceeded 96 percent. We launched Nays in 2022 in order to meet the daily financial needs of the young population with high financial technology adaptation and a variety of experience expectations, all while providing a simple and easy experience. Offering advantageous shopping and money transfers, Nays reached more than 1 million users in a short time. Within our strategy to design the bank of the future and corresponding customer experience, we launched İş Mekan, a Next-Generation Customer Contact Point, with the aim of reaching our customers, who we contact digitally, in the physical world as well and offering multiple value propositions by meeting their needs more holistically without limiting them to banking processes. Support for Entrepreneurship Our Bank, which has supported entrepreneurs since the first years of its establishment, maintains its effectiveness in the entrepreneurial or entrepreneurship ecosystem with a broad perspective. In 2022, we collaborated with the Vehbi Koç Foundation for initiatives that focus on a more livable world. Within this scope, we launched the “Impact Entrepreneurship Program” for initiatives that act with the vision of creating a new world by scaling social and environmental impact with technology. The 9th term startups of the Workup Entrepreneurship Program, of which we are the main supporter and which has been continuing uninterruptedly for 5 years, and the 1st term startups of the Workup Agri Entrepreneurship Program, which was launched in 2021 under the roof of Workup, graduated in 2022. To date, 35 Workup startups have made a significant contribution to the national economy by receiving an investment of approximately USD 12 million during or after the program. Also, in the coming period, we aim to deepen the Workup parent brand by focusing on different verticals. In 2022, we also opened our second Entrepreneurship Branch in Izmir in cooperation with İzQ. Our branch, which differs from traditional banking activities, was designed to serve entrepreneurs and ecosystem stakeholders. As a Bank that believes in a collective working culture and shared wisdom and internalizes these values, we always act with a “people first” approach. We strive to implement the most up-to-date practices in order to keep going as an institution where employees can realize their potential and are proud to work. To this end, in 2022, we continued with projects related to working life as well. We have made progress in agile areas, which are important transformation areas. We continued our investments to implement next-generation working models, which have become widespread especially after the pandemic, and we made the hybrid working model open to all our employees. In 2022, with the widespread use of remote working in corporate life, our employees started to serve free from a location in Maxiofis environments, and the aim is to enhance Maxiofis working environments. Esteemed Stakeholders, In the face of fluctuations in the global economy, the impacts of the climate crisis, and increasing social and economic inequalities, İşbank is positioned as an inclusive business partner. Preparing to celebrate its 100th anniversary, as an institution with deep-rooted corporate values and always looking out for the interests of its country, our Bank has turned its compass towards the principle of sustainable gain for all in these turbulent times. Undoubtedly, the Bank will continue its activities in light of the founding values of our country with the support of all parties that trust it. I would like to extend my gratitude to all our stakeholders who have provided full support for us on this steadfast journey and to all İşbank employees who have always worked with great dedication. Yours sincerely, An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 20 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 21 Looking Into the Future Operating Environment: General Evaluations Global Economy In 2022, the uncertainty caused by the Russia-Ukraine war, as well as the commercial and financial sanctions imposed on Russia, have been the main risk factors for the world economy, especially for European economies. Therefore, while the disruptions in supply chains for basic needs such as energy and food increased global inflationary pressures, the rapid tightening of monetary policies worldwide caused economic activity to lose momentum. In such an environment where global recession concerns increased, international organizations revised their growth forecasts for the world economy downwards and inflation forecasts upwards during the year. According to IMF data, the global economy, which displayed a rapid recovery of 6.2% in 2021, is predicted to have completed 2022 with a growth rate of 3.4%, and the slowdown trend in the global economy is expected to continue in 2023 as well. Despite the slowdown in economic activity, central banks in advanced economies continued to take strong tightening steps to fight high inflation, leading to a decline in the risk appetite for emerging economies. Accordingly, portfolio investments in emerging economies followed a fluctuating course during the year. 2022 2023 2024 IMF Forecasts (January 2023) Growth World 3.4 Advanced Economies 2.7 USA Euro Area UK Japan 2.0 3.5 4.1 1.4 Emerging Economies 3.9 Türkiye Russia China Brazil Inflation Advanced Emerging Increase in World Trade Volume 5.5 -2.2 3.0 3.1 8.8 7.3 9.9 5.4 2.9 1.2 1.4 0.7 -0.6 1.8 4.0 3.0 0.3 5.2 1.2 6.6 4.6 8.1 2.4 3.1 1.4 1.0 1.6 0.9 0.9 4.2 3.0 2.1 4.5 1.5 4.3 2.6 5.5 3.4 Turkish Economy After a strong performance in the first half of the year, the Turkish economy grew by 5.6% in 2022, with a marked deceleration in the second half. In 2022, tax revenues increased rapidly due to the buoyant course of economic activity, especially in the first half of the year, as well as the high course of inflation throughout the year, supporting budget revenues, while budget expenditures increased more moderately compared to revenues. Accordingly, the budget deficit in 2022 stood at TL 139.1 billion, well below the budget target set at the end of 2021 and the MTP forecast announced in September 2022. In 2022, despite the rapid recovery in transport and tourism revenues, the current account deficit displayed a widening trend due to geopolitical developments that pushed up global commodity prices, particularly energy prices, and the slowdown in EU economies. Accordingly, the current account deficit increased nearly 7-fold on an annual basis to USD 48.8 billion in 2022. In addition to global inflationary pressures, strong domestic demand and the lagged effects of the depreciation in the Turkish lira caused inflation to remain high during the year. Annual CPI inflation, which peaked at 85.51% in October, declined from this level due to the base effect and was realized as 64.3% at the end of 2022. D-PPI inflation, which reached 157.7% in October, was 97.7% at the end of the year. The CBRT has cut the policy rate by a total of 500 basis points since August and brought it down to 9% as of November. The volatility in domestic financial markets during the year due to the rapid tightening trend in global financial conditions decreased following the implementation of macroprudential policies. Türkiye’s 5-year CDS premium, which rose as high as 900 basis points during the year, followed a downward trend in the last months of the year and ended the year at around 500 basis points. Türkiye GDP Growth (annual % change) Türkiye Inflation Indicators (annual % change) 11.4 5.6 7.5 3.0 1.9 0.8 D-PPI CPI 200 150 100 50 0 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 Source: TÜİK data Source: TÜİK data Banking Sector* While the banking sector continued to support economic activity in 2022, it maintained its strong outlook. The volume of Turkish Lira loans, including loans to the financial sector, increased by 77.5% on an annual basis, reaching TL 4,749.6 billion as of December 30, 2022. In the same period, the volume of FX loans fell to USD 125.9 billion, with a decrease of 15.7%. Accordingly, the total loan volume expanded by 52.8% as of December 30, 2022 and reached TL 7,100 billion. According to the exchange rate adjusted data, the total loan volume expanded by 38% in this period. As of December 30, 2022, according to the Weekly Bulletin data published by the Banking Regulation and Supervision Agency, the volume of TL deposits, including deposits of banks, increased by 145.7% and reached TL 4,468 billion compared to the same period in 2021 with the support of the FX- protected deposit accounts. The volume of FX deposits in USD terms decreased by 12.5% in this period and was realized as USD 208.4 billion. Thus, as of December 30, 2022, the total deposit volume increased by 68.4% compared to the same period of the previous year and reached TL 8,360 billion. According to the exchange rate adjusted data, the annual increase in total deposit volume was 45.4%. * Calculated using weekly sector data published by the Banking Regulation and Supervision Agency, with participation banks excluded from sector figures. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 22 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 23 İşbank 2022 was a year in which the high inflation outlook prevailed, policy rates remained relatively low, and balance sheets were shaped within the framework of macroprudential measures. Maintaining its balance sheet management with a risk-oriented, dynamic, and sustainable perspective, İşbank increased its asset size by 52.0% to TL 1,408.3 billion by the end of 2022 and maintained its title of being “Türkiye's largest private bank.” In 2022, İşbank continued to support the real sector and households, increasing its cash loans by 53.9% compared to the end of the previous year. The total equity provided by the Bank to the economy exceeded TL 1 trillion by the end of 2022, of which TL 759.3 billion were cash loans and TL 246.7 billion were non-cash loans. Thus, İşbank continued to be the private bank making the most significant contribution to the national economy. Continuing to improve its asset quality indicators in 2022, the Bank’s non-performing loans ratio declined to 3.0% from the previous year-end level of 4.1%. İşbank’s deposit size increased by 56.3% compared to the previous year-end and reached TL 931.1 billion. While the regulations introduced within the framework of the “liraisation” strategy shaped the composition of deposits, TL deposits increased by more than 130% within this framework. İşbank maintained its leading position among private banks not only in total deposits but also in size of demand deposits. Maintaining its strong liquidity level in 2022, İşbank’s total liquidity coverage ratio stood at 155%, while the foreign currency liquidity coverage ratio stood at 473%. İşbank maintained its leading position among private banks with its shareholders’ equity, which increased by 120.4% in 2022 year-on-year and reached TL 191.4 billion. With a capital adequacy ratio of 24.4% in 2022, İşbank became one of the banks with the highest ratio in the sector. As a result of our stakeholders’ confidence in our Bank’s strong structure, İşbank significantly increased its market capitalization during the year and became the bank with the highest market value among private banks by the end of 2022. In 2023, under a macroeconomic outlook in which inflation loses momentum, exchange rates remain stable within a narrow band, and the policy rate remains flat, the banking sector will prioritize the management of balance sheets shaped by macroprudential policies, taking into account liquidity, interest rate, and exchange rate risks. In addition, strengthening capital with products and services to support equity through risk-adjusted returns and profitability will be prioritized. Flexible and agile management will be displayed in the formulation of balance sheet strategies and updating them according to changing conditions. In the operating environment of 2023, in which it will be important to manage customer preferences effectively while adapting to rapidly changing legislative regulations, the impact of legal regulations on growth targets and profitability will be reflected in balance sheet management decisions with a holistic and prudent perspective along with the priority of maintaining customer confidence. With a capital adequacy ratio of 24.4% in 2022, İşbank became one of the banks with the highest ratio in the sector. Global Tendencies, Risks, Opportunities and Forecasts The year 2022 was completed under the impact of high inflation and economic bottlenecks worldwide. The impact of the COVID-19 pandemic, extreme natural events caused by climate change, and political turmoil were other prominent developments of the year. High inflation negatively affects production and purchasing power. Global growth, which was 6.2% in 2021, is predicted to decline to 3.4% in 2022 and 2.9% in 2023. Global inflation is projected to rise from 4.7% in 2021 to 8.8% in 2022 but is expected to decline in 2023 and 2024.1 The predictability of the future values of economic variables such as input prices, interest rates, exchange rates, and expenses is important for making decisions regarding production and investment in the economy. As prediction becomes more difficult in an environment of inflation and uncertainty, it also becomes difficult to make decisions regarding production and investment. Increasing costs due to inflation, various financial risks, and uncertainty adversely affect production. Increasing inflation and decreasing production negatively affect purchasing power. The Organization for Economic Cooperation and Development (OECD) has lowered its forecast for world economic growth to 3 percent for 2022 and 2.8 percent for 2023. It also notes that in developing countries, high energy and food prices have caused deterioration in households’ real incomes.2 Food prices continued to rise in most countries, with inflation in the OECD reaching 10.7%. The highest rates (above 20%) were observed in Estonia, Hungary, Latvia, Lithuania, and Türkiye.3 The 2022 Global Inflation Perception Survey conducted by Ipsos in 28 countries revealed that the purchasing power of 8 out of 10 people in Türkiye has decreased. Respondents stated that they spend more money on food expenditures, give up the brands they are used to, and follow promotions compared to three months ago.4 In the 28 countries where the survey was conducted, people have been worrying about paying their bills for the next six months. How do we manage? For details on İşbank’s practices and performance in this area, please visit the (internal lnk) “An Inclusive and Resilient Economy” section. 1 World Economic Outlook Update, January 2023 2 OECD Economic Outlook 3 Prices and purchasing power parities (PPP) - OECD 4 The purchasing power of 8 out of 10 people in Türkiye has fallen- (bloomberght.com) 5 IPCC, “Climate Change 2022: Impacts, Adaptation and Vulnerability” Report 6 World Economic Forum (WEF), 2022 Global Risks Report 7 Deloitte, Turning Point 2022 8 Deloitte 2022 CxO Sustainability Report The climate crisis continues to top the global agenda. While the climate crisis puts pressure on natural resources and biodiversity by triggering extreme weather events such as droughts and floods, it also causes an increase in socio-economic inequality and humanitarian crises between countries.5 The climate crisis is seen as one of the most important risks facing the world today. According to the 2022 Global Risk Report6 published by the World Economic Forum (WEF), the top global risks include failure to take action for climate, extreme weather, and loss of biodiversity. According to the Allianz Risk Barometer 2022 Survey,7 the increase in natural disasters and climate change are listed in third and sixth place, respectively. Without timely action, climate change is estimated to cost the global economy USD 178 trillion over the next 50 years. The transition to a low-carbon economy in the fight against climate change presents companies with a range of operational, economic, and reputational risks on topics such as adapting green technologies, complying with international and national environmental regulations, and accessing financing. Business leaders now recognize climate change as a planetary emergency. According to Deloitte's 2022 CxO Sustainability Report,8 which examines the concerns and actions of senior executives and companies on climate change and sustainability, 79% of C-level executives or CxOs believe the tipping point to take action on climate change has been reached. Compared to the previous survey, this rate has increased by 20%. Again, 97% of CxOs emphasize that climate change has already negatively affected their organizations, while 50% emphasize that it has negatively affected their operations. The Global CEO Survey9 conducted by PwC reveals that 40% of CEOs include climate change in their strategic risk management. Not only the business world but also society is growing more concerned about climate change. In a survey on climate change perceptions conducted by Deloitte in 2021, 57% of respondents said they “feel concerned about climate change” and 72% said they “believe climate change is an emergency”. The Deloitte Global 2022 Generation Z and Y Survey10 also shows that climate is a top concern for these generations. 11Generations Z and Y think that the world is at a critical threshold in terms of climate change and demand that companies take action on climate change. How do we manage? Please visit the “Climate Action” section for details on İşbank's practices and performance in this area. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 24 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 25 The use of big data and artificial intelligence in the finance sector is on the rise. In the financial sector, which is a data-intensive industry, big data and artificial intelligence applications are being utilized to a great extent thanks to the proliferation of big data, increasing capacity, and decreasing cost of technology. 12 Companies can improve their operational performance with artificial intelligence applications13 (chatbots and digital assistants, robot consultancy, natural language processing, machine learning, intelligent process automation, visual and video data analysis, etc.). In addition, by offering personalized products and services, they gain significant advantages in areas14 such as increasing customer satisfaction and loyalty, reducing risk, gaining a competitive advantage, detecting fraud and fraudulent transactions faster, and making strategic decisions. According to Deloitte's “State of AI in the Enterprise” survey,15 94% of business leaders see AI as critical to success in the next five years. And 76% of respondents plan to increase their investments in AI to realize more benefits. According to the results of the survey conducted by KPMG with over 400 banking leaders, 63% of respondents recognize AI and 54% recognize data analytics as an important tool for competitive advantage.16 McKinsey’s “AI Banks of the Future” report states that AI has the potential to generate USD 1 trillion in additional benefits for banks each year.17 PwC estimates that AI will boost global GDP by USD 15.7 trillion by 2030.18 A new forecast from the International Data Corporation (IDC) Worldwide AI Spending Guide shows that global spending on artificial intelligence (AI) will reach nearly USD 118 billion in 2022 and exceed USD 300 billion in 202619. In the banking sector, the AI market is expected to reach USD 64.03 billion by 2030, up from USD 3.88 billion in 2020.20 Developments such as the “Great Resignation” and the “Silent Resignation” affect companies from all sectors. The workforce crises known as the “Great Resignation” and the “Silent Resignation”, which have become more visible after the pandemic, affect companies from all sectors all over the world. In the USA, resignation rates, which increased every year between 2009 and 2020, decreased due to the uncertainty brought on by the COVID-19 pandemic, but reached a record high as the impacts of the pandemic subsided. According to the US Bureau of Labor Statistics, more than 47 million Americans voluntarily quit their jobs in 2021.21 According to Dr. Anthony Klotz, who conceptualizes this movement as the Great Resignation, people who went through transformative processes during the pandemic quit their jobs or move to new jobs with higher self-satisfaction, with the desire to embark on new personal journeys. Professionals who are used to working remotely during the pandemic do not want to return to the office environment as the pandemic’s impact subsides and are looking for other jobs where they can work remotely.22 The Silent Resignation23 movement, which describes people who, even if they do not resign, refuse work beyond their assigned tasks or become less psychologically engaged at work, is also affecting the world. In the USA, employee loyalty declined further to 32% in the second quarter of 2022, while the rate of those who do not feel loyalty rose to 18%.24 Since the pandemic, the way people relate to their work has changed. People have started to look for more meaning in their jobs, realizing that the extra effort they put in at work is not paying off. Silent resignation is a reaction to a culture of hustle and bustle and burnout from people who are less engaged at work.25 The repercussions of this wave in Türkiye are the desire of skilled labor to work abroad and the decline in job loyalty rates. While the economic crisis had not intensified and the pandemic had not yet started, TÜİK International Migration Statistics for 2019 report that more than 300 thousand people migrated from Türkiye to abroad.26 In a study conducted in Türkiye,27 24 percent of employees state that they are in the process of silent resignation and 46.6 percent state that they are prone to this concept due to reasons such as low salary, work-private life imbalance, lack of clear job description, closed career paths, and long working hours. The rate of those who feel they belong in their workplace is only 18.5 percent. How do we manage? For details on İşbank's practices and performance in this area, please visit the (internal lnk) “Next Generation Banking” section. How do we manage? Please visit the “Decent Work” section for details on İşbank's practices and performance in this area. The transformation of banks into technology companies is accelerating. Cybersecurity remains on the agenda as the most important issue of the digital world. Digitalization continues to shape the future of the banking sector as it does in many other industries. In line with the increasing demand for digital banking experience, banks are focusing on integrating technology into all banking processes and services with the aim of improving customer experience, increasing operational efficiency, and reducing risks. According to Insider Intelligence Research, 39% of retail banking executives say technology has reduced costs, while 24% say it has improved the customer experience. The survey also reveals that 66% of executives believe that new technologies such as blockchain, artificial intelligence (AI), and the Internet of Things (IoT) will have the greatest impact on banking by 2025. On the other hand, there is research that shows that companies face some challenges in adopting these technologies. In a recent survey conducted by Deloitte, 84% of respondents said they had difficulty with artificial intelligence technology, while 65% had difficulty with cybersecurity, 65% with cloud computing, 62% with advanced analytics, and 56% with robotic process automation. How do we manage? For details on İşbank's practices and performance in this area, please visit the “Next Generation Banking” section. Cybersecurity and data privacy breaches, which emerge in different ways every day, create risks for companies of all sizes. Low levels of awareness and inadequate protection practices leave systems and information vulnerable. While cybersecurity vulnerabilities increased by an average of 28.3% annually between 2016 and 2021, it is estimated that the number of data breach incidents in the world exceeded 40 billion in 2021. The cost of data breaches has increased from USD 3.86 million to USD 4.24 million, reaching a historic 17-year high in reported data breaches. 28 The results of Deloitte's cybersecurity survey of 577 senior executives from 26 countries show that cyberattacking software is a major concern, with the biggest impact being disruption to operations.29 According to research conducted by the European Union Agency for Cybersecurity (ENISA) between March and August 2022, the top 10 cybersecurity threats that will emerge by 2030 are; ᆔ Supply chain compromise of software dependencies ᆔ Advanced disinformation campaigns ᆔ Rise of digital surveillance/loss of privacy ᆔ Human error within cyber-physical ecosystems and exploited legacy systems ᆔ Targeted attacks enhanced with smart device data ᆔ Lack of analysis and control of space-based infrastructure and objects ᆔ Rise of advanced hybrid threats ᆔ Skills shortage ᆔ Cross-border ICT service providers as a single point of failure ᆔ Artificial intelligence abuse.30 How do we manage? Please visit the “Information Security at İşbank” section for details on İşbank's practices and performance in this area. 9 PwC, Global Annual Review 2022 10 https://www.deloitte.com/global/en/Industries/government-public/perspectives/the- world-is-ready-for-climate-action.html 11 Deloitte Global 2022 Generation Z and Y Survey 12 Deloitte, Big Data: Time for a Lean Approach in Financial Services 13 https://www.tsb.org.tr/media/attachments/ipek-ulusoy_yapay-zeka-ve-makine- ogrenmesi.pdf 14 https://www.wipro.com/business-process/why-banks-need-artificial-intelligence/ 15 Deloitte State of AI in the Enterprise, 5th Edition, 2022 16 KPMG- Future of Commercial Banking 17 https://www.mckinsey.com/industries/financial-services/our-insights/ai-bank-of-the- future-can-banks-meet-the-ai-challenge 18 https://www.pwc.co.uk/audit-assurance/assets/explainable-ai.pdf 19 Worldwide Spending on AI-Centric Systems Will Pass $300 Billion by 2026, According to IDC 20 https://www.upgrad.com/blog/artificial-intelligence-in-banking/ 21 The Great Resignation Didn’t Start with the Pandemic (hbr.org) 22 Transcript: The Great Resignation with Molly M. Anderson, Anthony C. Klotz, PhD & Elaine Welteroth - The Washington Post 23 When Quiet Quitting Is Worse Than the Real Thing (hbr.org) 24 Is Quiet Quitting Real? (gallup.com) 25 “Silent resignation” after “great resignation” | Independent Türkçe (indyturk.com) 26 TÜİK Corporate (tuik.gov.tr) 27 One out of four young people in Türkiye is in the process of ‘silent resignation’ - (bloomberght.com) 28 https://www2.deloitte.com/content/dam/Deloitte/tr/Documents/technology-media- telecommunications/deloitte-tubisad-bit-2021-raporu.pdf 29 Deloitte (2021 Future of Cybersecurity Survey, N=577) 30 https://www.enisa.europa.eu/news/cybersecurity-threats-fast-forward-2030 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 26 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 27 Increasing and changing regulations create a dynamic risk environment. The impacts of climate change and the pandemic, economic crises, and political uncertainties bring along many regulations for the business world. Along with these regulations, expectations for companies in terms of sustainability and transparency are increasing. This creates a dynamic risk environment for companies. While compliance with regulations requires a high level of effort, non-compliance can result in a lack of stakeholder trust and a damaged brand reputation. Increased regulatory compliance requires collecting and standardizing a range of data, directing it to the right decision makers, and incorporating it into risk and strategic decision-making processes. This process may be challenging for companies. Participants more than 57% in Deloitte survey, which included finance, accounting, sustainability, and legal executives of 300 public companies with over USD 500 million in revenue, indicated that data access and data accuracy or completeness remain their greatest challenges with respect to Environmental, Social, and Governance (ESG) data.31 Companies are expected to monitor not only their own operations but also those of their suppliers in line with regulatory requirements. It is stated that failure to follow ESG regulations in the supply chain can lead to business interruptions.32 Aiming to meet the commitments of the Paris Agreement, the EU Green Deal aims to reduce emissions by at least 55% by 2030 and make the EU carbon neutral by 2050.33 The EU Green Deal is transforming international trade as well as the fight against climate change. It brings a range of responsibilities for both companies’ own operations and those of their suppliers, combining significant opportunities and risks. The Carbon Border Adjustment Mechanism, which is part of the EU Green Deal, directly affects our country, with more than 40% of its exports going to EU countries. Higher costs and a decrease in competitiveness are among the expected impacts.34 The Corporate Sustainability Reporting Directive (CSRD), a new EU legislation, the framework for which was drafted in 2022, requires all large companies to publish regular reports on their environmental and social impact activities. This regulation expands the scope and reporting requirements of the Non-Financial Reporting Directive (NFRD). While the NFRD covers around 11,000 companies, the CSRD will cover around 49,000 companies. 35 The CSRD is binding for companies currently subject to the NFRD with more than 250 employees and total assets of more than EUR 20 million or turnover of more than EUR 40 million. Relevant companies are expected to submit their CSRD-compliant reports for the 2024 financial year on January 1, 2025.36 How do we manage? Please visit the “Transparent and Ethical Management” section for details on İşbank's practices and performance in this area. The impacts of the energy crisis are felt in all sectors and social life. The impacts that emerge when the continuity of energy, which is one of the critical resources for societies, is endangered or interrupted spread to both economic and social life. In this respect, the energy crisis emerges as a factor that threatens sustainable development. The impacts of rising energy prices are felt by all companies. While aviation, shipping, and chemical companies are directly impacted by higher energy prices, the food industry and tourism sectors are affected by second-round impacts.37 38 The oil and gas industry is one of the sectors most affected by the energy crisis. While Russia’s invasion of Ukraine and geopolitical shifts affected energy prices extremely quickly, negotiations on a new nuclear deal with Iran are complicating the energy landscape.39 The Ukraine-Russia conflict had an accelerating impact on the energy crisis. The European Union, which supplies 41% of its natural gas needs from Russia, is the most dependent region in the world for energy from Russia. Russia also plays an important role in the supply of many resources such as copper, nickel, and lithium needed for renewable energy.40 Energy consumption worldwide is still heavily dependent on fossil fuels as today's decarbonization policies are fairly new. In Europe, fossil fuels represent around 70% of final energy consumption. Electricity, which represents 22% of energy consumption, is also largely generated from fossil fuels, mainly gas and coal.41 Energy prices reached record highs, but remain highly volatile. Before the invasion of Ukraine, wholesale gas prices were around 200% higher than a year ago. Gas prices reached more than EUR 340 per MWh in July, more than ten times higher than a year ago. Wholesale electricity prices followed a similar trend. High gas demand during the post-Covid-19 economic recovery also plays an important role in these high prices.42 The indirect impacts of the energy crisis, such as production restrictions, shutdowns, and recessions, have resulted in high energy bills and fuel shortages both in Europe and in many developing countries. In developing economies, where the share of household budgets spent on energy and food is already high, higher energy bills have increased poverty. This hampers progress towards achieving energy access. Even in advanced economies, higher energy bills have impacted vulnerable households and caused significant economic, social and political strains.43 Rising energy prices are hampering food security and the ability to meet humanitarian needs. Millions of people have become dependent on humanitarian assistance to survive. This, in turn, poses an obstacle to efforts to eradicate poverty and achieve other development goals.44 How do we manage? For details on İşbank’s practices and performance in this area, please visit the “An Inclusive and Resilient Economy” section. Russia-Ukraine tensions had a significant impact on the global economy. The World Bank’s Economic Update Report shows that the ongoing war in Ukraine has diminished post- pandemic economic recovery prospects for emerging and developing economies in Europe and Central Asia. As energy price hikes in the aftermath of the Russia- Ukraine war continue to impact the region, economic activity is expected to remain under deep pressure over the coming year, with growth predicted to slow to 0.3% in 2023. In Europe, which continues to hold on despite the invasion so far, some of the region’s largest economies are expected to grow beyond expectations, and some governments are predicted to contract by 0.2% this year with a cautious extension of pandemic stimulus programs. According to analyses by the Economist Intelligence Unit (EIU),45 the conflict between Russia and Ukraine will negatively impact the global economy in the areas of financial sanctions, commodity prices, and supply chains. 31 Heads Up — Executive Summary of the SEC's Proposed Rule on Climate Disclosure Requirements (March 21, 2022; Last Updated March 29, 2022) | DART – Deloitte Accounting Research Tool 32 Key Trends in ESG Regulations in 2022 and Beyond | RegASK 33 Delivering the European Green Deal (europa.eu) 34 Türkiye should see the EU Green Deal as an opportunity to transition to a low-carbon economy | WWF 35 4 key sustainability regulations you should know about in 2022 (sustainlab.co) 36 New rules on corporate sustainability reporting: provisional political agreement between the Council and the European Parliament - Consilium (europa.eu) 37 https://think.ing.com/articles/the-sectors-most-affected-by-soaring-energy-prices 38 First-round impacts: Higher costs from rising energy prices Second-round impacts: Effects in the new normal because energy prices are likely to remain high for at least the next two years 39 https://home.kpmg/xx/en/home/insights/2022/04/top-risks-facing-the-oil-and-gas- industry-in-2022.html As the global impact of US and EU sanctions against Russia is limited, the most serious impact of the Russia- Ukraine conflict on the world economy is expected to come in the form of higher commodity prices. Concerns about supply, destruction of physical infrastructure, and sanctions are also expected to lead to a significant increase in commodity prices. With gasoline prices set to rise by at least 50% this year, on top of last year's fivefold increase and Europe's limited gas stocks, concerns about gas supplies for the 2022/23 northern hemisphere winter season continue. As Russia is a major producer of various base metals (aluminum, titanium, palladium and nickel), prices are expected to continue to rise as long as the conflict continues. This will have a substantial impact on industrial sectors (such as the automotive industry) across the globe. Agricultural commodity prices will also continue to rise as Ukraine and Russia account for more than a quarter of the global wheat trade. Higher commodity prices are expected to boost global inflation in 2023. The EIU expects global inflation to be around 6% this year.46 The impacts of the social dimension of the war have also started to emerge. According to a UNICEF study,47 the war in Ukraine and rising inflation pushed four million more children into poverty in Eastern Europe and Central Asia. This corresponds to a 19% increase since 2021. The study on the impact of the war in Ukraine and the concomitant economic downturn on child poverty in Eastern Europe and Central Asia, with data from 22 countries, shows that children bear the heaviest burden of the economic crisis caused by the war. While children make up 25 percent of the population, they account for nearly 40 percent of the 10.4 million people who fell into poverty this year.48 How do we manage? For details on İşbank’s practices and performance in this area, please visit the “An Inclusive and Resilient Economy” section. 40 https://home.kpmg/fr/fr/blogs/home/posts/2022/03/how-the-russia-ukraine-crisis- impacts-energy-industry.html 41 https://home.kpmg/fr/fr/blogs/home/posts/2022/03/how-the-russia-ukraine-crisis- impacts-energy-industry.html 42 https://home.kpmg/fr/fr/blogs/home/posts/2022/03/how-the-russia-ukraine-crisis- impacts-energy-industry.html 43 https://www.iea.org/topics/global-energy-crisis 44 https://reliefweb.int/report/world/understanding-energy-crisis-and-its-impact-food- security-august-2022 45 The Economist Intelligence Unit / https://www.eiu.com/n/global-economic-implications- of-the-russia-ukraine-war/ (Mart, 2022) 46 https://www.eiu.com/n/global-economic-implications-of-the-russia-ukraine-war/ 47 https://www.unicef.org/turkiye/bas%C4%B1n-b%C3%BCltenleri/unicef-ukrayna- sava%C5%9F%C4%B1-ve-y%C3%BCkselen-enflasyon-d%C3%B6rt-milyon- %C3%A7ocu%C4%9Fu-yoksullu%C4%9Fa 48 https://www.unicef.org/turkiye/bas%C4%B1n-b%C3%BCltenleri/unicef-ukrayna- sava%C5%9F%C4%B1-ve-y%C3%BCkselen-enflasyon-d%C3%B6rt-milyon- %C3%A7ocu%C4%9Fu-yoksullu%C4%9Fa An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 28 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 29 Message from the Sustainability Leader Esteemed Stakeholders As the first national bank of our Republic, İşbank has been one of the leading economic actors of our country with its support for economic development from past to present. Since 1924, İşbank has been contributing to the national economy, providing financing to all sectors, from industry to agriculture, and working to increase the welfare level of society. Our strategic priority We work with the aim of creating shareable and sustainable value for all our stakeholders through our business model, which we define as “İşbank Banking” and which we continuously develop and pass down from generation to generation in light of our corporate values. In order to contribute to the Sustainable Development Goals by increasing our positive impact together with our customers, suppliers, and employees, in short, all stakeholders in our ecosystem, we address sustainability at the highest level and among the strategic priorities in our business plans and transform this approach into concrete outputs. As an organization aware of our responsibility, we address sustainability in a way that includes actions that will contribute to our common future. Since 2015, when we established our Sustainability Management System, we have been addressing our sustainability efforts systematically and in line with international best practices. Our Sustainability Committee, the highest governance body, includes members of our Board of Directors and Executive Board. This governance structure ensures that our comprehensive and multidimensional sustainability activities are managed from a holistic perspective and that interdisciplinary interaction is supported. We address sustainability in all its dimensions with our business model, which actively manages all areas from end to end, from reducing the carbon footprint resulting from our own operations to supporting the green transformation of our customers, from procuring sustainable resources to developing sustainability-themed products and services, offering them to customers, and monitoring the environmental and social impacts of the credits extended. Our decarbonization efforts In order to control the environmental impacts of our own operations, we monitor different environmental indicators in key impact areas such as waste generation, water and energy consumption, and carbon emissions in our Head Office buildings and branches and continue our digitalization efforts for paperless banking. By the end of 2022, we obtained ISO 14001 Environmental Management System certification at all our locations. Based on scientific data, we set the target to reduce our Scope 1 and 2 emissions by 38% by 2025 and 65% by 2030 and to conduct our operations as carbon-neutral by 2035. We made a commitment to the Science Based Targets Initiative (SBTi) for our emission reduction targets to be validated on a scientific basis. In line with this goal, we procured all of our electricity consumption as renewable energy in 2022. Since 2019, we have been sharing our environmental performance with our stakeholders under the CDP Climate Change Program. In 2022, we raised our CDP Climate Change Program score to the “A-” level, which is defined as the leadership category. We aim to be among the Global Climate Leaders in this area. We also report to the CDP Water Security Program to announce our actions on water use and impact management on water resources. In April 2022, we made a commitment to the Net Zero Banking Alliance by taking a very important step to manage the impacts arising from our loan portfolio and set our reduction targets. In order to reach net-zero targets by 2050, our Bank commits to supporting our customers' transition processes to a net-zero economy by focusing its 2030 targets on carbon- intensive sectors and reporting and publishing its progress in emission targets on an annual basis. Joining the Net-Zero Banking Alliance together with the Principles of Responsible Banking will further increase our effectiveness in fighting climate change. The rising green transformation against the risks posed by climate change in the world and in our country creates important opportunities for banks. Banks stand out as institutions that have the power to transform entire sectors through their lending processes thanks to being the main source of financing. Banks’ observance of sustainability principles in their lending processes ensures that the companies that will utilize this financing also operate within the framework of the same principles, enabling better management of environmental, social, and governance risks. After 2015, we allocated all financing of new projects for electricity generation investments to renewable energy projects. In 2020, we took an industry-leading decision; we announced that we would not finance new thermal power plant investments to generate electricity using coal and natural gas as fuel. Subsequently, we added coal mining, gold mining using cyanide, and activities prohibited by national legislation and international conventions regarding the protection of biodiversity resources and cultural heritage to the Exclusion List. At İşbank, since 2012, we have been assessing the potential environmental and social risks of new investment projects with a total investment amount of more than USD 10 million through the Environmental and Social Risk Assessment Model. We evaluate climate change and its consequences not only from a risk perspective but also in terms of the opportunities it creates for green transformation. We see the Carbon Border Adjustment Mechanism, which will affect SMEs exporting to the EU, as an opportunity for our customers to reduce their carbon emissions by increasing their awareness of the issue. In this regard, we continue our efforts to provide our customers with both product packages and consultancy. We aim to contribute to our customers’ green transformation with the different loan products we offer In the field of funding, the sustainability-linked syndicated loans we provide by determining performance indicators that reveal our environmental and social impacts are another We have committed to provide TL 300 billion of sustainable loans by 2026, as well as TL 100 billion of financing for women entrepreneurs within 5 years. Within the scope of our Net-Zero Banking Alliance commitment, we work to establish our emission reduction targets, prioritizing carbon-intensive sectors. Gamze Yalçın Deputy Chief Executive Sustainability Leader indicator of our responsible banking approach. In addition, since 2008, we have been raising funds from abroad to be used for issues related to environmental and social themes, including energy efficiency and renewable energy projects of small and medium-sized enterprises, residential energy efficiency projects, and green housing loans, as well as financing SMEs, women's businesses, and enterprises in prioritized development regions. In 2022, we secured a total of USD 327 million in new sustainability-related funding from the EBRD, IFC, and AIIB. Financing for an inclusive economy We believe that sustainable development can only be realized by increasing the participation of women in business and the female labor force in the economy. To this end, we are increasingly using both our own resources and external funds to support women-owned businesses. As a signatory of the United Nations Women's Empowerment Principles (WEPs), we continue our efforts in many areas, from financing and training activities for female entrepreneurs to the egalitarian attitude that we have displayed towards our women employees. We believe that conducting our activities by taking these internationally approved principles into consideration will create significant added value. We attach importance to the development of inclusive products and services that will enable access to financial services for all segments of society. We concretely demonstrate our understanding of financial inclusion with the support we provide to SMEs, women, and young entrepreneurs and the value we create in agricultural banking. Practices supporting gender equality We are one of the pioneering organizations in our country with our understanding of gender equality. In this organization, which is based on the equality of women and men and where equal opportunities are provided in every field from the first day of employment, we reinforce and develop this deep-rooted understanding in line with the requirements of the era. Our Gender Equality Policy was established in 2021 with the decision of our Board of Directors. This Policy sets out the basic rules and principles regarding our Bank’s practices that observe gender equality in line with the principles of equal opportunity and diversity, both for its employees and its operations.. In 2022, we made this approach visible in the international arena by being listed in the Bloomberg Gender Equality Index, one of the most reputable indices in the world. Our Targets At İşbank, we structure our sustainability efforts with concrete targets. We transparently share our efforts and progress towards the targets we set in our key performance areas. In parallel with drawing the decarbonization roadmap for our loan portfolio in 2023, we will focus on increasing our sustainable finance balance. We have committed to TL 300 billion of sustainable loans by 2026, as well as TL 100 billion of financing for women entrepreneurs within 5 years. Within the scope of our Net-Zero Banking Alliance commitment, we work to establish our emission reduction targets, prioritizing carbon- intensive sectors. “The World is Ours, The Future is Ours” At İşbank, we work with the dream of a beautiful future for everyone. We use our resources for a world where all segments of society participate equally in the economy, gender equality is achieved, natural resources are used responsibly, and children and young people can dream freely. We would like to thank all our stakeholders, especially our employees and customers, for accompanying us on this journey. Yours sincerely, An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 30 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 31 Management Evaluation and Analysis How Do We Create Value? Sustainability at İşbank Loans accounted for 53.9% of İşbank’s total assets of TL 1.4 trillion as of year-end 2022. The Bank’s total cash loans increased by 53.9% in 2022, driven by strong TL loan growth in the first half. Compared to the end of the previous year, retail loans and TL commercial loans increased by 61.0% and 85.6%, respectively, with total growth in TL loans reaching 75.5%. As a result of our strategy to reduce the share of FX loans, the contraction in FX loans accelerated compared to the previous year and was realized at 10.1% in USD terms. Deposits continue to be the main source of funding with a 66.1% share in total liabilities. In 2022, the Bank's total deposit volume increased by 56.3%. Exchange rate-protected deposit products were decisive in deposit development and customer preferences, with TL deposits increasing by 130.4% while foreign currency deposits contracted by 10.7% in USD terms. In 2022, our shareholders’ equity and capital adequacy ratio remained strong, supported by our net profit. We will prioritize the management of our balance sheet with a proactive and prudent approach by considering the risk- return balance in order to ensure that our strong financial structure and capital adequacy are maintained under all conditions in 2023 as well. As the bank of the future, we aim to repay our debt to our country, society and the world, not only through the services we will offer in banking with strong financial results and a sound financial structure, but also by making a difference with our social impact and sustainability initiatives. On the other hand, as a bank that uses technology in the most effective way to differentiate itself from the competition with our innovative approach and that prioritizes entrepreneurship, we will focus on increasing the contribution of the value created in new customers, new products/services, and new businesses/ markets to our operating results every day. Having recorded a strong growth performance in the first half of 2022 on the back of the high contribution from private consumption expenditures, the Turkish economy lost momentum in the third quarter due to macroprudential measures restricting loan supply and grew by 5.6% in 2022. In the Turkish banking sector, loan growth displayed a strong outlook in the first half of the year amid buoyant economic activity. In the second half of the year, the growth in TL commercial loans slowed due to the legal regulations that were put into effect as of the second quarter and subsequently increased in weight. The contraction in FX loans continued to reduce banks’ FX liquidity needs. While deposits have continued to be the main source of funding, exchange rate-protected deposit products, which were announced for the first time in December 2021, supported the transition from FX deposits to TL deposits during the year. In this period, as İşbank, we continued to create value for the development of the country’s economy and society, and to pioneer technological development in the sector with our strong and productive business model, which we structured in line with our vision of “becoming the bank of the future, creating sustainable value with an inclusive and participatory approach” and our strategy of “managing our balance sheet to ensure sustainable and value-added growth while using our internal and external resources in accordance with the priorities of the country's economy and preparing our enterprise for the future by continuously improving our business model along with our group companies and all our business partners in the period of technological transformation.” As of year-end 2022, the Bank maintained its title as “Türkiye's largest private bank” in terms of total assets, loans, deposits, and shareholders’ equity. Aiming to create shareable and lasting value for our country since its foundation, İşbank’s sustainability approach has been summarized as “İşbank Banking”. Our business model: İşbank Banking İşbank Banking is a business model that combines financial and non-financial capital elements with the goal of “producing shareable and sustainable value”. With this model, the Bank aims to generate value for all its stakeholders in the short and long term. This value creation model, which allows the Bank’s sustainability priorities to be integrated into all decision-making processes, positions sustainability as one of the focal points of its corporate strategy. İşbank carries out all its efforts in this direction under the ownership of senior management and with the participation of all employees. Looking out for social benefit, as well as the needs and expectations of all its stakeholders, İşbank associates the outputs of its value creation process with the United Nations Sustainable Development Goals that it has contributed to and manifests its support of global goals with the approach of shareable and sustainable value creation. Please visit https://www.isbank.com.tr/en/ about-us/our-approach for the principles of İşbank Banking. Highlights in 2022 ✓⃞■ ✓⃞■ ✓⃞■ ✓⃞■ ✓⃞■ ✓⃞■ ✓⃞■ ✓⃞■ ✓⃞■ The first Integrated Annual Report, which transparently reports our ESG performance, has been published. The Bank became a member of the Net-Zero Banking Alliance, established by the UN to ensure that member banks align their portfolios with net-zero emission targets in line with the Paris Climate Agreement by 2050. CDP Climate Change Report Leadership Score “A-” Leadership Category CDP Water Security Report Score “B” Governance Category The Bank is listed in the BIST Sustainability 25 Index. Gender Equality Program was established. The Bank was listed in the Bloomberg Gender Equality Index. Became a member of the 30% Club. With the Board decision, the Diversity Policy of the Board of Directors was put into effect. Please visit https://www.isbank.com.tr/en/ about-us/sustainability-milestones to review our past achievements. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 32 İşbank 2022 Integrated Annual Report Our Business Model Financial Capital Human Capital Social-Relational Capital Intellectual Capital Natural Capital Produced Capital Operational Procedures / Value Creation Items Our Strategic Goals Efficient risk management Continuous commitment to our country Value creating technology and innovation leadership Ülkemize kalıcı taahhüt Strong and sustainable financial performance Flawless customer experience Happy and productive human resource Ethical and responsible banking compassionate towards people, society and the environment Contributed SDGs İşbank 2022 Integrated Annual Report 33 Results Output Financial Capital: 53.9% Cash Loan Growth in Total 58.2% Average profit on shareholder equity TL 931.1 billion Total deposits TL 61.5 billion Net profit 55%✓ Percentage of female employees 42.6% ✓ Percentage of female employees in management 97.5%✓ Unionization rate 1.90%✓ Employee turnover rate Individual Net Promoter Score Ranking 1.✓ (among private banks) 361✓ Number of graduates from the "81 Students from 81 Cities" 569 Number of female entrepreneurs who participated in events to support female entrepreneurs 16 thousand Ekonomi.isbank.com.tr subscribers 2 “İmece Workshops”, 15 "Farmer Meetings” 265 Number of technological entrepreneurs who were supported to enter the banking system 106 Number of projects financed under ÇESMOD 100% The amount of energy generated from renewable energy sources of the total energy consumption 75% Share of renewable energy projects in İşbank's total energy generation projects portfolio 190 million pages✓ Paper savings with digitalization 6,169✓ Number of Bankamatik ATMs 68.2 million Number of questions answered with Maxi 䦻 High profitability 䦻 Market share aligned with goals 䧝 The negative impact of the purchasing power declining due to high inflation on financial capital 䧝 The negative impact of uncertainties caused by turbulent operating environment on financial capital Human Capital: 䦻 High employee commitment 䦻 Increasing digital competencies 䧝 The negative impact of decreasing workforce due to increasing digitalization on human capital 䧝 The negative impact of global trends such as great resignation on human capital and intellectual capital Social and Relational Capital: 䧝 The negative impact of increasing digitalization on relational capital 䦻 The positive impact of a large supply pool on financial capital 䦻 The positive impact of high customer satisfaction on financial capital Intellectual Capital: 䦻 The positive impact of low ESG risks with practices regarding problematic lending on financial and natural capital 䦻 Alignment with current banking through supported fintechs 䧝 The negative impact of uncreditable activities on financial capital 䧝 Difficulty of transforming large corporate structures during the transformation of banks into technology companies Natural Capital: 䦻 The positive impact of decreasing resource consumption on natural and financial capital 䦻 Efficient management of climate risks contribute to transformation economy 䧝 The negative impact of increasing "green" regulations on financial and produced capital 䧝 The budget set aside to decrease the environmental impact of operations has a negative impact on financial capital, but a positive impact on human capital Produced Capital: 䦻 The positive impact of continuous operations through superior technological competencies on financial and relational capital 䦻 Decreasing personnel needs have a positive impact on financial capital but a negative impact on human capital 䦻 The positive impact of going paperless on financial and natural capital 䧝 The negative impact of increasing digitalization on relational capital An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 34 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 35 Sustainability Management Our Stakeholders The Board of Directors is the highest level management authority in İşbank’s sustainability management. The “Sustainability Committee” is the management body that is responsible for the Bank’s sustainability activities, which is managed by the Chairperson of the Board, consists of two Board of Directors and Executive Board Members, and where all business units are represented. The Deputy Chief Executive responsible for the Investor Relations and Sustainability function assumed the role of Sustainability Leader. The Sustainability Leader is responsible for representing the Bank in sustainability communications, including stakeholder engagement, and guiding sustainability initiatives. In addition to the Sustainability Committee, consisting of Board of Directors and Executive Board Members, and the Sustainability Leader, there is a Sustainability Coordinator and a Sustainability Working Group. The Sustainability Coordinator ensures that sustainability and climate-related issues are effectively on the agenda of the Bank’s senior management. For this purpose, representatives from all key business units of the Bank come together in the Sustainability Working Group. The aim of the Working Group, which enables information flow between all divisions, is to ensure that sustainability and climate-related issues are included in business decisions. The Investor Relations and Sustainability Division is responsible for monitoring developments in the field of sustainability, analyzing global trends, and ensuring coordination within the Bank regarding related activities. The Bank has structured its perspective on sustainability and its activities in the fields of environment, social and governance under the "Sustainability Management System" it established in 2015 and has since been developing this structure both in an organizational sense and with innovations in the end-to-end business model. İşbank’s Sustainability Policy and other complementary policies approved by the Board of Directors form the basis for the functioning of the Sustainability Management System. For İşbank, establishing regular, timely and two-way communication with stakeholders is a priority in all activities. The Bank believes in the importance of stakeholder communication to achieve its corporate goals and understand stakeholder expectations. İşbank is a supporter and member of numerous local and global initiatives. Thus, the Bank aims to be a learning organization and to be among the actors that produce solutions for social and environmental issues. For the Bank's corporate memberships, please visit the “Corporate Memberships” list. İşbank also actively uses social media to provide its customers and all stakeholders with up-to-date information about the corporation and evaluates stakeholder opinions on these channels. In 2022, the total number of followers of İşbank and its brands on LinkedIn, Youtube, Twitter, Facebook, and Instagram was approximately 2.7 million people. Details of social media accounts can be found in the “Social Media Followers“ list. Sustainability Committee Sustainability Coordinator Sustainability Leader Investor Relations and Sustainability Division Sustainability Working Group Loans Portfolio Management Strategy and Corporate Performance Management Risk Management Purchasing Loan Allocation Financial Institutions Construction and Real Estate Management Product Development and Talent Management Marketing Human Resources You can access İşbank's Sustainability Policy at https://www.isbank.com.tr/en/about- us/Documents/sustainability/sustainability- policy.pdf. Other policies that support İşbank's sustainability approach can be found at the addresses below. Supplier Code of Conduct Occupational Health and Safety Policy Environmental and Social Impacts Human Rights and Human Resources Anti-Bribery and Anti-Corruption Policy Gifts and Hospitality Policy Gender Equality Policy An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 36 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 37 Our Stakeholders Employees Business Partners Suppliers Subsidiaries Shareholders A motivated and qualified workforce is needed to achieve corporate goals. A workforce with digital competencies provides a competitive advantage for the Bank. Why is it important for İşbank? Working Life Evaluation Survey, training programs, performance evaluation, internal communication platforms, regular executive meetings Communication channels Business partners that match up with İşbank’s corporate values and with whom joint projects can be carried out in a mutually beneficial relationship provide financial and reputational benefits for the Bank. Joint projects, thematic meetings, training programs Long-term supplier relationships provide the Bank with operational sustainability and cost advantages. As an integrated organization, İşbank creates value for its investors through the synergy it creates with its subsidiaries. İşbank's broad-based shareholder structure provides the Bank with financial strength. Boards of Directors of subsidiaries, Joint projects, reputation research Daily communication with product and service suppliers, projects aimed at increasing sustainability awareness among suppliers General Assembly and investor meetings, investor presentations, analyst and investor days, promotional meetings, teleconferences, daily communications from the Investor Relations and Sustainability Division, İşbank Investor Relations web page, Public Disclosure Platform (KAP), the Information Society Services Platform established as per the Turkish Commercial Code, Integrated Report, CDP Reports Initiatives Supported İşbank contributes to its corporate know-how and reputation through the initiatives it is a member of and supports. Financial Institutions and Rating Agencies University Students Analysts Public Institutions Customers NGOs and Media Strong partnerships with financial institutions provide the Bank with advantageous financial opportunities. With its employer branding efforts, İşbank aims to be a corporation preferred by the next generation in the future as it is today. İşbank contributes to analysts’ accurate assessments through transparent and timely information sharing, thus guaranteeing that it is a preferred corporation. İşbank ensures its operational sustainability by fully complying with laws and regulations in all geographies in which it operates. The Bank exchanges views with public institutions and expresses opinions on new regulations. With its high corporate reputation, İşbank establishes trust-based relationships with its customers and finances the Bank’s sustainable growth strategy through its broad customer base. İşbank contacts numerous non- governmental organizations to keep abreast of current developments, exchange ideas with other institutions and organizations, obtain information in areas of need, and share its corporate news with the public in a fast and accurate manner. Conferences, seminars, congresses, workshops, replying to written queries Evaluation and information meetings, Corporate Reports, replying to written queries Career days, campus events, sponsorship activities Analyst days, investor meetings, investor presentations, teleconferences, communications of the Investor Relations and Sustainability Division, Annual Report, Integrated Report, Reputation Research Reporting processes, consultation meetings Branches, Bankamatik ATMs, Internet Branch, Telephone Branch and mobile banking channels, customer relations representatives, meetings, customer satisfaction surveys, social media Information and press meetings, private meetings, replying to written queries, online training, mentorship activities and other joint projects Basic expectations from İşbank An egalitarian, development- supportive, fair working environment; A corporation that brings the competencies of the day to its employees; Adoption of new working models A win-win approach with transparent and innovative corporate practices Fair selection and evaluation processes; Fast and easy communication; Corporate capacity building Protecting and enhancing İşbank Group’s reputation, Joint projects and information exchange To directly and quickly get accurate and up-to-date information about İşbank and exercise their shareholder rights Increasing joint projects Transparent reporting on financial and non-financial performance Mentoring activities; Internship and career opportunities Transparent non-financial reporting Full compliance with legislation; exchange of ideas on new regulations Easy to reach; Accurate guidance on products and services; User-friendliness of digital channels Quick response to information requests; Opportunities for joint project development İşbank manages a competent and large pool of suppliers through supplier selection, evaluation, and development systems. İşbank implements projects that will create synergy with its subsidiaries and includes its subsidiaries in its audit processes. İşbank’s Investor Relations and Sustainability Division considers providing timely information to the Bank’s shareholders to be its primary responsibility. İşbank shares its performance with its stakeholders by fulfilling the requirements of its corporate engagements that increase every year. İşbank reports its financial and non-financial performance on various platforms. As one of the most preferred employer brands in Türkiye, İşbank offers internship and mentoring opportunities to a large number of university students every year. İşbank reports its sustainability performance in compliance with numerous international frameworks. As one of the leading players in the sector, İşbank submits its opinions on the regulations related to the sector and carries out all its activities with a full compliance approach. Through its digital channels, İşbank is accessible 24/7. Customer feedback is analyzed and integrated into decision- making processes. İşbank carries out joint projects with numerous non-governmental organizations compatible with its corporate values. İşbank has defined its policies and procedures to be an egalitarian employer. The Bank strives to be the employer of the next generation through trainings developed for employees at all levels and models such as agile working and hybrid working. İşbank aims to establish long-term relationships with business partners who share the values equivalent to its corporate ethical values and to increase the corporate capacity of its business partners. İşbank's Response Related capital element An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 38 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 39 Materiality Analysis at İşbank İşbank identifies and manages its corporate priorities through a dynamic process and a multiple-stakeholder engagement approach. Through the materiality analysis conducted every year, İşbank identifies the topics that have the potential to affect its business model, where stakeholder expectations are high, and which İşbank can influence, and reviews its current list of material topics. The dynamic process of materiality analysis benefits from the opinions of numerous stakeholders, changing regulations and standards, corporate strategies, and prominent developments on the global agenda. In 2022, the material topics reviewed with a “double materiality” approach were divided into 3 groups. Our performance and targets on topics identified as “highly important” have been shared in detail in the Integrated Annual Report. The Report includes exemplary projects and performance indicators for the topics in the “important” group. “Less important” topics are closely monitored by İşbank, but performance in this area is not covered in detail in the report. Double materiality: When determining its material topics, İşbank considers the financial and non-financial impacts of topics with high potential impact on its business strategies and high stakeholder expectations with a holistic approach, taking into account its wide stakeholder network. The financial and reputational risk that each topic in the materiality process poses to the Bank and the level of impact that the topic will have on the relevant stakeholders are evaluated simultaneously. İşbank adopts a long-term impact approach. Therefore, even if the short-term financial and social impact of a topic is low, medium and long-term social and financial impacts are also considered in line with stakeholder expectations. In addition, all topics are also evaluated in terms of İşbank’s potential to influence the topic. For example, while evaluating Climate Action, which is among İşbank’s material topics, during the materiality process, the position of the topic within the Bank’s business strategies, the financial and social risk assessment of the topic, the short and long-term impact of the topic on stakeholders, the existing / developing regulations and standards around the topic were taken into consideration, and the positive and negative impacts of İşbank on Climate Action were evaluated. In the upcoming period, İşbank will continue its work by including stakeholder views in the materiality process in a more dynamic way. Materiality Steps Step 1: Topic list Step 2: Evaluation of topics Based on the 2021 topic list, a list of topics that may be important for İşbank was created. In the process, corporate strategies, changing legislation and standards, sectoral practices, corporate engagements, global trends, and stakeholder expectations were considered. 2.1. Evaluation of stakeholder expectations: The expectations of key stakeholders in the field of sustainability from İşbank were determined as a result of an evaluation of the results of expectation and satisfaction research organized for various stakeholder groups and media research. 2.2. Influence on business strategies: The significance level of the influence of the topics included in the list of topics on the Bank's business strategies was evaluated through comprehensive employee and manager meetings, corporate strategy and engagement requirements, results of benchmarking studies, and global trends. 2.3. İşbank’s impact on the topic: All topics were assessed in terms of the Bank's positive and negative social, economic, and environmental impacts on the topic, and the risks and opportunities the topic poses for the Bank and its stakeholders were explored. Step 3: Selection of material topics: The assessed topics were placed in the materiality matrix. Step 4: Validation meetings: The prepared matrix was approved by İşbank executives. MATERIALITY Topics Matrix Priority High Priority Top Priority l s r e d o h e k a t S r o f e c n a t r o p m I 1⃞■ Cybersecurity and customer privacy 2⃞■ Financial performance and profitability 3⃞■ Combating climate change 4⃞■ Efficient risk management 5⃞■ Digital banking 6⃞■ Employee rights, commitment and satisfaction 7⃞■ Responsible products and services 8⃞■ Responsible financing and investment decisions integrating ESG criteria 9⃞■ Equal opportunity, diversity and gender equality Business ethics, transparency, corporate management and reporting Customer centricity Financial inclusion Importance for İşbank The Bank's environmental footprint Contribution to social welfare The future of business and new working models Responsible procurement and supply chain Changes in Material Topics Compared to the Previous Year The Preferred Employer topic was made a sub-heading of The Corporate Social Responsibility topic title was changed Employee Rights, Commitment and Satisfaction. to Contribution to Social Welfare. The Digital Transformation topic title was changed to Digital Responsible Marketing was moved under Responsible Banking. Products and Services. Open Banking was moved under Digital Banking. The Future of Business and New Working Models topic was The Financial Literacy topic was made a sub-heading of Financial Inclusion. Corporate Governance was added to Business Ethics, Transparency and Reporting. added to the matrix. Employee Volunteerism, Stakeholder Communication, Compliance with Regulations, and Employee Health and Safety were removed from the matrix. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 40 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 41 Topics ESG Impacts Importance for İşbank Relevant Stakeholders Related Corporate Policy/Document How do We Manage? Combating Climate Change Climate change is the most important issue facing the planet. Changing climate conditions are fundamentally altering the way of doing business in many sectors. Those at the bottom of the income pyramid are the most adversely affected by this rapid transformation. The transition to a “Green Economy” is among the most important agenda items of the global economy. Business models that do not consider environmental risks show that companies will face resource issues in the medium and long term, and this, in turn, will create multidimensional risks for financial institutions. İşbank analyzes the risks and opportunities that the transition economy will create and aims to minimize the environmental impact of its own operations and financing activities while increasing the number and scope of products and services that support the green economy. Financial Performance and Profitability The turbulent global economy, rapidly changing risk matrices, and a changing and differentiating competitive environment are factors that make sustainable profitability difficult. Companies without stable financial performance have difficulty surviving in this conjuncture. İşbank aims to create shareable and sustainable value for all its stakeholders through its brand which is identified with confidence in the sector, extensive shareholder and customer base, advanced international connections, and a well-managed risk approach. Digital Banking Increasing digitalization in the financial sector increases the accessibility of financial products and causes traditional banks to compete with fintechs. Banking and finance are among the sectors most affected by increasing digitalization and changing customer preferences. Banks that have difficulty understanding new trends and fail to offer inclusive products are pushed out from the competition. Therefore, improving digital banking activities and communication with customers are among İşbank's main goals. Employee Rights, Commitment and Satisfaction The changing business life after the pandemic has faced many developments that negatively affect employee engagement, such as the great resignation and silent resignation. High employee turnover and loss of talent are among the major operational risks affecting all sectors. İşbank has always been a preferred employer for new graduates with its unique corporate culture. The Bank continues to retain its human resources through internal promotion systems and a rich training portfolio. İşbank meets changing employee expectations with its agile business models, hybrid working systems, and investments in employee development. Equal Opportunity, Diversity and Gender Equality Economic development is only possible if all segments of society participate in the economy on equal terms. In countries where women's participation in the economy is low, statistics on innovation and the distribution of national wealth also lag behind. As part of its banking approach, İşbank supports a participatory economy in which all segments of society contribute. The Bank believes it is an ethical and economic necessity for women to participate in the economy, assume managerial roles, and take part in social life as they wish. Cybersecurity and Customer Privacy Increasing digitalization brings with it cyber threats. The loss or theft of important information poses serious threats to all individuals and organizations. It may result in data loss, security threats, business interruptions, and financial losses. İşbank meticulously manages cybersecurity and customer information privacy due to the requirement to ensure trust in digital banking services, to ensure that next-generation banking services are preferred by customers, to protect corporate reputation, and to minimize legal risks. Responsible Products and Services Efficient Risk Management Banking and finance are among the sectors most affected by changing customer preferences due to the impact of sustainability. Banks that have difficulty understanding new trends and fail to offer inclusive products and services that positively impact the environment and society are pushed out of the market and lose their competitive advantage. İşbank develops products and services that are inclusive of all segments of society and the economy. Developing products that not only take into account the different life stages, economic needs, and sectoral requirements of its customers, but that are also easy to understand and support savings awareness is the basis of the Bank's understanding of delivering responsible products and services. In the new global economy, the management of non- financial risks is as important as financial risks. Many social and environmental risks such as compliance with regulations, risks arising from climate change, human resources risks, and reputational risks affect the sustainability of organizations. At İşbank, the risk management process, which puts “good corporate governance” to the forefront and ensures the segregation of units responsible for monitoring and controlling risk from executive functions, identifies risks in accordance with international regulations and manages financial and non- financial risks together with banking-specific risk management principles. Customers Financial Institutions Society Climate Change Risk Policy Sustainability Policy Environmental and Social Impacts Policy Please visit the “Climate Action” section for our management approach, performance and goals in this area. Shareholders Investors Employees Customers Sectoral Stakeholders Employees Customers Employees NGOs Society Please visit the “Financial Performance” section for our performance in this area. Please visit the “Next-Generation Banking” section for our performance in this area. Human Rights and Human Resources Policy Ethical Principles and Operational Rules Remuneration Policy Gender Equality Policy Occupational Health and Safety Policy Please visit the “Decent Work” section for our performance in this area. Human Rights and Human Resources Policy Gender Equality Policy Board of Directors Diversity Policy Please visit the “Decent Work” section for our management approach, performance, and goals in this area. Customers Sectoral Stakeholders Regulatory Authorities Personal Data Protection Policy Privacy Policy Disclosure Policy Please visit the “Information Security at İşbank” section for our management approach, performance and goals in this area. Customers Public Institutions Disclosure Policy Customer Satisfaction Policy ISO 9001 Quality Policy Please visit the “Responsible Products and Services” section for our management approach, performance and goals in this area. Public Institutions Shareholders and Investors Climate Change Risk Policy Reputational Risk Policy Consolidated Risk Policies Information Systems Risk Management Policy Model Risk Management Policy Compliance Risk Management Policy Anti-Bribery and Anti-Corruption Policy Risk Policies Implementation Instruction Please visit the “Efficient Risk Management” section for our management approach, performance and goals in this area. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 42 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 43 Topics ESG Impacts Importance for İşbank Relevant Stakeholders Related Corporate Policy/Document How do We Manage? Responsible Financing and Investment Decisions Integrating ESG Criteria Business Ethics, Transparency, Corporate Management and Reporting Customer Centricity The banking sector's main responsibility for climate action and responsible banking is to take environmental and social impact factors into consideration during loan allocation processes. İşbank meticulously evaluates the environmental, social and governance risks caused by its lending activities. The Bank supports multi-partner initiatives in the sector to increase knowledge in this area. Customers Society Sectoral Stakeholders Sustainability Policy Environmental and Social Impacts Policy Climate Change Risk Policy Please visit the “Social and Environmental Risk Management in Loans” section for our management approach, performance and goals in this area. Regulations in the banking and finance sector are diversifying every year. The reporting, compliance with ethical principles, and transparency obligations of institutions are increasing at the same rate. The risk of non-compliance is one of the leading risks that threaten all institutions. Compliance with business ethics principles has always been among the uncompromising corporate priorities of İşbank. The Bank shapes all of its stakeholder relations in line with these principles. The Bank strives for full compliance with laws and regulations in all areas and regions in which it operates. The Bank manages its risks in this area through a corporate governance structure complying with international standards and numerous voluntary and mandatory reports. Rapidly changing customer preferences due to the impact of sustainability, increasing access to financial services, and fintechs becoming competitors to traditional banks are developments that increase the importance of understanding changing customer expectations. Corporations that do not invest in this area may lose their competitive advantage in the market. İşbank endeavors to become a reliable partner that all customers can access when required and find easy to work with. In line with its strategy of being "the closest bank to customers", the Bank reviews all its systems and processes by looking at them from a customer-experience point of view. Public Institutions Shareholders and Investors Ethical Principles and Operational Rules Disclosure Policy Anti-Bribery and Anti-Corruption Policy Gifts and Hospitality Policy Please visit the “Transparent and Ethical Management” section for our management approach, performance and goals in this area. Customers Customer Satisfaction Policy Disclosure Policy Please visit the “Customer Centricity” section for our management approach, performance and goals in this area. Financial Inclusion Increasing access to financial products and enabling everyone to contribute to the economy are among the sustainable development goals and among the most important responsibilities of the banking and finance sector. İşbank aims to increase and ensure fair distribution of social welfare by developing products and services for all segments of society. The Bank supports entrepreneurship, transfers resources to SMEs, creates financing resources to increase the participation of women and youth in the economy, and strives to increase financial literacy. Customers Society Sustainability Policy Please visit the “Financial Inclusion” section for our management approach, performance and goals in this area. The Bank's Environmental Footprint In combating climate change, all organizations are working to reduce their environmental footprint. Regardless of the sector, reducing environmental impacts has also become an area of competition. İşbank has set its target to reduce greenhouse gas emissions and shared this target with its stakeholders within the scope of the CDP Climate Change Program reporting. Society Regulatory Authorities Sustainability Policy Environmental and Social Impacts Policy Climate Change Risk Policy Please visit the “Environmental Impact Management” section for our management approach, performance and goals in this area. Contribution to social welfare Brands that show sensitivity to social issues and establish a relationship with society, not only with their products but also with their values, gain a competitive advantage. They increase their legitimacy, brand value, and reputation in the eyes of society. As one of the leading banks in Türkiye, İşbank plays a pioneering role in building a better society. Through its contribution to the national economy and long-term social responsibility projects, the Bank contributes to the dream of a better world for future generations. The Future of Business and New Working Models Alternative working models that increased with the pandemic have become permanent in many sectors. Remote working, hybrid working, and project-based business models are increasingly finding a place in traditional working life and are preferred by employees. İşbank considers the needs and expectations of its employees while maintaining its well-established employer brand. Thanks to its robust technological infrastructure, the Bank supports remote working and hybrid working models. The Bank's ever-increasing number of agile working groups also creates significant value for next-generation employees who desire a dynamic working life. Society Sustainability Policy Environmental and Social Impacts Policy Gender Equality Policy Please visit the “Contribution to social welfare” section for our management approach, performance and goals in this area. Employees Human Rights and Human Resources Policy Gender Equality Policy Please visit the “Decent Work” section for our management approach, performance, and goals in this area. Responsible Purchasing and Supply Chain Supply chain disruptions and incidents of non- compliance threaten operational sustainability in many sectors, and institutions are becoming increasingly responsible for the performance of their supply chains. İşbank establishes long-term relationships with its suppliers based on a win-win approach. The Bank works with companies that have norms equivalent to its corporate sustainability and ethical approach and carries out practices and training activities to improve their performance. Suppliers Business Partners Supplier Management Principles Supplier Management Principles Please visit the “Responsible Purchasing” section for our management approach, performance and goals in this area. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 44 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 45 B oard of Directors Executive B oard M anagers E m ployees B usiness Partners S uppliers S ubsidiaries S hareholders Initiatives S upported Institutions Finance U niversity Students A nalysts Institutions P ublic C usto m ers N G O s Material Topics and Reporting Frameworks Topic Reporting Framework Impact on business strategy Stakeholder Expectations GRI SASB TCFD SKA UN WEPs Digital banking Customer centricity Priorities according to stakeholder groups Cybersecurity and customer privacy Financial performance and profitability Combating climate change Efficient risk management Employee rights, commitment and satisfaction Responsible products and services Responsible financing and investment integrating ESG criteria Equal opportunity, diversity and gender equality Business ethics, transparency and reporting Financial inclusion The Bank's environmental footprint Contribution to Social Welfare The Future of Business and New Working Models Responsible Procurement and Supply Chain The Bank's environmental footprint 302-1, 302-2, 302-3, 302-4, 302-5, 303-3, 303-5, 305-1, 305-2, 305-3, 305-4, 305-5, 306-2, 306-3, 306-4 Employee rights, commitment and satisfaction Responsible financing and investment decisions integrating ESG criteria Digital banking Equal opportunity, diversity and gender equality Financial inclusion 202-1, 401-1, 401-2, 401-3, 402-1 304-2, 413-2 201-3, 405-1, 405-2, 406-1 Combating climate change Business ethics, transparency, corporate management and reporting 205-1, 205-2, 205-3, 408-1, 409-1, 410-1, 415-1 Contribution to social welfare 203-1, 203-2, 413-1 Customer centricity 417-1, 417-2, 417-3 Efficient risk management Cybersecurity and customer privacy 201-2 418-1 Responsible supply and procurement 204-1, 308-1, 308-2, 414-1, 414-2 Responsible products and services The future of business and new working models Financial performance and profitability 201-1, 201-4 Low Medium High An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 46 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 47 İşBank's Sustainability Journey Initiatives Supported in the Field of Sustainability 2012 2 014 2015 The first Sustainability Report was published. The UN Global Compact (UNGC) was signed. The “Environmental and Social Risk Evaluation Model (ERET)” was developed to determine environmental and social risks in loan processes. The Sustainability Policy, which includes Environmental and Social Impacts, Human Rights and Human Resources, Anti-Bribery and Anti-Corruption, Gifts and Hospitality Policies, was approved by the Board of Directors and put into action. The Sustainability Management System was established. İşbank was listed in the BIST Sustainability Index. İşbank Head Office building was awarded the international BREEAM In-Use Excellent certificate. 2016 2017 2018 2019 İşbank was included in the FTSE4Good Emerging MarketsIndex. The Global Compact Türkiye Declaration on Sustainable Finance was signed. Tuzla Technology and Operation Center was awarded the LEED Gold green building certificate. Tuzla Data Center was certified with LEED v4 Gold for Data Centers. The first 100% Green Eurobond transaction among Turkish banks was issued. The first Green Project Financing Loan was provided. The first Integrated Report was published. An Environmental Management System (ISO 14001) was formed in line with international standards. CDP Climate Change Reporting was initiated. 2020 2021 2022 Loans for financing greenfield investments of coal- and natural gas-fired thermal power plants to be established for electricity generation were included in the İşbank Exclusion List. A Sustainability Committee, which operates under the Board of Directors Was established. The Sustainable Bonds Framework was formed. In line with the “ScienceBased Targets” (SBT), the goal of being carbon neutral was set. International ESG risk rating was obtained from Sustainalytics. The UN Women's Empowerment Principles (WEPs) were signed. United Nations Environment Program Finance Initiative (UNEP FI) Principles of Responsible Banking were signed. Gold mining operations using cyanide were added to the Exclusion List. The first sustainability-linked syndicated loan agreement was signed. The Sustainable Finance Framework was formed. Renewable energy has started to be used in all of the Bank's operational areas where renewable energy can be supplied for electricity consumption. Environmental and Social Impact -Assesment Model "ÇESMOD" was developed. The Gender Equality Policy entered into force. The Climate Change Risk Policy was formed. The CDP Water Security Report was initiated. The first Integrated Annual Report was published. The Bank committed to the Net- Zero Banking Alliance (NZBA). Became a member of the 30% Club. With the decision of the Board, the Diversity Policy of the Board of Directors was put into effect. The Bank was listed in the BIST Sustainability 25 Index and Bloomberg Gender Equality Index. Arya Venture Capital Investment Fund, the first gender balance- oriented venture capital investment fund in Türkiye and the MENA region, was established, and the Bank became its main investor. The UN Global Compact and the Declaration of Sustainable Finance The UN Global Compact is the world's largest corporate sustainability initiative. İşbank is committed to complying with the principles of the Global Compact in all its activities. İşbank fulfilled the requirements of the Global Compact, which was renewed in 2022, by becoming a member of the “early adopter” program before the mandatory transition process. İşbank is a member of the Global Compact Türkiye Sustainable Finance Working Group. The group aims to raise awareness on the concept of sustainability across the real sector, especially in the Turkish finance sector, and mobilize the private sector to create the financial resources needed to achieve the Sustainable Development Goals. İşbank is a signatory of Global Compact Türkiye's Declaration of Sustainable Finance, which was prepared by the Global Compact Türkiye Sustainable Banking and Finance Working Group. With this declaration, the signatory banks pledged to take environmental and social risks into consideration during loan assessment processes and support “innovative sustainable finance principles” for investments of USD 10 million and above. With this support, İşbank declared to not only take social and environmental risks into consideration during loan assessment processes but also to play a leading role in embracing an inclusive and sustainable finance approach that supports the development of sustainability-driven banking products as well as the growth of this market. United Nations Environment Program Finance Initiative (UNEP FI) Principles of Responsible Banking (PRB) The Principles of Responsible Banking introduced by the UNEP FI are intended to ensure alignment of the signatory banks with the vision set forth in the United Nations Sustainable Development Goals (SDGs) and the Paris Climate Agreement. These principles, which define the role that the banking sector can play to achieve a green and inclusive economy, are designed to maximize the influence of the banking sector on the efforts toward sustainable economic growth. Being a signatory of the UNEP FI Principles of Responsible Banking and a member of the UNEP FI, İşbank completed its portfolio impact analysis in 2022 and maintained its collaborative efforts in the UNEP FI working groups. United Nations Sustainable Development Goals The Sustainable Development Goals are a call to action that includes the goals to be achieved by the end of 2030 by the United Nations member states. It focuses on solving social, cultural and ecological issues grouped under 17 main topics, such as ending hunger and poverty, combating climate change, gender equality, quality education, and responsible production and consumption worldwide. İşbank is aware of the transformative power and responsibility of the banking and finance sector in sustainable development. Therefore, the Bank supports the United Nations Sustainable Development Goals and reports its direct and indirect contributions to the goals. The Banks Association of Turkey Sustainability Working Group İşbank is an active participant of the the Banks Association of Turkey(BAT) Sustainability Working Group. The group shares information on local and global developments in sustainability, exchanges views on sustainability by holding meetings with regulatory institutions and boards, and develops training programs to support sustainability efforts in the sector. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 48 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 49 Net-Zero Banking Alliance (NZBA) Environmental Initiatives With more than 100 members from 40 countries, the Net-Zero Banking Alliance represents nearly 40% of global banking assets. The Alliance is critical to mobilizing the financial sector for climate action. Members of the Alliance: commit to aligning their portfolios with net-zero emissions targets by 2050, set scenario-based interim targets in priority sectors for 2030 or earlier, prioritize carbon-intensive sectors with the most significant impact when setting targets, set initial targets within 18 months of becoming a member, and disclose progress on the transition strategy set at a high level within one year of setting targets. In April 2022, İşbank made a commitment to this alliance by taking a very important step to manage the impacts arising from its loan portfolio and set reduction targets. In order to reach net-zero targets by 2050, the Bank committed to supporting its customers' transition processes to a net-zero economy by focusing its 2030 targets on carbon-intensive sectors and reporting and publishing its progress in emission targets on an annual basis. The Net-Zero Banking Alliance commitments, along with the Principles of Responsible Banking, will further increase the effectiveness of İşbank in fighting climate change. CDP- Carbon Disclosure Project CDP is an independent global organization that allows publicly-traded companies to disclose information to their investors about how they use natural resources and manage the risks in this area. İşbank has been transparently sharing its environmental goals and performance with its stakeholders within the scope of the CDP Climate Change Program since 2019. The Bank was awarded a score of “A-” Leadership level in the CDP Climate Change Program in 2022. İşbank also began to make disclosures as part of the CDP Water Security Program to report on its water usage as well as the actions taken to manage its impact on water resources in 2021, and its score in this area was "B" Management level in 2022. Science-Based Targets Initiative (SBTi) The Science-Based Targets Initiative directs the private sector's climate action by enabling companies to set science-based emission reduction targets in order to keep the global temperature increase below 1.5⁰C and to meet the targets set in the Paris Climate Agreement. İşbank committed to basing its emission reduction targets on Science-Based Targets. The UN Women's Empowerment Principles (WEPs) The UN Women's Empowerment Principles offer guidance to businesses on how to promote women's empowerment in the workplace and in the community. As a signatory of WEPs, İşbank assumes a role in promoting and facilitating the participation of women in employment. Bloomberg Gender Equality Index The Bloomberg Gender Equality Index (GEI), a capitalization-weighted variable market index that adopts transparency in data reporting and aims to monitor the performance of publicly traded companies, measures gender equality in five categories. İşbank joined the GEI in 2022 and transparently reported its efforts on gender equality internationally. Global Reporting Initiative (GRI) GRI standards are standards that enable all organizations, regardless of size and sector, to understand and report abouttheir impact on the economy, environment, and people. İşbank has been reporting its sustainability performance in accordance with the GRI Standard since 2012. International Integrated Reporting Council - IIRC IIRC is a global coalition of regulatory authorities, investors, companies, standard-setting authorities, accounting experts, and NGOs. İşbank has been publishing its integrated sustainability and annual reports in compliance with the IIRC reporting framework since 2018. Integrated Reporting Association Türkiye (ERTA) Founded to raise awareness on integrated reporting and integrated thinking throughout Türkiye, ERTA strives to enhance the capacity of businesses and ensure that good practices are shared. The association aims to establish integrated thinking as a core value across all institutions and organizations through collaboration, at a national and international level, with organizations from the public and private sectors as well as non-governmental organizations and academic institutions. İşbank is a member of ERTA. 30% Club The 30% Club is a cooperation in which the chairpersons of the board of directors and CEOs aim to improve the gender balance at all levels of their organizations. Behind this cooperation lies the belief that gender balance will make companies more successful and boards more effective. İşbank became a member of the 30% Club in 2022. Refinitiv Refinitiv Information Limited (Refinitiv) is an international rating agency that measures the environmental, social, and governance performance of organizations. İşbank ranked 4th among 1,097 global banks with a score of 94 out of 100 as of the end of 2022 in the evaluation done by Refinitiv. Indexes in which İşbank is listed and scored Sustainalytics Sustainalytics is an internationally recognized research and rating organization that focuses on sustainability and evaluates the environmental, social and governance performance of organizations. İşbank received a rating of 18.6 in the ESG assessment for 2022, achieving a "low risk" level. The Bank's objective is to strengthen its funding structure and become a key player that promotes sustainable and inclusive economic growth by gaining access to green/ sustainable funds from international markets by making use of this and other similar ratings from organizations that conduct an in-depth assessment of the Bank's sustainability performance. FTSE4Good Emerging Markets Index BIST SÜRDÜRÜLEBİLİRLİK ENDEKSİ The "FTSE4Good Emerging Markets Index", launched by the global index and data provider FTSE Russell under the guardianship of the London Stock Exchange, is viewed as one of the key global indices that organizations take into account as they seek to invest in companies that demonstrate good sustainability practices. The index, which was launched to encourage financial institutions to take environmental, social and governance criteria into consideration when making investment decisions, assesses the performance of organizations against such criteria. BIST İşbank has been included in the "FTSE4Good Emerging SÜRDÜRÜLEBİLİRLİK Markets Index" since 2016. The Bank also aims to be listed ENDEKSİ ŞİRKETİ in the Dow Jones Sustainability Index in the future. BIST SUSTAINABILITY INDEX BIST Sustainability Index BIST The BIST Sustainability Index was created to help the companies listed in Borsa İstanbul gain a better SUSTAINABILITY INDEX CONSTITUENT COMPANY understanding of sustainability and embrace best sustainability practices and includes only those companies that are publicly traded in Borsa İstanbul and have a top- level corporate sustainability performance. İşbank has been included in the "BIST Sustainability Index" since 2015. In addition, it was included in the BIST Sustainability 25 Index in 2022 with its successful performance in environmental, social, and governance areas. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 50 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 51 Contribution to Sustainable Development Goals İşbank considers the UN Sustainable Development Goals (SDGs) as an important component of its sustainability strategy and monitors and reports its performance against these goals. The banking and finance sector has the necessary expertise and resources to be able to offer solutions, both direct and indirect, to global issues. The sector's transformative power and leverage effect on the economy mean that it is well-equipped to make significant contributions to the Sustainable Development Goals. İşbank indirectly contributes to these goals by providing the necessary funding for solutions that have the potential to help solve the issues associated with the 17 development goals. İşbank directly contributes to 7 goals that fall into its field of activity. Contributed SDGs İşbank's Approach Targets to which the Bank Contributes Material Topic 4.1 Ensuring that all girls and boys complete primary and secondary education 4.2 Ensuring that all girls and boys have access to quality preschool education 4.3 Increasing access to technical and vocational education 4.4 Improving technical and vocational skills and entrepreneurship 4.5 Eliminating gender disparities in education 4.7 Achieving literacy and numeracy in the field of sustainable development 4.a Providing inclusive learning environments for all 5.1. Ending all forms of discrimination against women and girls everywhere 5.2. Eliminating all forms of violence against all women and girls in public and private spheres, including trafficking, sexual and other types of exploitation 5.5. Ensuring women's full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life 5.a. Undertaking reforms to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources, in accordance with national laws 5.b. Enhancing the use of enabling technology, in particular information and communications technology, to promote the empowerment of women 5.c. Adopting and strengthening sound policies and enforceable legislation for the promotion of gender equality and the empowerment of all women and girls at all levels 7.2 Increasing investments in renewable energy 7.3 Increasing energy efficiency İşbank believes that easily accessible and quality education is essential for sustainable development. Therefore, the Bank not only invests in the development of its employees, but also contributes to Türkiye’seducation quality through programs led as part of its long- term social responsibility projects. İşbank believes that the participation of women and girls in economic and social life is one of the most important components of sustainable development. Within the scope of the Gender Equality Program, the Bank implements projects that encompass the entire value chain, including its employees, customers, business partners, suppliers, and society at large. İşbank supports the transition to a low-carbon economy and puts up the finance for renewable energy investments with the aim of energy transformation. The Bank funds raising for the renewable energy sector by committing itself to utilizing renewable resources in its operations. Strategic Area Decent Work, Contribution to Social Welfare Employee Rights, Commitment and Satisfaction, Contribution to Social Welfare Equal Opportunity and Diversity, Decent Work, Responsible Banking Responsible Products and Services, Financial Inclusion Climate Action, The Bank's Environmental Footprint Climate Action, Operational Impact Management Contributed SDGs İşbank's Approach Targets to which the Bank Contributes Material Topic 8.2: Increasing the economic added value created 8.3: Creating more decent jobs 8.4: Decoupling economic growth from environmental degradation 8.5: Achieving full employment and decent work for all women and men 8.6: Increasing youth employment 8.7: Eradicating forced labor and ending modern slavery 8.8: Protecting labor rights 9.2: Promoting inclusive and sustainable industrialization 9.4: Supporting clean and environmentally-friendly technologies 9.5: Increasing the budget for Research & Development activities 10.2: Promoting inclusive economic growth for all 10.3: Eliminating discrimination 10.4: Adopting policies that can prevent inequality Responsible Products and Services, The Bank's Environmental Footprint, Combating Climate Change, Financing and Investment Integrating ESG Criteria, Employee Rights, Commitment and Satisfaction, Responsible Products and Services, Combating Climate Change, Financing and Investment Integrating ESG Criteria Responsible Products and Services, Employee Rights, Commitment and Satisfaction Strategic Area An Inclusive and Robust Economy, Decent Work An Inclusive and Robust Economy, Next- Generation Banking An Inclusive and Robust Economy, Decent Work 13.1 Strengthening resilience to climate-related hazards and natural disasters 13.3 Improving awareness on climate change and adaptation Climate Action, The Bank's Environmental Footprint Climate Action, Operational Impact Management Besides its widespread network of branches and digital banking applications, İşbank also supports access to financial services and contributes to social welfare through products and services developed for disadvantaged customer groups. By making its unbiased and comprehensive economic reports electronically accessible to all, the Bank wishes to allow stakeholders from different backgrounds to benefit from its intellectual knowledge. İşbank also creates value by offering its employees a fair and decent work environment. Supporting sustainable industries and investing in scientific research and innovation are essential to making sustainable development possible. İşbank supports the transition to the new economy by focusing on digital banking solutions, financing infrastructure investments, performing innovative development projects, and supporting startups. The banking sector has an important role and responsibility to provide financial resources so that economic inequalities can be eliminated. İşbank is against all kinds of discrimination. The Bank strives to create sustainable value for all stakeholders by providing a fair work environment, increasing access of disadvantaged groups to financial services, and supporting long-term social responsibility programs. Supporting the transition to a low-carbon economy, İşbank takes environmental impacts into consideration when offering products and services. The environmental and social impacts of the projects financed are rigorously reviewed to ensure that appropriate actions are taken to minimize/eliminate potential risks that may arise from the projects. As a member of the Net-Zero Banking Alliance (NZBA), in 2022, the Bank continued to support the transition of the real economy to net-zero emissions and carbon-free strategies. The Bank help tackle the-climate change by reducing its environmental footprint. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 02 Reliable Financial Actor 54 An Inclusive and Robust Economy 76 Climate Action 88 Next-Generation Banking 54 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 55 Inclusive and Robust Economy inclusive and robust economy represents an economic growth model which allows everyone to benefit from economic well-being and creates opportunities for all. As İşbank, we strive to ensure that the growth potential that the financial sector can create through its leverage effect is equally reflected in all segments of society. Related Capital Elements: Relevant Stakeholders: ᲁCustomers ᲁPublic institutions and regulatory authorities ᲁSectoral stakeholders ᲁInvestors and shareholders Material Topics ᲁCombating Climate Change ᲁFinancial Performance and Profitability ᲁFinancial Inclusion ᲁCustomer Centricity ᲁResponsible Products and Services Risks Opportunities High inflation and falling purchasing power because of supply chain disruptions caused by the COVID-19 pandemic Global uncertainties making long-term planning difficult Declining customer loyalty as a result of increased digitalization and reduced customer contact Losing touch with developments such as platform business models and sharing economy, which are essential components of the new economy Penalties and sanctions that may be incurred due to rapidly changing regulations and non- compliance Inequalities due to large sub-populations being unable to access financial resources Reputational risks to the sector due to complex and non-transparent financial transactions and processes The financial impacts of global and national actions expected to be taken to fight against climate change Extreme weather conditionsand loss of biodiversity as a result of the global failure of actions to address climate change Increasing customer satisfaction by developing products and services according to their expectations and needs thanks to regular customer communication with experienced İşbank personnel serving customers in addition to digital channels İşbank's ability to quickly make use of emerging opportunities thanks to its robust financial structure The Bank's dynamic and proactive business strategy that prioritizes sustainable growth Increasing the Bank's penetration through products specifically developed for disadvantaged groups Contributing to the global fight against climate change by offering products and services that support customers' transition to a carbon neutral economy Expanding the customer base by developing products and services that address the needs of all groups of society Increasing customer satisfaction by providing customers with accurate and timely information about products and services Contributed SDGs Key Performance Indicators Total Cash Loan Growth (%) Non-performing Loan Ratio (%) 2019 4.7 6.5 Swap-adjusted Net Interest Margin (%) 3.71 Net Fees and Commissions Growth (%) 26.4 OPEX Growth (%) Cost / Income Ratio (%)** 21.8 38.8 Return on Average Tangible Equity (%) 12.1 Return on Average Assets (%) Capital Adequacy Ratio (%) Tier 1 Ratio (%) Leverage (%) Number of Customers (million) 1.39 17.87 14.97 9.07 19.50 Individual Net Promoter Score Ranking (among private banks) 1 Customer satisfaction score (%) 81.2 Number of people reached through Farmer Meetings Number of disabled-friendly Bankamatik ATMs 4,485 4,410 Number of female entrepreneurs who participated in events to support female entrepreneurs 425 Number of events organized in support of SMEs 34 2020 27.7 5.6 (6.5)* 4.37 0.9 20.5 32.9 11.8 1.25 2021 2022 42.9 4.1 3.14 35.6 34.9 30.9 20.0 1.92 53.9 3.0 6.85 111.9 113.9 25.8 58.2 5.32 18.68 (18.02)* 20.36 (16.53)* 24.36 (21.49)* 14.73 (14.17)* 15.78 (12.49)* 20.51 (17.91)* 7.88 20.00 1 86.2 1,500 4,598 448 40 6.75 20.7 1 90 1,861 5,113 267 29 9.19 22.8✓ 1✓ N/A***✓ 7,000 5,731✓ 2,328**** 19 Number of İŞ'TE SME website views 1,112,126 550,413 439,000 410,278✓ Improving financial literacy and savings awareness Number of feedback responses communicated to the Customer Relationship Program More than 21 thousand students participated in the workshops held at İşbank Museum. Museum workshops could not be held from March 2020 onwards due to the COVID-19 measures put in place. Museum workshops could not be held due to the COVID-19 measures put in place. In 2022, 11,910 students participated in the workshops held at İşbank Museums. 466,708 824,456 656,000 693,162 * Excluding impact of BRSA measures. ** Adjusted rates included in 2019, 2020, 2021 and 2022 investor presentations. *** As of 2022, Retail and Commercial Net Promoter Score are tracked instead of the overall customer satisfaction score. **** Calculated by including WeLead (Leading Women Entrepreneurship for Accelerating Development) and Arya Women Investment Platform studies. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 56 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 57 Targets Targets for 2022 TL Loan Growth ~45%(1) TL Deposit Growth ~60%(1) Return on Average Tangible Equity >40%(1) Swap-adjusted Net Interest Margin >5%(1) 75.5% 130.4% 58.2% 6.8% Increase in Net Fees and Commissions Income > 80%(1) 111.9% OPEX Growth at Inflation Levels OPEX / Operating Income 35-36% NPL Ratio <4%(1) Net Cost of Risk <125 bp(3) Capital Adequacy Ratio (excluding impact of BRSA measures) >15% (1) Revised expectation as of August 8, 2022 (2) Return on average equity (3) Including exchange rate effect 113.9% 25.8% 2.96% 95 bp(2) 21.5% Realization in 2022 Realization Targets for 2023 ✓⃝ ✓⃝ ✓⃝ ✓⃝ ✓⃝ ✓⃝ ✓⃝ ✓⃝ ✓⃝ >40% ~30%(2) >5% ~80% ~80% <3% ~150 bp >15% Financial Performance and Profitability İşbank maintains its leading position in its sector with its strong capital structure and profitable and successful growth strategy. The Largest Private Bank in Türkiye İşbank - the largest private bank in Türkiye - increased its total asset size to TL 1,408.3 billion in 2022. Performing above its targets this year, İşbank maintained its leadership among private banks in terms of the size of total loans, deposits, and equities during the same period. İşbank is the private bank that makes the most significant contribution to the national economy with a total size of cash loans reaching TL 759.3 billion as of the end of 2022. Loans in TL grew by 75.5%, while loans in foreign currencies decreased by 10.1% compared to the end of the previous year, excluding currency impact. The resources provided by the Bank to the economy through non-cash loans amounted to TL 246.7 billion as of the end of 2022. At the end of 2022, 53.9% of the Bank's total assets consisted of loans, while the ratio of its securities portfolio to its total assets was 19.8%. Thanks to its stable growth policy and effective risk management practices in loan allocation processes, İşbank achieved an NPL ratio of 3.0% at the end of 2022. Extensive Customer and Shareholder Base İşbank boasts an extensive shareholder base which consists of nearly 240 thousand individual and corporate investors. As of the end of 2022, 37.31% of the Bank's capital was held by İşbank Members' Supplementary Pension Fund, which has a membership base of approximately 49 thousand employees and retirees. İşbank was serving 22.8 million customers as of the end of 2022. Widespread Deposit Base With its broad network of services and diversified digital contact points, İşbank offers its customers a wide range of products through various channels and continues to be the bank of choice among savers. The total size of deposits of İşbank reached TL 931.1 billion in 2022, with a 56.3% increase. TL deposits increased by 130.4% compared to the end of the previous year, while deposits in foreign currencies decreased by 10.7%, excluding currency impact. Introduced at the end of 2021 and widely used throughout 2022, “Exchange rate-protected deposit accounts” made a significant contribution to the increase in Turkish currency deposits. The share of demand deposits in total deposits was 45.5% at the end of 2022. İşbank maintained its leadership among private banks in terms of the size of demand deposits, as well as total deposits and deposits in foreign currencies in 2022. Diversified Funding Base Deposits, which accounted for 66.1% of the total liabilities at the end of 2022, continued to be the primary funding source of İşbank. İşbank continued to make use of non-deposit funding sources in domestic and foreign markets in order to diversify funding sources and extend the maturity structure of its liabilities by taking funding costs into consideration. İşbank's non-deposit sources, which consisted of repo transactions, funds borrowed, securities issued in domestic and foreign markets, and subordinated debts, accounted for 12.3% of the total liabilities at the end of 2022. Strong and Robust Financial Structure The size of İşbank's shareholder equity reached TL 191.4 billion at the end of 2022 with a 120.4% increase compared to the end of the previous year. Maintaining its strong capital structure, İşbank's capital adequacy ratio was 24.4% at the end of the year. The Bank achieved a net profit of TL 61.5 billion in 2022 with a return on average equity of 46.8% and a return on average assets of 5.3%. The Bank's share in deposit markets calculated based on the monthly sector data dated December 2022 as published by BRSA: A total market share of 14.2% in savings deposits, with 11.3% and 15.7% respectively in Turkish Lira and foreign currencies A total market share of 12.5% in the total deposits market (excluding Banks deposits), with 9.5% and 14.1% respectively in Turkish Lira and foreign currencies. In Q4 of 2022, consumer loans grew by 9.3% with an increase of TL 7.3 billion, while credit cards and total personal loans increased by 9.5% and 9.3%, respectively, compared to Q3. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 58 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 59 Composition of Assets (%) Cash and Banks Securities Loans Subsidiaries and Affiliates Other Total Composition of Liabilities (%) Deposits Funds Borrowed and Money Markets(1) Other Liabilities Shareholders' Equity Total 2022 15.8 19.8 53.9 5.7 4.9 100 2022 66.1 12.3 8.0 13.6 100 2021 22.2 15.4 53.2 4.3 4.9 100 2021 64.3 19.6 6.7 9.4 100 (1) Includes Turkish Lira and foreign currency debt instruments issued and subordinated debts. Key Financial Items (TL Million) 2022 2021 Change (%) Ranking Among Private Banks Total Assets 1,408,323 926,569 Loans Deposits Shareholders' Equity 759,289 493,378 931,077 191,376 595,628 86,839 52.0 53.9 56.3 120.4 Key Financial Ratios (%) Interest-Earning Assets(1) / Total Assets Loans / Total Assets Loans / Deposits NPL Loans / Total Loans NPL Coverage Ratio Demand Deposits / Total Deposits Shareholders’ Equity / Total Liabilities Capital Adequacy Ratio Return on Average Equity(2) 2022 88.2 53.9 81.5 3.0 74.4 45.5 13.6 24.4 46.8 (1) Interest-earning assets include Turkish Lira and foreign currency required reserves. (2) Averages calculated based on quarterly balances. 1 1 1 1 2021 89.3 53.2 82.8 4.1 66.2 47.9 9.4 20.4 18.4 İşbank and its Activities in 2022 Corporate Banking International Banking With corporate banking services, İşbank provides local corporations and international companies with services and financing solutions tailored to their needs. >⃞■Products and Services: Project Financing, Risk Management Solutions (Hedging), Digital Solutions, Cash Flow Products >⃞■Developments in 2022: In 2022, İşbank focused on sustainable profitability to respond to the end-to-end needs of its customers by considering ecosystem profitability. By deepening the ecosystem networks of legal entity customer groups, product and service infrastructures that digitalize cash flows, especially through next-generation digital banking and digital platforms, were effectively made available to customers. Innovative models were designed to deepen the extensive customer base, especially for regaining customers whose numbers initially had decreased. As a result of all these activities, a significant improvement was made in TL commercial deposits and commission income items at the end of 2022 compared to 2021. Despite the volatility in the global and national conjuncture, in the business unit where TL/ FX cash loan investments were effectively managed, loan demands were met with a holistic profitability approach by considering the right priorities, keeping the asset quality in the forefront in a way to observe the sustainability of our current loan portfolio and Bank customers. In the funding approach, which prioritizes TL/ FX export loans which provide strong support to the portfolio and asset quality with their deepening and side income/earnings impact on the Bank’s customers, their high correlation with the economic growth activity of our country, and their relatively short-term structure compared to other loans, an optimum management approach was shown regarding loan maturity structures and durations. İşbank collaborates with correspondent banks in processing foreign trade transactions and payments of its customers, and effectively manages correspondent bank relations according to the principle of reciprocity. The bank also aims to increase its share in the foreign trade market and obtain funds from internationalmarkets . In addition to foreign trade transactions, issuance of letters of guarantee, wire transfer services and TL account transactions to be processed in Türkiye upon demand of customers of correspondent banks, İşbank also fulfills other service demands in accordance with the applicable law. In order to ensure that its customers can complete their supply processes without interruption by facilitating their access to appropriate financing solutions and products according to their needs, İşbank maintains its efficient and sustainable collaborations with export insurance, credit agencies, and other financial organizations. >⃞■Developments in 2022: As of year-end 2022, İşbank had nearly 1,018 correspondent banks in 119 countries. Due to global inflationary pressures and the slowdown in the global economy, the importance of efforts to provide resources for customers’ energy efficiency projects increased. In parallel with the developments in the world and in the sector, İşbank secured two sustainability-linked syndication loans in June and November 2022, and, within this framework, set up various performance indicators related to environmental and social impact, as was done in the syndication loans secured in 2021. Within the scope of the securitization program based on foreign remittance flows (“Diversified Payment Rights”), the Bank obtained a total of USD 227 million in funds from the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) in August 2022. In September 2022, İşbank signed a USD 100 million loan agreement with the Asian Infrastructure Investment Bank (AIIB) and realized its first transaction with the relevant institution. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 60 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 61 Capital Markets Transactions With its subsidiaries in capital markets, İşbank continues its brokerage services in capital market instruments such as equity markets, precious metals, derivatives and investment funds and offers custody and fund valuation services. As a customer-oriented bank, it also continues its product development and infrastructure projects to meet customer needs in the best way possible. >⃞■Developments in 2022: To obtain long-term funding and diversify funding sources, the issuance of debt instruments was continued in 2022 as well. In 2022, İşbank continued to issue debt instruments of different types and maturities in order to provide long-term funding compared to deposits, diversify the existing funding structure, eliminate the maturity mismatch between asset-liability balance sheet items, and prevent interest rate risk due to short maturity. By the end of 2022, İşbank issued domestic commercial papers and bonds with a nominal value of TL 4.8 billion through sales to qualified investors and TL 4.9 billion through public offerings, contributing to the diversity of TL-denominated products offered to customers. İşbank maintained its leadership in the brokerage sector with a trade volume of TL 1.1 trillion in the Borsa İstanbul Debt Securities Market as of year-end 2022. Generating 8.30% of the trading volume in the Borsa İstanbul Equity Market with its subsidiary İş Investment as of year-end 2022, İşbank maintained its position among the leading institutions in the market. As of year-end 2022, the number of investment funds for which custody services were provided increased by 46% and their size by 121% compared to the same period of the previous year. The Bank continues to play a leading role in the sector in terms of the number of investment funds and asset management companies it works with. The investment fund balance, which stood at TL 25.7 billion at the end of 2021, increased by 93% to TL 49.6 billion in 2022 as a result of the intense demand of customers seeking returns. In 2023, when this investor interest is expected to continue, in order to increase asset management commission revenues and provide customers with real return opportunities in a negative real interest rate environment, the Bank aims to organize regular investment fund sales campaigns together with its subsidiary İş Portföy Yönetimi A.Ş through its efforts to develop new products in investment funds, to improve channel-based customer experience, and to continuously train and activate sales and marketing functions. The balance of equities, which stood out as the investment product in which customers showed the most interest in 2022, increased by 207% in 2022, reaching TL 157.5 billion. In addition to the balance, the remarkable increase in the volume of customer share transactions in 2022 made a positive contribution to the Bank’s commission income. Commercial Banking In compliance with its mission, İşbank stands by industrial organizations, tradespeople, SMEs and other miscellaneous businesses. Being present at all points of commerce, İşbank offers products and services that create value for its customers throughout Türkiye with its widespread branch network. >⃞■Products and Services: Business Credit Card, Maximum İşyerim, POS, ÇekCepte, Instant POS, Instant Commercial Loan, Instant Commercial Products, Digital Overdraft Current Account, Maximiles TIM Exporter Card, Instant Agriculture Loan, SME Loans, İmece Card, İşim Card, Tarsim, İmeceMobil, DijiKolay, Denizleri Koruyalım (Let's Protect the Seas) Loan, Digital Supplier Finance System, Project Financing, Risk Management Solutions (Hedging), Digital Solutions Private Banking İşbank Private Banking continues to offer customized investment products according to the needs and preferences of its customers through its asset management-oriented business model structured in cooperation with the Bank’s subsidiaries İş Portföy, İş Yatırım, and Anadolu Hayat Emeklilik. >⃞■Products and Services: Asset Management, Privia Black Credit Card, Privia Investment Fund, Privia Consumer Loans, Privia Pension Plan, Privia Motor Insurance, Financial Status Report, Privia Line >⃞■Developments in 2022: Privia Black credit card, which is designed to be allocated only to private banking customers and provides privileged advantages in luxury brands and companies in line with the expectations of customers, was offered to customers in April 2022. By the end of 2022, 70% of private banking customers with credit cards were allocated Privia Black credit cards. As of year-end, with the contribution of the Privia Black credit card, credit card expenditures of private banking customers increased by 168% compared to the previous year. The Bank's asset management-oriented business model, integrated with its subsidiaries, aims to meet the needs of customers in all areas of life with high standards of service delivery. Within this scope, the Bank adopted an agile working model called the Subsidiary Desk, which was implemented with competent personnel from İş Portföy, İş Yatırım, Anadolu Hayat Emeklilik, and Anadolu Sigorta subsidiaries, and products and services were offered to customers in a coordinated manner. As a result of the work carried out within the framework of an aligned structure; ᆔThe total amount of funds managed in cooperation with İş Portföy increased by 55%, including family funds. ᆔParticipation share generation in Anadolu Hayat Emeklilik products grew by 26%, while the total amount of savings grew by 76%. ᆔAnadolu Sigorta premium production grew by 126%. In line with the strategy of expanding private banking service points, efforts were accelerated for commercial company partners in need of asset management, and it was aimed to improve and deepen the use of money and capital market products. In addition, İşbank Private Banking offered its customers various arts and sporting events throughout 2022, depending on their tastes and preferences. İşbank Private Banking was named the best bank in Türkiye in the Family Wealth Management and Financial Planning category in the Euromoney Private Banking and Wealth Management survey in 2022. Payment Systems İşbank's activities in the field of payment systems have a simple goal:to offer ‘‘standing by its customers with a perfect user experience’’ when they need it. Therefore, to ensure ease of use of its products and services for daily use, the Bank tries to understand the needs of users with an average level of financial literacy while designing products and services that will be commonly used. >⃞■Products and Services: Personal and Business Credit Cards, Personal and Business Debit Cards, MaxiPara Cards, İmece Cards, Dealer Cards, Instant Card Applications, Applications for Money Transfers Between Cards, Virtual and HCE Cards, Interest and Fee Applications, Deferred Payment with Interest and Installment Transactions, Installment Limitations, Account Statement, Repayment and Duration of Delay, Points and Miles Applications, Co-branded Card Applications, Contactless Payment >⃞■Developments in 2022: The Moka Super POS (Virtual) campaign, which enables small and medium-sized companies to make installments to different bank cards with a single virtual POS, started to be offered to our customers through our İşCep and Commercial Internet Branches. By being integrated with transportation infrastructure providers in various cities of Türkiye, it became possible to use contactless credit and debit cards as transportation cards by scanning them through the Bank's contracted merchant system. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 62 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 63 Cross-Border Banking İşbank Group carries out its cross-border banking operations through its branches, subsidiary banks, and agencies abroad. İşbank has a presence in 11 different foreign countries. 9 of a total of 33 branches belong to Frankfurt-based (Germany) İşbank AG, whereas Moscow-based (Russia) JSC İşbank has 1 and Tbilisi- based (Georgia) JSC İşbank Georgia has 2 branches. In addition, there are 2 representative offices in Kazan and St. Petersburg, which are affiliated with JSC İşbank. In addition to the aforementioned, İşbank has 2 branches in Iraq, 2 in Kosovo, 2 in the UK, 1 in Bahrain and 14 in the Turkish Republic of Northern Cyprus (TRNC). The Bank has 2 representative offices, one in Shanghai (China) and the other in Cairo (Egypt). >⃞■Developments in 2022: İşbank stands out in Iraq, especially with the international banking services it offers through its Erbil Branch. In addition to mediating a significant portion of the trade between the two countries, the Bank contributes to businesses that generate added value for the region. Through its two branches operating in Iraq, the Bank also mediates letter of guarantee transactions addressed to the counterpart institutions and organizations in the country. In 2022, the volume of cash loans and customer deposits increased by 22.76% and 15.73%, respectively. The year 2022 was a year in which İşbank received positive results from its activities to collect widespread deposits and increase the number of customers in Kosovo. The positive relations established with the Gulf Region countries through the Bahrain Branch contributed to İşbank's efforts to diversify its fundingbase. In 2022, İşbank moved to its new service building in the UK and continued to offer all banking services to its customers. The level of relations with London- based companies was raised, and significant increases were achieved in contracted merchant transaction volumes. Preparations to develop a modern mobile banking product for İşbank's customers in the UK, Kosovo, and Iraq were completed. As of 2022, it has been made available to our customers. As of year-end 2022, the size of the total assets of İşbank's organizations based in foreign countries was USD 5.8 billion. The Bank's foreign subsidiaries and foreign branches account for 37.9% and 62.1% of this figure. Digital Banking >⃞■Developments in 2022: The primary components of digital banking are to engage in contextual interaction with customers, offer personalized and innovative services, and provide an end-to-end seamless experience. The number of İşbank's digital banking users increased by 27.5% compared to 2021 and reached 13 million. The share of non-branch channels in transactions increased to 96.16% while the share of digital channels in sales rose to 65%. In 2022, 20% of the Bank's new retail customers were acquired end-to-end digitally through our “becoming a customer remotely” service via the İşCep application. Together with those who started the process on İşCep and completed it at the branch, this ratio rises to 29%. In addition, the Nays application, which debuted on app stores on June 21, 2022, reached 2 million downloads and 1.4 million registered users, 68% of whom established a new relationship with İşbank, and 55 thousand users became İşbank customers by the end of 2022. In 2022, 87 new functions were added to İşCep. Among the new functions added to our digital channels, the most prominent ones were the renewal of the money transfer and investment fund screens to maximize the experience, participation and tracking of card campaigns, mobile contactless payment, available limit suggestion, money transfer to cryptocurrency companies, installment commercial additional account, and Moka Super POS application. Within the scope of the ongoing developments for Forest for the Future (Geleceğe Orman) (); leader race, participation points, carbon point history, and point earning display in task detail, as well as suggestions to reduce carbon footprint were activated. Within the scope of API developments and integration efforts, the Bank maintained its position as the bank with the highest number of integrations among competing banks and continued to be among the leading banks in terms of API diversity. Treasury Management >⃞■Developments in 2022: The Treasury operations were managed according to the principles of the Asset/Liability Management Risk Policy, in parallel to the liquidity, interest and exchange rate risks, the principles of sustainable profitability, and the Bank’s risk appetite. Potential risks that may arise from the interest rate structure and İşbank’s FC position, which is managed as an important element of the liquidity composition, were followed up ad-hoc and on a scenario basis, alongside other interrelated positions. Effective risk management was exercised by utilizing derivative products, along with money and capital markets products depending on market conditions. İşbank's main goal is to optimize the risk-return balance and reinforce its balance sheet structure through a sustainable and profitable growth strategy by focusing on loan and investment portfolios, effective use of capital, and dynamic management of FC and liquidity positions as well as cost control. Accordingly, the Bank created a flexible balance sheet composition by taking into consideration all elements, including expansion of the deposit base, i.e. the main source of funding, and diversification of non-deposit sources, optimization of risk-return balance, and fulfillment of customer needs. In the first quarter of 2022, the main agenda was dominated by exchange rate-protected deposits, in the second quarter by the macroprudential measures implemented in coordination with the HMB, CBRT, BRSA and CMB, and in the third quarter by the increase in the weight of these measures and additional liabilities introduced as part of the “Liraization” strategy. Loan, collateral, and liquidity policy steps focused on strengthening the effectiveness of the monetary policy transmission mechanism had an impact on the balance sheet management decisions of banks. Personal Banking İşbank's activities in the field of personal banking are shaped around the principal target of "becoming the customers' financial solution partner of choice in every stage of their lives”. The Bank's operations are built on a single strategy: to obtain a timely and accurate understanding of the customers' needs in order to offer them the best possible solution and experience. >⃞■Products and Services: Remote Customer Acquisition, Private Pension for My Child, Exchange Rate-Protected Deposits, Artificial Intelligence- and RPA-assisted applications, real-time analytic application development, Remote Customer Management, Forest for the Future >⃞■Developments in 2022: 21% of our new customers were acquired through the end-to-end digital remote customer acquisition method. With 175 thousand participants under the age of 18 in the Private Pension System, İşbank maintained its position as the sector leader. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 64 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 65 İşbank's Subsidiaries Customer Centricity As an integrated group, İşbank has acquired many subsidiaries in line with its mission to support the industrial and economic development of Türkiye. İşbank's Subsidiary Policy involves: Strengthening the strategic perspective on the activities of current subsidiaries on a corporate level by taking risk/return balance and market conditions into consideration, Pursuing growth for all subsidiaries, from those newly incorporated to mature ones, through organic and inorganic methods, and Ensuring that our companies are among the pioneering and leading companies in their respective sectors and increasing their market value. As of year-end 2022, the Bank directly and indirectly holds shares in 136 companies, 113 of which are controlled by the Bank. The Bank directly holds shares in 29 companies. These companies accounted for TL 82.8 billion of the Bank's total assets as of the end of the year. Türkiye Sınai Kalkınma Bankası A.Ş., Anadolu Hayat Emeklilik A.Ş., İş Finansal Kiralama A.Ş., İş Gayrimenkul Yatırım Ortaklığı A.Ş., İş Yatırım Menkul Değerler A.Ş., and Türkiye Şişe ve Cam Fabrikaları A.Ş. represent 73.9% of this subgroup of the Bank's assets and are publicly traded on Borsa İstanbul. Anadolu Anonim Türk Sigorta Şirketi, İş Girişim Sermayesi Yatırım Ortaklığı A.Ş., TSKB Gayrimenkul Yatırım Ortaklığı A.Ş., and İş Yatırım Ortaklığı A.Ş. are the other publicly-held Group companies controlled by İşbank through indirect shareholding. As of year-end 2022, the portfolio accounts for 5.9% of İşbank's assets. İşbank's subsidiaries operate in the USA, Germany, United Arab Emirates, Bosnia and Herzegovina, Bulgaria, China, Georgia, India, Netherlands, England, Spain, Italy, Hungary, Egypt, Romania, Russia, Slovakia, Ukraine, Singapore and TRNC. For the performance of our subsidiaries in 2022, please visit the section “İşbank’s Subsidiaries”. AG TRAKYA YATIRIM HOLDİNG Acting in line with its strategy of “being the closest bank to customers”, İşbank focuses on customer experience in all its systems and processes and continues its activities with the goal of being a reliable, easy to work with business partner that its more than 22 million customers can access when required. Customer Satisfaction Understanding the changing needs and expectations of customers and striving to ensure unconditional customer satisfaction through innovative, fast, and user-friendly solutions, İşbank monitors customer satisfaction levels throughout the year through various channels and methods. İşbank’s customer satisfaction and Net Promoter Score (NPS) are compared with peer banks through independent research companies. According to the results of individual NPSsurveys conducted by independent research companies, İşbank managed to maintain its leadership in this area in 2022 as well. In addition to the support of the research company, continuous measurement studies are being carried out using İşCep in-app NPS surveys, end-of-transaction effort/satisfaction surveys, and expectation surveys via e-mail/phone. In addition to digital channels and channels such as e-mail/SMS, satisfaction measurement studies are also conducted through physical media such as in-branch kiosk surveys and photoblocks. In measurement studies, feedback is collected by displaying surveys to customers at the end of their transactions, including customer journeys, and single transactions and workflows which result in Over 4 million customer feedback responses have been obtained so far in digital measurement studies. 2022 İşCep Net Promoter Score was 57%, Branch Satisfaction Score was 76%, and Bankamatik ATM Satisfaction Score was 86%. an error; this feedback is used in the development and presentation of new products/services. In 2022, next-generation analytical capabilities were acquired to improve the service experience on digital channels that have become customers’ primary touch point and to offer real-time contextual suggestions and guidance to customers on digital channels, especially İşCep. For this purpose, analyses based on behavioral data of customers were conducted, and more than 70 million interactions were created in 2022. While correct suggestions and guidance were offered to customers in times of need through these interactions, solutions were created for smooth completion of transactions in challenging situations. Customers submitted 1.2 million product applications, and they were provided with guidance to ensure that more than 3 million transactions could be seamlessly performed via digital channels. In 2022, the “Net Promoter Score” of Private Banking customers was measured through a survey conducted during the year, and the satisfaction score was realized as 69✓ Customer feedback was used as input in product and service development and delivery processes. The satisfaction score was measured as 73% in 2018, 74% in 2019, 78% in 2020, 82% in 2021, and 76% in 2022 over the kiosks and QR-coded Photoblocks in the branches. The decrease in branch transactions during the pandemic had a positive impact on customer satisfaction in 2020 and 2021. Branch experience is monitored in terms of employee interest, transaction speed and transaction quality, Bankamatik ATM experience in terms of device cleanliness and menu convenience, and İşCep experience in terms of application speed and menu convenience. In line with customer feedback, actions are taken to improve the experience in our channels. İşbank closely monitors changes in customer behavior, expectations and consumption habits and carries out various projects and practices to respond proactively to this change. Accordingly, in 2022, an Advertising and Brand Health research study was conducted through an independent research firm to see the effects of the Bank's advertising activities related the Bank's core banking products and payment systems products on the Bank's customers and other bank customers and to measure the perception of the Bank and its Maximum brands. The results of the research were shared with the Bank on a weekly, monthly and quarterly basis. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 66 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 67 Customer Feedback İşbank collects customer feedback through channels such as its corporate website (www.isbank.com.tr), Internet Branch, İşCep, call center, branches, e-mail, fax, letters, official institutions and organizations, and social media. Applications submitted by the customer to the Bank are evaluated within the Customer Relations Platform (MIP) and efforts are made to find solutions as quickly as possible. Customers' demands and complaints on social media and other online platforms are also closely monitored. The actions taken by the head office divisions to improve the customer experience are presented to the Board of Directors quarterly, together with a report on the distribution and course of customer requests and complaints. As per legislation, the number of applications submitted by financial consumers in the form of objections or complaints that involve issues, grievances or dissatisfaction with the individual products and services, as well as the breakdown of such applications on a per-subject basis and the associated resolution times, are reported to the BRSA quarterly, and this data is also submitted to the Banks Association of Turkey (BAT) at the same time. The data submitted by banks is then consolidated by BAT and communicated to the member banks quarterly. The cumulative number of complaints received by İşbank for 2022 is 312 thousand, and the Bank ranks 3rd among member banks of BAT. Statistical data and explanations regarding the content and distribution of customer requests and complaints submitted to the Bank and the responses given to customers are reported to senior management quarterly. In 2022, 207,117 customer complaints were received. In 2022, Customer Relations Program (MIP) received 192,531 applications. In 2022, İşbank Call Center received 20 million calls and has held the EN ISO 15838 "Call Communication Centers Standard" Certificate since 2011. In 2022, İşbank received nearly 748 thousand feedback responses from various channels, and 92% of this feedback, remaining after excluding duplicate and non-response applications, was addressed through the MIP. Changes to Existing Products and Services as a Result of Customer Feedback With the SoftPOS infrastructure, Pos’um Cepte, which transforms Android mobile phones and tablets into POS devices, was provided with multi-terminal and employee feature functions; thus, the mobility of the application was increased by enabling company employees to receive payments without the requirement of being a Bank customer. Credit card customers logging in to İşCep were offered pre-approved credit card limits; the application enabled a limit increase of TL 3.1 billion in one month. Customers started to be informed via SMS and Push before the expiration of the MaxiPoints they earned from campaigns. Customers using Advance MaxiMiles/ MaxiPoints started to be informed a certain period before the end of the advance closure date. Within the scope of Maximum Mobile/Pazarama activities, MaxiMiles and MaxiPoints were made available for hotel payments on the Pazarama Tatil page. The “Invoice saving” feature was introduced to İşCep and credit payment plan information was added in accordance with customer requests. It was made possible to change the credit card delivery address on İşCep. In investment fund purchase transactions, fund details and portfolio breakdown were displayed, and display of pensioner promotion information and renewal was enabled. Informing Customers In line with the responsible banking and customer centricity approach, İşbank provides its customers with accurate and up-to-date information in an open and transparent manner through various channels. Explanations regarding the Bank's products and services are made in a way to include all the details the customer needs about the product and service, especially legal requirements. The Bank makes investments to develop the skills of those employees who, directly or indirectly, offer customers such information in this area. In 2022, the Bank did not incur any penalty due to non-compliance with regulations on customer information requirements. Customer Information Channels New products and services to be made available to customers via digital channels are shared with the İşbank Phone Banking teams to be announced to customer representatives to prepare them for potential customer inquiries before such products and services are delivered. New products and features to be added to İşCep are explained in the description field in the app store. In addition, videos are posted about the Bank's products, campaigns, and services in the Stories section of İşCep. Guidance messages are displayed to customers in digital channels. Regarding the potential errors or problems encountered in digital channels, the customer relations service and the call center are immediately notified to ensure that proper guidance is provided and that the errors and problems are re- directed to the related divisions. Communication campaigns such as mailing, advertisement and announcement are carried out to inform customers about digital channels. The Bank's corporate website provides detailed information about the digital channels, transaction sets and security practices. Private banking customers are given information in person about products, services, and investment alternatives. Customers can also get detailed information about products and services by visiting privia.com.tr. SME and Enterprise Banking customers are provided with up-to-date information about products and services through customer visits and various channels including İşCep, the corporate website, corporate social media accounts, Maximum İşyerim application, İŞ'TE KOBİ website, ATMs, e-mail, and SMS. QR Codes are included in printed brochures, posters, newspaper and magazine adverts to ensure that customers can access detailed information about the product in question by visiting the corporate website. In addition to the application instructions used for providing information to customers at branches, İşbank also publishes all the details needed about its products via its corporate website isbank.com.tr. Product information forms are available for special deposit products that are non-standard in personal banking. Agricultural Banking customers are kept up-to- date about products/services through digital channels, especially İşCep, the corporate website and Maximum İşyerim application, and e-mail, Bankamatik ATMs, SMS channels, and customer visits. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 68 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 69 Responsible Products and Services With its responsible product and service offering approach, İşbank develops products and services that take into account the different life stages, economic needs, and sectoral requirements of its customers, and that are easy to understand, encourage savings awareness, cover all segments of society, and aim to increase financial literacy. All products and services of İşbank are evaluated within the scope of risks that may be exposed, due to products, services or activities defined in the Bank's legislation. During the master plan studies for 2022, in order to ensure products, services, and activities to be developed are evaluated from a sustainability point of view, an article that allows a product's environmental and social benefits to be questioned and whether the product supports sustainability activities has been added. Responsible Marketing İşbank accepts it as a key responsibility to provide its customers with consistently accurate, transparent, and clear information about its products and services. With a customer-oriented approach, the Bank offers its customers information that facilitates their decision-making process and meets their requirements and informs its customers thoroughly and accurately about the benefits and risks that may arise. Communication does not include misleading, complex, and contradictory statements or duplicate information. For İşbank’s responsibility and working principles, please review “Ethical Principles and Operational Rules”. Products and Services for Increasing Awareness on Savings Aiming to promote saving awareness in all segments of society, İşbank maintained its position as the bank with the largest deposit base among private banks in the third quarter of 2022 as well. As of year-end 2022, total deposits grew by 56.3% to reach TL 931.1 billion. Üstü Kalsın (Keep the Change) Offering customers the opportunity to save money without changing their shopping habits, the Üstü Kalsın (Keep the Change) application transfers the difference created by the customers with credit cards and investment accounts to round up their credit card debt to a higher amount of their choice to be deposited into an investment savings account. As of December 2022, the number of investors using the application reached 124 thousand, with a total fund size of TL 90.7 million. Digital Moneybox Introduced for those under the age of 18 to be able to save money through digital channels, the Digital Moneybox is the digital form of the Classic İşbank Moneybox, one of İşbank's iconic products. Moneybox Hybrid Fund The Moneybox Hybrid Fund is a “savings” fund that contributes to investing in the future of children today and creating awareness on saving at an early age. Being the first investment fund developed for children, the Moneybox Hybrid Fund ranks first among similar funds in the sector in terms of number of investors. As of the end of December 2022, the Moneybox Hybrid Fund had nearly 141 thousand investors and an investment size of nearly TL 851 million. Gold Banking At İşbank, customers are offered the opportunity to save money with Time or Demand Deposit Gold Account options. Gold Meetings are also held at branches in order to bring the so-called “under the mattress savings” into the banking sector and to secure precious jewelry against the risk of loss and theft. There is also integration with the Jewelry Gold Valuation System (KAD-SİS). Gold or jewelry items brought by customers are deposited into the Demand Gold Account in grams of gold. Robofon The Robofon Consultancy service, managed by İş Portföy, provides fund consultancy services to clients who wish to save even small amounts. The Investor Profiling Module of the Robofon Consultant, made available at İşCep and the Internet Branch, analyzes the investor's current financial situation and needs and determines their risk perception. At the end of the process, the most suitable fund for the individual is found among the Robofon Family. Fund consultancy services were successfully provided in 2022, as well, and the total number of customers completing the investor profile questionnaire and receiving fund advice exceeded 210 thousand. İşCep Personal Finance Management İşCep Personal Finance Management allows customers to view their assets in the Bank as well as their assets in Anadolu Hayat Emeklilik and İş Yatırım from a single location and to easily control their financial transactions. Thus, while keeping their payments and expenditures under control, customers can also direct their savings. Regular Savings Order With the aim of directing not only assets of a certain amount but also small savings to regular savings, the Regular Savings Instruction service was introduced to İşCep in 2022, enabling customers who invest their savings in time deposit products to make one-time or regular transfers from their demand deposit accounts to their time deposit accounts at maturity. Maximum Time Deposit Account Maximum Time Deposit Account secures automatic payments of individual customers who want to invest their savings in the short term while earning overnight interest on their deposits. Daily Earning Account The Daily Earning Account, which can be opened via İşCep or Internet Branch, offers customers the opportunity to utilize their savings on a daily basis compared to long-term accounts. As of the end of 2022, the Daily Earning Account balance amounted to TL 3.3 billion. Exchange Rate-Protected Deposit Account At the end of December 2021, within the “Communique on Encouraging Conversion of FX Deposits to TL Time Deposit and Participation Accounts” published in the Official Gazette, 2 different products, “FX-Protected TL Time Deposit Account for Customers Converting from FX” and “FX-Protected TL Time Deposit Account” were made available to customers to protect their savings against fluctuations in exchange rates and to support financial stability by increasing the share of TL deposits in total deposits in the banking system. In 2022, “FX- Protected TL Time Deposit Account for Customers Converting from Gold” and “Deposit Account for Citizens Residing Abroad” (YUVAM) and FATSİ accounts were also introduced in accordance with the additional regulations issued by the Central Bank of the Republic of Türkiye (CBRT). Account types other than FATSI, which can only be opened at branches, can also be opened via İşCep and Internet Branch. Total Balance of FX-Protected Time Deposit Accounts was TL 130 billion at the end of 2022. Excluding bank deposits, savings invested in FX-Protected TL Time Deposit products accounted for 13.64% of the Bank’s total deposits in the first twelve months. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 70 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 71 In large-scale infrastructure investments are financed by İşbank, corporate social responsibility budgets are allocated to projects to eliminate or mitigate potential negative impacts that may arise due to investments, and positive impacts are increased by developing processes for the benefit of stakeholders in the impact area of the projects. In particular, loss of livelihoods due to land acquisition and forced resettlement are among the most common impacts of investments. Individuals and groups affected by the project are identified and classified through the “Replacement Plan” and “Restructuring of Livelihoods” plans, and appropriate action is taken to eliminate impacts. For highway projects, the Bank developed various social responsibility projects such as upgrading the roads, schools and water pipelines in villages located along the route of the highway, donating agricultural machinery, providing seed support, offering art development training programs for women stakeholders and supporting education via specific annual budgets for villages that rely on agricultural activities. The most common impacts of financed investments include loss of livelihood and forced resettlement due to land acquisition. As a result of the expropriation or consolidation of privately owned lands in a number of investments, some households were subjected to compulsory replacement or significant loss of livelihoods due to the relocation of workplaces. For those projects subject to financing at international standards, individuals and groups affected by the project were identified and classified through the “Replacement Plan” and “Restructuring of Livelihoods” plans, and appropriate action was taken to eliminate impacts. Tailored "Private Hedge Funds" The expectations of private banking customers, who have a high level of knowledge about financial products and high return expectations in the areas of professional asset management and investment instruments that provide an optimal risk/return balance offered by expert staff, were met through forward exchange funds, personalized hedge funds, and family funds that provide intergenerational wealth transfer in a return-oriented manner. Human Rights and Social Impact Evaluations in Investment and Loan Activities In İşbank's investment and loan activities, human rights and social impacts are taken into account as well as environmental impacts, and practices are requested to eliminate human rights violations and negative social impacts. In the risk assessment model used for human rights and social impacts, there are variables related to matters such as child and forced labor, community and occupational health and safety, working conditions, job conditions, OHS management systems, forced resettlement, loss of livelihoods, stakeholder communication, gender equality, sexual harassment, and discrimination. Investments that are to be financed by the Bank and assigned the risk score A (high risk) based on the Environmental and Social Risk Evaluation are subject to an impact evaluation, including the Social Impact Assessment (SIA), in accordance with the requirements of international standards. “Public Participation Meetings” are held in all investments that require local EIA as a minimum, and additional stakeholder communication meetings and corporate social responsibility activities are carried out within the scope of stakeholder participation in all financing subject to environmental and social risk assessment. Financial Literacy In order to increase financial literacy within society to enable customers to make the right decisions regarding their financial assets and increase trust in the financial sector, İşbank aims to increase the level of financial literacy of every segment of society and every customer from each segment. Blog posts and training content were published on the İŞ'TE KOBİ website, www.istekobi.com.tr, in order to improve the financial literacy of tradespeople, women entrepreneurs, SMEs, entrepreneurs, and farmers. Additionally, the İŞ’TE KOBİ website includes a specific area where visitors can ask questions and receive answers from experts about various topics such as taxation processes, how to incorporate a new company, and benefits for women entrepreneurs. Financial literacy workshops are organized at the İşbank Museum. The Bank carries out activities to increase the financial literacy of women in particular. In line with these efforts, in 2022; Under the WeLead (Leading Women Entrepreneurship for Accelerating Development) Project carried out in cooperation with TÜRKONFED, face-to-face trainings on Introduction to E-Commerce, Entrepreneurship, Digital Marketing, Sales in Marketplaces, and Gender Responsive Procurement were held in various provinces of Türkiye, while online trainings were provided on Company Establishment and Taxation, Entrepreneurship, Introduction to E-Commerce, E-Accounting, E-Invoicing, Micro Export, Trademark, Patent and Design, Quality Process Improvement and Process Development, and Facebook Ad Panel. In the Entrepreneur and Investor Academies and Business Workshops organized in cooperation with the Arya Women Investment Platform, the Bank continued to offer training series that contributed to the financial literacy of women entrepreneurs free of charge. Financial Literacy and Marketing Training was provided for the Amesia Bee Women's Cooperative. Within this scope, 14 women benefited from the training opportunity. Local farmer meetings are held every year to improve the digitalization and financial literacy of farmers. In 2022, 7,000 farmers were reached through 39 meetings. Additionally, with the “ImeceMobil” application, which can be downloaded free of charge, financial, digital, and agricultural literacy support is provided to farmers. Economic Research İşbank's Economic Research Division closely monitors cyclical, structural and macroeconomic developments in both the national and global economy and prepares periodic reports. These include “Daily Market Bulletin”, “Weekly Bulletin” and "Monthly Economic Review". The Division also analyzes important data regarding the Turkish economy economy and shares them on its website at ekonomi.isbank.com.tr. “Data Analyses” reports consisting of Economic Growth, Inflation Developments, Budget Balance, and Balance of Payments are published monthly within this scope. In 2022, 6 Recent Sectoral Developments bulletins and 12 sectoral reports were published. The sectoral reports were about agriculture, agricultural foods for export, cereals, snacks food, passenger transportation, maritime transportation & ship and yacht building, electricity, road freight transportation, steel, non-ferrous and precious metals, construction and logistics real estate & infrastructure projects and overseas contracting sectors. In addition, the impact of the Green Deal on sectors and the “Sectoral Expectations for 2022” reports published in February were presented to all stakeholders of the Bank. In addition, the “Consumption Expenditures By Sectors” study is updated and published on monthly basis. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 72 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 73 Financial Inclusion İşbank aims to increase and ensure fair distribution of social welfare by developing products and services for all segments of society. SME Banking Digital Anatolia The Digital Anatolia project was launched in 2018 in cooperation with TÜRKONFED in order to contribute to the digital transformation of Anatolian SMEs producing in Anatolia and to determine a roadmap for digital transformation on a sectoral basis. Within the project, online broadcasts focused on digitalization and sustainability are organized for SMEs with the participation of senior executives from leading companies in the sector and experts in their fields. The live broadcasts of the Digital Anatolia meetings reached a total of 13,251 individual viewers in 2022. By adding the recordings to the YouTube account, a comprehensive archive is created, and more people are reached in the digitalization of SMEs. DijiKolay DijiKolay was launched in 2021 to address the expectations and needs of SME and Business segment customers regarding digitalization with a holistic approach, bringing together solutions that include the products, services and applications of digital service providers and the Bank's existing digital transformation campaigns and services in a single location. In 2022, the Bank worked towards enriching the products and services included in DijiKolay, making DijiKolay a "live service" that addresses customer expectations and thus contributes to the digitalization efforts of the Bank's customers and firms in the sector, managing customer experience in a positive manner and acquiring new customers. İŞ’TE KOBİ İŞ’TE KOBİ website, which was established in 2009, was provided SMEs with the most up-to-date sectoral information and news they needed in 2022. They were also able to digitally access trainings on a wide range of topics such as e-commerce, entrepreneurship, technology, marketing and sales, human resources, and leadership. In addition to SMEs, content was also offered in the segments of tradespeople, entrepreneurs, farmers, and women entrepreneurs. To date, over 7 thousand news reports and over 4 thousand videos, articles, and training content have been presented on the website, directly contributing to the way they do business. İŞ’TE KOBİ iewed more than 21 million times by 10 million visitors, İŞ’TE KOBİ was viewed 410✓ thousand times in 2022. Collaboration with KOSGEB İşbank contributes to SMEs' access to financing and supports tradespeople in areas affected by natural disasters via support programs co-executed with the General Directorate of KOSGEB (Small and Medium Scaled Industry Development and Support Directorate ofTurkey). Accordingly, as part of its natural disaster relief programs, loan disbursements under the protocols signed in 2021 for Edirne, Artvin, Düzce, Rize, the provinces of the Western and Central Black Sea Region, and the districts of Van affected by floods and forest fires, as well as Istanbul İkitelli OSB Emergency Support Loan Protocols also continued in 2022. Protocols were also signed for the Emergency Support Loan for the Tuzla district of Istanbul province and the KGF Supported SME Financing Support Program with Employment Commitment. As part of these supports, 167 disbursements of TL 264,288,800 were made. Additionally, the Bank continued to offer loans under the "KOSGEB SME Finance Support Program Protocol" signed in 2021, lending TL 95,127,000 through 1,517 individual loans. Within the scope of the Support Campaign for Tradespeople and SMEs, TL 5 billion of financing was provided. Exporter Card & Maximiles TIM Exporter Card İşbank launched the “Exporter Card” in 2016, a first in the industry for exporting SMEs. Thanks to the this card, export companies both benefit from all the features of company credit cards and earn MaxiPoints from the export transactions that they carry out through İşbank. The number of Exporter Cards and Maximiles TIM Exporter Cards increased from 8,648 at the end of 2021 to 10,371 at the end of 2022. Protocol with the Türkiye Exporters Assembly As of year-end 2022, the total amount of financing provided to SMEs in cash and non-cash loans reached TL 243.9 billion✓. (TIM) and Export Support Loan Campaign Loan rates are offered within the scope of the “Exporter Support Protocol” signed between İşbank and the Türkiye Exporters Assembly (TIM) in order to finance exports, which includes various loan types such as "Female Entrepreneur Export Support Loan" and the "Fair Participation Export Loan”. Within the scope of the relevant protocol, a total of USD 44.6 million was disbursed to exporter companies in 2022. With the placement of USD 91.7 million provided under the Export Support Loan Campaign, another special campaign organized by the Bank for exporters, a total of USD 136.3 million was disbursed in 2022 within the scope of these two campaigns. Support to the Agricultural Sector and Farmers In line with the Sustainable Development Goals, İşbank carries out activities that bring together agriculture and technology with an innovative perspective and support the financing needs arising at this point with the most appropriate methods, contributing to increased productivity in agriculture. Thanks to the "ImeceMobil" application, which has 190 thousand users, financial literacy and income-expense tracking support is provided to farmers, and farmers can make İmece Card and agricultural loan applications without going to a branch. In addition, satellite services and expert-assisted special services available for use in the ImeceMobil application, which can be downloaded free of charge, enable farmers to monitor the condition of their lands and the health of their crops. The application also prevents excessive fertilization that pollutes the environment by offering fertilization suggestions and helps farmers avoid incorrect irrigation practices by making irrigation suggestions to reduce water use, allowing them to control costs and achieve better crop yields. 4,500 farmers benefited from services specific to sustainable agriculture such as irrigation, fertilization, and satellite, an area the size of 40,000 football fields was saved from over-fertilization, enough water to fill 8,500 Olympic-sized swimming pools was saved, and these services were used at a total of 120,000 decares of land, increasing the yield of these fields. Thanks to the recommendations given to farmers as well as the data obtained from 30 agricultural monitoring and forecast tools granted to them under the Digital Agriculture project led in collaboration with Vodafone Business, a decrease in the use of inputs, including agricultural fertilizers, pesticides and water, an increase in productivity and a decrease in environmental waste continue to be achieved. The project provides early warning, irrigation, fertilization, and spraying recommendations. The project, which has been carried out by İşbank and Vodafone Business since 2019, won an award in the Corporate Collaboration category at the Sustainable Business Awards 2022. The Workup Agri Agriculture Entrepreneurship Program, which was launched to improve the value proposition offered to agricultural customers and contribute to the country's agriculture with sustainable solutions in the field of digitalization, offers trainings, mentoring support, and cooperation opportunities to agricultural entrepreneurs. The Workup Agri program won the “Golden Sardis” award in the category of Innovative Acceleration and Incubation Programs. Awareness-raising activities such as Farmer Meetings and Agricultural Banking Seminars at Universities have reached 20 thousand farmers and 900 students. . The total amount of cash commercial loans extended to the agricultural sector is TL 19.9 billion. In 2022, as part of the activities were carried out for the agricultural sector and farmers; 1,355 farmers utilized the Instant Agricultural Loan product, which was launched as a first in the sector and enables end-to-end agricultural loan disbursement through digital channels. The “Instant İmece Card” product, which allows farmer customers to be allocated a İmece Card up to TL 50,000 from İşCep, was made available to customers as of December 2022. With the help of irrigation system loans, pressurized irrigation systems were installed on nearly 1,900 decares of dry farming areas, enabling producers to use resources efficiently and achieve 45% higher crop yields, while 3.3 million m³ of water savings and a 24% yield increase were achieved by financing pressurized irrigation systems installed on 3,175 decares of wild irrigation areas. In addition, pressurized irrigation systems installed on 10,597 decares of land were renewed, ensuring the continuation of resource efficiency and yield increase. Within the scope of sustainability criteria, “İmece Workshops” were organized in order to present common methods that are protective for both nature and producers, identify common solution proposals for each stakeholder, and strengthen the agricultural ecosystem in the country and the Bank’s position within this ecosystem. With the number of active female farmer customers increasing by about 30%, İşbank extended a total of TL 274.3 million in loans to female farmers during 2022, while the total loan balance on female farmer customers increased by 82% to approximately TL 896 million. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 74 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 75 The Saruhanlı/Manisa Branch was reorganized and started to serve as the first agriculture specialized branch of İşbank as of June 16, 2022, within the scope of the efforts to expand agriculture specialized branches in markets where Türkiye’s agricultural activities are predominant. The branch has 54 solar panels on the roof to generate electricity from solar energy, meeting all the electricity needs of the branch. İşbank received the “Golden PSM” award at the PSM Awards in the Innovative Customer Interaction and Experience category for its First Agriculture Specialized Branch, Saruhanlı/ Manisa Branch. With the events organized at the branch, producers were brought together with prominent people in the sector, mutual evaluations were made about the sector, and the financial literacy of producers was improved. In addition to the existing mobile vehicles, 2 Mobile Branches, including Bankamatik ATMs, were put into service in order to deepen agricultural banking field activities and to produce on-site, instant solutions to needs. Some of the electricity needed for the Mobile Branch vehicles is provided by solar panels. The İmece Platform was developed to enable stakeholders in the agricultural ecosystem to carry out their financial and operational processes end-to-end in the digital space, and pilot installations of the platform were realized. Integrations such as mobile application, cash management, and application routing were initiated. The Agricultural Banking Advisory Board was established and held its first meeting on 30.09.2022 in order to contribute to İşbank's strategy by monitoring developments and technological innovations in agriculture, food, and related sectors in the world and Türkiye. Action suggestions were included in the 2023 work lists. The 44th “İş’le Buluşmalar” event was held in Izmir with the theme of “Sustainability in Agriculture and Technology” with the wide participation and intense interest of agricultural sector stakeholders. Supporting Women's Participation in the Economy İşbank believes that the participation of women's businesses in the economy and increasing women's employment play a key role in realizing sustainable development. To this end, the Bank increasingly uses both its own resources and foreign funds to support female enterprises. fund in Türkiye based on gender equality in business life, launched in cooperation with İş Portföy (İş Asset Management), a subsidiary of İşbank, and the Center for Gender Studies at Koc University (KOÇ-KAM). The “İş Asset Management Women Equity Fund” aims to pave the way for women to create more value in economic life and to support research that will enable women to have a greater say in employment and management. When selecting companies to be included in the fund, various criteria are taken into consideration such as having at least one female board member, having women in decision-making positions, and providing other public information content generated under the KOÇ-KAM consultancy. Domestic equity shares of companies meeting at least two of the above criteria can be included in the pool of equities in which the Fund can invest. The criteria defined by KOÇ-KAM include having a female employment rate above the mean female employment rate in Türkiye, fostering a balanced private-business life, embracing gender equality and equal pay policies, adopting a fair approach in recruitment processes and supporting social gender equality projects. The Fund invests in equity shares of domestic companies that employ women on an equal basis and attaches importance to ensuring women hold management positions. Half of the revenue generated by the Fund is transferred to research and scholarship recipients through the “KOÇ-KAM UNESCO Chair - İşbank Women's Studies and Women's Leadership Scholarship Program”. The İş Asset Management Women Equity Fund was awarded the Sardis Grand Prize in 2021. The İş Asset Management Women Equity (TL) Fund won the Sustainable Business Award in the “Women's Empowerment” category in 2022 at the Sustainable Business Awards, where innovative projects that create significant impact on economic, social, and environmental issues and protect our common future are awarded. Women’s Banking Within the Women's Banking program, the existing processes, products and services are reviewed, aligned with the expectations and needs of women customers, and various value propositions are offered in order to increase the depth of the female customer portfolio and work with the Bank and to make the Bank's practices more accessible. İş Asset Management Women Equity Fund In 2022, 13,000 new investors joined the “İş Asset Management Women Equity Fund”, the first investment Within this scope, customer satisfaction and Net Promoter Score are also measured and regularly monitored on a gender basis. The Personal Banking NPSscore for female participants was reported as 39 in 2022. İşbank carries out activities to increase the financial literacy of women in particular. In line with these efforts, in 2022; employees working in the sales service at the branch. In this way, the opportunity to make video calls was extended to corporate mobile phones. ᆔUnder the WeLead (Leading Women Entrepreneurship for Accelerating Development) Project, face-to-face trainings on Introduction to E-Commerce, Entrepreneurship, Digital Marketing, Sales in Marketplaces, and Gender Responsive Procurement were held in various provinces of Türkiye, while online trainings were provided on Company Establishment and Taxation, Entrepreneurship, Introduction to E-Commerce, E-Accounting, E-Invoicing, Micro Export, Trademark, Patent and Design, Quality Process Improvement and Process Development, and Facebook Ad Panel. Enabled Banking İşbank endeavors to ensure that all its service areas are accessible to disabled users. Verbal and visual directional aids, tactile paving, wheelchair ramps, and Bankamatik ATMs suited for use by disabled customers are available at the branches. 649 branches have tactile surface applications, 459 of which are suitable for visually impaired access. In Bankamatik ATMs, SMS messaging with headphones and tactile surface support is implemented, and features are regularly improved. Audio menus in Bankamatik ATMs are designed in accordance with the standards set by the Banks Association of Türkiye. 93% of ATMs are suitable for use by visually impaired customers. In order to facilitate access to branches for customers with orthopedic disabilities, the differing elevations at the entrances of 811 branches were removed in 2022, and 488 branches were made suitable for orthopedically disabled access. İşbank ensures that there is at least one Bankamatik ATM that is suited for use by orthopedically impaired people in each province where it has orthopedically impaired customers, and if there is more than one ATM at the front of a branch, one device is made suitable for disabled access. Special staff members are employed at İşbank's Call Center to allow hearing-impaired customers to receive services at the Bank's branches by communicating via video call. In 2022, “softphone” authorization was granted to the assigned corporate mobile phones of authorized Customers' suggestions and requests regarding the installation of new Bankamatik ATMs or upgrading existing ones so they are accessible by disabled people are carefully evaluated, and the necessary action is taken. İşbank also develops digital solutions for its disabled customers. The İşCep IOS application supports Voice Over, while the Android application supports TalkBack features. With the “Dynamic type” feature, text sizes in İşCep can be adjusted according to personal preferences. İşbank's corporate website is compatible with Jaws. The "Enabled Banking" page has been added to our corporate website isbank.com.tr to provide the necessary directions for our disabled customers to easily carry out their transactions. For hearing-impaired customers, a translation plugin has been added to the "Enabled Banking" and "Help" pages which translates content into sign language via an avatar. The bank keeps the date of birth, disability, and disability status information of disabled customers in its system and provides services that should be provided to customers free of charge. Within this scope, customers can use all Bankamatik ATMs installed in the country to inquire about balance, withdraw money, deposit money, inquire about credit card debt, and pay credit card debt without any additional costs and fees. In addition, for disabled customers, transactions such as signing contracts, opening accounts, using loans, and applying for cards can be carried out safely and easily. Eye Brand Certification BlindLook is a firm that, with its voice-focused technology, allows any product or service to be freely accessible to visually-impaired people, making mindful blind-friendly brands a reality. The firm's Eye Brand certification is a global certificate that documents inclusive services offered by blind-friendly brands. Within İşbank’s collaboration with Blindlook, blind users tested the Bank's websites. The websites maximiles. com.tr and maximumgenc.com.tr passed these tests and received the "Eye Brand" badge. The certification process for the Bank's corporate website isbank.com.tr and İşCep is underway. 511 Number of branches suitable for use by visually impaired customers 791 329 Number of branches suitable for use by orthopedically impaired customers Number of Bankamatik ATMs suitable for use by orthopedically impaired customers 93% Ratio of disabled- friendly Bankamatik ATMs An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 76 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 77 Climate Action Climate change is one of the most urgent problems facing our planet. As İşbank, we conduct comprehensive risk and opportunity analyses for climate change, which affects the environment, social life, and economy and has various negative impacts worldwide. To be a part of the solution, we establish partnerships for climate action. Related Capital Elements: Material Topics: ᲁResponsible Finance and Investment Integrating ESG Criteria ᲁCombating Climate Change Risks Opportunities Existing financial solutions proving to be ineffective as a result of changes in the way of doing business and risk matrix across many sectors due to global warming Compliance challenges encountered by customers during the transition to a green economy Infrastructure deficiencies of organizations for a transition economy Potential difficulties in complying with laws and regulations governing the green economy Potential deterioration in customer creditworthiness due to climate-related risks Contributed SDGs Contribution to a green economy and combating climate change through effective ESG risk management Possibility to reach new customers as a reliable partner in the transition to a green economy Ability to access new global fund sources that promote a transition economy İşbank's comprehensive risk management approach and its capacity to adapt early to climate-related regulations Key Performance Indicators 2019 2020 2021 2022 Field visits made as part of environmental and social risk evaluation Number of financed projects subjected to environmental and social risk evaluation Sum of financing provided for projects subjected to environmental and social risk evaluation (million USD) Amount of clean energy (million MWh) generated by financed renewable energy projects Total installed capacity of the renewable energy projects financed by İşbank (MW) Share of renewable energy projects in the total energy projects portfolio (%) Carbon Disclosure Program (CDP) Climate Change Report Carbon Disclosure Program (CDP) Water Safety Report 22 13 395 21.9 262 67.3 C - 1 7 365 24.9 5 9 331 32.3 44 8 432 40.9 1,950 1,008 2,059✓ 69.5 A- - 71 B C 75 A- B Targets Targets for 2022 The Bank will continue working to increase the share of renewable energy projects in the total energy generation projects portfolio. In 2022, it is anticipated that 100% of the loans to be allocated for new energy plant investments will be used for renewable energy projects. Realization in 2022 Realization Targets for 2023 100% ✓⃝ The target is planned to be preserved. In 2022, the Bank will create its report as per the Task Force on Climate-related Financial Disclosures (TCFD). İşbank aims to improve reporting on climate change-linked risks and opportunities in order to achieve a better approach to corporate governance and risks. The Bank is still continuing its activities on this front. In order to reach net-zero targets by 2050 within the scope of the NZBA commitment, the Bank aims to support its customers' transition processes to a net-zero economy by focusing its 2030 targets on carbon-intensive sectors, and to report and publish its progress in emission targets on an annual basis. The Bank is continuing its activities. İşbank set targets for the amount of sustainable loans it will provide to the national economy in 2022. - The Bank aims to increase the number of customers investing in sustainable capital market instruments by 5%. Number of customers in 2022: 36,513. The target is planned to be preserved. Within the scope of the NZBA commitment, efforts to decarbonize the loan portfolio will continue. İşbank aims to provide TL 300 billion in sustainable loans by 2026. By 2025, the number of customers is targeted to exceed 42 thousand. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 78 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 79 Climate Change Risk Management Risks arising from climate change are radically affecting business practices and risk matrices across all sectors. If financial institutions do not closely monitor these changes and provide the necessary internal controls, they may face significant commercial risks and fail to take advantage of the opportunities created by the transition economy. İşbank takes into account all risks (including transition risks and physical risks and the subcategories thereof) arising from climate change. These risks are prioritized based on a qualitative and quantitative assessment. Climate-related risks and opportunities are addressed in the Business Program, which includes the Bank's annual targets, and in the Strategic Plan document, which is prepared with a longer-term perspective, as part of efforts to integrate sustainability goals and policies into business conduct. To be a guiding business partner in enabling customers to develop adaptability to market dynamics that will affect their activities, such as Green Deal and carbon border adjustment, Playing a leading role in the green transformation of the national economy within the framework of Net- Zero Banking Alliance membership, Increasing the share of sustainability-themed loans and resources in the balance sheet, Reducing greenhouse gas emissions, energy consumption, vehicle fuel consumption, and waste, Diversifying and increasing the volume of environmental financing products that reflect İşbank’s responsible banking approach and similar factors aiming to mitigate climate-related risks and seize opportunities. The Climate Change Risk Policy sets out the principles and procedures to be followed for detecting, identifying, assessing, measuring, monitoring, controlling, reporting and managing the climate change risks the Bank may be exposed to in connection with its activities. The Climate Change Risk Policy is an integral part of the Bank's other Risk Policies. A large portion of the Bank's exposure to climate risk arises from its customers in the commercial loan portfolio. For the measurement of this risk, the commercial loan portfolio covering all sectors is considered and analyzed. A two-stage approach is followed to assess the exposure of the loan portfolio to climate risks: 公 A sectoral climate change risk heat map is used to identify the sectors that should be prioritized when assessing climate change risk. The 5-level risk scale is used to determine to what extent each sector is exposed to climate risks. 典 A scenario analysis enables an impact analysis to be performed for risk events in sectors with high and medium-high climate risk levels identified by the heat map. The adopted scenario analysis approach is prepared in accordance with the climate change methodology followed by the United Nations Environment Program - Finance Initiative (UNEP-FI) and the climate scenarios created by TCFD. The main purpose of climate change risk management is to ensure that the Bank's activities and practices are aligned with its climate change strategy. Responsibilities for management of climate change risk have been defined in the form of a triple defense line. The role of the first line of defense is basically to ensure that the loan decisions are made by considering the climate change risks during the loan allocation process. The second line of defense determines the working principles, rules, policies and requirements in relation to the climate change risk. The third line of defense, within its existing roles and responsibilities, offers reassurance to the Board of Directors that the structure described here functions properly. İşbank has added the indicator “Share of Sectors With High Climate Change Risk Within Total Commercial Portfolio” to the solo risk appetite framework to prevent the concentration of sectors with a high exposure to climate change risks within the portfolio and provide guidance for composition of the portfolio in subsequent periods. This indicator is monitored monthly and reported quarterly. The impact of a possible carbon tax or carbon trading system implementation on İşbank is measured through scenario analyses. With this method, the financial data of loan customers operating in sectors that are exposed to high transition risks and are expected to be most affected by such regulations, especially in the energy generation sector, are subjected to stress tests by taking into account the additional liabilities mentioned, and the possible effects of changes in the creditworthiness of the customers on the Bank's balance sheet are analyzed. Financing assessments are also carried out to contribute to the reduction of carbon emissions of sectors such as cement, iron-steel, aluminum, fertilizer, and energy, which will be primarily affected by the EU Carbon Border Adjustment. Partnerships for Climate Action İşbank has been reporting since 2019 within the scope of the Carbon Disclosure Project (CDP) which allows companies to report to investors how they manage their activities aiming to reduce carbon emissions and their risks related to climate change. The Bank raised its rating to “(A-) Leadership” in 2022. In 2023 and beyond, the Bank aims to maintain its leadership level rating by continuing its efforts to manage climate change risks and seize opportunities. İşbank joined the Net-Zero Banking Alliance (NZBA) in 2022. The Net-Zero Banking Alliance brings together 122 banks from 41 countries under the umbrella of the United Nations, representing approximately 40% of global banking assets and committing to align their loan and investment portfolios with net-zero emissions by 2050. With the NZBA commitment, İşbank aims to seize the opportunities that will arise during the transition to a green economy, support customers' ESG transformation, manage risks associated with climate change, and to position itself as a guiding business partner to improve companies' adaptability to regulations that will affect economic activity, such as the European Union Green Deal/carbon border tax. This membership also imposes a number of obligations on İşbank. In order to reach net-zero targets by 2050, the Bank is committed to supporting its customers' transition processes to a net-zero economy by focusing its 2030 targets on carbon-intensive sectors and to reporting and publishing its progress in emission targets on an annual basis. İşbank has also committed to confirming its emission reduction targets under the Science Based Targets (SBT). An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 80 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 81 İşbank aims to align its operations with the UN Sustainable Development Goals (SDGs) and the Paris Climate Agreement targets through its signature of the United Nations Environment Program Finance Initiative (UNEP FI) Principles for Responsible Banking (PRB). The ‘Principles for Responsible Banking’, which are expected to make a significant contribution to the United Nations Sustainable Development Goals and the Paris Agreement targets, focus on six areas: Alignment, Impact, Customers, Stakeholders, Governance and Goal Setting, and Transparency and Accountability. You can access İşbank's Impact Report within the scope of UNEP Principles for Responsible Banking at https://www.isbank.com.tr/bankamizi-taniyin/Documents/ yatirimci-iliskileri/raporlarimiz/prb/PRB2021.pdf. İşbank also supports sector-based partnerships on climate action. İmece Workshops are organized where representatives from many different branches such as universities, private sector, entrepreneurs, associations, and public administrators come together with public authorities to discuss issues on climate, misuse of water, deforestation, and misapplication of agricultural techniques, and these issues are evaluated together with all parties. İmece Workshops contribute to the sector with their carefully selected participants and workshop outputs. Within this scope, two İmece Workshops were organized in October and December of 2022, with the theme of Water and Wheat, respectively. İşbank is one of the project stakeholders of the Izmir Agricultural Technology Center, which was launched under the leadership of the Izmir Commodity Exchange to contribute to the continuation of agriculture in harmony with changing conditions and to develop new and effective technologies. This center aims to become an R&D base for agricultural technologies. Among the center’s goals is to ensure the continuous development of agricultural technologies and increase the interest of young people in agriculture. The European Fund for Southeast Europe S.A (EFSE) is funding a joint project for Türkiye's agricultural sector under a consultancy services agreement with Finance in Motion Gmbh (FiM), a German financial institution. Within the project, work is ongoing to measure the carbon footprint of wheat, barley, sunflower, and corn producers. Within the cooperation, the Bank contributed to the financing of various trainings for bank employees as well as producers in the agricultural ecosystem, farmer meetings and events, which aim to contribute to sustainable agriculture such as İmece Workshops, organized on different topics. Within this scope, in 2022, 5 “Hero Product Trainings” and preparation of reports on these products, in-bank technical training, 2 “İmece Workshops”, 15 “Farmer Meetings” and agricultural calendars for 3 products were realized. “Green Transformation Meetings at SMEs” are organized in Organized Industrial Zones with the aim to inform SMEs about sustainability, to convey the opportunities therein, and to raise awareness. Management of Water Risks Water-related risks to which İşbank is exposed are assessed holistically within the framework of corporate risk management. Water risks related to “physical damage” in terms of the Bank's own operations are evaluated under the “Physical Damage/Risk” category of operational and climate change risk classifications. These risks, such as damage to assets as a result of heavy rains and floods, are assessed within the scope of Top-Down Risk Assessment, which is an approach used to assess and prioritize operational risks that may arise during the conduct of operations. The Bank also conducts an annual “Environmental Risk Assessment” for its direct operations, including water, waste management, compliance with legal obligations, employee health and safety, and other water risks related to suppliers. Key stakeholders in the İşbank ecosystem include employees, customers, investors, regulatory authorities, suppliers, and the local communities in which we operate. These stakeholders are taken into account in water-related risk assessments. One of the main risks that could significantly affect the Bank's operations is damage to the Bank's assets and/ or customer assets (e.g. assets in safe deposit boxes) located in the Bank's premises due to the increased frequency of extreme weather events such as floods due to climate change. In addition, İşbank is also exposed to a number of water-related risks through its customers. One of the most important of these risks is the loss of value of real estate in the Bank's collateral portfolio due to events that may occur in the short and long term, such as severe floods and sea water rise. İşbank also evaluates the potential environmental and social (E&S) impacts of the investment projects it finances. All projects are evaluated within the scope of national laws and regulations. In all projects financed by İşbank, customers must comply with the relevant regulations. At İşbank, all potential ESG risks of all new investments are evaluated according to the ÇESMOD system. Water-related risks examined through this model are under three main headings: water source, wastewater, and resource consumption. In order to reduce the effects of water-related risks, İşbank expects project companies to measure water quality at the intervals set out in applicable regulations and to report on the use of water and resource efficiency. Management of Forest Risks Companies that use forest products as raw materials in their processes must comply with the provisions of national forest laws. In all projects financed by İşbank, customers are required to comply with national laws and regulations on forestry. İşbank evaluates the potential ESG risks of projects according to the ÇESMOD methodology. With the ÇESMOD methodology, critical habitat and sensitive areas evaluation and balancing strategy studies are taken into consideration in order to conduct an assessment of forest-related risks. Based on these factors, İşbank considers the project's environmental impact in terms of deforestation and use of forests. For example, large-scale highway projects are classified as high-risk (A) projects as they use a significant amount of land. İşbank requires project companies to take certain measures, such as re-locating trees around the project area to appropriate areas and/or planting trees in place of any trees cut down, in order to eliminate negative effects of the investment in sensitive areas. Tree planting commitments are taken from projects, particularly linear projects and thermal power plants. These commitments are included in contracts and monitored annually. Management of Biodiversity Risks While risk categories are identified as part of the Environmental and Social Impact Evaluations done by İşbank, biological risks are evaluated on a per-project basis. A Biodiversity Action Plan (BAP) is requested for projects with Risk A category and high biodiversity risks. In the ÇESMOD question set, the need for a critical habitat assessment and balancing strategy study for all relevant projects is examined. In addition, on a sectoral basis, additional impact questions such as bat habitat, bird migration routes and biodiversity issues are considered. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 82 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 83 Environmental and Social Risk Management in Loans Factors such as those listed above, the scope of which is set out in the applicable laws and regulations, are evaluated and scored using questions specifically developed based on the activities of the company being evaluated. Based on the answers given, the risk level of the project is determined, e.g. high (A), medium high (B+), medium low (B-) and low (C). A "Project Environmental and Social Evaluation Document" is prepared based on national and international legislation and good practices (e.g. IFC Performance Standards, EBRD Performance Requirements, Equator Principles), and the document is then added to the loan folder which is submitted for approval. For all projects deemed eligible based on the evaluations conducted by the Sustainable Finance (SF) team, including but not limited to those projects which are classified by İşbank as high-risk (risk category A), an independent environmental consultant is assigned to act on behalf of the Bank. The independent environmental consultant conducts field visits and literature research to determine the current status of the project and its possible environmental and social impact. As a result of this work, an Environmental and Social Status Evaluation (ESSE), which describes the current status and applicability of any permission / approval process regarding environmental obligations as well as the consultant's comments, and an Environmental and Social Action Plan (ESAP), which describes how to limit and eliminate this impact and manage the process, are drawn up and submitted to the Bank. When deemed necessary, the consultant is requested to carry out periodic monitoring studies on these ESAP items throughout the loan term. In projects where an At İşbank, new investment projects with an investment value over USD 10 million are subjected to the Environmental and Social Risk Evaluation Tool (ÇESMOD). The ERET model, which İşbank had used since 2013 to calculate the Environmental and Social Risk Score of investments, was replaced in 2021 by ÇESMOD (Environmental and Social Model), an Environmental and Social Risk Evaluation Model that is more closely aligned with the global standards of risk measurement and can be tailored according to the type of investment. In 2022, the transition process from ERET was completed, and the new model was put into use. With the ÇESMOD Model, E&S risk scores for investments financed by the Bank are calculated with initial evaluations conducted with specific sets of questions based on the type of investment, e.g. new facility development, capacity expansion and/or additional facilities or refinancing/procurement, followed by evaluations conducted with specific sets of questions based on the sector in question Sets of questions based on type of investment and sector: 䬏 EIA decisions, environmental permits, environmental and/or social impact evaluation, 䬏 Nature preserve, critical habitat and ecosystem evaluations, 䬏 Earthquake risk, 䬏 Natural resource use, 䬏 Waste management, 䬏 Air, soil and water quality, 䬏 Noise and dust, 䬏 Occupational health and safety, public health and safety, 䬏 Management of chemicals, 䬏 Involuntary displacement and stakeholder engagement independent environmental consultant is not appointed, ESSE, ESAP and monitoring activities are carried out by İşbank SF service specialists if necessary. In the newly created ÇESMOD model, sector-based questions are asked about both groundwater and surface water resources, and risk scores are determined accordingly. Where necessary, forest and water-related permits are requested from companies on a project basis. Within the scope of the EIA regulation, IFC Performance Standards, Equator Principles and EBRD Performance Criteria, İşbank also assesses how the project affects biodiversity and nature preserves. In 2022, 166 investments were subjected to Environmental and Social Risk Evaluation. A total of 106 projects were financed between 2013 and 2022. Number of Field Visits Made as Part of Environmental and Social Risk Management Number of projects undergoing Environmental and Social Risk Evaluation Number of projects financed after undergoing environmental and social risk evaluation Number of projects financed by risk category 44✓ 12✓ 8✓ 1 ‘A’, ✓ 5 ‘B+’✓ 3 ‘B-‘ ✓ 3 ‘C’ ✓ Sustainability Analysis System (SÜRAS) Since 2012, İşbank has been assessing environmental and social risks in projects with a total investment amount above a certain limit in order to manage the impact it creates through its loan portfolio. Regardless of the amount of financing, the Environmental and Social Risk Evaluation Tool (ÇESMOD) is being used to determine the environmental and social risk categories of projects with a total investment value of more than USD 10 million, and a roadmap is being created to eliminate or limit the possible negative impacts of the investment as much as possible according to the assigned risk category. However, as climate change and its increasing risks are becoming more evident, there is a need to improve existing ways of doing business and review them in line with international best practices. In this context, in addition to the investment types evaluated within the scope of the ÇESMOD, a process for assessing environmental and social risks across the commercial loan portfolio was designed and put into operation in 2022. The new process, called the Sustainability Analysis System (SÜRAS), includes; ᆔ“Environmental and Social Question Set”, which enables companies to determine the environmental and social risks and ᆔ “Climate Change Question Set”, which enables the companies to determine awareness and resilience levels on climate change risks. Activities Not Financed İşbank rejects any loan applications for activities on the İşbank Exclusion List, which the Bank names in the annex to its Environmental and Social Impacts Policy, without even taking them into consideration. Among activities not financed by the Bank are investments involving forced labor and child employment, the production of weapons of mass destruction and landmines, and the production and trading of internationally prohibited chemicals, drugs or substances that are harmful to the ozone layer. Loans for financing greenfield investments of coal- and natural gas-fired thermal power plants to be established for electricity generation and new coal mine investments are included in the İşbank Exclusion List. In 2022, gold mining using cyanide, and activities prohibited by national legislation and international conventions regarding the protection of biodiversity resources and cultural heritage were also added to the activities not financed. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 84 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 85 Products and Services Contributing to a Green Economy Climate change brings many opportunities as well as risks. With the financing allocated to support the transition economy, it is possible to develop creative products and processes to combat climate change. In order to be a good companion for its customers in a green economy, İşbank develops numerous products and services that support a green economy. İşbank Group is in the energy business In 2022, İşbank Group established İş Enerji Yatırımları A.Ş. to create an integrated energy portfolio, primarily in electricity generation and trade. İşbank Group aims to further expand its fields of activity by incorporating the energy sector, particularly electricity generation. İş Enerji aims to participate in facilities and companies engaged in the generation and trade of electrical energy, primarily based on renewable energy sources such as hydraulic, wind, and solar energy. Having made a significant contribution to Türkiye’s annual electricity generation with the loan support provided to the electric energy sector to date, İşbank Group has also assumed the role of investor in the sector with its shareholdings in renewable energy power plants with an installed capacity of over 800 MW. Financing Renewable Energy The transition to renewable energy sources is among the most important steps of climate action. Renewable energy investments also provide significant economic benefits through the new business lines created. It is essential that renewable energy investments and technologies are supported to ensure an increase of renewable sources in energy generation. İşbank is one of the pioneering institutions in financing renewable energy projects in our country. All new project financing provided by the Bank for electricity generation investments after 2015 has been allocated to renewable energy projects. The number of renewable energy projects financed during the year is 162, and the loan amount provided to these projects is USD 544 million. All new project financing provided by İşbank for the energy generation sector in 2022 consists of renewable energy projects. In line with its commitment to allocate 100% of its new investment loans for the energy generation sector to renewable energy investments, the Bank aims to increase the ratio of renewable energy loans to total electricity generation loans even more from its level of 75%. Cooperation with International Financial Institutions for a Green and Sustainable Economy Since 2008, İşbank has been obtaining medium-long- term, special-purpose financing from international financial institutions such as the European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), Proparco, U.S. International Development Finance Corporation (DFC (formerly known as OPIC)), the International Finance Corporation (IFC), and the Asian Infrastructure Investment Bank (AIIB) in order to finance the sectors and activities that contribute to sustainability. Besides energy efficiency and renewable energy projects, these resources are also used to finance female entrepreneurs, SMEs, agricultural enterprises and businesses located in priority development regions. The Bank also supports the economy by increasing awareness and efficiency in the use of resources through technical consultancy and training received from financial institutions. Closely following developments in the field of sustainable finance, İşbank evaluates the new financing needs of its customers and continues to provide resources for projects that are feasible and comply with lending principles and environmental and social standards. The total amount of loan agreements signed with international financial institutions within the sustainable framework during the year is USD 327 million. You can find the list of funds obtained by İşbank from international financial institutions and that were outstanding as of 2022 in the Table of Outstanding Loans from International Financial Institutions. The sustainability-linked syndication loans İşbank secured two sustainability-linked syndication loans amounting to EUR 483 million and USD 257 million in June 2022 and EUR 330.5 million and USD 191 million in November 2022. New resources for green transformation and a sustainable economy Within the scope of the securitization program based on foreign remittance flows (“Diversified Payment Rights”), the Bank obtained a total of USD 227 million in funding from the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) in August 2022, with a final maturity of 5 years. The USD 127 million in funding provided by the EBRD will be used to finance women-led businesses as well as renewable energy and resource efficiency investments. The USD 100 million in funding provided by the IFC, on the other hand, will be used to finance mortgages, including green mortgages. In September 2022, İşbank signed a USD 100 million loan agreement with the Asian Infrastructure Investment Bank (AIIB) and realized its first transaction with the relevant institution. This 5-year term loan will be used to finance SMEs and small-scale corporate firms affected by the COVID-19 pandemic. Karapınar YEKA SPP project Within the scope of the Karapınar YEKA SPP project, which is planned to be established in the Karapınar district of Konya province with an installed capacity of 1,000 MWe, financing was provided by our Bank and the environmental and social risks of the project were evaluated. The risk score was B+. The Environmental and Social Risk Governance System “ESRG” was developed to audit project activities. The ESRG consists of Kalyon Enerji’s policies, project assessment documentation, project-specific management plans, supporting thematic sub-plans, and reporting templates to monitor progress. The ESRG will be supported by management plans to be prepared. The ESRG framework is compatible with ISO14001:2015 Environmental management and OHSAS 18001:2007 Occupational Health and Safety management requirements. In addition, within the framework of the risk category, on behalf of the lenders, a private firm has been assigned to provide services on behalf of the Banks to carry out an environmental and social impact evaluation study within the scope of the Karapınar SPP Project, as per local legislation and regulations, Equator Principles, IFC Performance Standards, EBRD Performance Criteria, and international best practices, and an Environmental and Social Status Evaluation (ESSE) for permits, licenses, and legal requirements for the Project and an Environmental and Social Action Plan (ESAP) for managing the identified impacts were prepared. Within this framework, the monitoring of the actions to be taken to limit the environmental and social impacts of the Project will be carried out by the audit firm through site visits every six months during the construction period and annually during the operation period, and these reports will be disclosed to the lenders within the same periods; the loan agreement will be conditioned on the outputs of these reports being in line with the company's commitments and, where necessary, the implementation of appropriate actions. It was determined that the activities carried out serve Sustainable Development Goals 7.1, 7.2, 8.4, 8.5, 8.7, 12.5, 13.3, 17.3, and 17.7. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 86 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 87 Green Enterprise Loan Green Vehicle Loan İmeceMobil Launched in 2022, the Green Enterprise Loan was created to support companies that obtain sustainability certificates by making investments to minimize their environmental impact at every stage of the life cycle from raw materials to the final product. Pressurized Irrigation Systems Loan The Pressurized Irrigation Systems Loan provides financing for the transformation investments of customers using wild or pressurized irrigation. The pressurized irrigation systems loan is estimated to provide TL 31 million in economic benefits and a 35% increase in efficiency. TEMA Environmental Variable Fund The fund targets investors who want to utilize their TL savings in the long term, are environmentally conscious, protect nature, and aim to leave a livable world for future generations. In 2022, the total value of the fund was TL 31.5 million and the number of investors was 2,981. The annual return is 31.28%. Green Loan and Green Mortgage This Green Loan product is aimed to finance various environmentally friendly activities, such as post- insulation (thermal and/or water insulation) of existing buildings, supply of natural gas conversion, installation of energy-efficient heating and/or cooling systems or replacement of old inefficient ones with more energy- efficient systems, replacement of durable goods with more energy-efficient ones, and purchase of solar energy panels. The Green Mortgage provides financing for the purchase of real estate properties with energy classes of “A” and “B”. In order to encourage green products, the allocation fee charged for both Green Loan products is 2.5 per thousand of the loan amount, while for standard consumer loans and mortgages it is 5 per thousand. Green Vehicle Loan campaigns are organized for electric and hybrid model vehicles. Individuals and commercial customers can benefit from these campaigns, and improvements are made in favor of our customers in interest rate/fee-commission items according to market conditions. No loan allocation fee is charged for personal vehicle loans extended within the scope of the campaign. The total amount of loans extended in 2022 for electric and hybrid vehicles amounted to TL 1,232 million. Solar Loan by İşbank The loan aims to finance rooftop, facade, and land-type unlicensed SPP investments for self-consumption purposes. In 2022, nearly TL 596 million in Solar Loans were lent by İşbank. Energy Efficiency Loan The loan aims to finance “resource efficiency” investments that cover energy efficiency as well as water efficiency, raw material efficiency, and waste management. Green Office Premises Loan Green Office Premises Loans can be extended to legal entity merchant customers for all kinds of real estate purchases except land, and to real person merchants and self-employed individuals for the purchase of workplaces to be used in their commercial activities from “Green Buildings” with A and B Energy Identity Certificates, Gold and above category LEED, and Very Good and above category BREEAM certificates. In 2022, the amount of loans extended amounted to TL 54.3 million. Electric Vehicle Charging Station Installation Loan Financing is provided for the establishment of Electric Vehicle Charging Stations in order to contribute to the development of the electric vehicle sector and help EV owners easily access charging units. The ImeceMobil application, developed by Softtech Ventures, a subsidiary of İşbank, provides special services for farmers, enabling them to do the correct amount of irrigation and use fertilizer at the right time, thus contributing to the proper use of resources. Marine Conservation Loan Launched in the last quarter of 2021, the Marine Conservation Loan aims to meet the financing needs of businesses that want to contribute to the protection of the seas by investing in wastewater treatment, wastewater recovery facilities, ship ballast water treatment or gray water treatment systems, or that want to improve their existing facilities by investing in maintenance, repair, and capacity increases. The wastewater treatment and ship ballast water treatment systems within the loan contribute to biodiversity by enabling the existence of clean water and food in the environment in which they live and protecting the existence of life forms so that they can survive. In 2022, the Marine Conservation Loan amounted to approximately TL 49.6 million. “Green” and “Sustainable” Investment Instruments Within the scope of the “Green Debt Instrument, Sustainable Debt Instrument, Green Lease Certificate, Sustainable Lease Certificate Guidelines” published by the Capital Markets Board (CMB) in February 2022, İşbank obtained the necessary permission in June to issue green and/or sustainable bonds or commercial papers up to USD 1.5 billion abroad. Geleceğe Orman (Forest for the Future) As part of İşbank's goal of a sustainable future, İşbank launched the Geleceğe Orman (Forest for the Future) application on İşCep last year in cooperation with the TEMA Foundation. The carbon points users collect through green banking transactions and activities in their daily lives are converted into sapling donations through the TEMA Foundation. By the end of 2022, the number of participants in Geleceğe Orman exceeded 200 thousand, while 80 thousand saplings were donated through the application to date. The Bank aims to plant a total of 1 million saplings in the first three years. In 2022, the Geleceğe Orman application received the first prize at the Gartner Eye on Innovation for Financial Services Awards. “Water” themed İmece Workshop In our country, where 74% of freshwater resources are used for agricultural irrigation, joint solution suggestions for protecting both nature and producers were discussed at the Imece Workshop, including how to manage water with new technologies in the fight against drought, how to prevent water waste for sustainable agriculture, and how to use freshwater resources more efficiently in agriculture. The Water Workshop, held in Izmir under the slogan “Akışına Bırakma” (Don't Let It Flow), brought together representatives from relevant public and non- governmental organizations, agricultural cooperatives and associations, producers, academics, agricultural entrepreneurs, and leading farmers. The report of the water workshop is available at https://www.isbank.com.tr/is-ticari/su-calistayi. “Wheat” themed İmece Workshop More than 70 stakeholders including representatives from relevant public and non-governmental organizations, agricultural cooperatives and associations, producers, academics, agricultural entrepreneurs, and farmers came together at the Wheat Workshop held in Ankara on December 15, 2022 under the slogan “Buğday ek, hayat biç” (Sow wheat, reap life). Solutions on how to produce wheat, which is of strategic importance as the world's main food source, in the most efficient way for sustainable agriculture and its contribution to the economy were discussed. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 88 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 89 Next-Generation Banking In recent years, the most radical change in the way of doing business in the banking and finance sector has been the increasing digitalization in all areas. With digitalization, the development of products and services by fintechs in parallel with traditional banking is another important development in the field of next-generation banking. İşbank aims to continuously improve itself by meeting the requirements of next-generation banking with its strong and competent digital banking infrastructure. For 98 years, it has been providing customers with a flawless and secure experience at all contact points by using technology in its most efficient and up-to-date form. Related Capital Elements Relevant Stakeholders ᲁCustomers ᲁRegulatory Authorities ᲁIndustry Stakeholders Material Topics ᲁDigital Banking ᲁCybersecurity and Customer Privacy Risks Opportunities Cybersecurity risks increased with digitalization Management of reduced need for labor as a result of digitalization Failure to keep up with rapid economic and technological changes due to large corporate structure Losing touch with developments such as platform business models and sharing economy, which are essential components of the new economy Providing personalized products to customers with digital products and services and 24/7 accessibility Opportunity to establish more effective communication with customers thanks to digitalization of procedures Becoming a preferred institution in the eyes of stakeholders with data security investments Becoming an important actor of the new economy with the support provided to entrepreneurs Strengthening business strategies with partnerships in the field of fintech Fast decision making and implementation with agile business models 2019 6.506 2020 6.521 2021 6.476 Key Performance Indicators Number of Bankamatik ATMs Number of digital banking customers (million) Number of mobile banking customers (million) Maximum Mobile users (million) Share of digital channels in non-cash financial transactions (%) Share of digital channels in sales (%) Number of cardless transactions made from Bankamatik ATMs (million) Amount of cardless transactions performed through Bankamatik ATMs (billion TL) Paper consumption savings achieved by digitalization (million pages) Increase in the number of digital banking customers compared to the previous year (%) Share of non-branch channels (%) Number of users reached by Maxi (million) Number of questions answered by Maxi (million) 8,1 7,8 1,7 84,6 40,1 33,8 24,8 40,4 12,5 92,2 4,8 18,9 Volume of end-to-end digital commercial loan disbursement through Instant Commercial Loan (million TL) 143,98 9,2 9,0 1,9 92,1 57,5 35,3 32,4 71,2 13,6 95,7 5,7 33,3 506 10,2 10,0 2,1 94,6 62,7 39,3 40,6 64 11,0 95,6 6,7 49,1 1.191 Successful Transactions Index for IT Critical Services 99,96 99,95 99,96 Number of technological entrepreneurs who were supported to enter the banking system Number of campaigns aimed at promoting the products of technological entrepreneurs Fines incurred due to data security breaches (TL) 117 7 0 80 4 97 16 350.000 150.000 2022 6.169✓ 13,0 11,9✓ 2,8 96,0 64,8 53,0 67,7 190 27,9 96,2 8,8 68,2 2.038 99,97 265 52 0 Contributed SDGs Targets Targets for 2022 Realization in 2022 Realization Targets for 2023 It is aimed to increase the share of digital channels in total sales to above 66% and to above 70% by 2023. As of the end of 2022, it is 65.2%. The Bank aims to increase the number of customers using digital banking channels to 11.5 million by 2023. Also, with the impact of our Nays application, we reached 13 million individual digital channel customers by the end of 2022. The number of technological entrepreneurs who will enter the banking system by 2023 is aimed to be over 100 every year. In 2022, the Technological Entrepreneur Package was defined for the first time, providing privileges in our core banking services and facilitating entry into the financial system for a total of 265 startups. ✓⃝ ✓⃝ ✓⃝ It is aimed to be 70% in 2023. The Bank aims to increase this number to 14.5 million by 2023. The number of technological entrepreneurs who will enter the banking system is aimed to be over 100 every year. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 90 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 91 Digital Banking While carrying out digital banking activities, İşbank aims to engage in contextual interaction with customers, offer personalized and innovative services, and provide an end-to-end seamless experience. The number of İşbank's digital banking users increased by 27.5% compared to 2021 and reached 13 million. The share of non-branch channels increased to 96.16%, while the share of digital channels in sales rose to 65%. In addition, the Nays application, which debuted on app stores on June 21, 2022, reached 2 million downloads and 1.4 million registered users, 68% of whom established a new relationship with İşbank, and 55 thousand users became İşbank customers by the end of 2022. İşbank’s digital banking focus areas are; 䬏 Creating a flawless, secure, and personalized customer experience for users at all contact points through digital technologies and analytical methods designed with an innovative approach, 䬏 Providing customers with a seamless end-to-end experience by developing joint services with non- Bank stakeholders within its vision to offer banking service anywhere, 䬏 Collaborating with startups that will benefit the Bank, Group companies and customers, and implementing innovative business models, including impact entrepreneurship with an open innovation approach, 䬏 Developing solutions and value propositions that will assist users and organizations in making healthy financial decisions, 䬏 Becoming an integrated business partner and gateway to the digital world for all individual customers in personal banking and for companies in commercial banking, 䬏 Achieving a broad-based customer portfolio with the inclusion of both unbanked customers and commercial establishments with limited access to financial services, 䬏 Contributing to nature and the future by adopting new practices serving sustainability across digital channels. Accordingly, the new features that were prominent in İşCep in 2022 were as follows: 䬏 Renewal of the money transfer and mutual fund screens to maximize the experience, 䬏 Regarding credit cards; mobile contactless payment, card campaigns, credit card pending transaction installments along with additional installments, additional card application, 䬏 Ability to record vehicle information and perform vehicle-related operations quickly, 䬏 Ability to set a foreign exchange and gold alarm and send instant notifications when the specified buying/ selling rate is reached, 䬏 Pensioner promotion renewal, 䬏 Suggesting a available limit, 䬏 Transferring money to cryptocurrency organizations, 䬏 Super POS application, additional commercial account with installments, and virtual card for our commercial customers, 䬏 Within the scope of the ongoing developments for Geleceğe Orman (Forest for the Future), leader race, participation points, carbon point history and point earning display in task detail, and suggestions to reduce carbon footprint functions were added. In 2022, 20% of our Bank's new retail customers were acquired end-to-end digitally through our “becoming a customer remotely” service via our İşCep application. Together with those who started the process on İşCep and completed it at the branch, this ratio rises to 29%. İşCep and Maximum Mobile, which continue to offer privileged transactions to customers with new features every day, include privileges and card transactions specific to İşbank cards. Even if customers do not have their credit cards with them, they can pay quickly and securely with QR codes when shopping in stores or on e-commerce sites with İşCep and Maximum Mobile. Serving in 2022 with a renewed design, Pazarama is an inclusive ecosystem where buyers and sellers in e-commerce communicate with each other seamlessly and easily. While purchasing products and services, Pazarama, which enables access to payment and financing opportunities that facilitate these transactions without the need for another application, is included within Maximum Mobile. In 2022, efforts were made to improve the customer experience on Maximum Mobile, and at the same time, “cashback campaigns”, which were offered to our customers in 2022 and have given a certain percentage discount on spending, were launched. While 2 million customers logged in to Maximum Mobile in 2021, 2.6 million customers logged in in 2022 with an increase of 33%. While 68 thousand customers logged in to Maximum İşyerim in 2021, 89 thousand customers logged in in 2022 with an increase of 31%. The number of downloads for the Maximum İşyerim application increased from 230,131 in 2021 to 339,972 at year-end 2022. The number of users utilizing the services of the Maximum İşyerim application during the year reached 96.3 thousand. In digital banking, İşbank's personal banking assistant Maxi, which works with natural language processing (NLP) technologies, offers a one-to-one dialog experience to serve users 24/7 with proactive solutions in times of need and allows customers to make their transactions by talking or texting. In 2022, with the Maxi IVR integration work completed as part of the improvement of the customer experience, Maxi started to greet all users contacting the Call Center, informing them quickly and directing them to the relevant menus. Maxi realized 68.2 million dialogs in 2022, with the number of dialogs increasing by 33.4% compared to 2021. As part of the artificial intelligence integrations, Maxi, the personal banking assistant, instantly addresses refund claims of customers whose money is stuck in a Bankamatik ATM and has also begun to perform appropriate transactions for customers who would like to report lost or stolen cards. In 2022, temporary password and mobile phone update requests of our customers started to be made via video calls. Within this scope, approximately 1 million temporary password calls and 60 thousand cell phone update calls were received with customer identity verified via video. In 2022, the diversity of transactions available in İşCep was increased with enriched sales and application capabilities in line with customers' expectations. The total number of transactions that can be made on İşCep has been increased to 616. In order to provide our customers with a smooth end-to-end experience with the products and services we offer through digital channels, continuous improvements are made, and digital channel competencies are continuously enhanced by utilizing the opportunities provided by technology. NAYS Customer journeys have evolved with advancing technology, and consumers’ expectations from financial applications have accordingly evolved into contextualized and personalized experiences. As many technology companies and technology- based platforms have become able to offer financial services, it has become essential to design new experience journeys. the NAYS, which was launched 2022, application targets customers who are highly technology savvy, open to innovation, and want to receive lean services. The application, in which the most needed financial services in daily life are offered with an easy, innovative, and entertaining experience, was designed with insights from potential users. Aiming to reach individuals, especially the young segment between the ages of 18-25 who are looking for an easier experience other than sophisticated banking products and who live intertwined with digital applications, NAYS is expected to reach a wider audience in the future by adding savings and investment products to its free money sending and receiving service, advantageous shopping opportunities, flexible borrowing opportunities, and gamified earning mechanisms. The Nays application, which debuted on app stores on June 21, 2022, reached 2 million downloads and 1.4 million registered users, 68% of whom established a new relationship with İşbank, and 55 thousand users became İşbank customers by the end of 2022. İşbank is awarded the best digital bank in Central and Eastern Europe İşbank was awarded Central and Eastern Europe's (CEE) Best Digital Bank at the Awards for Excellence organized by Euromoney, one of the most prestigious global finance and banking publications. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 92 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 93 Open Banking The Bank began API development activities according to the standards published in preparation for compliance with the open banking legislation. In this context, , the Bank aims to make İşCep and the Internet Branch the primary channel through which customers will prefer to consolidate their financial transactions. İşbank aims to expand the variety of APIs and the number of integrations to include strategic products in order to deliver the most suitable products at 3rd party contact points with smooth experiences to its customers when they need them. With the possibility to integrate digital customer acquisition with 3rd parties, the number of new digital customers and digital product sales will increase. Solutions will be provided for the financial needs of small players who do not yet have sufficient technical knowledge and resources for API integration, with products that use the İşbank API infrastructure and can be easily integrated. Within this framework, highlighting API services that will be offered outside İşbank channels will contribute positively to the future of the Bank. Therefore, within the scope of API developments and integration efforts made, the Bank maintained its position as the bank with the highest number of integrations among competing banks, and continued to be among the leading banks in terms of API diversity. In line with open banking, which has been adopted with the vision of “banking anywhere”, a total of 62 APIs were developed, and 96 different integrations were realized through the APIs developed. The volume of financial transactions through APIs exceeded TL 180 billion. Within the scope of the CBRT open banking regulations, which became mandatory on February 28, 2023, account information and payment initiation services were made available to authorized third-party institutions in the form of APIs, and work was completed to display other bank accounts included in the system on our İşCep and Internet Branch channels in a consolidated manner and to initiate payment transactions from these accounts. Within the scope of BRSA service banking regulations, personal and commercial lending scenarios will be implemented following BRSA approval. As the BRSA’s circular on establishing a remote contractual relationship and transaction authorization is expected to be finalized, the approval process is on hold by the BRSA. After approval, the Bank will be one of the first banks to provide service model banking. Paperless Banking With the digital approval of product contracts and application forms, the opening of non-Bank Registered Electronic Mail (KEP) delivery to the entire Bank, and the introduction of digital signatures on receipts, 190 million✓ pages of paper were saved in 2022 with an increase of 175% with respect to 2021, and TL 22 million was saved in paper cost with an increase of 192% compared to last year. With the digitalization of various contracts, 1.56 million contracts, equivalent to 21.6 million pages, were saved annually. It was determined that this operation saved TL 6.6 million in a 6-month period. 190 million✓ pages of paper savings and TL 22 million paper cost savings 327,199 downloads for Maximum İşyerim app 2.8 million number of Maximum Mobile users Developments in Payment Systems With the perspective of “banking anywhere”, efforts to address the daily needs of our customers are deployed digitally and/or physically through business partnerships in different sectors. Accordingly, the projects and applications deployed in the field of card applications are as follows: In order to ensure that real person merchant customers can complete their commercial credit card applications with an end-to-end digital experience, customers can view and approve the Commercial Credit Card Membership Agreement on İşCep for commercial credit card applications made by logging in to İşCep, and the application can be completed upon approval of the agreement. In addition to making the lives of İşbank customers easier, this project also contributes to the Bank’s paperless banking and sustainability goals. POAŞ Dealer cards have begun to be produced digitally. With the Maximum Business+ product, İşbank contributed to the reduction of the operations with customers and branches regarding the payments to be made to the vendor by obtaining a certificate of expenditure when it is necessary to check the purpose of the lending in loans extended for the cash needs of customers. The İmece Card Application and Allocation Flow via İşCep was launched, and within the framework of the flow, it became possible to allocate İmece Cards up to a limit of TL 50 thousand to real person farmers who are İşbank customers by using the Instant Commercial Loan decision engine, and to simultaneously produce and deliver them to the branches of their choice. The ability to use Miles while shopping at certain stores has been provided. Credit card ready limit allocation was launched on İşCep. We deployed the following projects and applications in the field of contracted merchants: In 2022, by being integrated with transportation infrastructure providers in various cities of Türkiye, it became possible to use contactless credit and debit cards as transportation cards by scanning them through the Bank’s contracted merchant system. Acceptance of UnionPay QR Method on İşbank Physical POS Terminals: As part of the agreement between İşbank and UnionPay International since 2020, the Maximum İşyerim app can accept QR payments via UnionPay's mobile app. Thanks to the developments in the payment acceptance methods introduced in 2022, Ingenico POS devices can accept payments in Euro, USD, and TL via the UnionPay QR code method. “POS’um Cepte” App: In addition to the speed and convenience it provides, contactless payment is also preferred in terms of hygiene. Therefore, with the Maximum İşyerim app, it is now possible to turn an NFC-enabled Android mobile phone into a POS terminal for accepting contactless payments. In 2022, the Pos’um Cepte App was provided with multi- terminal and employee payment functions; thus, the mobility of the application was increased by enabling company employees to receive payments without the requirement of being a Bank customer. Moka Super POS (Virtual) Campaign: The Moka Super POS (Virtual) Campaign, which enables small and medium-sized companies to make installments to different bank cards with a single virtual POS, started to be offered to our customers through the İşCep and Commercial Internet Branch. Payment Collection with TR QR Code: it will be possible to create QR Codes in the "TR QR Code" format on POS terminals and Maximum İşyerim applications wittin the efforts made, and all domestic customers of the Bank will be able to shop by using QR codes at İşbank POS terminals. New Functions in Payment Collection via AliPay Wallet and WeChatPay Method: Thanks to the collaboration between İşbank and Alipay, payments in USD and Euro via Alipay wallet can be accepted on the Bank's physical POS terminals and Maximum İşyerim application. In 2022, the WeChatPay payment method, which used to be accepted only on Ingenico model physical POS terminals, is accepted on all Ingenico brand physical POS terminals and in cash registry protocols, except for ÖKC and GMP3 protocols, and the Euro has been added as a payment currency. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 94 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 95 Digital Loan Developments Digitalization in Business Processes İşbank aims to increase employee productivity by digitalizing its repetitive, low value-added processes that have a high risk of error. In 2022, many processes were digitalized, saving time and reducing environmental impact. In 2022; With the Customer Embedding project, an Artificial Intelligence model that creates digital twins of our customers was developed. By using the outputs of this model as input in various artificial intelligence projects, we aim to increase customer satisfaction and develop more suitable products and services for customers. Screen enhancements were completed in order to monitor and track investments for which the ÇESMOD was completed, and a score was created. Within this scope, an application was designed to monitor the ÇESMOD and action plans of investments. According to İşbank’s Articles of Incorporation, Board of Directors meetings can also be held electronically. Accordingly, the Electronic Board of Directors System (e-YKS), which will enable shareholders to participate and vote in these meetings electronically, was purchased from Merkezi Kayıt Kuruluşu A.Ş. and installed. It is planned that e-YKS, which was implemented as a pilot in 2022, will be officially put into use as of January 1, 2023, and that Board of Directors and Board Committee decisions will be submitted to the approval of the members via e-YKS and the electronic signatures (e-signature/mobile signature) of the members will be obtained. Thus, it will be possible to carry out these processes, all of which are carried out on paper, within the framework of paperless banking and digitalization principles. Thanks to projects such as Smart Legislation Search and Letter of Guarantee Matching, developed with Artificial Intelligence Natural Language Processing algorithms, applications were developed to support İşbank employees in their labor-intensive work, reduce human error, and gain speed. In order to acquire potential customers looking for housing and vehicles at the source, mortgage and vehicle loan applications received through loan comparison websites and advertisement sites on digital media are digitally transmitted to İşbank branches. In this way, sales channels were diversified, and conversion rates on loan applications were increased. With this effort, loans amounting to TL 246.9 billion were extended in 2022. In 2022, TL 45.5 billion worth of loans were extended within the scope of “Instant Loan”, “Instant Shopping Loan”, and “Ready Limit” applications, which are paperless banking applications where all processes can be completed through digital channels such as İşCep, Internet Branch, and the İş Bankası ile Öde (Pay with İşbank) application that can be accessed through contracted shopping sites. TL 26.1 billion in loans were extended within the scope of the “My Loan is Ready” application, which enables the completion of consumer loan applications through digital channels, with the final approval process completed at the branch regardless of the channel where the process starts. The lending rate through digital channels, which was 80% last year, increased to 84.9% in 2022. With the İş'te Limit (Limit at İşbank) application, which shows the credit worthiness of İşbank customers, displays the total limit of consumer loan, additional account, or credit card products that can be allocated to the customer, and also allows limit transfers between related products, customers can apply directly from İşCep as well as our branches. Customers with a set İş’te Limit can apply directly from this screen for the relevant products within their defined İş’te Limits. In addition to İşCep, customers who have the appropriate permission can now proactively inquire about and be offered an İş’te Limit through RPA processes. TL 26.4 billion worth of İş’te Limit was determined within the proactive İş’te Limit application, and TL 616 million worth of İş’te Limit was determined within the İş’te Limit application from İşCep. In 2022, approximately 326 thousand additional accounts with a total limit of TL 3.4 billion were opened through digital channels. In 2022, approximately 326 thousand additional accounts with a total limit of TL 3.4 billion were opened through digital channels. Digitalization in Branch Operations In 2022, in order to reduce the number of counter transactions at branches, efforts were made to develop next-generation devices with a similar structure and architecture to the counters where customers will receive self-service and pilot implementation has been started in three branches. In addition to cash transactions, efforts are underway to address more customers with a wider menu set with functions such as customer acquisition, video calls, application processes, card delivery, digital verification, and contract approval. Within the scope of improving in-branch approval and authentication processes, efforts are underway to ensure customer authentication in the branch and in the field with the chip ID card and biometric verification. As of the end of December, expenditures for projects carried out under the Digital Customer Experience of the Future program amounted to TL 62.5 million. The number of İşbank branches renovated as part of digital transformation reached 578 as of year-end 2022. Artificial Intelligence Artificial intelligence applications managed within the framework of the corporate vision and strategies at İşbank aim to maximize customer experience and direct employees to areas where they can create higher value with the automation of low value-added processes. Accordingly, an Artificial Intelligence Division was established at the Bank. The "Agile working model" is applied in artificial intelligence, which is one of the priority areas of work. As of year-end 2022, artificial intelligence investments realized amounted to TL 43 million. Artificial Intelligence Governance Machine learning operations (MLOps) are used for Artificial Intelligence to operate at İşbank on a large scale, continuously learning and sustainably. The applications and collaborations (technology, people, and processes) developed within this scope are positioned as the key to industrializing artificial intelligence. As a result, a single platform suitable for corporate integration has been introduced that manages the entire artificial intelligence lifecycle end-to-end by standardizing and automating it. Artificial Intelligence Ethics Approach In order to manage Artificial Intelligence technologies correctly and to create the expected effect, the principles that İşbank adheres to were published as the Artificial Intelligence Ethical Approach under the Ethical Manifesto. Social Benefit and Sustainability: In our artificial intelligence activities, in addition to sustainability, we prioritize creating social benefit in many areas of life such as economy, education, and culture, as well as the principle of respect for the environment. Impartiality: We make our AI decisions independent of qualities such as race, origin, belief, status, and gender, and we reject all forms of bias. Transparency and Explainability: In our artificial intelligence activities, in addition to sustainability, we prioritize creating social benefit in many areas of life such as economy, education, and culture, as well as the principle of respect for the environment. Durability: We run our artificial intelligence models autonomously from end-to-end in our Bank’s cloud infrastructure, where up-to-date technologies are used in a way that is open to human control and closed to human intervention. We take all security measures for our models and provide the necessary controls. Accountability: We record our artificial intelligence activities in accordance with the legislation and its purpose. Within our duties and authorities, we make decisions as per the applicable legislation and banking principles. We manage all processes centrally with the İşbank Mozaik* platform we developed ourselves. Security: We organize our artificial intelligence activities in accordance with national, international, and internal policies. We take and implement all measures to prevent illegal transactions. We collaborate with other banks and institutions in this regard and protect bank and customer confidential information and personal data within the framework of our information security policies. Innovation and Entrepreneurship In order to make the right strategic moves and take the right actions in the digital world where technology is developing rapidly, İşbank continues to develop innovative business models suitable for new competitive conditions. Adopting an open innovation approach with its visionary structure, İşbank supports joint cooperation models with startups to develop new products and services and closely monitors new ideas and technological trends through innovation centers established in Türkiye and abroad as well as technology companies, universities, and institutions, and organizations in its network of contacts. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 96 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 97 Innovation at İşbank Innovation efforts in 2022 closely monitored innovative applications and solutions with the potential to impact the future on a global scale, including the sustainability field, and proof-of-concept studies were carried out for innovative business models. The competencies of the Forest for the Future application launched in 2021, in which customers can convert the points they earn from their spending, banking transactions, and daily activities that contribute to nature into sapling donations, were further developed. Within the framework of our Web 3.0 vision, which consists of the components of continuously developing our competencies in blockchain technologies through experimental studies, expanding the use of smart contracts, creating beyond-banking products/ services that will enable the digital asset ecosystem to become established, and designing physical ownership links for digital assets, we aimed to utilize the value propositions of blockchain and metaverse technologies from various perspectives. The budget allocated for R&D and innovation at İşbank in 2022 was TL 206 million. In 2022, the actual budget expenditure was TL 148 million. Support for Entrepreneurship As of its founding mission, supporting all economic activities, especially entrepreneurship, and aiming to provide this support in a sustainable and accessible manner, İşbank carries out many activities to support technology-based startups. In line with its vision of being the bank of entrepreneurship and startups, the Bank continued its ecosystem collaborations around entrepreneurship programs, which have been ongoing since 2017, and further expanded its network of influence in this area. In 2022, the Bank collaborated with 52 initiatives and carried out campaigns and proof-of- concept work. The Bank continued to work intensively to support the ecosystem through the Istanbul Entrepreneurship Branch opened in 2021 and the Izmir Entrepreneurship Branch which started operating in 2022. By the end of the year, the total number of customers of the Entrepreneurship Branches reached 656, of which 433 were newly brought to İşbank or activated customers during the year. The number of business partnerships established within the scope of non-financial value propositions for entrepreneurs reached 9 by the end of the year, and 52 entrepreneurs were enabled to develop collaborations/campaigns with İşbank or its subsidiaries. In 2022, the Technological Entrepreneur Package was defined for the first time, providing privileges in our core banking services and facilitating entry into the financial system for a total of 265 startups. In 2022, USD 1.2 million was invested in 4 startups, 2 of which were follow-up investments, through the Maxis Innovative Venture Capital Fund, of which İşbank is the main investor and which was established to provide resources to early-stage technology startups in the entrepreneurship ecosystem. Internal Entrepreneurship Program Thanks to the "Internal Entrepreneurship Program", which was launched to introduce innovative business ideas and develop the employees' teamwork and continuous learning skills, the employees have gained the skills "to think and act like an entrepreneur" and improved their innovation, creativity, risk-taking and competitive thinking skills and also got the opportunity to generate their ideas, detect problems, create solutions and launch their products. Entrepreneurship teams, which consist of employees, improve their knowledge and awareness about innovative business models, entrepreneurship and the basics of internal entrepreneurship and are given training and mentorship support from their program partners that have experience in entrepreneurship. This program aims to contribute to the transformation of İşbank's innovative/entrepreneurial culture by providing all employees across the country with competencies such as entrepreneurship, teamwork, and continuous learning/ development. Workup and WorkupAgri Entrepreneurship Program The Workup Entrepreneurship Program, which was created to support and accelerate early-stage startups with a technology-oriented, sustainable and scalable business model, has continued since 2017. Eight startups graduated with the Demo Day held in the 10th term of Workup. The 2nd term of the Workup Agri Entrepreneurship Program, which was launched to support new technologies in agriculture and related topics and to add new collaborations to our agricultural value proposition, continues with 6 startups. 140 startups have been accepted to the Workup and WorkupAgri programs out of over 15 thousand applications, and 100 of them have graduated with Demo Day events. 2 out of every 3 Workup startups and 3 out of every 4 entrepreneur graduates continue to exist in the entrepreneurship ecosystem. 40 Workup startups received USD 15 million in investments during and after the program. Arya Women Investment Platform Arya Venture Capital Fund İşbank is the main sponsor of the Arya Women Investment Platform, which has worked to increase both investment and business development opportunities for women entrepreneurs since 2018. The Arya Investment Preparation Acceleration Program is being organized as part of the collaboration between İşbank and the Arya Women Investment Platform, in which women entrepreneurs go through a 5-week training and mentorship program to get ready to meet investors. At the semi-final event, the entrepreneurs included in the program deliver their investor presentations and graduate from the program. In the final part of the program, the Arya Retreat event, which brings the remaining entrepreneurs together with investors and lasts for 3 days, 3 entrepreneurship projects receive awards after completion of the presentations delivered to the jury and investors. The program also includes workshops, and opportunities for collaboration and networking are presented. The seventh Arya Retreat was organized in 2022 with the theme “Invest in Women”. A training series for women entrepreneurs is organized under the name Arya Business Workshops; practical information and cases are shared on topics such as marketing, sales, finance, investment, and e-commerce. The workshops also include the experience sharing of entrepreneurs who are successful in their fields. The trainings provided within the scope of Arya Entrepreneur Academy aim to provide entrepreneurs with basic awareness and the vision they need to manage and grow their startups. With the Arya Investor Academy, which focuses on women’s angel investing, the basic elements of the angel investing process are conveyed to women and women are encouraged to become angel investors. The number of women who benefited from the Investment Preparation Program and the Retreat event, Business Workshops, Entrepreneurship, and Investor Academies reached 569. In Türkiye, the biggest challenge women entrepreneurs’ face in realizing their dreams and reaching a certain scale is access to finance and finding funding. Many women with creative ideas, experience, and self- confidence can start their own businesses if they find financial support. Within this scope, the financial, educational, and mentoring support to be provided to women entrepreneurs from the foundation stage of their businesses until they reach the stage where they grow and contribute to the economy is of great importance. More women entrepreneurs brought into the economy means more production, more employment, and thus a greater contribution to the national economy. To this end, in 2022, Arya Women Investment Platform and İşbank established a fund, which is aimed to reach a minimum size of USD 10 million, to invest in gender- balanced startups that offer the potential for sustainable returns. The fund will invest in gender-balanced startups and aims to become a venture capital fund with regional impact. WeLead In cooperation with TÜRKONFED and İşbank and with the support of UN Women Regional Office for Europe and Central Asia, a new project called “WeLead (Leading Women Entrepreneurship for Accelerating Development)” was launched for women entrepreneurs. The project aims to improve the capacities of entrepreneurial women and strengthen their communication networks. Within the project, it is planned to provide training support to entrepreneurial women regardless of sector and scale. Training content is based on two pillars which are ‘gender equality awareness’ and ‘technical capacity building’. The technical content covers topics such as digitalization, budget management, supply chain management and branding, which were identified as a result of the WeLead Research Report, the source for shaping the project.50 Within the project, 15 online and face-to-face training programs were organized in 2022., 2022, the WeLead Project, launched on June 1,2022, provided access to training for more than 1,700 women entrepreneurs. The project will continue with similar activities in 2023 as well. 50https://www.isbank.com.tr/bankamizi-taniyin/turkonfed-ve-is-bankasi- girisimci-kadinlar-icin-guclerini-birlestirdi An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 98 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 99 Women Entrepreneurship Loan İşbank offers financing support to tradeswomen who want to grow their business, to companies 51% of the shares of which are held by female shareholders, or to women’s enterprises that have at least one female senior executive and at least 20% of the shares of which are held by female shareholders, for all their business needs. As of year-end 2022, the Bank provided TL 25 billion✓ in financial support to more than 62 thousand women entrepreneurs. Export Support Loan with Turk Eximbank İşbank provides financial support to women and young entrepreneurs through the "Women Entrepreneurs Export Support Loan" and "Young Entrepreneurs Export Support Loan" products under the protocol entered into with Turk Eximbank in order to increase the participation of women and young entrepreneurs in export activities. TÜBİTAK BİGG Young entrepreneurs will be supported until 2025 within the program launched in cooperation with İşbank and Özyeğin University Fit Startup Factory to be the implementing organization in the TÜBİTAK Individual Young Initiative (BİGG) Program. KWORKS Impact Entrepreneurship Program and being carried out in partnership with Vehbi Koç Foundation, Workup, and Koç University Entrepreneurship Research Center with the contributions of the Social Entrepreneurship Network of Türkiye (TSGA), the Impact Entrepreneurship Program, which was launched in May 2022, was completed, which aims to support the scaling of technology-based startups that create or have the potential to create environmental and social impact in areas such as quality education, healthy and quality life, climate, accessible and clean energy, and sustainable cities and communities. With the Impact Day event held in October, 5 startups graduated from the Program. Sponsorships for Young Entrepreneur Programs İşbank was the main supporter of the Turkish Entrepreneurship Foundation (GİRVAK) and TÜSİAD “Bu Gençlikte İş Var” Program, which play an important role in helping young people gain an entrepreneurial perspective at an early age and see entrepreneurship as a career path. FounderOne FounderOne, a next-generation investment fund aiming to invest in early-stage impact startups, was established in June 2022 in cooperation with the Turkish Entrepreneurship Foundation, Turkish Informatics Foundation, and our subsidiary Maxis Girişim Sermayesi Portföy Yönetim A.Ş. Next-Generation Contact Point: İş Mekan With the aim of designing the customer experience and the Bank of the Future, the Next-Generation Contact Point project was started and branded as İş Mekan with the aim of reaching our customers we contact digitally in the physical world and meeting their needs more holistically as the İşbank Group without limiting them to banking processes. The aim is to continuously improve the customer experience and strengthen customer belonging and loyalty through İş Mekan’s contact points whose concepts will vary according to different customer profiles and market characteristics. İş Mekan, which started operations in Nişantaşı, has created an ecosystem where visitors can meet İşbank Group brands and platforms in addition to performing banking transactions. İş Mekan features a corner for İş Kültür Publishing where visitors can enjoy a pleasant bookstore experience, the first physical point of sale of İşbank’s online shopping platform Pazarama, and a café offering a next-generation coffee experience. In addition, there are meeting rooms rented by our subsidiary İşmer and workspaces that all our customers can use free of charge. İş Mekan has been designed to inspire its visitors with a variety of events and activities that will bring them together on a regular basis to create a community. In order to support the physical İş Mekan experience area digitally and to provide a holistic experience, the İş Mekan mobile application, which is complementary to the physical İş Mekan experience, has been offered to our customers in the app marketplaces. With this application, users will be able to book meeting rooms at the İş Mekan, book spaces for events and, with future developments, be informed about campaigns and announcements before anyone else. In this way, the aim is to create a collective customer experience by supporting the service offered in the physical world in the digital world as well. Information Security at İşbank İşbank works meticulously to ensure the reliability of its operations against risks related to information confidentiality and cybersecurity, which are increasing with digitalization. The processes related to ensuring the security of information systems and the secure storage of personal data and confidential information, which are the most important issues of our day, are maintained through regular investments in the field of security and training and awareness activities for the continuous development of a security culture. The Board of Directors has the ultimate responsibility to ensure information security within İşbank. To this end, the Board of Directors develops the required strategy and oversees its implementation via the committee. The Information Security Committee is responsible for establishing and implementing policies for information and personal data security. All organization units of the Bank are responsible, within the boundaries of their areas of responsibility, for carrying out their activities in accordance with these policies and other sub- regulations based on them. Policies and other sub-regulations regarding information security and personal data form the basis of any actions to be taken within this scope. Through constant awareness programs, the Bank strives to increase the knowledge of its employees and raise awareness among end users. In 2022, 8.933 employees from the Head Office and branches received a total of 9,853 hours of training in the fields of cybersecurity, social engineering and information security. İşbank's banking processes and information systems are annually audited by the Board of Inspectors in a risk- based manner to provide a basis for the Management's Statement to be submitted to an independent auditor in accordance with the "Regulation on External Audit Institutions’ Information Systems and Banking Processes Audits" published by the Turkish Banking Regulation and Supervision Agency (BRSA). Processes for ensuring information security are absolutely covered during the audits of information systems. With priority given to the control targets regarding the provisions included in the "Information Security Management" section of the BSEB regulation, and within the framework of the mentioned regulations, the existence, adequacy and effectiveness of a process that includes activities such as risk assessment, approval of the corporate information security policy by the Board of Directors and supervision of its implementation by the Senior Management, conducting studies to increase the awareness of the Bank personnel on information security, classifying all data according to the degree of security sensitivity and conducting security controls at the appropriate level for each class, implementation of information security tests, prevention of data loss, and updates of existing controls and structures created according to technological developments are evaluated. In line with audit studies for information technologies (IT), inspections are carried out to contribute to the achievement of basic goals for the healthy management of IT risks and the effective and efficient use of IT resources. The scope of the said audit work is determined by a risk assessment prepared by taking into account the criticality of the applications and systems for the Bank and their sensitivity in terms of data security. These system-oriented technical inspections are carried out on the basis of local legislation and international best practices, including especially the articles of the BSEB regulation which are directly related to ensuring information security. The internal control environments regarding information security of İşbank's subsidiaries and affiliates and the organizations from which the Bank receives support services are also evaluated through audit activities, similar to the audit activities carried out within the Bank. As per the communiqué “Penetration Tests for Information Systems” published by BSRA, banks are required to carry out penetration testing at least once a year. The purpose of penetration testing is to identify and fix vulnerabilities that may result in unauthorized access to the Bank's information systems or sensitive data before such vulnerabilities are exploited. External firms have been carrying out penetration tests at İşbank since 2012 in accordance with the communiqué. Penetration test action plans prepared on a quarterly basis by Information Security regarding the findings of the penetration tests are reviewed by the audit team, and the "Penetration Test Finding Follow-up Report" for the current year is reported in the following year. In the ordinary audit activities and investigations carried out by the members of the Board of Inspectors, the effectiveness of the measures taken for the confidentiality of customer information is reviewed. In An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 100 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 101 case of a customer complaint submitted to the Bank in relation to an alleged breach of confidentiality due to loss or disclosure of customer information to third parties, the issue is meticulously handled in all aspects, and the audit results are reported. Within the scope of the investigations, the data and audit trails in the Bank's systems are analyzed in a holistic and detailed manner, and any situations that indicate reasonable doubt are examined from an analytical perspective. In the event of a reasonable suspicion that such information is disclosed to third parties, investigations on the subject are expanded, and if these suspicions reflect the truth, the necessary measures and decisions within the scope of both internal regulations and legal legislation are taken without delay. In addition, the processes described in the Bank legislation regarding provision of information to customers about the outcome of such complaints are executed in order to ensure that the complaint owners are notified about the outcome of the investigations. Within the scope of internal audit activities, all investigation results are reported to the Board of Directors through the Audit Committee; within the framework of audit reports, it is ensured that the measures taken by the relevant unit managements are monitored. The Internal Control Division information systems internal control activities team conducted inspections at 76 checkpoints for the Bank’s information security process. In addition, various checkpoints for cybersecurity on the Bank’s critical IT assets are regularly monitored at daily, weekly, and monthly intervals as part of level two controls, and the identified operational issues are shared with the relevant IT units to correct them. The control activities of the Internal Control Division within this scope include: access to databases, authorization and security parameter controls, controls for the security of privileged public user accounts and user groups on servers and databases, activity controls of high-privilege users on critical servers and applications for information security, server anti-virus software controls, controls for the security of server audit trails, data leakage prevention system controls Additionally, regular access and authorization controls are done to ensure that end-user privileges in basic applications used for the main banking processes are up to date. Within the framework of the security architecture, there are multiple layers in the communication network infrastructure of İşbank. Anti-DDoS solutions are positioned to prevent suspicious external DDoS (Distributed Denial of Dervice) traffic. In the outermost network, incoming and outgoing traffic is controlled by IPS (Intrusion Prevention Systems) and WAF (Web Application Firewall) systems. In order to increase security on the communication network, different zones have been created on the network. Within each zone, there are different firewalls and access control lists (ACLs), and zones are protected by customized rules and security defense mechanisms. In addition, different switches and VLANs (Virtual Local Area Networks) have been established in different zones. Outgoing internet traffic is analyzed by secure socket layer (SSL) monitoring tools and protected by sandbox APT (Advanced Persistent Threat) systems. All server and endpoint devices are protected by endpoint security solutions. Authorizations in the systems are made based on role and in accordance with the principle of separation of duties, and authorizations are regularly reviewed. The trace records created on the systems are transferred to SIEM products, and security warnings are followed by the Security Intelligence and Defense Center within the framework of predetermined rules on a 24/7 basis, and actions are taken regarding security incidents. At İşbank, regular penetration tests are conducted to detect possible system vulnerabilities. Systems are patched to fix any detected vulnerabilities. Information security awareness training is provided and phishing tests are done to increase awareness among Bank employees. Risky transactions made by the Bank’s customers through digital banking channels are regularly monitored. Current risks and threats are evaluated and necessary actions are taken quickly. In addition, efforts to raise customer awareness of current risks and threats were given importance and priority. In 2022, approximately TL 78 million was invested in information security and cybersecurity fields. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 03 Responsible Operations 104 Reducing Negative Impact of Our Operations 114 Decent Work 104 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 105 Reducing Negative Impacts of Operations As one of the biggest banks in Türkiye, İşbank offers services to millions of users with its operations throughout the country. When managing its widespread network of operations, the Bank aims to minimize its environmental impact, ensure its suppliers embrace identical working norms, and be a reliable employer for all its employees. Related Capital Elements Relevant Stakeholders ᲁEmployees ᲁBusiness Partners ᲁSuppliers Material Topics ᲁThe Bank's environmental footprint ᲁResponsible Procurement and Supply Chain Risks Increase in operational expenses with rising energy costs Failure to meet the requirements of corporate commitments due to non-compliance with environmental regulations Loss of reputation due to adverse events that may occur in the supply chain Operational risks that may occur due to disruptions in the supply chain Opportunities Reducing operational expenses and observing resource efficiency with energy efficiency, reduction of water consumption, and paperless banking practices Realizing cooperation that will provide efficiency with effective supply chain management Contributed SDGs Targets Targets for 2022 Realization in 2022 Realization In line with its goal to reduce greenhouse gas emissions, the Bank aims to reduce the total Scope-1 and Scope-2 emissions calculated in accordance with the International GHG Protocol by 38% by 2025, 65% by 2030, and to zero by 2035, and carry out its activities as carbon- neutral as of 2035 (target baseline year: 2018) The Bank aims to meet at least 50% of the eligible consumer electricity consumption from clean energy sources by 2025 and 100% by 2030, in line with its greenhouse gas emission reduction targets (target baseline year: 2021) Obtaining the ISO 14001 Environmental Management System certification to cover all operation and service locations of the Bank by the end of 2022 75% 100% 100% Based on 2020, zero paper consumption in banking activities until 2024 through digitalized processes Savings of 190 million pages In order to reduce negative environmental impacts in 2021 and beyond, the following targets have been set: Reducing water consumption by switching to water- saving aerators in all sink faucets of branches, Saving energy by continuing to change the lighting fixtures to LEDs, Continuing to replace old type air conditioners with new generation air conditioners with higher efficiency. In addition, LED conversion of lighting fixtures in 125 branches was planned to be realized in 2022. LED conversion of 250 branches was completed in 2022. The replacement of old generation air conditioners with next-generation models continues in our renovated branches. ✓⃝ ✓⃝ ✓⃝ Targets for 2023 and Beyond Maintaining the current level Maintaining the current level Maintaining the current level Savings of 196 million pages Reducing electricity and natural gas consumption by 5% and emissions from vehicle use by 5-10% in the coming period, By the end of 2023, LED conversions of all branches are planned to be completed. Targets for 2022 Realization in 2022 Realization Targets for 2023 and Beyond Maintaining the local supplier ratio at 98% 97.09% The green procurement* ratio is aimed to not fall below 3%. 4% ×⃝● ✓⃝ The ratio is aimed to not fall below 96%. The green procurement ratio is aimed to not fall below 3% until 2025. * Green procurement includes all products/services produced from environmentally friendly/recyclable materials and/or that cause less damage to the environment. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 106 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 107 Key Performance Indicators GHG Emissions (ton CO2e)1✓ Scope 1 Scope 2 Scope 3 Total (Scope 1 + Scope 2) Emission Intensities✓ Emission per employee (tCO2e/number of employees) Emission according to consolidated total assets (tCO2e/TL million) Emission according to consolidated total assets (tCO2e/USD million) Emissions by consolidated net profit (tCO2e/TL million) Emissions by consolidated net profit (tCO2e/USD million) USD Balance Sheet Rate Energy Consumption1✓ 2018 2019 2020 2021 2022 20,629 22,528 22,119 20,472 68,599 10,563 89,071 4.40 0.20 0.93 21,789 71,781 8,727 93,570 4.30 0.20 0.98 57,193 7,779 77,822 3.40 0.10 0.80 8,784 6,458 31,312 1.40 0.03 0.36 0 2 10,846 22,119 0.95 0.01 0.24 0.32 14.94 17.02 10.00 2.00 61.64 78.38 5.24 5.89 74.14 7.39 26.33 5.97 13.09 18.65 Total Energy Consumption (GJ) 756,517 670,254 588,942 630,216 607,022 Total Energy Consumption (MWh) Total Electricity Consumption (MWh)2 210,144 127,989 186.18 132,501 163.59 119,912 175.06 121,404 168,617 122,652 Total Natural Gas Consumption (m3) 4,126,643 3,879,943 4,178,163 5,284,460 4,529,353 8,000 170,586 6,400 78,713 14,710 77,606 11,296 21,869 1,011 26,954 Fuel Oil Consumption (lt) Coal Consumption (kg) Diesel Consumption (lt) Total Water Consumption (m3)✓ City Water 365,424 335,964 278,890 262,235 282,919 Rainwater (recovered/re-used water) 5,820 9,425 3,588 Drinking Water3 (tanker water + bottled water) - - - 7,947 5,470 8,820 3,063 Total Amount of Wastewater 371,244 345,389 282,477 270,182 291,739 Vehicle Fuel Consumption (lt)✓ Fuel Consumption of Company Vehicles (Diesel) 2,718,367 4,012,798 3,639,660 3,155,927 2,659,440 Fuel Consumption of Company Vehicles (Gasoline) 15,335 11,982 7,592 334,694 1,344,827 Fuel Consumption of Employee Shuttles (Diesel) 562,655 541,627 535,390 550,100 530,861 Business Trips with Personal Vehicles (Diesel) Business Trips with Personal Vehicles (Gasoline) Business Trips with Personal Vehicles (LPG) - - - - - - 36,685 42,740 22,259 40,352 43,731 27,035 57,855 65,546 26,014 Paper Consumption (ton) ✓ Amount of Waste (ton)4 ✓ Total Amount of Waste Amount of Domestic Waste Amount of Hazardous Waste (batteries, fluorescent lamps, car batteries, cells, toner cartridges, medical waste) Medical waste Amount of Electronic Waste Total amount of waste recycled5 (ton) ✓ Amount of paper waste recycled (ton) ✓ Amount of non-hazardous waste recycled6 (ton) ✓ Plastics Metal Glass Plastics + Metal (Branch) Amount of hazardous waste recycled6 (ton) ✓ Batteries Fluorescent lamps Car batteries Cells Toner cartridges Total amount of hazardous waste (Branch) 14 1 9 251 200 29 - - - - 13 - - - - - - 9 2018 2019 2020 2021 2022 808 679 643 503 963 2,116 1,884 1,964 1,757 1,026 861 7 2 30 205 129 41 - - - - 5 - - - - - - 8 1 37 163 94 25 - - - - 7 - - - - - - 1,570 1,001 12 2 23 568 346 189 - - - - 10 - - - - - - 1,719 1,118 6 3 74 599 353 164 10 5 59 90 8 1 0.35 2 0 0.28 5 74 1 The emission and consumption data reported in 2018 included the Head Office buildings, all domestic branches and regional directorates, and in 2019, the Atlas Data Center was also added to this data. The increase in electricity consumption in 2019 was partly due to the inclusion of the data center. 2 Since the electricity consumption is IREC-certified, Scope 2 emissions are calculated as “0”. In 2022, the amount of energy generated from renewable energy sources accounted for 100% of the total energy consumption. 3 Represents the amount of drinking water consumed in the Head Office buildings. Drinking water for these buildings is supplied by tankers, carboys, and bottled water, and it has been monitored since 2021. In service buildings with ISO14001 certification, drinking water is supplied by bottled and carboy water. 4 2018-2019-2020 data only includes the Head Office buildings. 2021 and 2022 data includes the Head Office buildings as well as the service buildings with ISO 14001 certification. 5 The total amount of recycled waste consists of recycled non-hazardous wastes, recycled hazardous wastes, paper wastes and electronic wastes, and includes the data of the Head Office buildings. 6 The breakdown of recycled non-hazardous and hazardous waste amounts by waste type was started as of 2022, and the reported data includes the data of the Head Office buildings. 2018 2019 2020 2021 2022 Number of Local Suppliers Ratio of Local Suppliers* (%) Ratio of Procurement from Local Suppliers (%) Total Number of Suppliers 2,673 97.41 92 2,744 3,396 97.42 91 3,486 3,673 97.09 87.71 3,783 *While calculating the ratios, companies registered in the trade registry and operating in Türkiye were accepted as local companies. 417,479 351,180 320,068 282,318 333,258 Amount of electronic waste recycled (ton) ✓ 30 37 23 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 108 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 109 Environmental Impact Management Environmentally Friendly Buildings Believing that using natural resources responsibly and minimizing the impact on the environment while conducting its activities are fundamental duties of both individuals and institutions, İşbank takes responsibility for climate action in order to maintain its operations with minimal environmental impact. The Bank bases this responsibility on the targets it sets and the commitments it makes. Additionally, İşbank is undertaking many improvement and energy-efficiency projects to mitigate the negative environmental impact it causes. Climate targets Within the scope of combating climate change, İşbank established its strategy on climate change risk, and climate change was added to the Bank’s risk catalogue. In the combat against climate change, İşbank set its target for reduction of greenhouse gas emissions and stated it in its disclosure under the CDP Climate Change Program: "To reduce the total Scope-1 and Scope-2 greenhouse gas emissions calculated in accordance with the International GHG Protocol by 38% by 2025, 65% by 2030, and to zero by 2035, and to carry out activities as carbon-neutral as of 2035 (target baseline year: 2018)" İşbank made a commitment to the Science Based Targets Initiative (SBTi) for identified science-based emission reduction targets to be validated. In 2023, it is aimed to go beyond these targets and evaluate Scope-3 emissions from lending activities and the supply chain with a target-based approach. İşbank was awarded a score of “A-" in the CDP Climate Change Program in 2022. Environmental Management At İşbank, an ISO 14001 Environmental Management System Project has been in place since 2018 in order to reduce its environmental impact and build an environmental management system that complies with international standards. Within this scope, training is provided to employees working in the position of environmental officer. In 2022, our 638 employees who will serve as environmental officers attended the “Environmental Management System (ISO 14001) Training” and 12 employees who will conduct the internal audit of this system attended the “Environmental Management System (ISO 14001) Internal Auditor Training”. Employees who start their careers at İşbank are provided with information about the Environmental Management (ISO 14001) System in the “Getting to Know Our Bank” course as part of the “Starting My Career” Training. In addition, employees were provided with information and awareness on the environmental management system through online workshops. The Environmental Management System is audited by the Internal Control Division on an annual basis. The Bank has not incurred any fines for non-compliance with environmental laws and regulations during the reporting period. As of 2022, İşbank has ISO 14001 Environmental Management System Certificates for 1,178 locations. Efforts are underway to obtain zero waste certification in line with the Zero Waste Legislation at the covered locations. At the end of 2022, the ratio of certified locations to the Bank’s total locations was 100%, and efforts are underway to include newly opened branches in the certification process. With the newly launched Sustainability Platform, data collection from branches is carried out through an online application. İşbank aims to maintain its environmental management system which complies with international standards in the coming years. İşbank has awareness of the destruction of nature and economic loss caused by electronic waste. Therefore İşbank sells scrap and returns toner cartridges to recycle field assets whose life cycle is managed by the Information Technologies Division. All companies to which sales are made have WEEE certificates. All recycling operations are outsourced to authorized companies in line with the Bank’s general rules. As of 2022, the Bank has ISO 14001 Environmental Management System Certificates for 1,178 locations (100% of total locations). Environmentally friendly buildings play a key role in reducing the environmental impact of İşbank's activities. İşbank's big buildings, such as the Head Office, operations center and data center, were designed to minimize their environmental impact. İşbank Head Office building in Levent, Istanbul has a BREEAM In-use Excellent certificate. Additionally, Tuzla Technology and Operations Center (TUTOM) received the LEED Gold certificate. From 2020 when remote working arrangements were put in place to the end of 2021, electricity consumption at the Head Office locations decreased by 8.4%. The Bank’s Tuzla Data Center (Atlas) building has the LEED v4 Gold for Data Centers certification and is the first data center in Türkiye to meet these standards. In the Atlas Data Center building, the heated air generated after the data halls with IT cabinets are cooled with air is used to heat the office areas. In this way, the Bank’s energy consumption is reduced, and energy savings are achieved. In addition, rainwater is collected through rainwater collection channels installed in our buildings, treated to a certain level and then reused in various areas. At the Head Office and TUTOM buildings, all waste is sorted and recycled according to the ISO 14001 Environmental Management System Standard. Efficiency in Branches İşbank aims to use energy and resources efficiently in order to reduce the environmental impact of its service buildings and carries out such efficiency activities with a continuous improvement approach. In 2022, during the renovation work in the Bank, branch lighting, heating, and cooling systems were modernized. Existing lights were replaced with LED lighting, while old air conditioners were replaced with high energy-efficient units, and natural gas conversion was carried out at branches that were heated with coal or diesel fuel. At our Head Office building, the heating, cooling and domestic water system pumps were replaced with more energy-efficient models. LED conversion of lighting fixtures in all service buildings is ongoing. It is planned to be completed by the end of 2023. At all service buildings, conventional flush tanks were replaced with new models that use less water, and urinals with photocell control were chosen to replace existing urinal flush tanks. Lavatory faucets in all service buildings were replaced with water-saving faucets. It is estimated that 15% water savings will be achieved with these measures. As a result of the improvements and upgrades made for higher energy efficiency, emissions (scope 1+scope 2) were reduced by 9,196 tCO2e. Visors are being installed on Bankamatik ATMs that convert solar energy into electric energy and help reduce energy consumption. Acting as solar panels, the Bankamatik ATM visors can meet a significant portion of the energy need of façade lighting, except for the advertisement panels. By the end of 2022, 68 Bankamatik ATMs with solar panels produced 330 Wh per device per day. These systems are in the testing stage, and it is planned to expand their use to all renovated units from 2022 onwards. In addition, İşbank plans to invest in a solar farm covering all its branches in 2023. Efforts to reduce single-use plastics in branches and Head Office buildings are ongoing. The use of disposable water cups, of which 317,840 were consumed in 2022, was terminated within the year; similarly, the purchase of new cardboard cups at the Head Office building was also terminated In 2022, 190 million✓ sheets of paper and TL 22 million in paper costs were saved through digital, digital signature, and KEP delivery practices. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 110 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 111 Responsible Procurement Sustainable development is only possible through responsible business models. Positive or negative impacts caused by organizations are not confined to the area of its operations but may affect a large area based on the organization’s size. Aware of its responsibilities, İşbank aims to propagate its approach to, and standards of, business to its supply chain as well. By collaborating with its suppliers, the Bank tries to ensure that best practices and products extend to an even larger area. İşbank works to achieve sustainable business success with a financially strong, environmentally friendly supply chain that is also reliable with high-quality production and continuity. In order to leave a more livable world for future generations, it is of critical importance to protect the environment and use resources in a sustainable manner. In addition, the importance given to employee and human rights and compliance with ethical principles have a great impact on the development of societies and countries. Within this context, sustainability criteria come to the forefront in product/ service procurement in order to contribute to the said values. In accordance with the Sustainability Policy, İşbank endeavors to minimize the negative environmental and social impacts caused by suppliers and to raise the positive effects to maximum levels. In this context, the Bank respects environmental and social criteria in its supplier selection. The Bank follows a procurement strategy that envisages contributing to the sustainability of the ecosystem, including its suppliers, through its social and environmental policies based on growing together with stakeholders. In line with İşbank's ethical banking approach, the Supplier Code of Conduct, based on the UN Global Compact and İşbank Human Rights and Human Resources Policy, determines the main principles and essentials in purchases of goods and services. All suppliers are expected to show due diligence in acting in compliance with these principles and policies and to refrain from behaviors that may be contrary to these principles. In order to carry out healthy and sustainable procurement processes, İşbank expects its suppliers to have values identical to its own. CIPS Certification The conformance of the Bank’s purchasing organization and processes to international standards was certified with the CIPS (The Chartered Institute of Procurement & Supply) certificate it obtained in 2021. CIPS is one of the leading professional institutes that sets the best practices and standards in the field of procurement and supply chain management. The Bank is the first organization in the Turkish banking and finance sector to receive this certificate. Within the framework of İşbank's Procurement Implementation Instruction and Procurement Policy, the environmental impact of the products and services to be purchased is also evaluated as per the requirements of the environmental management system in the selection of suppliers from which the products or services needed by the Bank will be purchased. In addition, measures are taken to reduce or eliminate environmental impacts, taking into account the requirements specified in the country’s legislation and the Bank’s regulations. The Bank cooperates with suppliers whose working principles are compatible with the Bank’s sensitivities in terms of human rights, environmental and social impacts. Supplier selection is carried out within the principles set forth in the Procurement Policy and Implementation Instruction. Article 2 of the Supplier Management Principles states "No person is employed under the age limit defined in the legal legislation. ”. In addition, the Bank does online research and looks into the market sources to gather information about suppliers. Furthermore, suppliers are visited on a regular basis as part of a specially designed program. Within this context, there are no suppliers that employ child labor, or no information has been received in this regard. At the same time, our suppliers are asked whether they have policies to prevent child labor in the Sustainability Survey directed to them once a year The Supplier Management Principles, Anti-Bribery, Anti-Corruption, and Gift and Hospitality Policies, which set out the basic principles and principles to be followed in the relations between İşbank and suppliers from whom products and services will be purchased, can be accessed from the procurement platform. Thus, suppliers can be informed about procurement processes and policies while registering on İşbank's procurement platform. These policies are also available on the Bank’s website and are accessible to all stakeholders. The Supplier Management Principles on the home page of İşbank’s procurement platform detail the sensitivities that suppliers must comply with. The sensitivities specified in the Principles are observed in supplier selection. No purchase is made from suppliers who cannot submit the required documents. A large proportion of İşbank's suppliers are well-known companies in the sector that fulfill their legal obligations due to their position in society. In the reporting period, there was no information on any negative impact related to suppliers in terms of human rights, working conditions, and social criteria. İşbank aims to collaborate with its global peers and suppliers in order to be a pioneer in sustainability by benefiting from best practices and product examples. Like environmental criteria, social criteria are also important in the selection of suppliers at İşbank. The Bank is highly respectful of association and collective bargaining rights. Sensitivities on this issue are taken into consideration in supplier selection. Purchases of goods and services from suppliers that are found to be involved in practices of bribery and corruption are suspended, and such suppliers are banned. The supplier cannot employ workers under the age limit defined in the legal legislation. For our suppliers, who were visited regularly, no feedback with a negative social impact was received during their reporting periods. İşbank works to achieve sustainable business success with a financially strong, environmentally friendly supply chain that is also reliable with high-quality production and continuity. The Bank adopts the principle of continuously improving its employees along with its suppliers, ensuring organizational excellence and consistently improving business processes. When selecting suppliers, the Bank chooses one from its existing pool of suppliers based on the nature of procurement in question or tries to reach new alternative suppliers by looking at predefined criteria. In addition to the specified criteria, the Bank also takes different parameters into consideration, such as reference checks, sector analysis, and financial analysis when identifying alternative suppliers. Each year, the business unit that uses the product/service is asked a number of questions for supplier evaluation within the supplier performance management study. Specialized employees working in the Procurement Division also evaluate suppliers through the questions directed to them. This study is carried out systematically through the purchasing application for the suppliers that account for a large portion of the purchases. As part of supply chain management, İşbank expects its suppliers to: Act in accordance with environmental and ethical rules, Be able to adapt to the developing and changing sector conditions, Meet the Bank's expectations of quality-logistics performance, Be open to cooperation to reduce the negative impact of the production process on the environment, Prefer environmentally friendly raw materials and supplies with minimal impact on the environment in procurement activities, Try to minimize the environmental impact associated with their production and logistics processes. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 112 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 113 In current procurement processes, environmental/social impacts are taken into account in supplier selection; Boxes purchased in 2022 were made entirely from recyclable materials. The work chairs purchased for the Head Office buildings and branch managers in 2022 were made of 95% recycled material. The carpets purchased for agile offices are carbon neutral. High-energy class air conditioners are preferred for the air conditioning requirements. Certificates of compliance with environmental regulations such as Waste Electrical and Electronic Equipment Processing Certificate, Non-Hazardous Waste Collection-Separation Certificate, Waste Battery and Accumulator Temporary Storage Permit, Hazardous Waste Transport Vehicle Licenses, and ISO 14001 Certificate are requested from participating companies in scrap sale tenders. With the tender held in 2022, renewable energy sources were preferred for the entire electricity consumption under the Bank’s control in the electricity purchase for 2023. In 2022, hybrid vehicles were preferred for most of the vehicle leasing contracts. İşbank has adopted the principle of continuously improving its suppliers, ensuring organizational excellence, and consistently improving business processes. The Bank continued to contribute to the national economy by selecting local suppliers in 2022 as well. Therefore, local suppliers accounted for 97% of the total suppliers, while the amount of procurement from local suppliers accounted for 88% of the total volume of procurement during the reporting period. İşbank also monitors the environmental impacts of its supply chain. In the Supplier Management Principles, it is stated that environmental criteria are also effective in supplier selection. In purchases with high environmental impact, suppliers are evaluated according to their competencies and no purchase is made from suppliers who cannot submit the necessary documents. For such special purchase activities, suppliers that submit the required documentation are preferred, regardless of price. A Sustainability Survey is sent to suppliers once a year. Suppliers from which the Bank buys a large amount of products/services via its purchasing application are subject to a survey which included 38 questions in the main topics of environment, labor and human rights, ethics, and sustainable purchasing. The survey, which was conducted to understand at what stage suppliers are in terms of sustainability, also aims to raise their awareness on this topic. A total of 30 suppliers, constituting 57% of purchasing, participated in the survey which was sent to suppliers covering 71% of purchases for 2022. The survey consists of 38 questions in total - 24 under Environment, 8 under Employee and Human Rights, 4 under Ethics, and 2 under Sustainable Purchasing topics.- The survey also includes questions on water management, such as the total amount of water used in production, targets set to reduce water consumption, whether reporting is done for water use, and actions taken to reduce water use. All purchasing is carried out in accordance with the Supplier Management Principles, Gender Equality, and Human Rights policies available on the Bank’s website. The Bank observes gender equality in all its activities and aims to create opportunities to raise awareness on the topic. The aforementioned survey sent to suppliers also includes questions on gender equality. Business Continuity Management Program The Business Continuity Management Program, which has been carried out at İşbank since 2009 as a holistic management process aimed at creating an effective response capability to protect the institution’s reputation, brand, and value-creating activities, is in compliance with the ISO 22301 standard and legal regulations in Türkiye. Under the program, studies that will constitute inputs to information systems recovery plans and strategies are carried out, and the continuity of our branches is monitored. The program is supported by trainings for all employees. In 2022, it was ensured that business continuity recovery strategies were implemented within one business day in branches where service interruptions occurred, except for regional disasters; 2 online trainings planned for Business Continuity Coordinators were held on March 29 and 31, 2022 with the participation of 65 managers; all business continuity plans were updated within the studies carried out throughout the year; and all planned business impact analysis studies were completed. The completion ratio of the Business Continuity Management Digital Training, which was directed to a total of 23,019 employees, was 93.99% as of October 2022. In 2022, the Business Continuity Management Policy, which constitutes the framework of the program, was updated in line with the developments in this field, particularly the Regulation on Banks' Information Systems and Electronic Banking Services (BSEB Regulation). In line with the business continuity experiences gained during the pandemic, the Workflows to be followed by our branches in the event of Prolonged System Outages were published for our branches. The ratio of employees with ISO 22301 Certification among the Business Continuity Team employees was 100%. The inclusion of the Remote Working Service Level Agreement in 2022 among the Service Level Agreements that include monitoring indicators for the continuity of İşbank Information Systems Applications is considered as one of the reflections of new working models on the program. Considering the reflections of new working models on the activities carried out within the program, studies will be carried out also in 2023 by adopting the continuous improvement and development approach, which is emphasized in the essence of the ISO 22301 standard, and it is aimed to increase effectiveness with application support as well. Within the Business Impact Analysis studies carried out under the İşbank Business Continuity Management Program, all Bank processes, including our critical services, are evaluated every year in terms of; Financial Impacts Reputational Impacts Legal, Legislative, and Contractual Impacts Operational and Business Goal Impacts that may occur if processes are interrupted, by the relevant Head Office Divisions, and as a result of the evaluation, the “Criticality Level” of each process is determined as Very High, High, Medium, and Low. Business Continuity Plans are prepared on the basis of each Head Office Division in order to ensure that the processes can be restored before the anticipated Maximum Tolerable Period of Disruption (MTPD) in case of any interruption. The Information Systems Continuity Plan, which is a part of the Bank’s Business Continuity Management Program, ensures the continuity of information systems services that maintain the continuity of İşbank’s activities in the event of an interruption and ensures that critical business functions are restarted effectively and efficiently in the event of a major interruption in the Bank’s computer and communication resources. The potential impacts natural disasters and extreme weather conditions may have on our operations are included among the location-based extraordinary conditions the branch/regional/general directorate units may face within the activities conducted for ensuring the Bank’s business and service continuity and among extraordinary conditions which may cause interruptions in terms of providing the continuity of the Bank’s systems. Said risks are considered in the corporate crisis management processes, and in case said risks occur, the emergency management processes to be implemented are all defined in the Business Continuity Plans and IS Continuity Plan. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 114 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 115 Decent Work At İşbank, employees enjoy a respectful, peaceful, safe, fair, and supportive work environment. Having happy and productive employees with a vision of the future is one of İşbank’s primary goals. Related Capital Elements Relevant Stakeholders ᲁEmployees Material Topics ᲁEmployee Rights Loyalty and Satisfaction ᲁFuture of Work and New Working Models ᲁEqual Opportunity Diversity, and Gender Equality Risks Opportunities In accordance with its general recruitment policy, İşbank only recruits for entry-level positions. All recruitment positions are for recent graduates or young professionals; executives are trained in- house. One of the most important risks is the loss of qualified employees who reached a certain level of maturity within the Bank for various reasons. Not being preferred by talented and successful new graduates and young professionals Being affected by global labor crises defined as the “great resignation” and “silent resignation” due to the changing demands and expectations of employees and changing work habits and decreasing employee loyalty Loss of workforce and reputation due to failure to meet the expectations of existing and potential employees Being the employer of choice for potential employees with a trusted brand and trusted employer image Keeping employee satisfaction high by offering employees long-term career opportunities through İşbank’s in-house promotion culture Being a preferred institution for young employees thanks to practices in various fields such as agile business models, artificial intelligence, data analytics, and comprehensive training programs Being among the leading institutions of the sector in terms of diversity and equal opportunity and being a bank preferred by employees Keeping employee motivation high by prioritizing a work-private life balance Contibuted SDGs Key Performance Indicators Employee turnover rate (%) Number of practices that support employee satisfaction Participation rate in employee satisfaction surveys (%) Unionization rate (%) Satisfaction with the human resources practices score as part of the working life evaluation survey Ratio of female employees to the total number of employees (%) Ratio of female employees in senior and middle management (%)(Assistant Manager and above) Average training hours per employee per year* Share of digital trainings within all trainings (%) Hours of training per person in management and leadership development programs Hours of training per person in IT competence development trainings 2019 1.86 18 90 99 67 55 45 25.7✓ 30✓ 14.2✓ 23.4✓ Hours of training per newly recruited employee in their first year 164✓ Number of suggestions communicated by employees 6,292 2020 2021 1.6 15 88 98 71 55 45 2.01 13 85 98 68 55 44 25.4✓ 51✓ 29.3✓ 30✓ 2022 1.90✓ 16 89 97.5✓ 72 55 42.6✓ 43✓ 25✓ 11.4✓ 16.7✓ 22.1✓ 17.6✓ 145✓ 4,260 26.3✓ 36.1✓ 116✓ 2,950 108✓ 4,702 *Training figures exclude participants of refresher trainings, while Private Security Officers and Servant Staff are not included. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 116 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 117 Employee Loyalty and Satisfaction İşbank believes that the fundamental basis of business success is employee loyalty and satisfaction and considers it a key responsibility to provide a satisfying work environment for its employees. The Bank has a deeply-rooted corporate culture and supports employees with their requirements according to today's modern world. Thanks to its deep-rooted culture and a work approach that keeps pace with the times, employees remain a part of the İşbank family for many years. Employee loyalty and satisfaction are regularly measured through surveys in the Bank. The results of these surveys, which are conducted in the areas of training activities, performance management, career management, recruitment process, remuneration, and rewarding, aiming to increase employee satisfaction, are evaluated by managers and enable the necessary improvements to be made. In 2022, 90% of the Bank’s employees participated in the employee loyalty and satisfaction survey conducted with the support of a consulting firm. In this study, the employee loyalty rate was measured as 60%. Practices that support employee satisfaction at İşbank include online tours and workshops, culture and art events, special employee discounts obtained from various organizations, and practices aimed at increasing employee volunteering support. The running team, which also included employees of the Bank, attended marathons for the benefit of different foundations in 2022 and collected donations for the relevant foundations with the support of our employees. The presence of long-term employees is an important indicator of employee satisfaction and loyalty. 76% of its employees have been working for İşbank for more than 10 years. As of year-end 2022, the employee turnover rate was around 1.90%✓, and the voluntary turnover rate was 3.75%. Targets Targets for 2022 Realization in 2022 Target Realization Targets for 2023 and Beyond Continuing to plan role-based development journeys of newly established areas as part of the agile transformation program, designing training programs that will increase the level of knowledge and develop the skills of our employees according to their competency needs in the newly established competency lines. Continuing to offer trainings in the “Training Catalogue” designed to support the development of employees in professional development, digitalization, personal development and leadership topics throughout the year. Continuing to reach even more employees with the “Data Analytics Development Program” launched in 2021 to support competency transformation in the field of data analytics and artificial intelligence. Completing and launching the “New Digital Learning Infrastructure” project designed to increase digital training hours through innovative learning practices that offer employees continuous development opportunities with highly tailored content through an artificial intelligence-based suggestion system and allow employees to access trainings much more easily through a learner-driven approach. Introducing the new learning game, which was prepared to contribute to the acquisition of future competencies by supporting employees’ personal development and their progress in technical banking issues, to employees in 2022. While role-based trainings designed with the Agile Management Division continue, Risk Competence Line and Process Competence Line trainings were designed in addition to Customer Experience Competence Line trainings. While the role-based trainings of Agile Area employees continue, new training designs will be made together with the Agile Management Division in parallel with changing needs. A total of 59 topics on professional development, digitalization, personal development, and leadership were presented to our employees throughout the year. ✓⃝ Individual Development Plan trainings supported by different learning tools to develop Business Development and Innovation, Result-Oriented Problem Solving, Continuous Development, Customer Centricity, and Human Relations Management competencies will be made available to all our employees at basic, intermediate, and advanced levels, tailored to the competencies that our employees need to develop. In addition to the phase 1 trainings offered through the digital training platform within the “Data Analytics Development Program” and the Applied Statistics and Applied SQL in Data Analytics trainings in phase 2, QlikSense Data Visualization training was implemented, and a seminar on artificial intelligence was presented to the program participants. In 2022, about 4,500 employees received a total of over 51,700 hours of training under the program. Since the launch of the program in 2021, a total of 2,241 of our employees have improved their data literacy skills, gained knowledge on the fundamentals of data analytics, and received their Phase I certificates. A total of 1,414 of our employees participated in Phase II trainings, which include technical knowledge and application-based courses designed for employees who want to further develop themselves in this field. ✓⃝ Data Analytics Development Program is planned to be continued. On 05.04.2022, the “New Digital Learning Infrastructure” project was completed and made available to our employees. Our new learning game “İşLegends” was introduced to our employees on 28.09.2022. ✓⃝ Within 2023, the aim is to continue to improve our digital learning platform “Learning World” by adding new features to improve the user experience aligned with good practice examples. In our “İşLegends” learning game, the aim is to add new mini- games that support competency development and to design a multiplayer structure within the same learning game. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 118 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 119 Employee Rights The Future of Business and New Working Models İşbank guarantees a work environment where employee rights are fully respected. All the Bank employees are free to join trade unions within the scope of freedom of association and act of their own free will. 97.5% of the Bank’s employees are union members. The Remuneration Policy, which is based on the Bank's internal regulations and the provisions of legal legislation, especially the Collective Labor Agreement, defines all economic and social rights of employees. The ultimate authority and responsibility for ensuring that the Bank’s remuneration practices are managed effectively within the framework of the relevant legislation and this Policy rests with the Bank’s Board of Directors. The İşbank Remuneration Committee is responsible for the preparation of decisions regarding remuneration to be submitted to the Board of Directors for approval, ensuring the compliance of remuneration with the Bank's risk appetite, ethical values, internal balances, and strategic goals, and regularly monitoring the effectiveness of the Policy. It is essential that the remuneration of the Bank's managers and employees at all levels is in line with the Bank's ethical values, internal balances, and strategic goals and is not associated with the Bank's performance. The salaries of senior executives are determined in accordance with the Bank's strategies, long-term goals and risk management structure and are designed to prevent excessive risk taking. The wage package of the Bank consists of salary, bonus, meals, foreign language compensation, dividend payment determined by the Articles of Incorporation, and other fringe payments that may vary depending on seniority and/or scope of the job. Payments such as high productivity allowance, product- based sales bonuses, and executive bonuses may also be made to employees in line with their individual performance. In the coming period, it is planned to establish an incentive-based remuneration system for the Executive Board and other senior executives based on specific performance indicators related to sustainability in line with the Bank’s strategic priorities. Manager and manager candidates working in branches and the Head Office divisions receive premium payments on an annual basis. Attention is paid to ensure that the manager premium payments are aligned with the performance of employees, the Bank's long-term strategy and the risks assumed. There is no variable remuneration practice for key employees in the Bank. In 2022, the “Personalized Goal Setting and Systematic Bonus” was introduced to cover all employees, and the target cards consisting of individual and team goals began to be used to evaluate the success of business results. Within the Collective Bargaining Agreement signed with the Bank-Finance and Insurance Workers Union (BASİSEN), all employees, regardless of title and seniority, are eligible for healthcare benefits as per the principles of the Healthcare Benefit Implementation Regulation, as well as facilities such as food service and personnel transportation services, and other benefits and support packages such as marriage support package, maternity allowance, child allowance, natural disaster support, goods transportation allowance and immigration allowance. Part-time employment of university students under contracts has started at İşbank, but these employees cannot benefit from the provisions of the Collective Labor Agreement due to their individual contracts. At İşbank, the principle of freedom of employment and contract applies. At İşbank, which is among the organizations with the highest rate of unionized employees in the sector, there are no activities that pose a risk of forced labor. In 2022, online sports workshops were organized for employees. Relevant videos were shared through an application that employees can benefit from continuously. İşbank supports its employees with practices that go beyond their fundamental rights and freedoms: İşbank contributes to the sportive lives of its employees with the gym located in the Head Office and TUTOM buildings that is available for all employees. The Bank has practices that go beyond the legislation. Annual leave, maternity leave, disability and unpaid leave arrangements specified in the Collective Bargaining Agreement can be expanded to grant rights in favor of employees beyond the legal regulations. There is also the practice of granting administrative leave by the direct managers upon request of employees for personal matters. The remote work practice put in place in connection with the pandemic means the employees now have more time to deal with their personal matters. With the COVID 19 pandemic, the remote working culture entered business life. Until October 2022, the Bank tried different working models determined by prioritizing employee and customer health and closely monitored the development of many parameters such as employee loyalty, employee happiness, business performance, and customer satisfaction. In the reporting period, when pandemic-related concerns and health measures were almost over, it was observed that remote and hybrid working was adopted as a valid, new working model in the world and in our country. Thus, until the end of 2023, İşbank employees will continue to work with a setup of; Remote working for teams in the fields of technology, remote service, remote sales, and operations working at least 2 days a month in the office, Hybrid working for business units and development teams, Full-time office work for teams that need to be in the office due to the nature of their work. In addition to Head Office employees, branch employees can also work remotely in line with the principles to be determined at the initiative of the branch manager. In addition to the Head Office premises, modern offices called MaxiOfis are being opened in different provinces in line with the “İşim Her Yerde” approach and with the principle that these jobs can be performed from “An İşbank Office” at any location where employees are located, in cases where the work to be done can be performed independently of the location. Considering the office usage needs evolving with the new working model, 8 MaxiOfis locations were opened in Istanbul, Izmir, Ankara, Adana, Antalya, and Trabzon, which can be used by all employees whose work is suitable for remote working, especially remote workers and employees assigned to different cities. In office designs, the aim is to create spaces that offer comfort, flexibility, and new opportunities that increase employees’ sense of belonging and strengthen positive interaction in business life with social space solutions considering community health. Realized with this vision, MaxiOfis locations are contemporary and modern workspaces with spacious and next-generation design, cafés and recreation areas, libraries and private meeting rooms. These offices are organized according to the hybrid working setup, with desks and meeting rooms made available to all İşbank employees by being included in the booking system. In this way, workspaces that can be booked and used for different purposes such as collaborative work, events, meetings, and customer meetings, when needed, are available to all employees without space and table ownership and can be used more effectively and efficiently. In order to manage human resources effectively and to provide location-independent access to the next-generation competencies needed, functions such as remote service, remote sales, data analytics, and operations, which the Head Office units want to expand strategically, were made functional under the scope of competency lines. With assignments to these functions, the aim is to increase the welfare and standard of living of more employees by meeting the demands of employees who request transfers to different cities. MaxiOfis locations are being determined by taking into account the demands and needs of employees. With this practice, the Bank is able to access the next- generation competencies it needs regardless of location, and employees are offered different career alternatives. Currently, 445 employees are performing their duties in this context. Also in 2023, the Bank plans to continue opening new MaxiOfis locations where needed and to assign employees in Anatolia to these offices within the scope of the competency lines specified. With the introduction of remote and hybrid working and the experience that flexible working models are also applicable, employees have found the opportunity to work from different cities within the framework of their needs. Employees who request it have the opportunity to work permanently in MaxiOfis locations opened outside Istanbul if their managers find it appropriate. In this way, it has been possible to create an alternative to the increasingly difficult living conditions in Istanbul. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 120 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 121 Agile Workshop Despite its large corporate structure, İşbank is an institution with fast decision-making processes. An important component of this working system is the “agile areas” established in critical areas. In agile areas where employees from different functions come together, fast and innovative solutions are created for critical questions. With the addition of the 10 Agile Areas in 2022, there are now a total of 22 Agile Areas, 1,500 employees working with the agile working model, and 185 Agile Teams. Within the Agile Academy, a training catalogue and learning journeys consisting of 23 modules were designed in a structure that can serve external companies. In 2022, within the agile transformation efforts, divisions with functions such as payment systems and product development were restructured under the agile working model in line with İşbank’s strategic goals and started their activities with a focus on providing more innovative products and services to our customers. The Agile Service Unit, which creates value for the customer and receives business from the same service pool, was put into practice. With the Panel, which was commissioned to strengthen the institutional framework of the agile working model and to ensure that employees’ Field-Team-Competence Line-Role information can be monitored instantly through the system, employee information working in agile organizations can be monitored and reported instantly through the system. The new Software Development Life Cycle, which ensures that all existing processes, from the planning of a job in agile areas to the period after it is taken into the production environment, are carried out in accordance with the agile model, has been implemented in all areas. In the JIRA application, where agile teams engaged in software development carry out business planning, a Single Backlog structure where business and software needs can be managed through the same backlog was implemented. In this way, the software development and release processes of agile organizations have become more efficient. The structure required for measuring and evaluating the innovation rate in the works produced by Agile Teams has been put into operation. As of 2023, the aim is to take various actions to increase the innovation rate of Agile Team work lists through monitoring. In 2023, it is planned to spread agile values and an agile mindset in all Head Office Divisions. The following results were obtained with the evaluations made in 2022. 50% Improvement in Time to Market 4.26/5 Agile Maturity 4.34/5 Employee Satisfaction Equal Opportunity, Diversity and Gender Equality Our Gender Equality Strategy İşbank has supported women since its foundation. By becoming a signatory to the United Nations Women’s Empowerment Principles (WEPs) in 2020, the Bank reinforced this egalitarian approach and committed to playing a role in supporting and facilitating women’s participation in employment in Türkiye. Inclusion in the WEPs has created a complementary framework for existing efforts. As an extension of this approach, the Gender Equality Policy was established in 2021 with the decision of the Board of Directors. With the Board’s decision, the Board of Directors Diversity Policy was put into effect in 2022. In 2022, a program was established to put the Bank’s efforts on gender equality into a structural framework under the Gender Equality Policy. The aim of this program is to develop good practices that create impact by considering all stakeholders in the Bank’s value chain. For this purpose, a 4-pillar structure was designed with the dimensions of employees, suppliers, customers, and society. Working Groups, which include various business units of the Bank, continue to work on this topic through various actions. To access the Gender Equality Policy, please click here. At İşbank, providing equal opportunity to all employees without discrimination is a material topic. On the basis of diversity, inclusion, and equal opportunity, discrimination based on factors such as gender, language, religion, ethnic origin, and age is not permitted in business processes. Attaching special importance to ensuring gender equality, the Bank conducts training and practices in this regard. İşbank is a signatory to the Women’s Empowerment Principles (WEPs), which were launched by the United Nations Environment Program Finance Initiative and aim to empower women to take part in economic life in all sectors and at all levels. The Bank is a corporate member of the 30% Club’s Türkiye Network, an international initiative that aims to increase the number of women on the boards and in executive leadership of companies worldwide. One of the institutions with the highest number of female employees in Türkiye, 55%✓ of İşbank’s employees and 42.6%✓ of its executives are female. There are 11 executives on the Bank’s Board of Directors, 1 of whom is a woman. The ratio of female executives on the Board of Directors is 9.09%. In recruitment, all candidates are provided with equal employment opportunities without gender discrimination. Of the job applicants, 43.58% are female and 56.42% are male. Of the Bank’s recent graduate employees, 47.07% are women and 52.93% are men. At İşbank, which is among the institutions with the highest number of female employees in Türkiye, providing equal opportunities to all employees without discrimination is a corporate priority. Breakdown of Employees by Gender* Male 45%✓ Female 55%✓ Breakdown of Managers by Gender* Female 42.6%✓ Male 57.4%✓ *Employees with the title of Private Security Officer are excluded. Ratios including Private Security Officers F: 51%, M: 49% *Assistant Manager and higher titles An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 122 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 123 55%✓ Female employee ratio 42.6%✓ Ratio of female managers 12% Ratio of female engineers 15.75% Ratio of female senior executives 53.29% Ratio of female employees hired in 2022 39% Ratio of female employees in the top 10% of the Bank’s highest paid employees 44.59% Ratio of women in the lower middle pay quartile at the Bank 49.77% Ratio of women in the low pay quartile at the Banki 50.01% Ratio of women in the highest pay quartile at the Bank 4.85 Average unadjusted gender pay gap 36.05% Ratio of women working in information technology (IT) 55.25% Ratio of women in the upper middle pay quartile at the Bank 99.7%✓ Rate of female employees returning from maternity leave Equal pay for equal work Career opportunities The Remuneration Policy covers the employees and managers of the Bank at all levels and is under the responsibility of the Remuneration Committee, which directly reports to the Board of Directors. Remuneration is managed through transparent and measurable processes and systems, and there is no gender-based wage differentiation within the remuneration policy. As of December 2022, regardless of role and responsibility, the median salary payment to female employees in the Bank was 9% higher than the median salary paid to male employees.51 The 2022 “Gender Equality in Remuneration Audit Report” was submitted to the Audit Committee on 09.02.2023. The said report concluded that the remuneration of female and male employees did not differ according to gender in the conjugate study as of the date of commencement of employment, the date of the last title change, and the date of the last level change. 51 In the calculations, monthly regular payments made to employees working in Türkiye as of November 2022 regardless of their performance were taken into account. Payments such as overtime pay, cash compensation, shift compensation and other social benefits and non-guaranteed payments made once a year were not taken into account. A joint program was developed with Upschool to increase the number of competent women to work in technology and digital activities at İşbank. Only female candidates, who are the 4th can apply for the program, women who are 4th-year university students or graduates, are not over 30 years of age and succeeded in the evaluation process will receive technical training for 10 weeks and then have the opportunity to work in the Information Technologies, Data Management, or Head Office business lines at the Bank. Awareness for equality İşbank implements gender equality practices covering all employees and activities in line with the principles of equal opportunity and diversity. “Diversity and Inclusion” training was organized for Head Office and Branch managers. Aiming to raise awareness on unconscious prejudice, the training, in which gender equality and tools and methods to reduce discriminatory behaviors were discussed, was attended by 313 managers in December 2021 and 1,794 managers in 2022. The “Leader Women” Program was launched in 2022 to encourage more active participation of female employees in management and to support their development on their way to senior management positions. 123 managers have participated in the program, which includes classroom trainings focusing on furthering leadership competencies, as well as experience-sharing meetings where participants will come together in small groups periodically throughout the year under the mentorship of experienced managers. The program is planned to continue in the future as well. Within the scope of awareness-creating and consciousness- raising trainings focused on themes that support İşbank's sustainability vision and the United Nations Sustainable Development Goals, the following Management Development Conferences were organized for managers and manager candidates: “Sexism Behind Politeness: Culture and Language”, “Sustainability through the Lens of Gender Equality”, and “Law Against Violence: Empowerment through Rights”. In addition, “Better is Possible with Inclusive Leadership” training in the Branch Managers Training Catalogue and “Women in Business Life and Inclusive Leadership” training in the Leader Women Program were organized. A total of 749 of our employees’ self-awareness on tacit prejudices was supported through these trainings. A 2-hour “Diversity and Inclusion” course is provided to new recruits with the titles of Officer and Assistant Specialist within the Starting My Career Trainings and to employees promoted to Senior and Assistant Manager roles in the career training programs. In this course, tacit prejudice and gender equality are covered for 1 hour. In the 2-hour training “The Richness of Differences: Diversity and Inclusion”, which was included in the Training Catalogue offered to all our employees with the principle of equal opportunity, a 20-minute section of the training was on gender equality, and a 40-minute section was on tacit prejudice, totaling one hour of discussion on these 2 topics, and a total of 1,204 people participated in the related trainings. In addition, discrimination, prejudices, and gender inequality topics were conveyed in the 45-minute section of the 2-hour “Equality in Language and Communication” training included in the Training Catalogue, and 60 people received this training. Furthermore, the “Ethical Principles and Operational Rules” digital training was made available to employees. The training included detailed information on the Bank’s ethical principles and operational rules; quality, compliance, and risk policies; the principles on the Policy for Combating Financial Crimes and Sanctions and Compliance Program, Compliance with Competition Law and provision of Information Security; and information on the “Ethics Hotline” where employees can report any violations or suspected violations of ethical principles. The Correct Approach towards Disability and Sign Language trainings continue to be offered as mandatory trainings. İşbank always considers gender equality in its marketing and advertising activities. Women/female farmers play an important role in the agricultural sector. In order to demonstrate this importance and appreciation, the Bank evaluates its advertising and marketing content from this perspective and approaches the positioning of women, the expressions in texts, the selected visuals, and scenario flows within this framework. Content for use in the Bank’s marketing and advertising activities is prepared with sensitivity against gender discrimination, reviewed by the relevant teams before publication, and evaluated in terms of all prejudices and identity distinctions, including gender. In case some or all of the content is deemed inappropriate, feedback is provided to the relevant business units and contracted third-party companies, and business processes are also developed in this regard. In machine learning models, care is taken not to use gender information and information such as “date of maternity leave” that may lead to gender prediction. There were no complaints of gender discrimination in marketing and advertising activities. Support for Women In cooperation with TÜRKONFED and İşbank and with the support of UN Women Regional Office for Europe and Central Asia, the “WeLead (Leading Women Entrepreneurship for Accelerating Development)” project was launched for women entrepreneurs. The project aims to improve the capacities of entrepreneurial women and strengthen their communication networks. Within the project, training content on financial and non-financial topics was prepared for entrepreneurial women regardless of sector and scale. Within this scope, face-to-face trainings on E-commerce, Digital Marketing and Global Marketplaces, and Gender Responsive Procurement were held in Istanbul on June 29, 2022; Introduction to E-Commerce and Sales in Marketplaces in Trabzon on October 11, 2022; Entrepreneurship and Introduction to E-Commerce and Sales in Marketplaces in Antalya on November 16, 2022; and Digital Marketing and Introduction to E-Commerce and Sales in Marketplaces in Kayseri on November 29, 2022. Online trainings were held on August 17, 2022 on Company Establishment and Taxation, on September 7, 2022 on Entrepreneurship, on September 28, 2022 on Introduction to E-Commerce, on October 5, 2022 on E-Accounting, E-Invoice, on November 3, 2022 on Micro Export, on November 11, 2022 on Trademark, Patent and Design, on December 7, 2022 on Quality Process Improvement and Process Development, and on December 15, 2022 on Facebook Ad Panel. An Entrepreneur Women Meetings event was organized in Adıyaman on September 20, 2022. By offering financial and non-financial services to women entrepreneur customers, the Bank aims to increase the loyalty of existing customers and acquire new ones. İşbank regularly monitors the depth score of women entrepreneur customers, which indicates product penetration and establishment of profitable relationships, product ownership means in POS and corporate credit card products, which make a high contribution to the expansion of the Bank’s demand deposit base, their total combined shares, and their Commercial NPL ratios. The Bank has Women Entrepreneur Loan and Eximbank Funded Women Entrepreneur Export Support Loan Campaigns for women entrepreneurs. Family-friendly employer The family life of its employees is important for İşbank. Accordingly, the Bank conducts practices that support the balance between the work and private lives of its employees. For female employees, pregnancy and the postpartum period can affect their work life. In order to avoid such disruptions, İşbank puts in place practices that will facilitate the return of female employees to work after childbirth. Thanks to these practices, 99.7%✓ of female employees who took maternity leave in 2022 returned to work. The positions of female employees on maternity leave are preserved, and following the end of their leave, they can continue their duties in the same position and in the same location. They can request unpaid maternity leave before starting work or benefit from part-time work arrangements. For new mothers, breastfeeding rooms have been allocated to create a more comfortable working environment after maternity leave. Employees using breastfeeding breaks can also benefit from personnel transportation services. Mother and child benefit from the comprehensive health benefits offered by the Bank. Children between 36-72 months of age of female employees working at the Bank’s TUTOM location can benefit from the Private Tuzla Bilfen Kindergarten operating at the relevant location. All employees with children are provided with a maternity and child allowance. Male employees can take a longer paternity leave than the length of leave specified in the regulations. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 124 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 125 Compliance with Operating Principles Employee Health and Safety Preferred Employer If, during routine audits conducted by the Board of Inspectors, suspicion arises that the Bank employees do not conform to work standards, or if the Board receives a claim that the operating principles are not complied with, the issue is meticulously reviewed. If tangible evidence is found that proves such suspicion or claim, the reports prepared to allow the necessary administrative decisions to be made in accordance with the Bank’s collective labor agreement and the legislation are reviewed by the Board and then transferred to the related Head Office Divisions for action. For behaviors that are found to be in violation of the Bank's policies, the necessary disciplinary action, up to termination of the employment contract, is taken according to the Human Resources Regulation and applicable provisions and procedures of the Collective Labor Agreement. Where circumstances warrant legal action, the violation is brought to the attention of legal authorities. Accordingly, 46 investigations were carried out and referred to the related Head Office Divisions in 2022. Sexual harassment allegations submitted to the Board of Inspectors are examined by the Board, and the findings are transferred to the relevant disciplinary units of the organization in accordance with the provisions of legal and internal regulations. Internal Communication and Employee Participation For İşbank, the ideas and suggestions of our employees are valued. The Bank listens to the employees' suggestions, complaints and feedback via constant communication channels and reflects them in its management and decision- making processes. There are various platforms aimed to systematically ensure employee participation at İşbank. As part of the Employee Communication Platforms and Programs (ÇİPP), trend surveys are conducted among employees, and they contribute to the planning of new activities. Innovations such as cultural tours, competitions and e-sports activities have been introduced via this platform, and the participation of employees in social responsibility activities has increased. Thanks to the hobby and interest groups created through ÇİPP, employees are given the opportunity to expand their communication networks within the Bank. HR Help Desk (Maximo) is a practice where employee opinions, evaluations, requests and complaints are received and forwarded to the relevant units. There are mechanisms based on in-house confidentiality where employees can report their complaints about the workplace. Employees can report actual or suspected violations of İşbank's Ethical Principles and Operational Rules, the Bank's policies and internal regulations, as well as national and international legislation via the Ethics Hotline. It is essential that the reports are kept confidential; and unless expressly requested, the name of the reporting person is kept confidential. Employees are not exposed to any disciplinary action, direct or indirect retaliation, or put at any disadvantage compared to their peers for reporting a violation. Submissions coming through the “Negative News Line” can only be viewed and directly answered by the CEO. Thus, employee privacy and confidentiality is protected at the highest level. In 2022, 761 employees created 812 negative news items, and product and process improvements were evaluated by the related business divisions. The “About Me” platform was created to enable employees to communicate issues they deem useful to be known by the Human Resources Function and to support the Bank's decision-making processes with accurate and detailed information. The information entered on the platform can only be viewed by authorized persons in the Human Resources Management Division and by the employee themselves, and the confidentiality of the shared information is essential. Through this platform, employees can make notifications under the topics “About My Family”, “About My Health”, “I Have a Complaint”, “I Have a Wish”, and “About My Career”. The aim of the “I Have a Suggestion” application is to create new applications and solutions related to the banking system together with employees by utilizing their knowledge and experience, thereby improving and enhancing the customer experience. Suggestions can be entered into the system by all our employees, provided that they bring innovation and benefit to the Bank's practices and that each suggestion covers a single topic. Another aim of the application is to develop employees’ creativity and increase their sense of job satisfaction by making them more participatory. Suggestions entered by employees are subjected to a preliminary evaluation by the Corporate Architecture Division according to their prior presence in the agenda and availability in practice. Then, if necessary, they are directed to the relevant Divisions according to the subject matter. Suggestion owners are provided with responses via the system within a maximum of 15 days from the date of suggestion entry. Suggestion owners can monitor the outcome of their suggestions through the system. At the end of these processes, suggestion owners are given gift vouchers from İş Kültür Publications for suggestions that are deemed favorable and approved for implementation. Within the reporting period, 3,669 out of 4,702 suggestions entered were evaluated by the relevant divisions, and 434 were implemented. The remaining 1,033 suggestions are under evaluation. Ensuring a healthy and safe work environment for employees in compliance with international standards is one of the main responsibility areas of İşbank. The most authorized person in charge of OHS at İşbank is the Human Resources Management Division Manager, two reporting levels lower than the General Manager. In line with the provisions of the Occupational Health and Safety Law, OHS Committees where employees are represented are established in the Bank's buildings having more than 50 employees. As of year-end 2022, there are 40 OHS Committees operating at İşbank. The OHS Committees convened 151✓ times during the year, with 361✓ committee members participating, including 107✓ employee representatives. Maintaining a healthy and safe work environment is as important as providing such an environment. And this is possible if employees have OHS awareness. İşbank organizes trainings to increase OHS awareness among employees. In 2022, 49,344 person-hours of OHS training were provided to 9,454 employees. İşbank’s Occupational Health and Safety Policy was approved by the Board of Directors, announced to all employees, and published on the Bank’s website. International Award to İşbank in Occupational Health and Safety In 2022, İşbank was awarded the “International Occupational Safety Award”, one of the most prestigious awards in the world in the field of occupational health and safety, organized by the British Safety Council. In 2022, 49,344 person- hours of OHS training were provided to 9,454 employees. İşbank aims to become the preferred employer for qualified humancapital. By attracting a potential workforce, the Bank contributes to the development of young employees, increases the sustainability and brand value of the organization, and retains existing employees. The Bank communicates with potential employees and university students through various channels in order to reach potential qualified employees. Communication with university students takes place via campus communication, student clubs and career centers. Employees representing the business divisions of the Bank share the corporate culture and their personal experiences with the youth. In-house technologies and innovation studies are communicated to the students. Within the scope of the Master Class Internship Program and Future Hub programs for students in their last two years of university education, young people are provided with the opportunity to get to know the institution closely, work on joint projects with current employees, and gain personal and professional development opportunities through online training. Depending on the requirements of the position, online exams and recruitment processes are monitored. Thanks to online applications, the Bank offers employment opportunities throughout the country. There are internship programs for students in their last two years of university education, which allow young people to become more familiar with the Bank, observe existing employees, and benefit from their perspectives. Besides universities, İşbank also collaborates with non-governmental organizations. As a result of such collaborations, various development programs are undertaken. Through projects carried out jointly with U2C, Upschool organizations, 1 million jobs program and the Yenibirlider Association, part-time work opportunities are offered to university students, and the Future Hub Development Program is organized for young people. Within the scope of development programs, university students are offered mentorship, as well as the right to benefit from in-house trainings and the opportunity to participate in art events organized by the Bank and İş Sanat. This not only helps young people in their education but also enriches their cultural and personal development. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 126 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 127 Talent Management İşbank continuously invests in human capital. Accordingly, the Bank offers its employees opportunities to improve their skills throughout their career journeys and prioritizes the development of future skills as a strategy. A wide range of training programs and learning opportunities, personalized with pioneering technologies and offered in line with the principle of equal opportunity, contribute to enhancing the competencies of employees. Supporting the continuous development of employees is also aligned with İşbank's vision of “being the bank of the future that creates sustainable value”. Newly recruited employees participate in "Starting My Career" training programs, differentiated according to the specific title and duties of participants, starting from their first day on the job. Employees can benefit from various trainings offered in the “Training Catalogue” on their specific needs and preferences and attend seminars on different topics offered under the "İş'te Sohbetler" brand. Within the scope of the Training Catalogue, more than 4,850 of our employees participated in the trainings held in a total of 59 areas in 2022, including professional development, digitalization, personal development, and leadership. Trainings were held on different subjects by taking into account the types of branches, roles and the duties and responsibilities associated with these roles in order to support field employees with their competency transformation. The “Sales Academy Phase 3” training program for individual sales teams and the “Sales Academy Phase 4” training program designed in 2021 continued, taking into account the next-generation customer behaviors and expectations. In addition to the trainings organized for commercial sales teams, the “Tradespeople, SME and Agriculture Academy”, which focuses on getting to know tradespeople, SME and agricultural customers, was launched and offered to employees in 2 modules. Within the role-based trainings designed specifically for the roles in Mixed, Commercial, Corporate, and Private Banking branches, the number of people who participated in training in 2022 reached over 28,900 and over 162 thousand hours of training were provided. Trainings on different subjects were also held to develop sales competencies and increase the technical knowledge of direct sales teams, and more than 380 employees in direct sales teams in personal, commercial and agricultural segments received over 3 thousand hours of training. Role-based trainings designed together with the Agile Management Division continued in order to ensure the best functioning of the agile model in the Bank, to spread the agile philosophy and framework, and to support the adaptation and development of teams. Technical trainings and competency development programs were organized to address special agile working principles according to the needs of Team Member, Product Owner, Agile Ambassador, Agile Coach, Competency Line Leader and Area Leader roles. Among the programs that support employee development and competency transformation in line with the competencies of the future, the Data Analytics Development Program, which focuses on data analytics competency, continued in 2022 with high demand and participation. The program is available for use by all employees, regardless of title and role. It is intended to help employees understand data, gain new skills related to working with data, develop data literacy and establish a data-driven, decision-making culture. In 2022, about 4,500 employees received over 51,700 hours of training in the program, which starts with basic level training and continues with applied training on data analysis techniques and data visualization tools for employees who want to further develop themselves in this field. The Digital Academy was designed to develop the digital competencies of employees in the fields of User Experience and Digital Marketing with the aim of providing employees with the competencies that will be needed in the future today and to ensure competency transformation within the scope of the future business model and was presented to employees in the form of learning journeys. The first 2 modules of the program, each consisting of 5 modules designed with a mixed learning model, were opened to employees within the year, and a total of 48,289 hours of training were provided within the Digital Academy. The remaining modules are planned to be offered to employees in 2023. At İşbank, management and leadership development programs consist of technical and competency-based trainings that are held for managers with different titles and designed to support the competencies required for the specific role in question. Leadership development programs aim to strengthen the next-generation leadership competencies of the Bank’s managers and promote a winning culture and a leadership approach focused on continuous development. Within the academy programs designed specifically for business areas such as marketing, innovation, data science, and artificial intelligence architecture, 127 employees attended a total of 5,940 hours of training in 2022. All employees can access various on-demand digital content such as videos, e-learning, and games, from a single platform via the “Learning World” digital learning platform. Infrastructure changes in the “Learning World” platform were completed, and the new system was made available to employees. The new “Learning World” has taken its place as an important reference source in the development journeys of employees with its artificial intelligence-supported suggestion engine and more user-friendly interface, an ever-enriching range of content, and the addition of different systemic features in a structure that can support employees’ development processes more effectively and meet various needs that will arise in the future. As of the end of 2022, there are more than 750 contents in the Learning World. In addition to supporting the development of employees’ professional and personal competencies, the Bank’s range of learning tools was expanded to contribute to the acquisition of new competencies in line with changing needs. A collaboration was realized with the Neoskola platform, where content prepared by leading expert trainers is presented with high production quality, and training videos on 10 topics were made available to employees. In addition, the Vidobu platform, which includes learning videos prepared by expert trainers, was also made available to the Bank’s employees. Within the “Sustainability Digital Training Series”, which was prepared to inform employees about the concept and history of sustainability, why we need to achieve sustainability and corporate practices within the subject, “Sustainability - State of the World”, “Sustainability - History of Sustainability”, and “Sustainability - Business World and Sustainability” digital trainings were made available to employees as of the third quarter of 2022. In the fourth part of the training series, the content production process of which is ongoing, the efforts put forward by the finance and banking sector for sustainability will be conveyed, and it is aimed to be made available in the first quarter of 2023. The digital training of the same name, which was prepared to increase awareness of sustainable development goals and to inform employees about the Bank's work within the scope of Sustainable Development Goals, was presented to employees in December 2022. products and applications. The program consists of more than 40 short videos, including the “Renewable Energy Mixed Fund”, “Electric Vehicles Mixed Fund”, and “Gold Fund”, which are managed with the expertise of İş Portföy A.Ş., a subsidiary of İşbank, and offered to customers. Work was completed on the preparation of a new learning game to raise employees’ awareness of the Bank’s strategic goals, support them in acquiring future competencies in line with future banking and evolving business needs based on it, and to contribute to their knowledge of the Bank’s vision, mission, and values. The İşLegends learning game, which is a next-generation continuation of the Bank’s learning game culture that started with İşVille and İşGame, centered on competency development, was made available to employees on 28.09.2022. 3,385 employees participated in İşLegends, and over 900 thousand questions were answered. Performance and Learning Culture İşbank executives are trained from within the Bank. This means that employees are also the executives of the future. All employees have the opportunity to be promoted to managerial positions in line with their performance. Therefore, the Performance Management System plays a key role in İşbank's human resources practices. With the performance evaluation process, employees can take the necessary steps regarding their career development. In 2022, performance feedback was provided to 21,466 employees. Assessment Center Practices The Transition to Management Assessment Center Application, an additional decision support mechanism, was designed so that the transition to the management career stage of employees of certain title groups at İşbank is based on more objective and concrete criteria. This mechanism was designed in a structure that will demonstrate whether the employees have the competencies that are considered critical for high performance in the target position for which they are candidates at the expected level and whether they are suitable for the relevant position, enabling the right employees to be promoted. The “Mutual Fund Recommendations” digital training program was created to inform employees about new A total of 596 employees were included in the assessment between June 13, 2022 and September 27, 2022. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 04 Good Corporate Citizen 130 Transparent and Ethical Management 184 Contribution to Social Welfare 130 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 131 Transparent and Ethical Management An important component of İşbank’s pioneering position in the sector is its ethical and principled banking approach, which is also the foundation of the Bank’s reputation. Preparing to celebrate its 100th year, İşbank is identified with trust and reputation in the banking sector. İşbank’s management approach is based on its deep-rooted history, complies with international standards, and aims to create value for all stakeholders. Risks Opportunities Penal sanctions due to non-compliance with rapidly changing and increasing legal regulations Being out of the competition as a result of the top management’s knowledge and experience level not keeping pace with the changing economic conjuncture Risk of loss of trust with stakeholders and dismissal from relevant engagements due to failure to meet reporting and information sharing requirements Increasing the interest of investors and customers with an excellent reputation and brand value Becoming an international financial institution by being included in various indices as a result of corporate compliance efforts Contributing to reputation management with transparent information sharing, gaining a competitive advantage in different performance areas Contributed SDGs Related Capital Elements Material Topics ᲁBusiness Ethics Transparency Corporate Management and Reporting ᲁEfficient Risk Management Relevant Stakeholders ᲁShareholders ᲁInvestors ᲁEmployees ᲁCustomers Key Performance Indicators 2019 2020 2021 2022 Number of employees receiving Anti-Bribery and Anti-Corruption Training 7,577 7,830 5,716 17,015**✓ Total hours of Anti-Bribery and Anti-Corruption Training 3,115✓ 857✓ 627✓ 2,130✓ Risk Management Number of times the Risk Committee convened: 12 Conducting loss event data analysis Completion of scenario analysis Conducting impact- probability analysis Conducting Top-Down Risk Assessment Number of times the Risk Committee convened: 12 Number of times the Risk Committee convened: 11 Number of times the Operational Risk Committee convened: 1 Number of times the Operational Risk Committee convened: 2 Conducting loss event data analysis Conducting loss event data analysis Completion of scenario analysis Completion of scenario analysis Conducting impact- probability analysis Conducting impact- probability analysis Conducting Top-Down Risk Assessment Conducting Top-Down Risk Assessment Number of times the Risk Committee convened: 11 Number of times the Operational Risk Committee convened: 2 Conducting loss event data analysis Completion of scenario analysis Conducting impact- probability analysis Conducting Top-Down Risk Assessment Audits carried out by the Board of Inspectors Number of domestic branch audits Number of foreign branch audits Number of subsidiary audits Number of Head Office division audits Publishing of Integrated Annual Report Number of social media followers (million) Developing cooperation with national and international initiatives Fulfilling UNEP FI Principles for Responsible Banking commitments Fulfillment of NZBA commitments 245 2 7 14 - 2.6 186 4 10 12 - 2.7 175 2 10 24 79* 3 8 20 Completed Completed 2.6 2.7 See. Initiatives Supported in the Field of Sustainability See. Initiatives Supported in the Field of Sustainability See. Initiatives Supported in the Field of Sustainability *The number of branch audits decreased as the number of central audits and regional audits increased. **The main reason for the increase in the “Number of People” is the digital training “Policy for Combating Financial Crimes and Sanctions and Compliance Program”, the content of which was renewed and assigned to all employees as legal compliance training in November 2021. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 132 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 133 Targets Targets for 2022 Realization in 2022 Realization Targets for 2023 and Beyond Developing the risk management skills of employees to spread the effective risk management approach to the entire Bank and spreading the “Risk Culture in Our Bank” digital training, which was given to increase their awareness on the subject. Completing the impact analysis studies of the Bank’s portfolio in line with the UNEP FI Principles for Responsible Banking by 2024 and contributing to the studies towards sustainable development and global climate goals in line with the targets. Within the scope of the NZBA commitment, decarbonizing the loan portfolio Reminder e-mails and various communication activities were carried out to ensure that employees completed the “Risk Culture in Our Bank” digital training in 2022. By the end of 2022, the number of employees who completed the training exceeded 14,500. ✓⃝ A “Loan and Risk Management Academy” will be established in 2023 to increase the level of knowledge of our employees who are planning to work in the risk management area of our Bank’s lending processes and to contribute to their inclusion processes. The Bank is still continuing its activities. Maintaining the current target The Bank is still continuing its activities. Managing the impacts arising from the Bank’s loan portfolio and setting reduction targets Management Structure Consisting of 11 members, one of whom is a woman, İşbank’s Board of Directors is the highest management body responsible for steering the Bank’s strategy. Having 3 independent52 members, the Board of Directors is composed of non-executive members, except for the CEO. The CEO and Chairperson of the Board of Directors roles at the Bank are assumed by different persons. The Board of Directors has several governance committees in place to support the activities of the Board in various areas. Responsible for implementing the strategies established by the Board of Directors and led by the CEO, the Executive Committee has 14 members other than CEO, including 3 women. Members of İşbank’s Board of Directors are responsible to the Bank and its shareholders while fulfilling their duties. By accepting membership to the Board of Directors, the members accept and declare that they are responsible to the Bank and its shareholders. The members are obliged to fulfill their duties within the framework of the authorities and responsibilities set forth in the legislation and the Articles of Incorporation and to comply with the principles and procedures set forth in the Bank’s “Directive on the Operation Procedures and Principles of the Board of Directors”. The Board of Directors of İşbank consists of 7-11 members, one of whom is the CEO, as set forth in the Articles of Incorporation. Members other than the CEO are elected by the Bank’s General Assembly for a maximum term of three years. Members whose term of office expires may be re-elected. The number and qualifications of the independent Board members are 52 As per the II-17.1 Corporate Governance Communiqué published on 03.01.2014, the members of the board of directors who are assigned as members of the audit committee, as part of the organization of the board of directors of banks, are considered as independent members of the board of directors. determined in accordance with the regulations of the Capital Markets Law on corporate governance. There is no practice of subjecting a certain proportion of the Board members to rotation at the General Assembly. Candidates who have the qualifications specified in the legislation are elected by the Board of Directors for the vacancies due to death, resignation, or other unforeseen reasons, and these members are submitted for approval at the first General Assembly meeting to be held. The members elected in this manner serve until the first meeting of the General Assembly, and if their election is approved by the General Assembly, they continue to serve for the remaining term of the member they are elected to replace. In the event that there is a conflict of interest regarding one of the items on the agenda of the İşbank Board of Directors, the Chairperson, Vice Chairperson and Members may not preside over the meeting and may not participate in the discussion of the agenda items in which there is a conflict of interest. İşbank’s General Assembly has a structure that allows shareholders to present their opinions and suggestions. Shareholders or other interested parties who wish to speak on the agenda item under discussion notify the chairperson of the meeting. The chairperson announces the persons who will take the floor to the general assembly and gives the floor to these persons according to the order of application. Pursuant to Article 1527 of the Law, the procedures and principles set forth in the said article and sub-regulations are applied with respect to the submission of opinions and suggestions of the shareholders or their representatives participating in the general assembly meeting electronically. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 134 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 135 Board Member Matrix* Age and Average Tenure Independence Policy: To become a Board Member the person has to have the capacity to exercise civil rights and possess the qualifications stipulated in the relevant legislation. There is no maximum age specified. The Board Member is elected at least every three years by the General Assembly and the members can be re-elected. If a vacancy in membership during the interim period occurs due to any reasons, the Board of Directors elects a member to complete the remaining term of its predecessor office and submits to the approval of the first General Assembly to be held. Distribution of Experience of Non-Executive Board Members Distribution of Experience of Executive Board Members Policy: As per the 1-17.1 Corporate Governance Communiqué published on 03.01.2014, the members of the Board of Directors who are assigned as members of the Audit Committee, as part of the organization of the Board of Directors of banks, are considered as independent members of the Board of Directors. Ahmet Gökhan Sungur is Independent Member of the Board of Directors, Yusuf Ziya Toprak and Ersin Önder Ciftçioğlu are Independent Members of the Board of Directors since they are also members of the Audit Committee. 73% 27% 0-5 years 7 5-10 years 3 >10 years - 0-5 years 1 5-10 years 3 >10 years - Average age of non-executive members: 65.2 Average tenure of non- executive members: 3.7 years Average age of executive members: 55 Average tenure of executive members: 2 years Non-Independent Independent 8 3 Educational Background and Gender Diversity Educational Background Post Graduate University (4-year college) 55% 45% Gender Diversity 91% 18% 82% 9% 2021 2022 Female Male Skills Independent Auditing and / or Corporate Finance Banking / Investment / Insurance / Pension / Stock Exchange / FOREX Technological Skill / Digitalization and Information Technologies (Cybersecurity) Acquisition and M&A and / or Capital Markets Public Policies Environmental / Social Entrepreneurship / Innovation Communication / Marketing / Customer Services International Adnan Bali Yusuf Ziya Toprak Hakan Aran Feray Demir Ersin Önder Çiftçioğlu Fazlı Bulut Durmuş Öztek Recep Hakan Özyıldız Mustafa Rıdvan Selçuk Ahmet Gökhan Sungur Sadrettin Yurtsever ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● ✓⃝● *Prepared based on Glass Lewis Board Skills Matrix. Number of Board Members and their Term of Office Policy: Our Board of Directors consists of 11 members, including the CEO, who is the natural member of the board. Except for the CEO, 10 Board Members are elected at least every three years by the General Assembly and the members can be re-elected. To become a Board Member the person has to have the capacity to exercise civil rights and possess the qualifications stipulated in the relevant legislation. Number of Board Members 11 11 11 11 11 2018 2019 2020 2021 2022 Change in the Board of Directors within the last 5 years 9 members were appointed, term of office of 2 members is about to expire, new members have been elected. Board Member Adnan Bali Yusuf Ziya Toprak Hakan Aran Feray Demir Ersin Önder Çiftçioğlu Fazlı Bulut Durmuş Öztek Recep Hakan Özyıldız Mustafa Rıdvan Selçuk Ahmet Gökhan Sungur Sadrettin Yurtsever Number of Board Meetings Not Attended 0 1 0 0 0 0 0 0 0 0 0 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 136 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 137 Board of Directors Adnan Bali Chairperson Yusuf Ziya Toprak Vice Chairperson Hakan Aran Member of the Board and Chief Executive Officer Feray Demir Board Member Ersin Önder Çiftçioğlu Board Member Fazlı Bulut Board Member Mr. Adnan Bali was born in İslahiye in 1962 and graduated from Middle East Technical University, Faculty of Economics and Administrative Sciences, Department of Economics. He joined İşbank as Assistant Inspector on the Board of Inspectors in 1986. He became Assistant Manager in the Treasury Division in 1994 and served as a Unit Manager in the same division in 1997. He was appointed as Head of the Treasury Division in 1998. Mr. Bali served as the Manager of the Şişli Branch in 2002 and Manager of the Galata Branch in 2004; he was appointed Deputy Chief Executive on 30 May 2006 and Chief Executive Officer of İşbank on 01 April 2011. Apart from his role in the Bank, Mr. Bali is also the Chairperson of Türkiye Sınai Kalkınma Bankası A.Ş. and Softtech Ventures Teknoloji A.Ş., and the Chairperson of the İşbank Members’ Supplementary Pension Fund. Elected to İşbank's Board of Directors on 31 March 2021 and Chairperson of the Board of Directors on 01 April 2021, Mr. Bali has also been serving as the Chairperson of the Remuneration Committee, Risk Committee, Sustainability Committee and Board of Directors Operating Principles Committee and as a member of the Credit Committee. Mr. Yusuf Ziya Toprak was born in Trabzon in 1943 and graduated from Istanbul Economics and Commercial Sciences Academy, Department of Finance. Mr. Toprak started to work as an Assistant Inspector on the Board of Inspectors at İşbank in 1967. In the following years, he served as Assistant Manager and Group Manager in the Automation and Organization Divisions, as Manager in the Securities Division, and General Manager at Yatırım Finansman Securities. He was appointed as Deputy Chief Executive at İşbank in 1999. Mr. Toprak, who retired in 2004, continued serving as the Vice Chairperson and a Member of the Board of Directors at Şişecam until 2010. Mr. Yusuf Ziya Toprak, who was elected as a member of İşbank’s Board of Directors on 31 March 2020 and as the Vice Chairperson of the Board on 1 April 2020, also serves as the Chairperson of the Audit Committee, T.R.N.C. Internal Systems Committee and Operational Risk Committee, a member of the Risk Committee, and an alternate member of the Credit Committee. Born in Antakya in 1968, Hakan Aran graduated from the Faculty of Engineering, Computer Engineering Department of Middle East Technical University. He completed his master's degree in Business Administration at Başkent University and is currently continuing his PhD in Banking at Istanbul Commerce University. Beginning his career at İşbank as a Software Specialist in 1990, Mr. Aran was appointed as the Head of the Software Development Division in 2005. He was promoted to the position of Deputy Chief Executive responsible for operations, digital banking and technology in 2008 and took part in important transformation programs of the Bank. Appointed as İşbank's 17th Chief Executive Officer on 1 April 2021, Mr. Aran also serves as the Chairperson of the Credit Committee, Human Resources Committee, Information Technology Strategy Committee and Information Security Committee and as a member of the Risk Committee and Operational Risk Committee. In addition to his duties at the Bank, Mr. Aran serves as the Chairperson of Trakya Yatırım Holding A.Ş. and İşbank AG. Mr. Ersin Önder Çiftçioğlu was born in Ankara in 1960 and graduated from Hacettepe University, Faculty of Social and Administrative Sciences, Department of English Linguistics. Mr. Çiftçioğlu began his career at İşbank as an Officer in the Yenişehir/Ankara Branch in 1985, and was appointed as Assistant Section Head, Section Head, Sub-Manager and Assistant Manager in the same branch. In 2007, he was appointed as Assistant Manager at the Başkent/Ankara Corporate Branch and Regional Manager of the SME Loans Underwriting Division of the Adana Region in the same year and subsequently served as Ankara Center I. Region Manager in 2008. He was appointed as the Ege/Izmir Corporate Branch Manager in 2011 and Başkent/ Ankara Corporate Branch in 2016. Mr. Çiftçioğlu, who was elected to İşbank’s Board of Directors on 31 March 2017 and 31 March 2020, also serves as the chairperson of the Corporate Governance Committee and a member of the Audit Committee, TRNC Internal Systems Committee, Sustainability Committee, Operational Risk Committee and Risk Committee. Born in Ağrı in 1968. Ms. Feray Demir graduated from Anadolu University, Faculty of Economics and Administrative Sciences, Department of Business Administration and Istanbul University, Faculty of Open and Distance Education, Department of Sociology. She started her professional career as an Officer at the Sefaköy/Istanbul Branch in 1988. She was appointed as Assistant Section Head in 1990, Section Head in 1995, Sub-Manager in 1996 and as Assistant Manager in 1999 at the same branch. She then served in the same position in the Commercial Loans Division and Corporate Marketing Division at the Head Office. She was appointed as Branch Manager to the Çarşı-Güneşli/Istanbul Branch in 2005, and then served as Head of Commercial Banking Sales Division from 2007 to 2011. She served as Branch Manager of the Istanbul Corporate Branch from 2011 to 2016. In addition to her duties at the Bank, Ms. Demir also serves as a member of the Board of İşbank Members' Supplementary Pension Fund. Ms. Demir, who was elected to İşbank's Board of Directors on 25 March 2016, 31 March 2017 and 31 March 2020, also serves as a member of the Corporate Social Responsibility Committee, Credit Committee, Remuneration Committee, Sustainability Committee, Corporate Governance Committee and Board of Directors Operating Principles Committee. Mr. Fazlı Bulut was born in Pertek in 1964 and graduated from Ankara University, Faculty of Political Science, Department of Economics. He completed his master’s degree in Economic Development at New Hampshire College in the USA. Mr. Bulut served as Account Expert and Senior Account Expert at the Ministry of Finance on the Board of Account Experts from 1985 to 1997. He taught General Accounting at the College of Tourism and College of Computer Technology at Bilkent University from 1996 to 1998. Mr. Bulut served as Vice General Manager and Member of the Board of the Social Insurance Institution from 1997 to 1999. He served as Vice General Manager, General Manager and Member of the Board of Directors in Tepe Home Mobilya ve Dekorasyon Ürünleri San. Tic. A.Ş., a subsidiary of Bilkent Holding, from 1999 to 2011. He subsequently served as a consultant for Bilkent Holding on tax and retailing from 2011 to 2012, as the General Manager of B. Braun Kalyon Medikal ve Dış Ticaret A.Ş. from 2013 to 2015, and as the Coordinator of Financial Affairs in Terra İnşaat Grubu from 2016 to 2017. Mr. Bulut has also published books on various subjects. Mr. Bulut, who was elected to the İşbank Board of Directors on 29 March 2019 and 31 March 2020, also serves as a member of the Corporate Social Responsibility Committee and an alternate member of the Credit Committee. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 138 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 139 Durmuş Öztek Board Member Recep Hakan Özyıldız Board Member Mustafa Rıdvan Selçuk Board Member Ahmet Gökhan Sungur Board Member Sadrettin Yurtsever Board Member Mr. Durmuş Öztek was born in Sivas, Şarkışla in 1953 and graduated from Ankara University Faculty of Political Sciences, Department of Economics and Finance. He completed his master’s degree in Economics at Vanderbilt University in the USA. Mr. Öztek served as a Finance Auditor between 1975-1986 in the Ministry of Finance. In the following years, he served as Division Head, Deputy General Manager and General Manager in the General Directorate of Budget and Financial Control; Chief Auditor and Member of the Financial Advisory Committee in the Ministry of Finance; Auditor in Turk Telekom, Member of the General Committee in the Council of Higher Education, and Financial Counselor in the Turkish Embassy in Brussels. He served as a Ministry Counselor in the Ministry of Finance between 2006-2011. Mr. Öztek, who was elected to the İşbank Board of Directors on 31 March 2020, serves as a member of the Corporate Social Responsibility Committee and the Board of Directors Operating Principles Committee. Mr. Recep Hakan Özyıldız was born in Bursa in 1956 and graduated from Ankara University Faculty of Political Sciences, Department of Economics and Finance. He completed his master’s degree in Economics at Northeastern University in the USA. Mr. Özyıldız started to work at the Ministry of Treasury and Finance as an Assistant Treasury Specialist in 1978. In the following years, he served as Branch Manager at the Undersecretary of Treasury and Foreign Trade and the General Directorate of Banking and Foreign Exchange; Division Head, Deputy General Manager and General Manager at the General Directorate of Public Finance under the Ministry of Treasury and Finance; Auditor at İşbank, General Manager of the State Economic Enterprises in the Treasury, Senior Advisor of Economics in the Turkish Embassy in London, and Assistant Undersecretary in the Ministry of Treasury and Finance. Mr Özyıldız, who is also a columnist and commentator, continues to serve as a part-time academic tutor in Ankara University, Faculty of Political Sciences. Mr. Özyıldız was elected to the İşbank Board of Directors on 31 March 2020. Mr. Mustafa Rıdvan Selçuk was born in Malatya in 1955, and graduated from Ankara University, Faculty of Political Sciences, Department of Economics and Finance. He received his master’s degree in Economics from Vanderbilt University in the USA. Mr. Selçuk started his career in the Ministry of Finance in 1978 as an Assistant Account Expert. In the following years, he served as Account Expert, Senior Account Expert, Division Head in the General Directorate of Revenues, General Manager and Chairperson of Bağkur in the Ministry of Labor and Social Security, Labor and Social Security Advisor in the Turkish Embassy in Copenhagen and as Ministry Advisor in the Ministry of Finance. Mr. Selçuk, who has also served as a Certified Public Accountant since 2003, is an Independent Auditor at BDD Bağımsız Denetim ve Danışmanlık A.Ş., and a partner at Girişim YMM Limited Şti. Mr. Selçuk was elected to the İşbank Board of Directors on 31 March 2020. Mr. Ahmet Gökhan Sungur was born in Yozgat in 1953. He graduated from Middle East Technical University, Department of Chemical Engineering and received his master’s degree from the same department. Mr. Sungur, who started his career in 1975 at the General Institute of Mineral Research and Exploration, Department of Technology, as Chief Specialist Chemical Engineer, worked in Hisarbank and Güntekin İnşaat A.Ş. as a System Analyst between 1981-1982. Later, between 1982-1999, he served as Manager of Software Development at İşbank and Chief Executive Officer at İş Net A.Ş. between 1999-2003. Mr. Sungur was elected as an Independent Member of the İşbank Board of Directors on 31 March 2020. Mr. Sadrettin Yurtsever was born in Bingöl in 1964 and graduated from Gazi University, Faculty of Education, Department of English Language Education. Mr. Yurtsever, who started his career at İşbank as a candidate officer in the İzmir Branch in 1993, served in the same branch as Section Head and Sub-Manager. He served as Assistant Manager in the SME Loans Underwriting Division of the Denizli Region in 2006, İzmir Central II. Region Sales Division Assistant Regional Manager in 2007, Regional Manager in the same division in 2011, Branch Manager of the Bornova/İzmir Commercial Branch in 2013 and the Mediterranean/Antalya Corporate Branch in 2018. Mr. Yurtsever, who was elected to the İşbank Board of Directors on 31 March 2020, also serves as a member of the Corporate Governance Committee and the Corporate Social Responsibility Committee. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 140 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 141 Executive Board N. Burak Seyrek was born in 1970 in Ankara. In 1990, Mr. Seyrek graduated from Ankara University, Faculty of Political Sciences, Department of International Relations and started working as an Assistant Specialist in the Training Division of Türkiye İş Bankası A.Ş. in the same year. In 1993, Mr. Seyrek became an Assistant Specialist at the 1st Loans Division, and was appointed as Loan Specialist at İşbank GmbH Frankfurt, a subsidiary of İşbank, in 1994, as Assistant Manager in 1996, and as Assistant Manager at Başkent Branch in 2001. In 2004, Mr. Seyrek was appointed as Ostim Branch Manager, in 2007 as Ankara Center 2nd Regional Manager, in 2010 as Commercial Banking Product Manager, in 2011 as Commercial Banking Sales Manager, and in 2013 as SME and Enterprise Banking Sales Manager. On 1 October 2013, Nevzat Burak Seyrek was appointed Chief Executive Officer of İşbank AG and on 25 March 2016, he was promoted to Deputy Chief Executive of Türkiye İş Bankası A.Ş. Nevzat Burak Seyrek holds the title of Cambist and speaks German. Born in Ankara in 1971. Ms. Gamze Yalçın graduated from the Economics Department of Middle East Technical University, Faculty of Economics and Administrative Sciences. She also holds a master’s degree in International Banking and Finance from the University of Birmingham in the UK. She attended the Advanced Management Program at Harvard Business School in 2017. She joined the Organization Division at İşbank as an Assistant Specialist in 1993 and served in different units of İşbank. Ms. Yalçın was appointed as Deputy Chief Executive on 28 November 2017. Ms. Yalçın also serves as İşbank’s Sustainability Leader. Born in Adana in 1974. Mr. Ozan Gürsoy graduated from Middle East Technical University, Faculty of Economic and Administrative Sciences, Department of Public Administration and completed his master’s degree in International Banking and Finance at the University of Birmingham in 2003. In 1996, Mr. Gürsoy joined İşbank’s Board of Inspectors as a Trainee Assistant Inspector, became Assistant Manager in the Corporate Loans Underwriting Division in 2006, and then served as Unit Manager at the same division. Mr. Gürsoy became Commercial Banking Product Division Manager in 2011, Gebze Corporate Branch Manager in 2015, and was promoted to Deputy Chief Executive in May 2020. Mr. Gürsoy holds the title of Cambist and Financial Analyst and speaks English. Born in Antakya in 1968, Hakan Aran graduated from the Faculty of Engineering, Computer Engineering Department of Middle East Technical University. He completed his master's degree in Business Administration at Başkent University and is currently continuing his PhD in Banking at Istanbul Commerce University. Beginning his career at İşbank as a Software Specialist in 1990, Mr. Aran was appointed as the Head of the Software Development Division in 2005. He was promoted to the position of Deputy Chief Executive responsible for operations, digital banking and technology in 2008 and took part in important transformation programs of the Bank. Appointed as İşbank's 17th Chief Executive Officer on 1 April 2021, Mr. Aran also serves as the Chairperson of the Credit Committee, Human Resources Committee and Information Technology Strategy Committee and as a member of the Risk Committee and Operational Risk Committee. Born in Ankara in 1971. Ms. Ebru Özşuca graduated from the Economics Department of Middle East Technical University, Faculty of Economics and Administrative Sciences. She also holds a master’s degree from the Economics Department of the Graduate School of Social Sciences at Middle East Technical University and completed her master’s in International Banking and Finance from the University of Southampton in the UK in 1998. She attended the Advanced Management Program at Harvard Business School in 2015. She joined İşbank as an Assistant Specialist at the Treasury Division in 1993. Ms. Özşuca served in different units of İşbank and was appointed as Deputy Chief Executive on 28 November 2017. Born in Ankara in 1967. Mr. Cahit Çınar graduated from the International Relations Department of Ankara University, Faculty of Political Science. He attended Munich Ludwig- Maximillians University between 1989-1990. He began his career at İşbank as an Assistant Specialist in the Economic Research Division in 1991 and joined the Board of Inspectors as an Assistant Inspector in 1992. He served in different units of İşbank and the Güneşli Corporate Branch and served as Chief Executive Officer at İşbank AG, a subsidiary of İşbank located in Germany. Mr. Çınar was appointed as Deputy Chief Executive of İşbank on 5 October 2018. Born in Kırcaali in 1975. Mr. Sezgin Yılmaz graduated from Uludağ University, Faculty of Economic and Administrative Sciences, Department of Economics. Mr. Yılmaz started his career as an Officer at Bursa Branch in 1997. After serving in various positions in the Bank, Mr. Yılmaz was appointed as Regional Manager of SME Loans Underwriting Division in Kayseri in 2012 and Regional Manager of SME Loans Underwriting Division in İzmir Central I. Region in 2015. He then served as Regional Sales Manager of SME and Enterprise Banking Sales Division in İzmir Central II. Region in 2016. Support Services and Procurement Division Head in 2017, and Procurement Division Head in the respective order in 2018. Mr. Yılmaz, who was elected to İşbank Board of Directors on 29 March 2019 Mr. Yılmaz was appointed as Deputy Chief Executive of İşbank on 29 July 2020. Hakan Aran Chief Executive Officer Sabri Gökmenler Deputy Chief Executive Sezgin Lüle Deputy Chief Executive N. Burak Seyrek Deputy Chief Executive Ebru Özşuca Deputy Chief Executive Can Yücel Deputy Chief Executive Sezai Sevgin Deputy Chief Executive Gamze Yalçın Deputy Chief Executive H. Cahit Çınar Deputy Chief Executive İzlem Erdem Deputy Chief Executive Suat E. Sözen Deputy Chief Executive Sezgin Yılmaz Genel Müdür Yardımcısı Ozan Gürsoy Deputy Chief Executive Sezgin Yılmaz Deputy Chief Executive Tufan Kurbanoğlu Deputy Chief Executive Mehmet Celayir Deputy Chief Executive Mr. Sezgin Lüle has been serving as Deputy Chief Executive responsible for Digital Banking, Payment Systems, and Customer Experience at İşbank since January 2021. Mr. Lüle started his career at İşbank as an Organization Method Specialist and held various positions in the Inspection Board, Accounting, Change Management, and Corporate Architecture Divisions, respectively. He has experience in project portfolio management, Business Architecture, Process Automation, and Organizational Transformation. Born in 1976 in Trabzon, Mr. Lüle graduated from Boğaziçi University, Department of Industrial Engineering. In 2004, he graduated from the University of Birmingham MBA IBF program and completed the HBS AMP program in 2019. Born in Istanbul in 1968. Mr. Sezai Sevgin graduated from Marmara University, Faculty of Economic and Administrative Sciences. On 31 July 1990, he began his career at İşbank as an Assistant Inspector on the Board of Inspectors. He became the Branch Manager at İşbank AG Succursale de Paris on 28 May 1998. He was appointed as the Group Manager of the Corporate Banking Marketing Division on 2 July 2004, and Head of the SME and Commercial Banking Marketing Division on 28 March 2007. He became the Branch Manager of the Gebze Corporate Branch on 13 April 2011 and Maslak Corporate/Istanbul Branch on 28 February 2013. He was appointed as the General Manager of Bayek Healthcare Group, a İşbank subsidiary, on 29 December 2015. Mr. Sevgin was appointed as Deputy Chief Executive of İşbank on 28 December 2021. Born in 1970, Mr. Suat E. Sözen graduated from Gazi University, Department of Economics in 1991. In the same year, he started working as an Assistant Specialist at İşbank. After working in various Head Office Divisions and Branches, he became Corporate Communications Manager in 2008. In 2017, Mr. Sözen became Corporate Communications Coordinator and Secretary General and was appointed Deputy Chief Executive on 25 March 2022. Born in Kars in 1971, Mr. Tufan Kurbanoğlu graduated from the Public Administration Department of Middle East Technical University, Faculty of Economic and Administrative Sciences. In 1993, Mr. Kurbanoğlu joined İşbank’s Board of Inspectors as an inspector and was promoted to Assistant Manager in the Commercial and Corporate Loans Monitoring and Follow-up Division in 2002, Unit Manager in the same Division in 2006, and Regional Manager in the Retail Loans Monitoring and Follow-up Division in 2011. In 2014, Mr. Kurbanoğlu was appointed as Division Manager of the Commercial and Corporate Loans Monitoring and Follow-up Division and has been serving as the Deputy Chief Executive since 25 March 2022. Born in Ankara in 1968. Mr. Sabri Gökmenler graduated from the Computer Engineering Department of Middle East Technical University in 1991 and completed his master's degree in the same department in 1995. Mr. Gökmenler, who began his career at İşbank in 1991 as a Software Specialist, served in Softtech, a subsidiary of İşbank, from 2004 onwards. He became the Head of the IT Architecture & Security Management Division of İşbank in 2008 and Head of the Information Technologies Division in 2012. Mr. Gökmenler attended the Advanced Management Program (AMP) at Harvard Business School in 2018 and was appointed as Deputy Chief Executive on 28 January 2021. Mr. Gökmenler is currently the Chairperson of the Board of Directors of Softtech, İş-Net, and GullsEye, and a Board Member of İşbank AG and MaxiDigital in Germany. He is also an Advisory Board Member at KUIS Artificial Intelligence Center established in cooperation with Koç University and İşbank, and an Executive Board Member at Blockchain Türkiye Platform. Born in 1978 in Ankara, Mr. Can Yücel graduated from Middle East Technical University, Faculty of Economic and Administrative Sciences, Department of Economics in 1999. Mr. Yücel started his professional career as a Trainee Assistant Inspector at the Board of Inspectors of İşbank in the same year. He served as Assistant Manager at SME Loans Underwriting Division in 2008 and Assistant Manager at Corporate Loans Underwriting Division in 2009; appointed as Unit Manager in the same division in 2011. In 2016, Mr. Yücel was appointed as Head of the Corporate Loans Underwriting Division and as the Başkent Corporate/Ankara Branch Manager in 2020. Having completed the Harvard Business School - Advanced Management Program, Mr. Yücel was promoted to Deputy Chief Executive on 26 August 2021. Ms. İzlem Erdem graduated from Marmara University, Faculty of Economics and Administrative Sciences, Department of Economics (English) in 1990. She attended the Advanced Management Program at Harvard Business School in 2016. In 1990, Ms. Erdem started working as an Assistant Economics Specialist in the Economic Research Division of Türkiye İş Bankası A.Ş. and became Assistant Manager in 1998. In 2000, Ms. Erdem was assigned to the Capital Markets Division, and in 2004 she assumed the position of Unit Manager in the same division. In April 2008, she was appointed as Division Manager in the Economic Research Division of İşbank and was promoted to Chief Economist in 2018. Ms. Erdem was appointed as Deputy Chief Executive in March 2022. In addition to her duties at İşbank, Ms. Erdem serves as the Chairperson of the Board of Directors at İş Yatırım Ortaklığı A.Ş. and İmeceMobil Tarım Platformu Elektronik Hizmetler Ticaret A.Ş. and as a Board Member at Birleşik İpotek Finansmanı A.Ş. Ms. İzlem Erdem has been a member of the Board of Directors at Şişecam since 25 March 2015. Born in Bingöl in 1970, Mr. Mehmet Celayir graduated from Istanbul University, Faculty of Economics, Department of International Relations. Mr. Celayir joined İşbank in 1996 as a clerk in the Elazığ Branch and after serving in various branches and divisions of İşbank, he was appointed Deputy Chief Executive on 14 December 2022 while serving as the Gaziantep Corporate Branch Manager, a position he has held since 2020. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 142 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 143 Organization Chart* BOARD OF DIRECTORS CHIEF EXECUTIVE OFFICER HAKAN ARAN AUDIT COMMITTEE YUSUF ZİYA TOPRAK ERSİN ÖNDER ÇİFTÇİOĞLU DEPUTY CHIEF EXECUTIVE N. Burak Seyrek DEPUTY CHIEF EXECUTIVE Ebru Özşuca DEPUTY CHIEF EXECUTIVE Gamze Yalçın DEPUTY CHIEF EXECUTIVE H. Cahit Çınar DEPUTY CHIEF EXECUTIVE Ozan Gürsoy DEPUTY CHIEF EXECUTIVE Sezgin Yılmaz DEPUTY CHIEF EXECUTIVE Sabri Gökmenler DEPUTY CHIEF EXECUTIVE Sezgin Lüle DEPUTY CHIEF EXECUTIVE Can Yücel DEPUTY CHIEF EXECUTIVE İzlem Erdem DEPUTY CHIEF EXECUTIVE Suat Sözen DEPUTY CHIEF EXECUTIVE Tufan Kurbanoğlu DEPUTY CHIEF EXECUTIVE Mehmet Celayir HEAD OFFICE COUNSELLORSHIP CORPORATE AND COMMERCIAL BANKING MARKETING DIVISION TREASURY DIVISION FINANCIAL MANAGEMENT DIVISION LEGAL AFFAIRS DIVISION AGILE MANAGEMENT DIVISION PERSONAL BANKING MARKETING DIVISION INFORMATION TECHNOLOGIES DIVISION DIGITAL BANKING DIVISION LOANS PORTFOLIO MANAGEMENT DIVISION SMES AND BUSINESS BANKING MARKETING DIVISION GENERAL SECRETARIAT LEGAL AFFAIRS AND FOLLOW UP DIVISION BANKING BASIC OPERATIONS DIVISION COMMERCIAL BANKING SALES DIVISION ECONOMIC RESEARCH DIVISION FINANCIAL INSTITUTIONS DIVISION CONSTRUCTON & REAL ESTATE MANAGEMENT DIVISION HUMAN RESOURCES MANAGEMENT DIVISION PERSONAL BANKING SALES DIVISION PURCHASING DIVISION CUSTOMER SERVICES DIVISION CORPORATE LOANS ALLOCATION DIVISION SMES AND BUSINESS BANKING SALES DIVISION CORPORATE COMMUNICATION DIVISION LOANS MONITORING DIVISION SUPPORT SERVICES DIVISION FREE ZONE BRANCHES CAPITAL MARKETS DIVISION BRANCHES ABROAD & FOREIGN REPRESENTATIVES INVESTOR RELATIONS & SUSTAINABILITY DIVISION MANAGERIAL REPORTING & INTERNAL ACCOUNTING DIVISION SUBSIDIARIES DIVISION CORPORATE ARCHITECTURE DIVISION STRATEGY & CORPORATE PERFORMANCE MANAGEMENT DIVISION TALENT MANAGEMENT DIVISION PERSONAL BANKING PRODUCT DIVISION DATA MANAGEMENT DIVISION PERSONAL LOANS DIVISION ARTIFICIAL INTELLIGENCE DIVISION PAYMENT SYSTEMS ECOSYSTEM DIVISION PAYMENT SYSTEMS OPERATIONS DIVISION RETAIL LOANS ALLOCATION DIVISION AGRICULTURAL BANKING MARKETING DIVISION PRIVATE BANKING MARKETING & SALES DIVISION RETAIL LOANS MONITORING DIVISION FOREIGN TRADE & COMMERCIAL LOAN OPERATIONS DIVISION PROJECT FINANCING DIVISION COMMERCIAL BANKING PRODUCT DIVISION COMMERCIAL & CORPORATE LOANS MONITORING DIVISION PAYMENT SYSTEMS PRODUCT DIVISION COMMERCIAL LOANS COLLECTION DIVISION SECRETARIAT TO THE BOARD OF DIRECTORS BOARD OF INSPECTORS DEPUTY CHIEF EXECUTIVE Sezai Sevgin INFORMATION SECURITY DIVISION INTERNAL CONTROL DIVISION CORPORATE COMPLIANCE DIVISION RISK MANAGEMENT DIVISION * As of 31.03.2023 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 144 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 145 Information on Board of Directors Meetings in 2022 At İşbank, the Board meetings are held at least once a month, yet interim meetings might be held in case of need. Meeting agendas are prepared in accordance with the proposals of Head Office divisions. Moreover, various reports requested by the Board of Directors from the Bank management and off the agenda topics put forward by the Board members are discussed during the meetings. By the end of 2022, 16 Board meetings were held and 15 of them were held by full participation. 983 pages of minutes were recorded for the said meetings, which lasted 62 hours in total. A total of 235 files were reviewed, which consist of 167 files for loan underwriting and 68 files on other issues regarding loans; based on the work carried out by convening meetings or by individual review and signing of the file by each Board Member, which resulted in 168 loan decisions. A total of 567 files were reviewed on non-credit matters and 567 resolutions were taken. Consequently, 963 Board resolutions were taken in 2022, including 228 that were passed during the meetings. İşbank Committees Assessments on İşbank Committees The Board of Directors has several governance committees in place to support the activities of the Board in various areas of expertise. İşbank committees presented their decisions and reports to the Board of Directors in 2022 when necessary within the framework of their activities, and the necessary decisions have been taken as a result of the assessment of the Board of Directors. Audit Committee Pursuant to its working principles, the Audit Committee is responsible for holding meetings at least twice a year, provided that six-month periods are not exceeded; it is obligated to inform the Board of Directors about the results of the activities carried out and measures to be taken based on these results and about necessary practices to be implemented. Moreover, the Audit Committee is obligated to provide its recommendations regarding other issues that are deemed significant for the Bank in order to carry out its activities safely. The Audit Committee works in collaboration with the Remuneration Committee and the Risk Committee. The Audit Committee is in charge of; ੵ Ensuring that the internal systems of the Bank function efficiently and sufficiently, that these systems and the accounting and reporting systems operate within the framework of the related regulations and the Bank’s policies, and that the information produced has integrity, ੵ Making preliminary assessments necessary for the selection of independent audit firms, rating, valuation, and support service institutions, regularly monitoring the activities of these institutions selected by the Board of Directors, evaluating them periodically within the context of the provisions of the legislation, and providing information to the Board of Directors, ੵ Reviewing the assessments of the independent audit firms, evaluating independent audit results, and consulting with independent auditors, ੵ Informing the Board of Directors about findings of the independent auditors and internal systems divisions, and about measures taken by the top management and by the units reporting to the top management, ੵ Ensuring that the internal audit functions of subsidiaries that are subject to consolidation are coordinated in line with the related regulations, ੵ Receiving information and reports about internal systems and functioning of divisions within the scope of internal systems, their operations including consolidated risks, and about related policies and regulations, ੵ Overseeing whether the reports accurately and completely reflect the financial position of the Bank, ੵ Making assessments in order to ensure whether or not required procedures and principles have been implemented for detecting, measuring, monitoring, and controlling potential and existing risks incurred by the Bank and ensuring that risk framework and risk culture, in line with the Bank’s structure and operations, are established within the Bank, ੵ Ensuring that the internal capital adequacy evaluation process (ICAAP) includes all risks in a consolidated manner and audit and control processes are established to provide required assurance on its adequacy and accuracy, ੵ Evaluating professional education levels and competency of managers and personnel assuming duties in divisions within the scope of internal systems, making suggestions to the Board of Directors for the selection of managers, and presenting opinions to the Board of Directors during their dismissal, ੵ Establishing communication channels to make sure that information will be provided directly to the Audit Committee, the internal audit unit, or the Bank inspectors in case of Bank fraud, ੵ If required, requesting information, documents or reports from all Bank units, support service contractors, and independent auditors and, subject to Board approval, receiving consultancy from specialists in their respective fields, ੵ Informing or reporting to the Board about the results of its own operations, the measures needed to be taken in order for the Bank’s operations to be within the framework of the related legislation and Bank policies in a continuous and secure way and its evaluations, opinions, and recommendations on any other issues that are deemed to be important, ੵ Fulfilling other responsibilities determined by the related legislation and the duties given by the Board within this framework. Committee Members: ੵ Deputy Chairperson of the Board of Directors and Chairperson of the Audit Committee: Yusuf Ziya Toprak ੵ Board Member: Ersin Önder Çiftçioğlu As of 2022, the Audit Committee held 60 meetings with full participation and adopted 100 resolutions. TRNC Internal Systems Committee TRNC Internal Systems Committee has been established within the framework of TRNC Banking Law and related regulations. The Committee holds meetings at least twice a year, provided that a six-month period is not exceeded, and informs the Board of Directors on the results of its own activities, its opinions on the measures needed to be taken, and the necessary practices to be implemented by the branches that operate under the TRNC office, and other important issues in order for these branches to operate in a secure way. The TRNC Internal Systems Committee is responsible for ensuring the efficiency and sufficiency of the internal systems provided by the Bank in relation to the operation of the branches that operate under the TRNC office, ensuring the operation of the internal systems, accounting, and reporting systems in line with the law and related regulations and ensuring the integrity of the produced information, carrying out the preliminary assessment of independent audit firms and other companies providing services directly related to other banking operations to be selected by the Board, and monitoring regularly and coordinating these companies that are selected and contracted by the Board. Committee Members: ੵ Deputy Chairperson of the Committee and Board of Directors: Yusuf Ziya Toprak ੵ Board Member: Ersin Önder Çiftçioğlu As of 2022, the TRNC Internal Systems Committee held 12 meetings with the full participation of its members and adopted 14 resolutions. Credit Committee The Credit Committee makes resolutions on loan allocation within its authorization limit, makes decisions on demands to change the loan allocation conditions within its authorization limit and carries out other assignments regarding loans given by the Board. The Credit Committee consists of three members: the Chief Executive Officer or Deputy Chief Executive, who is also the chairperson of the Committee, and two members from the Board of Directors. There will also be two alternate members of the Committee who will stand in should the need arise. As the loan proposal files are presented, the Committee decides on the loan allocation with consensus after each Committee Member examines and signs the files. Unanimous Credit Committee resolutions are implemented immediately, while majority resolutions are implemented after approval by the Board of Directors. Committee Members: ੵ Regular member and Chairman of the Committee Chief Executive Officer: Hakan Aran ੵ Chairperson of the Board of Directors: Adnan Bali ੵ Board Member: Feray Demir Alternate members ੵ Vice Chairperson of the Board of Directors: Yusuf Ziya Toprak ੵ Board Member: Fazlı Bulut By the end of 2022, 58 files under the authority of the Credit Committee were evaluated, and 45 resolutions were adopted with the full participation of the members. Credit Revision Committee In accordance with the Bank's Credit Risk Policy, the Credit RevisionCommittee is formed at the end of each year to evaluate the Bank's relationships with its credit customers by reviewing the commercial loan portfolio and determining the limits to be considered for the following year with respect to the aforementioned persons and institutions. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 146 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 147 Committee Members: ੵ Chairperson of the Board of Directors: Adnan Bali ੵ Vice Chairperson of the Board of Directors: Yusuf Ziya Toprak, ੵ Board Member: Feray Demir, ੵ Board Member: Ersin Önder Çiftçioğlu ੵ Board Member: Sadrettin Yurtsever The Credit Revision Committee completed its review of certain companies and groups under the authority of the Board of Directors and the Credit Committee on 21.03.2022. Corporate Governance Committee The Corporate Governance Committee was established to monitor the Bank’s compliance with the corporate governance principles, make improvements in corporate governance practices and suggestions to the Board, and fulfill the tasks of the Corporate Governance Committee and Nomination Committee as set out in the applicable legislation. The Committee consists of a chairperson and three members. Committee Members: ੵ Committee Chairperson and Board Member: Ersin Önder Çiftçioğlu ੵ Board Member: Sadrettin Yurtsever ੵ Board Member: Feray Demir ੵ Head of the Investor Relations and Sustainability Division: Neşe Gülden Sözdinler As of 2022, the Corporate Governance Committee held 4 meetings with the full participation of its members and took 4 decisions. Sustainability Committee The Sustainability Committee was established to develop the Bank's sustainability strategy and policies and submit them to the Board of Directors for approval, to set out the sustainability targets and action plans and ensure coordination within the Bank for their implementation, to ensure that sustainability issues are incorporated in the Bank's strategic business plans, to monitor the progress of the metrics and targets, and to perform other similar tasks. The Committee is the highest authority responsible for sustainability activities in the Bank. In accordance with the Board's resolution dated 24.12.2020 with no. 44176, the Committee consists of one chairperson and fourteen members. The Committee Chairperson is Adnan Bali, and the Committee Members are Feray Demir, Ersin Önder Çiftçioğlu, N. Burak Seyrek, Gamze Yalçın, H. Cahit Çınar, Ozan Gürsoy, Sezgin Yılmaz, Sabri Gökmenler, Can Yücel, Sezai Sevgin, İzlem Erdem, Suat E. Sözen, Hürdoğan Irmak and Neşe Gülden Sözdinler. As of year-end 2022, the Sustainability Committee held 1 meeting with the full participation of its members and took 1 decision. Remuneration Committee The Remuneration Committee was established to perform functions and activities related to monitoring and controlling the remuneration policies of the Bank on behalf of the Board of Directors. The Committee has two members. The Remuneration Committee convenes at least twice a year, not to exceed six months between two meetings, and submits to the Board of Directors the results of its activities and its opinions regarding other issues deemed important. Within the framework of compliance with Corporate Governance Principles, the Remuneration Committee is responsible for monitoring and checking policies related to remuneration management on behalf of the Board of Directors and ensuring that remuneration is in compliance with the Bank's ethical values, internal balances and strategic goals. The Committee is also responsible for evaluating remuneration policy and practices within the framework of risk management, reviewing the remuneration policy and submitting proposals as required to the Board of Directors, as well as fulfilling other responsibilities set out in applicable legislation and the tasks assigned to it by the Board of Directors within this framework. Committee Members: ੵ Chairperson of the Committee and Board of Directors: Adnan Bali ੵ Board Member: Feray Demir As of 2022, the Remuneration Committee held 8 meetings with the full participation of its members and took 12 decisions. Board of Directors Operating Principles Committee The Board of Directors Operating Principles Committee is responsible for submitting its findings, opinions and recommendations regarding the interpretation and implementation of applicable legal provisions, including especially the İşbank Board of Directors Operating Principles and Procedures and the Directions on İşbank Board of Directors Operating Principles. Committee Members: Committee Members: ੵ Chairperson of the Committee and Board of Directors: Adnan Bali ੵ Board Member: Feray Demir ੵ Board Member: Durmuş Öztek ੵ Adnan Bali: Chairman of Board of Directors and Head of Risk Committee ੵ Yusuf Ziya Toprak: Vice Chairman of Board of Directors and Head of Audit Committee ੵ Ersin Önder Çiftçioğlu: Member of Board of Directors Risk Committee ੵ Hakan Aran: CEO Risk Committee is responsible for articulating the risk management strategies and policies İşbank will adhere to both on a consolidated and unconsolidated basis, presenting them to the İşbank Board of Directors for approval and monitoring compliance with them. Committee is the common communication platform for the Bank’s executive divisions in terms of assessing the risk the Bank is exposed to, making suggestions about the actions to be taken and approaches to be followed. The Committee's principal duties are the following: 䬏Preparing the risk strategies and policies and presenting to the Board for approval. 䬏Monitoring the effective usage of the outcomes of the Internal Capital Adequacy Assessment Process in the planning and decision making processes of the Bank. 䬏Negotiating and adjudicating the issues addressed by Risk Management Division. 䬏Recommending the level of risk limits for exposures/possible exposures to the Board, monitoring the breaches of these limits and making recommendations regarding the elimination of those breaches to the Board. 䬏Recommending the amendments in the risk policies to the Board. 䬏Monitoring the risk management processes, i.e. risk identification, definition, measurement, assessment, control and reporting processes, carried out by Risk Management Division. 䬏Monitoring the accuracy and reliability of the risk measurement methodologies and their results. 䬏Suggesting proposals regarding the determination of risk appetite statement and its amendments to the Board. 䬏Taking measures to establish risk culture in the Bank, creating processes to fulfill the responsibility of supervision, understanding all of the risks arising from the activities of the Bank and supervising the integration of these risks to risk management system of the Bank. ੵ Ebru Özşuca: Deputy Chief Executive and Head of Asset & Liability Management Committee ੵ Sezai Sevgin: Deputy Chief Executive ੵ Can Yücel: Deputy Chief Executive ੵ Gamze Yalçın: Deputy Chief Executive ੵ Hürdoğan Irmak: Head of Risk Management Division ੵ Hamit Umut Toğay: Head of Internal Control Division ੵ Süleyman H. Özcan: Corporate Compliance Division Risk Committee contributes to the configuration of Group risk policies also through consolidated group meetings. In the activities that the Risk Committee carries out on a consolidated basis, the deputy CEO responsible from Subsidiaries Division and Head of Subsidiaries Division also attend the meetings. In the Risk Committee meetings held in the first 3 quarters of 2022, risk management practices of İşbank and its subsidiaries under consolidated risk policies have been evaluated, risk reports have been presented to the Committee, the results have been analyzed and decisions regarding the risk management systems and processes were taken. By the end of the 3rd quarter, the Committee had 8 meetings and 27 decisions have been taken. Operational Risk Committee Operational Risk Committee which is established by the Board decision dated 30.04.2020 and numbered 43790, operates to determine the strategies and policies for managing operational risks that Bank may be exposed to, improve the operational risk management framework and strengthen governance model regarding operational risks. Operational Risk Committee is formed to meet at least twice during a calendar year, and the members are listed below. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 148 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 149 Committee Members: ੵ Yusuf Ziya Toprak: Vice Chairman of Board of Directors and Head of Operational Risk Committee ੵ Ersin Önder Çiftçioğlu: Member of Board of Directors ੵ Hakan Aran: CEO ੵ Ozan Gürsoy: Deputy Chief Executive ੵ Sezgin Yılmaz: Deputy Chief Executive ੵ Sabri Gökmenler: Deputy Chief Executive ੵ Sezai Sevgin: Deputy Chief Executive ੵ Sezgin Lüle: Deputy Chief Executive and Head of Innovation Committee ੵ Gürler Özkök: Head of Board of Inspectors ੵ Süleyman H. Özcan: Head of Corporate Compliance Division ੵ H. Umut Togay: Head of Internal Control Division ੵ Hürdoğan Irmak: Head of Risk Management Division ੵ Bülent Akdemir: Head of Information Security Division ੵ Burcu Nasuhoğlu: Unit Manager of Risk Management Division Committee functions in coordination with Risk Committee and reports operating results to the Board through Audit Committee. By the end of 2022, Operational Risk Committee had 2 meetings with the attendance of all members and 2 decisions have been taken. Corporate Social Responsibility Committee The Corporate Social Responsibility Committee evaluates developments related to current activities, collaboration conditions, requests and project proposals submitted to the Bank and monitors the results. The ratio of non-executive managers in the Committee is 50%, and there are no independent members. As of the end of 2022, 13 positive and 6 negative decisions were taken in 6 meetings held with the participation of all members of the Corporate Social Responsibility Committee, and information was provided on 9 subjects. Committee Members: ੵ Board Member: Feray Demir ੵ Board Member Fazlı Bulut ੵ Board Member: Durmuş Öztek ੵ Board Member Sadrettin Yurtsever ੵ Deputy Chief Executive: Yalçın Sezen ੵ Deputy Chief Executive: Can Yücel ੵ Deputy Chief Executive: Suat E. Sözen ੵ Head of the Corporate Communications Division: Gül Meltem Atılgan Committee Name Audit Committee TRNC Internal Systems Committee Credit Committee Credit Revision Committee Corporate Governance Committee Sustainability Committee Remuneration Committee Board of Directors Operating Principles Committee Risk Committee Operational Risk Committee Corporate Social Responsibility Committee Number of Members Number of Meetings Decisions Taken 2 2 5 5 4 15 2 4 11 14 7 60 12 - 7 4 1 8 0 11 2 6 100 14 45 1 4 1 12 0 33 2 19 Information on Risk Management Policies Applied per Risk Types Besides banking activities, both financial and non- financial risks encompassing the whole group required to be analyzed, monitored and reported from the standpoint of group risk management in addition to that of banking- specific risk management principles. Beyond regulatory requirements this aspect of risk management has become an industry standard for corporate governance. The risk management process, organized within the framework of advanced risk management methodologies and favors a common risk management culture throughout the establishment, is structured to emphasize good corporate governance, assuring segregation of units responsible for monitoring and controlling risk from executive functions. In that respect, risk definition, measurement, analysis, monitoring, reporting and control functions are carried out within the same framework. The process of risk management and the functions involved in that process are among the highest priority responsibilities of the İşbank Board of Directors. The Risk Management Division, which acts through the Risk Committee and Operational Risk Committee and forms a functional constituent of the risk management function in collaboration with the Bank Credit Committee and the Asset & Liability Management Committee, carries out the works towards the regulatory and internal capital adequacy in accordance with the Basel framework and consistent with international best practices, in addition to working towards developing and validating risk measurement methodologies and optimizing the capital adequacy management process. Capital Adequacy Policy Capital Adequacy Policy defines the level of capital, on consolidated and unconsolidated basis, that the Bank must hold against potential losses arising from financial risks associated with on and off-balance sheet items in addition to non-financial risks caused by the Bank’s operations; and establishes the principles for maintaining and monitoring the minimum capital levels determined in accordance with the regulations and the Internal Capital Adequacy Assessment Process. Capital Adequacy Policy is an integral part of the Risk Policies. Credit Risk Policy Credit risk is defined as the probability of the Bank having a loss due to the counterparty not fulfilling the obligation partially or fully on maturity as affirmed in the agreement. Credit Risk Policy sets the framework for credit risk management, control and monitoring, roles and responsibilities and credit risk limits. İşbank maintains identification, measurement and management of credit risk across all products and activities as defined in the Article 48 of the Banking Law. The Board reviews credit risk policies and strategies annually at minimum. CEO, and the other chief executives and the division heads that are involved in the credit lifecycle are responsible for the execution of credit risk policies. The credit risk profile of the Bank is continuously monitored. The trend of risk factors and the changes in these factors are reported to the senior management regularly. Avoiding concentration is essential in managing credit risk. Concentration in the credit portfolio is monitored by taking the balance of earnings, riskiness and capital charges into account. To this end, limits specified by the Board of Directors based on counterparties, industry, credit type, collateral, country, maturity, currency etc. are implemented. In managing credit risk, İşbank implements internal risk limits specified by the Board of Directors that restrict the maximum credit risk based on parameters such as risk groups and sectors in addition to the credit risk limits that are mandated by legal regulations. These internal limits are determined in a way that does not lead to risk concentrations. İşbank employs internal credit risk rating systems in managing credit risk. Internal credit risk rating systems and artificial intelligence applications are employed with the capability to monitor credit risk on a portfolio basis; to calculate expected and unexpected credit losses and to assess credit risk correctly in credit pricing, performance management, sales and marketing. The assessment and management of the risks related to the models are done according to the Model Risk Management Policy. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 150 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 151 Asset and Liability Management Risk Policy Asset and liability management risk is defined as; the risk of loss caused by Bank’s failure to effectively manage all financial risks arising from the bank's assets, liabilities and off-balance sheet transactions. Market risk of trading book, structural interest rate risk of banking book and liquidity risk are all within the scope of asset and liability management risk. All principles and procedures related to constitution and management of Bank’s asset-liability structure and Bank’s risk appetite is established by the Board of Directors. Ensuring asset and liability management risk being maintained within the levels imposed by legislation and internal risk limits is the first priority. Within the Bank’s risk appetite framework risk tolerance levels which aim to put a cap on the amount of risk undertaken by the Bank are determined by Board of Directors for each risk type on both bank-only and consolidated basis. In this process, liquidity, target income level and general expectations about the risk factors are taken into consideration. Board of Directors and Audit Committee are obliged to track that Bank’s capital is used optimally. For this purpose, they have to keep risks under control and ensure necessary actions being taken. Asset-Liability Management Committee is responsible for governance of asset and liability management risk in accordance with the risk appetite framework and risk limits determined by Board of Directors and within the principles and procedures expressed in ALM risk policy. Measuring asset and liability management risk, reporting the results and monitoring the compliance with the risk limits are the responsibilities of Risk Management Division. The level of the risk taken is reviewed under different scenarios. Measurement results are tested in terms of reliability and integrity. Asset and liability management risk is reported to Risk Committee and reported to the Board of Directors through Audit Committee. Compliance with risk limits is closely and continuously monitored by Risk Management Division, Asset-Liability Management Committee and related business units. In the event of a breach in the risk limits, the breach and its reasons are instantly reported to Board of Directors through Audit Committee. Course of action needed to be taken in order to eliminate the breach is determined by the Board. Asset and liability management processes and compliance with the policy rules are audited by internal audit system. The principles regarding the audit process, audit reports and fulfillment of action plans to eliminate the errors and gaps determined by internal audit are established by the Board of Directors. Stress Testing Policy The purpose of the Stress Testing Policy is to measure the significant risks and vulnerabilities that may arise from both bank specific adverse developments or from stress conditions on general economic and financial environment. Stress testing programme is defined as the collection of studies and analyses to assess the risks generated by Bank’s activities and the programme covers the methodologies, assumptions and scenarios related with those analyses. In order to ensure the validity and appropriateness of the results; stress testing programme is regularly monitored and updated taking into consideration the current economical conjuncture and market conditions, Bank’s products, strategies and technological capabilities and Bank’s risk appetite framework. Bank implements a stress testing programme oriented to assess the risks both from a holistic view (i.e. bank- wide stress tests) and on the basis of the important risk types (i.e. individual stress tests) in accordance with the regulations and internal procedures and the results are reported to the senior management, Board of Directors and other related legal authorities. The Board of Directors is responsible for conducting the stress testing programme as a whole. The Board of Directors ensures that the outputs of the stress testing programme are evaluated and used as an input for decision making on the relevant fields. Executing the analyses included in stress testing programme, reporting the outputs of the stress tests and monitoring the compliance with respect to the risk limits are the responsibility of Risk Management Division. The scope of the stress testing programme, the set of risk factors to be used in the analyses and the level of the stress parameters are determined by Risk Committee. The processes related to stress testing and compliance with the policy rules are audited by internal audit system. The principles regarding the audit process, audit reports and fulfillment of action plans to eliminate the errors and gaps determined by internal audit are established by the Board of Directors. Employees have the understanding of the Bank's objective to attain a working environment aiming to reduce the probability of loss, considering that the entire internal rules and procedures, led by operational risk policy, and act sensitively to the inherited operational risks and controls. Reputational Risk Policy Reputational risk is defined as loss of trust to the Bank or reputation impairment as a result of non-compliance with existing legal regulations or negative view of parties such as current or potential customers, partners, opponents and supervisory authorities and related studies are conducted by Risk Management Division. Reputational Risk Policy determines principles and procedures for definition, evaluation, control, monitoring, reporting and management activities of reputational risk sources. Reputational risk sources are evaluated both individually and as a whole, appropriate systems and controls are established to manage risky elements efficiently. Risk Management Division is responsible for reporting reputational risk evaluations periodically to Risk Committee, Audit Committee and the Board of Directors. All the employees execute their functions with the responsibility of preserving the reputation of the Bank. Consolidated Risk Policies Compliance with risk management principles related to the Bank’s subsidiaries is monitored according to Bank’s Consolidated Risk Policies. Through Consolidated Risk Policies, subsidiaries identify their specific risk management policies which are approved by their boards that form the framework of their risk management systems and processes. Risk levels of subsidiaries are monitored closely by Risk Management Division and reported periodically to the Risk Committee and the Board. Operational Risk Policy Operational risk is defined as “the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events”. This definition includes legal risk. Risk Management Division is responsible for the risk management activity on this particular risk. Operational risk management activities comprise defining, measuring, analyzing, monitoring and reporting, controlling of operational risks, following up the new techniques on management of operational risks besides regulatory and internal reporting. The fundamental principles and procedures of risk management are determined in Operational Risk Policy. Categorization of inherited operational risks within the activities and processes is made possible by the Risk Catalogue. It serves as the basic document to define and classify the risks and is subject to alteration as conditions change. Risk Catalogue is modified in line with the improving risk management practices and changing regulations. Operational risk is managed on the basis of the three lines of defense approach within the framework of risk management policies approved by the Board. Risk appetite and affiliated internal limits which are determined by the Board for the operational risks are monitored periodically. Internal and external factors that may affect banking operations negatively are considered in the process of determining operational risks. Operational risk management process combines both qualitative and quantitative approaches in measurement and assessment. In the process of measurement and assessment, risks are prioritized with respect to financial, legal, reputational and operational effects of operational risks that Bank is exposed to. Apart from the calculations executed within the scope of legislation, “internal measurement methods”, “impact - likelihood analysis”, “loss data analysis”, “scenario analysis”, “stress testing” and “key risk indicators” are utilized. Studies are reported to the Board through Risk Committee and Operational Risk Committee. Operational risks that the Bank is exposed in the banking and information systems processes, risk levels of new product, service and activities, support and valuation services, operational risk related loss events and risk indicators are monitored regularly by Risk Management Division and reported periodically to the Risk Committee, Operational Risk Committee and the Board. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 152 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 153 Information Systems Management Policy The purpose of the Information Systems Management Policy is to determine the principles regarding identification, measurement, monitoring, control, reporting and management of risks arising from information systems management. With this policy, it is intended to effectively manage information systems, which is a critical element for sustaining Bank's activities, by considering information systems management as a part of corporate risk management practices. The provisions of this policy are applied in the management of the Bank's information systems and all elements containing these systems. Risks derived from information technologies are basically assessed within the scope of Bank’s operational risk management framework. It is essential that those risks which could be seen as multipliers of the other risks derived from activities of the Bank are measured, closely monitored and controlled within Bank’s integrated risk management framework. Model Risk Management Policy The purpose of the Model Risk Management Policy is to regulate the procedures and principles, regarding the model risk management by considering the end to end life cycle of the models used by the Bank. With the policy, it is aimed to manage the model risk, caused by errors, malfunctions or deficiencies in the life cycle of the models used in the activities of the Bank, with a holistic perspective. In the bank, model risk is managed by the three line of defense structure; first line of defense (model owner, model development team, model implementation team, model user), second line of defense (model risk management team, validation team, internal control) and the third line of defense (internal audit). Model risk management covers the entire model life cycle. The main activities in each step of the model life cycle and the responsibilities within the scope of these activities are determined in the policy. Climate Change Risk Policy Climate change includes “transition risks” that may be encountered due to the transition to a low carbon economy and “physical risks” that may arise due to the effects of climate change on nature. Bank’s Climate Change Risk Policy regulates the principles and procedures regarding the identification, definition, evaluation and/or measurement, monitoring, control, reporting and management of climate change risks that the Bank may be exposed to as a result of its activities. Climate change risk, in addition to being a type of risk that the Bank may be directly exposed to, may also arise due to other risks that may occur during the execution of its operations. Therefore, Climate Change Risk Policy is an integral part of the Bank's other Risk Policies. The main purpose of climate change risk management is to ensure the compatibility of the Bank's activities and practices with its climate change strategy. Responsibilities regarding climate change risk management, have been defined within the framework of the three line of defense. Basically, the task of the first line is to ensure that credit decisions are made taking into account the risks of climate change throughout the lending process. The second line determines the working principles, rules, policies and requirements regarding climate change risk. The third line provides assurance to the Board of Directors that the structure described here is functioning properly. Managers of Internal Systems Second Line of Defense: Name Sezai Sevgin Hürdoğan Irmak Süleyman H. Özcan Engin Yalçın Duty Term of Office Professional Experience Deputy Chief Executive Responsible for Internal Systems: Head of Risk Management Division Head of Corporate Compliance Division (Compliance Officer) Head of the Internal Control Division 1 year 2 months 5 years 3 days 2 years 6 months 2 months 33 years 22 years 29 years 26 years Board of Inspectors İşbank AG Corporate Marketing Division Commercial Banking Marketing Division Gebze Corporate Branch Maslak Corporate Branch Bayındır Health Group Board of Inspectors Accounting Division, Change Management Board, Strategy and Corporate Board of Inspectors Payment Systems Performance Management Division, Retail Banking Product Division Investor Relations Division İş Merkezleri Yönetim ve İletişim A.Ş. Corporate Loans Underwriting Division Board of Inspectors Risk Management Division Bachelor’s Degree Bachelor's Degree Bachelor’s Degree Bachelor’s Degree Divisions Previously Served Educational Background Third Line of Defense: Name Duty Term of Office Professional Experience Divisions Previously Served Educational Background Gürler Özkök Chairperson of the Board of Inspectors Risk Management Division Deputy Chairperson of the Board of Inspectors, 12 months 29 years Izmir Branch Izmir Commercial Branch Akdeniz Corporate and Maslak Corporate Branches Master's Degree Abroad An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 154 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 155 Audit Committee’s Assessment on the Operation of Internal Audit, InternalAudit, Compliance and Risk Management Systems, and its Activities in the Reporting Period Internal Audit Reporting to the Board of Directors of İşbank, the Board of Inspectors conducts audits of the Bank’s Head Office divisions, banking processes, information systems, domestic and foreign branches, and the activities of consolidated subsidiaries. The audits aim to provide assurance that the Bank’s activities are in compliance with legal regulations, the Bank’s strategies, policies, principles, and goals. The work carried out in this direction prioritizes the assessment of the effectiveness of the processes for identifying risks and developing the necessary controls within the framework of the activities of the first and second lines of defense. In accordance with national and international quality standards, audits are conducted on-site or remotely, depending on business needs, with a modern and risk- focused approach, utilizing the strength of the Board of Inspectors’ deep-rooted audit culture and advanced information technologies. The Board of Inspectors also conducts preliminary inspections, examinations, and investigations into suspicions of internal crime. The audit reports prepared as a result of the inspection activities are communicated to the senior management and relevant divisions via the Audit Committee, and the measures taken in response to the findings are monitored by the Board of Inspectors. The Board of Directors closely monitors the activities of the Board of Inspectors through monthly activity reports submitted via the Audit Committee. İşbank’s banking processes and information systems are annually audited by the Board of Inspectors in a risk-based manner to provide the basis for the Management's Declaration to be submitted to an independent auditor in accordance with the "Regulation over External Audit Institutions’ Information Systems and Banking Processes Audits" published by the Turkish Banking Regulation and Supervision Agency (BRSA). In this context, during the audit of the financial reporting process within the routine banking processes, the preparation of the consolidated financial statements as well as the unconsolidated financial statements are reviewed by the Board of Inspectors. In addition, during the regular audits of subsidiaries, the financial reports submitted by the related companies are reviewed within legal regulations and basic accounting principles such as accuracy and completeness. In 2022, audits were conducted in domestic and foreign branches, as well as in the Head Office Divisions and Units, subsidiaries and Regional Directorates. In addition, the Bank’s loans to the top 400 companies with the highest credit risk, which constitute 47% of the Bank’s total loans, were audited. The following audits were conducted: 䬏Portfolio (Collective) Custody Service, 䬏Sustainability Management System, 䬏Gender Equality in Remuneration, 䬏Compliance Program on Prevention of Laundering Proceeds of Crime and the Financing of Terrorism, 䬏Türkiye İş Bankası A.Ş. Group Compliance Program on Prevention of Laundering Proceeds of Crime, 䬏London Branch Compliance Program on Prevention of Laundering Proceeds of Crime, 䬏Valuation Services Received by İşbank, 䬏Internal Capital Adequacy Assessment Process (ICAAP), 䬏Compliance with the Guidelines on Loan Allocation and Monitoring Processes. The management of customer complaints is also audited by the Board of Inspectors, and customer complaints received directly by the Board of Inspectors through various channels, including the Ethics Line, are inspected on a case-by-case basis.. Compliance Compliance is the foremost duty and responsibility of all managers and employees of İşbank at any level. Compliance functions and activities executed in the Bank's Head Office divisions, domestic and overseas branches, and its subsidiaries are monitored by the Corporate Compliance Division, which reports to the Board of Directors. The purpose of the Corporate Compliance Division is to make the maximum contribution to the Bank's efforts to effectively manage and control compliance risk according to a materiality- and risk-based approach and to ensure the execution and management of the Bank's activities in accordance with applicable laws, regulations and standards at all times. Employees of the Sanctions and International Obligations Unit participate in various events such as seminars, trainings and conferences organized by international organizations such as SIBOS, ACAMS, correspondent banks, data provider companies, various authorities, or other institutions. The Compliance Risk Management Policy and Combating Financial Crimes and Sanctions Policy are available at www.isbank.com.tr under “Investor Relations/Corporate Governance”. Internal Control The main objective of the internal control system is to provide the maximum contribution to achieve İşbank’s corporate targets set in accordance with the Bank’s vision, mission and strategies, as well as stakeholder expectations. To this end, the performance required to ensure that all components of the internal control system operate together in an integrated and effective manner, under the supervision of İşbank’s Board of Directors, with the contribution and support of all İşbank’s employees, is being rigorously carried out with professional care and attention. For this purpose, “on-site” and/or “remote” controls have been carried out by the Internal Control Division with a risk-oriented approach on the activities of the Bank’s domestic and foreign branches and Head Office units, financial reporting and information systems, and internal control structures of the subsidiaries subject to consolidation. Activities for central and continuous monitoring of the effectiveness of controls by using advanced data analytics applications were conducted. Besides being the "Compliance Officer" of the Bank, the Head of the Corporate Compliance Division is also a member of the Risk Committee and Operational Risk Committee and a consultant member of the ISSteering Committee, Business and ISContinuity Committee, Information Security Committee, and Information Sharing Committee. The Bank also oversees the effective execution of the corporate compliance activities of its subsidiaries. The necessary researching, analyzing, monitoring, assessing, informing, conducting, coordinating and reporting activities regarding compliance issues are conducted within the Corporate Compliance Division, which consists of three sub-units, namely Regulatory Compliance, Fiscal Crimes, and Sanctions and International Obligations. The duties and responsibilities of the Compliance Officer as specified in the Law on Prevention of Laundering Proceeds of Crime and other applicable regulations are fulfilled by the Head of the Corporate Compliance Division, who is the legal "Compliance Officer" of İşbank as well. The Head of the Corporate Compliance Division also serves as the "Compliance Officer" of the Financial Group, the parent company of which is the Bank, in accordance with MASAK (Financial Crimes Investigation Board) regulations. Activities regarding the prevention of financial crimes and sanctions at İşbank are executed in a purposeful and effective manner in accordance with applicable regulations and the Bank’s Policy and Compliance Program, which were developed for this purpose. Officers and Assistant Specialists who have just begun to work for İşbank and employees who are promoted receive a “Policy for Combating Financial Crimes and Sanctions and Compliance Program” class as part of their career training program. In addition, the Corporate Compliance Division shares information on Financial Crimes, Sanctions, International Obligations and Legal Compliance activities under the Career as a Specialist Internship Program designed to support the career growth of Senior Assistant Specialists at the Bank. In addition to these trainings, all employees who are expected to have knowledge on the subject due to their duties at the Bank are provided with an e-training titled “Combating Financial Crimes”. In addition, orientation training is provided to employees of overseas organizations, and lectures on Combating Financial Crimes and International Sanctions are given to the members of the Board of Inspectors within the III. Term Training Program. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 156 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 157 The results of the reviews were analyzed by the Internal Control Division, and developing proposals, monitoring and follow-up activities intended for eliminating the existing deficiencies and preventing the recurrence of the defects were continued. In order to contribute to their professional development, İşbank’s internal control personnel were provided with various trainings throughout the year. The Internal Control Division also supported the trainings given to İşbank’s employees in order to increase the awareness of internal control activities across the organization. In 2022, in accordance with İşbank’s Sustainability Policy, control activities regarding the operations carried out within the scope of the Sustainability Management System were conducted. The "internal audit" activities defined within the scope of ISO 14001 - Environmental Management System are carried out by the Internal Control Division. İşbank’s internal control system and internal control activities are structured and operated to make sure that the Bank’s assets are protected, the Bank’s activities are carried out in compliance with the Law and other relevant legislations, the Bank’s internal policies, guidelines, and banking practices, accounting and financial reporting systems function securely and in integrity, and information is provided promptly. The design and operational effectiveness of the internal control activities carried out by the relevant units in the process is regularly examined by the Internal Control Division, which is an independent function. In the inspections conducted by the Internal Control Division in 2022, no significant disruption was found in the internal controls in place to ensure the effective, reliable, and uninterrupted execution of the Bank’s activities and services, as well as the integrity, consistency, reliability, timely availability, and security of the information provided by the accounting and financial reporting system. Efficient Risk Management At İşbank, the risk management process puts "good corporate governance" to the forefront and ensures the segregation of units responsible for monitoring and controlling risk from executive functions, identifies risks in accordance with international regulations and facilitates measurement, analysis, monitoring, reporting and control functions. The risks to which the Bank is exposed are managed with a triple defense line. The first line of defense is comprised of the executive units and is responsible for identifying and assessing risks, ensuring continuous implementation of risk management, designing and putting process controls in place, and reporting results according to the Bank's risk appetite, rules, procedures and risk strategies. The second line of defense is comprised of the Risk Management Division, Corporate Compliance Division and Internal Control Division, which report to the Board of Directors. The Risk Management Division is responsible for creating the risk policies and risk catalogue and updating them as necessary, setting and updating control targets for the risks, measuring, monitoring and reporting the risks, and developing a risk management framework. The Internal Control Division tests the effectiveness of controls, while the Corporate Compliance Division sets the policy for compliance risks and establishes the principles regarding the control targets for compliance risks. In the third line of defense, the Board of Inspectors is responsible for conducting an independent audit of the risk management framework and control systems to ensure their effectiveness and adequacy. The Risk Committee, which was established to share risk management principles within the Bank in order to reflect them in decision-making and implementation processes, is responsible for articulating the risk management strategies and policies of the Bank on a consolidated and unconsolidated basis, submitting them to the Board of Directors for approval and monitoring their implementation. Furthermore, the Operational Risk Committee operates to improve the operational risk management framework and strengthen the governance model regarding operational risks. Financial Risks Non Financial Risks Credit Risk Assets / Liability Management Risk Business Risk Other Risks Operational Risk Reputational Risk Strategic Risk Counterparty Risk Market Risk Insurance Risk Fraud Risk Transaction, Process and Product Risk Macro economic/ Systemic Risks Legal and Regulatory Change Risk Credit Concentration Risk Structural Interest Rate Risk Settlement Risk Liquidity Risk Country Risk Investment Risk Residual Risk Securitization Risk Financial Crime Risk Human Resources Risk Business Strategy Risk Environmental Risks Conduct Risk Physical Damage Risk Political Risk Talent Management Risk Compliance Risk Information Technologies Risks and Cyber Risks Climate Change Risk New Technology/ Digitalization Risk Model Risk Competition Environment Risk An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 158 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 159 The Bank's risk management practices are intended to create a common risk culture across the organization. Risk management activities are based on the regulations and good practices guidelines published by the Banking Regulation and Supervision Agency (BRSA). Besides compliance with regulatory limits, the Bank also ensures capital and liquidity adequacy against all risks undertaken by the Bank as part of the Internal Capital Adequacy Assessment Process (ICAAP). The Risk Management Division, which is the main executing body of central risk management activities at the Bank, carries out activities related to regulatory and internal capital adequacy to ensure compliance with the Basel framework and international best practices, develops and validates risk measurement methodologies, and optimizes the capital adequacy management process. The Bank’s level of risk exposure is systematically monitored in accordance with the written risk policies and implementation procedures. The Bank runs the risk management process as per internal regulations approved by the Board of Directors, including Capital Adequacy, Credit Risk, Asset-Liability Management Risk, Operational Risk, Model Risk, Climate Change Risk, Stress Testing, Reputational Risk, Consolidated Risk and Information Systems Management Policies. The Bank uses impact-probability analysis, loss event data analysis, scenario analysis, stress testing and risk indicators in addition to the prioritization of risk in the measurements related to operational risks. The risks which are defined in the Risk Catalogue and for which the management principles are explained in detail in the risk policies are reviewed annually, as a minimum, and the related definitions and principles are kept up-to-date. In order to manage the Bank's risk profile and conduct a prospective assessment of it, the scenario analysis method is used to assess the impact on conjectural but unexpected operational risk-type loss events. The scenario analysis allows assessment of catastrophic events which are also referred to as tail risks and rarely occur but create a high impact when they do occur. Scenario analysis results provide inputs to the operational risk management stress testing and top-down risk assessment studies in addition to the operational risk internal capital requirement. İşbank has defined numerous risk management policies for various risk types. Management of Non-financial Risks Besides financial risks, non-financial risks such as climate change risk, environmental management risk, internal behavior/culture and ethics risks, and employee practice and employee relations risks are defined in the Bank's risk catalogue and consideredas part of risk management activities. Introducing best practices in the management of climate change risks is a priority for İşbank. The Bank carried out project activities aimed at measuring and reporting the climate change risks to which it may be exposed and developing the principles and procedures of governance and integrating such risks into the Bank's strategy and loan processes. The climate change risk, positioned as a strategic risk in the Bank's risk catalogue, is defined and exemplified according to TCFD and international best practices to include transition risks and physical risks. The Climate Change Risk Policy, which was approved and put into force by the Board of Directors, sets out the principles and procedures to be followed for detecting, identifying, assessing and/or measuring, monitoring, controlling, reporting and managing the climate change risks that the Bank may be exposed to in connection with its activities. The "Share of Sectors With High Climate Change Risk Within Total Commercial Portfolio" indicator is monitored within the framework of the Bank's solo risk appetite in order to prevent an increase in the concentration of sectors with a high exposure to climate change risk within the portfolio and to provide guidance for composition of the portfolio in subsequent periods. The Bank utilizes a scenario approach in measuring climate change risks. For high-risk sectors, which are identified with the climate change heat map method, an impact analysis for climate risk events is conducted by taking into account the scenario analysis approach of the United Nations Environment Program - Finance Initiative (UNEP-FI), and NGFS reference scenarios. Reputational risk refers to potential losses which may be caused by loss of trust in the Bank or damage to the Bank’s reputation as a result of non-compliance with existing legal regulations or negative views of parties such as current or potential customers, partners, competitors and supervisory authorities. The Bank uses the Reputation Index to monitor reputational risk. This index was created by the Bank to serve as an early warning for elements which might potentially impact the Bank's reputation. Assessments of the level of reputational risk are reported to senior management on a quarterly basis as a minimum. It is the senior management's responsibility to monitor and improve compliance with the corporate governance concept, which constitutes the basis of reputational risk. İşbank Risk Management Policies Capital Adequacy Policy Operational Risk Policy Stress Testing Policy Information Systems Risk Management Policy Consolidated Risk Policies Asset and Liability Management Risk Policy For Information on Risk Management Policies Applied per Risk Types, see page 149. Climate Change Risk Policy Reputational Risk Policy Credit Risk Policy Model Risk Management Policy Ersin Önder Çiftçioğlu Board Member and Audit Committee Member Yusuf Ziya Toprak Vice Chairperson of the Board of Directors and Audit Committee Chairperson An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 160 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 161 Business Ethics Anti-Bribery and Anti-Corruption İşbank established the “Ethical Principles and Operational Rules” in line with the Principles of Banking Ethics of the Banks Association. İşbank’s Collective Bargaining Agreement and the Bank's legislation also include regulations on employees and working life. Additionally, İşbank's "Human Rights and Human Resources Policy" includes provisions that refer to ethical principles. There is an ethics hotline to allow employees, customers, and other related parties to report any violation of operational rules to the related units of the Bank in accordance with the Ethical Principles and Operational Rules. In 2022, the Ethics Hotline received a total of 4 complaints. Reports and notifications regarding bribery, corruption and other similar actions submitted through the Ethics Hotline are monitored by the Board of Inspectors. For behaviors that are found to be in violation of the Bank's policies, the necessary disciplinary action, up to termination of the employment contract, is taken according to the applicable provisions and procedures of the Collective Labor Agreement. Customer complaints can be conveyed via e-mail, petition, or fax to digital channels, Branches, or directly to the Head Office or the Board of Inspectors. Complaints submitted by customers to Branches and the Head Office units are transferred to the Customer Relations Platform and followed up on the relevant platform. With a special application specifically designed for all employees, complaints can be directly submitted to the Head Office, which then transfers them to the Board of Inspectors for evaluation as necessary. During the training, Intern Assistant Inspectors receive a one-hour “Ethical Principles” and “Anti-Bribery and Anti-Corruption” training. The topic of "Ethical Principles" is also covered as part of a one-hour class during the "Branch Managers Development Program", "My Management Career”, and "As I Rise in My Career" trainings given to managers and manager candidates. In 2022, 1,480 hours of ethical training was given to 2,700 employees. The “Internal Audit” training provided by the Board of Inspectors as part of the Branch Managers Development Program covers ethical banking principles. In addition, in the seminars “Sexism Behind Politeness: Culture and Language”, “Sustainability through the Lens of Gender Equality”, and “Law Against Violence: Empowerment Through Rights” held within the scope of Management Development Conferences, information on basic human rights from the perspective of related topics was shared. Private security officers are informed about individual rights in the “Law on Private Security Services and Individual Rights” course, which is delivered as part of their refresher training. In 2022, 191 employees participated in Private Security Refresher trainings. In addition, in 2022, the Bank’s “Human Rights and Human Resources Policy” text was sent by the Support Services Division to all private security officers via e-mail for their information. In the “Getting to Know Our Bank” course delivered as part of the “Starting My Career” trainings organized for new employees at İşbank, the principles set out in the Bank’s Human Rights and Human Resources Policy are addressed. During the “Getting to Know Our Bank” course within the scope of “Starting My Career” trainings provided to new employees at İşbank, the requirement to act according to the discipline regulations and the "Ethical Banking Principles" is emphasized. In the career training programs organized for employees promoted to Senior and Assistant Manager positions, the Board of Inspectors also provides information on this subject. In the "Banking Law" class included in the Career as a Specialist training for Senior Assistant Specialists and the career training programs for employees promoted to Supervisorand Assistant Manager roles, information is provided on the ethical principles that bank employees are obliged to comply with. The “Ethical Principles and Operational Rules” digital training was made available to employees. The training included detailed information on the Bank’s ethical principles and operational rules, our quality, compliance and risk policies, the principles on Combating Financial Crimes and implementation of Sanctions, Compliance with Competition Law and ensuring Information Security, and information on the “Ethics Hotline” where employees can report any violations or suspected violations of ethical principles. Anti-bribery and anti-corruption is an uncompromised priority of İşbank’s banking approach. Bribery and corruption risk is defined as the risk that the Bank will incur losses due to an employee of the Bank abusing the power vested in them as part of their role at the Bank in order to, directly or indirectly, secure benefits for themselves or third parties and failing to comply with the anti-bribery and anti-corruption laws and internal regulations. Measuring and prioritizing bribery and corruption risk is done through a top-down risk assessment, impact-probability analysis, loss event data analysis and scenario analysis activities. During routine audits conducted by the Board of Inspectors according to Internal Audit Standards, all risks, including anti-bribery and anti-corruption, are addressed on a periodic basis, and the audit results are reported to authorized divisions of the Bank in accordance with the provisions of applicable legislation, and the outcomes of the reported findings are monitored. Besides existing risks, factors that present potential risks are also identified, appropriate solutions are proposed, and the entire process is monitored. If any violation of anti-corruption policies is detected during the audits, appropriate action is taken according to the internal discipline regulations and legal regulations. All findings, reports and customer complaints related to corruption practices are meticulously handled and thoroughly investigated. At the end of audits, the reports prepared to allow necessary administrative decisions to be made in accordance with the Bank's collective labor agreement and the legislation are transferred to the related Head Office Divisions for action. In 2022, the scale of activities evaluated in relation to corruption risks was found to be at a negligible level compared to the total assets of the Bank. İşbank’s guiding policies on anti-corruption are the “Ethical Principles and Operational Rules” and the “Anti-Bribery and Anti-Corruption Policy”. İşbank’s "Anti-Bribery and Anti-Corruption Policy”, which is the reference document for combating bribery and corruption at the Bank, was publicly disclosed on the corporate website. The Anti-Bribery and Anti- Corruption Policy is implemented by the relevant Head Office Division under the supervision of the Corporate Governance Committee. Compliance with the provisions of this policy is audited within the scope of internal audit. The principles regarding fulfillment of the action plans to resolve audit findings are determined by the Corporate Governance Committee. For behaviors that are found to be in violation of the Bank's policies, the necessary disciplinary action, up to termination of the employment contract, is taken according to the Human Resources Regulation and applicable provisions and procedures of the Collective Labor Agreement. Where circumstances warrant legal action, the violation is brought to the attention of legal authorities. The content of the e-training "Policy for Combating Financial Crimes and Sanctions Compliance Program”, which is assigned to all employees as a legal compliance training, is determined by the Corporate Governance Division and updated regularly and covers information about the topic of "Anti-Bribery and Anti-Corruption”. Regular communication is carried out to ensure completion of this training by the employees. During the "Getting to Know Our Bank" course within the scope of "Starting My Career" trainings provided to new employees at İşbank, the requirement to act according to the discipline regulations and the "Ethical Banking Principles" is emphasized. This topic is also covered during the "Policy for Combating Financial Crimes and Sanctions and Compliance Program" class for our Officers and Assistant Specialists which is included in the same training program. With the "Banking Law" class included in the Career as a Specialist training for Senior Assistant Specialists and the career training programs for employees promoted to Supervisorand Assistant Manager roles, information is provided about the legal regulations concerning corruption and other similar crimes. The sensitivities specified in the Anti-Bribery and Anti-Corruption Policy on the home page of İşbank’s purchasing platform are also observed in supplier selection. In the reporting period, no supplier was found to be involved in bribery and corruption incidents. Click here for İşbank’s Ethıcal Prıncıples And Code Of Conduct. Click here for İşbank’s Anti-Bribery and Anti-Corruption Policy. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 162 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 163 Corporate Governance Principles Compliance Statement İşbank is subject to the provisions stipulated for banks in the Banking legislation and Capital Markets legislation regarding Corporate Governance Principles. The Bank carries out its activities in accordance with the compulsory principles of the Communiqué on Corporate Governance (Communiqué) published by the Capital Markets Board. The Bank’s practices regarding the non-compulsory provisions of the principles stipulated in the Communiqué and additional information within the framework of Corporate Governance are included in the Corporate Governance Compliance Report and Corporate Governance Information Form, which are part of the Integrated Annual Report which is published with the approval of our Board of Directors. No changes are foreseen to be performed in the Bank’s managerial practices within the framework of the principles stipulated in the Communiqué. Within the year, efforts to develop the practices of the corporate governance principles of the Bank have continued. The “Sustainability Principles Compliance Framework” section of our Integrated Annual Report includes the Bank’s practices and information regarding the principles within the scope of the regulation with the same title published by the Capital Markets Board. Corporate Governance Compliance Report Company Compliance Status Yes Partial No Exempted Not Applicable Explanation Corporate Governance Compliance Report 1.1. FACILITATING THE EXERCISE OF SHAREHOLDER RIGHTS x X X X X X X 1.1.2- Up-to-date information and disclosures which may affect the exercise of shareholder rights are available to investors at the corporate website. 1.2. RIGHT TO OBTAIN AND REVIEW INFORMATION 1.2.1 - Management did not enter into any transaction that would complicate the conduct of special audit. 1.3. GENERAL ASSEMBLY 1.3.2 - The company ensures the clarity of the General Assembly agenda, and that an item on the agenda does not cover multiple topics. 1.3.7- Insiders with privileged information have informed the board of directors about transactions conducted on their behalf within the scope of the company's activities in order for these transactions to be presented at the General Shareholders' Meeting. 1.3.8 - Members of the board of directors who are concerned with specific agenda items, auditors, and other related persons, as well as the officers who are responsible for the preparation of the financial statements were present at the General Shareholders' Meeting. 1.3.10 - The agenda of the General Shareholders' Meeting included a separate item detailing the amounts and beneficiaries of all donations and contributions. 1.3.11 - The General Shareholders' Meeting was held open to the public, including the stakeholders, without having the right to speak. 1.4. VOTING RIGHTS 1.4.1 - There is no restriction preventing shareholders from exercising their shareholder rights. 1.4.2 - The company does not have shares that carry privileged voting rights. 1.4.3-The company withholds from exercising its voting rights at the General Shareholders' Meeting of any company with which it has cross-ownership, in case such cross-ownership provides management control. 1.5. MINORITY RIGHTS 1.5.1 - The company pays maximum diligence to the exercise of minority rights. 1.5.2 - The Articles of Association extend the use of minority rights to those who own less than one twenthieth of the outstanding shares, and expand the scope of the minority rights. 1.6. DIVIDEND RIGHT 1.6.1 - The dividend policy approved by the General Shareholders' Meeting is posted on the company website. X X In addition to the shareholders of İşbank, the persons mentioned in "İşbank Internal Directive on Working Principles and Procedures of General Assembly" may attend the General Assembly X X X X In our Bank, minority rights are exercised in line with the related legislation. Company Compliance Status Yes Partial No Exempted Not Applicable Explanation X 1.6.2 - The dividend distribution policy comprises the minimum information to ensure that the shareholders can have an opinion on the procedure and principles of dividend distributions in the future. 1.6.3 - The reasons for retaining earnings, and their allocations, are stated in the relevant agenda item. 1.6.4 - The board reviewed whether the dividend policy balances the benefits of the shareholders and those of the company. 1.7. TRANSFER OF SHARES 1.7.1 - There are no restrictions preventing shares from being transferred. 2.1. CORPORATE WEBSITE 2.1.1. - The company website includes all elements listed in Corporate Governance Principle 2.1.1. 2.1.2 - The shareholding structure (names, privileges, number and ratio of shares, and beneficial owners of more than 5% of the issued share capital) is updated on the website at least every 6 months. 2.1.4 - The company website is prepared in other selected foreign languages, in a way to present exactly the same information with the Turkish content. 2.2. ANNUAL REPORT 2.2.1 - The board of directors ensures that the annual report represents a true and complete view of the company's activities. 2.2.2 - The annual report includes all elements listed in Corporate Governance Principle 2.2.2. 3.1. CORPORATION'S POLICY ON STAKEHOLDERS 3.1.1- The rights of the stakeholders are protected pursuant to the relevant regulations, contracts and within the framework of bona fides principles. 3.1.3 - Policies or procedures addressing stakeholders' rights are published on the company's website. 3.1.4 - A whistleblowing programme is in place for reporting legal and ethical issues. 3.1.5 - The company addresses conflicts of interest among stakeholders in a balanced manner. X X X X X X X X X X X X 3.2. SUPPORTING THE PARTICIPATION OF THE STAKEHOLDERS IN THE CORPORATION'S MANAGEMENT X İşbank employees participate in the management of the Bank via their beneficiary status in İşbank Members' Supplementary Pension Fund, which holds 37.31% of İşbank shares. 3.2.1 - The Articles of Association, or the internal regulations (terms of reference/manuals), regulate the participation of employees in management. 3.2.2 - Surveys/other research techniques, consultation, interviews, observation method etc. were conducted to obtain opinions from stakeholders on decisions that significantly affect them. 3.3. HUMAN RESOURCES POLICY 3.3.1 - The company has adopted an employment policy ensuring equal opportunities, and a succession plan for all key managerial positions. 3.3.2 - Recruitment criteria are documented. 3.3.3 - The company has a policy on human resources development, and organises trainings for employees. 3.3.4 - Meetings have been organised to inform employees on the financial status of the company, remuneration, career planning, education and health. 3.3.5 - Employees, or their representatives, were notified of decisions impacting them. The opinion of the related trade unions was also taken. 3.3.6 - Job descriptions and performance criteria have been prepared for all employees, announced to them and taken into account to determine employee remuneration. X X X X X X X An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 164 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 165 Company Compliance Status Company Compliance Status Yes Partial No Exempted Not Applicable Explanation Yes Partial No Exempted Not Applicable Explanation 3.3.7 - Measures (procedures, trainings, raising awareness, goals, monitoring, complaint mechanisms) have been taken to prevent discrimination, and to protect employees against any physical, mental, and emotional mistreatment. 3.3.8 - The company ensures freedom of association and supports the right for collective bargaining. 3.3.9 - A safe working environment for employees is maintained. 3.4. RELATIONS WITH CUSTOMERS AND SUPPLIERS 3.4.1-The company measured its customer satisfaction, and operated to ensure full customer satisfaction. 3.4.2 - Customers are notified of any delays in handling their requests. 3.4.3 - The company complied with the quality standards with respect to its products and services. 3.4.4 - The company has in place adequate controls to protect the confidentiality of sensitive information and business secrets of its customers and suppliers. 3.5. ETHICAL RULES AND SOCIAL RESPONSIBILITY 3.5.1 - The board of the corporation has adopted a code of ethics, disclosed on the corporate website. 3.5.2-The company has been mindful of its social responsibility and has adopted measures to prevent corruption and bribery. 4.1. ROLE OF THE BOARD OF DIRECTORS 4.1.1 - The board of directors has ensured strategy and risks do not threaten the long-term interests of the company, and that effective risk management is in place. 4.1.2 - The agenda and minutes of board meetings indicate that the board of directors discussed and approved strategy, ensured resources were adequately allocated, and monitored company and management performance. 4.2. ACTIVITIES OF THE BOARD OF DIRECTORS 4.2.1-The board of directors documented its meetings and reported its activities to the shareholders. 4.2.2 - Duties and authorities of the members of the board of directors are disclosed in the annual report. 4.2.3-The board has ensured the company has an internal control framework adequate for its activities, size and complexity. 4.2.4 - Information on the functioning and effectiveness of the internal control system is provided in the annual report. 4.2.5 - The roles of the Chairman and Chief Executive Officer are separated and defined. 4.2.7-The board of directors ensures that the Investor Relations department and the corporate governance committee work effectively. The board works closely with them when communicating and settling disputes with shareholders. X X X X X X X X X X X X X X X X X 4.2.8 - The company has subscribed to a Directors and Officers liability insurance covering more than 25% of the capital. X Our Bank’s Board of Directors and Executives are insured against the risk of loss they may cause due to their faults while performing their duties within the scope of a liability insurance policy that names our Bank and our participations as the insured, however, the coverage of insurance is below the mentioned amount. 4.3. STRUCTURE OF THE BOARD OF DIRECTORS 4.3.9 - The board of directors has approved the policy on its own composition, setting a minimal target of 25% for female directors. The board annually evaluates its composition and nominates directors so as to be compliant with the policy. 4.3.10 - At least one member of the audit committee has 5 years of experience in audit/accounting and finance. 4.4. BOARD MEETING PROCEDURES 4.4.1-Each board member attend the majority of the board meetings in person or via an electronic board meeting system 4.4.2 - The board has formally approved a minimum time by which information and documents relevant to the agenda items should be supplied to all board members. 4.4.3 - The opinions of board members that could not attend the meeting, but did submit their opinion in written format, were presented to other members. 4.4.4 - Each member of the board has one vote. 4.4.5 - The board has a charter/written internal rules defining the meeting procedures of the board. 4.4.6 - Board minutes document that all items on the agenda are discussed, and board resolutions include director's dissenting opinions if any. X X X X X X X 4.4.7-There are limits to external commitments of board members. Shareholders are informed of board members' external commitments at the General Shareholders' Meeting. 4.5. BOARD COMMITTEES 4.5.5 - Board members serve in only one of the Board's committees. 4.5.6 - Committees have invited persons to the meetings as deemed necessary to obtain their views. X 4.5.7 - If external consultancy services are used, the independence of the provider is stated in the annual report. 4.5.8 - Minutes of all committee meetings are kept and reported to board members. 4.6. FINANCIAL RIGHTS 4.6.1-The board of directors has conducted a board performance evaluation to review whether it has discharged all its responsibilities effectively. 4.6.4-The company did not extend any loans to its board directors or executives, nor extended their lending period or enhanced the amount of those loans, or improve conditions thereon, and did not extend loans under a personal credit title by third parties or provided guarantees such as surety in favour of them. X X 4.6.5 - The individual remuneration of board members and executives is disclosed in the annual report. X X X X X X The duties that İşbank Board members have outside the Bank are provided in the Annual Report which is presented in the General Assembly. Members of İşbank Board of Directors may take part in more than one committee within the context of the related legislation. Restrictions related with the loans to be extended by İşbank to the Board members and employees are defined in article 50 of the Banking Law. In this context, İşbank does not extend loans to its Board members and employees other than those allowed by the law. Total compensation of the Board members and managers with administrative responsibilities is disclosed. On the other hand, the net allowance amount paid to our Board members on an individual basis is determined at our General Assemblies and disclosed to the public together with the General Assembly minutes. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 166 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 167 Corporate Governance Information Form 1. SHAREHOLDERS 1.1. Facilitating the Exercise of Shareholders Rights The number of investor meetings (conference, seminar/etc.) organised by the company during the year In 2022, İşbank participated 9 conferences online for stock and bond investors. In these events, a total of 127 meetings were conducted. In addition to 4 investor events in teleconference and videoconference format, where investors participated via remote access, 111 meetings were held. 1.2. Right to Obtain and Examine Information The number of special audit request(s) The number of special audit requests that were accepted at the General Shareholders' Meeting 1.3. General Assembly - - Link to the PDP announcement that demonstrates the information requested by Principle 1.3.1. (a-d) www.kap.org.tr/tr/Bildirim/914649 Whether the company provides materials for the General Shareholders' Meeting in English and Turkish at the same time General Assembly documents except the list of participants and the minutes of the meeting (invitation to the General Assembly, agenda, proxy statement, information document, dividend distribution proposal, etc.) are presented in Turkish and English simultaneously. The links to the PDP announcements associated with the transactions that are not approved by the majority of independent directors or by unanimous votes of present board members in the context of Principle 1.3.9 The links to the PDP announcements associated with related party transactions in the context of Article 9 of the Communique on Corporate Governance (II-17.1) The links to the PDP announcements associated with common and continuous transactions in the context of Article 10 of the Communique on Corporate Governance (II-17.1) - - - The name of the section on the corporate website that demonstrates the donation policy of the company İşbank Donation and Contribution Principles can be found on İşbank website, Home Page > About Us > Investor Relations > Corporate Governance > İşbank Donation and Contribution Principles. The relevant link to the PDP with minute of the General Shareholders' Meeting where the donation policy has been approved https://www.kap.org.tr/tr/Bildirim/270320 The number of the provisions of the articles of association that discuss the participation of stakeholders to the General Shareholders' Meeting Article 47 Identified stakeholder groups that participated in the General Shareholders' Meeting, if any Shareholders and shareholder representatives as well as Board members, independent auditor representatives and İşbank employees (within the context of the legislation) participated in the General Assembly held in 2022. 1.4. Voting Rights Whether the shares of the company have differential voting rights No In case that there are voting privileges, indicate the owner and percentage of the voting majority of shares. - The percentage of ownership of the largest shareholder 37,31% 1.5. Minority Rights Whether the scope of minority rights enlarged (in terms of content or the ratio) in the articles of the association If yes, specify the relevant provision of the articles of association. No - 1.6. Dividend Right The name of the section on the corporate website that describes the dividend distribution policy Home Page >About Us > Investor Relations > Corporate Governance > Dividend Distribution Policy Minutes of the relevant agenda item in case the board of directors proposed to the general assembly not to distribute dividends, the reason for such proposal and information as to use of the dividend. PDP link to the related general shareholder meeting minutes in case the board of directors proposed to the general assembly not to distribute dividends - - General Assembly Meetings General Meeting Date 25.03.2022 The number of information requests received by the company regarding the clarification of the agenda of the General Shareholders' Meeting 0,00% Shareholder participation rate to the General Shareholders' Meeting 81,02% Percentage of shares directly present at the GSM Percentage of shares represented by proxy 0,04% 80,98% Specify the name of the page of the corporate website that contains the General Shareholders' Meeting minutes, and also indicates for each resolution the voting levels for or against Specify the name of the page of the corporate website that contains all questions asked in the general assembly meeting and all responses to them Home > About Us > Investor Relations > Corporate Governance > Resolutions Made at the Annual General Meeting Home > About Us > Investor Relations > Corporate Governance > Resolutions Made at the Annual General Meeting The number of the relevant item or paragraph of General Shareholders' Meeting minutes in relation to related party transactions - The number of declarations by insiders received by the board of directors 858 The link to the related PDP general shareholder meeting notification https://www.kap.org.tr/tr/Bildirim/ 1014714-1013992- 1013298- 1004842- 1004917-1013298-1013992-1014714 2. DISCLOSURE AND TRANSPARENCY 2.1. Corporate Website Specify the name of the sections of the website providing the information requested by the Principle 2.1.1. Home Page > About Us > Investor Relations If applicable, specify the name of the sections of the website providing the list of shareholders (ultimate beneficiaries) who directly or indirectly own more than 5% of the shares. Home > About Us > Investor Relations > Corporate Overview > Corporate Information > Ownership Structure List of languages for which the website is available Turkish and English 2.2. Annual Report The page numbers and/or name of the sections in the Annual Report that demonstrate the information requested by principle 2.2.2. a) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on the duties of the members of the board of directors and executives conducted out of the company and declarations on independence of board members Additional Information Regarding the Related Legislation b) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on committees formed within the board structure İşbank Committees c) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on the number of board meetings in a year and the attendance of the members to these meetings Information about the Board of Directors Meetings in 2022 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 168 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 169 ç) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on amendments in the legislation which may significantly affect the activities of the corporation No legislation change that would significantly impact İşbank activities has occured d) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on significant lawsuits filed against the corporation and the possible results thereof Unconsolidated Financial Statements as at and for the Year Ended 31 December 2022 with Independent Audit's Report Thereon - Information on Other Provisions Whether the company provides an employee stock ownership programme (There isn't an employee stock ownership programme) The name of the section on the corporate website that demonstrates the human resource policy covering discrimination and mistreatments and the measures to prevent them. Also provide a summary of relevant parts of the human resource policy. Home Page > About Us > Sustainability > Our Policies e) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on the conflicts of interest of the corporation among the institutions that it purchases services on matters such as investment consulting and rating and the measures taken by the corporation in order to avoid from these conflicts of interest None f) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on the cross ownership subsidiaries that the direct contribution to the capital exceeds 5% g) The page numbers and/or name of the sections in the Annual Report that demonstrate the information on social rights and professional training of the employees and activities of corporate social responsibility in respect of the corporate activities that arises social and environmental results 3. STAKEHOLDERS 3.1. Corporation’s Policy on Stakeholders İşbank has no cross ownership subsidiaries. Responsible Operations - Decent Work / Good Corporate Citizen - Contribution to Social Welfare The name of the section on the corporate website that demonstrates the employee remedy or severance policy Compensation principles for Bank employees are determined by the Collective Bargaining Agreement which is shared with the employees through İşbank's Corporate Intranet Portal. The number of definitive convictions the company was subject to in relation to breach of employee rights None The position of the person responsible for the alert mechanism (i.e. whistleblowing mechanism) The contact detail of the company alert mechanism In addition to our employees, all other stakeholders can submit their complaints to the Board of Inspectors through the channels included in the Ethical Principles and Code of Conduct approved by the Board of Directors of our Bank. Following detailed and independent evaluations, complaints are directly examined by the Board of Inspectors or transferred to the relevant units of the Bank. İşbank also has an online communication platform through which employees may submit their requests and complaints to the Senior Management directly. Only a limited number of managers have access to the said platform. E-mail: etik@isbank.com.tr Phone: +90 212 316 14 44 Address: Türkiye İş Bankası A.Ş. Etik Hat İş Kuleleri Kule 1 Kat 34 34330 Levent-Beşiktaş/ İSTANBUL 3.2. Supporting the Participation of the Stakeholders in the Corporation’s Management Name of the section on the corporate website that demonstrates the internal regulation addressing the participation of employees on management bodies No information on this matter is available on our website. Corporate bodies where employees are actually represented 3.3. Human Resources Policy Isbank employees participate in the management of the Bank via their beneficiary status in İşbank Members' Supplementary Pension Fund, which holds 37.31% of İşbank shares. The role of the board on developing and ensuring that the company has a succession plan for the key management positions Board of Directors create succession plans. The name of the section on the corporate website that demonstrates the human resource policy covering equal opportunities and hiring principles. Also provide a summary of relevant parts of the human resource policy. Home Page > About Us > Sustainability > Our Policies The number of definitive convictions the company is subject to in relation to health and safety measures None 3.5. Ethical Rules and Social Responsibility The name of the section on the corporate website that demonstrates the code of ethics Home Page > About Us > Investor Relations > Corporate Governance > Ethical Principles and Code of Conduct The name of the section on the company website that demonstrates the corporate social responsibility report. If such a report does not exist, provide the information about any measures taken on environmental, social and corporate governance issues. Home Page > About Us > Sustainability > Our Reports Any measures combating any kind of corruption including embezzlement and bribery Home Page > About Us > Sustainability > Our Policies 4. BOARD OF DIRECTORS-I 4.2. Activity of the Board of Directors Date of the last board evaluation conducted 23.11.2022 Whether the board evaluation was externally facilitated Whether all board members released from their duties at the GSM No Yes Name(s) of the board member(s) with specific delegated duties and authorities, and descriptions of such duties No delegation of authority in İşbank Number of reports presented by internal auditors to the audit committee or any relevant committee to the board 101 Specify the name of the section or page number of the annual report that provides the summary of the review of the effectiveness of internal controls Audit Committee's Assessment on the Operation of Internal Audit, Internal Control, Compliance and Risk Management Sytems and Its Activities in the Reported Period Name of the Chairman Name of the CEO Adnan Bali Hakan Aran If the CEO and Chair functions are combined: provide the link to the relevant PDP annoucement providing the rationale for such combined roles Link to the PDP notification stating that any damage that may be caused by the members of the board of directors during the discharge of their duties is insured for an amount exceeding 25% of the company's capital Chairman and General Manager seats are held by different persons Our Banks Board of Directors and Executives are insured against the risk of loss they may cause due to their faults while performing their duties within the scope of a liability insurance policy that names our Bank and our participations as the insured, however, the coverage of insurance is below the mentioned amount. On the other hand, this issue has not been disclosed on the Public Disclosure Platform The name of the section on the corporate website that demonstrates current diversity policy targeting women directors https://www.isbank.com.tr/en/about-us/Documents/investor-relations/ board_diversity_policy.pdf The number and ratio of female directors within the Board of Directors 1 / %9 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 170 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 171 Composition of Board of Directors Name, Surname of Board Member Whether Executive Director Or Not Whether Independent Director Or Not The First Election Date To Board Link To PDP Notification That Includes The Independency Declaration Whether the Independent Director Considered By The Nomination Committee Whether She/ He is the Director Who Ceased to Satisfy The Independence or Not Whether The Director Has At Least 5 Years’ Experience On Audit, Accounting And/Or Finance Or Not ADNAN BALİ YUSUF ZİYA TOPRAK Non- executive Non- executive HAKAN ARAN Executive FERAY DEMİR ERSİN ÖNDER ÇİFTÇİOĞLU FAZLI BULUT DURMUŞ ÖZTEK RECEP HAKAN ÖZYILDIZ MUSTAFA RIDVAN SELÇUK Non- executive Non- executive Non- executive Non- executive Non- executive Non- executive Not independent director 01.04.2011 Independent director 31.03.2020 Not independent director Not independent director 01.04.2021 25.03.2016 Independent director 31.03.2017 Not independent director 29.03.2019 Not independent director 31.03.2020 Not independent director 31.03.2020 Not independent director 31.03.2020 AHMET GÖKHAN SUNGUR Non- executive Independent director 31.03.2020 www.kap. org.tr/tr/ Bildirim/916723 SADRETTİN YURTSEVER Non- executive Not independent director 31.03.2020 Not applicable Not considered Not applicable Not applicable - No - - Not considered No Not applicable Not applicable Not applicable Not applicable Considered Not applicable - - - - No - Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 4. BOARD OF DIRECTORS-II 4.4. Meeting Procedures of the Board of Directors Number of physical or electronic board meetings in the reporting period 9 physical, 7 online Director average attendance rate at board meetings 98,86% Whether the board uses an electronic portal to support its work or not Yes Number of minimum days ahead of the board meeting to provide information to directors, as per the board charter In accordance with article II/4/b of the Directive on Working Procedures and Principles of İşbank Board of Directors, a copy of the agenda and proposals is sent to the members before the meeting date at a reasonable time which allows them to make the necessary evaluations. The name of the section on the corporate website that demonstrates information about the board charter Articles of Association Number of maximum external commitments for board members as per the policy covering the number of external duties held by directors None 4.5. Board Committees Page numbers or section names of the annual report where information about the board committees are presented İşbank Committees Link(s) to the PDP announcement(s) with the board committee charters www.kap.org.tr/tr/Bildirim/262622 Composition of Board Committees-I Names Of The Board Committees Name Of Committees Defined As "Other" In The First Column Name-Surname of Committee Members Whether Committee Chair Or Not Whether Board Member Or Not Corporate Governance Committee Corporate Governance Committee Corporate Governance Committee Corporate Governance Committee Audit Committee Audit Committee Remuneration Committee Remuneration Committee Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Ersin Önder Çiftçioğlu Feray Demir Sadrettin Yurtsever Neşe Gülden Sözdinler Yusuf Ziya Toprak Ersin Önder Çiftçioğlu Adnan Bali Feray Demir Hakan Aran Adnan Bali Feray Demir Yusuf Ziya Toprak (Alternate member) Credit Committee Credit Committee Credit Committee Credit Committee Credit Committee Fazlı Bulut (Alternate member) Turkish Republic of Northern Cyprus Internal Systems Committee Yusuf Ziya Toprak Turkish Republic of Northern Cyprus Internal Systems Committee Ersin Önder Çiftçioğlu Credit Revision Committee Adnan Bali Credit Revision Committee Yusuf Ziya Toprak Credit Revision Committee Feray Demir Credit Revision Committee Ersin Önder Çiftçioğlu Credit Revision Committee Sadrettin Yurtsever Corporate Social Responsibility Committee Feray Demir Corporate Social Responsibility Committee Sadrettin Yurtsever Corporate Social Responsibility Committee Fazlı Bulut Corporate Social Responsibility Committee Durmuş Öztek Corporate Social Responsibility Committee Can Yücel Corporate Social Responsibility Committee Suat E. Sözen Corporate Social Responsibility Committee Gül Meltem Atılgan Risk Committee Risk Committee Risk Committee Risk Committee Risk Committee Risk Committee Adnan Bali Yusuf Ziya Toprak Ersin Önder Çiftçioğlu Hakan Aran Ebru Özşuca Gamze Yalçın Yes No No No Yes No Yes No Yes No No No No Yes No No No No No No No No No No No No No Yes No No No No No Board member Board member Board member Not board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Board member Not board member Not board member Not board member Board member Board member Board member Board member Not board member Not board member An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 172 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 173 Names Of The Board Committees Name Of Committees Defined As "Other" In The First Column Name-Surname of Committee Members Whether Committee Chair Or Not Whether Board Member Or Not 4. BOARD OF DIRECTORS-III 4.5. Board Committees-II Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Other Risk Committee Risk Committee Risk Committee Risk Committee Risk Committee Can Yücel Sezai Sevgin Hürdoğan Irmak Süleyman H. Özcan Engin Yalçın Operational Risk Committee Yusuf Ziya Toprak Operational Risk Committee Hakan Aran Operational Risk Committee Ersin Önder Çiftçioğlu Operational Risk Committee Ozan Gürsoy Operational Risk Committee Mehmet Celayir Operational Risk Committee Sabri Gökmenler Operational Risk Committee Sezgin Lüle Operational Risk Committee Sezai Sevgin Operational Risk Committee Gürler Özkök Operational Risk Committee Süleyman H. Özcan Operational Risk Committee Engin Yalçın Operational Risk Committee Hürdoğan Irmak Operational Risk Committee Bülent Akdemir Operational Risk Committee Burcu Nasuhoğlu No No No No No Yes No No No No No No No No No No No No No Not board member Not board member Not board member Not board member Not board member Board member Board member Board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Sustainability Committee Adnan Bali Yes Board member Sustainability Committee Ersin Önder Çiftçioğlu Sustainability Committee Feray Demir Sustainability Committee Gamze Yalçın Sustainability Committee N. Burak Seyrek Sustainability Committee Ozan Gürsoy Sustainability Committee Sabri Gökmenler Sustainability Committee Sezgin Yılmaz Sustainability Committee Sezai Sevgin Sustainability Committee H. Cahit Çınar Sustainability Committee İzlem Erdem Sustainability Committee Can Yücel Sustainability Committee Suat E. Sözen Sustainability Committee Hürdoğan Irmak Sustainability Committee Neşe Gülden Sözdinler Board of Directors Operating Principles Committee Board of Directors Operating Principles Committee Board of Directors Operating Principles Committee Adnan Bali Feray Demir Durmuş Öztek No No No No No No No No No No No No No No Yes No No Board member Board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Not board member Board member Board member Board member Specify where the activities of the audit committee are presented in your annual report or website (Page number or section name in the annual report/website) Information about the activities of Audit Committee which was established within the context of the related legislation is presented in "İşbank Committees" section of the Annual Report. Specify where the activities of the corporate governance committee are presented in your annual report or website (Page number or section name in the annual report/website) İşbank Committees Specify where the activities of the nomination committee are presented in your annual report or website (Page number or section name in the annual report/website) At İşbank, functions of Nomination Committee are fulfilled by Corporate Governance Committee. Specify where the activities of the early detection of risk committee are presented in your annual report or website (Page number or section name in the annual report/website) Information about the activities of Risk Committe is presented in "İşbank Committees" section of the Annual Report. Specify where the activities of the remuneration committee are presented in your annual report or website (Page number or section name in the annual report/website) Information about the activities of Remuneration Committe which was established within the context of the related legislation is presented in "İşbank Committees" section of the Annual Report. 4.6. Financial Rights Specify where the operational and financial targets and their achievement are presented in your annual report (Page number or section name in the annual report) Reliable Financial Actor, Responsible Operations Specify the section of website where remuneration policy for executive and non-executive directors are presented. Home Page > About Us > Investor Relations > Corporate Governance > Remuneration Policy Specify where the individual remuneration for board members and senior executives are presented in your annual report (Page number or section name in the annual report) Additional Information Regarding the Related Legislation Composition of Board Committees-II Names Of The Board Committees Name of committees defined as "Other" in the first column The Percentage Of Non-executive Directors The Number Of Meetings Held In Person The Number Of Reports On Its Activities Submitted To The Board The Percentage Of Independent Directors In The Committee 25% 100% 0% 20% 100% 75% 100% 100% 80% 100% 4 online 60 8 - 12 100% 40% 3 physical, 4 online 50% 64% 64% 33% 100% 0% 18% 14% 7% 0% 2 physical, 4 online 4 physical, 7 online 2 physical 1 online - 2 12 - - 2 1 8 14 - 1 - Corporate Governance Committee Audit Committee Remuneration Committee Other Other Other Other Other Other Other Other Credit Committee Turkish Republic of Northern Cyprus Internal Systems Committee Credit Revision Committee Corporate Social Responsibility Committee Risk Committee Operational Risk Committee Sustainability Committee Board of Directors Operating Principles Committee An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 174 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 175 Sustainability Principles Compliance Framework COMPLIANCE STATUS YES NO PARTIAL IRRELEVANT EXPLANATION DEFINITION A. General Principles A1. Strategy, Policies and Targets Material environmental, social and corporate governance (ESG) issues, risks and opportunities have been determined by the partnership's Board of Directors. ESG policies (e.g. Environmental Policy, Energy Policy, Human Rights and Employee Policy etc.) have been created and disclosed to the public by the Board of Director of the corporation A1.1 A1.2 Short and long- term targets set within the scope of ESG policies were disclosed to the public. A2. Implementation/Monitoring The committees and/or units responsible for the implementation of ESG policies and the highest level officials in the partnership related to ESG issues and their duties have been identified and disclosed to the public. Activities carried out within the scope of policies by the responsible committe and/ or unit were reported to the board of directors at least once a year. A2.1 A2.2 Creates and discloses implementation and action plans aligned with ESG targets. A2.3 The ESG Key Performance Indicators (KPI) and the level of reaching these indicators on a yearly basis were disclosed to the public. A2.4 Discloses efforts for improving sustainability performance with respect to work processes or products and services. A3. Reporting A3.1 A3.2 A3.3 In the annual reports information on the sustainability performance, goals and actions of the partnership is given in an understandable accurate and adequate manner Provides information about which of the United Nationas (UN) 2030 Sustainable Development Goals its activities are related to Makes disclosures regarding the lawsuits filed and/ or conluded against the company on account of ESG issues, which are material with respect to ESG issues, which are material with respect to ESG policies and/or have material impact on operations A4. Verifications A4.1 ESG Key Performance measurements are verified by an independent third party and publicly disclosed. x x x x x x x x x x x x Home Page >About Us > Sustainability > Our Policies Home Page >About Us > Sustainability > Our Policies Global Tendencies, Risks, Opportunities and Forecasts, page 23-27 Our Business Model: İşbank Banking, page 31 Reliable Financial Actor, page 52-101 Responsible Operations, page 102-127 Good Corporate Citizen page 128-189 2022 CDP Climate Change Report, page 48-62 Home Page >About Us > Sustainability > Our Organization İşbank Committees, Sustainability Committee, page 144-148 2022 CDP Climate Change Report, page 4-8 Our Business Model: İşbank Banking, page 31 Reliable Financial Actor, page 52-101 Responsible Operations, page 102-127 Good Corporate Citizen page 128-189 2022 CDP Climate Change Report, page 48-62 2022 CDP Water Security Report, page 62-65 Key Performance Indicators, page 55,77, 89, 106, 115, 131, 185 Responsible Products and Services, page 68-70 Products and Services Contributing to a Green Economy, page 84-87 Home > About Us > Sustainability > Responsible Products and Services > Products and Services Contributing to Society Global Tendencies, Risks, Opportunities and Forecasts, page 23-27 How Do We Create Value? Sustainability at Isbank, page 31-33 Reliable Financial Actor, page 52-101 Responsible Operations, page 102-127 Good Corporate Citizen, page 128-189 Contribution to Sustainable Development Goals, page 50-51 https://www.kap.org.tr/en/Bildirim/1012970- 1031025-1038508- 1053513-1065379- 1070878-1102646 Non-Financial Data Reporting Guide and Independent Assurance Report, page 450-457 COMPLIANCE STATUS YES NO PARTIAL IRRELEVANT EXPLANATION DEFINITION B1 B2 B. Environmental Principles Discloses its policies and practices, action plans in relation to environmental management systems (known by the ISO 14001 standard) and programs Publicy discloses the limitations over the reporting scope, reporting period, reporting date, reporting conditions of the environmental reports to be prepared for providing environmental management information. B3 It’s stated in A2.1. B4 Environmental targets included in scope of performance incentive systems on the basis of stakeholders (such as members of the Board of Director, managers and employees) have been disclosed to the public. B5 How the priority environmental issues are integrated into business goals and strategies has been publicly disclosed. B6 It’s stated in A2.4 B7 B8 B9 B10 B11 B12 It has been publicly disclosed how environmental issues are managed and integrated into business objectives and strategies throughout the partnership value chain, including the operational process, including suppliers and customers including suppliers and customers. Whether relevant organizations and non- governmental organizations on the environment are involved in Periodically reports information about its environmental impacts comparatively in the light of environmental indicators; Greenhouse gas emissions Scope- 1(Direct), Scope-2 (Indirect from purchased energy), Scope-3 (Other indirect), air quality, energy management, water and wastewater management, waste management, biodiversity implications) Discloses the standards, protocols, methodology and base year detailsfor collecting and calculating its data Discloses the status of environmental indicators for the reporting year in comparison with previous years (increase or decrease) Sets and discloses its short-term and long- term targets for mitigating its environmental impacts. Also provides information about the progress achieved, if applicable, in the reporting period with respect to the targets it has set previously. B13 A strategy to combat the climate crisis has been created and the planned actions have been publicly announced. x x x x x x x x x x x x x Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Our Policies About the Report, page 6-7 Non-Financial Data Reporting Guide and Independent Assurance Report, page 450-457 2022 CDP Climate Change Report, page 10-11 How Do We Create Value? Sustainability at İşbank, page 31-33 Global Tendencies, Risks, Opportunities and Forecasts, page 23-27 Reliable Financial Actor, page 52-101 Responsible Operations, page 102-127 Good Corporate Citizen, page 128-189 2022 CDP Climate Change Report, page 35-42 Responsible Procurement, page 110-112 Home > About Us > Sustainability > Our Policies > Supplier Code of Conduct Initiatives Supported in the Field of Sustainability, Page 47-49 Corporate Memberships, page 437 Home > About Us > Sustainability > Memberships and Initiatives Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Memberships and Initiatives Reducing the negative impacts of our operations, page 104-113 Non-Financial Data Reporting Guide and Independent Assurance Report, page 450-457 Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Responsible Banking > Our Environmental Impact 2022 CDP Climate Change Report, page 69-89 Reducing the negative impacts of our operations, page 104-113 2022 CDP Climate Change Report, page 48-62 Climate Action, page 76-87 Home > About Us > Sustainability > Responsible Banking > Combating Climate Change 2022 CDP Climate Change Report, page 35-42 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 176 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 177 COMPLIANCE STATUS COMPLIANCE STATUS YES NO PARTIAL IRRELEVANT EXPLANATION DEFINITION YES NO PARTIAL IRRELEVANT EXPLANATION DEFINITION Climate Action, page 76-87 Home > About Us > Sustainability > Responsible Products and Services > Products Contributing to the Green Economy Sustainable Procurument, page 110-112 Home > About Us > Sustainability > Our Policies > Supplier Code of Conduct Reducing the negative impacts of our operations, page 104-113 Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Responsible Banking > Our Environmental Impact Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Responsible Banking > Our Environmental Impact Reducing the negative impacts of our operations, page 104-113 Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Responsible Banking > Our Environmental Impact Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Responsible Banking > Our Environmental Impact Reducing the negative impacts of our operations, page 104-113 Home > About Us > Sustainability > Responsible Banking > Our Environmental Impact Non-Financial Data Reporting Guide and Independent Assurance Report, page 450-457 2022 CDP Water Security Report, page 36-46 Programs or procedures have been established and disclosed to the public in order to prevent or minimize the potential negative impact of products and/or services on the environment. Actions have been taken to reduce greenhouse gas emissions of third parties (e.g. suppliers, subcontractors, dealers, etc.) and these actions have been disclosed to the public. The environmental benefits/benefits and cost savings of initiatives and projects aimed at reducing environmental impacts have been disclosed to the public Energy consumption (natural gas, diesel, gasoline, LPG, coal, electricity, heating, cooling, etc.) data are publicly disclosed as Scope -1 and Scope -2.) Public disclosure was made about the electricity, heat, steam and cooling produced in the reporting year. Studies on increasing the use of renewable energy and the transition to zero or low carbon electricity have been made and publicly announced. B14 B15 B16 B17 B18 B19 Renewable energy production and usage data is publicly disclosed. B20 B21 Energy efficiency projects have been carried out and the amount of energy consumption and emission reduction achieved through energy efficiency projects has been disclosed to the public. Water consumption, if any, amounts of water drawn, recycled and discharged from underground or above ground, its sources and procedures have been disclosed to the public. x x x x x x x x x B22 It has been publicly disclosed whether its operations or activities are included in any carbon pricing system (Emissions Trading System, Cap & Trade or Carbon Tax). x B23 Information on carbon credits accumulated or purchased during the reporting period has been disclosed to the public. x İşbank’s operations or activities are not included in the carbon pricing system. It is known that legal authorities are working on establishing a local carbon trading system. All national and international developments are followed closely and development opportunities are evaluated in this area İşbank aims to reduce the total Scope-1 and Scope-2 greenhouse gas emissions calculated in accordance with the International GHG Protocol by 38% by 2025, 65% by 2030, and to zero by 2035, and to carry out activities as carbon-neutral as of 2035. As of 2021, İşbank has started to use renewable energy in all of its operational points that can be supplied, and has already reached its targets for 2025 and 2030. İşbank primarily carries out focused efforts to reduce its direct and indirect emissions, and in the following periods, it will also be able to consider the purchase of carbon credits in order to zero the emissions. B24 Discloses the details if carbon pricing is applied within the Company x At this stage, there is no carbon pricing practice in our bank. On the other hand, all activities of our Bank are in a continuous development with the ESG focus, and the implementation of the carbon pricing practice will be evaluated in the following period. B25 The platforms where the partnership discloses its environmental information are publicly disclosed. x C1.1 C1.2 C1.3 C1.4 C1.5 C. Social Principles C1. Human Rights and Employee Rights Forms a Human Rights and Employee Rights Policy with a commitment to fully comply with the Universal Declaration of Human Rights, ILO Conventions which Turkey has confirmed and the legal framework and regulations governing the operation of corporate life in Turkey. Discloses the policy in question and the roles and responsibilities associated with its implementation. Incorporates equitable workforce, improvement of working standards, women’s employment and inclusion (Xt discriminating on the basis of gender, race, religion, language, marital status, ethnicity, sexual orientation, gender identity, family responsibilities, union activities, political affiliation, disabilities, social and cultural differences, etc.) in its policy concerning employee rights, while looking out for the effects of supply and value chain. Describes the measures taken throughout the value chain for the protection of groups sensitive to certain ecoXmic, environmental, social factors (low-income groups, women, etc.) or securing miXrity rights / equal opportunities. Reports developments regarding discrimination, inequality, human rights violations, forced labor and corrective practices. Explain the regulations to prevent child labor. Explains policies regarding investment in employees (training, development policies), compensation, vested benefits, right to unionize, work / life balance solutions and talent management. Determines dispute resolution processes by creating mechanisms for employee complaints and dispute resolution. It regularly explains the activities carried out to ensure employee satisfaction. Determines the dispute resolution processes by establishing mechanisms for employee complaints and resolution processes. Explains the activities to ensure employee satisfaction within the reporting period. x x x x x x x Initiatives Supported in the Field of Sustainability, page 47-49 2022 CDP Climate Change Report 2022 CDP Water Security Report Our Environmental Impact | Türkiye İş Bankası (isbank.com.tr) Home > About Us > Sustainability > Our Policies > Human Rights And Human Resources Policy Home > About Us > Sustainability > Our Policies > Human Rights And Human Resources Policy Home > About Us > Sustainability > Our Policies > Supplier Code Of Conduct Home > About Us > Sustainability > Our Policies > Gender Equality Policy Home > About Us > Sustainability > Our Policies > Supplier Code Of Conduct Sustainable Procurement, page 110-112 Financial Inclusion, page 72-75 Equal Opportunity and Diversity, page 123-127 Equal Opportunity and Diversity ve Gender Equality, page 123-127 GRI Content Index, page 458-461 Decent Work, page 114-127 Home > About Us > Investor Relations > Corporate Governance > Remuneration Policy Home > About Us > Investor Relations > Corporate Governance > Ethical Principles and Code of Conduct Compliance with Operating Principles, page 124 Home > About Us > Investor Relations > Corporate Governance > Ethical Principles and Code of Conduct Decent work, page 114-127 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 178 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 179 COMPLIANCE STATUS YES NO PARTIAL IRRELEVANT EXPLANATION DEFINITION Establishes and discloses occupational health and safety policies. C1.6 Discloses the measures taken to prevent workplace accidents and for protecting occupational health along with statistical data on accidents. C1.7 Establishes and discloses personal data protection and data security policies. x x x C1.8 Establishes and discloses a code of ethics. x C1.9 Explains the work within the scope of social investment,social responsibility, financial inclusion and access to finance. C1.10 Organizes information meetings and training programs on ESG policies and practices for employees. x x C2. Stakeholders, International Standards and Initiatives C2.1 C2.2 Establishes and discloses a customer satisfaction policy for management and resolution of customer complaints. Information about the communication with stakeholders (which stakeholder, subject and frequency) is publicly disclosed. C2.3 Explains the international reporting standards adopted in its reporting. C2.4 C2.5 D1 D2 Discloses the principles adopted regarding sustainability, international organizations, committees and principles that it is a signatory or member of. Makes improvements and conducted studies in order to to qualify for inclusion in sustainability indices of Borsa İstanbul and/or international index providers. D. Corporate Governance Principles Seeks stakeholders’ opinions while determining the measures and strategies related with sustainability. Implications on raising the awareness of sustainability and its importance through conducting social responsibility projects, awareness activities and training programs. x x x x x x x Home > About Us > Sustainability > Our Policies > Occupational Health and Safety Policy Employee Health and Safety, page 125 Human Resources Data, page 443 Home > Privacy Policy Home > About Us > Investor Relations > Corporate Governance > Personal Data Protection Policy Home > About Us > Investor Relations > Corporate Governance > Ethical Principles and Code of Conduct Contribution to Social Welfare, page 184-189 Financial Inclusion, page 72-75 Talent Management, page 126-127 Equal Opportunity and Diversity ve Gender Equality page 123-127 Human Resources data, page 443 https://www.isbank.com.tr/en/contact-us https://www.isbank.com.tr/en/contact-form https://www.isbank.com.tr/iletisim-formu-takip Client Oriented, page 65-67 Stakeholders, page 35-37 About the Report, page 6-7 Initiatives Supported in the Field of Sustainability, page 47-49 2022 CDP Climate Change Report, page 3, 18-22 Initiatives Supported in the Field of Sustainability, page 47-49 Sustainability Priorities, page 46 Initiatives Supported in the Field of Sustainability, page 47-49 How Do We Create Value? Sustainability in İşbank, page 31-33 Transparent and Ethical Management, page 130-183 2022 CDP Climate Change Report Contribution to Social Welfare, page 184-189 Dividend Distribution Policy The principles regarding the Bank’s dividend distribution are regulated in Article 58 of the Articles of Incorporation. According to this: “After deducting all general expenses from the income arising from the operations of the Bank within a year, including premiums, bonuses and similar payments to the personnel of the Bank, and funds for all kinds of depreciations, as well as necessary provisions, the net profit obtained shall partly be set aside as reserve fund and partly distributed in the order, manner, and at the rates indicated below. a) 1- 5% to legal reserve fund, 2- 5% as provision for probable future losses, 3- 10% as first extraordinary reserve fund. If the cause for the setting aside of a provision and fund for a probable future loss and/or risk no longer exists, the remainder of these accounts added to the net profit after the allocation made in subparagraph (a) shall be added to the first contingency reserve fund in section (a/3). b) An amount equal to 6% of the paid-in capital represented by Group A, B, and C shares shall be distributed to shareholders as the "first dividend" from the amount remaining after the reserves mentioned in paragraph (a) above are set aside from the net profit. Should the profit realized in any year be insufficient to provide for the first dividend of 6% referred to above, the balance shall be allocated and distributed from the extraordinary reserve fund. However, the amount allocated from the reserve fund in this way shall constitute a debt that must be allocated from the net profit of subsequent years. c) After the reserved fund referred to in paragraph (a) and the first dividend referred to in paragraph (b) above, the balance shall be distributed as follows: 10% to the founder shares (limited to the portion of TL 250 thousand –two hundred and fifty thousand– of paid-in capital) 20% to the employees of the Bank, and 10% shall be set aside as the second extraordinary reserve fund. d) After the amounts set forth in paragraphs (a), (b) and (c) have been set aside and distributed, the balance remaining by considering paragraph (e) shall be distributed to the shareholders as a “second dividend” in the manner stated below. 1- The net total of the dividends to be distributed to the holders of Group A shares as first and second dividends under paragraphs (b) and (d) may not exceed 60% of the capital paid up by them, the net total of the dividends to be distributed to holders of Group B shares may not exceed 30% of the capital paid up by them, and the net total of the dividends to be distributed to holders of Group C shares may not exceed 25% of the capital paid up by them. 2- After the amounts set forth in paragraphs (a), (b) and (c) have been set aside and distributed, should the balance be insufficient to distribute the second dividend in the manner specified by the paragraph (1) above, total dividends to be paid to the three Groups of shares shall be calculated separately in the distribution of the second dividend by considering twice the amount of the paid-in capital represented by Group A shares, the full amount of the paid-in capital represented by Group B shares, and 5/6 (five- sixths) of the amount of paid-in capital represented by Group C shares. e) The amount that needs to be added to the statutory reserve under paragraph 2/c of Article 519 of the Turkish Commercial Code shall be set aside. f) The General Assembly shall, upon proposal of the Board of Directors, decide whether the balance remaining after the distribution and allocation of the net profit as specified above shall be transferred to the extraordinary reserve funds, carried over to the following year, or up to 80% of such balance be distributed in net to the shareholders by dividing the same by the number of shares and the remaining balance be transferred to the extraordinary reserve funds or carried over to the following year. In the calculation of the dividends to be paid to all three Groups of shares; Group A shares will be considered as 40 times the share quantity, Group B shares will be considered as 1.5 times of the share quantity, and Group C shares will be considered as the same quantity due to the reason that 20 shares each with a nominal value of TL 500 (this amount is related to the period prior to the Law No. 5083 regarding the Monetary Unit of the Turkish Republic on which the rate of change has not been applied) have been changed with shares with a nominal value of 1 Kurus." The dividends are distributed within the scope of the related legislation in a manner and at a time determined by the General Assembly. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 180 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 181 Summary Report of the Board of Directors Esteemed Shareholders, Welcome to our Bank’s 99th Ordinary General Assembly Meeting. As we present the Board of Directors' Report, the Balance Sheet and the Income Statement covering the results of our activities in fiscal year 2022 for your review and approval, we respectfully greet all of you here today. In 2022, the risks and uncertainties caused by the Russia-Ukraine war, as well as the commercial and financial sanctions imposed on Russia, have been the main risk factors for the world economy, especially for European countries. While disruptions in supply chains for basic needs such as energy and food due to the war increased global inflationary pressures, the rapid tightening of monetary policies across the world caused economic activity to lose momentum. Ordinary General Assembly Meeting: As per the resolution of the Board of Directors of İşbank, the Ordinary General Assembly Meeting of the Bank will be held on Thursday, 30 March 2023, at 14:00 at the İş Towers Head Office Auditorium, 34330 Levent/İstanbul. In 2022, the Turkish economy grew by 5.6% on the back of high consumption expenditures and moderate contributions from exports and investments. On the other hand, the rise in global commodity prices, particularly energy, caused the current account deficit to widen and inflationary pressures to increase despite the rapid recovery in tourism revenues. Agenda of the Ordinary General Assembly 1. Opening Ceremony, establishment of the Council of Chairmanship While the banking sector continued to support economic activity in 2022, it maintained its strong outlook. The volume of Turkish Lira loans, including loans to the financial sector, increased by 77.5% on an annual basis, reaching TL 4,749.6 billion as of December 30, 2022. In the same period, the volume of FX loans fell to USD 125.9 billion with a decrease of 15.7%. Accordingly, the total loan volume expanded at a rate of 52.8% as of December 30, 2022 and reached TL 7,100 billion. According to the exchange rate adjusted data, the total loan volume expanded by 38% in this period. As of December 30, 2022, according to the Weekly Bulletin data published by the Banking Regulation and Supervision Agency, the volume of TL deposits including deposits of banks increased by 145.7% and reached TL 4,468 billion compared to the same period in 2021 with the support of the FX-protected deposit accounts. The volume of FX deposits in USD terms decreased by 12.5% in this period and was realized as USD 208.4 billion. Thus, as of December 30, 2022, the total deposit volume increased by 68.4% compared to the same period of the previous year and reached TL 8,360 billion. According to the exchange rate adjusted data, the annual increase in total deposit volume was 45.4%. As of 31.12.2022, compared to the end of the previous year, ੵ The amount of our loans reached TL 759.3 billion with a 53.9% increase, ੵ The amount of our deposits reached TL 931.1 billion with a 56.3% increase, ੵ Our total assets reached TL 1,408.3 billion with a 52.0% increase, ੵ Our equity reached TL 191.4 billion with a 120.4% increase .Thanks to its stable growth policy and effective risk management practices in loan allocation processes, our Bank achieved an NPL ratio of 3.0% at the end of 2022. At the same time, İşbank maintained its leadership among private banks in terms of the total amount of deposits in 2022 and continued to make use of non-deposit funding sources in domestic and foreign markets in order to diversify funding sources and extend the maturity structure of its liabilities by taking funding costs into consideration. The Bank preserved its strong capital structure throughout the year, with a capital adequacy ratio of 24.4%, well above the regulatory limit, as of year-end 2022. The Bank achieved a net profit of TL 61.5 billion in 2022 with a return on average equity and return on average assets of 46.8% and 5.3%, respectively. Our Esteemed Shareholders, We hereby submit our Annual Report, Balance Sheet and Income Statement pertaining to our activities during 2022 for your review and approval. We would like to take this opportunity to express our gratitude to our stakeholders for their steadfast trust in our Bank, to the institutions of the Republic of Türkiye for their support, and to our employees for their dedicated efforts. We extend our respects to you, our valued shareholders, for having honored this General Meeting with your attendance. İŞBANK BOARD OF DIRECTORS 2. Discussion of 2022 Annual Report of the Board of Directors, Financial Statements, the Independent Auditors' Reports and ratification of the Annual Report of the Board of Directors and Financial Statements 3. Discharge of the Board of Directors from their responsibilities for the transactions and accounts of the year 2022 4. Determination of the method and date of allotment of dividends which is permitted to be distributed in cash by the BRSA based on our Bank's application. 5. Determination of the allowance for the members of the Board of Directors 6. Election of the Members of the Board of Directors whose term of office has expired and the determination of their term of office 7. Selection of the Independent Audit Company 8. Permitting the Members of the Board of Directors as per articles 395 and 396 of the Turkish Commercial Code 9. Amendment of the article 5 of the Articles of Incorporation regarding increase of the maximum level of registered capital and the extension of the permission period of the maximum level of registered capital 10. Submitting the amount of donations and aids made regarding earthquake to the information and approval of the shareholders 11. Presenting information to the shareholders about the donations 12. Presenting information to the shareholders on the subjects held in Capital Markets Board Corporate Governance Communique principle no. 1.3.6 13. Presenting information about the buyback transactions executed in 2023 as per the resolution of the Board of Directors 14. Presenting information about our bank's decarbonization plan An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 182 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 183 Profit Distribution Proposal As a result of our activities in 2022, our Bank's net profit for the period was TL 61,537,880,372.57, and the prior years’ profit was TL 165,466,370.28 within the framework of various legislation. In addition, as a portion of the net profit for the reporting year is distributed to the Bank's employees pursuant to Article 58 of the Bank's Articles of Incorporation, we have an amount of TL 3,093,000,000.00 set aside within 2022 for dividends to be distributed to the Bank's employees within the framework of the TMS 19 - Employee Benefits accounting standard by taking into consideration our dividend distribution policy, prior practices and the applicable legislation. Accordingly, it is proposed as follows: ੵ the accounting profit making the basis of the distribution be determined as TL 61,703,346,742.85 by adding the prior years' profit of TL 165,466,370.28 to the net profit for the period, ੵ out of the accounting profit, the portion in the amount of TL 204,246,783.98 arising from the earnings on disposal of real estates and shares be transferred to relevant reserves to be maintained in a specific fund account and for conversion into capital when needed; and the portion of TL 272,095,016.00 be set aside as a venture capital fund to be allocated to venture capital investment trusts and funds, so as to include the allocation of TL 988,973.00 venture capital investment related to R&D discount, and be subject to deduction in the corporate tax base in accordance with the relevant legislation, ੵ the portion in the amount of TL 3,093,000,000.00, which was set aside for dividends to be distributed to the Bank's employees, be added to the distributable amount, ੵ based on the distributable amount so formed, 10% thereof that needs to be set aside as first extraordinary reserves be increased within the frame of the provisions of the Banking Law and the Turkish Commercial Code and a total of TL 25,926,568,681.74 be set aside as first extraordinary reserves, and the distributable amount of TL 64,320,004,942.87, which includes the first extraordinary reserves mentioned above, be distributed as follows pursuant to the provisions of applicable legislation and Article 58 of the Articles of Incorporation of İşbank, ੵ the remaining amount of TL 1,009,596,232.20 after distribution be set aside as extraordinary reserves. PROFIT FOR THE PERIOD PRIOR YEARS' PROFIT NET ACCOUNTING PROFIT NON-DISTRIBUTABLE PROFIT ADDED TO DISTRIBUTION DISTRIBUTABLE PROFIT I. FIRST DISTRIBUTION (Articles of Incorporation Art. 58/a-b) - 5% Legal Reserves - First Extraordinary Reserves - First Dividends To Group A Shares To Group B Shares To Group C Shares II. SECOND DISTRIBUTION (Articles of Incorporation Art. 58/c-d-e) - To Founder Shares - 20% to Bank Employees - 10% Legal Reserves - 10% Second Extraordinary Reserves - Second Dividends To Group A Shares To Group B Shares To Group C Shares III. THIRD DISTRIBUTION (Articles of Incorporation Art. 58/f) - Third Dividends To Group A Shares To Group B Shares To Group C Shares - 10% Legal Reserves 3,216,000,247.14 45,043,201,118.96 60.00 1,740.00 599,998,200.00 38,652.01 3,092,160,715.35 509,220,116.74 1,546,080,357.68 540.00 6,960.00 1,899,994,300.00 107,686.99 117,109.60 6,730,416,751.40 673,064,154.80 TL 61,537,880,372.57 165,466,370.28 61,703,346,742.85 - 476,341,799.98 3,093,000,000.00 64,320,004,942.87 48,859,201,366.10 15,460,803,576.77 7,047,501,641.78 8,413,301,934.99 7,403,705,702.79 1,009,596,232.20 Provided that the above proposal is accepted by the General Assembly, dividend payout to the Bank's shareholders will commence on 03.04.2023, and gross profit shares shown in the table below, will be distributed to each share group with a nominal value of TL 1 and to each founder share: Type of Share Gross TL To Group A shares with a nominal value of TL 1 108.2869900 To Group B shares with a nominal value of TL 1 To Group C shares with a nominal value of TL 1 To each Founder Share 4.3382621 0.9230437 15.7249837 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 184 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 185 Contribution to Social Welfare İşbank aims to use the added value it creates for the benefit of society via social responsibility activities that consider community needs and have a long-term and lasting impact; accordingly, the Bank has been implementing projects in the fields of education and environment, as well as culture and arts since its foundation. The Bank’s social investment programs are carried out under the Corporate Social Responsibility Committee reporting to the Board of Directors. Effective stakeholder participation in social responsibility projects is ensured through collaborations with different stakeholder groups, particularly non-governmental organizations. Related Capital Elements Material Topics ᲁContribution to social welfare Risks Loss of reputation Reduced brand awareness among younger generations Opportunities Being a trusted bank in the eyes of stakeholders and society with projects developed in line with society's needs Projects aligned with the UN Sustainable Development Goals Direct communication with customers thanks to increased financial literacy Contribution to corporate reputation Contributed SDG’s Key Performance Indicators 2018 2019 2020 2021 2022 Contribution to equal opportunities in education: 81 Students from 81 Cities Including graduates, the number of students is close to 700. With 54 students who graduated in 2019, the number of students is nearly 750. In 2020, the total number of graduates reached 231. In 2021, the total number of graduates reached 296. In 2022, the total number of graduates reached 361. With the 11th campaign, a total of 13 million books have been donated to primary school students to date. With the 12th campaign, a total of 14 million books have been donated to primary school students to date. The 13th campaign was transferred to digital format within the framework of COVID-19 measures and 4 electronic books were donated. The 14th campaign was held as a hybrid campaign within the framework of COVID-19 measures. In addition to the 3 electronic books donated, 1 book was also printed in a limited number. Within the scope of the 15th campaign, 500,000 printed copies of the book “The Adventures of Sherlock Holmes” were presented to students, and the book “The Secret Garden” was also presented to children digitally via the kumbaradergisi.com portal. More than 52 thousand books were sent to 2,844 schools and libraries. More than 58 thousand books were sent to 3,116 schools and libraries. Due to COVID-19, more than 22 thousand books were sent to more than 1,200 schools and libraries. The number of books sent to schools reached 31,615 books which were distributed to 1,734 schools as of year- end 2021. The number of books sent to schools reached 56,000 books which were distributed to 2,167 schools as of year-end 2022. Supporting the upbringing of generations who read and question, and supporting the cognitive and cultural development of children: The number of books donated within the “Show Your Report Card, Get Your Book” Campaign Supporting the upbringing of generations who read and question, and supporting the cognitive and cultural development of children: Number of books donated to schools and libraries Targets 2022 Targets Realization in 2022 Realization Targets for 2023 and Beyond Continuing the campaign in a hybrid model in Show Your Report Card, Get Your Book, within the COVID-19 measures Continuing the "81 Students from 81 Cities" project designed for Darüşşafaka students and undergraduate scholarship recipients For the first time, printed books were sent to all Bank branches and museums in Türkiye and the TRNC. The total number of graduates reached 361. ✓⃝ ✓⃝ Our campaign will continue both in print and online. The project is still ongoing. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 186 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 187 Projects in the Education Field School Sports Chess Tournament İşbank understands the importance of education in achieving and preserving social development and carries out inclusive long-term projects in the field of education. The Bank's purpose is to contribute to the education of new generations who embrace the principles of Atatürk and will move our nation up among the ranks of modern societies. Chess İşbank contributes to chess education to make it a popular and easily accessible sport. The Bank became the main sponsor of the Turkish Chess Federation (TCF) in 2005 to help transform chess into a popular sport across the country. İşbank Chess Classes Chess classes are set up in primary and secondary schools to encourage children to play chess, draw the attention of teachers and parents to this sport and eliminate the lack of equipment in schools with limited resources. As of 2022 , the total number of chess classes opened in schools reached 30,000. The Northern Cyprus Chess Federation In addition to being the main sponsor of TSF, İşbank has also been a sponsor of the Northern Cyprus Chess Federation since 2013. After the sponsorship, chess started to take place as a club activity once a week in primary schools in the Turkish Republic of Northern Cyprus (TRNC). All schools in the TRNC have a chess class. Türkiye Junior and Stars Chess Championship The “Turkish Junior and Junior Chess Championships” held in Antalya every year in January were held in Antalya between January 22 and 29. In 2022 Türkiye Junior and Junior Chess Championships, 1,410 for the age group of 7-12, 13-18 for the Turkish Junior Chess Championship A total of 2,034 athletes, 624 of whom were in the age range, were registered. Athletes who ranked in every age category were entitled to represent Türkiye in international tournaments and to enter the National Team Pool. School Sports Chess Local Competitions were held between November 4, 2021 and March 4, 2022, and Group Competitions were held between April 18-22, 2022. The final of the 2022 School Sports Chess Türkiye Tournament was held at the Sivas Taha Akgül Indoor Sports Hall between April 25-29, 2022. 81 Students from 81 Cities With the mission of "equal opportunity in education", Darüşşafaka offers children who have lost their mother and/or father and who have insufficient financial means a quality education under modern conditions from fifth grade to the last year of high school with full scholarship and boarding. With the "81 Students from 81 Cities" project initiated in the 2008-2009 academic year in cooperation with Darüşşafaka, İşbank implemented one of the most comprehensive and long-term projects in the field of education in the country. The education expenses of all students included in the program within the scope of the project are covered by İşbank. Within the scope of the project, at the end of the 2020-2021 academic year, 65 students graduated from the school in this 13th term, and the total number of graduates reached 296. In 2022, the total number of graduates reached 361. İşbank continues to support students who graduated from Darüşşafaka and passed the university entrance exam under the 81 Students from 81 Cities Project. In addition, within the scope of Koç University's "Anadolu Scholarship Holders" program, the education expenses of a certain number of students who graduate from Darüşşafaka each year are covered by İşbank. The total number of students, including the graduates, is approximately 750. Show Your Report Card, Get Your Book "Show Your Report Card, Get Your Book", one of the biggest book campaigns in Türkiye carried out to date, was launched by İşbank at the end of the 2007-2008 academic year. The campaign was intended to support the development of children's cognitive and cultural abilities, support the bringing up of a generation who reads and questions, and contribute to cordial communication between İşbank and children at an early age. Turkish Chess Federation Main Sponsorship Following the Turkish Chess Federation Main Sponsorship of İşbank; Number of licensed athletes rose from 30,000 to 1,200,000 Number of chess trainers rose from 2 ,000 to 87,156 Number of chess clubs rose from 600 to 2 ,205 Athletes with titles rose from 6 to 227 Chess tournaments rose from 400 to 13,550 35 world championships, 37 world second place awards, 41 world third place awards, 84 European championships, 79 European second place awards, and 68 European third place awards have been won so far. Total number of medals won 344 At the end of the 2021-2022 academic year, within the scope of the 15th campaign, printed copies of the book “The Adventures of Sherlock Holmes” were presented to students, and the book “The Secret Garden” was also presented to children digitally via the kumbaradergisi. com portal. The digital books were enriched with illustrations and animations. The books were sent to all Bank branches and museums in Türkiye and the TRNC. In addition, a limited number of books were printed in the Braille alphabet and sent to schools providing education for the visually impaired. For children in regional boarding schools, affection houses, closed youth prisons and juvenile reformatories, a selection of the works published by İş Bankası Kültür Yaayınları and other children's books were provided within the scope of the campaign. Book Donation to Schools and Libraries As part of our social responsibility efforts in the field of contribution to education, books published by İşbank’s Cultural Publications are sent to schools and public libraries throughout Türkiye. In 2022, 56 thousand books were delivered to 2,167 schools and libraries. Kumbara Magazine The magazines "Kumbara" and "Mini Kumbara", which are prepared with two separate types of content for 3-6 and 7-14 age groups to provide high-quality, instructional and entertaining content to children, are published digitally. The interface of Kumbara Magazine, the main channel of the Show Your Report Card, Get Your Book campaign, has recently been updated, and the content frequency has been increased. The magazine provides children with plenty of entertaining and instructive content in areas such as science, life, chess, culture and art. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 188 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 189 Golden Youth Award Every year since 1971, students who are successful in the university entrance exam are rewarded with the "Golden Youth" award by İşbank. The number of students who have been awarded so far has exceeded 3,700. Artificial Intelligence Application and Research Center The "Artificial Intelligence Application and Research Center" was established in cooperation with İşbank and Koç University in order to contribute to the scientific and academic activities of our country and to carry out advanced studies in the field of artificial intelligence, which is of great importance worldwide. In the Artificial Intelligence Center established under the roof of Koç University Faculty of Engineering, Koç University faculty members train experts for industry and academia, as well as work to solve the problems of the business world. Infectious Diseases Application and Research Center During the COVID-19 pandemic, which affected the world and our country, İşbank and Koç University entered into an important cooperation and pioneered the establishment of the "Infectious Diseases Application and Research Center" in order to contribute to the scientific and academic activities of our country in the field of public health. Established within Koç University with the support of İşbank, the center is intended to contribute to the scientific activities of our country in the field of public health, conduct research on infectious diseases, provide diagnosis and treatment solutions for diseases and develop prevention methods. The center, which undertakes coordinated projects among the Faculty of Medicine, Engineering, Science, Economics and Administrative Sciences and Humanities Faculties within Koç University, carries out its activities at the Koç University Hospital in Topkapı. Projects in the Environmental Field İşbank develops various projects in cooperation with non-governmental organizations to create a better world to live in, draw attention to environmental problems associated with deforestation, and ensure the development of environmental awareness in society, especially among children. The World is Ours, The Future is Ours İşbank carries out various projects under the theme “The World is Ours, The Future is Ours” with its efforts in the field of sustainability, which is one of its strategic priorities. In this context, the Bank sponsored the Marmara Sea 2022 Symposium, organized for the 3rd time by the Turkish Marine Research Foundation and the documentary Bir Umut Marmara (Marmara, A Hope) prepared by Savaş Karakaş to create and raise public awareness and produce solutions against mucilage and its impacts; it purchased an unmanned underwater glider (Sea Explorer), which will be used for the first time in Türkiye, to support the marine studies of the entire academia and scientific world under the leadership of METU Institute of Marine Sciences. Nature Education Programs TEMA Foundation’s Nature Education Programs are supported with the revenues obtained from the İş Asset Management TEMA Variable Fund - Türkiye’s first environmental fund offered by İşbank and its subsidiary İş Portföy. "Nature Education Programs", which are defined as "Mini TEMA" for preschool children and "Junior TEMA" for elementary school-age children, are ecological literacy trainings prepared by the TEMA Foundation for children to spend time in nature, and observe and discover nature by feeling, touching, smelling and hearing. A total of 455,188 children were reached, 189,195 children within the scope of the Mini TEMA Nature Education Program and 265,993 children within the scope of the Junior TEMA Nature Education Program, which were launched in the 2019-2020 Academic Year and have continued with educational activities in schools for three academic years. Tema Foundation Collaboration Based on an agreement entered into with the Tema Foundation, the Tema Foundation undertakes to plant one sapling for every 100 kg of paper donated by İşbank. Within this scope, a total of 341,532✓ kg of paper was donated for the period March 2020 - August 2022, and 3,415✓ saplings were planted during this period. Projects in the Culture and Art Field İşbank makes contributions to enrich the country's cultural and artistic life and to bring works from the world’s cultural and creative scene to the country. In addition, the Bank supports projects aimed at unearthing the country's archaeological heritage, introducing it to new generations, and preserving it for the future. İş Kültür Yayınları Quality publishing, contribution to the development of the Turkish language and helping children develop the habit of reading at an early age are the main principles of İşbank Cultural Publications. Within this context, more than 19 million books were presented to readers in 2022. İş Sanat İş Sanat conducts long-term, broad-reaching, and sustainable activities on behalf of İşbank in cultural fields, particularly art, museology, archaeology, and history, in order to support our country's cultural development and to enrich the accumulation of knowledge in culture and art by offering opportunities for the public to interact with art. Performing Arts In 2022, İş Sanat continued its activities in the field of performing arts with a hybrid approach using physical and digital platforms. Many events featuring local and international artists from various branches of the performing arts, such as classical music concerts, local projects, story and poetry recitals, and theater plays, were presented to audiences at different venues, particularly at İş Towers Hall. Events were organized outdoors in Istanbul, Ankara and Izmir with "Friday After Work”, in Bodrum Zai with “Wednesday Stage”, in various ancient cities with “Ancient Stage”, and on the YouTube channel. Art Galleries Beril Anılanmert, Mahmut Celayir, and Yalçın Gökçebağ exhibitions were organized at Kibele Art Gallery in the 2021-2022 season. The 2022-2023 season opened with Mustafa Pilevneli’s exhibition “60 Years in Blues” and continues with Saim Bugay’s exhibition “Heykelin Sözü”. In the 2021-2022 season, Soner Genç, Habip Aydoğdu, and Nevhiz Tanyeli exhibitions were organized at the Ankara Art Gallery. Beril Anılanmert’s “Seyir Defteri” exhibition opened the 2022-2023 gallery season. Contributions in the Field of Archaeology Archaeological studies are supported to unearth and preserve Türkiye’s rich archaeological heritage and to shed light on the history of civilization through scientific studies. As of 2022, the archaeological activities supported are presented below. ੵ Zeugma Ancient City - House of Muses in Nizip - Gaziantep ੵ Patara Ancient City in Kaş - Antalya ੵ Teos Ancient City in Seferihisar - Izmir ੵ Nysa Ancient City in Sultanhisar - Aydın ੵ Stratonikeia Ancient City in Yatağan - Muğla, and ੵ Yesemek Hittite Statue Workshop and Survey Research in İslahiye - Nurdağı Also in 2022, in archaeological publications, the book “Nysa: The City with Two Sides” was prepared under the editorship of excavation head Assoc. Prof. Serdar Hakan Öztaner. Activities such as podcasts, videos, interviews, etc. are carried out to strengthen cultural heritage awareness in our country. Museology and Institutional History Studies İşbank Museum (Eminönü, Istanbul) Since opening its doors in November 2007, İşbank Museum has been telling and presenting the long-established corporate history of the Bank as well as the economic development of Türkiye through banking equipment, documents, communication tools, photographs, advertising- promotional materials and films. The number of visitors in 2022 reached 304,913, while the total number of visitors since the opening of the Museum reached 2,165,558. The Museum also continues to host its visitors with temporary exhibitions. ੵ The İstiklal Exhibition, which was originally opened within İşbank Museum in 2019, was expanded with İzmir-specific additions, and “Büyük Zaferin 100. Yılına Doğru İstiklal Sergisi(İstiklal Exhibition Towards the 100th Anniversary of the Great Victory)” re-opened for visitors at İzmir Kültürpark Atlas Pavilion on August 30, 2021. The exhibition remained open until September 9, 2022, the 100th anniversary of the liberation of Izmir, and was visited by 111,112 people. ੵ On October 28, 2021, the exhibition titled "Bir Asrın Ardından / Cepheler, İnsanlar ve Büyük Zafer" (After a Century / Fronts, People, and the Great Victory) was opened at the museum. The exhibition was visited by 328,575 people from its opening date until the end of 2022. Workshops for schools, which were suspended due to the pandemic, were resumed in 2022. In 2022, 5,868 students were hosted in workshops organized under different topics. İşbank Museum of Economic Independence (Ulus, Ankara) İşbank transformed its historical building in Ulus, Ankara, which had served for many years as the Bank's third Head Office building, into a museum in order to share with the public its experience, which is of great importance in terms of national economic history. The historical Ulus building, one of the capital's landmarks, was opened to visitors in 2019 as the "İşbank Museum of Economic Independence" to host the documents and memories of the country's economic independence and development process. The number of visitors reached 87,620 in 2022, while the total number of visitors reached 193,388. 6,036 students participated in the workshops. İşbank Painting and Sculpture Museum (Beyoğlu, Istanbul) The restoration and construction works that began in 2020 to transform the historic building in Beyoğlu into a museum continued in 2022. The preparatory work of the Museum, which is planned to be opened to visitors in the autumn of 2023, is being carried out in cooperation with the founding curator Prof. Dr. Gül İrepoğlu, plastic arts consultant Prof. Rahmi Aksungur, and museological consultant Burçak Madran. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 190 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 191 Independent Auditor’s Report To the General Assembly of Türkiye İş Bankası Anonim Şirketi: Audit of Unconsolidated Financial Statements Qualified Opinion We have audited the accompanying unconsolidated financial statements of Türkiye İş Bankası A.Ş (the Bank), which comprise the statement of balance sheet as at December 31, 2022, and the unconsolidated statement of income, unconsolidated statement of profit or loss and other comprehensive income, unconsolidated statement of changes in shareholders’ equity, unconsolidated statement of cash flows and a summary of significant accounting policies and other explanatory notes to the unconsolidated financial statements. In our opinion, except for the effects of the matter on the unconsolidated financial statements described in the Basis of for Qualified Opinion paragraph, the accompanying unconsolidated financial statements present fairly, in all material respects, the unconsolidated financial position of Türkiye İş Bankası A.Ş. as at December 31, 2022 and unconsolidated financial performance and unconsolidated its cash flows for the year then ended in accordance with the Banking Regulation and Supervision Agency (“BRSA”) Accounting and Financial Reporting Legislation which includes “Regulation on Accounting Applications for Banks and Safeguarding of Documents” published in the Official Gazette no.26333 dated 1 November 2006, and other regulations on accounting records of Banks published by Banking Regulation and Supervision Agency and circulars and interpretations published by BRSA and Turkish Financial Reporting Standards (“TFRS”) for those matters not regulated by the aforementioned regulations. Basis of Qualified Opinion As explained in Section Five Part II-i.4.5 and IV.f, the accompanying unconsolidated financial statements as at December 31, 2022 include a free provision at an amount of TL 8,475,000 thousands of which TL 4,075,000 thousands was provided in prior years and TL 4,400,000 thousands provided in the current period by the Bank management for the possible effects of the negative circumstances which may arise from the possible changes in the economy and market conditions which does not meet the recognition criteria of “Turkish Accounting Standard” (TAS) 37 “Provisions, Contingent Liabilities and Contingent Assets”. Our audit was conducted in accordance with “Regulation on independent audit of the Banks” published in the Official Gazette no.29314 dated April 2, 2015 by BRSA (BRSA Independent Audit Regulation) and Independent Auditing Standards (“ISA”) which are the part of Turkish Auditing Standards issued by the Public Oversight Accounting and Auditing Standards Authority (“POA”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with of Code of Ethics for Independent Auditors (Code of Ethics) published by POA and have fulfilled our other responsibilities in accordance with the code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the unconsolidated financial statements of the current period. Key audit matters were addressed in the context of our audit of the unconsolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion section we have determined the matters described below to be the key audit matters to be communicated in our report. Türkiye İş Bankası Anonim Şirketi Unconsolidated Financial Statements As at and For the Year Ended December 31, 2022 With Independent Auditor’s Report Thereon This report includes “Independent Auditor’s Report” comprising 6 pages and; "Unconsolidated Financial Statements and Related Disclosures and Footnotes” comprising 119 pages. (Convenience Translation of Unconsolidated Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish) An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 192 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 193 Independent Auditor’s Report Independent Auditor’s Report Key Audit Matter How the Key Audit Matter is addressed in our audit Pension Fund Obligations Financial impact of TFRS 9 “Financial Instruments” standard and impairment on financial assets and related important disclosures As presented in Section III disclosure VIII, the Bank recognizes expected credit losses of financial assets in accordance with TFRS 9 Financial Instruments standard. We considered impairment of financial assets as a key audit matter since: ੵ Amount of on and off-balance sheet items that are subject to expected credit loss calculation is material to the financial statements. ੵ There are complex and comprehensive requirements of TFRS 9. ੵ The classification of the financial assets is based on the Bank’s business model and characteristics of the contractual cash flows in accordance with TFRS 9 and the Bank uses significant judgment on the assessment of the business model and identification of the complex contractual cash flow characteristics of financial instruments. ੵ Policies implemented by the Bank management include compliance risk to the regulations and other practices. ੵ Processes of TFRS 9 are advanced and complex. ੵ Judgements and estimates used in expected credit loss, complex and comprehensive. ੵ Disclosure requirements of TFRS 9 are comprehensive and complex. Our audit procedures included among others include: ੵ Evaluating the appropriateness of accounting policies as to the requirements of TFRS 9, Bank’s past experience, local and global practices. ੵ Reviewing and testing of processes which are used to calculate expected credit losses by involving our Information technology and process audit specialists. ੵ Evaluation of the reasonableness and appropriateness of key judgments and estimates determined by management and the methods, judgments, and data sources used in calculating expected loss, taking into account the standard requirements, industry and global practices. ੵ Reviewing the appropriateness of criteria in order to identify the financial assets having solely payments of principal and interest and checking the compliance to the Bank’s Business model. ੵ Evaluating the alignment of the significant increase in credit risk determined during the calculation of expected credit losses, default definition, restructuring definition, probability of default, loss given default, exposure at default and macro-economic variables that are determined by the financial risk management experts with the Bank’s past performance, regulations, and other processes that has forward looking estimations. ੵ Assessing the completeness and the accuracy of the data used for expected credit loss calculation. ੵ Testing the mathematical accuracy of expected credit loss calculation on sample basis. ੵ Evaluating the judgments and estimates used for the individually assessed financial assets. ੵ Evaluating the necessity and accuracy of the updates made or required updates after the modeling process ੵ Auditing of TFRS 9 disclosures. It has been addressed whether there have been any significant changes in regulations governing pension liabilities, employee benefits plan during the period, that could lead to adjust the valuation of employee benefits. Support from actuarial auditor of our firm, has been taken to assess the appropriateness of the actuarial assumptions and calculations performed by the external actuary. We further focused on the accuracy and adequacy of the Bank’s provision provided for the deficit and also disclosures on key assumptions related to pension fund deficit. Employees of the Bank are members of “Türkiye İş Bankası A.Ş. Mensupları Emekli Sandığı Vakfı”, (“the Fund”), which is established in accordance with the temporary Article 20 of the Social Security Act No. 506 and related regulations. The Fund is a separate legal entity and foundation recognized by an official decree, providing all qualified employees with pension and post-retirement benefits. As disclosed in the “Section Three Note XVII” to the financial statements, Banks will transfer their pension fund to the Social Security Institution and the authority of the “Council of Ministers” on the determination of the mentioned transfer date is changed as “President” in the Decree Law No. 703 published in the Official Gazette numbered 30473 and dated July 9, 2018. According to the technical balance sheet report as of 31 December 2022 prepared considering the related articles of the Law regarding the transferrable benefit obligations for the non- transferrable social benefits and payments which are included in the articles of association, the Fund has an actuarial and technical deficit which is fully provisioned for. The valuation of the Pension Fund liabilities requires judgment in determining appropriate assumptions such as defining the transferrable social benefits, discount rates, salary increases, demographic assumptions, inflation rate estimates and the impact of any changes in individual pension plans. The Bank Management uses Fund actuaries to assist in assessing these assumptions. Considering the subjectivity of key assumptions and estimate used in the calculations of transferrable liabilities and the effects of the potential changes in the estimates used together with the uncertainty around the transfer date and given the fact that technical interest rate is prescribed under the law, we considered this to be a key audit matter. Derivative Financial Instruments Derivative financial instruments including foreign exchange contracts, currency and interest rate swaps, currency and interest rate options, futures and other derivative financial instruments which are held for trading are initially recognized on the statement of financial position at fair value and subsequently are re-measured at their fair value. Details of related amounts are explained in “Section Five Note I.c.” and “Section Five Note II.b”. Our audit procedures included among others involve reviewing policies regarding fair value measurement accepted by the bank management fair value calculations of the selected derivative financial instruments which is carried out by valuation experts of our firm and the assessment of used estimations and the judgements and testing the assessment of operating effectiveness of the key controls in the process of fair value determination. Fair value of the derivative financial instruments is determined by selecting most convenient market data and applying valuation techniques to those particular derivative products. Derivative Financial Instruments are considered by us as a key audit matter because of the subjectivity in the estimates, assumptions and judgments used. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 194 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 195 Independent Auditor’s Report TÜRKİYE İŞ BANKASI A.Ş Responsibilities of Management and Directors for the Unconsolidated Financial Statements Bank management is responsible for the preparation and fair presentation of the unconsolidated financial statements in accordance with the BRSA Accounting and Reporting Legislation and for such internal control as management determines is necessary to enable the preparation of the financial statement that is free from material misstatement, whether due to fraud or error. In preparing the unconsolidated financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Bank’s financial reporting process. Auditor’s Responsibilities for the Audit of the Unconsolidated Financial Statements In an independent audit, the responsibilities of us as independent auditors are: Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with BRSA Independent Audit Regulation and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with BRSA Independent Audit Regulation and ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: ੵ Identify and assess the risks of material misstatement of the unconsolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. (The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.) ੵ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control. ੵ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ੵ Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the unconsolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the unconsolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with government with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the unconsolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements 1. In accordance with Article 402 paragraph 4 of the Turkish Commercial Code (“TCC”) no 6102; no significant matter has come to our attention that causes us to believe that the Bank’s bookkeeping activities and financial statements for the period January 1 – December 31, 2022, are not in compliance with the TCC and provisions of the Bank’s articles of association in relation to financial reporting. 2. In accordance with Article 402 paragraph 4 of the TCC; the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit. The engagement partner who supervised and concluded this independent auditor’s report is Fatma Ebru Yücel. THE UNCONSOLIDATED FINANCIAL REPORT AS AT AND FOR THE YEAR ENDED DECEMBER 31, 2022 Headquarters Address: İş Kuleleri, 34330, Levent/İstanbul Telephone: 0212 316 00 00 Fax: 0212 316 09 00 Web site: www.isbank.com.tr E-mail: musteri.iliskileri@isbank.com.tr The unconsolidated financial report as at and for the year ended prepared in accordance with the communiqué of “Financial Statements and Related Disclosures and Footnotes to be announced to Public by Banks” as regulated by Banking Regulation and Supervision Agency, comprises the following sections: GENERAL INFORMATION ABOUT THE BANK UNCONSOLIDATED FINANCIAL STATEMENTS EXPLANATIONS ON THE ACCOUNTING POLICIES INFORMATION ON FINANCIAL STRUCTURE AND RISK MANAGEMENT DISCLOSURES AND FOOTNOTES ON THE UNCONSOLIDATED FINANCIAL STATEMENTS OTHER EXPLANATIONS INDEPENDENT AUDITOR’S REPORT The unconsolidated financial statements for the year ended and related disclosures and footnotes in this report are prepared in accordance with the Regulation on the Procedures and Principles for Accounting Practices and Retention of Documents by Banks, “Banking Regulation and Supervision Agency” (BRSA) regulations, “Turkish Accounting Standards”, “Turkish Financial Reporting Standards” and the related statements and guidance and in compliance with the financial records of our Bank. Unless otherwise stated, the accompanying unconsolidated financial report is presented in thousands of Turkish Lira (TL) and has been subjected to independent audit and presented as the attached. Ersin Önder Çiftçioğlu Member of the Board and the Audit Committee Yusuf Ziya Toprak Deputy Chairperson of the Board of Directors and Chairperson of the Audit Committee Adnan Bali Chairperson of the Board of Directors Ali Tolga Ünal Head of Financial Management Division Gamze Yalçın Deputy Chief Executive In Charge of Financial Reporting Hakan Aran Chief Executive Officer February 6, 2023 Istanbul, Turkey Website The authorized contact person for questions on this financial report: Name – Surname/Title: Neşe Gülden Sözdinler/Head of Investor Relations and Sustainability Division Phone No Fax No E-mail : +90 212 316 16 02 : +90 212 316 08 40 : nese.sozdinler@isbank.com.tr investorrelations@isbank.com.tr : www.isbank.com.tr An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 196 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 197 Content SECTION I General Information about the Bank I. II. III. IV. V. VI. Explanations on the Establishment Date and Initial Status of the Bank, History Including the Changes in the Former Status Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Bank, any Changes in the Period, and Information on the Bank’s Risk Group Explanations on the Chairperson’s, Directors’, Auditors’, Chief Executive Officer’s and Deputy Chief Executives’ Shares, if any, and the Areas of their Responsibility sat the Bank Information on the Bank’s Qualified Shareholders Summary Information on the Bank’s Functions and Business Lines Existing or Potential, Actual or Legal Obstacles on the Transfer of Shareholder’s Equity Between the Bank and its Subsidiaries or the Reimbursement of Liabilities VII. Written Policies on Assessment of Ensuring Compliance on Market Discipline, Disclosure Obligations, Frequency and Accuracy of Related Disclosures SECTION II Unconsolidated Audit Financial Statements I. II. III. IV. V. VI. VII. Balance Sheet (Statement of Financial Position) – Assets Balance Sheet (Statement of Financial Position) – Liabilities Statement of Off-Balance Sheet Items Statement of Profit or Loss Statement of Profit or Loss and Other Comprehensive Income Statement of Changes in the Shareholders’ Equity Statement of Cash Flows VIII. Statement of Profit Distribution SECTION III Explanations on Accounting Policies I. II. III. IV. V. VI. VII. Basis of Presentation Strategy for Use of Financial Instruments and Foreign Currency Transactions Associates and Subsidiaries Forward, Option Contracts and Derivative Instruments Interest Income and Expenses Fees and Commission Income and Expenses Financial Assets VIII. Impairment of Financial Assets IX. X. XI. XII. XIII. XIV. XV. Offsetting Financial Instruments Sale and Repurchase Agreements and Securities Lending Transactions Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities Goodwill and Other Intangible Assets Tangible Assets Leasing Transactions Provisions and Contingent Liabilities XVI. Contingent Assets XVII. Liabilities Regarding Employee Benefits XVIII. Taxation XIX. XX. XXI. Borrowings Equity Shares and Issuance of Equity Securities Bank Acceptances and Bills of Guarantee XXII. Government Incentives XXIII. Segment Reporting XXIV. Other Disclosures 198 198 198 199 199 199 199 200 201 202 204 205 206 208 209 210 210 211 211 211 211 211 213 214 214 214 214 215 215 215 216 216 217 219 219 219 219 219 219 SECTION IV Information on the Financial Position and Risk Management of the Bank I. II. III. IV. V. VI. VII. Explanations on Shareholders’ Equity Explanations on Credit Risk Explanations on Currency Risk Explanations on Interest Rate Risk Explanations on Equity Shares Risk Arising from Banking Book Explanations on Liquidity Risk Management and Liquidity Coverage Ratio Explanations on Leverage Ratio VIII. Explanations on Other Price Risks IX. X. XI. Explanations on Presentation of Financial Assets and Liabilities at Fair Value Explanations on Transactions Carried Out on Behalf of Third Parties and Fiduciary Transactions Explanations on Risk Management Objectives and Policies XII. Explanations on Segment Reporting SECTION V Disclosures and Footnotes on the Unconsolidated Financial Statements I. II. III. IV. V. VI. VII. VIII. IX. Disclosures and Footnotes on Assets Disclosures and Footnotes on Liabilities Disclosures and Footnotes on Off-Balance Sheet Items Disclosures and Footnotes on Statement of Income Disclosures and Footnotes on the Statement of Changes in Shareholders’ Equity Disclosures and Footnotes on Statement of Cash Flows Disclosures and Footnotes on the Bank’s Risk Group Disclosures on the Bank’s Domestic, Foreign, Off-Shore Branches or Subsidiaries and Foreign Representative Offices Subsequent Events SECTION VI Other Explanations I. Explanations on the Bank’s Credit Ratings SECTION VII Explanations on the Independent Audit Report I. II. Explanations on the Independent Auditors’ Report Explanations and Footnotes of the Independent Auditors Report 220 227 236 238 242 243 248 249 249 251 251 267 268 281 289 291 295 296 297 298 298 299 299 299 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 198 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 199 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 SECTION ONE: GENERAL INFORMATION ABOUT THE BANK Chief Executive Officer and Deputy Chief Executives: I. Explanations on the Establishment Date and Initial Status of the Bank, History Including the Changes in the Former Status TÜRKİYE İŞ BANKASI A.Ş. (“the Bank”) was established on August 26, 1924, to operate in all kinds of banking activities and to initiate and/or participate in all kinds of financial and industrial sector undertakings when necessary. There is no change in the Bank’s status since its establishment. II. Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Bank, any Changes in the Period, and Information on the Bank’s Risk Group As of December 31, 2022, 37.31% of the Bank’s shares are owned by T. İş Bankası A.Ş. Supplementary Pension Fund (Fund), 28.09% are owned by the Republican People’s Party- CHP (Atatürk’s shares) and 34.60% are on free float (December 31, 2021: Fund 37.26%, CHP 28.09%, Free float 34.65%). III. Explanations on the Chairperson’s, Directors’, Auditors’, Chief Executive Officer’s and Deputy Chief Executives’ Shares, if any, and the Areas of their Responsibility at the Bank Chairperson and Members of the Board of Directors: Name and Surname Areas of Responsibility Adnan Bali Yusuf Ziya Toprak Hakan Aran Feray Demir Ersin Önder Çiftçioğlu Fazlı Bulut Durmuş Öztek Recep Hakan Özyıldız Mustafa Rıdvan Selçuk Ahmet Gökhan Sungur Sadrettin Yurtsever Chairperson of the Board of Directors, Remuneration Committee, Chairperson of the Risk Committee, Sustainability Committee and Chairperson of the Board of Directors Operating Principles Committee and the Member of the Credit Committee Deputy Chairperson of the Board of Directors, Chairperson of the Audit Committee, TRNC Internal Systems Committee and Operational Risk Committee, Member of the Risk Committee and Substitute Member of the Credit Committee Chief Executive Officer and Board Member, Chairperson of the Credit Committee, Human Resources Committee and Information Systems Strategy Committee, Natural Member of the Risk Committee, Chairperson of the Executive Committee Director, Member of the Credit Committee, Corporate Governance Committee, Remuneration Committee, Corporate Social Responsibility Committee, Sustainability Committee, and the Member of the Board of Directors Operating Principles Committee Director, Chairperson of the Sustainability Committee, Member of the Audit Committee and TRNC Internal Systems Committee, Member of the Risk Committee and Operational Risk Committee Director, Member of Corporate Social Responsibility Committee and Substitute Member of the Credit Committee Director, Member of Corporate Social Responsibility Committee, and the Member of the Board of Directors Operating Principles Committee Director Director Director Director, Member of Corporate Governance Committee and Corporate Social Responsibility Committee Name and Surname Areas of Responsibility Hakan Aran Nevzat Burak Seyrek Ebru Özşuca Gamze Yalçın H. Cahit Çınar Ozan Gürsoy Sezgin Yılmaz Sabri Gökmenler Sezgin Lüle Can Yücel Sezai Sevgin İzlem Erdem Suat E. Sözen O. Tufan Kurbanoğlu Mehmet Celayir Chief Executive Officer and Member of the Board of Directors, Credit Committee, Chairperson of Human Resources Committee and Information Technologies Strategic Committee Natural Member of Risk Committee, Member of Operational Risk Committee and Chairperson of the Executive Committee Corporate and Commercial Banking Marketing, Commercial Banking Sales, Transboundary Banking, Free Zone Branches, Member of the Sustainability Committee Treasury, Economic Research, Capital Markets, Member of the Risk Committee Financial Management, Financial Institutions, Investor Relations and Sustainability, Managerial Reporting and Internal Accounting, Information Technologies Strategic Committee, Member of Risk Committee and Sustainability Committee Legal Consultancy, Associates, Member of the Operational Risk Committee, Construction and Real Estate Management, Member of the Sustainability Committee Human Resources Management, Strategic and Corporate Performance Management, Agile Management, Corporate Architecture, Member of Information Technologies Strategic Committee, Operational Risk Committee and Sustainability Committee Member of Retail Banking Marketing, Sales and Products, Retail Loans, Sustainability Committee Information Technologies, Data Management, Acquisition, Artificial Intelligence, Member of Operational Risk Committee, Sustainability Committee, and Information Technologies Strategic Committee Customer Relations Coordination Responsible, Digital Banking, Customer Relations, Card Payment Ecosystems, Card Payment Operations, Card Payment Products and Member of Operational Risk Committee Retail, Commercial and Corporate Loans Allocation, Loans Monitoring, Credits Portfolio Management, Project Finance, Member of the Corporate Social Responsibility Committee, Member of the Risk Committee and Sustainability Committee Information Security, Internal Control, Corporate Compliance, Natural Member of the Risk Committee, Information Technologies Strategic Committee, Member of the Operational Risk Committee and Sustainability Committee SME and Enterprise Banking Product and Sales, Agricultural Banking Marketing, Commercial Banking Product, Member of Sustainability Committee General Secretary, Corporate Communication, Digital Banking, Member of the Corporate Social Responsibility Committee, Member of the Sustainability Committee Legal Affairs and Legal Proceedings, Loans Monitoring, Commercial and Corporate Loans and Retail Loans Proceedings Member of Banking Base Operations, Agile Management, Support Services, External Operations and Commercial Loan Operations, Operational Risk Committee At the meeting of the Board of Directors of the Bank dated 13.12.2022, it was decided to appoint Mr. Mehmet Celayir to the position of Deputy Chief Executive. Mr. Yalçın Sezen retired from his position at the Bank on 31.01.2023. The Parent Bank’s shares attributable to the Directors and members of the Audit Committee, to the CEO and the Deputy Chief Executives are of minor importance. IV. Information on the Bank’s Qualified Shareholders Name Surname/Company Shares Ownership Paid-in Capital Unpaid Capital T. İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı (İşbank Members’ Supplementary Pension Fund) Cumhuriyet Halk Partisi – Republican People’s Party - (Atatürk’s Shares) 3,731,244 %37.31 3,731,244 2,809,205 %28.09 2,809,205 V. Summary Information on the Bank’s Functions and Business Lines In line with the relevant legislation and principles stated in the Articles of Incorporation of the Bank, the Bank’s activities include operating in retail, commercial, corporate and private banking, foreign currency and money market operations, marketable securities operations, international banking services and other banking operations, as well as initiating or participating in all kinds of financial and industrial sector corporations as may be required. VI. None. VII. Existing or Potential, Actual or Legal Obstacles on the Transfer of Shareholders’ Equity between the Bank and its Subsidiaries or the Reimbursement of Liabilities VII. Written Policies on Assessment of Ensuring Compliance on Market Discipline, Disclosure Obligations, Frequency and Accuracy of the Related Disclosures The Bank has written policies on assessment of ensuring compliance on market discipline, disclosure obligations, frequency and accuracy of related disclosures. The mentioned policies which are agreed by Board of Directors’ can be obtained from the Bank’s website. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 200 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 201 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Unconsolidated Balance Sheet (Statement Of Financial Position) Unconsolidated Balance Sheet (Statement Of Financial Position SECTION TWO: UNCONSOLIDATED FINANCIAL STATEMENTS ASSETS FINANCIAL ASSETS (NET) Cash and Cash Equivalents Cash and Balances with Central Bank Banks Money Market Placements Expected Credit Loss (-) Foot notes V-I-a V-I-ç THOUSAND TL CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total 152.182.251 271.580.331 423.762.582 77.063.730 248.977.452 326.041.182 22.339.070 199.486.876 221.825.946 17.445.369 188.544.363 205.989.732 21.699.372 177.230.281 198.929.653 17.280.450 164.642.771 181.923.221 650.374 22.384.255 23.034.629 168.221 23.961.080 24.129.301 - - - 10.676 127.660 138.336 - 3.302 - 59.488 - 62.790 Financial Assets at Fair Value Through Profit or Loss V-I-b 4.703.224 9.607.720 14.310.944 2.220.989 8.351.219 10.572.208 Government Debt Securities Equity Securities Other Financial Assets Financial Assets at Fair Value Through Other Comprehensive Income Government Debt Securities Equity Securities Other Financial Assets 377.411 498.961 3.826.852 9.274.555 9.651.966 333.165 832.126 477.614 207.094 - 3.826.852 1.536.281 6.006.316 6.483.930 458.187 1.886.716 665.281 3.422.997 V-I-d 124.642.997 45.953.397 170.596.394 56.816.982 30.738.094 87.555.076 124.131.177 44.220.021 168.351.198 56.387.087 28.618.627 85.005.714 160.992 350.828 935.061 798.315 1.096.053 1.149.143 80.176 349.719 472.152 1.647.315 552.328 1.997.034 Derivative Financial Assets V-I-c-i 496.960 16.532.338 17.029.298 580.390 21.343.776 21.924.166 Derivative Financial Assets at Fair Value Through Profit or Loss Derivative Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets Measured at Amortised Cost (Net) Loans Lease Receivables Factoring Receivables Other Financial Assets Measured at Amortised Cost (Net) Government Debt Securities Other Financial Assets Expected Credit Loss (-) 496.960 16.532.338 17.029.298 580.390 21.343.776 21.924.166 - - - - - - 555.605.494 287.547.860 843.153.354 310.048.682 222.249.550 532.298.232 V-I-e V-I-ı 493.476.961 288.946.360 782.423.321 287.305.913 226.902.837 514.208.750 - - - - - - - - - - - - V-I-f 85.116.372 8.257.625 93.373.997 41.733.414 4.679.320 46.412.734 84.231.448 2.808.785 87.040.233 41.550.971 2.111.385 43.662.356 884.924 5.448.840 6.333.764 182.443 2.567.935 2.750.378 22.987.839 9.656.125 32.643.964 18.990.645 9.332.607 28.323.252 ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) V-I-n 1.594.570 6.055 1.600.625 1.594.570 6.055 1.600.625 - - - 818.101 818.101 - 9.532 9.532 - 827.633 827.633 - 69.572.029 10.287.445 79.859.474 34.921.907 4.539.438 39.461.345 Investments in Associates (Net) V-I-g 399.382 Held for Sale Discontinued Operations EQUITY INVESTMENTS Associates Accounted by using Equity Method Unconsolidated Associates Subsidiaries (Net) Unconsolidated Financial Subsidiaries 27.085.925 10.287.445 37.373.370 13.073.619 4.539.438 Unconsolidated Non-Financial Subsidiaries 42.086.722 V-I-ğ 69.172.647 10.287.445 79.460.092 34.610.826 4.539.438 39.150.264 - 399.382 - - - - - - 399.382 311.081 - - 399.382 311.081 - - - 311.081 - 311.081 - - - - 42.086.722 21.537.207 - - - - - - - - - - 17.613.057 21.537.207 - - - 17.131.994 3.506.177 - 64.954 17.196.948 8.659.882 8.256 3.514.433 1.747.103 - - - 39.978 3.006 - 8.699.860 1.750.109 - 3.506.177 8.256 3.514.433 1.747.103 3.006 1.750.109 - - - - - - - - - - - - - - - 87.529 2.470.081 2.557.610 31.917.998 7.317.254 39.235.252 7.774.473 7.158.580 14.933.053 831.510.513 576.812.155 1.408.322.668 441.121.407 485.447.617 926.569.024 Joint Ventures (Net) Joint Ventures Accounted by using Equity Method Unconsolidated Joint Ventures TANGIBLE ASSETS (Net) INTANGIBLE ASSETS (Net) Goodwill Other INVESTMENT PROPERTY (Net) CURRENT TAX ASSET DEFERRED TAX ASSET OTHER ASSETS TOTAL ASSETS V-I-h V-I-j V-I-k V-I-l V-I-m V-I-o I. 1.1 1.1.1 1.1.2 1.1.3 1.1.4 1.2 1.2.1 1.2.2 1.2.3 1.3 1.3.1 1.3.2 1.3.3 1.4 1.4.1 1.4.2 II. 2.1 2.2 2.3 2.4 2.4.1 2.4.2 2.5 III. 3.1 3.2 IV. 4.1 4.1.1 4.1.2 4.2 4.2.1 4.2.2 4.3 4.3.1 4.3.2 V. VI. 6.1 6.2 VII. VIII. IX. X. I. II. III. IV. 4.1 4.2 4.3 V. 5.1 5.2 VI. VII. 7.1 7.2 VIII. IX. X. 10.1 10.2 10.3 10.4 XI. XII. XIII. 13.1 13.2 XIV. 14.1 14.2 XV. XVI. 16.1 16.2 16.2.1 16.2.2 16.2.3 16.3 16.4 16.5 16.5.1 16.5.2 16.5.3 16.5.4 16.6 16.6.1 16.6.2 LIABILITIES DEPOSITS FUNDS BORROWED MONEY MARKETS Foot notes V-II-a V-II-c THOUSAND TL CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total 386.133.818 544.943.471 931.077.289 167.618.387 428.009.989 595.628.376 3.366.612 68.088.714 71.455.326 2.505.052 63.146.374 65.651.426 28.009.248 12.090.068 40.099.316 39.121.801 9.113.694 48.235.495 SECURITIES ISSUED (Net) V-II-ç 2.157.957 26.156.146 28.314.103 5.194.456 25.441.356 30.635.812 Bills Asset Backed Securities Bonds FUNDS Borrower Funds Other FİNANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS DERIVATIVE FINANCIAL LIABILITIES Derivative Financial Liabilities at Fair Value Through Profit or Loss Derivative Financial Liabilities at Fair Value Through Other Comprehensive Income FACTORING PAYABLES LEASE PAYABLES (Net) PROVISIONS Restructuring Provisions Reserve for Employee Benefits Insurance Technical Provisions (Net) Other Provisions CURRENT TAX LIABILITY DEFERRED TAX LIABILITY LIABILITIES RELATED TO ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS V-II- b-g V-II-f V-II-ğ V-II-h V-II-h V-II-ı Held for Sale Discontinued Operations SUBORDINATED DEBT Loans Other Debt Instruments OTHER LIABILITIES SHAREHOLDERS' EQUITY Paid-in capital Capital Reserves Share Premium Share Cancellation Profits Other Capital Reserves Accumulated Other Comprehensive Income or Loss Not Reclassified Through Profit or Loss Accumulated Other Comprehensive Income or Loss Reclassified Through Profit or Loss Profit Reserves Legal Reserves Status Reserves Extraordinary Reserves Other Profit Reserves Profit or Loss Prior Periods' Profit or Loss Current Period Profit or Loss 1.755.212 0 0 0 1.755.212 3.133.754 0 0 0 0 3.133.754 0 402.745 26.156.146 26.558.891 2.060.702 25.441.356 27.502.058 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2.836.442 6.004.376 8.840.818 6.163.475 6.423.058 12.586.533 2.836.442 6.004.376 8.840.818 6.163.475 6.423.058 12.586.533 0 0 0 0 0 0 0 0 0 0 0 0 2.053.406 98.801 2.152.207 1.614.884 85.555 1.700.439 29.136.548 1.402.544 30.539.092 14.400.399 1.086.919 15.487.318 0 5.507.254 0 0 0 0 0 0 5.507.254 2.392.832 0 0 0 0 0 0 2.392.832 0 23.629.294 1.402.544 25.031.838 12.007.567 1.086.919 13.094.486 6.531.922 1.080.530 0 0 0 31.008 6.562.930 1.816.875 14.344 1.831.219 0 0 0 0 1.080.530 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 V-II-i 2.277.824 31.280.921 33.558.745 2.296.445 35.174.552 37.470.997 0 0 0 0 0 0 2.277.824 31.280.921 33.558.745 2.296.445 35.174.552 37.470.997 V-II-e V-II-j 49.847.129 13.419.108 63.266.237 24.978.068 5.524.050 30.502.118 196.315.737 -4.939.662 191.376.075 89.923.933 -3.084.642 86.839.291 10.000.000 1.164.946 108.952 0 1.055.994 0 204 204 0 0 10.000.000 4.500.000 1.165.150 109.156 0 1.113.235 108.944 0 1.055.994 1.004.291 0 204 204 0 0 4.500.000 1.113.439 109.148 0 1.004.291 20.188.138 -1.146 20.186.992 7.840.024 -617 7.839.407 44.848.370 -4.938.720 39.909.650 11.507.178 -3.084.229 8.422.949 58.410.937 6.168.857 0 52.242.080 0 61.703.346 165.466 61.537.880 0 0 0 0 0 0 0 0 58.410.937 46.081.015 6.168.857 5.065.786 0 0 52.242.080 41.015.229 0 0 61.703.346 18.882.481 165.466 5.414.586 61.537.880 13.467.895 0 0 0 0 0 0 0 0 46.081.015 5.065.786 0 41.015.229 0 18.882.481 5.414.586 13.467.895 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 709.747.173 698.575.495 1.408.322.668 355.633.775 570.935.249 926.569.024 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 202 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 203 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Unconsolidated Balance Sheet (Statement Of Financial Position) Unconsolidated Statement Of Off-Balance Sheet Items Foot notes CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total THOUSAND TL A. OFF-BALANCE SHEET CONTINGENCIES and COMMITMENTS (I+II+III) V-III 453.428.754 823.573.068 1.277.001.822 284.514.410 709.267.988 993.782.398 GUARANTEES AND SURETYSHIPS 90.063.305 156.633.209 246.696.514 46.066.357 147.369.066 193.435.423 Letters of Guarantee 84.315.803 94.966.881 179.282.684 45.796.275 85.701.218 131.497.493 Guarantees Subject to State Tender Law 1.344.063 1.143.615 2.487.678 865.540 764.138 1.629.678 Guarantees Given for Foreign Trade Operations 11.143.447 40.608.395 51.751.842 4.204.824 46.666.437 50.871.261 Other Letters of Guarantee Bank Acceptances Import Letter of Acceptance Other Bank Acceptances Letters of Credit Documentary Letters of Credit Other Letters of Credit Prefinancing Given as Guarantee Endorsements Endorsements to the Central Bank of Turkey Other Endorsements Purchase Guarantees for Securities Issued Factoring Guarantees Other Guarantees Other Suretyships COMMITMENTS Irrevocable Commitments Forward Asset Purchase Commitments Forward Deposit Purchase and Sales Commitments Capital Commitments to Associates and Subsidiaries Loan Granting Commitments Securities Underwriting Commitments Commitments for Reserve Deposit Requirements Commitments for Cheque Payments Tax and Fund Liabilities from Export Commitments Commitments for Credit Card Expenditure Limits Commitments for Credit Cards and Banking Services Promotions Receivables from Short Sale Commitments Payables for Short Sale Commitments Other Irrevocable Commitments Revocable Commitments Revocable Loan Granting Commitments Other Revocable Commitments 71.828.293 53.214.871 125.043.164 40.725.911 38.270.643 78.996.554 5.576.890 3.754.586 9.331.476 111.350 14.670.501 14.781.851 0 667.717 667.717 0 498.510 498.510 5.576.890 3.086.869 8.663.759 170.612 133.794 36.818 53.075.611 53.246.223 33.011.590 33.145.384 20.064.021 20.100.839 111.350 158.732 105.367 53.365 14.171.991 14.283.341 42.736.471 42.895.203 29.051.381 29.156.748 13.685.090 13.738.455 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.836.131 4.836.131 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4.260.876 4.260.876 0 0 188.802.924 30.478.905 219.281.829 97.612.185 45.290.289 142.902.474 186.639.578 22.139.127 208.778.705 96.073.979 35.197.535 131.271.514 980 0 1.000.000 65.197.193 0 0 5.447.537 22.490 112.111.363 277.375 0 0 2.582.640 2.163.346 2.128.346 35.000 4.515.325 4.516.305 9.291.941 17.794.260 27.086.201 0 0 0 1.000.000 0 0 0 0 0 0 2.105.002 67.302.195 34.174.955 1.702.741 35.877.696 0 0 0 0 0 0 0 0 0 0 0 0 5.447.537 3.291.900 22.490 41.377 112.111.363 46.524.830 277.375 208.406 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3.291.900 41.377 46.524.830 208.406 0 0 15.518.800 18.101.440 2.540.570 15.700.534 18.241.104 8.339.778 10.503.124 1.538.206 10.092.754 11.630.960 8.339.778 10.468.124 1.488.206 10.092.754 11.580.960 0 35.000 50.000 0 50.000 DERIVATIVE FINANCIAL INSTRUMENTS 174.562.525 636.460.954 811.023.479 140.835.868 516.608.633 657.444.501 Derivative Financial Instruments Held for Risk Management Fair Value Hedges Cash Flow Hedges Net Foreign Investment Hedges 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 I. 1.1 1.1.1 1.1.2 1.1.3 1.2 1.2.1 1.2.2 1.3 1.3.1 1.3.2 1.4 1.5 1.5.1 1.5.2 1.6 1.7 1.8 1.9 II. 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8 2.1.9 2.1.10 2.1.11 2.1.12 2.1.13 2.2 2.2.1 2.2.2 III. 3.1 3.1.1 3.1.2 3.1.3 Foot notes CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total THOUSAND TL Derivative Financial Instruments Held for Trading 174.562.525 636.460.954 811.023.479 140.835.868 516.608.633 657.444.501 Forward Foreign Currency Buy/Sell Transactions 9.076.327 53.207.947 62.284.274 13.885.441 46.330.649 60.216.090 Forward Foreign Currency Buy Transactions Forward Foreign Currency Sell Transactions Currency and Interest Rate Swaps Currency Swap Buy Transactions Currency Swap Sell Transactions Interest Rate Swap Buy Transactions Interest Rate Swap Sell Transactions Currency, Interest Rate and Security Options Currency Call Options Currency Put Options Interest Rate Call Options Interest Rate Put Options Securities Call Options Securities Put Options Currency Futures Currency Buy Futures Currency Sell Futures Interest Rate Futures Interest Rate Buy Futures Interest Rate Sell Futures Other 6.486.754 24.879.081 31.365.835 9.851.253 20.305.444 30.156.697 2.589.573 28.328.866 30.918.439 4.034.188 26.025.205 30.059.393 158.868.495 505.601.396 664.469.891 117.694.703 424.446.452 542.141.155 12.686.066 180.280.643 192.966.709 6.016.040 158.921.467 164.937.507 144.722.429 72.885.673 217.608.102 111.278.663 66.277.089 177.555.752 730.000 730.000 5.720.382 3.160.239 2.560.143 0 0 0 0 897.321 192.908 704.413 0 0 0 0 126.217.540 126.217.540 23.965.147 8.188.359 8.132.464 3.822.162 3.822.162 0 0 743.203 559.500 183.703 0 0 0 126.947.540 126.947.540 29.685.529 11.348.598 10.692.607 3.822.162 3.822.162 0 0 1.640.524 752.408 888.116 0 0 0 52.943.261 52.943.261 200.000 200.000 99.623.948 99.823.948 99.623.948 99.823.948 8.573.317 21.264.309 29.837.626 4.553.586 4.019.731 0 0 0 0 682.407 0 682.407 0 0 0 0 6.303.322 10.856.908 6.549.875 10.569.606 4.205.556 4.205.556 4.205.556 4.205.556 0 0 687.983 687.983 0 0 0 0 0 0 1.370.390 687.983 682.407 0 0 0 23.879.240 23.879.240 3.2 3.2.1 3.2.1.1 3.2.1.2 3.2.2 3.2.2.1 3.2.2.2 3.2.2.3 3.2.2.4 3.2.3 3.2.3.1 3.2.3.2 3.2.3.3 3.2.3.4 3.2.3.5 3.2.3.6 3.2.4 3.2.4.1 3.2.4.2 3.2.5 3.2.5.1 3.2.5.2 3.2.6 B. EMANET VE REHİNLİ KIYMETLER (IV+V+VI) 1.116.249.656 1.495.889.698 2.612.139.354 796.887.897 993.775.709 1.790.663.606 IV. 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 V. 5.1 5.2 5.3 5.4 5.5 5.6 5.7 VI. ITEMS HELD IN CUSTODY Customers' Securities Held Investment Securities Held in Custody Cheques Received for Collection 84.271.660 172.676.943 256.948.603 60.617.295 121.635.447 182.252.742 0 0 0 0 0 0 34.788.786 4.899.694 39.688.480 33.813.447 4.930.182 38.743.629 44.145.057 93.149.806 137.294.863 23.306.991 68.668.580 91.975.571 Commercial Notes Received for Collection 3.841.357 35.954.510 39.795.867 2.980.895 26.788.763 29.769.658 Other Assets Received for Collection Assets Received for Public Offering Other Items Under Custody Custodians PLEDGED ITEMS Marketable Securities Guarantee Notes Commodity Warranty Real Estates Other Pledged Items Pledged Items-Depository ACCEPTED BILL, GUARANTEES AND SURETIES TOTAL OFF-BALANCE SHEET COMMITMENTS (A+B) 0 0 0 0 0 0 0 0 0 0 0 0 1.496.460 38.672.933 40.169.393 515.962 21.247.922 21.763.884 0 0 0 0 0 0 1.031.977.996 1.323.212.755 2.355.190.751 736.270.602 872.140.262 1.608.410.864 67.423.981 800.624 68.224.605 53.604.619 352.719 53.957.338 2.550.997 35.205.788 37.756.785 2.516.138 33.012.695 35.528.833 235.924.378 132.452.520 368.376.898 144.690.167 75.209.001 219.899.168 0 0 0 0 0 0 561.535.101 876.040.583 1.437.575.684 398.843.430 580.623.489 979.466.919 164.543.539 278.713.240 443.256.779 136.616.248 182.942.358 319.558.606 0 0 0 0 0 0 0 0 0 0 0 0 1.569.678.410 2.319.462.766 3.889.141.176 1.081.402.307 1.703.043.697 2.784.446.004 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 204 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 205 Türkiye İş Bankası A.Ş. Unconsolidated Income Statement Türkiye İş Bankası A.Ş. Unconsolidated Statement of Profit or Loss and Other Comprehensive Income PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME I. II. 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.2 2.2.1 2.2.2 2.2.3 2.2.4 2.2.5 2.2.6 III. PROFIT/LOSS FOR THE PERIOD OTHER COMPREHENSIVE INCOME Other comprehensive income that will not be reclassified to profit or loss Revaluation Surplus on Tangible Assets Revaluation Surplus on Intangible Assets Gains/(Losses) on remeasurements of Defined Benefit Plans Other Income/Expense Items of Other Comprehensive Income not to be Reclassified to Profit Or Loss Taxes Relating To Components Of Other Comprehensive Income not to be Reclassified To Profit Or Loss Other Income/Expense Items not be Reclassified to Profit or Loss Exchange Differences on Translation Valuation and/or Reclassification Profit or Loss from Financial Assets at Fair Value through Other Comprehensive Income Income/(Loss) Related with Cash Flow Hedges Income/(Loss) Related with Hedges of Net Investments in Foreign Operations Other Income/Expense Items of Other Comprehensive Income to be Reclassified to Other Profit or Loss Taxes Relating To Components Of Other Comprehensive Income to be Reclassified To Profit Or Loss TOTAL COMPREHENSIVE INCOME (I+II) THOUSAND TL CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) 61.537.880 43.834.286 12.347.585 7.126.488 0 -2.593.679 8.119.452 -304.676 31.486.701 2.071.370 32.024.551 0 0 5.517.021 -8.126.241 105.372.166 13.467.895 7.268.169 3.606.560 1.606.325 0 -713.198 2.731.426 -17.993 3.661.609 1.702.150 -532.979 0 0 2.433.200 59.238 20.736.064 INCOME STATEMENT INTEREST INCOME Interest Income on Loans Interest Income on Reserve Deposits Interest Income on Banks Interest Income on Money Market Placements Interest Income on Marketable Securities Portfolio Financial Assets At Fair Value Through Profit or Loss Financial Assets At Fair Value Through Other Comprehensive Income Financial Assets At Measured at Amortised Cost Financial Lease Income Other Interest Income INTEREST EXPENSE (-) Interest on Deposits Interest on Funds Borrowed Interest on Money Market Funds Interest on Securities Issued Financial Lease Expense Other Interest Expenses NET INTEREST INCOME (I - II) NET FEES AND COMMISSIONS INCOME Fees and Commissions Received Non-cash Loans Other Fees and Commissions Paid Non-cash Loans Other DIVIDEND INCOME TRADING INCOME /(LOSS) (Net) Gains/(Losses) on Securities Trading Derivative Financial Transactions Gains/Losses Foreign Exchange Gains / (Losses) OTHER OPERATING INCOME GROSS OPERATING INCOME (III+IV+V+VI+VII) EXPECTED CREDIT LOSS (-) OTHER PROVISION EXPENSES (-) PERSONNEL EXPENSE (-) OTHER OPERATING EXPENSES (-) NET OPERATING INCOME/(LOSS) (VIII-IX-X-XI-XII) AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER PROFIT/LOSS FROM ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD NET MONETARY POSITION GAIN/LOSS PROFIT/LOSS ON CONTINUING OPERATIONS BEFORE TAX (XIII+...+XVI) TAX PROVISION FOR CONTINUING OPERATIONS (±) Current Tax Provision Deferred Tax Income Effect (+) Deferred Tax Expense Effect (-) NET PERIOD PROFIT/LOSS FROM CONTUNUING OPERATIONS (XVI±XVII) INCOME ON DISCONTINUED OPERATIONS Income on Assets Held for Sale Gain on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Other Income on Discontinued Operations EXPENSE ON DISCONTINUED OPERATIONS (-) Expense on Assets Held for Sale Loss on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Other Expense on Discontinued Operations PROFIT/LOSS ON DISCONTINUED OPERATIONS BEFORE TAX (XX-XXI) TAX PROVISION FOR DISCONTINUED OPERATIONS (±) Current Tax Provision Deferred Tax Expense Effect (+) Deferred Tax Income Effect (-) NET PERIOD PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XXII±XXIII) NET PERIOD PROFIT/LOSS (XIX+XXIV) Earnings per Share (*) Foot notes V-IV-a V-IV-b V-IV-c V-IV-ç V-IV-d V-IV-e V-IV-e V-IV-f V-IV-g V-IV-ğ V-IV-h V-IV-ı I. 1.1 1.2 1.3 1.4 1.5 1.5.1 1.5.2 1.5.3 1.6 1.7 II. 2.1 2.2 2.3 2.4 2.5 2.6 III. IV. 4.1 4.1.1 4.1.2 4.2 4.2.1 4.2.2 V. VI. 6.1 6.2 6.3 VII. VIII. IX. X. XI. XII. XIII. XIV. XV. XVI. XVII. XVIII. 18.1 18.2 18.3 XIX. XX. 20.1 20.2 20.3 XXI. 21.1 21.2 21.3 XXII. XXIII. 23.1 23.2 23.3 XXIV. XXV. (*) Expressed in exact TL THOUSAND TL CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) 123.454.753 82.579.909 284.681 444.545 448.198 39.658.335 235.962 24.247.051 15.175.322 0 39.085 48.251.300 32.480.838 2.993.523 3.677.551 5.770.518 362.675 2.966.195 75.203.453 16.146.898 20.770.884 2.257.434 18.513.450 4.623.986 1.461 4.622.525 38.604 4.522.593 3.314.827 -13.543.440 14.751.206 6.080.548 101.992.096 10.036.266 5.768.178 15.095.648 18.933.630 52.158.374 0 21.790.674 0 73.949.048 12.411.168 17.204.130 1.117.479 5.910.441 61.537.880 0 0 0 0 0 0 0 0 0 0 0 0 0 0 61.537.880 0,246149305 60.904.343 44.448.255 849.109 133.704 890 15.434.222 128.118 9.421.203 5.884.901 0 38.163 29.963.074 18.085.126 1.530.274 5.081.676 4.761.496 255.389 249.113 30.941.269 7.619.945 9.742.778 1.291.970 8.450.808 2.122.833 1.521 2.121.312 20.735 -5.149.127 357.107 -1.046.262 -4.459.972 4.401.570 37.834.392 10.837.246 3.612.921 6.366.681 9.545.008 7.472.536 0 8.003.345 0 15.475.881 2.007.986 1.103.778 2.855.911 1.951.703 13.467.895 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13.467.895 0,053871095 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 206 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 207 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Unconsolidated Statement Of Changes in Shareholders’ Equity Unconsolidated Statement Of Changes in Shareholders’ Equity CHANGES IN SHAREHOLDERS’ EQUITY Foot notes Paid-in Capital Share Premium Accumulated Other Comprehensive Income That will not be Reclassified in Profit/(Loss) Accumulated Other Comprehensive Income That will be Reclassified in Profit/(Loss) Share Certificate Cancellation Profits Other Capital Reserves Tangible assets accumulated revaluation reserve Increase / (Decrease) Accumulated gains / (losses) on remeasurements of defined benefit plans Other (1) Exchange differences on translation reserve Accumulated gains/ (losses) due to revaluation and/ or reclassification of financial assets measured at fair value through other comprehensive income Other (2) Profit Reserves Prior Period Profit/(Loss) Net Current Period Profit/(Loss) Total Shareholder's Equity 4.500.000 90.724 1.035.465 2.719.532 -284.097 1.797.412 1.518.568 1.133.556 2.109.216 40.079.251 13.081.825 67.781.452 4.500.000 90.724 1.035.465 2.719.532 1.445.692 -284.097 1.797.412 -570.558 2.731.426 1.518.568 1.702.150 1.133.556 2.109.216 40.079.251 13.081.825 -473.741 2.433.200 13.467.895 67.781.452 20.736.064 V-V PRIOR PERIOD ( 31/12/2021) Beginning Balance Adjustment in accordance with TAS 8 The Effect of Adjustments The Effect of Changes in Accounting Policies New Balance (I+II) Total Comprehensive Income Capital Increase in Cash Capital Increase Through Internal Reserves Paid-in-Capital inflation adjustment difference Convertible Bonds Subordinated Debt Increase/(Decrease) Through Other Changes (*) Profit Distribution Dividend Paid Transfer to Reserves Other (**) I. II. 2.1 2.2 III. IV. V. VI. VII. VIII. IX. X. XI. 11.1 11.2 11.3 I. II. 2.1 2.2 III. IV. V. VI. VII. VIII. IX. X. XI. 11.1 11.2 11.3 Ending Balance (III+IV+…...+X+XI) 4.500.000 109.148 1.004.291 4.165.224 -854.655 4.528.838 3.220.718 659.815 4.542.416 46.081.015 18.424 -31.174 6.001.764 6.001.764 -869.736 -6.797.503 -661.415 -6.001.764 -134.324 5.414.586 -882.486 -795.739 -661.415 -134.324 86.839.291 13.467.895 CURRENT PERIOD ( 31/12/2022) Beginning Balance Adjustment in accordance with TAS 8 The Effect of Adjustments The Effect of Changes in Accounting Policies New Balance (I+II) Total Comprehensive Income Capital Increase in Cash 4.500.000 109.148 1.004.291 4.165.224 -854.655 4.528.838 3.220.718 659.815 4.542.416 46.081.015 18.882.481 86.839.291 4.500.000 109.148 1.004.291 4.165.224 -854.655 4.528.838 6.119.976 -1.891.843 8.119.452 3.220.718 2.071.370 659.815 4.542.416 46.081.015 18.882.481 23.898.310 5.517.021 61.537.880 86.839.291 105.372.166 Capital Increase Through Internal Reserves 5.500.000 -5.500.000 Paid-in-Capital inflation adjustment difference Convertible Bonds Subordinated Debt Increase/(Decrease) Through Other Changes (*) Profit Distribution Dividend Paid Transfer to Reserves Other 8 51.703 294.231 17.535.691 17.535.691 126.560 -18.843.575 -1.307.884 -17.535.691 472.502 -1.307.884 -1.307.884 Ending Balance (III+IV+…...+X+XI) 10.000.000 109.156 1.055.994 10.285.200 -2.746.498 12.648.290 5.292.088 24.558.125 10.059.437 58.410.937 165.466 61.537.880 191.376.075 (1): Accumulated amounts of other comprehensive income of investments accounted by the equity method, that will not be reclassified as other profit or loss. (2): Accumulated amounts of other comprehensive income of investments accounted by the equity method, that will be reclassified as other profit or loss. (*) Prior Period's Profit / (Loss) for the period 31.12.2021 and Profit Reserves for the period 31.12.2022 include the classifications made within the scope of “TAS 27-Individual Financial Statements”. (**) According to the Articles of Association of the Bank, it is the dividend amount distributed to the Bank personnel. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 208 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 209 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Unconsolidated Statement of Cash Flows Unconsolidated Statement of Profit Distribution Table Foot notes THOUSAND TL CURRENT PERIOD (01/01-31/12/2022) PRIOR PERIOD (01/01-31/12/2021) THOUSAND TL CURRENT PERIOD (01/01-31/12/2022) PRIOR PERIOD (01/01-31/12/2021) A. 1.1 1.1.1 1.1.2 1.1.3 1.1.4 1.1.5 1.1.6 1.1.7 1.1.8 1.1.9 1.2 1.2.1 1.2.2 1.2.3 1.2.4 1.2.5 1.2.6 1.2.7 1.2.8 1.2.9 CASH FLOWS FROM BANKING OPERATIONS Operating Profit Before Changes in Operating Assets and Liabilities Interest Received Interest Paid Dividend Received Fees and Commissions Received Other Income Collections from Previously Written Off Loans and Other Receivables Cash Payments to Personnel and Service Suppliers Taxes Paid Other Changes in Operating Assets and Liabilities Net (Increase) / Decrease in Financial Assets at Fair Value Through Profit or Loss V-VI Net (Increase) / Decrease in Due From Banks Net (Increase) / Decrease in Loans Net (Increase) / Decrease in Other Assets Net Increase / (Decrease) in Bank Deposits Net Increase / (Decrease) in Other Deposits Net Increase/ (Decrease) in Financial Liabilities at Fair Value Through Profit or Loss Net Increase / (Decrease) in Funds Borrowed Net Increase / (Decrease) in Matured Payables 1.2.10 Net Increase / (Decrease) in Other Liabilities V-VI I. B. II. 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 C. III. 3.1 3.2 3.3 3.4 3.5 3.6 IV. V. VI. VII. Net Cash Provided From Banking Operations CASH FLOWS FROM INVESTING ACTIVITIES Net Cash Provided from Investing Activities Cash Paid for the Purchase of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Cash Obtained from Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Cash Paid for the Purchase of Tangible Asset Cash Obtained from the Sale of Tangible Asset Cash Paid for Purchase of Financial Assets at Fair Value Through Other Comprehensive Income Cash Obtained from Sale of Financial Assets at Fair Value Through Other Comprehensive Income Cash Paid for Purchase of Financial Assets Measured at Amortised Cost Cash Obtained from Sale of Financial Assets Measured at Amortised Cost (*) Other CASH FLOWS FROM FINANCING ACTIVITIES Net cash provided from financing activities Cash obtained from funds borrowed and securities issued Cash used for repayment of funds borrowed and securities issued Equity Instruments Dividends Paid Payments for Finance Leases Other Effect of change in foreign exchange rate on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period V-VI V-VI V-VI (*) Includes Redeemed Financial Assets measured at amortized cost. 29.321.468 103.691.818 -43.427.261 1.451.063 20.771.458 4.926.359 3.384.340 -22.292.589 -13.579.263 -25.604.457 56.755.949 -412.259 -1.407.545 -188.170.365 -1.122.078 5.142.070 238.319.648 0 -14.214.342 0 18.620.820 86.077.417 -75.342.524 -3.714.714 0 -1.325.592 218.743 -59.932.987 27.825.705 -55.070.273 19.171.942 -2.515.348 -31.982.420 10.906.657 -40.429.982 0 -1.667.884 -791.211 0 967.080 -20.280.447 114.894.449 94.614.002 14.064.345 54.774.522 -28.575.621 837.502 9.740.804 999.236 2.802.041 -10.730.457 -2.688.207 -13.095.475 79.007.898 -3.878.212 -16.411.725 -56.752.805 -2.370.308 -1.077.510 127.280.892 0 600.469 0 31.617.097 93.072.243 -7.296.356 -135.636 0 -500.697 223.992 -24.036.024 17.782.022 -15.700.230 15.819.175 -748.958 -15.071.710 7.897.669 -21.609.192 0 -795.739 -564.448 0 -1.171.636 69.532.541 45.361.908 114.894.449 I. 1.1 1.2 1.2.1 1.2.2 1.2.3 A. 1.3 1.4 1.5 B. 1.6 1.6.1 1.6.2 1.6.3 1.6.4 1.6.5 1.7 1.8 1.9 1.9.1 1.9.2 1.9.3 1.9.4 1.9.5 1.10 1.11 1.12 1.13 II. 2.1 2.2 2.2.1 2.2.2 2.2.3 2.2.4 2.2.5 2.3 2.4 III. 3.1 3.2 3.3 3.4 IV. 4.1 4.2 4.3 4.4 DISTRIBUTION OF CURRENT YEAR PROFIT (1) CURRENT PERIOD PROFIT (2) TAXES AND DUES PAYABLE (-) Corporate Tax (Income Tax) Income Tax Withholding Other Taxes and Dues Payable (3) NET PROFIT FOR THE PERIOD (1.1-1.2) PRIOR YEARS’ LOSSES (-) FIRST LEGAL RESERVES (-) OTHER STATUTORY RESERVES (-) NET PROFIT ATTRIBUTABLE TO [(A-(1.3+1.4+1.5)] FIRST DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Preferred Shares To Preferred Shares (Preemptive Rights) To Profit Sharing Bonds To Holders of Profit / Loss Share Certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO THE BOARD OF DIRECTORS (-) SECOND DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Privileged Shares To Owners of Preferred Shares To Profit Sharing Bonds To Holders of Profit / Loss Share Certificates STATUTORY RESERVES (-) EXTRAORDINARY RESERVES OTHER RESERVES SPECIAL FUNDS DISTRIBUTION FROM RESERVES DISTRIBUTED RESERVES DIVIDENDS TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Privileged Shares To Owners of Preferred Shares To Profit Sharing Bonds To Holders of Profit / Loss Share Certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO THE BOARD OF DIRECTORS (-) EARNINGS PER SHARE TO OWNERS OF ORDINARY SHARES (4) TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PREFERRED SHARES (4) TO OWNERS OF PREFERRED SHARES ( % ) DIVIDEND PER SHARE TO OWNERS OF ORDINARY SHARES (4) TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PREFERRED SHARES (4) TO OWNERS OF PREFERRED SHARES ( % ) 73.949.048 12.411.168 17.082.925 121.205 -4.792.962 61.537.880 0 0 0 61.537.880 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0,2461 615 0 0 0 0 0 0 21.250.467 2.007.986 1.057.464 46.314 904.208 19.242.481 0 1.103.071 143.605 17.995.805 270.000 269.998 2 0 0 0 359.481 0 1.076.790 1.076.756 24 10 0 0 0 16.289.534 0 0 0 0 0 0 0 0 0 0 0 0,1197 299 0 0 0,0120 29,93 0,0086 85,87 (1): The decision for dividend payment is made at the Annual General Meeting. Annual General Meeting has not been held as of the reporting date. (2): In accordance with "TAS 19 Employee Benefits", TL 360.000 allocated for the profit share to be distributed to the personnel in 2021 and added to the profit distribution base of the same year, and TL 5.414.586 retained earnings added to the profit distribution base of the same year are added to the previous period's profit in the table. (3): Deferred Tax Income. (4): Expressed in exact TL. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 210 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 211 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 SECTION THREE: EXPLANATIONS ON ACCOUNTING POLICIES I. Basis of Presentation: The unconsolidated financial statements, related notes, and explanations in this report are prepared in accordance with the “Regulation on Accounting Applications for Banks and Safeguarding of Documents” and other regulations on accounting records of Banks published by Banking Regulation and Supervision Agency and circulars and interpretations published by Banking Regulation and Supervision Authority, (together referred as “BRSA Accounting and Financial Reporting Legislation”) and requirements of Turkish Financial Reporting Standards (TFRS) published the Public Oversight Accounting and Auditing Standards Authority for the matters not regulated by the aforementioned legislations. COVID-19 outbreak, which started in China and spread globally in the first half of 2020, caused serious effects on both economic and social life. In addition to the social life effects of the cautions taken to ensure the control of outbreak in many countries, there are also consequences observed which is negatively affecting economic activity both on regional and global scale. As in other countries where the pandemic is effective, various cautions also have been taken in our country in social and economic terms. The Bank sustains its activities for the period precisely by closely monitoring the processes related to outbreak, postponing retail and non-retail customers' due debts, restructuring with grace period and existing or additional limit allocations in respect with customers’ needs. Assessments regarding to possible effects of the COVID-19 outbreak through the measurement of expected credit losses are explained in the Section Three “VIII. “Explanations on Impairment of Financial Assets”. “Interest Rate Benchmark Reform- Stage 2”, brought changes in various TAS / TFRSs effective from January 1, 2021, was released in December 2020 within the scope of the project of transition of the benchmark interest rates carried out by the International Accounting Standards Board (IASB). It was concluded that as of December 31, 2022, the changes have not occurred significantly on the Bank's financial statements. TAS 29 Financial Reporting in Hyperinflation Economies requires entities whose functional currency is that of a hyperinflationary economy to prepare their financial statements in terms of the measuring unit current at the end of the reporting period. TAS 29 describes characteristics that may indicate that an economy is hyperinflationary, and it requires all entities that report in the currency of the same hyperinflationary economy apply this Standard from the same date. Therefore, it is expected that TAS 29 will start to be applied simultaneously by all entities with the announcement of Public Oversight Accounting and Auditing Standards Authority to ensure consistency of the application required by TAS 29 throughout the country. However, the Authority has not published any announcement that determines entities would restate their financial statements for the accounting period ending on 31 December 2022 in accordance with TAS 29. In this context, TAS 29 is not applied and inflation adjustment has not been reflected in the financial statements as of December 31, 2022. The tension between Russia and Ukraine since January 2022 has turned into a crisis and an armed conflict as of the date of the report. The Bank does not carry out any activities in these two countries that are subject to the crisis. Considering the geographies in which the Bank operates, the crisis did not have a direct impact on the Bank's operations as of 31 December 2022. However, since the course of the crisis is still uncertain as of the date of this report, developments that may occur on a global scale, and the effects of these developments on the global and regional economy and on the Bank's operations, are closely monitored. Since the Bank's risks to both countries are at a very low level, these developments are not expected to have an significant impact on the Bank's operations. The accounting policies applied in the current period are in line with the prior period financial statements. The accounting policies and valuation principles used in the preparation of financial statements are presented below in detail. II. Strategy for Use of Financial Instruments and Foreign Currency Transactions 1. The Bank’s Strategy on Financial Instruments The Bank’s main activities comprise private, retail, commercial and corporate banking, money market and securities market operations, as well as activities related to international banking services. In conformity with the general liability structure of the banking system, the Bank’s liabilities are mainly composed of short-term deposits and other medium and long-term liabilities. The liquidity risk that may arise from this liability structure can be easily controlled through deposit continuity, as well as widespread network of the correspondent banks, market maker status (The Bank is one of the market makers banks) and by the use of liquidity facilities of the Central Bank of Republic of Turkey (“CBRT”). As a result, the liquidity of the Bank and the banking system can be easily monitored. On the other hand, foreign currency liquidity requirements are met by the money market operations and currency swaps. Most of the funds collected bear fixed interest, and by closely monitoring the developments in the sector, both fixed and floating rate placements are made based on the yields of alternative investment instruments. Safety principle has always been the top priority in placements and the placements are focused on high yielding and low risk assets by considering their maturity structure. Accordingly, a pricing policy aiming at high return is implemented in the long-term placements and attention is paid to the maximum use of non-interest income generation opportunities. The Bank determines its lending strategy by taking into consideration the international and national economic data and expectations, market conditions, current and potential credit customers’ expectations and tendencies, and risks such as; interest rate, liquidity, currency and credit risks. Furthermore, in conformity with this strategy, the Bank acts within the legal limits in terms of asset-liability management. The primary objectives related to balance sheet components are set by the long-term plans shaped along with budgeting; and the Bank takes the required positions against the short-term currency, interest rates and price fluctuations in accordance with these plans and the course of the market conditions. Foreign currency, interest rate and price fluctuations in the markets are monitored instantaneously. While taking positions, in addition to the legal limits, the Bank’s own transaction and control limits are also effectively monitored in order to avoid limit overrides. The Bank’s asset-liability management is executed by the Asset-Liability Management Committee, within the risk limits determined by the Board of Directors, in order to keep the liquidity risk, interest rate risk, currency risk and credit risk within certain limits depending on the equity adequacy and to maximize profitability. 2. Foreign Currency Transactions Foreign currency monetary assets and liabilities on the balance sheet are converted into Turkish Lira by using the prevailing exchange rates at the balance sheet date. Non-monetary items in foreign currencies carried at fair value are converted into Turkish Lira by the rates at the date of which the fair value is determined. Exchange rate differences arising from the conversions of monetary foreign currency items and the collections of and payments in foreign currency transactions are reflected to the income statement. The Bank started to apply equity method for the foreign associates and subsidiaries which were followed with historical rates in accordance with the TAS 27 “Separate Financial Statements” In this context, foreign subsidiaries are accounted at current rates in the financial statement and the resulting exchange differences are accounted under equity. The financial statements of the foreign branches of the Bank are prepared in the currency of the primary economic environment in which the entity operates (functional currency). The financial statements of foreign branches are expressed in TL which is the functional currency of the Bank and the presentation currency of the financial statements. Assets and liabilities of the foreign branches of the Bank are converted into TL by using the prevailing exchange rates at the balance sheet date. Income and expenses are converted by at exchange rates at the dates of the transactions. The exchange rate differences arising from the conversion are recorded in the shareholders’ equity. III. Associates and Subsidiaries The Bank accounts, its associates, and subsidiaries in accordance with equity method which described in TAS 28. Under the equity method, Bank’s share of net assets of the associates and subsidiaries is recognized in the Bank’s financial statements. The profit or loss of the Bank includes the Bank’s share of the profit or loss of the associates and subsidiaries and Bank’s other comprehensive income or expenses include the Bank’s share of other comprehensive income or expenses of the associates and subsidiaries. Mergers / acquisitions and change in share ratios of related associates and subsidiaries during the period are shown under the item "Increase / Decrease through Other Changes" in the statement of changes in shareholders’ equity. IV. Forward, Option Contracts and Derivatives Instruments Derivative transactions of the Bank consist of foreign currency and interest rate swaps, forwards, foreign currency options and interest rate options. The Bank has no derivative instruments decomposed from the main contract. The Bank classifies derivative transactions, which act as a hedge but does not meet qualification criteria for hedge accounting, as "Derivative Financial Assets at Fair Value through Profit or Loss" in accordance with the “TFRS 9 Financial Instruments” requirements. Derivative transactions are recorded at their fair value at the date of contract, receivables and payables arising from these transactions are recorded in off-balance sheet accounts. Derivative transactions are measured at fair value at subsequent reporting dates and if the valuation difference is positive, they are classified as "Derivative Financial Assets at Fair Value through Profit or Loss", if it is negative they are classified as "Derivative Financial Liabilities at Fair Value through Profit or Loss". The differences arising from the valuation of derivative transactions are associated with the income statement. On off-balance sheet items table, options which generated assets for the Bank are presented under “call options” line and which generated liabilities are presented under “put options” line. V. Interest Income and Expenses Interest income is calculated by using the effective interest rate method (the rate that equal the future cash flows of a financial asset or liability to its present net book value) to gross carrying amount of financial asset in conformity with “TFRS 9 Financial Instruments” except financial asset that is not a purchased or originated credit-impaired financial asset but subsequently has become credit-impaired. Under the scope of TFRS 9 application, the Bank does not reverse the interest accruals and rediscounts of non-performing loans and other receivables and monitors the related amounts under interest income and calculates expected credit loss on these amounts according to the related methodology. VI. Fees and Commission Income and Expenses Wages and commissions those that are not an integral part of the effective interest rate of the financial instruments measured at amortized cost are accounted for in accordance with "TFRS 15 - Revenue from Customer Contracts". Fees and commission income and expenses are recognized either on accrual basis or by using the effective interest method. Income earned in return for services rendered contractually or due to operations like sale or purchase of assets on behalf of a third-party real person or corporate body are recognized in income accounts in the period of collection. VII. Financial Assets The Bank within the scope of “TFRS 9 Financial Instruments”, classifies and accounts its financial assets as “Financial Assets at Fair Value Through Profit or Loss”, “Financial Assets at Fair Value Through Other Comprehensive Income” or “Financial Assets at Measured at Amortized Cost” by taking into account their business model and contractual cash flow characteristics. Financial assets are recognized or derecognized according to TFRS 9 “Recognition and Derecognition in Statement of Financial Position” requirements. The Bank recognizes a financial asset in its statement of financial position when it becomes a party to the contractual provisions of the financial instrument. Financial assets are measured at their fair value on initial recognition in the financial statements. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 212 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 213 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 The Bank has three different business models for classification of financial assets: ੵ Business model aimed at holding financial assets in order to collect contractual cash flows: Financial assets held under the mentioned business model are managed to collect contractual cash flows over the life of these assets. The Bank manages its assets held under this portfolio in order to collect certain contractual cash flows ੵ Business model aimed at collecting contracted cash flows of financial assets and selling: In this business model, the Bank intends both to collect contractual cash flows of financial assets and to sell these assets. ੵ Other business models: A business model in which financial assets; are not held within the scope of a business model aimed at collection of contractual cash flows and within the scope of a business model aimed at collecting and selling contracted cash flows, are measured by reflecting fair value in profit or loss. The Bank is able to reclassify all affected financial assets in case it changes the business model that is used for the management of financial asset. In the event of the termination of the rights related to the cash flows from a financial asset, the transfer of all risks and rewards of the financial asset to a significant extent or has no longer control of the financial assets, the Bank derecognizes the financial asset. 1. Financial Assets at Fair Value Through Profit or Loss Financial assets except financial assets measured at amortized cost or at fair value through other comprehensive income, are measured at fair value through profit or loss. Financial assets at fair value through profit or loss are financial assets held for the purpose of generating profit from short-term fluctuations in price or similar factors in the market or being part of a portfolio for profitability in the short term, regardless of the acquisition reason or financial assets that are not held in a business model that aims at collecting and/or selling contractual cash flows of financial assets. Financial assets at fair value through profit or loss are initially measured at fair value on the balance sheet and are subsequently re-measured at fair value. Gains or losses arising from the valuation are related to profit and loss accounts. In some cases, restructuring, alteration or counterparty changes of contractual cash flows of loans may lead to derecognition of related loans in accordance with TFRS 9. When the change in the financial asset results from derecognizing the existing financial asset from the financial statements and the revised financial asset is recognized in the financial statements, the revised financial asset is considered as a new financial asset in accordance with TFRS 9. When it is determined that there are significant changes between the new conditions of the revised financial asset and the first conditions in related agreements, the Bank evaluates the new financial asset according to the current business models. When it is determined that the contractual conditions do not only result in cash flows that include principal and interest payments at certain dates, the financial asset is recognized at fair value and is subject to valuation. The differences arising from the valuation are reflected in the nominal accounts. The Bank recognizes loans at fair value through profit or loss, if the contractual terms of the loan, do not result in cash flow including the principal payments and interest payments generated from principal amounts at certain dates. These loans are valued at their fair values after their recognition and the losses or gains arising from the valuation are included in the profit and loss accounts. 2. Financial Assets at Fair Value Through Other Comprehensive Income Financial assets at fair value through other comprehensive income are financial assets that are held under a business model that aims both to collect contractual cash flows and to sell financial assets, and financial assets with contractual terms that lead to cash flows that are solely payments of principal and interest on the principle amount outstanding at specific dates. Financial assets at fair value through other comprehensive income are initially recognized at their fair value including their transaction costs on the financial statements. The initial recognition and subsequent valuation of such financial assets, including the transaction costs, are carried out on a fair value basis and the difference between amortized cost and the cost of borrowing instruments is recognized in profit or loss by using the effective interest method. Dividend income arising from investments in equity instruments that are classified as at fair value through other comprehensive income is also recognized in income statements. Gains and losses, except impairment gain or loss and foreign exchange gain or loss, arising from changes in the fair value of financial assets at fair value through other comprehensive income are reflected to other comprehensive income until derecognized or reclassified. When the value of the financial asset is collected or financial asset is disposed, the related fair value differences accumulated in the shareholders’ equity are transferred to the profit or loss statement. During the initial introduction to financial statements, amendments to the fair value of an investment in an equity instrument within the framework of TFRS 9 that are not held for trading or that are not valued in a financial statement of an entity that acquires business combinations under the “TFRS 3 Business Combinations” may be subject to an irreversible preference regarding these amendments being accounted in other comprehensive income. In such case dividends taken from mentioned investment will be accounted in financial statement as profit or loss. 3. Financial Assets Measured at Amortized Cost Financial assets measured at amortized cost are those financial assets that are held within the framework of a business model aimed at collecting contractual cash flows over the life of the asset and which result in cash flows that include principal and interest on the principal amount outstanding at specific dates. Financial assets measured at amortized cost with the initial recognition at fair value including transaction costs are subject to valuation with their discounted cost value by using the effective interest rate method, after eliminating any provision for impairment if there is any. Interest income measured by using the effective interest rate method are recognized in the income statement as an “interest income”. The Bank evaluates its loans within the framework of current business models and can be classified as Financial Assets measured at Amortized Cost. The Bank also holds consumer price indexed government bonds (“CPI”) in its securities portfolio, reclassified as financial assets measured at fair value through other comprehensive income, financial assets measured at fair value through profit or loss and financial assets measured at amortised cost. In the valuation of the mentioned securities, the estimated inflation curve created by using the CPI index announced by Turkish Statistical Institute (“TÜİK”) and the “Annual CPI Expectation After 12 Months” from the CBRT Market Participants Survey is used. Future cash flows of securities are estimated by using the mentioned inflation data and valuation is made according to the effective interest method within the framework of the reference inflaiton index formula specified in the Undersecretariat of Treasury’s Investor Guide of CPI. VIII. Impairment of Financial Assets In accordance with the “TFRS 9-Financial Instruments” and the regulation and related decision “Procedures and Principals regarding Classification of Loans and Allowances Allocated for Such Loans” issued by BRSA, the Bank recognizes expected credit loss allowance on financial assets at fair value through other comprehensive income, financial assets measured at amortized cost, impaired credit commitments and financial guarantee contracts. Within the scope of TFRS 9, the expected credit loss is calculated according to the “three-stage” impairment model based on the change in the loan quality of financial assets after initial recognition and detailed in the following headings: Stage 1: An important determinant for calculating the expected credit loss in accordance with TFRS 9 is to assess whether there is a significant increase in the credit risk of the financial asset. Financial assets that have not experienced a significant increase in credit risk since the initial recognition are monitored in the stage one. Impairment for credit risk for the Stage 1 financial assets is equal to the 12-month expected credit losses. Stage 2: Financial assets that experienced a significant increase in the credit risk since initial recognition, are transferred to Stage 2. The expected credit loss of these financial assets are measured at an amount equal to the instrument’s lifetime expected credit loss. In order to classify a financial asset in the stage 2, the following criteria is considered: ੵ Overdue between 30-90 days ੵ Restructuring of the loan ੵ Significant deterioration in the probability of default In case of a significant deterioration in the probability of default, the credit risk is considered to be increased significantly and the financial asset is classified as stage 2. The absolute and gradual thresholds used to increase the probability of default are differentiated on the basis of portfolio and product group. In this manner, for the commercial portfolio, definition of increase in the probability of default is the comparison between the probability of default on loan’s opening date, obtained from the integrated rating/score based on internal rating and probability of default of the same loan on reporting date, obtained from the integrated rating/score based on internal rating. For the individual portfolio, it is accepted that the probability of default is worsened in cases where the behavioral score falls below the thresholds determined on the basis of the product and the probability of default exceeds the thresholds determined on the basis of the product. Stage 3: Financial assets with sufficient and fair information for impairment at the reporting date, are classified in the third stage. Expected credit loss of these financial assets is measured at an amount equal to the lifetime expected credit loss. The following basic factors are considered for the classification of a financial asset in the third stage: ੵ More than 90 days past due ੵ Whether the credit rating is weakened, has suffered a significant weakness or cannot be collected or there is a certain opinion on this matter While estimating the expected credit loss, statistical models, methods and tools are used in accordance with the relevant legislation and accounting standards. Expected credit loss is measured using reasonable and supportable information by taking current and forecasts of future economic information into consideration, including macroeconomic factors. Three scenarios, base scenario, optimistic scenario and the worst scenario, are used in forecasting studies made by macroeconomic models. The variables used in these macroeconomic estimates Industrial Production Index, Employment Ratio and Credit Default Swap indicators. The validity of the risk parameter estimates used in the calculation of expected credit losses is reviewed and evaluated at least annually within the framework of model validation processes. Macroeconomic forecasts and risk delinquency data used in risk parameter models are re-evaluated every quarter to reflect the changes in economic conjuncture and are updated if needed. In this framework, necessary updates were made in 2022. Except for demand or revolving loans, the maximum period for which expected credit losses are to be determined is the contractual life of the financial asset. For demand or revolving loans, maturity is determined by taking the future risk mitigation processes into account such as behavioral maturity analyses performed by the Bank and cancellation/revision of the Bank’s credit limit. While calculating the expected credit loss, aside from assessment of whether there is a significant increase in credit risk or not, basic parameters expressed as probability of default, loss given default and exposure at default are used. Probability of Default: Represents the probability of default on the loan over a specified time period. In this context, the Bank has developed models to calculate 12-month and life-time default probabilities by using internal rating based credit rating models. As for the Group Companies historical probability of default data has also been observed. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 214 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 215 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Loss Given Default (LGD): Defined as the damage caused by the default of borrower to the total balance of the exposure at the time of default. The LGD estimates are determined in terms of credit risk groups that are detailed in the Bank’s data resources and system facilities. The model used for the estimation of the LGD was established by taking into account the direct cost items during the collection process, based on the historical data of the Bank’s collection, cash flows are discounted at effective interest rates. Exposure at Default: For cash loans, the cash balance at the date of report, for non-cash loans the balance calculated using the Credit Conversion Factor (CCF) is represented by Exposure at Default. Credit Conversion Factor: Calculated for non-cash loans (undrawn limit for revolving loans, commitments, non-cash loans etc.) The historical limit usage data of the Bank for revolving loans are analyzed and the limit amount that can be used until the moment of default is estimated. For non-cash loans, the cash conversion ratio of the loan amount is estimated by analyzing the product type and the past compensation amount of the bank. Credit risks, which require qualitative assessments due to their characteristics and differ by grouping in this manner, are considered as individual within the internal policies. Calculations are made by the method of discounted cash flows with the effective interest rate expected from the relevant financial instrument. Discounted cash flows are estimated for 3 different scenarios in which parameters are differentiated, and individual expected credit loss is calculated by taking into consideration the cash deficit amounts weighted according to probabilities. As mentioned above, the Bank allocated expected credit losses by reflecting additional provisions through individual assessments performed for the customers that operates in sectors where the impact might be high in accordance with the Bank’s risk policies. Expected credit loss is reflected in the income statement. Released provisions in the current year are accounted under “Expected Credit Loss Expenses” and released provision which is carried from the prior year are accounted under “Other Operating Income”. Receivables evidenced through the Legal Process that collection is not possible can be written-off by fulfilling the requirements of the Tax Procedure Law. Besides, the loans for which specific provision is allocated and for which there is no reasonable expectation of recovery might be written-off. IX. Offsetting Financial Instruments Financial assets and financial liabilities shall be offset, and the net amount shall be presented in the balance sheet only when a party currently has a legally enforceable right to set off the recognized amounts or intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. X. Sale and Repurchase Agreements and Securities Lending Transactions Marketable securities subject to repurchase agreements are classified under “Financial Assets at Fair Value through Profit and Loss”, “Financial Assets at Fair Value through Other Comprehensive Income” or “Financial Assets Measured at Amortised Cost” in the Bank’s portfolio and they are valued according to the valuation principles of the related portfolios. Funds obtained from the repurchase agreements are recognized under “Funds from Repurchase Transactions” account in liabilities. For the difference between the sale and repurchase prices determined by the repo agreements for the period; expense accrual is calculated using the effective interest rate method. Reverse repo transactions are recognized under the “Receivables from Reverse Repo Transactions” account. For the difference between the purchase and resale prices determined by the reverse repo agreements for the period; income accrual is calculated using the effective interest rate method. XI. Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities Assets that meet the criteria to be classified as held for sale within the scope of “TFRS 5 – Non-current Assets Held for Sale and Discontinued Operations” are measured at the lower one of their fair value and their carrying amount which from the costs to sell are deducted and presented separately within the financial statements. In order to classify a tangible fixed asset as held for sale, the asset (or the disposal group) should be available for an immediate sale in its present condition subject to the terms of any regular sales of such assets (or such disposal groups) and the sale should be highly probable. For a highly probable sale, the appropriate level of management must be committed to a plan to sell the asset (or the disposal group), and an active programme to complete the plan should be initiated to locate a customer. Also, the asset (or the disposal group) should have an active market sale value, which is a reasonable value in relation to its current fair value. Events or circumstances may extend the completion of the sale more than one year. Such assets are still classified as held for sale if there is sufficient evidence that the delay in the sale process is due to the events and circumstances occurred beyond the control of the entity or the entity remains committed to its plan to sell the asset (or disposal group). A discontinued operation is a component of a bank that either has been disposed of or is classified as held for sale. Gains or losses relating to discontinued operations are presented separately in the income statement. XII. Goodwill and Other Intangible Assets As at the balance sheet date, there is no goodwill recorded in the unconsolidated balance sheet of the Bank. The Bank’s intangible assets consist of software programs. The purchased items are presented with their acquisition costs less the accumulated amortization and impairment provisions. In case there is an indication of impairment, the recoverable amount of the related intangible asset is estimated within the framework of “TAS 36 –Impairment of Assets” and impairment provision is set aside in case the recoverable amount is below its acquisition cost. The related assets are amortized by the straight-line method considering the estimated useful life. The amortization method and period are periodically reviewed at the end of each year. XIII. Tangible Assets The Bank follows its real estates in use, which are recorded under tangible fixed assets, according to the revaluation model within the framework of "TAS 16 – Property, Plant and Equipment" since 2015. The positive difference between the net book value of real estate property values and the renewed expertise values which are determined by the licensed valuation in 2022, companies are recorded under the shareholders’ equity. In case there is an indication of impairment, the recoverable amount of the related intangible asset is estimated within the framework of “TAS 36 – Impairment of Assets” and impairment provision is set aside in case the recoverable amount is below its acquisition cost. Tangible assets other than the land and construction in progress are amortized at the straight-line method, according to their estimated useful lives. The estimated useful life, residual amount and the method of amortization are reviewed every year for the possible effects of the changes that occur in the estimates and if there is any change in the estimates, they are recognized prospectively. Assets held under finance lease are depreciated over the expected useful life of the related assets. Assets subject to leasing are depreciated according to relevant contract periods. Leasehold improvements are amortized in equal amounts considering their useful life. However, in any case the useful life cannot exceed leasing term. When the lease period is not certain or longer than 5 years, the amortization period is recognized as 5 years. The difference between the sales proceeds arising from the disposal of tangible assets or the inactivation of a tangible asset and the book value of the tangible assets are recognized in the income statement. Regular maintenance and repair costs incurred for tangible assets are recognized as expense. There are no pledges, mortgages and similar encumbrances on tangible assets. The “Regulation on Procedures and Principles for the Trading of Precious Metals by Banks and the Disposal of Commodities and Real Properties acquired by Banks due to their Receivables” has been abolished by BRSA effective from January 1, 2017. Real properties acquired by Group due to their receivables and not treated in the scope of “TFRS 5 - Non-current Assets Held for Sale and Discontinued Operations" has been started to follow under “Other Assets” in accordance with the related accounting standard from the current period. The depreciation rates used in amortization of tangible assets and their estimated useful lives are as follows: Tahmini Ekonomik Ömür (Yıl) Amortisman Oranı Binalar Kasalar Diğer Menkuller XIV. Leasing Transactions 50 2-50 2-25 %2 %2 - %50 %4 - %50 Assets acquired through financial leases are carried at the lower of their fair values or amortized value of the lease payments. Leasing payables are recognized as liabilities in the balance sheet while the interest payable portion of the payables is recognized as a deferred amount of interest. Finance lease payments are separated as financial expense and principal amount payment, which provides a decrease in finance lease liability, thus helps a fixed rate interest on the remaining principal amount of the debt to be calculated. Within the context of the Bank’s general borrowing policy, financial expenses are recognized in the income statement. Assets held under financial leases are recognized under the “Property, Plant and Equipment” account and are depreciated by using the straight-line method. The Bank does not participate in the financial leasing transactions as a “lessor”. The Bank accounts its operating leases in accordance with the TFRS 16 "leases" standard. Operating leases within the framework of the aforementioned standard are monitored in a similar manner to financial leases. For the agreements within the scope of TFRS 16, the right of use asset and the lease payments are reflected to the financial statements and they are presented under "Tangible Assets" and "Liabilities from Financial Leases", respectively. The lease liability is calculated by discounting the future lease payments by the use of the Bank or alternative borrowing interest rates at the date of initial application or contract date. Fixed assets, which are accounted as right of use assets, are subject to depreciation considering the period of the contract. Interest expenses and foreign exchange differences related to the lease liabilities are associated with profit and loss statement. XV. Provisions and Contingent Liabilities As of the end of the reporting period, a past event is deemed to give rise to a present obligation if, taking account of all available evidence, it is more likely than not that a present obligation exists, the entity recognizes a provision in the financial statements. As of the end of the reporting period where it is more likely that no present obligation exists at the end of the reporting period, the entity discloses a contingent liability on footnotes unless the possibility of an outflow of resources embodying economic benefits is remote. In the financial statements, a provision is made for an existing commitment resulted from past events if it is probable that the commitment will be settled, and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the reliable estimates of management on the expenses to incur as of the balance sheet date to fulfill the liability by considering the risks and uncertainties related to the liability. In case the provision is measured by using the estimated cash flows required to fulfill the existing liability, the book value of the related liability is equal to the present value of the related cash flows. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 216 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 217 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 If the amount is not reliably estimated and there is no probability of cash outflow from the Bank to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements. XVI. Contingent Assets The contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the Bank. Since showing the contingent assets in the financial statements may result in the accounting of an income, which will never be generated, the related assets are not included in the financial statements, but if there is a possibility that an inflow of economic benefits of these assets may occur then it is explained in the footnotes of the financial statements. Nevertheless, the developments related to the contingent assets are constantly evaluated and if it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. XVII. Liabilities Regarding Employee Benefits 1. Severance Indemnities and Short-Term Employee Benefits According to the related regulation and the collective bargaining agreements, the Bank is obliged to pay termination benefits for employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or (for the female employees) who have voluntarily quit within one year after the date of their marriage. Within the scope of “TAS 19-Employee Benefits”, the Bank allocates severance indemnity provisions for employee benefits by estimating the present value of the probable future liabilities. According to TAS 19, all actuarial gains and losses occurred are recognized under shareholder’s equity. The Bank also allocates provision for the unused paid vacation. 2. Retirement Benefit Obligations Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (“İşbank Pension Fund”), of which each Bank employee is a member, has been established according to the provisional Article 20 of the Social Security Act No. 506. As per provisional article numbered 23 of the Banking Law numbered 5411, it is ruled that Bank pension funds, which were established within the framework of Social Security Act, will be transferred to the Social Security Institution, within 3 years after the publication of such law. Methods and principles related to transfer have been determined as per the Cabinet decision dated 30 November 2006 numbered 2006/11345. However, the related article of the act has been cancelled upon the President’s application dated November 2, 2005, by the Supreme Court’s decision dated March 22, 2007, numbered E.2005/39, K.2007/33, which was published on the Official Gazette dated March 31, 2007, and numbered 26479 and the execution decision was ceased as of the issuance date of the related decision. After the justified decree related to cancelling the provisional Article 23 of the Banking Law was announced by the Constitutional Court on the Official Gazette dated December 15, 2007 and numbered 26731, Turkish Grand National Assembly started to work on establishing new legal regulations, and after it was approved at the General Assembly of the TGNA, the Law numbered 5754 “Emendating Social Security and General Health Insurance Act and Certain Laws and Decree Laws”, which was published on the Official Gazette dated 8 May 2008 and numbered 26870, came into effect. The new law decrees that the contributors of the Bank pension fund, the ones who receive salaries or income from these funds and their rightful beneficiaries will be transferred to the Social Security Institution and will be subject to this Law within 3 years after the release date of the related article, without any need for further operation. The three-year transfer period can be prolonged for maximum 2 years by the Cabinet decision. However related transfer period has been prolonged for 2 years by the Cabinet decision dated March 14, 2011, which was published on the Official Gazette dated April 9, 2011, and numbered 27900. In addition, by the Law “Emendating Social Security and General Health Insurance Act”, which was published on the Official Gazette dated March 8, 2012 and numbered 28227, this period of 2 years has been raised to 4 years after that related transfer period has been prolonged for one more year by the Cabinet decision dated April 8, 2013, which was published on the Official Gazette dated 3 May 2013 and numbered 28636 also this period has revalidated one more year by the Cabinet decision dated February 24, 2014, which was published on the Official Gazette dated April 30, 2014 and numbered 28987. The Council of Ministers has been lastly authorized to determine the transfer date in accordance with the last amendment in the first paragraph of the 20th provisional article of Law No.5510 implemented by the Law No. 6645 on Amendment of the “Occupational Health and Safety Law and Other Laws and Decree Laws” published in the Official Gazette dated April 23, 2015, and numbered 29335. This authority was transferred to the President with the delegated legislation No.703 which was published in the repetitive Official Gazette No. 30473 dated July 9, 2018. On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article 20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the meeting of the afore-mentioned court on 30 March 2011. The aforementioned Law also states that; ੵ Through a commission constituted by the attendance of one representative separately from the Social Security Institution, Ministry of Finance, Turkish Treasury, State Planning Organization, Banking Regulation and Supervision Agency, Savings Deposit Insurance Fund, one from each pension fund, and one representative from the organization employing pension fund contributors, related to the transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be calculated by considering their income and expenses in terms of the lines of insurance within the context of the related Law, and technical interest rate of 9.8% will be used in the actuarial calculation of the value in cash, ੵ And that after the transfer of the pension fund contributors, the ones who receive salaries or income from these funds and their rightful beneficiaries to the Social Security Institution, these persons’ uncovered social rights and payments, despite being included in the trust indenture that they are subject to, will be continued to be covered by the pension funds and the employers of pension fund contributors. . In line with the new law, the Bank obtained a technical actuarial valuation report from the licensed actuary for the year ended December 31, 2022. In related period’s financial statements, Bank provided full provision for the total amount of technical and actual deficit stated in the actuarial report of the aforementioned period. The actuarial assumptions used in the related actuarial report are given in Section Five Note II-i-4.1. İşbank Members’ Supplementary Pension Fund has been founded to provide beneficiaries with additional social security and solidarity rights to compulsory social security benefits as per the provisions of the Turkish Commercial Code and Turkish Civil Code. XVIII. Taxation 1. Corporate Tax: In accordance with the Provisional Article 13 added to the Corporate Tax Law Numbered 5520 with the Law Numbered 7316, the 20% rate foreseen in the calculation of the corporate tax for the corporate earnings of the 2021 taxation period is determined as 25% (starting from the declarations to be submitted as of July 1, 2021 and to be valid for the corporate earnings for the taxation period starting from January 1, 2021), and as 23% for the corporate earnings for the 2022 taxation period. On the other hand, in accordance with the amendment made in Article 32 of the Corporate Tax Law with the Law No. 7394 published in the Official Gazette dated 15.04.2022 and numbered 31810, the corporate tax rate should start from the declarations that must be submitted as of 01.07.2022 and taxation starting from 01.01.2022. It has been determined as 25% to be valid for the corporate earnings of the period. In this context, the Corporate Tax rate valid for the period of December 31, 2022, is 25%. As per the Corporate Tax law, temporary tax is calculated and paid quarterly in line with the principles of the Income Tax Law and at the corporate tax rate. The temporary tax payments are deducted from the current period’s corporate tax. The 4th provisional tax for the year 2022 will be paid in February 2023 for to be deducted from the corporate tax of the current taxation period. Tax expense consists of current tax and deferred tax. The current tax liability is calculated over the portion of the period subject to taxation. The taxable profit differs from the profit stated in the income statement, as the income and expense items that can be taxable or deductible at other periods, and items that are not taxable or deductible are excluded. The current tax amounts payable is netted off with prepaid tax amounts and presented on the financial statements. Within the framework of the Corporate Tax Law numbered 5520, 75% of the gains on the sale of the participation shares, which were held in the assets for a minimum of 2 whole years and 75% of the gains on the sale of immovable are exempt from tax provided that they are added to the capital as set forth by the Law or that they are kept in a special fund under liabilities for a period of 5 years. However, in accordance with Article 89 / a of the Law No. 7061 and Article 5.1.e and Article 5.1.f of the Corporate Tax Law, which were published in the Official Gazette dated December 5, 2017, and numbered 30261, the 75% applied in terms of immovable sales mentioned above has been reduced to 50% which is effective from the date of publication of the Law. In accordance with the provision of Article 298 / A of the Tax Procedure Law, the necessary conditions for inflation adjustment in the calculation of corporate tax as of the end of the 2021 calendar year have been met. However, the application of inflation adjustment in the calculation of corporate tax was postponed to 2023 with the regulation made with the "Law on the Amendment of the Tax Procedure Law and the Corporate Tax Law" numbered 7352 published in the Official Gazette dated 29.01.2022 and numbered 31734. Accordingly, VUK (Tax Procedure Law) financial statements for the 2021 and 2022 accounting periods, including the provisional tax periods, will not be subject to inflation adjustment, and the 2023 accounting period will not be subject to inflation adjustment as of the temporary tax periods. will be subject to inflation adjustment regardless. 2. Deferred Tax: Deferred tax asset or liability is determined by calculating the tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts considered in the legal tax base account, by taking the legal tax rates into account. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Free provisions that are allocated for possible future risks are not subject to deferred tax calculation. No tax assets or liabilities are recognized for the temporary timing difference that affects neither the taxable profit nor the accounting profit and that arises from the initial recognition in the balance sheet, of assets and liabilities, other than the goodwill and mergers. The Bank calculates deferred tax for the provisions allocated for Stage 1 and Stage 2 expected credit loss. The carrying values of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is measured at enacted tax rates prevailing in the period or about to be enacted when the assets are realized or liabilities are settled, and the tax is recognized as income or expense in the income statement. Nonetheless, if the deferred tax is related to assets directly associated with the equity in the same or different period, it is directly recognized in the equity accounts. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 218 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 219 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 In accordance with the Provisional Article 13 added to the Corporate Tax Law Numbered 5520 with the Law Numbered 7316, the 20% rate foreseen in the calculation of the corporate tax for the corporate earnings of the 2021 taxation period is determined as 25% (starting from the declarations to be submitted as of July 1, 2021 and to be valid for the corporate earnings for the taxation period starting from January 1, 2021), and as 23% for the corporate earnings for the 2022 taxation period. On the other hand, in accordance with the amendment made in Article 32 of the Corporate Tax Law with the Law No. 7394 published in the Official Gazette dated 15.04.2022 and numbered 31810, the corporate tax rate should start from the declarations that must be submitted as of 01.07.2022 and taxation starting from 01.01.2022. It has been determined as 25% to be valid for the corporate earnings of the period. The Bank has calculated deferred tax by using 25% rate (December 31, 2021: 20%, 23%, and 25% rates are used). Deferred tax assets and liabilities are shown in financial tables by way of offsetting. 3. Tax Practices in the Countries that Foreign Branches Operate: Turkish Republic of Northern Cyprus (TRNC) In accordance with TRNC tax legislation, 15% income tax is accrued on the remaining tax base after 10% corporate tax is deducted from corporate income. The tax bases for companies are determined by adding the expenses that cannot be deducted according to TRNC regulations, to commercial gains and by subtracting exemptions and deductions from commercial gains. Income tax is paid in June, and corporate tax payment is made in two equal installments, in May and in October. On the other hand, withholding tax is paid in TRNC over interest income and similar gains of the companies. The related withholding tax payments and provisional tax paid every quarter during the year are deducted from corporate tax payable and the difference between withholding and provisional tax amounts and corporate tax payable is discounted from income tax provided that the withholding tax and paid provisional tax amounts are higher than corporate tax amount. England Corporate earnings are subject to 19% corporate tax in England. The relevant rate is applied to the tax base that is determined by adding the expenses that cannot be deducted due to the regulations, to commercial gains and by subtracting exemptions and deductions from commercial gains. In other respect, if the tax base calculated in accordance with the country legislation is within a certain range, the temporary corporate tax is paid in July, October of the relevant year and in January and April of the following year; If it is over a certain amount, it is paid in 4 installments in March, June, September and December of the relevant year. The corporate tax amount must be finalized and paid by the end of September of the year following the year of profit. In case the corporate tax payable as a result of the calculation is below the temporary taxes paid, the difference amount is deducted later or paid back to the Branch by the authority. Bahrain Banks in Bahrain are not subject to tax according to the regulations of the country. The Republic of Iraq (Iraq) The corporate tax rate in Iraq is 15%, and the corporate tax is paid on a consolidated basis to the tax office of the foreign bank's central branch. The first branch established in Iraq is considered as the central branch. Foreign bank branches whose central branch is within the boundaries of the Central Government must submit their consolidated financial statements to the relevant tax office by the end of May of the following year, and branches of foreign banks whose central branch is within the boundaries of the Northern Iraq Regional Government by the end of June of the following year at the latest and must pay the tax. Northern Iraq Regional Government tax offices can accrue fixed taxes other than the specified rate and can postpone the last payment period. Kosovo Corporate earnings are subject to income tax rate of 10% according to the Kosovo legislation. This ratio is applied to the tax base that will be calculated as a result of the implementation of exemptions, deductions, addition of disallowable expenses, to the corporate income and that are calculated in accordance with the tax laws. Tax has to be paid in advance until April, July, October and the 15th day of January of the following year by four installments. If those prepaid taxes are lower than the final corporate tax, the difference is paid until the end of March of the following year, in case of a claim made by the company, if it is higher, then the difference is returned to the institution by the tax authorities after the inspection conducted by those institutions. 4. Transfer Pricing: Transfer pricing is regulated through Article 13 of Corporate Tax Law titled “Transfer Pricing through Camouflage of Earnings”. Detailed information for the practice regarding the subject is found in the “General Communiqué Regarding Camouflage of Earnings through Transfer Pricing”. According to the aforementioned regulations, in the case of making purchase or sales of goods or services with relevant persons/corporations at a price that is determined against “arm’s length principle”, the gain is considered to be distributed implicitly through transfer pricing and such distribution of gains is not subject to deductions according to article 11 of Corporate Tax Law in means of corporate tax. XIX. Borrowings The Bank, whenever required, generates funds from individuals and institutions residing domestically and abroad by approaching the borrowing instruments in the form of syndication, securitization, collateralized borrowing and issue of bonds/bills. Such transactions are at first carried at acquisition cost, and in the following periods they are valued at amortized cost measured by using the effective interest rate method. XX. Equity Shares and Their Issuance Share issuance related to costs is recognized as expenses. Dividend income related with the equity shares are determined by the General Assembly of the Shareholders. Weighted average number of shares outstanding is taken into account in the calculation of earnings per share. In case the number of shares increases by way of bonus issues as a result of the capital increases made by using the internal sources, the calculation of earnings per share is made by adjusting the weighted average number of shares, which were previously calculated as at the comparable periods. The adjustment means that the number of shares used in calculation is taken into consideration as if the bonus issue occurred at the beginning of the comparable period. In case such changes in the number of shares occur after the balance sheet date, but before the ratification of the financial statements to be published, the calculation of earnings per share are based on the number of new shares. The Bank’s earnings per share calculations taking place in the income statement are as follows: Profit distributable to shareholders Weighted average number of share certificates (Thousand figure) Earnings per share – (in full TL) 61,537,880 250,002,250 0.246149305 Current Period Prior Period 13,467,895 250,002,250 0.053871095 XXI. Bank Acceptances and Bills of Guarantee Bill guarantees and acceptances are realized simultaneously with the customer payments, and they are presented as possible liabilities and commitments in the off-balance sheet accounts. XXII. Government Incentives There are no government incentives utilized by the Bank, during the current or prior accounting periods. XXIII. Segment Reporting Business segment is the part of an enterprise, ੵ which conducts business operations where it can gain revenues and make expenditures (including the revenues and expenses related to the transactions made with the other parts of the enterprise), ੵ whose operating results are regularly monitored by the authorities with the power to make decisions related to the operations of the enterprise in order to make decisions related to the funds to be allocated to the segment and to evaluate the performance of the segment, and ੵ which has its separate financial information. Information on the Bank’s business segmentation and related information is explained in Section IV, Note XII. XXIV. Other Disclosures None. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 220 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 221 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 SECTION FOUR: INFORMATION ON THE FINANCIAL POSITION AND RISK MANAGEMENT OF THE BANK I. Explanations on Shareholders’ Equity The capital adequacy standard ratio of the bank is 24.36%. (31.12.2021: 20.36%). The capital adequacy standard ratio has been calculated on the basis of the Regulation on Shareholder’s Equity of Banks, the Regulation on Measurement and Assessment of Capital Adequacy of Bank and other legal regulations related with BRSA decisions dated 21.12.2021, numbered 9996 and dated 28.04.2022, numbered 10188. Within the scope of the BRSA decisions, the amount subject to credit risk has been calculated by using the CBRT exchange rates as of 31.12.2021, and the shareholders’ equity has been calculated without taking into account the negative effects of financial assets in the portfolio of “Financial Assets Through Other Comprehensive Income” as of 21.12.2021. COMMON EQUITY TIER I CAPITAL Paid-in Capital to be Entitled for Compensation after All Creditors Share Premium Legal Reserves Other Comprehensive Income according to TAS Profit Net Current Period Profit Prior Period Profit Bonus Shares from Associates, Subsidiaries and Joint-Ventures not Accounted in Current Period’s Profit Common Equity Tier I Capital Before Deductions Deductions From Common Equity Tier I Capital Valuation adjustments calculated as per the article 9, (i) of the Regulation on Bank Capital Prior Period Current Period 11.615.938 6.115.938 109.156 109.148 57.746.955 45.454.002 68.855.410 23.175.203 61.703.346 18.882.481 61.537.880 13.467.895 165.466 5.414.586 200.030.805 93.736.772 Total Common Equity Tier I Capital ADDITIONAL TIER I CAPITAL Preferred Stock not Included in Common Equity Tier I Capital and the Related Share Premiums Debt Instruments and the Related Issuance Premiums Defined by the BRSA Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Covered by Temporary Article 4) Additional Tier I Capital before Deductions Deductions from Additional Tier I Capital Direct and Indirect Investments of the Bank on its own Additional Tier I Capital (-) Investments in Equity Instruments Issued by Banks or Financial Institutions Invested in Bank’s Additional Tier I Capital and Having Conditions Stated in the Article 7 of the Regulation Total of Net Long Positions of the Investments in Equity Items of Consolidated Banks and Financial Institutions where the Bank does not own 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital of Consolidated Banks and Financial Institutions where the Bank owns more than 10% of the Issued Share Capital Other items to be Defined by the regulator Items to be Deducted from Tier I Capital during the Transition Period Goodwill and Other Intangible Assets and Related Deferred Taxes not deducted from Tier I Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Evaluation of Capital Adequacy of Banks (-) Net Deferred Tax Asset/Liability not deducted from Tier 1 Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Evaluation of Capital Adequacy of Banks (-) Prior Period Current Period 192.857.543 90.161.889 Current and prior periods' losses not covered by reserves, and losses accounted under equity according to TAS 3.343.330 1.434.150 Deduction from Additional Tier I Capital when there is not enough Tier II Capital (-) Leasehold improvements on operational leases Goodwill Netted with Deferred Tax Liabilities 97.709 48.823 Total Deductions from Additional Tier I Capital Total Additional Tier I Capital Other Intangible Assets Netted with Deferred Tax Liabilities Except Mortgage Servicing Rights 3.201.916 1.561.603 Total Tier I Capital (Tier I Capital= Common Equity Tier I Capital + Additional Tier I Capital) 192.857.543 90.161.889 Remaining after deducting from the related deferred tax liability with the deferred tax asset based on future taxable income, except for deferred tax assets based on temporary differences Differences arise when assets and liabilities not held at fair value, are subjected to cash flow hedge accounting Total credit losses that exceed total expected loss calculated according to the Regulation on Calculation of Credit Risk by Internal Ratings Based Approach Securitization gains Unrealized gains and losses from changes in bank’s liabilities’ fair values due to changes in creditworthiness Net amount of defined benefit plans Direct and Indirect Investments of the Bank on its own Tier 1 Capital Shares Obtained against Article 56, Paragraph 4 of the Banking Law Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital Mortgage servicing rights (amount above 10% threshold) Net Deferred Tax Assets arising from Temporary Differences Exceeding the Threshold of Tier I Capital Amount Exceeding the 15% Threshold of Tier 1 Capital as per the Article 2, Clause 2 of the Regulation on Measurement and Evaluation of Capital Adequacy of Banks The Portion of Net Long Position of the Investments in Equity Items of Consolidated Banks and Financial Institutions where the Bank owns 10% or more of the Issued Share Capital not deducted from Tier 1 Capital Excess Amount arising from Mortgage servicing rights Excess Amount arising from Deferred Tax Assets from Temporary Differences Other items to be defined by the regulator 530.307 530.307 Deductions from Tier I Capital in cases where there are no adequate Additional Tier I or Tier II Capitals Total Deductions from Common Equity Tier I Capital 7.173.262 3.574.883 TIER II CAPITAL Debt Instruments and the Related Issuance Premiums Defined by the BRSA 25.342.500 18.606.250 Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Covered by Temporary Article 4) 1.046.800 Provisions (Amounts explained in the first paragraph of the article 8 of the Regulation on Bank Capital) 10.893.301 6.512.019 Tier II Capital Before Total Deductions Deductions from Tier II Capital 36.235.801 26.165.069 Direct and Indirect Investments of the Bank on its own Tier II Capital (-) Investments in Equity Instruments Issued by Banks and Financial Institutions Invested in Bank’s Tier II Capital and Having Conditions Stated in the Article 8 of the Regulation The Total of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of Tier I Capital (-) The Total of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital Exceeding the 10% Threshold of Tier I Capital (-) Other items to be Defined by the regulator (-) Total Deductions from Tier II Capital Total Tier II Capital Total Equity (Total Tier I and Tier II Capital) Deductions from Total Equity (Tier I Capital and Tier II Capital) Loans Granted against the Articles 50 and 51 of the Banking Law Net Book Values of Movables and Immovable’s Exceeding the Limit Defined in the Article 57, Clause 1 of the Banking Law and the Assets Acquired against Overdue Receivables and Held for Sale but Retained more than Five Years Other items to be Defined by the regulator Items to be Deducted from the Sum of Tier I and Tier II Capital (Capital) During the Transition Period 36.235.801 26.165.069 229.093.344 116.326.958 2.650 2.650 1.274 1.194 80 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 222 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 223 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Prior Period Current Period Information on Subordinated Liabilities: The Portion of Total of Net Long Positions of the Investments in Equity Items of Consolidated Banks and Financial Institutions where the Bank does not own 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital not deducted from Tier I Capital, Additional Core Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation The Portion of Total of Net Long Positions of the Investments in Equity Items of Consolidated Banks and Financial Institutions where the Bank owns more than 10% of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital not deducted from Additional Tier I Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation The Portion of Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank owns 10% of the Issued Share Capital, Deferred tax assets based on temporary differences and the right to offer mortgage as per the Temporary Article 2, Clause 1, Sub Clause 1 and 2 of the Regulation CAPITAL Total Capital (Total of Tier I Capital and Tier II Capital) Total Risk Weighted Assets CAPITAL ADEQUACY RATIOS Common Equity Tier I Capital Ratio (%) Tier I Capital Ratio (%) Capital Adequacy Ratio (%) BUFFERS Total Additional Common Equity Requirement Ratio (a+b+c) a) Capital Conservation Buffer Ratio (%) b) Bank-specific Counter-Cyclical Capital Buffer Ratio (%) c) Systematic Important Bank Buffer Ratio (%) Additional Common Equity Tier I Capital Over Total Risk Weighted Assets Ratio Calculated According to the Article 4 of Capital Conservation and Counter-Cyclical Capital Buffers Regulation (%) Amounts Lower Than Excesses as per Deduction Rules Remaining Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital 229.090.694 116.325.684 940.288.051 571.357.082 20,51 20,51 24,36 2,56 2,50 0,06 0 14,51 15,78 15,78 20,36 2,56 2,50 0,06 0 9,78 Remaining Total of Net Long Positions of the Investments in Tier I Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% or less of the Issued Share Capital 385.225 280.196 Remaining Mortgage Servicing Rights Net Deferred Tax Assets arising from Temporary Differences Limits for Provisions Used in Tier II Capital Calculation 2.557.610 General Loan Provisions for Exposures in Standard Approach (before limit of one hundred and twenty five per ten thousand) 16.381.640 15.233.222 General Loan Provisions for Exposures in Standard Approach Limited by 1,25% of Risk Weighted Assets 10.893.301 6.512.019 Subsequent call dates, if applicable None. Total Loan Provision that Exceeds Total Expected Loss Calculated According to the Communiqué on Calculation of Credit Risk by Internal Ratings Based Approach Total Loan Provision that Exceeds Total Expected Loss Calculated According to the Communiqué on Calculation of Credit Risk by Internal Ratings Based Approach, Limited by 0,6% Risk Weighted Assets Debt Instruments Covered by Temporary Article 4 (effective between 1 January 2018-1 January 2022) Upper Limit for Additional Tier I Capital Items subject to Temporary Article 4 Amount of Additional Tier I Capital Items Subject to Temporary Article 4 that Exceeds Upper Limit Upper Limit for Additional Tier II Capital Items subject to Temporary Article 4 Amount of Additional Tier II Capital Items Subject to Temporary Article 4 that Exceeds Upper Limit 1.046.800 17.272.200 Coupons / dividends Fixed or floating dividend/coupon Coupon rate and any related index Existence of a dividend stopper Fully discretionary, partially discretionary or mandatory Existence of step up or other incentive to redeem Fixed 7.85 % None. None. None. Issuer Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Unique identifier (CUSIP, ISIN etc.) US900151AF84 - XS1003016018 US90016BAF58 – XS1623796072 XS2106022754 Governing law(s) of the instrument It is subject to English Law except for certain articles that will be subject to Turkish Law. Issued within the scope of BRSA Regulation on Banks’ Equity. It is subject to English Law except for certain articles that will be subject to Turkish Law. Issued within the scope of BRSA Regulation on Banks’ Equity. It is subject to English Law except for certain articles that will be subject to Turkish Law. Issued within the scope of BRSA Regulation on Banks’ Equity. Subject to 10% deduction as of 1/1/2015 No No No Eligible at unconsolidated/consolidated Unconsolidated -Consolidated Unconsolidated -Consolidated Unconsolidated -Consolidated Instrument type Amount recognized in regulatory capital (Currency in million, as of most recent reporting date) Par value of instrument Accounting classification Original date of issuance Perpetual or dated Original maturity date 10.12.2013 Dated 10 Years Bond 7,460 Bond 9,325 9,325 Bond 13,988 13,988 Subordinated Liabilities Subordinated Liabilities Subordinated Liabilities Issuer call subject to prior supervisory (BRSA) approval Yes Optional call date, contingent call dates and redemption amount The Bank: (1) provided that subject to having obtained the prior approval of the related legislation, can purchase or otherwise acquire treasury stock (2) provided that subject to having obtained the prior approval of the BRSA, (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity. 29.06.2017 22.01.2020 Dated 11 Years Yes Dated 10 Years Yes The Bank has the option to repay all of the related bonds on June 29, 2023 provided that subject to having obtained the prior approval of the BRSA. The Bank: (1) provided that subject to having obtained the prior approval of the related legislation, can purchase or otherwise acquire treasury stock (2) provided that subject to having obtained the prior approval of the BRSA, (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity. The Bank has the option to repay all of the related bonds on January 22, 2025 provided that subject to having obtained the prior approval of the BRSA. The Bank: (1) provided that subject to having obtained the prior approval of the related legislation, can purchase or otherwise acquire treasury stock (2) provided that subject to having obtained the prior approval of the BRSA, (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity. None. Fixed 7 % None. None. None. None. Fixed 7.75 % None. None. None. Noncumulative or cumulative Noncumulative Noncumulative Noncumulative Convertible or non-convertible None. None. None. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 224 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 225 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 If convertible, conversion trigger (s) If convertible, fully or partially If convertible, conversion rate If convertible, mandatory or optional conversion If convertible, specify instrument type convertible into If convertible, specify issuer of instrument it converts into Write-down feature If write-down, write-down trigger(s) In accordance with Regulations on Equities of Banks.Article 8.2.ğ. bonds have deleted option from records. In accordance with Regulations on Equities of Banks.Article 8.2.ğ bonds have deleted option from records. In accordance with Regulations on Equities of Banks.Article 8.2.ğ. bonds have deleted option from records. Due to the losses incurred, where the Bank is at the point at which the BRSA may determine pursuant to Article 71 of the Banking Law that: (i) its operating license is to be revoked and the Bank is liquidated or (ii) the rights of all of its shareholders (except to dividends), and the management and supervision of the Bank, are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable). Due to the losses incurred, where the Bank is at the point at which the BRSA may determine pursuant to Article 71 of the Banking Law that: (i) its operating license is to be revoked and the Bank is liquidated or (ii) the rights of all of its shareholders (except to dividends), and the management and supervision of the Bank, are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) Due to the losses incurred, where the Bank is at the point at which the BRSA may determine pursuant to Article 71 of the Banking Law that: (i) its operating license is to be revoked and the Bank is liquidated or (ii) the rights of all of its shareholders (except to dividends), and the management and supervision of the Bank, are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) If write-down, full or partial Partially or completely Partially or completely Partially or completely If write-down, permanent or temporary Permanent Permanent Permanent If temporary write-down, description of write- up mechanism Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Incompliance with article number 7 and 8 of “Own fund regulation” Yes Yes Yes Details of incompliances with article number 7 and 8 of “Own fund regulation” To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. Issuer Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Unique identifier (CUSIP, ISIN etc.) TRSTISB72712 TRSTISB62911 TRSTISB92918 Governing law(s) of the instrument Is subject to Turkish Law. Has been issued in accordance with the BRSA Communiqué regarding the Equity of Banks. Is subject to Turkish Law. Has been issued in accordance with the BRSA Communiqué regarding the Equity of Banks. Is subject to Turkish Law. Has been issued in accordance with the BRSA Communiqué regarding the Equity of Banks. Taking into account in equity calculation Subject to 10% deduction as of 1/1/2015 No No. Unconsolidated – Consolidated Unconsolidated - Consolidated Eligible at unconsolidated / consolidated Instrument type (types to be specified by each jurisdiction) Amount recognized in regulatory capital (Currency ın TL million, as of most recent reporting data) Bond 880 Nominal value of instrument (TL Million) 1,100 Bond 800 800 No Unconsolidated – Consolidated Bond 350 350 Accounting classification Original date of issuance Perpetual or dated Original maturity date Issuer call subject to prior supervisory approval Subordinated Liabilities Subordinated Liabilities Subordinated Liabilities 08.08.2017 19.06.2019 26.09.2019 Dated 10 Years Yes Dated 10 Years Yes Dated 10 Years Yes Optional call date, contingent call dates and redemption amount The Bank; (1) can purchase bills that subject to having obtained the prior approval of the BRSA and the date which may not be earlier than fifth anniversary of the Issue Date (2) (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity The Bank; (1) can purchase bills that subject to having obtained the prior approval of the BRSA and the date which may not be earlier than fifth anniversary of the Issue Date (2) (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity The Bank; (1) can purchase bills that subject to having obtained the prior approval of the BRSA and the date which may not be earlier than fifth anniversary of the Issue Date (2) (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity Subsequent call dates, if applicable None. Interest/Dividend Payment Fixed or floating coupon/dividend payments Floating None. Floating None. Floating Coupon rate and any related index Government Debt Security for 5 years + 350 base points Turkish Lira Overnight Reference Interest Rate (TLREF) + 193 base points Government Debt Security for 5 years + 350 base points Existence of a dividend stopper Fully discretionary, partially discretionary or mandatory Existence of step up or other incentive to redeem None. None. None. None. None. None. None. None. None. Noncumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Convertible into equity shares None. None. None. If convertible, conversion trigger (s) If convertible, fully or partially If convertible, conversion rate If convertible, mandatory or optional conversion If convertible, specify instrument type convertible into If convertible, specify issuer of instrument it converts into An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 226 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 227 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Write-down feature If write-down, write-down trigger(s) In accordance with Regulations on Equities of Banks, Article 8 (2) (ğ), bonds have deleted option from records. In accordance with Regulations on Equities of Banks, Article 8 (2) (ğ), bonds have deleted option from records. In accordance with Regulations on Equities of Banks, Article 8 (2) (ğ), bonds have deleted option from records. Due to the losses incurred, within the framework of Article 71 of the Banking Law, (1) the Bank’s operating license is to be revoked and liquidated or (2) the rights of all of its shareholders (except to dividends) and the management and supervision of the Bank are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) based on the decision of the BRSA. Due to the losses incurred, within the framework of Article 71 of the Banking Law, (1) the Bank’s operating license is to be revoked and liquidated or (2) the rights of all of its shareholders (except to dividends) and the management and supervision of the Bank are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) based on the decision of the BRSA. Due to the losses incurred, within the framework of Article 71 of the Banking Law, (1) the Bank’s operating license is to be revoked and liquidated or (2) the rights of all of its shareholders (except to dividends) and the management and supervision of the Bank are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) based on the decision of the BRSA. If bond can be written-down, full or partially Partially or Completely Partially or Completely Partially or Completely If bond can be written-down, permanent, or temporary If temporary write-down, description of write-up mechanism Permanent Permanent Permanent Position in subordination hierarchy in case of liquidation (instrument type immediately senior to the instrument) Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Incompliance with article number 7 and 8 of Regulation on Bank Capital Yes. Yes. Yes. Details of incompliances with article number 7 and 8 of Regulation on Bank Capital To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. Explanations on the reconciliation of amounts on the equity items statement and amounts on the balance sheet: Current Period Calculation (*) Shareholders’ equity Leasehold improvements on operational leases Goodwill and intangible assets Provision Subordinated debt Deductions from shareholders’ equity Capital Carrying Amount Amounts in Equity 191.376.075 191,376,075 97,709 3,514,433 16,381,640 33,558,745 2,650 196.157.168 196,157,168 (97,709) (3,201,916) 10,893,301 25,342,500 (2,650) 229,090,694 (*) The related amounts are calculated in accordance with “Regulation on Equities of Banks”. In this context, part of the expected credit loss of stage 1 and stage 2 up to 1.25 % of amount subject to credit risk, part; subordinated loans according of the regulation, have been taken into consideration in equity calculation. On the other hand, in the calculation, the amount of equity calculated in accordance with the regulation dated 21.12.2021 and numbered 9996 of the BRSA and the amount based on the credit risk calculated in accordance with the regulation were used dated 28.04.2022 and numbered 10188. II. Explanations on Credit Risk 1. Credit risk is defined as the possibility of incurring loss where the counterparty in a transaction, partially or completely fails to meet its contractual obligations in due time in an agreement with the Bank. The Bank’s position against the credit risk limits defined by the current legislation is monitored by the Board. Within this framework, loans extended to Risk Groups and the Bank’s Risk Group, including the Bank; loans in high amounts and limitations regarding the shares in participations are monitored according to the limits determined in connection with the size of the shareholders’ equity. Credit risk limits of customers are determined depending on the financial situation and loan requirements of the borrowers, in strict compliance with the relevant banking legislation, within the framework of loan authorization limits of Branches, Regional Offices, Loan Divisions, the Deputy Chief Executives responsible for loans, the CEO, the Credit Committee and Board of Directors. These limits may be changed as may be deemed necessary by the Bank. Moreover, all commercial credit limits are revised periodically, provided that each period does not exceed a year. Furthermore, the borrowers and borrower groups forming a large proportion of the overall placement are subject to risk limits in order to provide further minimization of potential risk. The geographical distribution of borrowers is consistent with the concentration of industrial and commercial activities in Turkey. The distribution of borrowers by sector is monitored closely for each period and sectoral risk limits have been determined to prevent concentration of risk in sectoral sense. The credit-worthiness of customers is monitored on a consistent basis by using company rating and scoring models specially developed for this purpose, and the audit of statements of account received is assured to have been made in accordance with the provisions as stipulated by the relevant legislation. Utmost importance is given to ensure that loans are furnished with collaterals. Allocation decision, by the definition of credit risk, is not based on the assumption of collaterals can be liquidized. Most of the loans extended are collateralized by taking real estate, movable or commercial enterprise under pledge, promissory notes and other liquid assets as collateral, or by acceptance of bank letters of guarantee and individual or corporate guarantees. Jurisdictional applicability of collaterals in default, time required to convert to money and ability to maintain expected values are taken into consideration from the beginning of the credit allocation process. Most of the loans are collateralized by the receipt of real estate and securities pledge, commercial enterprise pledge, exchange notes and other liquid securities receivables, bank letters of guarantees and surety of other persons and institutions. It is an important element of the credit policy that disinclude concentration on collaterals. Non-performing and impaired loans has been classified in accordance with the “TFRS 9-Financial Instruments” and BRSA’s “Regulation on Procedures and Principles for Classification of Loans and Provisions to be set aside”. The detailed descriptions of these methods correspond with accounting practices, are included in Section Three Note VIII. Credit risk is the risk reduction effects without taking into consideration the total amount of exposures after offsetting transactions with different risk classes according to the types and amounts of disaggregated risks are listed below the average for the period. Amount subject to credit risk (*) Risk Classifications Exposures to central governments or central banks Exposures to regional governments or local authorities Exposures to administrative bodies and non-commercial undertakings Exposures to multilateral development banks Exposures to international organizations Exposures to banks and brokerage houses Corporates exposures Retail exposures Exposures secured by residential real estate property Exposures secured by commercial real estate property Past due items Items in regulatory high-risk categories Exposures in the form of bonds by mortgages Short term exposures to banks, brokerage houses and corporates Exposures in the form of collective investment undertakings Other items Share Certificate Investment (*) Risk amounts after the credit conversions and the effects of credit risk mitigation (**) Average risk amounts are the arithmetical average of the amounts in quarterly reports prepared. Current Period Risk Amount Average Risk Amount (**) 412,015,045 361,971,573 192,167 162,638 738,079 42,605,601 439,505,721 186,833,240 34,914,774 32,744,712 5,925,237 92,007,097 2,646,881 61,766,665 78,246,112 253,333 200,691 539,782 46,747,325 407,329,369 149,622,525 29,390,397 30,784,430 6,069,248 61,269,907 2,128,314 42,054,606 56,376,943 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 228 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 229 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 2. There are certain control limits on forward transactions in terms of counter parties, and the risks taken for derivative instruments are evaluated along with other potential risks resulting from the market fluctuations. 3. As a result of the current level of customers’ needs and the progress in the domestic market in this particular area, the Bank uses derivative transactions either for hedging or for commercial purposes. Derivative instruments with a remarkable volume are monitored with consideration that they can always be liquidated in case of need. 4.Indemnified non-cash loans are considered as having the same risk weights as unpaid cash loans. The rating and scoring systems applied by the Bank, includes detailed company analysis and enables rating of all companies and loans without any restrictions regarding credibility. Loans and companies, which have been renewed, restructured or rescheduled, are rated within the scope of this system. Specialized loans are evaluated by a special rating system, which is based on the credibility of the counterparty as well as the feasibility and risk analysis of the cash flows created mainly by the projects undertaken or the asset financed. 5. Lending transactions abroad are conducted by determining the country risks of related countries within the context of the current rating system and by taking the market conditions, country risks, and the relevant legal limitations into account. Furthermore, the credibility of banks and other financial institutions established abroad is examined within the framework of the ratings that are determined by rating agencies and backed with CDS-IR (based on credit default swap) ratings and credit limits are assigned to the related banks and financial institutions accordingly. 6. i. (i) The share of the Bank’s receivables from the top 100 and 200 cash loan customers in the overall cash loan portfolio stands at 28%, 36%, respectively (December 31, 2021: 31%, 39%). ii. (ii) The share of the Bank’s receivables from the top 100 and 200 non-cash loan customers in the overall non-cash portfolio stands at 42%, 54% respectively (December 31, 2021: 44%, 57%). iii. (iii) The share of the Bank’s cash and non-cash receivables from the top 100 and 200 loan customers in the overall cash and non-cash loans stands at 19%, 25%, respectively (December 31, 2021: 18%, 24%). Companies that are among the top loan customers ranked according to cash, non-cash and total risks are leaders in their own sectors, the loans advanced to them are in line with their volume of industrial and commercial activity. A significant part of such loans is extended on a project basis, with their repayment sources being analyzed in accordance with the banking principles to be considered as satisfactory and associated risks are determined and duly covered by obtaining appropriate guarantees when deemed necessary. 7. The total value of the stage 1 and stage 2 expected credit loss allocated for credit risk stands at TL 15,381,907 (December 31, 2021: TL 14,511,914). 8. The Bank measures the quality of its loan portfolio by applying different rating/scoring models on cash commercial/corporate loans, retail loans and credit cards. The breakdown of the rating/scoring results, which are classified as “Strong”, “Standard” and “Below Standard” by considering their default features, is shown below. The loans whose borrowers’ capacity to fulfill their obligations is very good, are defined as “Strong”, whose borrowers’ capacity to fulfill its obligations in due time is reasonable, are defined as “Standard” and whose borrowers’ capacity to fulfill their obligations is poor, are defined as “Below Standard”. Strong Standard Below Standard The table data comprises behavior rating/scoring results. Current Period Prior Period 50.00% 44.71% 5.29% 45.06% 49.68% 5.26% 9. The net values of the collaterals of the closely monitored loans are given below in terms of collateral types and risk matches. Type of Collateral Personal Commercial and Corporate Credit Cards Personal Commercial and Corporate Credit Cards Current Period Prior Period Real Estate Mortgage (*) 1,227,513 8,211,635 1,085,464 8,038,098 Cash Collateral (Cash, securities pledge, etc.) 47,812 478,666 48,643 248,190 10. The net values of the collaterals of non-performing loans are given below in terms of collateral types and risk matches. Type of Collateral Current Period Prior Period Net Value of the Collateral Loan Balance Net Value of the Collateral Loan Balance Real Estate Mortgage (*) 5,485,809 5,485,809 5,444,533 5,444,533 Cash Collateral Vehicle Pledge Other (Suretyship, commercial enterprise under pledge, commercial papers, etc.) 1,854 253,411 1,854 253,411 657 263,607 657 263,607 8,010,972 8,010,972 6,716,113 6,716,113 (*) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports, and after comparing the results to the mortgage/pledge amounts and loan balances the smallest figures are considered to be the net value of collaterals. 11. The aging analysis of the receivables past due but not impaired in terms of financial asset classes, is as follows: Current Period (*) Loans Corporate / Commercial Loans Consumer Loans Credit Cards Total 31-60 Days (**) 61-90 Days (**) (***) Total 173,399 229,331 452,940 855,670 184,153 128,202 184,076 496,431 357,552 357,533 637,016 1,352,101 (*) The loans classified as closely monitored that are not past due or past due for less than 31 days is TL 66,101,064. (**) Related figures show only overdue amounts of installment based commercial loans and installment-based consumer loans; the principal amounts of the loans which are not due as of the balance sheet date are equal to TL 854,981 and TL 1,646,781 respectively. Prior Period (*) Loans Corporate / Commercial Loans Consumer Loans Credit Cards Total 31-60 Days (**) 61-90 Days (**) Total 79,196 155,537 393,119 627,852 689,714 70,167 204,307 964,188 768,910 225,704 597,426 1,592,040 (*) The loans classified as closely monitored that are not past due or past due for less than 31 days is TL 55,682,522. (**) Related figures show only overdue amounts of installment based commercial loans and installment-based consumer loans; the principal amounts of the loans which are not due as of the balance sheet date are equal to TL 1,185,836 and TL 1,196,104 respectively. Pledge on Wages and Vehicles 3,092,378 Cheques & Notes Other (Suretyship, commercial enterprise under pledge, commercial papers, etc.) 369,527 1,907 2,344,742 331,996 499 456,308 33,996,002 450,396 33,902,536 Non-collateralized 7,029,998 11,101,472 3,941,709 3,411,382 7,588,212 2,206,344 Total 11,854,009 54,159,209 3,941,709 7,340,627 50,109,531 2,206,344 (*) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports; and after comparing the results to the mortgage/pledge amounts and loan balances, the smallest figures are considered to be the net value of collaterals. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 230 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 231 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 12. Profile of significant exposures in major regions Current Period Domestic European Union OECD Countries (**) Off-Shore Banking Regions USA, Canada Other Countries Investments in Associates, Subsidiaries and Jointly Controlled Entities Undistributed Assets/ Liabilities (***) Total Prior Period Domestic European Union OECD Countries (**) Off-Shore Banking Regions USA, Canada Other Countries Investments in Associates, Subsidiaries and Jointly Controlled Entities Undistributed Assets/ Liabilities (***) Total Risk Sınıfları (*) Contingent and Non-Contingent Receivables from Central Governments or Central Banks Contingent and Non-Contingent Receivables from Regional Government or Domestic Government Contingent and Non-Contingent Receivables from Administrative Units and Non-Commercial Enterprises Contingent and Non-Contingent Receivables from Multilateral Development Banks Contingent and Non-Contingent Receivables from International Organizations Contingent and Non-Contingent Receivables from Banks and Intermediaries Contingent and Non-Contingent Corporate Receivables Contingent and Non-Contingent Retail Receivables Contingent and Non-Contingent Receivables Secured by Residential Property 402,885,482 10 1,136,971 7,992,582 412,015,045 192,141 162,503 657,915 80,164 26 135 192,167 162,638 738,079 11,041,637 17,319,637 9,787,728 5,715 1,795,520 2,655,364 42,605,601 423,592,178 1,501,506 3,307,863 1,801,982 7,132 9,295,060 184,286,264 419,021 219,733 2,824 73,339 1,832,059 66,393,260 246,958 58,801 3,294 65,415 891,758 Non-Performing Receivables 5,836,531 75,939 4,709 1 1,917 6,140 90,985,138 164,594 34,256 437 18,387 804,285 Receivables are identified as high risk by the Board Secured Marketable Securities Short-term Receivables and Short- term Corporate Receivables from Banks and Intermediaries Investments as Collective Investment Institutions 2,646,881 Other Receivables 61,610,586 93,188 62,891 Share Certificate Investments 78,246,112 439,505,721 186,833,240 67,659,486 5,925,237 92,007,097 2,646,881 61,766,665 78,246,112 260,247,872 393 1,136,972 3,328,635 264,713,872 Risk Groups (*) Contingent and Non-Contingent Receivables from Central Governments or Central Banks Contingent and Non-Contingent Receivables from Regional Government or Domestic Government Contingent and Non-Contingent Receivables from Administrative Units and Non-Commercial Enterprises Contingent and Non-Contingent Receivables from Multilateral Development Banks Contingent and Non-Contingent Receivables from International Organizations Contingent and Non-Contingent Receivables from Banks and Intermediaries Contingent and Non-Contingent Corporate Receivables Contingent and Non-Contingent Retail Receivables Contingent and Non-Contingent Receivables Secured by Residential Property 342,280 587,534 299,645 28 74 5,913,906 16,832,796 8,512,787 1,405 4,209,839 1,639,272 294,656,816 982,718 2,629,437 652,920 3,369 7,349,672 124,213,264 245,659 143,404 1,545 37,789 1,532,929 51,549,305 212,708 45,683 85 34,547 653,554 Non-Performing Receivables 6,653,184 127,476 4,330 1,349 4,720 Receivables are identified as high risk by the Board Secured Marketable Securities Short-term Receivables and Short-term Corporate Receivables from Banks and Intermediaries Investments as Collective Investment Institutions 23,255,664 92,613 12,713 1,377 13,994 267,888 1,586,280 Other Receivables 26,581,561 110,895 455,605 Equity Investments 38,685,526 342,308 587,608 299,645 37,110,005 306,274,932 126,174,590 52,495,882 6,791,059 23,644,249 1,586,280 27,148,061 38,685,526 Total 1,249,632,601 20,478,768 13,556,145 1,814,253 3,098,681 23,477,409 78,246,112 1,390,303,969 Total 795,587,666 18,605,258 12,103,604 657,332 5,437,859 14,776,772 38,685,526 885,854,017 (*) Risk amounts after the credit conversions and the effects of credit risk mitigation (**) OECD countries other than EU countries, USA and Canada (***) Assets and liabilities that are not consistently allocated. (*) The figures represent total risk amounts before credit risk mitigation and after credit conversion factor. (**) OECD countries other than EU countries, USA and Canada (***) Assets and liabilities that are not consistently allocated An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 232 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 233 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 13. Risk profile by sectors or counterparties: Current Period Bank Current Period Bank (1) (**) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) TP YP Toplam Sectors/Counterparty (*) Agricultural Farming and Raising Livestock Forestry Fishing Industry Mining Production 93,906 74,933 6,232 12,741 548 509 39 4,183,233 8,691,911 2,551,173 8,587,676 47,717 1,584,343 49,604 54,631 1,075,738 996,712 7,850 71,176 31,259 29,950 48 1,261 553,141 525,557 2,794 24,790 12,190,025 2,439,711 14,629,736 11,978,255 788,255 12,766,510 112,758 1,526 114,284 99,012 1,649,930 1,748,942 3,823,813 4,736 684 194,041,164 16,152,449 10,756,512 2,923,022 11,171,508 38,975,666 134,008,658 143,840,896 277,849,554 114,809 3,706,023 7,519,636 344,410 215,983 33,347 596,844 3,510,047 5,314,982 8,825,029 130,801,547 15,457,417 10,274,920 600,420 8,243,242 38,975,666 115,952,180 92,107,055 208,059,235 Electricity, gas, and water 2,981 4,736 Construction Services Wholesale and Retail Trade Hotel, Food and Beverage Services 1,164,101 160,594,874 1,692,011 250,673 684 2,590 55,719,981 350,622 265,609 2,289,255 2,331,422 39,388,147 8,275,169 5,934,700 725,665 2,596,574 14,546,431 46,418,859 60,965,290 29,286,334 28,800,612 58,086,946 151,510 738,079 42,552,620 173,836,986 70,181,182 29,303,613 1,081,112 18,197,550 2,646,881 219,861 38,205,021 238,646,977 299,062,312 537,709,289 66,774,252 41,379,410 15,017,732 393,241 11,821,824 155,804 103,540,526 33,693,748 137,234,274 8,905,512 3,865,158 3,348,572 235,959 622,515 9,420,483 7,807,906 17,228,389 Transportation and Telecommunication 5,883,279 41,245,490 17,131,538 3,325,512 329,027 2,476,054 117,093 31,896,624 38,611,369 70,507,993 Financial Institutions 152,530,460 1 738,079 42,552,620 37,923,673 927,707 6,976,383 2,580,301 979,005 1,653,049 946,468 621,282 10,086,203 2,022,737 1,078,824 4,083,656 511,512 1,098,580 839,225 1,582 69,464 39,514 4,865 7,460 241,386 2,646,881 219,861 30,745,473 68,372,103 201,234,444 269,606,547 1,741,720 407,104 394,012 492,935 7,186,651 16,140,063 6,575,763 22,715,826 3,288,932 454,523 3,743,455 1,613,471 1,487,987 3,101,458 4,374,775 9,196,572 13,571,347 Real Estate and Renting Services Self-Employment Services Education Services Health and Social Services 23,874 59,050 32,985 122,542 Other Total 53,777 94,221 3,266 245 7,306 246,338,351 187,431 52,981 28,056,191 83,532,529 20,588,923 1,164,179 59,488,324 61,546,804 1,065,425 433,057,380 68,971,064 502,028,444 412,015,045 192,167 162,638 738,079 42,605,601 439,505,721 186,833,240 67,659,486 5,925,237 92,007,097 2,646,881 61,766,665 78,246,112 847,189,374 543,114,595 1,390,303,969 (1) Contingent and non-contingent exposures to central governments or central banks (9) Contingent and non-contingent exposures secured by real estate property (2) Contingent and non-contingent exposures to regional governments or local authorities (10) Past due receivables (3) Contingent and non-contingent exposures to administrative bodies and non-commercial undertakings (4) Contingent and non-contingent exposures to multilateral development banks (5) Contingent and non-contingent exposures to international organizations (6) Contingent and non-contingent exposures to banks and brokerage houses (7) Contingent and non-contingent corporate receivables (8) Contingent and non-contingent retail receivables (11) Receivables in regulatory high-risk categories (12) Other receivables (13) Share Certificate Investments (14) Stock Investments (*) Risk amounts after the credit conversions and the effects of credit risk mitigation (**) Credit Guarantee Fund guaranteed by the undersecretariat of treasury are included in the receivables from central governments. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 234 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 235 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 14. Analysis of maturity-bearing exposures according to remaining maturities: 16. Miscellaneous Information According to Type of Counterparty or Major Sectors Current Period Time to Maturity Risk Groups (*) Receivables from Central Governments or Central Banks Receivables from Regional Governments or Domestic Governments Receivables from Administrative Units and Non-Commercial Enterprises The multilateral development banks and non-contingent receivables 1 Month 1-3 Months 3-6 Months 6-12 Months Over 1 Year Total 15,757,516 5,281,883 7,177,077 13,251,675 177,195,527 218,663,678 1,518 4,127 28,719 16,047 141,753 192,164 2,872 3,365 10,841 1,833 93,183 112,094 555,476 13,487 167,096 736,059 Receivables from Banks and Intermediaries 20,468,704 3,673,418 4,382,787 3,177,195 2,876,087 34,578,191 Corporate Receivables 43,534,046 57,435,915 68,813,888 63,885,288 196,678,855 430,347,992 Retail Receivables 80,768,322 3,408,661 7,173,149 26,032,601 57,306,749 174,689,482 Collateralized Receivables with Real Estate Mortgages Receivables are identified as High Risk by the Board 6,802,085 2,253,297 3,758,046 8,240,241 41,873,182 62,926,851 5,282,625 6,772,289 10,765,843 13,746,024 55,316,322 91,883,103 Total 173,173,164 78,846,442 102,110,350 128,518,000 531,481,658 1,014,129,614 (*) The figures represent total risk amounts before credit risk mitigation and after credit conversion factor. 15. Information on Risk Classes In the calculation of the amount subject to credit risk, determining the risk weights related to risk classes stated on the article of “Regulation on Measurement and Evaluation of Capital Adequacy of Banks”, is based on the Fitch Ratings’ and JCR Avrasya Derecelendirme A.Ş. international rating. “Receivables from Banks and Intermediaries” are receivables from related parties residing in foreign countries against the risk evaluated in class with “Receivables from Central Governments or Central Banks” are receivables that are evaluated in the class will be the subject of risk weights determined in accordance with Fitch Ratings issued by the rating of the risk. “Contingent and Non-Contingent Receivables from Banks and Intermediaries” in the class with resident banks and brokerage firms in the dorm evaluated risk “Corporate Receivables” in the class evaluated dorm resident companies and financial institutions in the TL-denominated receivables, the risk weights that will be the subject of JCR Avrasya Derecelendirme A.Ş. international rating grades assigned by it are used. If a receivable-specific rating is performed, risk weights to be applied on the receivable are determined by the relevant credit rating. The table related to mapping the ratings used in the calculations and credit quality grades, which is stated in the Annex of Regulation on Measurement and Evaluation of Capital Adequacy of Banks, is given below: Credit Quality Grades 1 2 3 4 5 6 Risk Rating AAA via AA- A+ via A- BBB+ via BBB- BB+ via BB- B+ via B- CCC+ and lower Risk Amounts according to Risk Weights 0% 20% 35% 50% 75% 100% 150% 250% Other Mitigation in Shareholders’ Equity (**) 404,361,323 69,118,282 35,026,246 91,410,676 170,313,658 535,379,338 60,312,347 385,225 36,962,227 3,296,197 417,626,191 67,554,463 34,914,774 90,685,838 166,261,050 515,936,220 59,977,981 385,225 36,962,227 3,296,197 Risk Weight Amount Before Credit Risk Mitigation (*) Amount After Credit Risk Mitigation (*) The figures represent total risk amounts before credit risk mitigation and after credit conversion factor. Significant Sectors/Counterparty Current Period 1 Agricultural 1.1 1.2 1.3 Farming and Raising Livestock Forestry Fishing 2 Industry 2.1 2.2 2.3 Mining Production Electricity, gas, and water 3 Construction 4 Services 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 Wholesale and Retail Trade Hotel, Food and Beverage Services Transportation and Telecommunication Financial Institutions Real Estate and Renting Services Self-Employment Services Education Services Health and Social Services 5 Other 6 Total Loans Depreciated (TFRS 9) Provisions Significant Increase in Credit Risk (Stage 2) Non-Performing (Stage 3) Expected Credit Loss (TFRS 9) 660.859 537.181 2.447 121.231 24.254.801 18.578 6.780.275 17.455.948 3.516.100 25.510.500 4.242.845 6.183.361 3.905.105 12.950 6.746.091 1.403.131 76.514 2.940.503 16.012.667 69.954.927 114.270 103.241 654 10.375 9.819.108 114.036 2.027.883 7.677.189 3.549.317 5.866.800 1.758.183 641.584 1.386.657 5.309 1.914.212 82.347 33.729 44.779 3.784.635 23.134.130 151.588 127.448 933 23.207 13.132.751 83.350 2.927.043 10.122.358 3.038.616 8.423.293 1.792.112 874.918 1.504.391 5.091 3.314.576 466.230 35.307 430.668 4.166.500 28.912.748 17. Information on Value Adjustments and Change in Credit Provisions: Beginning Balance Additional Provisions Reversal of Provisions Other Value Adjustment Ending Balance 1 Stage 3 provisions 13,790,995 10,976,758 (7,560,641) 2 Stage 1 and Stage 2 Provisions 14,511,914 7,686,291 (6,816,298) 17,207,112 15,381,907 18. Exposures Subject to Counter-cyclical Capital Buffer Country RWA Calculations for Private Sector Loans in Banking Book RWA calculations for Trading Book Total Turkey TRNC England Albania Cayman Island Kosovo Malta Iraq United Arab Emirates Germany Other 624,751,534 498,961 625,250,495 5,849,080 3,278,076 1,910,228 1,801,937 1,517,770 1,499,950 1,268,420 302,225 220,857 619,885 5,849,080 3,278,076 1,910,228 1,801,937 1,517,770 1,499,950 1,268,420 302,225 220,857 619,885 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 236 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 237 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 III. Explanations on Currency Risk The exposed currency risk of the Bank is result of the difference between the assets denominated in and indexed to foreign currencies and liabilities denominated in foreign currencies. Furthermore, parity fluctuations of different foreign currencies are another element of the currency risk. The currency risk is managed by the internal currency risk limits which are established as a part of the Bank’s risk policies. The Assets and Liabilities Management Committee and the Assets and Liabilities Management Unit meet regularly to take the necessary decisions for hedging exchange rate and parity risks within the framework of the limits determined by the “Net Foreign Currency Overall Position/Shareholders’ Equity” Standard Ratio which is a part of the legal requirement and the internal currency risk limits specified by the Board of Directors. Foreign exchange risk management decisions are strictly applied. In measuring currency risk, both the Standard Method and the Value at Risk Model (VAR) and Expected Shortfall are used as applied in the statutory reporting. Measurements made within the scope of the Standard Method are carried out on a monthly basis and form the basis of determining the capital requirement for hedging currency risk. Risk measurements made within the context of the VAR are practiced on a daily basis using the historical and Monte Carlo simulation methods. Scenario analyses are conducted to support the calculations made within the VAR context. Expected loss calculations are also carried out daily. The results of the measurements made on currency risk are reported to the Key Management and the risks are closely monitored by taking into account the market and the economic conditions. The Bank’s foreign currency purchase rates at the date of balance sheet and for the last five working days of the period announced by the Bank in TL are as follows: Date USD EUR December 31, 2022 December 30, 2022 December 29, 2022 December 28, 2022 December 27, 2022 December 26, 2022 18.6500 18.6500 18.6150 18.6031 18.5821 18.5344 19.9247 19.9247 19.8629 19.7565 19.7900 19.7020 The Bank’s last 30-days arithmetical average foreign currency purchase rates: USD: 18,5001 TL EURO: 19,6013 TL Sensitivity to currency risk: The Bank’s sensitivity to any potential change in foreign currency rates has been analyzed. In the analysis presented below, 10% change, which is also the amount used for the internal reporting purposes, is anticipated in USD, EUR, GEL and GBP. % Change in Foreign Currency Effects on Profit/Loss (*) Current Period Prior Period 10 % increase 10 % decrease 10 % increase 10 % decrease 10 % increase 10 % decrease 10 % increase 10 % decrease 188,682 (188,682) 579,692 (579,692) 82,821 (82,821) (99,261) 99,261 (31,038) 31,038 284,955 (284,955) 44,033 (44,033) 13,420 (13,420) USD EURO GEL GBP (*) Indicates the values before tax Information on currency risk: Current Period Assets EUR USD Other FC Total Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey (1) Banks Financial Assets at Fair Value through Profit/Loss (2) Money Market Placements 57,908,106 86,448,059 32,874,116 177,230,281 6,109,905 2,683,519 7,062,434 9,746,660 9,211,916 22,384,255 8,756,568 21,186,747 Financial Assets at Fair Value Through Other Comprehensive Income 3,100,317 42,842,959 10,121 45,953,397 Loans (3) 136,109,934 147,243,157 6,038,471 289,391,562 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 7,825,519 2,461,926 10,287,445 Financial Assets Measured at Amortised Cost 1,438,360 4,373,646 2,445,619 8,257,625 Derivative Financial Assets Held for Risk Management Tangible Assets (2) Intangible Assets (2) Other Assets (2) Total Assets Liabilities Banks Deposits Foreign Currency Deposits (4) Money Market Funds 27,102 2,794 29,198 59,094 485,985 6,118,513 456,816 7,061,314 215,688,747 303,838,222 62,284,751 581,811,720 2,319,353 3,163,785 962,739 6,445,877 164,553,060 270,889,723 103,054,811 538,497,594 12,090,068 12,090,068 Funds Provided from Other Financial Institutions 22,092,337 45,974,467 21,910 68,088,714 Marketable Securities Issued (5) Miscellaneous Payables Derivative Financial Liabilities Held for Risk Management Other Liabilities (2) Total Liabilities Net Balance Sheet Position Net Off Balance Sheet Position Derivative Financial Assets (6) Derivative Financial Liabilities (6) Non-Cash Loans Prior Period Total Assets Total Liabilities Net Balance Sheet Position Net Off Balance Sheet Position Derivative Financial Assets Derivative Financial Liabilities Non-Cash Loans 56,678,084 2,126,368 5,141,862 758,983 253,537 57,437,067 7,521,767 4,118,373 6,770,823 511,140 11,400,336 195,209,491 400,708,812 105,563,120 701,481,423 20,479,256 (96,870,590) (43,278,369) (119,669,703) (14,455,388) 103,074,628 44,564,310 133,183,550 38,972,528 157,036,003 48,930,238 244,938,769 53,427,916 53,961,375 4,365,928 111,755,219 68,430,893 79,258,121 8,944,195 156,633,209 204,810,246 229,504,923 43,119,943 477,435,112 166,286,867 328,298,342 75,470,330 570,055,539 38,523,379 (98,793,419) (32,350,387) (92,620,427) (34,917,922) 102,207,134 33,934,554 101,223,766 23,722,933 151,052,076 37,319,331 212,094,340 58,640,855 48,844,942 3,384,777 110,870,574 63,144,010 75,747,621 8,477,435 147,369,066 (1) Precious metals accounts amounting TL 31,128,501 are included. (2) In accordance with the Communiqué regarding the principles of the “Regulation on Measurement and Practices of Banks’ Net Overall FC Position/Shareholders’ Equity Ratio on a Consolidated and Unconsolidated Basis”, Foreign Currency Income Accruals of Derivative Financial Instruments (TL 4,953,311), Operating Lease Development Costs (TL 5,860), Intangible assets (TL 8.256), Prepaid Expenses (TL 306,367), Stage 1 and Stage 2 expected credit loss (TL (9,754,592)), Assets Held for Sale and Related to Discontinued Operations (TL 6,055), in liabilities; Foreign Currency Expense Accruals of Derivative Financial Instruments (TL 1,906,925) and Shareholders’ Equity (TL (4,939,662)) in Stage 1 and Stage 2 expected credit loss for non-cash loans (TL 126,809) in liabilities are not included in currency risk calculations. (3) Foreign currency indexed loans amounting TL 524,822 presented in TL loans in the balance sheet are included in the table above. TL 384,739 is USD indexed, TL 134,916 is EUR indexed, TL 401 is CHF indexed, TL 4,766 is GBP indexed. (4) Precious metals deposit accounts amounting TL 74,492,798 are included. (5) Includes Tier 2 subordinated bonds which are classified on the balance sheet as subordinated loans. (6) The derivative transactions within the context of forward foreign currency options and foreign currency forwards definitions included in the Communiqué above are taken into consideration. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 238 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 239 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 IV. Explanations on Interest Rate Risk a. Interest rate sensitivity of assets, liabilities and off-balance sheet items (Based on time remaining to repricing date): Interest rate risk is defined as the impairment in the value of the Bank’s interest sensitive Asset, liabilities and off-balance sheet items due to interest rate fluctuations. A method which takes into consideration the effect of standard interest shocks on the economic values of the Bank’s on, and off-balance sheet interest sensitive accounts is used for measuring the interest rate risk arising from the banking accounts, whereas the interest rate risk related to interest sensitive financial instruments followed under trading accounts is assessed within the scope of market risk. Potential effects of interest rate risk on the Bank’s assets and liabilities, market developments, the general economic environment and expectations are regularly followed in meetings of the Asset-Liability Management Committee, where further measures to reduce risk are taken when necessary. The Bank’s on and off-balance sheet interest sensitive accounts other than the assets and liabilities exposed to market risk are monitored and controlled by the limits on the ratio of structural interest rate risk to equity and tier 1 capital determined by the Board within the scope of “Asset-Liability Management Risk Policy”. Moreover, scenario analyses formed in line with the average maturity gaps and the historical data and expectations are also used in the management of the related risk. In addition, the impact of changes in interest rates on the Bank’s net interest income is regularly analyzed. Within this framework, the limit on the ratio of change in net interest income to the capital is expected to occur under various scenarios are monitored and regularly reported to senior management. Interest rate sensitivity In this part, the sensitivity of the Bank’s assets and liabilities to the interest rates has been analyzed assuming that the year-end balance figures were the same throughout the year. Mentioned analysis shows how the FC and TL changes in interest rates by one point during the one-year period affect the Bank's income accounts and shareholders' equity under the assumption maturity structure and balances are remain the same all year round at the end of the year. During the measurement of the Bank’s interest rate sensitivity, the profit/loss on the asset and liability items that are evaluated with market value are determined by adding to/deducting from the difference between the expectancy value of the portfolio after one year in case there is no change in interest rates and the value of the portfolio one year later, which is measured after the interest shock, the interest income to be additionally earned/to be deprived of during the one year period due to the renewal or repricing of the related portfolio at the interest rates formed after the interest shock. On the other hand, in the profit/loss calculation of assets and liabilities that are not evaluated by the current market prices, it is assumed that assets and liabilities with fixed interest rates will be renewed at maturity date and the assets and liabilities having variable interest rates will be renewed at the end of repricing period with the market interest rates generated after the interest shock. Within this context, ceteris paribus, the possible changes that may occur in the Bank’s profit and shareholders’ equity in case of 100 basis point increase/ decrease in TL and FC interest rates on the reporting day are given below: % Change in the Interest Rate (*) Effect On Profit/Loss Effect on Equity (**) TL FC Current Period Prior Period Current Period Prior Period Money Market Funds 33,370,104 5,080,678 1,648,534 100 bps increase 100 bps increase 100 bps decrease 100 bps decrease 995,614 (1,307,172) 987,676 (1,762,490) (2,975,711) 3,223,619 (1,809,125) 1,993,226 (*) Changes in interest rates is calculated assuming that the expectations reflected in inflation. The effects on the profit/loss and shareholders’ equity are stated with their before tax values. (**) The effect on the profit/loss is mainly arising from the fact that the average maturity of the Bank’s fixed rate liabilities is shorter than the average maturity of its fixed rate assets. Miscellaneous Payables Marketable Securities Issued (***) Funds Provided from Other Financial Institutions 5,136,114 Current Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Non-interest Bearing Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 7,453,621 191,476,032 198,929,653 Banks 9,966,090 575,776 12,492,763 23,034,629 Financial Assets at Fair Value through Profit/Loss (*) Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income 5,487,304 8,313,492 3,972,432 8,890,775 13,968 4,662,271 31,340,242 43,537,183 22,389,243 38,186,122 35,522,205 29,865,588 1,096,053 170,596,394 Loans 205,534,988 84,473,946 245,527,395 195,501,347 51,385,645 782,423,321 Financial Assets Measured at Amortised Cost 11,568,362 22,518,424 25,385,370 22,459,724 11,442,117 93,373,997 Other Assets (**) 217,258 108,407,174 108,624,432 Total Assets 283,764,806 138,270,881 313,071,319 262,374,051 92,707,318 318,134,293 1,408,322,668 Liabilities Banks Deposits Other Deposits 5,488,092 1,821,717 1,022,170 365,803,736 97,869,384 34,542,133 1,172,896 1,493,230 9,825,209 421,863,931 921,252,080 40,099,316 46,920,353 52,056,467 1,999,278 2,492,560 8,441,214 24,217,675 24,722,121 61,872,848 14,583,517 49,496,547 5,313,106 1,669,504 392,652 71,455,326 Other Liabilities (****) 2,804,710 3,054,187 3,104,091 664,262 1,499,857 240,634,315 251,761,422 Total Liabilities 429,185,551 159,815,073 54,071,248 27,724,337 26,614,630 710,911,829 1,408,322,668 Balance Sheet Long Position Balance Sheet Short Position Off Balance Sheet Long Position Off Balance Sheet Short Position 259,000,071 234,649,714 66,092,688 559,742,473 (145,420,745) (21,544,192) (392,777,536) (559,742,473) 7,421,791 22,871,812 30,293,603 (8,120,500) (10,221,123) (8,298,250) (26,639,873) Total Position (137,998,954) 1,327,620 250,879,571 224,428,591 57,794,438 -392,777,536 3,653,730 (*) The balance includes derivative financial assets (**) The expected loss provisions are shown in Non-Interest column. (***) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. (****) Equity is included in ‘’non-interest bearing’’ column. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 240 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 241 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Prior Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Non-interest Bearing Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 14,620,305 167,302,916 181,923,221 Banks 3,736,353 208,939 20,184,009 24,129,301 b. Average interest rates applied to monetary financial instruments: Current Period EUR % USD % JPY % TL % Assets Cash (Cash in Vault. Foreign Currency Cash. Money in Transit. Cheques Purchased) and Balances with the Central Bank of Turkey Banks Financial Assets at Fair Value through Profit/Loss Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income 8,199,318 9,326,626 7,138,279 5,623,571 3,530 2,205,050 32,496,374 Loans Financial Assets Measured at Amortised Cost 19,965,684 16,404,869 13,928,740 19,161,533 17,516,956 577,294 87,555,076 Loans 96,042,600 44,023,134 144,511,067 181,377,115 48,139,857 114,977 514,208,750 Liabilities Banks Deposits Other Deposits Money Market Funds Miscellaneous Payables Debt Securities Issued (*) 8,277,298 12,224,444 15,562,809 8,408,689 1,939,494 46,412,734 Funds Provided from Other Financial Institutions Other Assets (**) 2,883,389 36,960,179 39,843,568 (*) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. Total Assets 153,724,947 82,188,012 181,140,895 214,570,908 67,599,837 227,344,425 926,569,024 2.50 1.15 3.00 3.33 6.14 2.66 0.86 0.08 4.25 4.25 2.75 4.98 5.48 8.17 5.12 4.96 0.62 6.82 6.88 7.09 7.27 13.30 13.53 32.82 20.56 23.30 12.64 11.63 9.03 14.37 10.85 Prior Period EUR % USD % JPY % TL % Assets Cash (Cash in Vault. Foreign Currency Cash. Money in Transit. Cheques Purchased) and Balances with the Central Bank of Turkey Banks Financial Assets at Fair Value through Profit/Loss Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income Loans Financial Assets Measured at Amortised Cost Liabilities Banks Deposits Other Deposits Money Market Funds Miscellaneous Payables Debt Securities Issued (*) Funds Provided from Other Financial Institutions 0.15 1.92 3.29 4.42 2.92 0.11 0.03 1.86 0.20 2.59 4.82 5.26 3.37 0.38 0.13 1.49 6.50 2.44 8.50 11.39 14.41 22.06 18.15 18.84 15.50 11.57 13.98 18.22 13.75 (2,289,875) (12,871,498) (6,587,375) (21,748,748) (*) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. Financial Assets at Fair Value through Profit/Loss (*) Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets Measured at Amortised Cost Miscellaneous Payables Marketable Securities Issued (***) Funds Provided from Other Financial Institutions Balance Sheet Long Position Balance Sheet Short Position Off Balance Sheet Long Position Off Balance Sheet Short Position Liabilities Banks Deposits Other Deposits 1,599,410 1,084,200 1,261 254,580,741 33,534,194 18,275,640 1,244,478 Money Market Funds 42,595,997 2,299,805 3,339,693 1,584,249 1,062,316 3,747,187 284,246,136 591,881,189 48,235,495 22,947,587 24,531,836 1,249,305 4,923,360 22,221,079 22,368,163 17,344,902 68,106,809 3,628,174 37,755,079 22,277,040 1,684,916 306,217 65,651,426 Other Liabilities (****) 3,998,152 3,949,203 3,646,271 1,453,969 1,286,172 110,081,315 124,415,082 Total Liabilities 309,236,028 83,545,841 69,760,984 26,751,526 18,937,291 418,337,354 926,569,024 111,379,911 187,819,382 48,662,546 347,861,839 (155,511,081) (1,357,829) (190,992,929) (347,861,839) 6,817,975 17,021,725 23,839,700 Total Position (148,693,106) 15,663,896 109,090,036 174,947,884 42,075,171 (190,992,929) 2,090,952 (*) The balance includes derivative financial assets (**) The expected loss provisions are shown in Non-Interest column. (***) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. (****) Equity is included in ‘’non-interest bearing’’ column. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 242 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 243 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 V. Explanations on Equity Shares Risk Arising from Banking Book VI. Explanations on Liquidity Risk Management and Liquidity Coverage Ratio a. Accounting policies related to equity investments in associates and subsidiaries can be seen in the Section Three Note III.2. b. Balance Sheet Value of Equity Investment, fair value, and for publicly traded, if the market value is different from the fair value comparison to the market price: Investments in Shares Quoted Investments in Shares Group A Subsidiaries Financial Subsidiaries Non-Financial Subsidiaries Non-Quoted Subsidiaries Financial Subsidiaries Non-Financial Subsidiaries Associates Financial Associates Non-Financial Associates Book Value Comparison Fair Value Market Value (*) 60,237,024 132,854,654 22,198,019 38,975,666 385,225 14,157 15,175,351 3,111,056 (*) Represents the sum of the market values of the related companies. c. Information on revaluation surpluses and unrealized gains/losses on equity securities and results included in Common Equity and Tier II Capital Portfolio 1 2 Private Equity Investments Shares Traded on a Stock Exchange 3 Other Stocks 4 Total Realized Gains/losses During the period Revaluation Increases Unrealized Gains and Losses Total Including into Tier I Capital (*) Total Including into Common Equity Including into Tier II Capital 56,681,532 56,681,532 12,072,255 68,753,787 12,072,255 68,753,787 (*) Represents the amounts reflected to equity according to the equity method. d. Capital requirement as per equity shares: Portfolio Carrying Value Total RWA Minimum Capital Requirement Private Equity Investments Share Traded on a Stock Exchange Other Stocks Total 61,173,685 18,685,789 79,859,474 61,173,685 16,582,702 77,756,387 4,893,895 1,326,616 6,220,511 Liquidity risk may occur as a result of funding long-term assets with short-term liabilities; The Bank’s liquidity is managed by the Asset-Liability Management Committee in accordance with the business strategies, legal requirements, current market conditions and expectations regarding the economic and financial conjuncture. The Bank’s principal source of funding is deposits. Although the average maturity of deposits is shorter than that assets as a result of the market conditions, the Bank’s wide network of branches and stable core deposit base are its most important safeguards of funding. Additionally, the Bank borrows medium and long-term funds from institutions abroad. Concentration limits are generally used in deposit and non-deposit borrowings in order to prevent adverse effects of concentrations in the liquidity risk profile of the Bank. In order to meet the liquidity requirements that may arise from market fluctuations, considerable attention is paid to the need to preserve liquidity and efforts in this respect are supported by projections of Turkish Lira and Foreign Currency (FC) cash flows. The term structure of TL and FC deposits, their costs and amounts are monitored on a daily basis. During these studies historical events and future expectations are taken into account as well. Based upon cash flow projections, prices are differentiated for different maturities and measures are taken accordingly to meet liquidity requirements. Moreover, potential alternative sources of liquidity are determined to be used in case of extraordinary circumstances. The liquidity risk exposure of the Bank has to be within the risk capacity limits which are prescribed by the legislation and the Bank’s risk appetite defined in its business strategy. It is essential for the Bank to have an adequate level of unencumbered liquid asset stock which can be sold or pledged, in case a large amount of reduction in liquidity sources occurs. The level of liquid asset buffer is determined in accordance with the liquidity risk tolerance which is set by the Board of Directors. Asset-Liability Management Committee is responsible for monitoring the liquidity position, determining appropriate sources of funds and deciding the maturity structure in accordance with the limits which are set by the Board of Directors. The Treasury Division is responsible for monitoring the liquidity risk, in accordance with the Asset and Liability Management Risk Policy limits, objectives set out in the business plan and the decisions taken at the meetings of Asset-Liability Management Committee. The Treasury Division is also responsible for making liquidity projections and taking necessary precautions to reduce liquidity risk, by using the results of stress testing and scenario analysis. Within this scope, Treasury Division is monitoring the Turkish Lira (TL) and foreign currency (FC) liquidity position instantly and prospectively based on the information provided from the branches, business units and IT infrastructure of the Bank. The assessment of long-term borrowing opportunities is carried out regularly in order to balance the cash inflows and outflows and to mitigate the liquidity risk. The Bank creates liquidity through repurchase agreements and secured borrowings based on the high quality liquid asset portfolio, through securitization and other structured finance products which are created from the asset pools like credit card receivables and retail loans. The Bank applies liquidity stress tests to measure liquidity risk. In this approach, in liquidity stress scenarios in which parameters are determined by the Board of Directors, the ability of the Bank’s liquid assets’ in covering cash outflows within a one-month horizon has been described. Liquidity adequacy limits for TL and FC are determined by Board of Directors, based on the liquidity requirements and risk tolerance of the Bank. The liquidity risk is measured by the Risk Management Division and results are reported to the related executive functions, senior management and Board of Directors. It is essential for the Bank to monitor the liquidity position and funding strategy continuously. In case of a liquidity crisis that may arise from unfavorable market conditions, extraordinary macroeconomic situations and other reasons which are beyond the control of the Bank, “Emergency Action and Funding Plan” is expected to be commissioned. In that case, related committees have to report the precautions taken and their results to the Board of Directors through Audit Committee. The Bank’s Foreign Currency (FC) and total (TL+FC) liquidity coverage ratio averages for the last three months, the highest value and the lowest value occurred in this period are given below. 31.10.2022 30.11.2022 31.12.2022 Current Period Current Period TL+FC FC TL+FC FC 160.65 155.09 154.99 457.48 467.81 487.23 156.66 172.64 199.25 434.83 468.88 507.82 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 244 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 245 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Grubun konsolide yabancı para ve toplam (YP+TP) likidite karşılama oranlarının son üç aylık döneme ilişkin ortalamalarına aşağıda yer verilmektedir. Likidite karşılama oranı: Prior Period HIGH QUALITY LIQUID ASSETS High Quality Liquid Assets CASH OUTFLOWS Total Unweighted Value (*) Total Weighted Value (*) TL+FC FC TL+FC FC 308.711.858 204.903.813 Retail and Small Business Customers, of which; 611.317.338 377.077.839 56.151.478 37.707.784 Stable deposits Less stable deposits Unsecured funding, of which; Operational deposits Non-operational deposits Other unsecured funding Secured funding Other cash outflows, of which; Derivatives cash outflow and liquidity needs related to market valuation changes on derivative or other transactions Obligations related to structured financial products Commitments related to debts to financial markets and other off- balance sheet obligations Other revocable off-balance sheet commitments and contractual obligations 99.605.132 4.980.257 511.712.206 377.077.839 51.171.221 37.707.784 334.798.824 187.403.972 168.815.630 98.329.464 3.005.540 36.219 739.822 9.055 227.527.733 151.835.763 100.701.866 66.519.903 104.265.551 35.531.990 67.373.942 31.800.506 8.511.344 19.369.975 8.511.344 19.369.975 224.756 13.731 3.273.748 14.132.379 3.273.748 14.132.379 5.237.596 5.237.596 5.237.596 5.237.596 80.267.478 73.076.139 4.013.374 3.653.807 Other irrevocable or conditionally revocable off-balance sheet obligations 426.353.159 175.080.021 36.996.071 15.510.864 TOTAL CASH OUTFLOWS CASH INFLOWS Secured lending Unsecured lending Other cash inflows 274.712.653 174.585.625 4.195.089 500.968 100.584.121 65.700.311 74.655.489 54.622.443 2.727.740 116.821.011 2.727.740 116.821.011 TOTAL CASH INFLOWS 107.506.950 182.521.322 77.884.197 171.443.454 TOTAL HQLA STOCK TOTAL NET CASH OUTFLOWS LIQUIDITY COVERAGE RATIO (%) (*) The simple arithmetic average calculated for the last three months of the weekly simple arithmetic average. Upper Limit Applied Value 308.711.858 204.903.813 196.828.456 43.646.406 156,91 470,84 Prior Period HIGH QUALITY LIQUID ASSETS High Quality Liquid Assets CASH OUTFLOWS Total Unweighted Value (*) Total Weighted Value (*) TL+FC FC TL+FC FC 196.731.749 137.922.605 Retail and Small Business Customers, of which; 385.342.542 255.632.298 35.792.010 25.563.230 Stable deposits Less stable deposits Unsecured funding, of which; Operational deposits Non-operational deposits Other unsecured funding Secured funding Other cash outflows, of which; Derivatives cash outflow and liquidity needs related to market valuation changes on derivative or other transactions Obligations related to structured financial products Commitments related to debts to financial markets and other off- balance sheet obligations Other revocable off-balance sheet commitments and contractual obligations 54.844.879 2.742.244 330.497.663 255.632.298 33.049.766 25.563.230 187.046.797 112.910.239 95.886.913 56.879.781 1.255.644 16.359 313.911 4.090 134.597.977 98.576.273 60.491.359 43.239.644 51.193.176 14.317.607 35.081.643 13.636.047 8.505.992 12.874.684 8.505.992 12.874.684 65.495 53.327 4.375.826 8.744.518 4.375.826 8.744.518 4.130.166 4.130.166 4.130.166 4.130.166 53.066.816 46.671.687 2.653.341 2.333.584 Other irrevocable or conditionally revocable off-balance sheet obligations 287.990.929 156.050.151 29.290.631 17.577.368 TOTAL CASH OUTFLOWS CASH INFLOWS Secured lending Unsecured lending Other cash inflows TOTAL CASH INFLOWS TOTAL HQLA STOCK TOTAL NET CASH OUTFLOWS LIQUIDITY COVERAGE RATIO (%) 149.840.013 102.080.414 112.194 36.588 1.571 1.356 63.377.888 46.531.386 52.758.960 40.975.721 7.972.830 61.206.589 7.972.830 61.206.589 71.462.912 107.774.563 60.733.361 102.183.666 Upper Limit Applied Value 196.731.749 137.922.605 111.461.021 29.261.943 176,18 470,51 (*) The simple arithmetic average calculated for the last three months of the weekly simple arithmetic average. Compared to the prior quarter, in the fourth quarter of 2022, it is observed that the total liquidity coverage ratio decreased due to the increase in net cash outflows, and the FC liquidity coverage ratio due to the decrease in the high-quality liquid asset stock. Total and Foreign Currency liquidity coverage ratios are continuing to hover far above the minimum level (respectively 100% and 80%) pursuant to legal legislations. The Liquidity Coverage Ratio which has been introduced to ensure banks to preserve sufficient stock of high-quality assets to meet their net cash outflows that may occur in the short term is calculated as per the Communiqué on “Measurement and Assessment of the Liquidity Coverage Ratio of Banks’ published by BRSA. The ratio is directly affected by the level of unencumbered high-quality assets which can be liquidated at any time and net cash inflows and outflows arising from the Bank’s assets, liabilities and off-balance sheet transactions. The Bank’s high quality liquid asset stock primarily consists of cash, the accounts held at CBRT and unencumbered government bonds which are issued by Turkish Treasury. The Bank’s principal source of funding is deposits. In terms of non-deposit borrowing, funds received from repurchase agreements, marketable securities issued, and funds borrowed from financial institutions are among the most significant funding sources of the Bank. In order to manage liquidity effectively, concentration of liquidity sources and usages should be avoided. Due to the strong and stable core deposit base of the Bank, deposits are received from a diversified customer portfolio. In addition, in order to provide diversification in liquidity sources and usages, liquidity concentration limits are used effectively. Total amount of funds borrowed from a single counterparty, or a risk group is closely and instantaneously monitored, taking liquidity concentration limits into account. In addition to these, the cumulative liquidity deficits that the Bank is exposed to in various maturity tranches are periodically monitored and reported to the senior management. Cash flows of derivatives that will take place within 30 days are taken into account in calculation of liquidity coverage ratio. Cash outflows of derivatives that arise from margin obligations, are reflected to the results in accordance with the methodology articulated in the related legislation. Liquidity risk of the Bank, its foreign branches and subsidiaries that are to be consolidated are managed within the regulatory limits and in accordance with the group strategies. For the purposes of effectiveness and sustainability of liquidity management, funding sources of group companies and funding diversification opportunities in terms of markets, instruments and tenor are evaluated and liquidity position of the group companies are monitored continuously by the Bank. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 246 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 247 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 1,096,053 1,505,925 3,095,119 18,934,956 91,349,350 54,614,991 170,596,394 (*) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. Presentation of assets and liabilities according to their remaining maturities: Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Unallocated (*) Total 79,630,417 119,299,236 Banks 16,625,971 5,832,882 575,776 4,658,978 5,485,456 8,234,431 4,048,809 8,895,585 16,983 Loans (***) 31,261,330 119,501,530 100,458,392 263,208,574 195,030,371 49,828,994 23,134,130 782,423,321 1,658,093 3,209,619 8,665,369 51,201,710 28,639,206 93,373,997 6,285,141 212,363 37 2,355,006 99,771,885 108,624,432 133,272,749 259,568,263 115,785,700 294,857,745 348,832,022 133,100,174 122,906,015 1,408,322,668 1,493,230 5,488,092 1,821,717 1,022,170 421,863,931 365,803,050 97,868,730 34,539,016 1,177,353 5,666,537 4,524,983 39,707,047 20,469,591 1,087,168 33,370,104 2,981,131 3,748,081 876,714 1,337,301 8,441,214 25,340,239 25,877,380 51,195,195 437,127 1,595 14,823,376 8,500,566 3,493,053 422,550 1,001,019 447,166 223,496,242 251,761,422 423,357,161 477,223,068 117,471,555 90,952,176 48,410,752 27,411,714 223,496,242 1,408,322,668 198,929,653 23,034,629 31,340,242 9,825,209 921,252,080 71,455,326 40,099,316 61,872,848 52,056,467 Current Period Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey Financial Assets at Fair Value through Profit/Loss (**) Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets Measured at Amortised Cost Other Assets Total Assets Liabilities Bank Deposits Other Deposits Funds Provided from Other Financial Institutions Money Market Funds Marketable Securities Issued (****) Miscellaneous Payables Other Liabilities Total Liabilities Liquidity Gap Net Off Balance Sheet Position Derivative Financial Assets Derivative Financial Liabilities Prior Period Total Assets Total Liabilities Liquidity Gap In compliance with the “TFRS 7”, the following table indicates the maturities of the Bank’s major financial assets and liabilities which are not qualified as derivatives. The following tables have been prepared by referencing the earliest dates of collections and payments without discounting the liabilities. The interest to be collected from and paid to the related liabilities is included in the following table. Adjustments column shows the items that may cause possible cash flows in the following periods. The values of the related liabilities registered in balance sheet do not include these amounts. Current Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Adjustments (-) Balance Sheet Value Liabilities Deposits Funds Provided from Other Financial Institutions Money Market Funds Marketable Securities Issued (*) Leasing Liabilities 423,357,161 372,260,825 101,422,669 36,748,019 1,253,490 935,042,164 3,964,875 931,077,289 5,717,510 5,097,548 42,112,957 23,320,862 1,152,166 77,401,043 5,945,717 71,455,326 33,407,213 3,036,464 3,863,524 40,307,201 207,885 40,099,316 1,460,631 1,425,574 11,991,684 34,125,926 28,795,298 77,799,113 15,926,265 61,872,848 63,333 144,014 522,280 1,694,169 2,267,874 4,691,670 2,539,463 2,152,207 Prior Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Adjustments (-) Balance Sheet Value Liabilities Deposits Funds Provided from Other Financial Institutions Money Market Funds Marketable Securities Issued (*) Leasing Liabilities 285,308,452 256,676,019 35,076,238 18,499,054 1,293,714 596,853,477 1,225,101 595,628,376 1,659,611 8,456,296 36,706,015 19,613,123 1,416,626 67,851,671 2,200,245 65,651,426 42,654,340 2,304,287 3,370,651 48,329,278 93,783 48,235,495 1,635,592 2,834,652 25,742,077 31,141,372 23,533,539 84,887,232 16,780,423 68,106,809 47,228 105,530 333,691 1,301,918 2,043,284 3,831,651 2,131,212 1,700,439 (*)Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. The following table shows the remaining maturities of non-cash loans of the Bank. Current Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Adjustments (-) Balance Sheet Value (290,084,412) (217,654,805) (1,685,855) 203,905,569 300,421,270 105,688,460 (100,590,227) Letters of Credit 21.031.210 4.695.440 8.170.572 19.349.001 53.246.223 3.964.875 931.077.289 Non-cash Loans 130,994,153 7,489,287 19,034,472 64,412,078 19,239,252 5,527,272 1,675,458 (1,424,161) 1,531,226 2,316,880 560,500 160,788,294 67,410,871 38,610,607 69,998,675 71,033,244 159,112,836 68,835,032 37,079,381 67,681,795 70,472,744 4,659,903 407,841,691 403,181,788 246,696,514 Letters of Guarantee 108.829.989 2.377.323 9.901.311 37.543.763 17.674.969 2.955.329 179.282.684 5.945.717 71.455.326 Acceptances Other Total 137.720 995.234 416.524 923.075 7.433.282 420.875 39.514 86.032 1.143.408 2.571.943 9.331.476 4.836.131 207.885 40.099.316 130.994.153 7.489.287 19.034.472 64.412.078 19.239.252 5.527.272 246.696.514 15.926.265 61.872.848 Prior Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Adjustments (-) Balance Sheet Value 143,072,463 153,235,665 65,644,687 161,256,464 263,201,666 86,896,229 53,261,850 926,569,024 Letters of Credit 39.975.559 299.733 853.893 1.753.195 12.823 42.895.203 3.964.875 931.077.289 285,308,452 335,053,148 53,535,693 83,497,127 44,129,952 21,414,802 103,629,850 926,569,024 Letters of Guarantee 75.331.583 1.272.415 6.663.085 32.272.226 12.915.460 3.042.724 131.497.493 5.945.717 71.455.326 Acceptances Other Total 583.828 875.751 1.028.920 2.256.076 10.359.840 553.187 14.781.851 207.885 40.099.316 14.840 115.302 1.085.273 2.169.710 4.260.876 116.766.721 2.615.908 9.773.054 44.500.563 14.566.743 5.212.434 193.435.423 15.926.265 61.872.848 (142,235,989) (181,817,483) 12,108,994 77,759,337 219,071,714 65,481,427 (50,368,000) Net Off Balance Sheet Position Derivative Financial Assets Derivative Financial Liabilities 3,200,930 2,669,768 (75,036) 1,505,529 446,812 133,805,197 54,101,623 37,634,533 45,771,066 61,283,833 130,604,267 51,431,855 37,709,569 44,265,537 60,837,021 Non-cash Loans 116,766,721 2,615,908 9,773,054 44,500,563 14,566,743 5,212,434 7,748,003 332,596,252 324,848,249 193,435,423 (*) Asset items, such as Tangible Assets, Subsidiaries and Associates, Office Supply Inventory, Prepaid Expenses and Non-Performing Loans, which are required for banking operations and which cannot be converted into cash in short-term, other liabilities such as Provisions which are not considered as payables and Shareholders’ Equity, are shown in the “Unallocated” column. (**) Includes Derivative financial assets. (***) Nonperforming loans are included in “Unallocated” column. (****) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 248 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 249 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 The following table shows the remaining maturities of derivative financial assets and liabilities of the Bank. Current Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total 31,365,835 30,918,439 On-Balance sheet items On-balance sheet items (excluding derivatives and SFTs, but including collateral) Assets amounts deducted from Tier 1 capital Total on balance sheet exposures 2,376,097 2,406,304 66,850,977 67,211,082 319,914,249 Derivative exposures and credit derivatives Forwards Contracts-Buy Forwards Contracts-Sell Swaps Contracts-Buy Swaps Contracts-Sell Futures Transactions-Buy Futures Transactions-Sell Options-Call Options-Put Other Total Forwards Contracts- Buy Forwards Contracts- Sell Swaps Contracts-Buy Swaps Contracts-Sell Futures Transactions-Buy Futures Transactions-Sell Options-Call Options-Put Other Total 5,717,551 5,697,764 130,035,589 147,228,461 25,945 25,402 3,538,061 3,553,528 10,756,575 10,520,109 42,160,572 53,156,757 671,422 811,948 1,557,467 1,551,533 12,515,612 12,294,262 13,656,029 55,041 50,766 5,545,458 4,879,934 24,078,829 15,059,520 13,676,934 13,015,952 64,503,890 66,650,582 344,555,642 707,612 707,612 127,978 3,822,162 3,822,162 752,408 888,116 15,170,760 14,514,769 52,943,261 319,901,130 136,245,903 75,689,988 137,680,470 141,505,988 811,023,479 Prior Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total 30,156,697 30,059,393 4,585,527 4,427,855 107,655,756 6,561,281 6,546,390 40,811,617 14,439,205 14,527,936 4,570,684 4,557,212 17,078,760 40,956,563 58,258,759 264,761,455 121,096,795 41,894,966 17,111,486 39,464,506 57,811,947 277,379,700 96,253 86,971 2,944,784 2,842,085 3,749,131 591,730 595,436 4,012,940 3,962,813 3,023,796 5,079,666 4,945,190 16,618,675 3,025,074 3,025,074 487,638 687,983 682,407 15,062,464 14,775,162 23,879,240 264,409,464 105,533,478 75,344,102 90,036,603 122,120,854 657,444,501 VII. Explanations on Leverage Ratio a. Explanations on Differences Between Current and Prior Years’ Leverage Ratios Replacement cost associated with derivative financial instruments and credit derivatives The potential amount of credit risk with derivative financial instruments and credit derivatives The total amount of risk on derivative financial instruments and credit derivatives Investment securities or commodity collateral financing transactions The amount of risk investment securities or commodity collateral financing transactions (Excluding on balance sheet items) Risk amount of exchange brokerage operations Total risks related with securities or commodity financing transactions Off -Balance Sheet Items Gross notional amount of off-balance sheet items Adjustments for conversion to credit equivalent amounts The total risk of off-balance sheet items Capital and Total Exposures Tier 1 Capital Total Exposures Leverage Ratio Leverage Ratio (*) Three-month average of the amounts in Leverage Ratio table. VIII. Explanations on Other Price Risks Current Period (*) Prior Period (*) 1,352,238,923 (3,039,822) 1,349,199,101 16,095,379 5,788,378 21,883,757 843,622,223 (1,492,485) 842,129,738 21,043,586 3,570,324 24,613,910 12,032,913 4,020,316 12,032,913 4,020,316 452,575,932 (10,541,558) 442,034,374 317,341,135 (9,508,394) 307,832,741 167,776,503 1,825,150,145 79,582,511 1,178,596,705 9.19 6.75 The Bank is exposed to stock price risk due to its investments in companies being traded on the Borsa İstanbul A.Ş. (BIST). The Bank's sensitivity to stock price risk at the reporting date was measured with an analysis. In the analysis, with the assumption of all other variables were held constant and the data (stock prices) used in the valuation method are 10% higher or lower. According to this assumption, in shares traded in Borsa Istanbul and followed under Financial Assets at Fair Value through Profit or Loss account, expected to have an effect amounting to TL 49,896 increase/decrease. The Bank’s unconsolidated leverage ratio is calculated in accordance with the principles of the “Regulation on Measurement and Evaluation of Banks’ Leverage Level”. The Bank’s consolidated Leverage ratio is 9.19% (December 31, 2021: 6.75). According to Regulation the minimum leverage ratio is 3%. The changes in the leverage ratio are mostly due to the increase in total risk amounts. IX. 1. Explanations on Presentation of Assets and Liabilities at Fair Value Information on fair values of financial assets and liabilities b. Explanations on leverage ratio: Financial Assets Money Market Placements Banks Financial Assets at Fair Value through Other Comprehensive Income Investments Financial Assets Measured Amortized Cost Loans Financial Liabilities Banks Deposits Other Deposits Funds Provided from Other Financial Institutions Marketable Securities Issued (*) Miscellaneous Payables Book Value Fair value Current Period Prior Period Current Period Prior Period 23.034.629 24.129.301 23.033.858 24.129.488 170.596.394 87.555.076 170.596.394 87.555.076 93.373.997 759.289.191 46.412.734 112.124.518 47.220.154 493.378.191 753.631.585 473.839.057 9.825.209 3.747.187 9.756.498 3.720.360 921.252.080 591.881.189 921.349.972 591.066.944 71.455.326 61.872.848 52.056.467 65.651.426 68.106.809 24.531.836 70.881.361 59.860.194 52.056.467 64.104.888 65.538.148 24.531.836 (*) Includes subordinated bonds which are classified on the balance sheet as subordinated loans. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 250 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 251 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Strike prices, quotations, market prices determined by the CBRT and published in the Official Gazette and the values calculated by using alternative models, are taken as the basis in the fair value determination of Financial Assets at fair value through other comprehensive income. When the prices of the financial assets measured at amortized cost cannot be measured in an active market, fair values are not deemed to be reliably determined and amortized cost, calculated by the internal rate of return method, are taken into account as the fair values. Fair values of banks, loans granted, deposits and funds borrowed from other financial institutions and marketable securities are calculated by discounting the amounts in each maturity bracket formed according to repricing periods, using the rate corresponding to relevant maturity bracket in the discount curves based on current market conditions. 2. Information on fair value measurements recognized in the financial statements “TFRS 13 - Fair Value Measurement” standard requires the items, which are recognized in the balance sheet at their fair values to be shown in the notes by being classified within a range. According to this, the related financial instruments are classified into three levels in such a way that they will express the significance of the data used in fair value measurements. At the first level, there are financial instruments, whose fair values are determined according to quoted prices in active markets for identical assets or liabilities, at the second level, there are financial instruments, whose fair values are determined by directly or indirectly observable market data, and at the third level, there are financial instruments, whose fair values are determined by the data, which are not based on observable market data. The financial assets, which are recognized in the balance sheet at their values, are shown below as classified according to the aforementioned principles of ranking. Current Period Level 1 Level 2 Level 3 Financial Assets at Fair Value Through Profit and Loss Debt Securities Equity Securities Derivative Financial Assets at Fair Value through Profit and Loss Other Financial Assets at Fair Value Through Profit or Loss (*) Debt Securities Equity Securities Other Derivative Financial Liabilities 4,109,370 498,961 55,286,765 5,542,596 333,165 17,029,298 3,826,852 113,862,747 978,103 8,840,818 350,829 (*) Since they are not traded in an active market, the equity securities TL 34,246 under the financial assets at fair value through other comprehensive income are shown in the financial statements at acquisition cost and the related securities are not shown in this table. Prior Period Level 1 Level 2 Level 3 Financial Assets at Fair Value Through Profit and Loss Debt Securities Equity Securities Derivative Financial Assets Held for Trading Other Financial Assets Available-for-Sale (*) Debt Securities Equity Securities Other Derivative Financial Liabilities 477,614 207,096 45,397,989 6,006,316 458,185 21,924,166 1,536,281 41,329,574 518,082 24,966 12,586,533 1,886,716 250,219 (*) Gerçeğe uygun değer farkı diğer kapsamlı gelire yansıtılan finansal varlıklar kalemi altındaki 34.246 TL’lik menkul kıymetler aktif bir piyasada işlem görmemeleri nedeniyle finansal tablolara elde etme maliyeti üzerinden yansıtılmış olup, söz konusu kıymetler bu tabloda gösterilmemiştir. The loans measured at fair value through profit and loss under Level 3 consists of loan granted to the special purpose entity which is disclosed in the Section V footnote I-f.2 and footnote I.r. The mentioned loan’s fair value is determined by the various valuation methods. The potential changes in the fundamental estimations and assumptions in the valuation work may affect the carrying fair value of the loan. X. Explanations on Transactions Carried Out on Behalf of Third Parties and Fiduciary Transactions The Bank gives trading and custody services in the name and on the account of its customers. The Bank has no fiduciary transactions. XI. Explanations on Risk Management Objectives and Policies Explanations according to “Communiqué on Public Disclosures about Risk Management” published on the Official Gazette No.29511 dated October 23, 2015 are included below. The Bank uses the Standardized Approach for calculation of capital charge for credit risk, therefore explanations about internal ratings-based approach are not included. a. General Information on Risk Management Approach and Risk Weighted Amounts: a1 The Bank's risk management approach Bank is exposed to financial and non-financial risks which are required to be analyzed, monitored, and reported within specific risk management principles of the Bank and with the perspective of risk management. The risk management process is organized within the framework of risk management and serves the creation of a common risk culture in corporate level, which brings “corporate governance” to forefront, the independence of the internal audit and monitoring units from the business units that undertake risks is established risk is defined in accordance with international regulations and in this context measurement, analysis, monitoring, reporting, and control functions are carried. Risk management process and the functions involved in the process is one of the primary responsibilities of the Board of Directors. The Risk Committee operates to prepare the Bank's risk management strategies and policies, submit them to the Board of Directors for approval and monitor the implementations. Evaluating the capital adequacy and observing the active use of results in Bank’s planning and decision-making processes, establishing and monitoring limits related to main risks, monitoring the activities of risk management (determining, defining, measuring, evaluating and managing risk) and monitoring results and methods in measuring risk are also under their authority and responsibility of the Committee. Committee reports activity results to the Board of Directors through Audit Committee. The Operational Risk Committee is engaged in determining strategies and policies for the management of operational risks that the Bank may be exposed to, developing an operational risk management framework, and strengthening the governance model for operational risks. The Committee reports the results of its activities to the Board of Directors through the Audit Committee. The Risk Management Department, which reports to the Board of Directors of the Parent Bank through the Internal Systems Manager; organized as Asset-Liability Management Unit, Credit Risk Management Unit, Credit Risk Analytics and Control Unit, Operational Risk and Affiliate Risk Unit, Model Risk and Validation Unit, Internal Capital Assessment Process and Economic Capital Unit. The Bank’s risk management process is carried out within the framework of risk policies which are issued by the Board of the Directors via Internal Systems Manager by taking the recommendations of the Risk Management Department into account and which include the written standards that are implemented by the business units. These policies which are entered into force in line with the international practices are general standards which contain organization and scope of the risk management function, risk measurement policies, duties and responsibilities of the risk management group, procedures for determining risk limits, ways to eliminate limit violations, compulsory approvals, and confirmations to be given in a variety of events and situations. In the aforementioned risk policies, the Bank’s risk appetite framework is defined as a set of approaches that determine the risk capacity, the risk appetite, the risk tolerance and that include the policies, procedures, controls and systems for reporting and monitoring of the limits set for the Bank’s risk profile and the indicators in the framework. The Bank's risk appetite framework, which is formed in accordance with the above-mentioned factors and entered into force with the Board of Directors approval, includes indicators that are aligned with the business plan, the strategic programme, capital and remuneration planning and comparable on a business unit level to the extent possible. The compliance to the limits within the framework is periodically monitored and the realization of the risk appetite indicators are reported to the Risk Committee and the Boards on a monthly basis. In order to build a strong corporate culture that has a risk management perspective, the Bank has policies, processes, systems and a control system that is integrated with the Bank’s risk management system to effectively control the bank's risk management system is available. All employees of the Bank essentially perform their duties in a responsible manner that aims to develop controls to reduce or eliminate the probability of the Bank to incur losses related to the operational risks. In the process risk analysis studies, risks and the related controls are evaluated together with employees performing the relevant process in a holistic approach. Procedures to be followed in case of a risk threshold breach and risk definitions are given in the risk politics. Code of conducts, operation manuals, the sharing of duties between business units and risk units are announced to the Bank’s staff. The risk reports that analyse the results reached by the Bank and the comprehensive risk assessment and comparison of these results with a risk management perspective are periodically submitted to the Risk Committee and to the Board through the Audit Committee. The content of the above mentioned reports could be summarised as follows: ੵ Capital adequacy ratio, the progression of the components of this ratio and the issues that affect the aforementioned ratio, ੵ Monitoring the compliance status of the limits set by the Board of Directors as a part of the risk appetite framework and based on the components of The movement table of financial assets at level 3 is given below: the main risk types, Balance at the Beginning of the Period Purchases Redemption or Sales (*) Valuation Difference Transfers Balance at the end of the Period Current Period Prior Period 2,136,935 (1,886,716) 100,610 350,829 2,243,397 (5,852) (100,610) 2,136,935 (1) As the details are given in the Fifth Section Note I-b.3, between the company and the TVF for the sale of all A group registered shares corresponding to 55% of the capital of the company owned by the special purpose company to the Turkish Wealth Fund (TVF). A share transfer agreement was signed, and the sale and transfer transaction were realized on 31.03.2022. Real estates which are presented in the financial statements at fair value are classified at level 3. ੵ In addition to the assessment of the loan portfolio on the basis of counterparties and loan types, monitoring of the portfolio as a whole according to parameters such as maturity, sector, geography, risk ratings, arrears, defaults, ੵ Measuring the assets and liabilities management risk, and reporting of measurement results, ੵ Monitoring of all risks assessed in the context of operational risk within the scope of non-financial risks, including operational risk, loss events that occurred in the Bank and risk indicators, ੵ Testing the measurement results in terms of completeness and reliability, ੵ Analysing the level of risk indicators under various stress scenarios, ੵ Examining various concentration indicators and the course followed by these indicators An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 252 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 253 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 As per the communique on “Bank’s Internal Systems and Internal Capital Adequacy and Assessment Process” and “Guidelines for Stress Testing of Banks to Use in Capital and Liquidity Planning”, stress tests are conducted for the entire risks that the Bank is exposed to and on the basis of significant risk categories. As a part of the holistic stress tests, risk appetite, capital planning, strategic plan and budget, action plans for emergencies and unexpected situations related to miscellaneous risks and other issues considered as significant are taken into consideration. In the holistic and individual stress test processes carried out by the Bank, the most advanced approaches used in risk measurement in the Bank are used as much as possible, together with the methods that are the basis of legal reporting (standard approaches for credit and market risk, basic indicator approach for operational risk). In the stress tests, both the first pillar risks (credit risk, market risk, operational risk) in scope of the regulatory framework and all the other risks that the Bank is exposed to independent of the regulatory framework are taken into account in a holistic perspective. In determining the course of capital adequacy under various scenarios during the planning horizon, the actions that the Bank will take in case of stress conditions and the impact of the diversified growth strategies of business units on the capital adequacy and the balance sheet are considered. The levels at which the capital adequacy ratio of the Bank will reach are estimated and monitored with stress tests. In addition, reverse stress tests are carried out regularly, by determining the problematic loan growth rate and increase in exchange rates, which will cause the Bank's capital adequacy to fall within the legal limits. The scope and content of the Bank's risk management system in terms of the main risk types are listed below. Bank's risk mitigation strategies and processes for the assessment of their effectiveness are given in Fourth Section II No. "Explanations on Credit Risk" under the Section IV, XI-f.1 notes. No. "The Public Disclosure of Qualitative Information Related to the Market Risk" mentioned in the section. Credit risk Credit risk is defined as the risk of the failure to comply with the requirements or failing to fulfill its obligations partially or totally of the counter side of the transaction contract with the Bank. The methodology and responsibilities of the credit risk management, controlling and monitoring and the framework of credit risk limitations specified with the credit risk policy. The Bank defines measures and manages credit risk of the all products and activities. Board of Directors review the Bank’s credit risk policies and credit risk strategy on an annual basis as a minimum. Top Management is responsible for the implementation of credit risk policies which are approved by Board of Directors. As a result of loans and credit risks analysis all findings are reported to Board of Directors and Top Management on a regular basis. In addition to transaction and company-based credit risk assessment process, monitoring of credit risk also refers to an approach with monitoring and managing the credit as a whole maturity, sector, security, geography, currency, credit type and credit rating. In the Bank’s credit risk management, along the limits as required by legal regulations, the Bank utilizes the risk limits to undertake the maximum credit risk within risk groups or sectors that the Board of Directors determines. These limits are determined such a way that prevents risk concentration on particular sectors. In case of exceeding the limits, the excess and its reasons are immediately reported to the Risk Committee and Board of Directors. The actions to be taken to remedy the excess and the time to eliminate the excess are concluded under the authority of the Board of Directors. The results of the controls regarding the excess of the risk limits and the evaluations of these limits are presented by Internal Audit and Risk Management Group to Top Management and Board of Directors. The Bank uses credit decision support systems which are created for the purpose of credit risk management, lending decisions, controlling the credit process and credit provisioning. The consistency of the credit decision support systems with the structure of the Bank’s activities, size and complexity is examined continuously by internal systems. Credit decision support systems contain the Risk Committee assessment and approval of Board of Directors. Asset and Liability Management Risk Asset-liability management risk defined as the risk of Bank’s incurring loss due to managing all financial risks that are inflicted from the Bank's assets, liabilities and off-balance sheet transactions, ineffectively. Trading book portfolio’s market risk, structural interest rate risk and liquidity risk of the banking portfolio; are considered within the scope of the asset liability management. Complying the established risk limits and being at the limits that stipulated by the legislation are the primary priority of Asset-liability management risk. Risk limits are determined by the Board of Directors by taking into consideration of the Group's liquidity, target income level and general expectations about changes in risk factors. Board of Directors and the Audit Committee are responsible for following the Bank's capital is used optimally; for this purpose, checking the status against risk limits and providing the necessary actions are taken. Asset and Liability Management Committee is responsible for managing the Asset and Liability risk within the framework of operating principles that are involved in the risk appetite and risk limits are set by the Board of Directors in accordance with the policy statement. Asset and liability management processes and compliance with the provisions of the policy are controlled and audited by the internal audit system. The execution of the audit, reporting the audit results, action plans for the elimination of errors and gaps identified as a result of inspections regarding the fulfillment of the principles, are determined by the Board of Directors. Operational Risk Operational risk is defined as “the possibility of loss resulting from inadequate or failed internal processes, people and systems, or from external events, including legal risk”. Studies consisted of and are formed of occur by execution of identification, definition, measurement, analysis, monitoring of operational risk, providing and reporting the necessary control related to monitoring the progress of our country and the world, the development of techniques and methods, necessary legal reporting, notification and conduct of follow-up transactions. Studies on the subject are conducted by the Department of Risk Management. Operational risks that arise due to the activities are defined in "Bank Risk Catalogue" and classified in respect of species. Bank Risk Catalogue is kind of the fundamental document that used for identification and classification of all at the risk that may be encountered. It is updated in line with the changes in the nature of the processes and activities. Qualitative and quantitative methods are used in a combination for measurement and evaluation of the operational risks. In this process, information use that obtained from "Impact-Probability Analysis", "Missing Event Data Analysis", "Risk Indicators", “Scenario Analysis”, “Top-Down Risk Assessment”, “Internal Model” methods. Methods prescribed by legal regulations are applied as minimum in determining the capital requirement level for the operating risk. Operational Risk Committee that established by a decision of the board of directors on 30.04.2020, the management of operational risks that the bank may be exposed for the determination of policies and strategies, the development of an operational risk management framework and operational risks include activities with the aim of strengthening the governance model. The Committee works in cooperation with the Risk Committee and reports the results of its activities to the Board of Directors through the Audit Committee. All risks are assessed in the context of operational risk, loss events and the risk indicators same as operational risks that occurred in the Bank, are monitored on a regular basis by the Department of Risk Management and reported periodically to the Risk Committee, Operational Risk Committee, and the Board of Directors. Model Risk Management and Validation Operations Model risk is the risk of financial losses and/or loss of reputation that the Bank may be exposed to due to errors and/or malfunctions that occur during the creation, implementation or use of models used in its activities. In order to address the model risk in a holistic manner, the model definition, model life cycle and triple line of defense structure and the duties and responsibilities of all functions of the Bank in this structure are defined in the model risk management policy. Model risk management and validation activities in the second line of defense of the triple line of defense structure; creating the model inventory, determining and approving the model class, validating the models, preparing periodic reports on the Bank's model risk and presenting those reports to the Risk Committee, Audit Committee and Board of Directors. Risk measurement models are validated at least once a year according to international standards. Within the scope of validation, activities are carried out to test the performance and validity of models with statistical methods, to examine the quality of the data used in the model development phase and the conceptual soundness of the selected methods, and to evaluate the health of the processes created for the use of the models. The results of the validation activities are reported to the Risk Committee, Audit Committee and the Board of Directors. a2. Overview of risk weighted amounts: Risk Weighted Amounts Minimum Capital Requirements Current Period Prior Period Current Period Credit risk (excluding counterparty credit risk) (CCR) 853,562,058 504,344,844 Of which standardized approach (SA) 853,562,058 504,344,844 Of which internal rating-based (IRB) approach Counterparty credit risk Of which standardised approach for counterparty credit risk (CCR) Of which internal model method (IMM) Equity positions in banking book under basic risk weighting or internal rating-based approach 14,270,649 14,329,919 14,270,649 14,329,919 Equity investments in funds – look-through approach 2,646,881 1,586,280 Equity investments in funds – mandate-based approach Equity investments in funds – 1250% weighted risk approach Settlement risk 21,438 Securitization positions in banking accounts Of which IRB ratings-based approach (RBA) Of which IRB Supervisory formula approach (SFA) SA/simplified supervisory formula approach (SSFA) Market risk Of which standardised approach (SA) Of which internal model approaches (IMM) Operational Risk Of which Basic Indicator Approach Of which Standardised approach (SA) Of which Advanced measurement approach 18,420,488 18,420,488 10,104,488 10,104,488 50,403,474 50,403,474 40,291,061 40,291,061 68,284,965 68,284,965 1,141,652 1,141,652 211,750 1,715 1,473,639 1,473,639 4,032,278 4,032,278 The amounts below the thresholds for deduction from capital (subject to a 250% risk weight) 963,063 700,490 77,045 Floor adjustment Total 940,288,051 571,357,082 75,223,044 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 254 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 255 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 b. Linkages between Financial Statements and Risk Amounts b1 Differences and matching between asset and liabilities’ carrying values in financial statements and risk amounts in capital adequacy calculation Carrying values of items in accordance with Turkish Accounting Standards Carrying values of items in accordance with Turkish Accounting Standards Current Period Carrying values in financial statements prepared as per TAS Subject to credit risk Subject to counterparty credit risk Securitization Positions Subject to market risk Not subject to capital requirements or subject to deduction from capital Prior Period Carrying values in financial statements prepared as per TAS Subject to credit risk Subject to counterparty credit risk Securitization Positions Subject to market risk Not subject to capital requirements or subject to deduction from capital Assets Cash and CBRT Banks and Money Market Placements Financial Assets at Fair Value Through Profit/Loss Financial Assets at Fair Value Through Other Comprehensive Income 198,929,653 198,929,653 23,034,629 23,034,629 14,310,944 11,543,354 170,596,394 170,596,394 Derivative Financial Assets at Fair Value Through Profit/Loss 17,029,298 17,029,298 17,029,298 Derivative Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets at Amortised Cost-Credit 782,423,321 782,423,321 Financial Assets at Amortised Cost-Other Financial Assets 93,373,997 93,373,997 Financial Assets at Amortised Cost-Expected Loss Provisions (-) 32,643,964 32,643,964 Assets Held for Sale and Discontinued Operations 1,600,625 1,600,625 Investment in Associates, Subsidiaries and Joint-Ventures 79,859,474 79,859,474 2,767,590 4,677,273 9,381,439 Tangible Assets Intangible Assets Investment Properties Current Tax Asset Deferred Tax Asset Other Assets Total Assets Liabilities Deposits Funds Borrowed Money Market Funds Marketable Securities Issued Derivative Financial Liabilities at Fair Value Through Profit/Loss Derivative Financial Liabilities at Fair Value Through Other Comprehensive Income Leasing Transaction Liabilities Provisions Current Tax Liability Deferred Tax Liability Subortinated Debts Other Liabilities Shareholders' Equity Total Liabilities 17,196,948 17,099,239 3,514,433 3,514,433 97,709 3,201,916 39,096,916 39,096,916 1,408,322,668 1,405,457,369 17,029,298 16,826,302 3,299,625 7,239,013 40,099,316 8,840,818 931,077,289 71,455,326 40,099,316 28,314,103 8,840,818 2,152,207 30,539,092 6,562,930 1,080,530 33,558,745 63,266,237 191,376,075 1,408,322,668 47,338,329 8,840,818 Assets Cash and CBRT Banks and Money Market Placements Financial Assets at Fair Value Through Profit/Loss 181,923,221 181,923,221 24,129,301 24,129,301 10,572,208 9,441,624 Financial Assets at Fair Value Through Other Comprehensive Income 87,555,076 87,555,076 Derivative Financial Assets at Fair Value Through Profit/Loss 21,924,166 21,924,166 21,924,166 Derivative Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets at Amortised Cost-Credit 514,208,750 514,208,750 Financial Assets at Amortised Cost-Other Financial Assets 46,412,734 46,412,734 Financial Assets at Amortised Cost-Expected Loss Provisions (-) 28,323,252 28,323,252 Assets Held for Sale and Discontinued Operations 827,633 827,633 Investment in Associates, Subsidiaries and Joint-Ventures 39,461,345 39,461,345 1,130,584 1,474,079 9,381,439 48,823 1,561,603 Tangible Assets Intangible Assets Investment Properties Current Tax Asset Deferred Tax Asset Other Assets Total Assets Liabilities Deposits Funds Borrowed Money Market Funds Marketable Securities Issued Derivative Financial Liabilities at Fair Value Through Profit/Loss Derivative Financial Liabilities at Fair Value Through Other Comprehensive Income Leasing Transaction Liabilities Provisions Current Tax Liability Deferred Tax Liability Subortinated Debts Other Liabilities Shareholders' Equity Total Liabilities 8,699,860 1,750,109 8,651,037 1,750,109 2,557,610 2,557,610 14,870,263 14,870,263 926,569,024 925,389,617 21,924,166 11,986,102 1,610,426 595,628,376 65,651,426 48,235,495 30,635,812 12,586,533 1,700,439 15,487,318 1,831,219 37,470,997 30,502,118 86,839,291 926,569,024 5,111,969 48,235,495 12,586,533 53,347,464 12,586,533 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 256 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 257 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 b2. The main sources of the differences between the risk amounts and the amounts assessed in accordance with TAS in the financial statements c.1.2. Credit quality of assets: Current Period Total Credit Risk Securitization Positions Counterparty credit risk Market risk Asset carrying value amount under scope of TAS 1,408,322,668 1,405,457,369 Liabilities carrying value amount under scope of TAS Total net amount scope of financial statement 1,408,322,668 1,405,457,369 885,372,448 158,493,495 1 2 3 4 5 6 7 8 9 10 11 Off-balance sheet amounts Repo style transactions (*) Differences in valuations Differences due to different netting rules Differences due to consideration of provisions Differences due to prudential filters Differences due to risk mitigation (**) Risk Amounts (166,370,491) (32,532,563) 1,365,047,811 35,132,130 7,985,484 (*) According to the "Regulation on Measurement and Evaluation of Capital Adequacy of Banks", it is the counterparty credit risk amount calculated for repo style transactions. (**) The source of the difference is collaterals of exposures to which credit risk mitigation is applied in the calculation of capital adequacy. Prior Period Total Credit Risk Securitization Positions Counterparty credit risk Market risk 17,029,298 16,826,302 (47,338,329) 8,840,818 64,367,627 7,985,484 23,771,654 11,360,476 21,924,166 11,986,102 (53,347,464) 12,586,533 75,271,630 600,431 26,056,873 4,488,558 1 2 3 4 5 6 7 8 9 10 11 Asset carrying value amount under scope of TAS 926,569,024 925,389,617 Liabilities carrying value amount under scope of TAS Total net amount scope of financial statement 926,569,024 925,389,617 Off-balance sheet amounts Repo style transactions (*) Differences in valuations Differences due to different netting rules Differences due to consideration of provisions Differences due to prudential filters Differences due to risk mitigation (**) Risk Amounts 670,197,753 139,078,854 (134,964,810) (65,293,708) 864,209,953 Current Period Loans Debt Securities Off-balance sheet exposures Total Prior Period Loans (*) Debt Securities Off-balance sheet exposures Total Gross Carrying Calue in Financial Statements Prepared in Accordance with Turkish Accounting Standards (TAS) Defaulted Non-defaulted Allowances/ amortization and impairments Net Values 23,134,130 1,990,915 759,289,191 269,306,646 453,484,304 17,207,112 1,616,688 765,216,209 269,306,646 453,858,531 25,125,045 1,482,080,141 18,823,800 1,488,381,386 Gross Carrying Calue in Financial Statements Prepared in Accordance with Turkish Accounting Standards (TAS) Defaulted Non-defaulted Allowances/ amortization and impairments Net Values 20,830,559 1,606,025 493,378,191 138,938,624 323,100,912 13,790,995 1,214,355 500,417,755 138,938,624 323,492,582 22,436,584 955,417,727 15,005,350 962,848,961 (*) The credit balance, which is measured at fair value through profit and loss, as detailed in section five 1-B-3, is not included in the above table. c.1.3. Changes in stock of default loans and debt securities (*): Defaulted loans and debt securities at end of the previous reporting period Loans and debt securities that have defaulted since the last reporting period Receivables back to non-defaulted status Amounts written off Other changes Defaulted loans and debt securities at end of the reporting period Current Period Prior Period 20,830,559 14,970,763 (497,130) (4,977,165) (7,192,897) 23,134,130 20,371,472 6,350,286 (1,017,053) (2,006,458) (2,867,688) 20,830,559 30,545,431 600,431 (*) Indemnified non-cash loans or non-cash loans not converted into cash, of the firms which are followed under “Non-performing Loans” accounts are not included in the table. (*) According to the "Regulation on Measurement and Evaluation of Capital Adequacy of Banks", it is the counterparty credit risk amount calculated for repo style transactions. c.1.4. Additional Explanation About the Credit Quality of Assets (**) The source of the difference is collaterals of exposures to which credit risk mitigation is applied in the calculation of capital adequacy. The Bank intends to use fair value measurement methods in accordance with TFRS 13 using valuation methodologies based primarily on observable data. In this context, market prices, quoted prices, prices set by CBRT and published in official gazette and internal pricing models are also utilized in the fair value measurement of the financial assets in the form of securities. Valuation models that use market data such as interest rates, efficiency curves, currency, and volatility curves are used as the basis for derivative transactions while third party valuation services are also available. The accuracy of the market prices, data and / or model inputs used in valuation under the independent price validation process is regularly checked and the suitability of the results provided by the third-party pricing service is tested at regular intervals. c. Explanation on Credit Risk c.1. General Information on Credit Risk c.1.1. General qualitative information on credit risk This information is included in footnotes under Section Four, Note II "Explanations on Credit Risk," and Section Four, Note XI-a.1. Bank’s methods for determining provision amounts and classification of its loans are mentioned in the Section Three Note VIII. The bank is restructuring its loans classified as first and second group as well as non-performing loans and receivables. Restructuring in performing loans are made by granting a new loan or extending the term date of credit given to customer by Bank. Restructuring of a contract is made on customer’s demand or with the purpose of enhancing the solvency of customer. Restructuring in non-performing loans are generally made by establishing a new redemption plan within the context of a protocol aiming the collection of those receivables whose redemption plan are not valid because of delinquency previously. The breakdown of receivables in terms of geographic regions, sectors and remaining maturities are represented in “Explanations on Credit Risk” in the Section Four Notes II. On the basis of sector-based provisions for receivables are presented in the footnote numbered Section Four II-16. The amounts of the receivables that are set aside for the geographical regions are as follows. The amount of non-performing loans which are written off in 2022 is TL 4,977,165. Current Period Prior Period Non-Performing Loans Specific Provision Non-Performing Loans Specific Provision Domestic EU Countries OECD Countries (*) Off-shore Banking Regions USA, Canada Other Countries Total 22,683,339 230,924 37,019 10,098 172,750 23,134,130 16,846,075 154,985 31,646 8,182 166,224 17,207,112 20,397,941 247,369 35,901 7,731 141,617 13,498,359 119,892 30,765 6,382 135,597 20,830,559 13,790,995 (*) OECD countries other than the EU countries, USA and Canada The aging analysis of past-due receivables is included in Section Four Note II-11 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 258 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 259 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 c.2. Credit risk mitigation c.2.1. Qualitative Requirements to be Disclosed to The Public Regarding Credit Risk Mitigation Techniques In the calculation of the Bank’s Credit Risk Mitigation in accordance with the “Communiqué on Credit Risk Mitigation Techniques” published in the Official Gazette numbered 29111 on 6 September 2014, the financial collaterals are taken into consideration. The Bank takes local currency and foreign currency deposit pledges into consideration as financial collaterals in calculating regulatory capital adequacy. Information on key characteristics of the policies and processes related to the assessment and management of collateral are included in footnotes under Section IV No. II, "Credit Risk Explanations". c.2.2. Credit risk mitigation techniques: Current Period Exposures unsecured Exposures secured by collateral Exposures secured by collateral, of which: secured amount Exposures secured by financial guarantees Exposures Secured by Financial Guarantees, of which: Secured Amount Exposures secured by credit derivatives Exposures secured by credit derivatives, of which: secured amount Loans 735,059,052 13,488,908 11,567,926 16,668,245 15,057,209 Debt securities 269,306,646 Total 1,004,365,698 13,488,908 11,567,926 16,668,245 15,057,209 Of which defaulted 23,134,130 Prior Period Loans (*) Debt securities Total Exposures unsecured Exposures secured by collateral Exposures secured by collateral, of which: secured amount Exposures secured by financial guarantees Exposures Secured by Financial Guarantees, of which: Secured Amount Exposures secured by credit derivatives Exposures secured by credit derivatives, of which: secured amount 577,741,977 10,355,755 8,618,981 10,746,384 9,724,012 153,871,817 731,613,794 10,355,755 8,618,981 10,746,384 9,724,012 Of which defaulted 23,623,595 (*) The credit balance, which is measured at fair value through profit and loss, as detailed in section five 1-B-3, is not included in the above table. c.3. Credit risk if standard approach is used c.3.1. Qualitative disclosures about the ratings notes used by banks to calculate credit risk by standard approach The mentioned disclosure is presented in Section Four Note XI-a.1. c.3.2. Standard approach - Exposure credit risk and credit risk mitigation effects Current Period Exposures before CCF and CRM Exposures post-CCF and CRM RWA and RWA density On-balance sheet amount Off-balance sheet On-balance sheet amount Off-balance sheet On-balance sheet amount Off-balance sheet Exposures to sovereigns and their central banks 395,124,248 Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Exposures secured by residential property Exposures secured by commercial property Past-due loans Exposures in higher-risk categories by the Board Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment undertakings Equity investments Other exposures Total Prior Period Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Exposures secured by residential property Exposures secured by commercial property Past-due loans Exposures in higher-risk categories by the Board Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment undertakings Equity investments Other exposures Total 192,016 83,157 738,079 372 1,579 188,278 408,343,017 3,672,028 7,992,586 191,900 81,195 738,079 267 81,443 96,096 162,638 20,433,631 25,969,270 20,430,777 22,174,824 15,517,496 341,155,364 223,156,926 322,616,192 116,889,529 377,402,501 182,922,462 153,862,247 178,894,934 7,938,306 145,267,977 33,886,107 29,488,075 5,925,237 92,190,362 2,424,138 5,076,150 33,793,426 29,488,075 5,925,237 1,121,348 12,220,171 3,256,637 19,863,194 4,344,792 1,575,017 91,861,606 145,491 154,170,082 167.56% 2,611,881 35,000 2,611,881 35,000 2,646,881 100.00% 60,591,899 78,246,112 4,331,668 60,591,899 1,174,766 48,815,130 78,246,112 78,823,950 1,243,588,630 416,620,645 1,233,814,330 156,489,639 867,323,494 79.03% 100.74% 62.38% Exposures before CCF and CRM Exposures post-CCF and CRM RWA and RWA density On-balance sheet amount Off-balance sheet On-balance sheet amount Off-balance sheet On-balance sheet amount Off-balance sheet 342,151 508,139 299,645 950 870 208,921 255,525,435 9,188,437 3,328,651 342,041 503,509 299,645 267 84,099 171,168 587,608 21,099,626 21,072,853 21,086,177 16,023,828 12,328,560 227,307,338 152,695,779 217,460,719 88,814,213 279,530,445 123,310,683 74,788,316 120,335,451 5,839,139 95,895,190 24,218,274 25,111,231 6,791,059 23,813,122 1,364,158 3,708,957 24,171,142 25,111,231 6,791,059 606,846 8,672,296 2,606,663 17,226,269 5,208,451 1,246,361 23,493,603 150,646 35,364,332 149,57% 1,536,280 50,000 1,536,280 50,000 1,586,280 100,00% 27,016,787 21,509,499 27,016,787 131,274 15,893,526 38,685,526 38,685,526 39,105,820 767,549,807 276,646,664 762,358,605 123,495,412 514,898,596 58,54% 101,09% 58,12% 1.94% 50.01% 100.00% 0.00% 36.42% 85.87% 77.75% 35.00% 60.66% 73.33% 1,26% 50,00% 100,00% 0,00% 33,22% 91,27% 76,00% 35,00% 62,15% 76,70% Exposures to sovereigns and their central banks 247,509,946 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 260 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 261 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 c.3.3. Standardised Approach-Exposures by Risk Classes and Risk Weights: 0% 10% 20% 25% 35% 50% Risk Weights Bank 75% 100% 150% 250% Other Total 404,022,454 10 7,992,581 412,015,045 192,142 25 162,638 192,167 162,638 738,079 738,079 21,064,541 20,524,535 872,908 112,527 31,090 42,605,601 46,382,576 40,959,223 347,210,029 227,883 4,726,010 439,505,721 166,261,050 20,572,190 34,914,774 25,763,036 6,981,676 3,161,068 2,763,991 178 186,833,240 34,914,774 32,744,712 5,925,237 85,824 78,753 59,637,393 32,205,127 92,007,097 0% 10% 20% 25% 35% 50% Risk Weights Bank 75% 100% 150% 250% Other Total 261,385,207 29 3,328,636 264,713,872 342,280 28 587,608 342,308 587,608 299,645 299,645 22,305,274 13,781,596 958,860 11,190 53,085 37,110,005 18,541,595 23,259,559 264,041,919 95,804 336,055 306,274,932 121,117,602 5,056,988 24,777,988 20,983,251 6,734,643 3,166,861 3,622,553 1,645 126,174,590 24,777,988 27,717,894 6,791,059 53,944 96,195 23,494,110 23,644,249 Other exposures 12,865,658 Total 417,626,191 107,346 67,554,463 34,914,774 90,685,838 166,261,050 515,936,220 59,977,981 385,225 36,962,227 1,390,303,969 Total 272,939,387 40,846,869 24,777,988 61,587,520 121,117,602 340,312,566 23,602,749 280,196 389,140 885,854,017 2,646,881 77,860,887 48,793,661 385,225 2,646,881 78,246,112 61,766,665 Other exposures 11,254,535 1,586,280 38,405,330 15,893,526 280,196 1,586,280 38,685,526 27,148,061 Current Period Risk Groups Exposures to sovereigns and their central banks Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Exposures secured by residential property Exposures secured by commercial property Past-due loans Exposures in higher-risk categories by the Board Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment undertakings Equity investments Prior Period Risk Groups Exposures to sovereigns and their central banks Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Exposures secured by residential property Exposures secured by commercial property Past-due loans Exposures in higher-risk categories by the Board Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment undertakings Equity investments An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 262 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 263 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 d. Explanations on Counterparty credit risk d.1. Qualitative Explanations on Counterparty credit risk The counterparty credit risk that the Bank is exposed to be managed within the framework of general limit allocation and credit risk mitigation that are outlined in the Credit Risk Policy of the Bank. In setting general credit limits, the counterparty credit risks of customers as well as their cash and noncash risks are taken into account with a holistic view. Moreover, the total position of the transactions which create counterparty credit risk is also monitored under a separate risk limit. The counterparty credit risk, which stems from derivatives and repo like transactions including transactions with qualified central counterparties that result in liabilities for both sides, is measured according to the Appendix-2 and Appendix-4 of the "Regulation on Measurement and Evaluation of Capital Adequacy of Banks" Counterparty credit risk valuation method based on the calculation of fair values of the derivative transactions is implemented. In the process of calculating the counterparty credit risk, the Standard Approach is used to determine the risk amounts of derivative transactions. In calculating the risk amount related to derivative transactions; 1.4 times the sum of potential credit risk amounts and positive replacement costs is charged. Most of the credit risk related to the derivative transactions with other banks is subject to daily collateral clearing agreements mutually signed with related parties and the counterparty credit risk is hence reduced. There are no guarantees received or sold by credit derivatives by the Bank in the context of trading or banking accounts. d.2. Counterparty credit risk (CCR) approach analysis: Current Period Replacement Cost Potential Future Exposure EEPE (Effective Expected Positive Exposure) Alpha used for computing regulatory EAD Exposure after Credit Risk Mitigation Risk Weighted Amounts Standardised Approach -CCR (for derivatives) 5,288,396 6,708,884 1,4 11,997,280 7,255,414 Internal Model Method (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Simple Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Comprehensive Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Value-at-Risk (VaR) (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Total 8,501,779 2,800,936 10,056,350 Current Period Replacement Cost Potential Future Exposure EEPE (Effective Expected Positive Exposure) Alpha used for computing regulatory EAD Exposure after Credit Risk Mitigation Risk Weighted Amounts Standardised Approach -CCR (for derivatives) 15,126,470 2,525,157 1,4 17,651,627 7,438,966 Internal Model Method (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Simple Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Comprehensive Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Value-at-Risk (VaR) (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Total 3,603,297 820,234 8,259,200 d.3. Capital obligation for credit valuation adjustment (CVA): Total portfolios subject to the Advanced CVA capital obligation (i) VaR component (including the 3x multiplier) (ii) Stressed VaR component (including the 3x multiplier) All portfolios subject to the Standardised CVA capital obligation Total subject to the CVA capital change d.4. CCR exposures by risk class and risk weights: Current Period Prior Period Risk Amounts (Post CRM) Risk Weighted Amounts Risk Amounts (Post CRM) Risk Weighted Amounts 11,997,280 11,997,280 4,117,938 4,117,938 17,651,627 17,651,627 6,061,815 6,061,815 0% 10% 20% 50% 75% 100% 150% Other Risk Weights 3,625,929 17 1 4,663,983 5,474,983 289,620 217,221 6,196,119 31,186 Total Credit Exposure (*) 3,625,929 17 10,138,967 6,702,960 31,186 4,757,100 4,757,100 Current Period Risk Groups Exposures to sovereigns and their central banks Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Other Exposures Total 3,625,929 4,953,603 5,692,204 31,186 6,196,137 4,757,100 25,256,159 (*) Other receivables: d.7. includes amounts reported in the table of risks to the central counterparty. Prior Period Risk Groups Exposures to sovereigns and their central banks Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Other Exposures Total 0% 10% 20% 50% 75% 100% 150% Other Risk Weights 9,034,901 Total Credit Exposure (*) 9,034,901 130 130 2,199,970 3,723,422 1 247,813 269,495 5,754,644 24,547 5,923,393 6,271,952 24,547 389,140 389,140 9,034,901 2,447,783 3,992,917 24,547 5,754,775 389,140 21,644,063 (*) Other receivables: d.7. includes amounts reported in the table of risks to the central counterparty. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 264 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 265 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 d.5. Collateral for CCR: Current Period Received Collateral Given Collateral Collateral used in derivative transactions Collateral used in other transactions Segregated Unsegregated Segregated Unsegregated Received Collateral Given Collateral Cash- Domestic Currency Cash- Other Currencies Total 27,662,201 11,981,322 39,643,523 Prior Period Received Collateral Given Collateral Collateral used in derivative transactions Collateral used in other transactions Segregated Unsegregated Segregated Unsegregated Received Collateral Given Collateral 40,360,089 8,394,718 48,754,807 Current Period Prior Period Post CRM risk exposure RWA Post CRM risk exposure RWA 4.757.100 4.746.787 96.361 95.142 94.936 389.140 387.118 8.904 7.782 7.742 10.313 206 2.022 40 100.538 146.312 39.347 1.219 40.614 1.122 Cash- Domestic Currency Cash- Other Currencies Total d.6. Credit derivatives exposures: None. d.7. Exposures to central counterparties (CCP): Exposure to Qualified Central Counterparties (QCCPs) (total) Exposures for trades at WCCPs (excluding initial margin and default fund contributions); of which (i) OTC Derivatives (ii) Exchange-traded Derivatives (iii) Repo-reverse repo transactions, credit securities transactions and securities or commodities lending or borrowing (iv) Netting sets where cross-product has been approved Segregated initial margin Non-segregated initial margin Paid guarantee fund amount Unpaid guarantee fund commitment Exposures to non-QCCPs (total) Exposures for trades at non-QCCPs (excluding initial margin and default fund contributions); of which (i) OTC Derivatives (i) Exchange-traded Derivatives (ii) Securities financing transactions (iii) Netting sets where cross-product has been approved Segregated initial margin Non-segregated initial margin Pre-funded default fund contributions Unfunded default fund contributions e. Explanations on securitizations: None. f. Market Risk Explanations f.1. Qualitative information to be disclosed to the public regarding market risk: Market risk is defined as the risk that may reduce the market value of the trading portfolio due to the changes in the risk factors named interest rate, exchange rates, equities and the price of commodities and options. The procedures for the management of market risk are discussed in the Bank's "Asset and Liability Management Risk Policy" and those procedures are in line with the risk/return expectations of the Bank and with the limits that are defined in the risk appetite framework. Limits related to market risk; are established by the Board and are revised periodically in order to reflect market conditions and best practices in the industry. Compliance to those limits is closely monitored by the Risk Management Department, Asset and Liability Management Committee and by the executive departments. Additionally, compliance with the provisions relating to the procedures and policies of market risk management is audited by the internal audit system. Trading activities of the securities that are included in the calculation of market risk is carried out by taking the Asset-Liability Committee decisions, risk policies and established limits into consideration and risks arising due to these activities are hedged using derivatives transactions where necessary. Measurement of market risk, reporting of results, and monitoring compliance with the risk limits are among the key responsibilities of the Risk Management Department. Analyses related to market risk are reported to the Risk Committee and to the Board via the Audit Committee by the Risk Management Department. The trading book of the Bank included in market risk calculations consists of on balance-sheet financial assets that are held for trading intent, derivatives that provide hedge to those instruments and foreign currency positions. The market risk carried by the Bank is measured and monitored using two methods known respectively as the Standard Method and the Value at Risk Model (VAR) and Expected Shortfall in accordance with the local regulations which are established in compliance with the international legislations. In this context, the exchange rate risk emerges as the most important component of the market risk. The market risk calculations using the Standard Method are performed at the end of each month and the measurement results are included in the statutory reports as well as being reported to the Bank’s top management. The Value at Risk Model and Expected Shortfall are another alternative for the Standard Method used for measuring and monitoring market risk. This model is used to measure the market risk on a daily basis in terms of interest rate risk, currency risk and equity share risk and is a part of the Bank’s daily internal reporting. Further retrospective testing (back-testing) is carried out on a daily basis to determine the reliability of the daily risk calculation by the VAR model, which is used to estimate the maximum possible loss for the following day. Scenario analyses which support the VAR model used to measure the losses that may occur in the ordinary market conditions are practiced, and the possible impacts of scenarios that are developed based on the future predictions and the past crises, on the value of the Bank’s portfolio are determined and the results are reported to the Bank’s top management. f.2. Standardised Approach: Outright Products Interest rate risk (general and specific) Equity risk (general and specific) Foreign exchange risk Commodity risk Options Simplified approach Delta-plus method Scenario approach Securitisations Total Current Period Prior Period RAT 17,794,076 4,996,400 997,925 9,123,063 2,676,688 626,412 626,412 9,118,589 3,798,288 464,125 4,265,063 591,113 985,899 985,899 18,420,488 10,104,488 g. Explanations on Operational Risk The operational risk capital requirement is calculated according to Regulation on Measurement and Evaluation of Capital Adequacy of Banks' article number 24, is measured using the Basic Indicator Approach once a year in parallel with domestic regulations. As of December 31, 2022, the operational risk amount is TL 50,403,474 (December 31, 2020: TL 40,291,061) and information about the calculation is given below. Current Period 2 PP Amount 1 PP Amount CP Amount Total/No. of Years of Positive Gross Rate (%) Total Gross Income 19,200,037 27,720,464 33,725,058 3 15 4,032,278 Value at operational risk (Total*12.5) 50,403,474 Prior Period 2 PP Amount 1 PP Amount CP Amount Total/No. of Years of Positive Gross Rate (%) Total Gross Income 17,545,195 19,200,037 27,720,464 3 15 3,223,285 Value at operational risk (Total*12.5) 40,291,061 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 266 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 267 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 h. The interest rate risk of the banking book items: XII. Explanations on Segment Reporting Interest rate risk arising from the banking accounts is defined as negative effect risk on capital of the changes in market interest rates due to differences in interest settlement and re-pricing on, differences in interest-earning assets taking part in the banking book; interest-bearing liabilities; interest-bearing derivative transactions inclusive of the policies established by the Bank Board of Directors, is managed within the framework of the strategies set by the Asset-Liability Management Committee. Compliance with internal risk limits for banking portfolio is closely and continuously monitored by the Risk Management Department and Asset-Liability Committee and the measurement results are reported to the Board of Directors on a monthly basis. Duration and sensitivity analysis are conducted on a monthly basis by the Bank in the scope of monitoring of interest rate risk arising from the banking books about Interest Rate Risk in the Banking Accounts from the Regulation on Measurement and Assessment of Standard Shock Method which is published in the Official Gazette No. 28034 dated 23 August 2011. In the duration analysis, the maturity gap between assets and liabilities of the balance sheet are determined by the calculation of the weighted average maturities based on the asset that sensitive to interest rate and liabilities and off-balance sheet transactions re-pricing period. In the interest rate risk sensitivity analysis, the influence of the various interest rate change scenarios to the economic value of the Bank's capital is examined. In the calculations made within the framework of the said regulation, behavioral maturity modeling is performed for demand deposits with low sensitivity to interest changes and whose original maturity is longer than the contractual maturity. In these studies, which are defined as core deposit analysis, based on historical data, calculations are made for what amount of demand deposits will remain within the bank for what maturity, and these analyzes are used as an input in quantifying the interest rate risk arising from banking accounts in a way that does not contradict legal provisions. Currency Applied Shock (+/- x basis point) Revenue/ Loss Revenue/Shareholders’ Equity – Loss/ Shareholders’ Equity TL TL EUR EUR USD USD Total (for Negative Shocks) Total (for Positive Shocks) i. Remuneration policy (+) 500 (-) 400 (+) 200 (-) 200 (+) 200 (-) 200 (11,670,706) 10,850,819 1,455,039 (1,457,745) (1,984,592) 3,182,748 12,575,822 (12,200,259) (5.17) % 4.81% 0.64% (0.65) % (0.88) % 1.41% 5.57% (5.41) % The Remuneration Committee, which is established to carry out the duties and activities related to the monitoring and supervision of the Bank's remuneration applications on behalf of the Board of Directors, consists of two members. The Remuneration Committee meets at least twice a year, not exceeding six months, and reports to the Board of Directors on the results of the activities carried out and important matters considered to have an impact on the Bank’s position. As of the end of 2022, the Remuneration Committee met 8 times and made a total of 12 decisions. Regarding compliance with the Corporate Governance Principles, the Remuneration Committee monitors and supervises the practices related to wage management on behalf of the Board of Directors; the fees are in line with the Bank's ethical values, internal balances and strategic objectives; the evaluation of the remuneration policy and its practices in the context of risk management; it is responsible for the presentation of the proposals determined in line with the requirements of the salary policy and the other responsibilities determined by the provisions of the applicable legislation and the fulfillment of the duties given by the Board of Directors in this framework. As of the end of 2022, the number of qualified employees working at the Bank is 29. The monetary and social rights of employees are determined in accordance with the Chartering Policy in the framework of the legislation related to the Collective Labor Agreement. The Bank carries out its practices with regard to remuneration policies within the framework of relevant banking and capital market legislation. This policy includes all managers and employees. Premium payments are made once a year to managers and managers who work in branches and headquarters units. It is considered that managerial premium payments are in line with the Bank's long-term strategy and the risks assumed, as well as the performance of its employees. There are no variable fees for qualified employees in the Bank. The compliance of the wage levels in the bank with the sector wage levels is monitored by participating in independent and anonymous wage surveys, which are held twice a year. Within the scope of the remuneration policy, the Bank's pricing practices are planned and executed on the basis of effective risk management, prevention of excessive risk taking, compliance with relevant legislation and scope and structure of the bank's activities, strategies, long-term objectives and risk management structures. The fees to be paid to the managers and employees of the Bank at every stage; It is essential that the Bank is in line with its ethical values, internal balances and strategic objectives, and that it is not only associated with its short-term performance. Payments made to employees are determined in a manner that will positively impact the Bank's corporate values and on the basis of objective conditions. Payments to be made to the managers of the units within the internal systems and to their staff are determined by taking into account the performance of the relevant personnel in relation to their functions, as they are in the audit or oversight, or are independent of the performance of the activity unit they control. The Bank’s operations are classified as corporate, commercial, retail and private banking, and treasury/investment banking. Services to the large corporations, SMEs and other trading companies are provided through various financial instruments within the scope of the corporate and commercial operations. Services such as project financing, operating and investment loans, deposit and cash management, credit cards, cheques and bills, foreign trade transactions and financing, letter of guarantees, letter of credits, forfeiting, foreign currency trading, bill collections, payrolls, investment accounts, tax collections and other banking services are provided for the aforementioned customer segments. Retail banking services are comprised of individuals needs such as deposits, consumer loans, overdraft accounts, credit cards, bill collections, remittances, foreign currency trading, safe-deposit boxes, insurance, tax collections, and investment accounts and by other banking services. All kinds of financing and cash management services provided to individuals in the high-income level are recognized as Private Banking activities. Treasury transactions are comprised of medium- and long-term funding tools such as securities trading, money market transactions, spot and forward TL and foreign currency trading, and derivative transactions such as forwards, swaps, futures and options, as well as syndications and securitizations. The details about the aforementioned investments are stated in Note I.h-I.i of Section Five. Statement of information related to business segmentation is given below. Below mentioned information has been prepared with the data obtained from the Bank's management reporting system. Current Period Interest Income Interest Expense Fees and Commissions Income Fees and Commissions Expense Dividend Income Trading Income/Loss (Net) Other Income Corporate/ Commercial Banking Individual/ Private Banking Treasury Transaction/ Investment Activities Unallocated Total 61,873,126 15,005,791 15,296,004 20,174,307 16,206,784 5,145,861 3,189,166 503,115 40,835,759 12,441,592 38,604 4,522,593 108,479 571,561 123,454,753 4,597,133 329,019 4,623,986 2,279,788 48,251,300 20,770,884 4,623,986 38,604 4,522,593 6,080,548 Expected Credit Loss and Other Provision Expenses 7,017,495 1,568,084 74,602 7,144,263 15,804,444 Other Operating Expense 5,198,926 13,410,401 15,419,951 34,029,278 Income/Loss from Investments in Subsidiaries Accounted by Equity Method 21,790,674 21,790,674 73,949,048 12,411,168 61,537,880 Income Before Tax Tax Provision Net Period Profit Total Assets Total Liabilities Prior Period Interest Income Interest Expense Commission İncome Commission Expense Dividend Income Trading Income/Loss (Net) Other Income Provision Expense Other Expense Income/Loss from Investments in Subsidiaries Accounted by Equity Method Income Before Tax Tax Provision Net Period Profit Total Assets Total Liabilities 588,020,459 157,068,287 398,204,736 265,029,186 1,408,322,668 403,518,032 484,887,253 182,268,308 337,649,075 1,408,322,668 Corporate/ Commercial Banking Individual/ Private Banking 31,950,917 6,733,700 6,695,135 12,339,254 10,607,910 2,675,474 2,643,970 7,091,015 2,560,293 307,201 688,195 6,078,683 Treasury Transaction/ Investment Activities Unallocated Total 16,417,925 11,373,446 20,735 (5,149,127) 7,414 16,416 8,003,345 196,247 1,248,018 372,169 2,122,833 1,442,985 6,654,541 7,272,713 60,904,343 29,963,074 9,742,778 2,122,833 20,735 (5,149,127) 4,401,570 14,450,167 15,911,689 8,003,345 15,475,881 2,007,986 13,467,895 394,696,667 99,234,839 228,168,114 204,469,404 926,569,024 241,815,534 330,076,297 194,580,263 160,096,930 926,569,024 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 268 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 269 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 SECTION FIVE: DISCLOSURES AND FOOTNOTES ON THE UNCONSOLIDATED FINANCIAL STATEMENTS I. a. DISCLOSURES AND FOOTNOTES ON ASSETS Cash and Central Bank of Turkey: a.1. Cash and balances with the Central Bank of Turkey: Cash in TL/Foreign Currency Central Bank of Turkey Other Total a.2. Information on balances with the Central Bank of Turkey: Unrestricted Demand Deposit Unrestricted Time Deposit Restricted Time Deposit Other (*) Total (*) The amount of reserve deposits held at the Central Bank of Turkey. a.3. Information on reserve requirements: Current Period Prior Period TL FC TL FC 4,108,843 11,613,711 2,627,481 12,182,962 17,590,529 165,193,959 14,652,969 152,099,358 422,611 360,451 21,699,372 177,230,281 17,280,450 164,642,771 Current Period Prior Period TL FC TL FC 17,590,529 45,894,722 14,652,969 66,674,939 7,453,446 111,845,791 85,424,419 d. Information on Banks: ç.1. Information on Banks: 17,590,529 165,193,959 14,652,969 152,099,358 As per the Communiqué no. 2013/15 “Reserve Deposits” of the Central Bank of the Republic of Turkey (“CBRT”), banks keep reserve deposits at the CBRT for their TL and FC liabilities mentioned in the communiqué. The reserve deposit rates vary according to their maturity compositions; the reserve deposit rates are realized between 3% - 8% for TL deposits and other liabilities, between 19% - 26% for FC deposits and precious metal deposit accounts and between 5% - 21% for other FC liabilities. Liabilities subject to required reserves are calculated and set aside every two weeks on Friday for 14-day periods. According to the Communique on Required Reserves published in the Official Gazette dated 01.07.2021 and numbered 31528, the possibility of establishing Turkish lira required reserves in foreign currency was terminated as of 01.10.2021. Within the scope of the CBRT's Communiqué numbered 2021/14, additional required reserve and commission application for foreign currency deposit accounts, effective as of 02.09.2022, according to the conversion rate into Turkish lira time deposit accounts; It has been terminated with the Communiqué numbered 2022/30 published in the Official Gazette dated 31.12.2022 and numbered 32060 with the 5th repetition, effective from the liability period dated 23.12.2022. On the other hand, as of 23.12.2022, the commission rate to be calculated over the required reserve amount for foreign currency deposit liabilities; In both real and legal person deposits, it is determined as 8% per annum for banks with a Turkish Lira deposit share below 50%, and 3% per annum for banks with a 50% to 60% deposit share. b. Information on Financial Assets at Fair Value through Profit and Loss: b.1. Financial Assets at fair value through profit and loss, which are given as collateral or blocked: As of 31.12.2022, the amount of financial assets given as collateral/blocked at fair value through profit or loss is TL 8,712,789 (December 31, 2021: 4,010,802). After the collection of the sales process, any special purpose entity that is the subject of the guarantee granted to the company which is under Financial Assets at Fair Value Through Profit and Loss and the loan amounting to TL 3,920,571, for which impairment provision has been made, was classified as non-performing loans as of 30.06.2022 and it was written off within the framework of the " Procedures and Principals regarding Classification of Loans and Allowances Allocated for Such Loans ". The shares in the amount of TL 526,236, which are tracked under “Impairment Losses on Assets Held for Sale and Subject to Discontinued Operations” and were reserved for the entire decrease in value, were deleted from the asset together with the decrease in value provision within the scope of registration of the liquidation of the company in the Türkiye Sicil Gazetesi dated 28.12.2022 and numbered 10735. b.4. TL 2,039,931 of other financial assets consists of the mutual funds; Quasar İstanbul Konut Gayrimenkul and Quasar İstanbul Ticari Gayrimenkul which were founded by İş Portföy Yönetimi A.Ş. c. Positive differences on derivative financial assets held for trading: Derivative Financial Assets at Fair Value Through Profit or Loss Forward Transactions Swap Transactions Futures Options Other Total Current Period Prior Period TL 234,532 76,983 185,445 FC 689,844 14,415,860 180,079 1,246,555 TL 307,790 31,882 240,718 FC 1,697,249 18,159,836 456,221 1,030,470 496,960 16,532,338 580,390 21,343,776 Banks Domestic Banks Foreign Banks Foreign Head Office and Branches Total d.2. Information on foreign banks: EU Countries USA, Canada OECD Countries (*) Off-shore Banking Regions Other Total (*) OECD countries other than the EU countries, USA and Canada. Current Period Prior Period TL FC TL FC 72 415,341 118 628,822 650,302 21,968,914 168,103 23,332,258 650,374 22,384,255 168,221 23,961,080 Restricted Amount Unrestricted Amount Prior Period Current Period Prior Period Önceki Dönem 6,042,205 2,147,862 3,400,101 6,992,733 4,798,843 3,164,571 1,229,286 2,504,313 977,040 1,732,111 4,120,368 3,083,978 15,710,536 18,040,125 4,702,354 6,908,680 1,223,812 5,460,236 b.2. Financial assets at fair value through profit and loss, which are subject to repurchase agreements:: Expected credit loss for cash and cash equivalents: Financial assets at fair value through profit and loss, which are subject to repurchase agreements as of December 31, 2022, are amounting to TL 161,016 (December 31, 2021: TL 115,057). b.3. All creditors including the Bank reached an agreement on restructuring the loans granted to the company. As stated in the year 2019, loans of the company had been planning to be restructured based on required permits and necessary approvals within a new special purpose entity which was already incorporated or will be incorporated in the Republic of Turkey and owned by the creditors either directly or indirectly through takeover of the shares, that have been pledged by the company as a guarantee for the credit risk. Above mentioned process was completed in 2018 and, in this context the Bank owns 11.5972% of the newly formed special purpose entity. At the Ordinary Meeting of General Assembly of 2018 held in 2019, it has been decided to increase the share capital of the mentioned company by TL 3,982,230, all to be covered by common receivables Whereas the Bank’s ownership ratio in company share have not changed, the nominal value of the shares owned increased from TL 6 to TL 461,833 respectively. Related amount is under Assets Held for Sale and Discontinued Operations account, while the loan amount remaining after the capital increase is followed under the Financial Assets at Fair Value Through Profit and Loss item on 10.03.2022, a share transfer agreement was signed between the company and TVF for the sale of all A group registered shares, corresponding to 55% of the company's capital, to Türkiye Varlık Fonu (TVF) and on 31.03.2022, the sale and transfer transaction was realized. Current Period Stage 1 Stage 2 Stage 1 Stage 2 Prior Period Stage 1 Stage 2 62,790 44,684 (3,349) Beginning of period provisions Additional provisions within the period Transfers within the period Write-offs from Assets Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 Currency Exchange Difference Current Period Ending Provisions 34,211 138,336 26,379 44,434 (18,484) 10,461 62,790 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 270 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 271 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 e. Information on Financial Assets at Fair Value through Other Comprehensive Income: f.3. Information on Maturity analysis of cash loans e.1. Information on financial assets at Fair Value through Other Comprehensive Income, which are given as collateral or blocked: Financial assets at fair value through other comprehensive income, which are given as collateral or blocked, amount to TL 57,585,824 as of December 31, 2022 (December 31, 2021: TL 21,372,033). e.2. Information on financial assets at Fair Value Through Other Comprehensive Income, which are subject to repurchase agreements: Financial assets at fair value through other comprehensive income, which are subject to repurchase agreements amount to TL 39,650,302 as of December 31, 2022 (December 31, 2021: TL 32,267,910). e.3. Information on financial assets at Fair Value through Other Comprehensive Income: Cash Loans Short-term Loans and Other Receivables Medium and Long-term Loans and Other Receivables Standard Loans 309,589,401 379,744,863 Loans under close monitoring Restructured Loans 6,155,109 19,573,727 2,963,197 41,262,894 Debt Securities Quoted on a Stock Exchange Not- Quoted (*) Share Certificates Quoted on a Stock Exchange Not-Quoted Impairment Losses (-) Other Total Current Period Prior Period f.4. Information on consumer loans, retail credit cards, personnel loans and personnel credit cards: 175,252,541 55,488,052 119,764,489 1,096,053 1,096,053 5,752,200 170,596,394 92,072,307 47,467,263 44,605,044 552,328 552,328 5,094,482 24,923 87,555,076 Consumer Loans – TL Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Consumer Loans – FC Indexed Real Estate Loans Vehicle Loans Short-Term Medium and Long Term Interest and Income Accruals Total 9,476,653 52,801 66,714 9,357,138 100,970,141 28,685,188 3,837,024 68,447,929 1,829 1,829 1,704,011 354,540 44,964 1,304,507 20,024 20,024 112,150,805 29,092,529 3,948,702 79,109,574 21,853 21,853 (*) Refers to the debt securities, which are not quoted on the Stock Exchange, or which are not traded, although quoted, on the Stock Exchange at the end of the related period. General Purpose Consumer Loans f. Information related to loans: f.1. Information on all types of loans and advances given to shareholders and employees of the Bank: Current Period Prior Period Cash Non-Cash Cash Non-Cash Direct Lending to Shareholders Corporate Shareholders Individual Shareholders Indirect Lending to Shareholders Loans and Other Receivables to Employees Total 586,440 586,440 967 967 353,655 353,655 861 861 f.2. Information about the Standard loans and loans under close monitoring and loans under close monitoring that have been restructured: Cash Loans Standard Loans Loans Under Close Monitoring Loans Not Subject to Restructuring Restructured Loans Loans with Revised Contract Terms Refinance Non-specialized loans Corporation Loans Export Loans Import Loans Loans Extended to Financial Sector Consumer Loans Credit Cards Other Specialized Loans Other Receivables Total 12 Month Expected Credit Losses (Stage I) Significant Increase in Credit Risk (Stage II) 689,334,264 240,747,331 100,660,779 34,468,286 106,364,392 84,734,146 122,359,330 25,728,836 11,083,712 596,604 1,779 9,719,209 2,849,769 1,477,763 23,359,939 16,721,005 48,627 20,866,152 10,938,206 1,042,531 1,091,940 5,498,367 2,134,800 6,750,615 689,334,264 25,728,836 23,359,939 20,866,152 Current Period Prior Period Standard Loans Loans Under Close Monitoring Standard Loans Loans Under Close Monitoring 3,676,271 3,417,459 11,705,636 11,094,455 Other Consumer Loans – FC Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Retail Credit Cards – TL With Installments Without Installments Retail Credit Cards – FC With Installments Without Installments Personnel Loans-TL Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Personnel Loans- FC Indexed Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Personnel Loans – FC Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Personnel Credit Cards – TL With Installments Without Installments Personnel Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL (real persons) Overdraft Accounts – FC (real persons) 2,831,098 2,831,098 165,403 7,854 2,693 154,856 7,202 7,202 54,909,240 24,789,032 30,120,208 141,814 141,814 35,634 515 35,119 311,164 148,532 162,632 1,684 1,684 5,785,122 245,890 62,206 183,684 4,708 164 43 4,501 57,986,228 27,682,336 30,303,892 141,814 141,814 205,745 8,018 3,251 194,476 423 423 54,876 318,789 155,734 163,055 1,684 1,684 5,839,998 Total 70,661,311 103,975,673 2,029,932 176,666,916 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 272 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 273 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 f.5. Information on commercial installments loans and corporate credit cards: f.10.2. Information on the movement of total non-performing loans Commercial Loans with Installments-TL Real Estate Loans Vehicle Loans General Purpose Commercial Loans Other Commercial Loans with Installments-FC Indexed Real Estate Loans Vehicle Loans General Purpose Commercial Loans Other Short-Term Medium and Long Term Interest and Income Accruals Total 24,126,058 13,434 3,645,983 20,466,641 73,604,896 3,668,187 24,329,585 45,607,124 85,235 1,779 83,456 1,429,058 35,344 281,916 1,111,798 359,634 7,153 352,481 99,160,012 3,716,965 28,257,484 67,185,563 444,869 8,932 435,937 Commercial Loans with Installments-FC 82,158 5,339,350 65,756 5,487,264 Real Estate Loans Vehicle Loans General Purpose Commercial Loans Other Corporate Credit Cards-TL With Installments Without Installments Corporate Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL (corporate) Overdraft Accounts – FC (corporate) Total f.6. Allocation of loan by borrowers: Public Private Total f.7. Domestic and foreign loans: Domestic Loans Foreign Loans Total 82,158 5,339,350 934,252 934,166 86 29,224,515 15,768,852 13,455,663 19,448 19,448 3,233,583 65,756 49,125 49,125 46,826 5,487,264 30,207,892 16,703,018 13,504,874 19,448 19,448 3,280,409 56,685,762 79,963,733 1,950,399 138,599,894 Current Period Prior Period 6,639,607 752,649,584 759,289,191 Current Period Prior Period 736,260,169 23,029,022 759,289,191 Current Period Prior Period 6,082,101 487,296,090 493,378,191 474,816,677 18,561,514 493,378,191 6,287,638 6,287,638 f.8. Loans granted to subsidiaries and associates: Direct Loans Granted to Subsidiaries and Associates Indirect Loans Granted to Subsidiaries and Associates Total f.9. Information on impairment provisions of Loans (Stage 3): Loans with Limited Collectability Loans with Doubtful Collectability Uncollectible Loans Total Current Period 13,925,479 13,925,479 1,229,326 2,353,691 13,624,095 17,207,112 Prior Period 848,210 1,160,409 11,782,376 13,790,995 f.10. Information on non-performing loans (Net): f.10.1. Information on non-performing loans, which are restructured or rescheduled: Current Period (Gross amounts before the provisions) Restructured Loans Prior Period (Gross amounts before the provisions) Restructured Loans Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans 1,199,485 1,199,485 118,515 118,515 135,860 135,860 54,316 54,316 6,148,323 6,148,323 3,333,401 3,333,401 Prior Period Ending Balance Corporate and Commercial Loans Retail Loans Credit Cards Other Additions (+) Corporate and Commercial Loans Retail Loans Credit Cards Other Transfers from Other NPL Categories (+) Corporate and Commercial Loans Retail Loans Credit Cards Other Transfers to Other NPL Categories (-) Corporate and Commercial Loans Retail Loans Credit Cards Other Collections (-) (*) Corporate and Commercial Loans Retail Loans Credit Cards Other Write-Offs (-) Corporate and Commercial Loans Retail Loans Credit Cards Other Debt Sale (-) (**) Corporate and Commercial Loans Retail Loans Credit Cards Other Currency Change Effect Corporate and Commercial Loans Retail Loans Credit Cards Other Current Period Ending Balance Corporate and Commercial Loans Retail Loans Credit Cards Other Provisions (-) Corporate and Commercial Loans Retail Loans Credit Cards Other Net Balance on Balance Sheet Group III Loans with Limited Collectability Group IV Group V Loans with Doubtful Zarar Niteliğindeki Krediler 1,667,147 1,104,265 352,879 210,003 10,698,709 6,793,006 2,742,183 1,163,313 207 7,574,289 4,821,470 1,962,973 789,639 207 2,269,208 1,344,640 576,850 347,718 521 179 309 33 358 180 178 2,522,196 1,731,162 555,108 235,926 1,229,326 798,652 295,309 135,365 1,292,870 2,187,877 1,748,895 277,752 161,230 222,192 192,631 20,710 8,798 53 7,574,289 4,821,470 1,962,973 789,639 207 4,363,593 2,910,462 998,995 453,876 260 935,582 368,864 372,775 193,943 559 205 301 53 31 31 272 137 135 4,684,865 3,483,602 889,499 311,764 2,353,691 1,644,939 514,135 194,617 2,331,174 16,975,535 15,745,438 668,497 436,120 125,480 4,049,862 4,023,541 4,161 2,350 19,810 4,363,593 2,910,462 998,995 453,876 260 4,971,531 4,527,394 301,815 137,960 4,362 4,612,111 4,529,659 2,352 6,308 73,792 363,943 122,715 139,108 92,557 9,563 485,664 484,274 1,331 59 15,927,069 13,983,947 1,229,709 655,521 57,892 13,624,095 12,092,033 924,637 559,071 48,354 2,302,974 (*) As of 31 December 2022, the amount of 4,604,476 TL has been deducted within the framework of the amendment made in the "Regulation on the Procedures and Principles Regarding the Classification of Loans and Provisions for These" published in the Official Gazette dated 27 November 2019 and numbered 30961. Details of which are given in Note I.b.3 of Section Five, the loan amounting to TL 4.475.966, which is followed in financial assets at fair value through profit or loss classified as non-performing loans in the current period and has been written off. (**) In the current period, the part of the receivables constitutes non-performing loans amounting to TL 363,974 are transferred to Emir Varlık Yönetim A.Ş. and İstanbul Varlık Yönetim A.Ş by collecting TL 76,500 of sales amount in cash. After the sale of non-performing loans and the write-off, the Banks’s non-performing loan ratio decreased from 3.57% to 2.96% as of 31.12.2022. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 274 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 275 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 f.10.3. Information on foreign currency non-performing loans: Current Period Balance at the End of the Period Provisions (-) Net Balance on Balance Sheet (*) Prior Period Balance at the End of the Period Provisions (-) Net Balance on Balance Sheet (*) Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans 1,292,736 598,592 694,144 602,138 291,909 310,229 3,127,450 1,465,512 1,661,938 1,070,131 545,376 524,755 9,872,746 8,569,151 1,303,595 10,547,942 6,459,390 4,088,552 (*) In addition to the loans extended in foreign currency, loans which are monitored in Turkish Lira are included. f.10.4. Information on gross and net non-performing loans as per customer categories: Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans Current Period (Net) Loans to Individuals and Corporate (Gross) Provisions (-) Loans to Individuals and Corporate (Net) Banks (Gross) Provisions (-) Banks (Net) Other Loans (Gross) Provisions (-) Other Loans (Net) Prior Period (Net) Loans to Individuals and Corporate (Gross) Provisions (-) Loans to Individuals and Corporate (Net) Banks (Gross) Provisions (-) Banks (Net) Other Loans (Gross) Provisions (-) Other Loans (Net) 1,292,870 2,522,196 1,229,326 1,292,870 818,937 1,667,147 848,210 818,937 2,331,174 4,684,865 2,353,691 2,331,174 1,027,468 2,187,877 1,160,409 1,027,468 2,302,974 15,869,177 13,575,741 2,293,436 57,892 48,354 9,538 5,193,159 16,850,055 11,667,521 5,182,534 125,480 114,855 10,625 f.10.5. Information on interest accruals, valuation differences and related provisions calculated for non-performing loans: Current Period (Net) Interest accruals and valuation differences Provisions (-) Prior Period (Net) Interest accruals and valuation differences Provisions (-) Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans 80,448 157,503 77,055 103,070 205,266 102,196 330,000 644,931 314,931 136,063 282,220 146,157 251,521 1,483,646 1,232,125 379,597 1,460,295 1,080,698 f.10.6. Outline of the liquidation policy for uncollectible loans and other receivables In order to ensure the liquidation of non-performing loans, all possibilities evaluated to ensure maximum collection according to the legislation. Primarily, administrative initiatives are taken to deal with the borrower. Collection through legal proceedings is applied if there is no possibility of collection, liquidation or structuring for receivables through negotiations. Our receivables that cannot be collected through administrative and legal initiatives can be written off from the assets within the framework of portfolio- based receivables sales or write-offs, by fulfilling the requirements of the Tax Procedure Law. f.10.7. Information on write-off policy Receivables classified as non-performing loans are collected primarily within the framework of administrative contacts with the debtors, and if no result is obtained, legal proceedings are applied. In case of deletion of NPLs from assets, one of the methods of destruction, receivable sale and write-off can be applied. In the Bank's write-off policy within the framework following the amendment made in Article 53 of the Banking Law with the Law on Income Tax and amending Certain Laws No. 19.07.2019/7186, along with the "Classification of Loans and the Procedures and Principles for the Reserves to be Allocated" published in the Official Gazette No. 27.11.2019 / 30961, the following statements are issued: ੵ The portion of the receivables, which are followed under the Fifth Group-Loans with a Loss Qualification and for which a lifetime expected credit loss provision has been made due to the default of the debtor, for which there is no reasonable expectation of its collection, can be write-off to the extent of the maximum provision amount, ੵ write-off is an accounting practice and does not result in the remission of the receivable, Receivables that are proven to be uncollectible in legal follow-up process can be write-off within the instructions of Tax Procedure Law. Expected Credit Loss Current Period Stage 1 Stage 2 Stage 3 Stage 1 Prior Period Stage 2 Provisions beginning of the period 3,417,459 11,094,455 13,790,995 Additional provisions within the period 2,594,541 4,207,497 9,560,435 2,566,751 2,018,263 7,809,169 6,148,847 Transfers within the period (2,622,121) (2,149,836) (2,558,495) (1,359,941) (1,799,663) Write-offs from Assets Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 477,898 (173,497) (466,158) 187,085 (4,976,818) (11,740) (13,588) (46,578) (1,358,108) 1,404,686 Currency Exchange Difference 28,569 190,701 11,637 473,529 (361,801) (21,047) 101,705 (466,441) 368,343 (1,212,754) 246,954 Stage 3 12,975,961 3,049,611 (1,468,889) (1,998,407) (7,088) (6,542) 1,233,801 12,548 Provisions at the end of the period 3,676,271 11,705,636 17,207,112 3,417,459 11,094,455 13,790,995 g. Financial Assets Measured at Amortised Cost: g.1. Financial Assets Measured at Amortised Cost given as collateral or blocked: Financial assets measured at amortised cost given as collateral or blocked amount to TL 58,013,328 as of December 31, 2022 (December 31, 2021: TL 9,520,594). g.2. Financial Assets Measured at Amortised Cost subject to repurchase agreements: Financial assets measured at amortised cost, which are subject to repurchase agreements amount to TL 4,989,769 as of December 31, 2022 (December 31, 2021: TL 17,843,004). g.3. Information on government securities measured at amortised cost: Government Bonds Treasury Bills Other Public Debt Securities Total Current Period Prior Period 87,040,233 43,662,356 87,040,233 43,662,356 g.4. Information on financial assets measured at amortised cost: Debt Securities Quoted on a Stock Exchange Not Quoted (*) Impairment Losses (-) Total Current Period 93,373,997 90,007,186 3,366,811 Prior Period 46,412,734 44,951,778 1,460,956 93,373,997 46,412,734 (*) Indicates unlisted debt securities, and debt securities that have not been traded at the end of the related periods while they are listed g.5. Movement of financial assets measured at amortised cost within the year: Current Period Prior Period Beginning Balance Foreign Exchange Differences Arising on Monetary Assets Purchases During the Year Disposals through Sales and Redemption Impairment Losses (-) Valuation effect Balance at the End of the Period 46,412,734 2,181,993 55,070,273 (19,171,942) 8,880,939 93,373,997 41,659,437 2,747,218 15,700,230 (15,819,174) 2,125,023 46,412,734 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 276 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 277 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Expected credit loss for financial assets measured at amortised cost Current Period Prior Period Stage 1 Stage 2 Stage 1 Stage 1 Stage 2 Stage 2 Beginning Term Provision Additional Provisions During the Period Disposal During the Period 20,343 53,189 (18,655) Write-off Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 Exchange Rate Differences Period-end Provisions h. Information on associates (Net): h.1. General information on associates: 68 54,945 12,001 18,508 (10,266) 100 20,343 No. Title Address (City/ Country) Bank’s Share Percentage- If Different, Voting Percentage (%) Bank’s Risk Group Share Percentage (%) 1- 2- Arap Türk Bankası A.Ş. Kredi Kayıt Bürosu A.Ş. İstanbul/TURKEY İstanbul/TURKEY 20.58 9.09 20.58 9.09 h.2. Information on financial statements of associates in the above order (*): No. Total Assets Shareholders’ Equity Total Tangible Assets Interest Income (**) Securities Income Current Period Profit/Loss Prior Period Profit/Loss Fair Value 1- 2- 12,228,874 766,973 1,872,216 155,774 584,891 323,951 708,973 25,990 63 1,247 215,338 29,975 163,288 19,581 (*) Shows September 30, 2022, amounts for Kredi Kayıt Bürosu A.Ş. and December 31, 2022, amounts for Arap Türk Bankası A.Ş h.5. h.6. h.7. Associates quoted on a stock exchange: None. Associates disposed of in the current period: None. Associates acquired in the current period: None. i. Information on subsidiaries (Net): i.1. Information on the equity of major subsidiaries: Türkiye Sınai Kalkınma Bankası A.Ş. İş Gayrimenkul Yatırım Ortaklığı A.Ş. Sigorta / Reasürans Şirketleri İş Finansal Kiralama A.Ş. İş Yatırım Menkul Değerler A.Ş. İşbank AG COMMON EQUITY TIER I CAPITAL Common Equity Tier I Capital Before Deductions Deductions from Common Equity Tier I Capital (-) Total Common Equity Tier I Capital ADDITIONAL TIER I CAPITAL Additional Tier I Capital before Deductions Deductions from Additional Tier I Capital (-) Total Tier I Capital TIER II CAPITAL Tier II Capital Before Deductions Deduction from Tier II Capital (-) Total Tier II Capital Total Tier I Capital and Tier II Capital Total Tier I Capital and Tier II Capital EQUITY i.2. General information on subsidiaries (*): 13,192,070 13,925,551 8,504,127 3,432,832 6,815,919 7,526,750 497,007 7,969 119,940 16,363 111,128 160,365 12,695,063 13,917,582 8,384,187 3,416,469 6,704,791 7,366,385 12,695,063 13,917,582 8,384,187 3,416,469 6,704,791 7,366,385 4,587,995 4,587,995 17,283,058 13,917,582 8,384,187 3,416,469 6,704,791 7,366,385 17,283,058 13,917,582 8,384,187 3,416,469 6,704,791 7,366,385 Title Address (City/ Country) Bank’s Share Percentage-if Different, Voting Rights (%) Bank’s Risk Group Share Percentage (%) (**) Includes interest income on securities. h.3. Movement of investments in associates: Beginning Balance Movements During the Period Purchases Bonus Shares Acquired Dividends Received from Current Year Profit Sales Revaluation Increase (*) Impairment Other Balance at the end of the period Capital commitments Contribution in equity at the end of the period (%) Banks Insurance Companies Factoring Companies Leasing Companies Finance Companies Other Financial Participations Total Current Period Prior Period 311,081 266,305 88,301 44,776 399,382 311,081 No 1- 2- 3- 4- 5- 6- 7- 8- 9- Anadolu Hayat Emeklilik A.Ş. Joint Stock Company İsbank Join Stock Company Isbank Georgia İş Finansal Kiralama A.Ş. İş Gayrimenkul Yatırım Ortaklığı A.Ş. İş Merkezleri Yönetim ve İşletim A.Ş. İş Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim Hizmetleri A.Ş. İş Yatırım Menkul Değerler A.Ş. İşbank AG (*) The differences arising from accounting by equity method is included. h.4. Sectoral information on financial associates and the related carrying amounts: Associates Current Period Prior Period 10- Kültür Yayınları İş Türk A.Ş. 11- Milli Reasürans T.A.Ş. 12- Trakya Yatırım Holding A.Ş. 13- Türkiye Sınai Kalkınma Bankası A.Ş. 14- Türkiye Şişe ve Cam Fabrikaları A.Ş.(*) 385,225 280,196 15- MOKA Ödeme ve Elektronik Para Kuruluşu A.Ş. Istanbul/TURKEY Moscow/RUSSIA Tbilisi/GEORGIA Istanbul/TURKEY Istanbul/TURKEY Istanbul/TURKEY Istanbul/TURKEY Istanbul/TURKEY Frankfurt-Main/GERMANY Istanbul/TURKEY Istanbul/TURKEY Istanbul/TURKEY Istanbul/TURKEY Istanbul/TURKEY Istanbul/TURKEY 62.00 100.00 100.00 27.79 52.06 86.33 100.00 65.74 100.00 100.00 87.60 100.00 47.68 50.93 100.00 83.00 100.00 100.00 58.24 64.84 100.00 100.00 70.78 100.00 100.00 87.60 100.00 51.37 57.02 100.00 385,225 280,196 (*) The purchased free float shares of listed subsidiaries in Borsa Istanbul (BIST) namely, Anadolu Hayat Emeklilik A.Ş., İş Finansal Kiralama A.Ş, and Türkiye Şişe ve Cam Fabrikaları A.Ş., which are booked under "Financial Assets at Fair Value Through Profit or Loss" account are not included. (Board of Directors Decision dated December 25, 2015). An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 278 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 279 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 i.3. Information on subsidiaries (Net): No Total Assets Shareholders’ Equity 90,659,179 3,466,207 4,525,552 1,633,192 2,917,655 828,210 36,330,079 3,744,045 Total Tangible Assets 215,301 100,257 57,507 60,515 17,417,219 13,920,236 13,959,708 173,511 248,448 96,048 114,602 35,809,603 7,267,688 33,318,257 7,920,657 151,817 115,324 9,922 40,380 206,268 346,362 9,690 12,400,448 5,055,936 2,449,885 1,660,198 1,158,868 689,914 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Interest Income Securities Income Current Period Profit/Loss Prior Period Profit/Loss Fair Value (**) 1,038,678 513,911 1,391,752 699,988 9,848,720 Additional Shareholders’ Equity Required 408,306 166,509 3,330,338 44,469 6,180 14,383 76,171 878,024 2,525 518,181 13,601 19,602 277,409 24 478,226 82,366 826,766 12,739 28,165 310,063 5,605,530 44,469 1,329,920 10,286,429 21,162 24,512 15,618 15,532 1,756,373 4,529,607 1,233,477 22,215,545 323,549 33,587 888,620 80,201 143,158 26,174 548,966 29,067 4,105,739 1,097,309 12,280,800 222,160 40,666 110,483 117,621,660 12,992,456 1,983,415 10,374,234 163,945,473 95,127,767 81,459,869 2,240,410 1,166,759 20,133,429 9,131,288 132,854,654 468,170 46,570 6,047 4,024 2,351 2,143 (*) Trakya Yatırım Holding A.Ş., İş Merkezleri Yönetim ve İşletim A.Ş., İş Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim Hizmetleri A.Ş., Kültür Yayınları İş Türk A.Ş. are December 31, 2021, and others are December 31, 2022. (**) Fair value represents the market value of the company. i.4. Movement of investments in subsidiaries: Balance at the Beginning of the Period 39,150,264 25,736,078 Current Period Prior Period Movements in the Period Purchases (*) Bonus Shares Acquired Dividends Received from Current Year Profit Sales Revaluation Surplus/Deficit (**) Impairment Balance at the End of the Period Capital Commitments (***) Contribution in equity at the end of the period (%) 3,714,714 135,635 36,595,114 13,278,551 79,460,092 39,150,264 1,000,000 (*) The amount in the current period is due to the purchase and capital increase of Trakya Yatırım Holding A.Ş. and Işbank AG and the amount in the prior period is due to the purchasing shares of Moka Ödeme Kuruluşu A.Ş. by cash, İş Gayrimenkul Yatırım Ortaklığı A.Ş., İş Yatırım Menkul Değerler A.Ş. ve Türkiye Sınai Kalkınma Bankası A.Ş.s shares followed in the Financial Assets at Fair Value Through Profit or Loss account is classified under subsidiaries and due to the capital increase of Trakya Yatırım Holding A.Ş. (**) The differences arising from accounting by equity method is included. (***) The committed capital of Trakya Yatırım Holding. i.5. Sectoral information on financial subsidiaries and the related carrying amounts: Current Period Prior Period 16,800,054 8,036,340 7,310,823 4,353,568 937,316 544,978 12,325,177 4,678,171 37,373,370 17,613,057 Current Period Prior Period 61,173,685 30,173,876 61,173,685 30,173,876 Related Companies Banks Insurance Companies Factoring Companies Leasing Companies Finance Companies Other Financial Subsidiaries Total i.6. Subsidiaries quoted on stock exchange: Traded on domestic stock exchanges Traded on foreign stock exchanges Total i.7. Subsidiaries disposed of in the current period: None. i.8. Subsidiaries acquired in the current period: None. j. Information on jointly controlled entities: There are no jointly controlled entities of the Bank. k. Information regarding finance lease receivables of the Bank (Net): The Bank has no finance lease receivables. l. Explanations on derivative financial assets held for risk management: The Bank has no derivative financial assets held for risk management. m. Information on tangible assets (net): Real Estates Leased Tangible Assets Buildings Under Construction Vehicles Other Tangible Assets Total Prior Period Cost 6,180,660 2,867,073 84,832 31,315 3,342,423 12,506,303 Accumulated Depreciation (13,452) (1,344,413) (20,343) (2,428,235) (3,806,443) 6,167,208 1,522,660 84,832 10,972 914,188 8,699,860 Net Book Value Current Period End: Net Book Value at the Beginning of the Period Change During the Period (Net) (*) Depreciation Impairment Net Currency Translation Differences (*) 6,167,208 1,522,660 7,278,554 (31,486) 28,990 857,502 (467,121) 5,610 84,832 19,268 10,972 13,331 (4,159) 1,137,208 (408,8719 914,188 8,699,860 9,305,863 (911,637) 28,990 73,872 177 68,085 Cost at the Period End 13,453,256 3,801,501 104,100 44,721 4,423,553 21,827,131 Accumulated Depreciation at the Period End (9,990) (1,882,850) (24,400) (2,712,943) (4,630,183) Closing Net Book Value 13,443,266 1,918,651 104,100 20,321 1,710,610 17,196,948 (*) The balance includes the movements in cost and accumulated depreciation items. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 280 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 281 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 n. Information on Intangible Assets: Net Book Value at the Beginning of the Period Change During the Period (Net) (*) Depreciation Impairment Net Currency Translation Differences (*) Cost at the Period End Accumulated Depreciation at Period End Closing Net Book Value (*) The balance includes the movements in cost and accumulated depreciation items. o. Explanations on investment property: The Bank has no investment property. p. Information on deferred tax asset: None. q. Information on assets held for sale and discontinued operations: Current Period Prior Period 1,750,109 2,515,348 (753,272) 2,248 6,700,672 (3,186,240) 3,514,433 1,330,841 748,959 (334,798) 5,107 4,183,060 (2,432,951) 1,750,109 Balance at the Beginning of the Period Transfers (Net) Depreciation (Net) Impairment Losses (-) Current Period Prior Period 827,633 779,736 1,220,094 (392,461) (6,744) Balance at the End of the Period 1,600,625 827,633 (*) Cari dönemdeki değişimin 1.249.492 TL’lik kısmı, Genel Energy Plc.’nin sermayesindeki %12,28 oranındaki payın, alacağa mahsuben Banka’ya devrine ilişkindir. Investment in a special purpose company whose details be given in Section Five footnote I.b.3 is classified within the scope of “TFRS-5 Assets Held for Sale and Discontinued Operations”. In 2019 the Bank’s nominal values in company’s capital increased from TL 6 to TL 461,833 respectively. As announced on KAP at the date of 31.03.2022, the sale and transfer of these shares to Türkiye Varlık Fonu has been completed and the provision for a decrease in value has been reserved for the entire investment classified under “TFRS 5- Fixed Assets Held for Sale and Discontinued Operations”. The shares in the amount of TL 461,833, which are tracked under “Impairment Losses on Assets Held for Sale and Subject to Discontinued Operations” and were reserved for the entire decrease in value, were deleted from the asset together with the decrease in value provision within the scope of registration of the liquidation of the company in the Türkiye Sicil Gazetesi dated 28.12.2022 and numbered 10735. The other assets classified as “Assets Held for Sale” consist of securities and real estates. Those real estates subject to sale are announced on the Bank’s web site. Announcements about the real estates subject to sale are also made by means of newspaper advertisements and similar media. r. Information on Other Assets: The “other assets” item of the balance sheet does not exceed 10% of total assets. II. DISCLOSURES AND FOOTNOTES ON LIABILITIES a. Information on Deposits: a.1. The maturity structure of deposits (current period): Current Period Demand 7 Days Notice Up to 1 Month 1-3 Months 3-6 Months 6 Months to 1 Year 1 Year and Over Accumulated Deposits Total Savings Deposits 52,151,311 13,192,421 57,543,852 89,132,133 5,629,299 4,469,259 4,453 222,122,728 Foreign Currency Deposits 250,797,888 43,990,383 138,702,464 12,156,645 2,712,716 15,643,368 1,332 464,004,796 Residents in Turkey 216,603,225 41,815,382 119,253,957 10,256,517 1,609,679 4,488,134 1,312 394,028,206 Residents Abroad 34,194,663 2,175,001 19,448,507 1,900,128 1,103,037 11,155,234 20 69,976,590 Public Sector Deposits 948,455 41,996 218,359 2,352 412 5 Commercial Deposits 55,067,638 53,590,998 12,165,643 19,907,452 8,470,551 4,974,482 Other Institutions Deposits Precious Metals Deposits 933,998 1,585,467 2,555,476 126,370 11,971 30,133 61,964,641 10,925 3,864,020 221,532 8,091,907 339,773 Interbank Deposits 1,493,230 3,783,386 2,189,927 79 461,663 1,896,924 756 22,356 1,469,538 580 2,297,918 322,705 400,126 1,485,468 1,867,222 79 61,537 1,896,924 The Central Bank of the Republic of Turkey Domestic Banks Foreign Banks Participations Banks Other Total 423,357,161 116,195,576 217,239,741 121,546,563 25,378,519 27,353,944 5,785 931,077,289 Prior Period Demand 7 Days Notice Up to 1 Month 1-3 Months 3-6 Months 6 Months to 1 Year 1 Year and Over Accumulated Deposits Total Savings Deposits 29,129,615 10,101,438 62,338,966 8,091,893 879,420 1,026,512 6,422 111,574,266 Foreign Currency Deposits 189,169,045 34,629,765 127,216,568 6,360,203 2,627,763 11,845,167 2,293 371,850,804 Residents in Turkey 170,392,877 32,260,729 110,981,890 4,853,136 1,507,234 4,219,586 1,517 324,216,969 Residents Abroad 18,776,168 2,369,036 16,234,678 1,507,067 1,120,529 7,625,581 776 47,633,835 Public Sector Deposits 1,205,680 11,796 139,914 1,073 374 200 Commercial Deposits 18,126,103 17,701,731 12,082,163 173,276 515,975 28,850 Other Institutions Deposits Precious Metals Deposits 602,088 571,697 3,160,538 40,352 2,411 51,875 46,013,605 1,055,562 150,880 6,508,325 311,651 Interbank Deposits 1,062,316 555,375 1,133,496 59 149,738 846,203 The Central Bank of the Republic of Turkey Domestic Banks Foreign Banks Participations Banks Other Total 480 198,421 863,350 65 450,260 105,115 538,289 595,207 148,477 59 1,261 846,203 285,308,452 63,571,802 207,127,207 14,817,736 10,684,006 14,110,458 8,715 595,628,376 Within the framework of the ""Communiqué on Supporting the Transformation into Turkish Lira Deposits and Participation Accounts" published in the Official Gazette dated 24.02.2022 and numbered 31760 and the CBRT's communiques numbered 2021/14, 2021/16, 2022/7 and 2022/11, the Bank offers its customers a TL deposit product with exchange rate protection. As of 31.12.2022, the amount of the foreign exchange-protected deposits opened within this scope is TL 130,418,788 (31.12.2021: 6,116,412 TL). 1,211,579 154,176,764 5,243,415 74,492,798 9,825,209 756 3,043,105 6,780,768 580 1,359,037 48,628,098 4,428,961 54,040,023 3,747,187 480 1,335,447 2,411,195 65 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 282 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 283 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 a.2. Savings deposits which are under the guarantee of Savings Deposits Insurance Fund exceeding the insurance limit: c.3. Information on funds borrowed: Savings Deposits Savings Deposits Foreign Currency Savings Deposits Other Deposits in the Form of Savings Deposits Foreign Branches’ Deposits Under Foreign Authorities’ Insurance Off-shore Banking Regions’ Deposits Under Foreign Authorities Insurance Under the Guarantee of Savings Deposits Insurance Fund Exceeding the Limit of Deposit Insurance Fund Current Period (*) Prior Period Current Period Prior Period 98,271,661 76,393,000 26,836,200 54,291,725 122,016,357 56,062,849 58,931,256 221,588,222 19,430,372 41,995,951 175,476,819 31,613,866 11,433,523 6,751,204 3,622,595 3,869,864 (*) With the Official Gazette dated 27.08.2022 and numbered 31936, a change was made in the determination of the deposits subject to insurance, and all deposits except those belonging to official institutions and credit and financial institutions were covered by insurance. Within this framework, there are commercial deposits amounting to TL 21,845,052 within the scope of the insurance, and the related amount is not shown in the table. Information on funds received through syndicated loans and securitization deals, which take a significant place among funds borrowed, are given below. Syndication loans: Date of Use June, 2022 November, 2022 Funds Borrowed 257,000,000 USD + 482,960,000 EUR 191,000,000 USD + 330,500,000 EUR Maturity 1 year 1 year Securitization deals: The Bank obtained funds by way of putting on securitization deals all its claims and receivables based on diversified payment rights in USD, EUR and GBP through TIB Diversified Payment Rights Finance Company. Information on funds received through securitization is given below. Date Structured Entity Amount Final Maturity Remaining Debt Amount as at December 31, 2022 a.3. Savings deposits which are not under the guarantee of deposit insurance fund: Foreign Branches’ Saving Deposits and Other Accounts Deposits and Other Accounts held by Main Shareholders and their Relatives Deposits and Other Accounts of the Chairperson and Members of Board of Directors, Chief Executive Officer, Senior Executive Officers and their Relatives Deposits and Other Accounts Covered by Assets Generated Through the Offenses Mentioned in Article 282 of the Turkish Criminal Code No,5237 and Dated 26 September 2004 Deposits in the Banks to be Engaged Exclusively in Off-shore Banking in Turkey b. Information on Derivative Financial Liabilities Held for Trading: Current Period Prior Period 3,622,595 3,869,864 June 2012 TIB Diversified Payment Rights Finance Company EUR 125,000,000 12 years December 2013 TIB Diversified Payment Rights Finance Company EUR 50,000,000 12 years December 2014 TIB Diversified Payment Rights Finance Company USD 220,000,000 14 years March 2015 TIB Diversified Payment Rights Finance Company USD 15,000,000 15 years 39,447 29,224 October 2015 TIB Diversified Payment Rights Finance Company USD 221,200,000 10 years October 2016 TIB Diversified Payment Rights Finance Company USD 55,000,000 12 years December 2016 TIB Diversified Payment Rights Finance Company USD 158,800,000 10-13 years December 2017 TIB Diversified Payment Rights Finance Company USD 55,000,000 December 2017 TIB Diversified Payment Rights Finance Company EUR 125,000,000 August 2022 TIB Diversified Payment Rights Finance Company USD 227,000,000 7 years 9 years 5 years EUR 21,875,000 EUR 15,000,000 USD 120,000,000 USD 13,593,750 USD 76,037,500 USD 32,195,112 USD 77,648,334 USD 22,000,000 EUR 101,190,476 USD 227,000,000 Derivative Financial Liabilities at Fair Value Through Profit or Loss Forward Transactions Swap Transactions Current Period Prior Period TL 104,067 2,700,243 FC TL FC 578,912 2,021,990 237,698 5,180,889 4,010,202 5,597,391 Other Transactions: As of August 2014, in connection with the future cash flows securitization program amounting to USD 500 million on 10 years maturity, the bank has increased the total amount of the financial instrument USD 600 million by obtaining the same structured USD 100 million in September 2017. d. Information on Debt Securities Issued (Net): Futures Options Other Total c. Banks and other financial institutions: c.1. Information on banks and other financial institutions: Funds borrowed from the Central Bank of Turkey Domestic banks and Institutions Foreign banks, institutions and funds Total c.2. Maturity analysis of funds borrowed: Short-term Medium and Long-term Total 32,132 244,575 131,283 461,724 126,245 2,836,442 6,004,376 6,163,475 6,423,058 Bills Bonds Total Current Period TL FC 1,755,212 402,745 2,157,957 26,156,146 26,156,146 Prior Period TL 3,133,754 2,060,702 5,194,456 FC 25,441,356 25,441,356 Current Period Prior Period TL FC TL FC e. Concentration on the Bank's liabilities: 66% of the Bank's liabilities consists of deposits, 5% of loans borrowed, 4% of securities issued and Tier II subordinated loans. Deposits have spread to a wide customer base with different characteristics. Borrowings are composed of funds obtained from various financial institutions through syndication, securitization, post-financing and money markets. 802,041 2,564,571 3,366,612 8,117,800 667,413 7,245,047 59,970,914 1,837,639 55,901,327 68,088,714 2,505,052 63,146,374 f. Information on Other Liabilities: Other liabilities do not exceed 10% of the balance sheet total. g. Information on Lease Payables (net): Current Period Prior Period TL 969,816 2,396,796 3,366,612 FC 5,720,964 62,367,750 68,088,714 TL 653,857 1,851,195 2,505,052 FC 6,295,676 56,850,698 63,146,374 Less than 1 Year Between 1-4 Years More than 4 Years Total Current Period Prior Period TL FC TL FC 516 419,468 4,271,686 4,691,670 483 308,361 1,843,363 2,152,207 17,713 171,033 3,642,905 3,831,651 17,177 143,594 1,539,668 1,700,439 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 284 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 285 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 h. Explanations on Hedging Derivative Financial Liabilities: The bank has no financial liabilities held for hedging derivatives. i. Information on Provisions: i.1. Reserves for employee benefits: According to the related regulation and the collective bargaining agreements, the Bank is obliged to pay employee termination benefits to employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or to the female employees who have voluntarily quit within one year after the date of their marriage. In accordance with the related regulations, the amount of employee termination benefits is TL 15,371.40 (exact TL amount as of December 31, 2022), which is one month salary for each service year and cannot exceed the base wage ceiling for employee termination benefits. A provision for severance pays to allocate that employees need to be paid upon retirement is calculated by estimating the present value of probable amount. The liability of the Bank arising from severance payment is determined in accordance with the actuarial report prepared by an independent valuation company. As of December 31, 2022, provision amounting to TL 5,290,639 is reflected in the financial statements (December 31, 2021: TL 2,278,323). Main actuarial assumptions used in calculation of severance pay liability are as follows: ੵ In the calculation, the discount rate is 22.45%, the inflation rate is 19.80%, and the real wage increase rate is 2%. ੵ In the calculation, the ceiling of 15,371.40 TL (full TL amount) valid as of 31.12.2022 was taken as basis. ੵ Retirement age is taken into account as the earliest age at which individuals can retire. ੵ CSO 1980 mortality table is used for probability of death for women and men. The movements related to provision for employee termination benefits are given below: Present value of defined benefit obligation at the beginning of the period Service Cost Interest Cost Benefits paid Loss/(Gain) due to Settlements / Reductions / Terminations Past Service Cost Actuarial loss/(gain) Defined benefit obligation at the end of the period Current Period Prior Period 2,278,323 158,573 421,268 (173,319) 10,174 1,941 2,593,679 5,290,639 1,393,897 94,375 166,952 (101,163) 11,064 713,198 2,278,323 In addition to the employee termination benefits the Bank allocates provisions for the unused vacation pay liability. As of December 31, 2022, provision for unused vacation pay is amounting to TL 216,615 (December 31, 2021: TL 114,509). i.2. Provisions for exchange losses in the principal amount of foreign currency indexed loans: Since foreign currency indexed loans are followed based on the rates on the lending date, the Bank incurs a loss if the exchange rates decrease and makes profit if the exchange rate increases. As of December 31, 2022, and December 31, 2021, provision amount for the currency evaluation losses in the principal amount of foreign currency indexed loans is not available. i.3. As of December 31, 2021, the Bank’s specific provisions for indemnified non-cash loans balance is TL 1,616,688 (December 31, 2021: TL 1,214,355) which is allocated for the non-cash loans of companies whose loans are followed under “Non-performing Loans” accounts. i.4. Information on other provisions: i.4.1. Liabilities arising from retirement benefits: Liabilities of pension funds founded as per the Social Security Act: Within the scope of the explanations given in Section Three Note XVII, in the actuarial report which was prepared as of December 31, 2022 for Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (İşbank Pension Fund) by a licensed actuary, of which each Bank employee is a member, and which has been established according to the provisional Article 20 of the Social Security Act No. 506, the amount of actuarial and technical deficit stands at TL 8,379,741. As of the same date, a provision was reserved for this amount in the financial statements. The above-mentioned actuarial audit, which was made in accordance with the principles of the related law, measures the cash value of the liability as of December 31, 2022, in other words; it measures the amount to be paid to the Social Security Institution by the Bank. Actuarial assumptions used in the calculation are given below. ੵ 9.8% technical deficit interest rate is used. ੵ 34.5% total premium rate is used. ੵ CSO 1980 woman/man mortality tables are used. Below table shows the cash values of premium and salary payments of the Bank as of December 31, 2022, taking the health expenses within the Social Security Institution limits into account. Net Present Value of Total Liabilities Other Than Health Net Present Value of Long-Term Insurance Line Premiums Net Present Value of Total Liabilities Other Than Health Net Present Value of Health Liabilities Net Present Value of Health Premiums Net Present Value of Health Liabilities Pension Fund Assets Amount of Actuarial and Technical Deficit The assets of the pension fund are as follows. Cash and Cash Equivalents Securities Portfolio Other Total Current Period Prior Period (30,350,1649 13,123,522 (17,226,642) (2,986,675) 9,514,553 6,527,878 2,319,023 (8,379,741) (15,810,869) 5,858,707 (9,952,162) (1,873,541) 4,247,562 2,374,021 1,483,086 (6,095,055) Current Period Prior Period 1,240,842 742,714 335,467 2,319,023 984,609 439,018 59,459 1,483,086 Health benefits that are still being paid will be determined within the framework of the Social Security Institution legislation and related regulations with the transfer. i.4.2. Provision of credit cards and promotion of banking services applications: As of December 31, 2022, the Bank has recognized provisions amounting to TL 235,129 for the amount which is recognized within the framework of credit card expenses of credit card customers or promotions for banking services. (December 31, 2021: TL 108,873). i.4.3. As mentioned public disclosures of the Bank on December 31, 2012 and December 19, 2013; an inspection has been made by the inspectors of Tax Inspection Board to "Türkiye İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı" ("İşbank Supplementary Pension Fund"), which was founded as per the provisions of the Turkish Commercial and Civil Codes, regarding the payments that fulfill İşbank's liabilities within the framework of the Articles of Foundation of the Pension Fund and the relevant legislation. As a result of this investigation, tax audit reports were prepared for the years 2007, 2008, 2009, 2010, 2011 claiming that the aforementioned liabilities should be taxed in terms of wage base, thus, they should be subject to withholding tax and stamp duty. According to this report, the total amount of tax and penalties notified to Bank was TL 74,353 for 2007 and 2008; and as of reporting date TL 151,899 for 2009, 2010 and 2011 and it was stated that the Bank applied to tax courts to cancel these tax notifications and some of the court decisions were determined in favor of the Bank and some others were determined against the Bank. In this context, for the finalized decisions of Regional Administrative Courts related to the years 2007 and 2008 against the Bank, the Bank applied to the Constitutional Court. According to decisions made by Constitutional Court up to reporting date, there is no predictability in legal conformity for taxing the Bank's contributions to the Pension Fund in terms of wage base and for this reason it was accepted that property right of the Bank has been violated according to the 35th article of Constitution. The Court decided that the amount of tax, penalties and default interest which was paid by the Bank should be paid back to the Bank as for compensation with its legal interest. According to the decision of the Constitutional Court, it is expected that the cases related to the periods 2007, 2008, 2009, 2010 and 2011 will conclude in favor of the Bank. In this context, the provisions amounting to TL 207,402 which had been allocated for the mentioned periods, reversed at 2015. In the last decision of the constitutional court numbered 2016/2400 regarding the legal proceedings initiated upon the conclusion of the lawsuits amounting to TL 61,060 for the 20 periods in 2012 and 2013 against the bank; it was accepted that the predictability criterion was realized after the 2012 tax review, and it was concluded that the Bank’s ownership rights were not violated for December 2012 and beyond periods. However, since the aforementioned periods were filed by making a reservation and paying taxes, the mentioned decision had no additional effect on the financial statements. In addition, at two case files, which was one of the lawsuits regarding the repayment of income tax stoppage and stamp tax which has been paid by reservation statement beginning from December 2013, of which its court decision was rendered in favour of the Bank, has been reversed by the majority of the votes of the Assembly after it was submitted to the General Assembly of Tax Courts and the decisions were finalized against the Bank. Regarding the mentioned issue, the legal process is ongoing. Within the scope of these developments, the Bank recognized provisions amounting to TL 12,622 (December 31, 2021: TL 162,960). i.4.4. In 1993, Dışbank A.Ş. shares which were owned by the Bank were sold to Lapis Holding A.Ş. In 2008, it was claimed that USD 75 million of the amount, which was paid upfront within the context of the sale agreement, had been provided from the funds of the insolvent TYT Bank A.Ş. by the buyer and payment of the mentioned amount as well as the interest to be calculated to the Savings Deposit Insurance Fund (SDIF) was demanded. The administrative actions initiated by the SDIF in 2008 were revoked by Council of State Administrative Law Chambers 13th upon the application of the Bank. The decisions which were in favour of the Bank were reversed by Plenary Session of the Law Chamber upon the appeal of the SDIF. Council of State Administrative Law Chambers 13th decided to reject the applications of the Bank in January 2016 due to their obligation to obey the decisions of reversal. After the aforementioned court decisions, although the legal process was still in progress, the collection procedures were carried out within the context of Law No. 6183 and TL 298,466 including the default interest, was collected from the Bank by the SDIF at prior periods and made provision for the whole amount. As a part of the legal process, individual application to the Constitutional Court of Republic of Turkey has been made by the Bank was not concluded positively. Regarding the ongoing lawsuits, the negative declaratory action brought against the Bank to determine that the Bank is not a debtor has been finalized against the Bank. In this context, necessary provision has been made by the Bank in the financial statements dated 31.12.2022 for the difference between the down payment regarding the sales contract stated above and the amount of 52.6 million USD paid in 2016. legal process is still ongoing An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 286 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 287 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 i.4.5. Except the other provisions indicated above, the Bank Management allocated free provision within conservatism principle, for negative circumstances which may arise from the possible changes that may arise in the economy and market conditions, amounting to TL 8,475,000 of which TL 4,075,000 provided in prior years and TL 4,400,000 was provided in the current period. j. j.1. Information on Tax Liability: Information on current tax liability: j.1.1. Information on tax provision: Explanations in relation to taxation and tax calculations were stated in section three notes XVIII. As of 31.12.2022, the remaining corporate tax debt as a result of netting of temporary taxes paid with corporate tax liability is TL 5,311,636. Beginning Value Deferred Tax Income / (Expense) (Net) Deferred Tax Accounted Under Equity Deferred Tax Accounted Under Previous Year P / L Exchange rate differences Net Deferred Tax (Asset)/Liability: Current Period Prior Period 2,557,610 4,792,962 (8,430,917) (185) (1,080,530) 3,420,494 (904,208) 41,245 79 2,557,610 Current Period Prior Period l. Information on subordinated loans: k. Information on Payables for Assets Held for Sale and Discontinued Operations The Bank does not have any payables for assets held for sale and discontinued operations. j.1.2. Information on taxes payable: Corporate Tax Payable Tax on Securities Income Tax on Real Estate Income Banking Insurance Transaction Tax Foreign Exchange Transaction Tax Value Added Tax Payable Other Total j.1.3. Information on premiums: Social Security Premiums – Employees Social Security Premiums – Employer Bank Pension Fund Premiums – Employees Bank Pension Fund Premiums – Employer Pension Fund Membership Fees and Provisions-Employees Pension Fund Membership Fees and Provisions-Employer Unemployment Insurance – Employees Unemployment Insurance – Employer Others Total j.2.Information on deferred tax liabilities: 5,311,636 376,516 7,431 570,782 52,378 67,390 158,108 6,544,241 1,051,363 234,685 5,590 324,422 117,926 23,653 65,785 1,823,424 Current Period Prior Period 646 756 5,759 11,520 8 18,689 267 329 2,397 4,796 6 7,795 The Bank have TL 1,080,530 deferred tax liability as of December 31, 2022. The related deferred tax debt is calculated over the temporary differences between the book values of assets and liabilities in the records and their tax base values calculated according to tax. If the items constituting the temporary differences are followed up among the equity items, the deferred tax asset/liability calculated over the mentioned temporary differences is associated with the related equity items. Deferred Tax (Asset)/Liability: Tangible Assets Base Differences Provisions (*) Valuation of Financial Assets Other Net Deferred Tax (Asset)/Liability: Current Period Prior Period 1,900,474 (7,694,748) 6,930,464 (55,660) 1,080,530 715,369 (5,339,164) 1,799,736 266,449 (2,557,610) (*) Consists of employee benefits liabilities, actual and technical deficit of pension fund, credit card point provisions, expected loss provisions for Stage I and II loans and other provisions. Bank has issued subordinated debt securities, to be included in the contribution capital calculation, with the following nominal values; ੵ 10 year-term in the amount of USD 400,000,000 with interest rate of 7.85% on December 10, 2013, 11 year-term having a call option on 6th year in the amount of USD 500,000,000 with interest rate of 7% on June 29, 2017 and 10 year-term having a call option on 5th year in the amount of USD 750,000,000 with interest rate of 7.75% on January 22, 2020 for the purpose of making available to the individuals and legal persons who are resident abroad, ੵ TL 1,100,000,000 on August 8, 2017, TL 800,000,000 June 19, 2019, and TL 350,000,000 September 26, 2019 (Full TL amount) each with a 10- year maturity and floating interest rates for qualified investors without being offered to the public in Turkey. The total of the aforementioned debt securities is TL 33,558,745 as of December 31, 2022 (December 31, 2021: TL 37,470,997). Current Period Prior Period TL FC TL FC Debt Instruments To Be Included In Additional Capital Calculation Subordinated Loans Subordinated Debt Instrument Debt Instruments To Be Included In Contribution Capital Calculation Subordinated Loans Subordinated Debt Instrument Total m. Information on shareholders’ equity: m1. Presentation of paid-in capital: Common shares Preferred shares Total 2,277,824 31,280,921 2,296,445 35,174,552 2,277,824 2,277,824 31,280,921 31,280,921 2,296,445 2,296,445 35,174,552 35,174,552 Current Period Prior Period 9,999,970 30 10,000,000 4,499,970 30 4,500,000 m.2. Explanation as to whether the registered share capital system ceiling is applicable at the Bank, if so, the amount of registered share capital: Capital System Registered Capital System Paid-in Capital Ceiling 10,000,000 10,000,000 BRSA and CMB approvals regarding the increase of the registered capital ceiling to 25,000,000 TL have been obtained and the approval of the Ministry of Commerce has been applied. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 288 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 289 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 m.3. The capital increase made in current period: It has been decided to increase the paid-in capital of the Bank from TL 4,500,000 to TL 10,000,000, fully covered by internal resources (extraordinary reserves). Accordingly, the process of capital increase was completed during the period and the registration of the new capital was carried out on 16.06.2022. m.4. Information on capital increase through transfer from capital reserves during the current period: None. m.5. Significant commitments of the Bank related to capital expenditures within the last year and the following quarter, the general purpose thereof, and the estimation of funds required for them: There is no capital commitment. Information regarding the shares of the company acquired: The Bank has repurchased shares amounting to TL 530,307 in accordance with the m.6. Board of Directors Decision dated August 17, 2018. m.7. Previous periods’ indicators related to income, profitability and liquidity, and the estimated effects of forecasts, which are to be made by taking into consideration the uncertainties of these indicators, on the Bank’s equity: The Bank’s balance sheet is managed in a prudent way to ensure that the effect of risks arising from interest rates, exchange rates and loans is at the lowest level. m.8. Privileges Granted to Shares: Turkish Commercial Law and related registration are kept conditionally; Group (A) shares each with a nominal value of 1 Kurus have the privileges of; ੵ Receiving 20 times the number of shares in the distribution of bonus shares issued from conversion of extraordinary and revaluation reserves generated in accordance with the relevant laws (Article 18 of the Articles of Incorporation) ੵ Exercising the preference rights as 20 times (Article 19 of the Articles of Incorporation), and Despite having a lower nominal value, Group (B) shares, each with a nominal value of 1 Kurus, have the same rights with the Group (C) shares having a nominal value of 4 Kurus each. Furthermore, Group (A) and (B) shares, each with a nominal value of 1 Kurus, are granted privileges in distribution of profits pursuant to Article 58 of the Articles of Incorporation. m.9. Information on marketable securities value increase fund: Financial Assets At Fair Value Through Other Comprehensive Income Valuation Difference Deferred Tax Effect Foreign Exchange Differences Current Period Prior Period TL FC TL FC 29,145,057 (4,586,932) 3,390,517 (2,730,702) 38,852,687 (9,707,630) (5,949,482) 1,362,550 4,232,605 (842,088) (3,353,951) 623,249 Total 29,145,057 (4,586,932) 3,390,517 (2,730,702) n. Information on Dividend Distribution: At the Bank’s Ordinary General Assembly, held on March 25, 2022, it was decided to allocate net profit from operating activities of 2021, amounting to TL 13,467,895 as follows; ੵ Resulting from the disposal of certain immovables, which are realized within the framework of the equity method specified in the "TAS 27 - Individual Financial Statements" accounting standard, resulting from the application of the "TFRS 9 - Financial Instruments" reporting standard, and which are followed within the scope of the "TAS 16 - Tangible Fixed Assets" accounting standard, adding a total of 5,414,586 TL, ੵ Addition of the provision amount of TL 360,000 allocated during the period for the profit share to be distributed to the personnel within the framework of the accounting standard "TAS 19-Benefits Provided to the Employees", ੵ The total amount of TL 143,605, which includes TL 35,132 from real estate sales profits to use for capital increase and TL 108,473 from the amount allocated as venture capital fund, of the balance sheet profit to be distributed amounting to TL 19,242,481 allocation as special reserve fund, of the amount as a basis for distribution of TL 19,098,876; ੵ TL 1,346,780 to A, B and C group shares as cash, ੵ TL 10 to the founding shares as cash, ੵ TL 359,481 as cash dividend to employees to be distributed, ੵ TL 17,392,605 as legal and extraordinary reserves to be reserved, has been decided. As of March 28, 2022; TL 17,536,210 was transferred to reserves account, cash dividends were distributed to the shares other than the shares acquired by the Bank, as of April 1, 2022. Since the Bank's Ordinary General Assembly Meeting for 2022 has not been held as of the report date, the profit from the activities of the aforementioned period has not been distributed. III. DISCLOSURES AND FOOTNOTES ON OFF BALANCE SHEET ITEMS a. a.1. Explanations to Liabilities Related to Off-Balance Sheet Items: Types and amounts of irrevocable loan commitments: Commitment for customer credit card limits amounts to TL 112,111,363 and commitment to pay for cheque leaves amounts to TL 5,447,537. The amount of commitment for the forward purchase of assets is TL 2,302,086 and for the forward sale of assets is TL 2,214,219. a.2. The structure and amount of probable losses and commitments resulting from off-balance sheet items, including those below: As of December 31, 2022, the Bank’s provisions for indemnified non-cash loans balance is TL 1,616,688 (December 31, 2021: TL 1,214,355) which is allocated for the non-cash loans of companies whose loans are followed under “Non-performing Loans” accounts. Commitments are shown in the table of “off-balance sheet items”. a.3. Guarantees, bank acceptances, collaterals that qualify as financial guarantees, and non-cash loans including other letters of credit: Bank Acceptances Letters of Credit Other Guarantees Total Current Period Prior Period 9,331,476 53,246,223 4,836,131 67,413,830 14,781,851 42,895,203 4,260,876 61,937,930 a.4. Certain guarantees, provisional guarantees, suretyships and similar transactions: Letters of Tentative Guarantees Letters of Certain Guarantees Letters of Advance Guarantees Letters of guarantee given to customs offices Other Letters of Guarantee Total a.5. Total Non-cash Loans: Non-cash Loans against Cash Risks With Original Maturity of 1 Year or Less With Original Maturity More Than 1 Year Other Non-cash Loans Total Current Period Prior Period 2,855,259 107,173,811 19,399,879 9,508,835 40,344,900 179,282,684 1,708,305 71,821,482 12,802,694 6,090,285 39,074,727 131,497,493 Current Period Prior Period 40,344,898 11,721,587 28,623,311 206,351,616 246,696,514 39,074,716 9,466,630 29,608,086 154,360,707 193,435,423 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 290 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 291 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 a.6. Sectoral risk concentration of non-cash loans: Agriculture Farming and Livestock Forestry Fishery Industry Mining and Quarrying Manufacturing Industry Electricity, Gas, Water Construction Services Wholesale and Retail Trade Hotel and Restaurant Services Transport and Communications Financial Institutions Real Estate and Rental Services. Self-Employment Services Education Services Health and Social Services Other Total TL 612,476 490,047 107,093 15,336 32,015,377 1,003,633 24,723,856 6,287,888 10,050,697 47,046,797 27,079,113 1,159,849 5,336,375 9,684,784 2,320,340 812,991 111,558 541,787 337,958 90,063,305 Current Period (%) FC 278,356 239,893 0.68 0.54 0.12 38,463 0.02 87,898,245 35.54 1,098,016 1.11 77,959,018 27.45 8,841,211 6.98 24,793,816 11.16 42,402,651 52.24 20,128,969 30.07 790,171 1.29 11,905,619 5.93 7,338,409 10.75 1,785,260 2.58 128,125 0.90 6,549 0.12 319,549 0.60 0.38 1,260,141 100 156,633,209 (%) 0.18 0.15 0.00 0.03 56.12 0.70 49.77 5.65 15.83 27.07 12.85 0.50 7.60 4.69 1.14 0.08 0.01 0.20 0.80 100 TL 296,207 199,806 82,391 14,010 12,116,069 320,342 8,066,185 3,729,542 7,521,162 25,865,094 15,532,556 450,043 3,081,863 4,543,921 1,418,515 502,777 73,900 261,519 267,825 46,066,357 Prior Period (%) FC 574,535 229,323 1,734 343,478 88,813,291 928,731 79,892,456 7,992,104 20,920,930 36,245,354 17,777,209 1,711,937 7,815,025 6,974,597 1,340,206 303,205 5,300 317,875 814,956 147,369,066 0.64 0.43 0.18 0.03 26.30 0.70 17.50 8.10 16.33 56.15 33.72 0.98 6.69 9.86 3.08 1.09 0.16 0.57 0.58 100 (%) 0.39 0.16 0.00 0.23 60.27 0.63 54.21 5.43 14.20 24.59 12.06 1.16 5.30 4.73 0.91 0.21 0.00 0.22 0.55 100 a.7. Non-cash Loans classified under Group I and Group II: Non-cash Loans Letters of Guarantee Bank Acceptances Letters of Credit Endorsements Group I TL 88,634,615 82,888,613 5,575,390 170,612 FC 150,949,970 89,832,287 3,713,689 52,620,740 Group II TL FC 1,162,109 1,160,609 1,500 4,125,769 3,632,062 40,897 452,810 Underwriting Commitments of the Securities Issued Factoring Related Guarantees Other Guaranties and Warranties 4,783,254 b. Explanation on Derivative Financial Instruments: Majority of the Bank’s derivative transactions comprise foreign currency and interest rate swaps, forward foreign exchange trading, and currency and interest rate options. Even though some derivative transactions economically provide risk hedging, since all necessary conditions to be defined as items suitable for financial risk hedging accounting are not met, they are recognized as “fair value through profit or loss” within the framework of TFRS 9 “Financial Instruments”. c. Explanations Related to Contingencies and Commitments: Balance of the “Other Irrevocable Commitments” account, which comprised the letters of guarantees, guarantees and commitments submitted by the Bank pursuant to its own internal affairs and guarantees given to third parties by other institutions in favor of the Bank and the commitments due to housing loans extended within the scope of unfinished house projects followed amounts to TL 18,101,440. The cheques given to customers is presented under off balance sheet commitments, as per the related regulations is amounting to TL 5,447,537. In case the cheques presented for payment to beneficiaries are not covered, the Bank will be obliged to pay the uncovered amount up to TL 3,000 (in exact TL amount) for the cheques that are subject to the Law numbered 3167 on “the Regulation of Payments by Cheque and Protection of Cheque Holders”, and up to TL 3,600 (in exact TL amount) for the cheques that are subject to the “Cheque Law” numbered 5941. The uncollected amount will be followed under “Indemnified Non-Cash Loans”. d. Explanations related to transactions made on behalf of or on the account of others: It is explained in Note X under Section Four. IV. DISCLOSURES AND FOOTNOTES ON STATEMENT OF INCOME a. Interest Income a.1. Information on interest income on loans: Interest Income on Loans (*) Short-term Loans Medium and Long-term Loans Interest on Non-performing Loans Current Period Prior Period TL FC TL FC 22,751,665 39,871,722 2,436,866 3,985,147 13,533,080 9,588,271 1,260,182 24,105,926 8,549,468 1,429 944,278 130 Premiums Received from State Resource Utilization Support Fund Total 65,060,253 17,519,656 34,638,475 9,809,780 (*) Includes fee and commission income on cash loans. a.2. Information on interest income on banks: The Central Bank of Turkey Domestic Banks Foreign Banks Foreign Head Offices and Branches Total a.3. Information on interest income from securities: Current Period Prior Period TL FC TL FC 52,130 155,264 39,543 2,725 71,739 528 194,883 31,889 29,548 194,807 249,738 103,628 30,076 Financial Assets at Fair Value Through Profit or Loss Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets Measured at Amortised Cost Total Current Period Prior Period TL 49,293 21,905,813 14,951,212 FC 186,669 2,341,238 224,110 TL 52,159 8,216,820 5,757,657 FC 75,959 1,204,383 127,244 36,906,318 2,752,017 14,026,636 1,407,586 As detailed in Note VII of Chapter III, the Bank has consumer price indexed (CPI) government bonds classified as financial assets at fair value through other comprehensive income, financial assets at fair value through profit or loss and financial assets measured by amortized cost in its securities portfolio. In the case of CPI forecast changes by 100 basis points in a positive or negative direction, as of 31 December 2022, the Parent Bank’s pre-tax profit will increase by approximately TL 127 million (full amount) or decrease by the same amount. a.4. Information on interest income received from associates and subsidiaries: Interest Income from Associates and Subsidiaries 1,253,289 613,651 Current Period Prior Period An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 292 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 293 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 b. Interest Expense b.1. Information on interest expense from funds borrowed: Banks Central Bank of Turkey Domestic Banks Foreign Banks Foreign Head Offices and Branches Other Institutions Total (*) (*) Includes fee and commission expenses from cash loans Current Period Prior Period TL FC TL FC 405,533 2,060,113 315,064 991,290 130,560 274,973 405,533 218,652 1,841,461 527,877 2,587,990 88,398 138,803 226,666 852,487 223,920 315,064 1,215,210 b.2. Information on interest paid to associates and subsidiaries: Interest Paid to Associates and Subsidiaries 820,602 409,674 Current Period Prior Period b.3. Information on interest paid on marketable securities issued: Interest on Securities Issued 1,144,803 4,625,715 1,260,390 3,501,106 Current Period Prior Period TL FC TL FC b.4. Information on Interest Expense on Deposits According to Maturity Structure: Current Period Demand Deposits Up to One Month Up to Three Months Up to Six Months Up to One Year Over One Year Accumulated Deposits Total Time Deposits 75 8 215,565 132,256 347,896 1,540,779 8,305,750 9,067,691 536,973 396,682 464 19,848,347 2,663 23,780 10 42 2 Commercial Deposits 129 4,551,092 1,637,449 2,488,692 1,457,150 379,004 117,461 562,135 18,097 1,699 223 26,497 10,513,516 699,615 TL Bank Deposits Savings Deposits Public Sector Deposits Other Institutions Deposits Deposits with 7 Days Notice Total FC 212 6,427,560 10,661,370 11,574,490 1,995,864 775,911 464 31,435,871 Foreign Currency Deposits Bank Deposits Deposits with 7 Days Notice 57 18 90,662 616,716 55,377 6,079 166,602 2 935,495 51,284 14,074 2,463 1,775 15,267 84,881 Precious Metals 75 141.957 Deposits Total Grand Total 75 287 11 141,957 637.314 6,524 637,314 58.584 24.276 182.759 744 16,422 890 58,584 24,276 182,759 2 2 1.044.967 24,591 1,044,967 6,569,517 11,298,684 11,633,074 2,020,140 958,670 466 32,480,838 Prior Period Demand Deposits Up to One Month Up to Three Months Up to Six Months Up to One Year Over One Year Accumulated Deposits Total Time Deposits TL Bank Deposits Savings Deposits Public Sector Deposits 236,834 109,341 346,175 10 1,089,360 10,622,231 622,976 87,086 115,091 645 12,537,399 Commercial Deposits 1,257 11,337 328 47 9 58 1,811,687 2,203,211 59,735 285,246 3,697 44,565 438,198 51,297 446 4,064 12,978 4,363,634 538,570 68 89 88 177 245 3,183,703 13,384,318 734,336 372,825 122,861 645 17,798,756 18,582 177,776 6,848 3,396 62,602 327 457 307 495 3,363 411 10,611 380 637 18,909 181,596 7,566 14,502 63,619 1 1 269,294 2,054 15,022 286,370 3,202,612 13,565,914 741,902 387,327 186,480 646 18,085,126 Other Institutions Deposits Deposits with 7 Days’ Notice Total FC Foreign Currency Deposits Bank Deposits Deposits with 7 Days Notice Deposits Total Grand Total c. Information on dividend income: Financial Assets at Fair Value Through Profit and Loss Financial Assets at Fair Value Through Other Comprehensive Income Other Total d. Information on trading income/losses (Net): Income Securities Trading Gains Gains on Derivative Financial Instruments (*) Foreign Exchange Gains Losses (-) Securities Trading Losses Losses on Derivative Financial Instruments (*) Foreign Exchange Losses Trading Income /Losses (Net) Current Period Prior Period 12,976 25,628 9,176 11,559 38,604 20,735 Current Period Prior Period 3,326,481 40,382,196 1,548,951,173 11,654 53,925,636 1,534,199,967 4,522,593 381,403 33,122,723 1,931,276,362 24,296 34,168,985 1,935,736,334 (5,149,127) (*) Income arising from foreign currency changes related to derivative transactions amounts to TL 27,805,262 and the losses amount to TL 44,333,328 and the amount of net losses TL 16,528,066 (December 31, 2021, profit: TL 28,826,011, loss: TL 30,043,929). e. Information on other operating income Other operating income mainly consists of expected credit loss reversals or collections from Stage 3 loans, and income from fees received from customers in return for various banking services and sales of fixed assets. On the other hand, the judicial process regarding the refund of the administrative fine paid by the Bank in accordance with the decision of the Competition Board in 2013 was concluded in favor of the Bank, and the administrative fine of TL 109,992 paid by the Bank was refunded. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 294 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 295 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 f. Information on expected credit loss and other provision expense: i. Information on provision for taxes from continuing and discontinued operations Expected Credit Loss 12 Month Expected Credit Loss (Stage I) Significant Increase in Credit Risk (Stage II) Non-performing Loans (Stage III) Impairment Losses on Marketable Securities Financial Assets at Fair Value Through Profit or Loss Financial Assets at Fair Value Through Other Comprehensive Income Impairment Losses on Associates, Subsidiaries and Joint-Ventures Associates Subsidiaries Jointly Controlled Entities Other (*) Total Current Period Prior Period 10,036,266 10,837,246 909,902 653,381 8,472,983 74,601 18,954 55,647 1,247,511 3,781,961 5,807,774 16,416 14,145 2,271 5,693,577 15,804,444 3,596,505 14,450,167 (1) The current period balance is the impairment loss expense of the assets held for sale and discontinued operations detailed in section five i.4.4, litigation provision expense of TL 825,000 and TL 4,400,000 Includes free provision expense detailed in section five i.4.5.. h. Other operating expenses: Reserve for Employee Termination Benefits Bank Pension Fund Deficit Provisions Impairment Losses on Tangible Assets Depreciation Expenses of Tangible Assets Impairment Losses on Intangible Assets Impairment Losses on Goodwill Amortization Expenses of Intangible Assets Impairment Losses on Equity Accounted Investments Impairment Losses on Assets to be Disposed Depreciation Expenses of Assets to be Disposed Impairment Losses on Assets Held for Sale and Subject to Discontinued Operations Other Operating Expenses Leasing Expenses Related to Exceptions to TFRS 16 Repair and Maintenance Expenses Advertisement Expenses (*) Other Expenses (*) Loss on Sale of Assets Other (**) Total Toplam Current Period Prior Period 418,637 2,284,686 3,937 911,637 171,229 1,858,944 5,795 686,512 753,272 334,798 33,675 11,266,794 154,605 398,243 677,733 10,036,213 4,341 3,256,651 18,933,630 18.933.630 4,279,084 116,435 237,531 286,996 3,638,122 1,799 2,206,847 9,545,008 9.545.008 (*)) The amount of expenditure made by the Bank within the scope of donation, aid and social responsibility projects in the current period is TL 119,660 (December 31, 2021:TL 78,991). (**) In the current period, 1,513,216 TL (31.12.2021: 1,016,208 TL) part of the related item consists of savings deposit insurance fund expenses, 665,046 TL (31.12.2021: 466,924 TL) part consists of fees, taxes, pictures, and fund expenses. The Bank's profit before tax arises from continuing activities. As of 31 December 2022, TL 75,203,453 of the profit before tax consists of net interest income, TL 16,146,898 of net fee and commission income, and the total of personnel expenses and other operating expenses is TL 34,029,278. j. Information on provision for taxes from continuing and discontinued operations As of December 31, 2022, the amount of the Bank’s tax provision is TL 12,411,168 and the amount consists of current tax expense that is amounting to TL 17,204,130 and consists of deferred tax expense amounting TL (4,792,962). k. Information on Net Operating Profit/Loss after Net Profit/Loss from Continuing and Discontinued Operations: The Bank’s net profit made from its continuing operations as of December 31, 2022, amounts to TL 61,537,880. l. Information on net period profit/loss: Income and expenses resulting from ordinary banking activities: There is no specific issue required to be disclosed for the Bank’s performance l.1. for the year ended period between January 1, 2022 – December 31, 2022. l.2. Effects of changes in accounting estimates on the current and future periods’ profit/loss: There is no issue to be disclosed. ‘‘The other’’ item which is located at the bottom of “Fees and Commissions Received” in the income statement consist of various fees and l.3. commissions received from transactions such as credit card transactions, capital market transactions. m. Explanation on other items on the income statement: Other items do not exceed 10% of the total amount of the income statement. n. Fees for services received from an independent audit firm: In accordance with the decision of public oversight, accounting and auditing standards authority dated 26.03.2021, the fees for the reporting period regarding the services received from the independent auditor or independent audit firm are given in the table below. In addition to the Bank, the fees for services rendered to the Bank's domestic/foreign subsidiaries and jointly controlled partnerships are included in the aforementioned fees, which are stated as VAT excluded. Independent audit fee for the reporting period Other Assurance Services and Other Non-Audit Fees Total Current Period Prior Period 30,347 8,029 38,376 22,258 5,243 27,501 V. DISCLOSURES AND FOOTNOTES ON STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY The paid-in capital is TL 10,000,000 in legal records. As of balance sheet date, the balance of legal reserves is TL 6,168,857 and the balance of extraordinary reserves is TL 52,282,743. Detail of the securities increase fund is explained in Section Five Note II-m.9 and TL (8,345,080) of this amount is the deferred tax effect on financial assets at fair value through other comprehensive income (31 December 2021: TL (218,839)). An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 296 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 297 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 VI. DISCLOSURES AND FOOTNOTES ON STATEMENT OF CASH FLOWS VII. DISCLOSURES AND FOOTNOTES ON THE BANK’S RISK GROUP The operating profit to TL 29,321,468 before the changes in operating assets and liabilities mostly comprised of TL 103,691,818 of interest received from loans and securities, and TL 43,427,261 of interest paid on deposits, loans, money market transactions and marketable securities borrowed by the Bank. The account ‘’Other’’ classified under operating profit other than fees and commissions paid, cash payments to personnel and service suppliers and taxes paid consists of other operating expenses, exchange and derivative gains/losses accounts is TL (25,604,457) (December 31, 2021: TL 13,095,475)). Net Increase (Decrease) in Other Liabilities account classified in changes of assets and liabilities resulting from the changes in Funds Provided Under Repurchase Agreements, miscellaneous payables, other liabilities and taxes, duties, charges, and premiums increase as TL 18,620,820 (December 31, 2021: TL 31,617,097 increase). Net Cash Provided from Other Investing Activities account includes net cash flows from sale of intangible assets and declined by TL 2,515,348 (December 31, 2021: TL 748,958 decrease). The effect of changes in foreign exchange rates on cash and cash equivalents is TL 967,080 as of December 31, 2022 (December 31, 2021: TL (1,171,636)). Due to the high rate of turnover of related foreign currency assets, the difference between the last 30 days’ arithmetic average of currency exchange rates and the year-end currency exchange rate is used to calculate the effect of change in foreign exchange rate. Cash, cash in foreign currency, unrestricted deposits in Central Bank of Turkey, money in transit, cheques purchased, precious metals, money market operations as well as demand and timed up to 3 months are defined as cash and cash equivalents. Cash and cash equivalents at beginning of the period: Cash Cash in TL and Foreign Currency Central Bank of Turkey and Other Cash Equivalents Banks’ Demand Deposits and Time Deposits Up to 3 Months Money Market Receivables Total Cash and Cash Equivalents December 31, 2021 December 31, 2020 96,225,661 14,810,443 81,415,218 18,668,788 18,668,788 32,467,082 9,102,557 23,364,525 12,894,826 12,894,826 114,894,449 45,361,908 a. Information on the volume of transactions relating to the Bank’s risk group, incomplete loan and deposit transactions and period’s profit and loss: a.1. Information on loans held by the Bank’s risk Group Current Period: Bank’s Risk Group Loans Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders of the Bank Other Real Persons and Corporate Bodies that have been Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Balance at the beginning of the period 6,287,638 16,814,945 Balance at the end of the period 13,925,479 17,111,566 Interest and commission income received 1,249,418 11,388 4,452,442 7,328,993 569,202 608,277 1,309,862 13,400 Prior Period: Bank’s Risk Group Loans Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders of the Bank Other Real Persons and Corporate Bodies that have been Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Balance at the beginning of the period 5,368,800 9,877,227 Balance at the end of the period 6,287,638 16,814,945 Interest and commission income received 612,064 6,879 2,585,068 4,452,442 232,067 494,875 608,277 8,628 The total amount resulting from the transactions made in the previous period shows the total cash and cash equivalents as of the beginning of the current period. a.2. Information on deposits held by the Bank’s risk group: Cash and cash equivalents at end of the period: Cash Cash in TL and Foreign Currency Central Bank of Turkey and Other Cash Equivalents Banks’ Demand Deposits and Time Deposits Up to 3 Months Money Market Receivables Total Cash and Cash Equivalents December 31, 2022 December 31, 2021 Bank’s Risk Group 79,630,416 15,588,450 64,041,966 14,983,586 14,983,586 96,225,661 14,810,443 81,415,218 18,668,788 18,668,788 94,614,002 114,894,449 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders Risk Grubuna Dahil Olan Diğer Gerçek ve Tüzel Kişiler Deposits Current Period Prior Period Current Period Prior Period Current Period Prior Period Balance at the beginning of the period 12.421.537 8.875.726 Balance at the end of the period 16.910.042 12.421.537 Interest expense on deposits 629.948 248.189 302.826 130.226 58.439 157.226 302.826 25.060 2.053.129 8.771.749 160.522 1.409.177 2.053.129 52.100 a.3. Information on forward and option agreements and other similar agreements made with the Bank’s risk group: Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders Risk Grubuna Dahil Olan Diğer Gerçek ve Tüzel Kişiler Current Period Prior Period Current Period Prior Period Current Period Prior Period 1,966,285 15,007,188 (21,221) 1,574,671 1,966,285 (62,997) 4,033 2,474,171 1,226 4,033 (2,179) Bank’s Risk Group Transactions at Fair Value Through Profit and Loss Beginning of the period End of the period Total Profit/Loss Transactions for hedging purposes Beginning of the period End of the period Total Profit/Loss An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 298 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 299 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Unconsolidated Financial Statements for the Year Ended December 31, 2022 b. Disclosures for Bank’s risk group: SECTION SIX: OTHER EXPLANATIONS The relation of the Bank with corporations in its risk group and under its control regardless of whether there are any transactions between the I. Explanations On The Bank’s Credit Ratings: b.1. parties: All types of corporate and retail banking services are provided to these corporations in line with the articles of Banking Law. The type and amount of transaction carried out, and its ratio to the overall transaction volume, values of principal items and their ratios to overall b.2. items, pricing policy and other items in addition to the structure of the relationship: MOODY’S The transactions carried out are mainly loan and deposit transactions. The ratio of loans extended to the risk group to the overall cash loans is 2.80%, while the ratio (excluding NPL) to the overall assets is 1.51%; the ratio of deposits of the risk group corporations to the overall deposits is 2.77%, while the ratio to overall liabilities is 1.83%, the comparable pricing method is used for the transactions. b.3. Purchase and sale of real estates, other assets and services, agency agreements, finance lease contracts, transfer of information obtained through research and development, license agreements, funding (including loans and provision of support as cash capital or capital-in-kind), guarantees and collaterals, and management agreements: Security purchases are made by İş Finansal Kiralama A.Ş., a subsidiary of the Bank, through leasing activities when required. The Parent Bank’s branches act as agents of Anadolu Anonim Türk Sigorta Şirketi and Anadolu Hayat Emeklilik A.Ş. Furthermore, through its branches, the Bank mediates the order transmission for İş Yatırım Menkul Değerler A.Ş. and carries out agency activities of İş Portföy Yönetimi A.Ş. If requested, cash and non-cash loan requirements of corporations within the risk group are met in accordance with the limits imposed by the Banking Law and the prevailing market conditions. b.4. As of December 31, 2022, total worth of the shares, which the Bank purchased from its subsidiaries that are traded on Istanbul Stock Exchange and accounted under the Financial Assets at Fair Value Through Profit or Loss in accordance with the Board of Directors decision dated December 25, 2015, and relevant following decisions is TL 498,959 (December 31, 2021: TL 207,050). c. Total salaries and similar benefits paid to the (executive members and senior executives) In the current period, the net payment provided to the key management amounts is TL 86,081 (December 31, 2021: TL 46,975). VIII. Disclosures On The Bank’s Domestic, Foreign, Off-Shore Branches Or Associates And Foreign Representative Offices Domestic Branches (*) 1.110 22.971 Number Employees Foreign Representative Offices Foreign Branches Off-Shore Branches 1 1 2 14 2 2 1 Country of Incorporation China Egypt England T.R.N.C. Iraq Kosovo Bahrain 3 2 49 207 40 31 6 Total Assets Legal Capital 53,147,779 28,264,019 6,837,919 3,157,421 8,094,514 2,248 80,000 842,061 199,247 Long-term Foreign Currency Deposit Long-term Local Currency Deposit Long-term Foreign Currency Senior Debt Short-term Foreign Currency Deposit Short-term Local Currency Deposit FITCH RATINGS Long-term Foreign Currency Issuer Default Rating Long-term Local Currency Issuer Default Rating Short-term Foreign Currency Issuer Default Rating Short-term Local Currency Issuer Default Rating National Long-term Rating Viability Rating Rating Outlook (*) B3 B3 B3 NP NP B- B B B A+ (tur) B Stable Stable Stable - - Negative Negative - - Negative - The dates when the Bank's credit ratings/outlooks were last updated are given below: Moody's: 16.08.2022, Fitch Ratings: 26.07.2022 (*) Outlook: “Stable” indicates that the current rating will not be changed in the short term; “positive” indicates that the current rating is very likely to be upgraded and “negative” indicates that the current rating is very likely to be downgraded. SECTION SEVEN: EXPLANATIONS ON THE AUDITORS’ INDEPENDENT AUDIT REPORT I. Explanations On The Auditors’ Independent Audit Report: The unconsolidated financial statements and disclosures for the period ended December 31, 2022, have been audited by Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi (A member firm of Ernst&Young Global Limited) and the independent auditors’ report dated February 6, 2023, is presented preceding the unconsolidated financial statements. II. Explanations And Footnotes Of The Independent Auditors Report (*) The Branches located in Free Trade Zones in Turkey are included among domestic branches. There are no significant issues or necessary disclosures or notes in relation to the Bank’s operations other than those mentioned above. IX. Subsequent Events Within the scope of the decision of the Board of Directors regarding the issue of debt instrument on October 7, 2022, the Bank issued a financial bond with a nominal value of TL 1,481,892 after December 31, 2022. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 300 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 301 Independent Auditor’s Report To the General Assembly of Türkiye İş Bankası Anonim Şirketi Audit of Consolidated Financial Statements Qualified Opinion We have audited the accompanying consolidated financial statements of Türkiye İş Bankası A.Ş (the Bank) and its subsidiaries (collectively referred as “The Group”), which comprise the consolidated statement of balance sheet as at December 31, 2022, and the consolidated statement of income, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in shareholders’ equity, consolidated statement of cash flows and a summary of significant accounting policies and other explanatory notes to the consolidated financial statements. In our opinion, except for the effects of the matter on the consolidated financial statements described in the Basis of for Qualified Opinion paragraph, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Türkiye İş Bankası A.Ş. as at December 31, 2022 and consolidated financial performance and consolidated its cash flows for the year then ended in accordance with the Banking Regulation and Supervision Agency (“BRSA”) Accounting and Financial Reporting Legislation which includes “Regulation on Accounting Applications for Banks and Safeguarding of Documents” published in the Official Gazette no.26333 dated 1 November 2006, and other regulations on accounting records of Banks published by Banking Regulation and Supervision Agency and circulars and interpretations published by BRSA and Turkish Financial Reporting Standards (“TFRS”) for those matters not regulated by the aforementioned regulations. Basis of Qualified Opinion As explained in Section Five Part II-i.4.5. and IV.f, the accompanying consolidated financial statements as at December 31, 2022, include a free provision at an amount of TL 8,475,000 thousands of which TL 4,075,000 thousands was provided in prior years and TL 4,400,000 thousands provided in the current period by the Group management for the possible effects of the negative circumstances which may arise from the possible changes in the economy and market conditions which does not meet the recognition criteria of TAS 37 “Provisions, Contingent Liabilities and Contingent Assets”. Our audit was conducted in accordance with “Regulation on independent audit of the Banks” published in the Official Gazette no.29314 dated April 2, 2015 by BRSA (BRSA Independent Audit Regulation) and Independent Auditing Standards (“ISA”) which are the part of Turkish Auditing Standards issued by the Public Oversight Accounting and Auditing Standards Authority (“POA”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with of Code of Ethics for Independent Auditors (Code of Ethics) published by POA and have fulfilled our other responsibilities in accordance with the code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. Key audit matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Basis for Qualified Opinion section we have determined the matters described below to be the key audit matters to be communicated in our report. Türkiye İş Bankası Anonim Şirketi Consolidated Financial Statements As at and for the Year Ended December 31, 2022 With Independent Auditor’s Report Thereon (Convenience Translation of Consolidated Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish) This report includes “Independent Auditor’s Report” comprising 6 pages and; "Consolidated Financial Statements and Related Disclosures and Footnotes” comprising 142 pages. Convenience Translation of the Independent Auditor’s Report Originally Issued in Turkish An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 302 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 303 Independent Auditor’s Report Independent Auditor’s Report Key Audit Matter How the Key Audit Matter is addressed in our audit Pension Fund Obligations Financial impact of TFRS 9 “Financial Instruments” standard and impairment on financial assets and related important disclosures As presented in Section III disclosure VIII, the Group recognizes expected credit losses of financial assets in accordance with TFRS 9 Financial Instruments standard. We considered impairment of financial assets as a key audit matter since: ੵ Amount of on and off-balance sheet items that are subject to expected credit loss calculation is material to the financial statements. ੵ There are complex and comprehensive requirements of TFRS 9. ੵ The classification of the financial assets is based on the Group’s business model and characteristics of the contractual cash flows in accordance with TFRS 9 and the Bank uses significant judgment on the assessment of the business model and identification of the complex contractual cash flow characteristics of financial instruments. ੵ Policies implemented by the Bank management include compliance risk to the regulations and other practices. ੵ Processes of TFRS 9 are advanced and complex. ੵ Judgements and estimates used in expected credit loss, complex and comprehensive. ੵ Disclosure requirements of TFRS 9 are comprehensive and complex. Our audit procedures included among others include: ੵ Evaluating the appropriateness of accounting policies as to the requirements of TFRS 9, Group’s past experience, local and global practices. ੵ Reviewing and testing of processes which are used to calculate expected credit losses by involving our Information technology and process audit specialists. ੵ Evaluation of the reasonableness and appropriateness of key judgments and estimates determined by management and the methods, judgments, and data sources used in calculating expected loss, taking into account the standard requirements, industry and global practices. ੵ Reviewing the appropriateness of criteria in order to identify the financial assets having solely payments of principal and interest and checking the compliance to the Group’s Business model. ੵ Evaluating the alignment of the significant increase in credit risk determined during the calculation of expected credit losses, default definition, restructuring definition, probability of default, loss given default, exposure at default and macro-economic variables that are determined by the financial risk management experts with the Group’s past performance, regulations, and other processes that has forward looking estimations. ੵ Assessing the completeness and the accuracy of the data used for expected credit loss calculation. ੵ Testing the mathematical accuracy of expected credit loss calculation on sample basis. ੵ Evaluating the judgments and estimates used for the individually assessed financial assets. ੵ Evaluating the necessity and accuracy of the updates made or required updates after the modeling process ੵ Auditing of TFRS 9 disclosures It has been addressed whether there have been any significant changes in regulations governing pension liabilities, employee benefits plan during the period, that could lead to adjust the valuation of employee benefits. Support from actuarial auditor of our firm, has been taken to assess the appropriateness of the actuarial assumptions and calculations performed by the external actuary. We further focused on the accuracy and adequacy of the Bank’s provision provided for the deficit and also disclosures on key assumptions related to pension fund deficit. Employees of the Group are members of Emekli Sandığı Vakıfları”, (“the Fund”), which is established in accordance with the temporary Article 20 of the Social Security Act No. 506 and related regulations. The Fund is a separate legal entity and foundation recognized by an official decree, providing all qualified employees with pension and post- retirement benefits. As disclosed in the “Section Three Note XX.2” to the financial statements, Banks will transfer their pension fund to the Social Security Institution and the authority of the “Council of Ministers” on the determination of the mentioned transfer date is changed as “President” in the Decree Law No. 703 published in the Official Gazette numbered 30473 and dated July 9, 2018. According to the technical balance sheet report as of 31 December 2022 prepared considering the related articles of the Law regarding the transferrable benefit obligations for the non- transferrable social benefits and payments which are included in the articles of association, the Fund has an actuarial and technical deficit which is fully provisioned for. The valuation of the Pension Fund liabilities requires judgment in determining appropriate assumptions such as defining the transferrable social benefits, discount rates, salary increases, demographic assumptions, inflation rate estimates and the impact of any changes in individual pension plans. The Group Management uses Fund actuaries to assist in assessing these assumptions. Considering the subjectivity of key assumptions and estimate used in the calculations of transferrable liabilities and the effects of the potential changes in the estimates used together with the uncertainty around the transfer date and given the fact that technical interest rate is prescribed under the law, we considered this to be a key audit matter. Derivative Financial Instruments Derivative financial instruments including foreign exchange contracts, currency and interest rate swaps, currency and interest rate options, futures and other derivative financial instruments which are held for trading are initially recognized on the statement of financial position at fair value and subsequently are re-measured at their fair value. The details of the related amounts are explained in “Section Five Note I.c”, and “Section Five Note II.b”. Our audit procedures included among others involve reviewing policies regarding fair value measurement accepted by the Group management fair value calculations of the selected derivative financial instruments which is carried out by valuation experts of our firm and the assessment of used estimations and the judgements and testing the assessment of operating effectiveness of the key controls in the process of fair value determination. Fair value of the derivative financial instruments is determined by selecting most convenient market data and applying valuation techniques to those particular derivative products. Derivative Financial Instruments are considered by us as a key audit matter because of the subjectivity in the estimates, assumptions and judgments used. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 304 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 305 Independent Auditor’s Report Türkiye İş Bankası A.Ş. Responsibilities of Management and Directors for the Consolidated Financial Statements Group management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the BRSA Accounting and Reporting Legislation and for such internal control as management determines is necessary to enable the preparation of the financial statement that is free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements In an independent audit, the responsibilities of us as independent auditors are: Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with BRSA Independent Audit Regulation and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with BRSA Independent Audit Regulation and ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: ੵ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. (The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.) ੵ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank and its subsidiaries internal control. ੵ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ੵ Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank's and its subsidiaries subject to consolidation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. ੵ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. ੵ Obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with government with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements 1. In accordance with Article 402 paragraph 4 of the Turkish Commercial Code (“TCC”) no 6102; no significant matter has come to our attention that causes us to believe that the Bank’s bookkeeping activities and financial statements for the period January 1 – December 31, 2022 are not in compliance with the TCC and provisions of the Bank’s articles of association in relation to financial reporting. 2. In accordance with Article 402 paragraph 4 of the TCC; the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit. The engagement partner who supervised and concluded this independent auditor’s report is Fatma Ebru Yücel. February 7, 2023 İstanbul, Türkiye The Consolidated Financial Report as at and for the Year Ended December 31, 2022 Headquarters Address: İş Kuleleri, 34330, Levent/İstanbul Telephone: 0212 316 00 00 Fax: 0212 316 09 00 Web Site: www.isbank.com,tr E-mail: musteri.iliskileri@isbank.com.tr The consolidated financial report as at and for the year ended prepared in accordance with the communiqué of “Financial Statements and Related Disclosures and Footnotes to be announced to Public by Banks” as regulated by Banking Regulation and Supervision Agency, comprises the following sections: GENERAL INFORMATION ABOUT THE PARENT BANK CONSOLIDATED FINANCIAL STATEMENTS OF THE PARENT BANK EXPLANATIONS ON THE ACCOUNTING POLICIES INFORMATION ON FINANCIAL STRUCTURE AND RISK MANAGEMENT OF THE GROUP DISCLOSURES AND FOOTNOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS OTHER EXPLANATIONS INDEPENDENT AUDITOR’S REPORT Associates, subsidiaries and structured entities whose financial statements have been consolidated in the consolidated financial report are as follows: Associates ARAP-TÜRK BANKASI A.Ş. Subsidiaries ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ ANADOLU HAYAT EMEKLİLİK A.Ş. EFES VARLIK YÖNETİM A.Ş. İŞ FAKTORİNG A.Ş. İŞ FİNANSAL KİRALAMA A.Ş. İŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. İŞ GİRİŞİM SERMAYESİ YATIRIM ORTAKLIĞI A.Ş. İŞ PORTFÖY YÖNETİMİ A.Ş. İŞ YATIRIM MENKUL DEĞERLER A.Ş. İŞ YATIRIM ORTAKLIĞI A.Ş. İŞBANK AG JOINT STOCK COMPANY İŞBANK (JSC İŞBANK) JOINT STOCK COMPANY ISBANK GEORGIA (JSC ISBANK GEORGIA) MAXİS GİRİŞİM SERMAYESİ PORTFÖY YÖNETİMİ A.Ş. MAXIS INVESTMENTS LTD. MİLLİ REASÜRANS T.A.Ş. MOKA ÖDEME VE ELEKTRONİK PARA KURULUŞU A.Ş. TSKB GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. YATIRIM FİNANSMAN MENKUL DEĞERLER A.Ş. YATIRIM VARLIK KİRALAMA A.Ş. Structured Entities TIB DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY The consolidated yearended financial statements and related disclosures and footnotes in this report are prepared, in accordance with the Regulation on the Procedures and Principles for Accounting Practices and Retention of Documents by Banks. Banking Regulation and Supervision Agency (BRSA) regulations, Turkish Accounting Standards, Turkish Financial Reporting Standards and the related statements and guidance and in compliance with the financial records of our Bank. Unless otherwise stated the accompanying consolidated financial report is presented in thousands of Turkish Lira (TL) and has been subjected to independent auditand presented as the attached. Ersin Önder Çiftçioğlu Member of the Board and the Audit Committee Yusuf Ziya Toprak Deputy Chairperson of the Board of Directors and Chairperson of the Audit Committee Adnan Bali Chairperson of the Board of Directors Ali Tolga Ünal Head of Financial Management Division Gamze Yalçın Deputy Chief Executive In Charge of Financial Reporting Hakan Aran Chief Executive Officer The authorized contact person for questions on this consolidated financial report: Name – Surname / Title: Neşe Gülden Sözdinler / Head of Investor Relations and Sustainability Division Phone No Fax No E-mail : +90 212 316 16 02 : +90 212 316 08 40 : Nese.Sozdinler@isbank.com.tr investorrelations@isbank.com.tr An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 306 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 307 Content SECTION I General Information about the Parent Bank I. Explanations on the Establishment Date and Initial Status of the Parent Bank, and History Including the Changes in the Former Status II. III. IV. V. VI. Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Parent Bank any Changes in the Period, and Information on the Parent Bank’s Risk Group Explanations on the Chairperson’s, Directors’, Auditors’, Chief Executive Officer’s and Deputy Chief Executives’ Shares, if any, and the Areas of their Responsibility at the Bank Information on the Parent Bank’s Qualified Shareholders Summary Information on the Parent Bank’s Functions and Business Lines Differences between the Communiqué on Preparation of Consolidated Financial Statements of Banks and Turkish Accounting Standards and Explanation about the Institutions Subject to Line-By-Line Method or Proportional Consolidation and Institutions which are Deducted from Equity or not Included in These Three Methods VII. Existing or Potential, Actual or Legal Obstacles on the Transfer of Shareholders’ Equity Between the Parent Bank and its Subsidiaries or the Reimbursement of Liabilities 308 308 308 309 309 309 311 VIII. Written Policies on Assessment of Ensuring Compliance on Market Discipline, Disclosure Obligations, Frequency and Accuracy of the 311 Related Disclosures SECTION II Consolidated Financial Statements I. Consolidated Balance Sheet – Assets II. III. IV. V. VI. VII. VIII. Consolidated Balance Sheet – Liabilities Consolidated Statement of Off-Balance Sheet Items Consolidated Statement of Profit or Loss Profit or Loss and Other Comprehensive Income Consolidated Statement of Changes in the Shareholders’ Equity Consolidated Statement of Cash Flows Consolidated Statement of Profit Appropriation SECTION III Explanations on Accounting Policies Basis of Presentation I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. XIII. XIV. XV. Strategy for Use of Financial Instruments and on Foreign Currency Transactions Information on the Consolidated Companies Forward, Option Contracts and Derivative Instruments Interest Income and Expenses Fees and Commission Income and Expenses Financial Assets Impairment of Financial Assets Offsetting Financial Instruments Sale and Repurchase Agreements and Securities Lending Transactions Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities Goodwill and Other Intangible Assets Tangible Assets Investment Property Leasing Transactions XVI. Insurance Technical Income and Expense XVII. Insurance Technical Provisions XVIII. Provisions and Contingent Liabilities XIX. XX. XXI. Contingent Assets Liabilities Regarding Employee Benefits Taxation XXII. Additional Information on Borrowings XXIII. Information on Equity Shares and Their Issuance XXIV. Bank Acceptances and Bills of Guarantee XXV. Government Incentives XXVI. Segment Reporting XXVII. Other Diclosures 312 313 314 316 317 318 320 321 322 322 323 324 325 325 325 325 326 327 327 327 328 328 328 329 329 329 330 330 331 333 333 333 333 333 333 SECTION IV Information on the Financial Position and Risk Management of the Group XXVIII. Explanations on Shareholders’ Equity XXIX. Explanations on Credit Risk XXX. Explanations on Currency Risk XXXI. Explanations on Interest Rate Risk XXXII. Explanations on Equity Shares Risk Arising from Banking Book XXXIII. Explanations on Liquidity Risk Management and Consolidated Liquidity Coverage Ratio XXXIV. Explanations on Leverage Ratio XXXV. Explanations on Other Price Risks XXXVI. Explanations on The Presentation of Financial Assets and Liabilities at Fair Value XXXVII. Explanations on Transactions Made on Behalf of Others and Transactions Based on Fiduciary XXXVIII. Explanations on Risk Management XXXIX. Explanations on Segment Reporting SECTION V Disclosures and Footnotes on the Consolidated Financial Statements I. Disclosures and Footnotes on Consolidated Assets II. III. IV. V. VI. VII. VIII. IX. Disclosures and Footnotes on Consolidated Liabilities Disclosures and Footnotes on Consolidated Off-Balance Sheet Items Disclosures and Footnotes on Consolidated Income Statement Disclosures and Footnotes on the Statement of Changes in Equity Disclosures and Footnotes on The Cash Flow Statement Disclosures and Footnotes on the Bank’s Risk Group Disclosures on the Bank’s Domestic, Foreign, Off-Shore Branches or Subsidiaries and Foreign Representative Offices Subsequent Events SECTION VI Other Explanations I. Explanation on the Group’s Credit Ratings SECTION VII Explanations on the Independent Audit Report I. Explanations on the Independent Auditors’ Report II. Explanations and Footnotes of the Independent Auditors Report 334 341 350 352 356 357 362 363 363 365 365 381 382 396 405 407 411 412 413 414 416 416 417 417 417 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 308 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 309 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes To The Consolidated Financial Statements for the the Year Ended December 31, 2022 Notes To The Consolidated Financial Statements for the the Year Ended December 31, 2022 I. Explanations on the Establishment Date and Initial Status of the Parent Bank, and History Including the Changes in the Former Status Chief Executive Officer and Deputy Chief Executives: TÜRKİYE İŞ BANKASI A.Ş. (“the Bank” or “the Parent Bank”) was established on August 26, 1924 to operate in all kinds of banking activities and to initiate and/or participate in all kinds of financial and industrial sector undertakings when necessary. There is no change in the Bank’s status since its establishment. II. Explanations on the Capital Structure, Shareholders who Directly or Indirectly, Solely or Jointly Undertake the Management and Control of the Parent Bank, any Changes in the Period, and Information on the Parent Bank’s Risk Group As of December 31, 2022, 37.31% of the Bank’s shares are owned by T. İş Bankası A.Ş. Supplementary Pension Fund (Fund), 28.09% are owned by the Republican People’s Party- CHP (Atatürk’s shares) and 34.60% are on free float (December 31, 2021: Fund 37.26%, CHP 28.09%, Free float 34.65%). III. Explanations on the Chairperson’s, Directors’, Auditors’, Chief Executive Officer’s and Deputy Chief Executives’ Shares, if any, and the Areas of their Responsibility at the Bank Chairperson and Members of the Board of Directors: Name and Surname Areas of Responsibility Adnan Bali Yusuf Ziya Toprak Hakan Aran Feray Demir Ersin Önder Çiftçioğlu Fazlı Bulut Durmuş Öztek Recep Hakan Özyıldız Mustafa Rıdvan Selçuk Ahmet Gökhan Sungur Sadrettin Yurtsever Chairperson of the Board of Directors, Remuneration Committee, Chairperson of the Risk Committee, Sustainability Committee and Chairperson of the Board of Directors Operating Principles Committee and the Member of the Credit Committee Deputy Chairperson of the Board of Directors, Chairperson of the Audit Committee, TRNC Internal Systems Committee and Operational Risk Committee, Member of the Risk Committee and Substitute Member of the Credit Committee Chief Executive Officer and Board Member, Chairperson of the Credit Committee, Human Resources Committee and Information Systems Strategy Committee, Natural Member of the Risk Committee, Chairperson of the Executive Committee Director, Member of the Credit Committee, Corporate Governance Committee, Remuneration Committee, Corporate Social Responsibility Committee, Sustainability Committee, and the Member of the Board of Directors Operating Principles Committee Director, Chairperson of the Sustainability Committee, Member of the Audit Committee and TRNC Internal Systems Committee, Member of the Risk Committee and Operational Risk Committee Director, Member of Corporate Social Responsibility Committee and Substitute Member of the Credit Committee Director, Member of Corporate Social Responsibility Committee, and the Member of the Board of Directors Operating Principles Committee Director Director Director Name and Surname Areas of Responsibility Hakan Aran Nevzat Burak Seyrek Ebru Özşuca Gamze Yalçın H. Cahit Çınar Ozan Gürsoy Sezgin Yılmaz Sabri Gökmenler Sezgin Lüle Can Yücel Sezai Sevgin İzlem Erdem Suat E. Sözen O. Tufan Kurbanoğlu Mehmet Celayir Chief Executive Officer and Member of the Board of Directors, Credit Committee, Chairperson of Human Resources Committee and Information Technologies Strategic Committee Natural Member of Risk Committee, Member of Operational Risk Committee and Chairperson of the Executive Committee Corporate and Commercial Banking Marketing, Commercial Banking Sales, Transboundary Banking, Free Zone Branches, Member of the Sustainability Committee Treasury, Economic Research, Capital Markets, Member of the Risk Committee Financial Management, Financial Institutions, Investor Relations and Sustainability, Managerial Reporting and Internal Accounting, Information Technologies Strategic Committee, Member of Risk Committee and Sustainability Committee Legal Consultancy, Associates, Member of the Operational Risk Committee, Construction and Real Estate Management, Member of the Sustainability Committee Human Resources Management, Strategic and Corporate Performance Management, Agile Management, Corporate Architecture, Member of Information Technologies Strategic Committee, Operational Risk Committee and Sustainability Committee Member of Retail Banking Marketing, Sales and Products, Retail Loans, Sustainability Committee Information Technologies, Data Management, Acquisition, Artificial Intelligence, Member of Operational Risk Committee, Sustainability Committee, and Information Technologies Strategic Committee Customer Relations Coordination Responsible, Digital Banking, Customer Relations, Card Payment Ecosystems, Card Payment Operations, Card Payment Products and Member of Operational Risk Committee Retail, Commercial and Corporate Loans Allocation, Loans Monitoring, Credits Portfolio Management, Project Finance, Member of the Corporate Social Responsibility Committee, Member of the Risk Committee and Sustainability Committee Information Security, Internal Control, Corporate Compliance, Natural Member of the Risk Committee, Information Technologies Strategic Committee, Member of the Operational Risk Committee and Sustainability Committee SME and Enterprise Banking Product and Sales, Agricultural Banking Marketing, Commercial Banking Product, Member of Sustainability Committee General Secretary, Corporate Communication, Digital Banking, Member of the Corporate Social Responsibility Committee, Member of the Sustainability Committee Legal Affairs and Legal Proceedings, Loans Monitoring, Commercial and Corporate Loans and Retail Loans Proceedings Member of Banking Base Operations, Agile Management, Support Services, External Operations and Commercial Loan Operations, Operational Risk Committee At the meeting of the Board of Directors of the Bank dated 13.12.2022, it was decided to appoint Mr. Mehmet Celayir to the position of Deputy Chief Executive. Mr. Yalçın Sezen retired from his position at the Bank on 31.01.2023. The Parent Bank’s shares attributable to the Directors and members of the Audit Committee, to the CEO and the Deputy Chief Executives are of minor importance. IV. Information on the Parent Bank’s Qualified Shareholders Director, Member of Corporate Governance Committee and Corporate Social Responsibility Committee Name Surname/Company Shares Ownership Paid-in Capital Unpaid Capital T, İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı (“İşbank Members’ Supplementary Pension Fund”) Cumhuriyet Halk Partisi – Republican People’s Party (Atatürk’s Shares) 3,731,244 37.31% 3,731,244 2,809,205 28.09% 2,809,205 V. Summary Information on the Parent Bank’s Functions and Business Lines In line with the relevant legislation and principles stated in the Articles of Incorporation of the Bank, the Bank’s activities include operating in retail, commercial, corporate and private banking, foreign currency and money market operations, marketable securities operations, international banking services and other banking operations, as well as initiating or participating in all kinds of financial and industrial sector corporations as may be required. VI. Differences between the Communiqué on Preparation of Consolidated Financial Statements of Banks and Turkish Accounting Standards and Explanation about the Institutions Subject to Full Consolidation Method or Proportional Consolidation and Institutions which are deducted from Equity or not included in these Three Methods Banks are obligated to prepare consolidated financial statements for credit institutions and financial subsidiaries for creating legal restrictions on a consolidated basis based on the “Communiqué on Preparation of Consolidated Financial Statements of Banks” by applying Turkish Accounting Standards. There is not any difference between the related Communiqué and the consolidation operations that is based on Turkish Accounting Standards and Turkish Financial Reporting Standards. The consolidated financial statements in this report includes the subsidiaries of the Bank, which are credit or financial institutions, in accordance with the BRSA regulations. As of current period, there is no credit or financial institution subsidiaries which are excluded in the scope of the consolidation. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 310 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 311 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes To The Consolidated Financial Statements for the the Year Ended December 31, 2022 Notes To The Consolidated Financial Statements for the the Year Ended December 31, 2022 The Parent Bank and its subsidiaries; ੵ ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ ੵ ANADOLU HAYAT EMEKLİLİK A.Ş. ੵ EFES VARLIK YÖNETİM A.Ş. ੵ İŞ FAKTORING A.Ş. ੵ İŞ FİNANSAL KİRALAMA A.Ş. ੵ İŞ GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. ੵ İŞ GİRİŞİM SERMAYESİ YATIRIM ORTAKLIĞI A.Ş. ੵ İŞ PORTFÖY YÖNETIMI A.Ş. ੵ İŞ YATIRIM MENKUL DEĞERLER A.Ş. ੵ İŞ YATIRIM ORTAKLIĞI A.Ş. ੵ İŞBANK AG ੵ JSC İŞBANK ੵ JSC İŞBANK GEORGIA ੵ MAXİS GİRİŞİM SERMAYESİ PORTFÖY YÖNETİMİ A.Ş. ੵ MAXİS INVESTMENTS LTD. ੵ MİLLİ REASÜRANS T.A.Ş. ੵ MOKA ÖDEME VE ELEKTRONİK PARA KURULUŞU A.Ş. ੵ TSKB GAYRİMENKUL YATIRIM ORTAKLIĞI A.Ş. ੵ TÜRKİYE SINAİ KALKINMA BANKASI A.Ş. ੵ YATIRIM FİNANSMAN MENKUL DEĞERLER A.Ş. ੵ YATIRIM VARLIK KİRALAMA A.Ş. ੵ and Structured Entity; ੵ TIB DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY is included in the consolidated financial statements with “full consolidation method”. The Parent Bank’s associate acting as a credit institution; ੵ ARAP-TÜRK BANKASI A.Ş. is accounted under equity accounting method in the consolidated financial statements. Consolidated companies are active in the areas of banking, insurance and reinsurance, private pensions, finance leasing, factoring, real estate investment, venture capital investment, brokerage, investment consulting, portfolio and asset management. Those companies are explained below. Anadolu Anonim Türk Sigorta Şirketi İş Portföy Yönetimi A.Ş. The purpose of the Company, which was founded in 2000, is to engage in capital market operations stated in its articles of association. Among the capital market operations, the company offers portfolio management and investment consulting services only to corporate investors. İş Yatırım Menkul Değerler A.Ş. The Company’s main field of activity is composed of intermediary, corporate finance, investment consulting and private portfolio management services. The Company’s shares are traded in the Borsa İstanbul A.Ş. since May 2007. İş Yatırım Ortaklığı A.Ş. The aim of the Company, which was founded in İstanbul in the year 1995, is to operate in capital market activities which is stated in the principal agreement, and Company’s main field of activities is portfolio management. The Company’s shares are traded in the Borsa İstanbul A.Ş. since April 1996. İşbank AG İşbank AG was founded to carry out the banking transactions in Europe. İşbank AG has 9 branches in total, 8 branches in Germany and 1 branch in Netherlands. JSC İşbank The Bank, which was acquired in 2011 and based in Moscow, is operating banking services as, corporate banking, individual deposits, treasury transactions and foreign trade financing operations with its Moscow Branch and representative offices in St. Petersburg and Kazan. JSC İşbank Georgia The Bank, which was established in Georgia in the third quarter of 2015, is operating banking services mainly deposit, loan and exchange transactions. As part of the organizational structure of Parent Bank in abroad, Batumi and Tbilisi branches which were established in 2012 and 2014 respectively proceed its operations as JSC Isbank Georgia. Maxis Girişim Sermayesi Porföy Yönetimi A.Ş. The purpose of the Company, which was founded in November 2017, is to establish and manage capital investment funds in accordance with the Capital Markets Law and related legislations. Maxis Investments Ltd. The purpose of the Company, which was founded in England in the year 2005, is to operate in activities in foreign capital markets. Milli Reasürans T.A.Ş. The Company, which was founded in 1929, aims to provide reinsurance and retrocession services in foreign and domestic branches. It has 1 branch in Singapore. The Company was established in 1925 and operates in almost all non-life insurance service. The Company’s shares are traded in the Borsa İstanbul A.Ş. Moka Ödeme ve Elektronik Para Kuruluşu A.Ş. Anadolu Hayat Emeklilik A.Ş. The company was acquired in 2021. The company established of 2014 and it operates in the field of payment services. The Company was founded in 1990 and its’ headquarter is located in Istanbul. The company’s main activities are private or group pension and life/death insurance and all kinds of insurance services related to these branches. There are 34 private pension funds offered by the company to the subscribers. The company’s shares are traded in the Borsa Istanbul A.Ş. TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. The core business activity of the Company, which was founded in 2006, is to create and develop an investment property portfolio and to invest in capital market instruments that are based on investment properties. The Company’s shares are traded in the Borsa İstanbul A.Ş. since April 2010. Efes Varlık Yönetim A.Ş. Türkiye Sınai Kalkınma Bankası A.Ş. The field of activity of the company, which was founded in February 2011, is to purchase and sell the receivables with other assets of deposit banks, participation banks and other financial institutions. Türkiye Sınai Kalkınma Bankası A.Ş. (TSKB) which is an industrial development, and an investment bank is founded specially to support private sector investments in industry and to provide domestic and foreign capital to Turkish companies. The Bank’s shares are traded in the Borsa İstanbul A.Ş. İş Faktoring A.Ş. Yatırım Finansman Menkul Değerler A.Ş. The Company, which operates in the factoring sector since 1993, is engaged in domestic and foreign factoring operations. The Company was founded in 1976. The purpose of the Company is to engage in capital market operations stated in its articles of association. İş Finansal Kiralama A.Ş. Yatırım Varlık Kiralama A.Ş. The Company, whose field of activity is financial leasing within the country and abroad started its business in 1988. The Company’s shares are traded in the Borsa İstanbul A.Ş. The purpose of the Company, which is founded in September 20, 2019, is to issue lease certificates exclusively within the framework of the Capital Market Law and related legislation İş Gayrimenkul Yatırım Ortaklığı A.Ş. The Company, whose main field of activity is investing in real estate, capital market instruments backed by real estate, real estate projects and capital market instruments, is conducting its business in the sector as a real estate investment trust since 1999. The Company’s shares are traded in the Borsa İstanbul A.Ş. since its establishment. İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. The Company, which started its venture capital business in the year 2000, aims to make long term investments in venture capital firms which established or to be founded in Turkey, have potential development and need resources. The Company’s shares are traded in the Borsa İstanbul A.Ş. since the year 2004. Existing or Potential, Actual or Legal Obstacles on the Transfer of Shareholders’ Equity between the Parent Bank and its Subsidiaries or the Reimbursement of Liabilities VII. None. VIII. Written Policies on Assessment of Ensuring Compliance on Market Discipline, Disclosure Obligations, Frequency and Accuracy of the Related Disclosures The Parent Bank has written policies on assessment of ensuring compliance on market discipline, disclosure obligations, frequency and accuracy of related disclosures. The mentioned policies which are agreed by Board of Directors can be obtained from the Parent Bank’s website. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 312 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 313 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Consolidated Balance Sheet (Statement Of Financial Position) Consolidated Balance Sheet (Statement Of Financial Position) SECTION TWO: CONSOLIDATED FINANCIAL STATEMENTS ASSETS FINANCIAL ASSETS (NET) Cash and Cash Equivalents Cash and Balances with Central Bank Banks Money Market Placements Expected Credit Loss (-) Foot notes V-I-a V-I-ç THOUSAND TL CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total 191.469.562 310.657.416 502.126.978 92.697.746 278.601.171 371.298.917 35.067.358 211.798.542 246.865.900 23.200.606 198.923.187 222.123.793 21.718.599 180.127.300 201.845.899 17.295.382 166.725.843 184.021.225 7.187.687 6.195.342 34.270 31.807.128 38.994.815 2.974.478 32.220.764 35.195.242 0 6.195.342 2.948.099 135.886 170.156 17.353 44.965 68.385 2.993.064 85.738 Financial Assets at Fair Value Through Profit or Loss V-I-b 23.469.599 10.105.253 33.574.852 5.768.364 8.712.674 14.481.038 Government Debt Securities Equity Securities Other Financial Assets Financial Assets at Fair Value Through Other Comprehensive Income Government Debt Securities Equity Securities Other Financial Assets 711.666 9.566.112 10.277.778 11.873.519 10.884.414 334.381 204.760 12.207.900 11.089.174 519.471 2.365.686 2.883.207 6.017.710 460.774 2.234.190 6.537.181 2.826.460 5.117.397 V-I-d 132.318.883 69.806.694 202.125.577 62.974.176 46.969.483 109.943.659 129.555.447 64.099.567 193.655.014 61.246.085 39.819.974 101.066.059 258.517 2.504.919 1.342.084 4.365.043 1.600.601 6.869.962 264.898 1.463.193 668.883 6.480.626 933.781 7.943.819 Derivative Financial Assets V-I-c-i 613.722 18.946.927 19.560.649 754.600 23.995.827 24.750.427 Derivative Financial Assets at Fair Value Through Profit or Loss Derivative Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets Measured at Amortised Cost (Net) Loans Lease Receivables Factoring Receivables Other Financial Assets Measured at Amortised Cost (Net) Government Debt Securities Other Financial Assets Expected Credit Loss (-) 613.722 18.946.927 19.560.649 754.600 23.995.827 24.750.427 0 0 0 0 0 0 586.224.751 393.104.327 979.329.078 326.322.483 307.111.279 633.433.762 V-I-e 502.248.199 375.845.283 878.093.482 292.585.111 302.937.054 595.522.165 V-I-e-ı V-I-e 4.961.490 13.400.104 18.361.594 3.642.540 8.682.657 12.325.197 13.696.739 2.211.918 15.908.657 5.097.842 1.797.516 6.895.358 V-I-f 91.311.985 15.644.176 106.956.161 45.055.046 6.490.282 51.545.328 90.427.061 9.829.112 100.256.173 44.872.603 3.103.354 47.975.957 884.924 5.815.064 6.699.988 182.443 3.386.928 3.569.371 25.993.662 13.997.154 39.990.816 20.058.056 12.796.230 32.854.286 ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) V-I-n 1.598.635 20.359 1.618.994 888.883 Held for Sale Discontinued Operations EQUITY INVESTMENTS Investments in Associates (Net) V-I-g Associates Accounted by using Equity Method Unconsolidated Associates Subsidiaries (Net) 1.598.635 20.359 1.618.994 888.883 0 0 0 0 42.680.123 190.321 42.870.444 21.918.409 405.345 385.225 20.120 0 0 0 405.345 385.225 20.120 316.851 280.196 36.655 Unconsolidated Financial Subsidiaries 0 0 0 0 Unconsolidated Non-Financial Subsidiaries 42.258.868 190.321 42.449.189 21.593.954 V-I-ğ 42.258.868 190.321 42.449.189 21.593.954 Joint Ventures (Net) Joint Ventures Accounted by using Equity Method Unconsolidated Joint Ventures TANGIBLE ASSETS (Net) INTANGIBLE ASSETS (Net) Goodwill Other V-I-h V-I-j V-I-k 15.910 0 15.910 24.107.773 3.880.370 27.994 0 0 0 15.910 0 15.910 370.345 199.443 24.478.118 4.079.813 0 27.994 3.852.376 199.443 4.051.819 INVESTMENT PROPERTY (Net) V-I-l 11.320.190 0 11.320.190 7.604 0 7.604 11.131.311 2.014.282 27.994 1.986.288 4.601.916 60.343 580.561 21.988 21.988 0 0 0 0 0 0 0 0 0 0 0 275.713 167.743 0 167.743 0 14.476 910.871 910.871 0 21.918.409 316.851 280.196 36.655 21.593.954 0 21.593.954 7.604 0 7.604 11.407.024 2.182.025 27.994 2.154.031 4.601.916 74.819 2.538.415 3.118.976 CURRENT TAX ASSET DEFERRED TAX ASSET OTHER ASSETS TOTAL ASSETS V-I-m V-I-o 16.486 963.685 9.868 10.425 26.354 974.110 132.660.097 15.947.393 148.607.490 62.506.945 12.950.409 75.457.354 994.921.672 720.509.897 1.715.431.569 522.722.879 601.681.194 1.124.404.073 I. 1.1 1.1.1 1.1.2 1.1.3 1.1.4 1.2 1.2.1 1.2.2 1.2.3 1.3 1.3.1 1.3.2 1.3.3 1.4 1.4.1 1.4.2 II. 2.1 2.2 2.3 2.4 2.4.1 2.4.2 2.5 III. 3.1 3.2 IV. 4.1 4.1.1 4.1.2 4.2 4.2.1 4.2.2 4.3 4.3.1 4.3.2 V. VI. 6.1 6.2 VII. VIII. IX. X. LIABILITIES DEPOSITS FUNDS BORROWED MONEY MARKETS Foot notes V-II-a V-II-c THOUSAND TL CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total 381.017.089 571.618.843 952.635.932 165.520.943 452.158.260 617.679.203 12.101.494 143.880.105 155.981.599 6.019.498 122.904.185 128.923.683 37.777.875 13.462.281 51.240.156 42.829.398 10.908.455 53.737.853 SECURITIES ISSUED (Net) V-II-ç 11.523.746 46.820.814 58.344.560 8.784.977 39.292.335 48.077.312 Bills Asset Backed Securities Bonds FUNDS Borrower Funds Other FİNANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS DERIVATIVE FINANCIAL LIABILITIES Derivative Financial Liabilities at Fair Value Through Profit or Loss Derivative Financial Liabilities at Fair Value Through Other Comprehensive Income FACTORING PAYABLES LEASE PAYABLES (Net) PROVISIONS Restructuring Provisions Reserve for Employee Benefits V-II- b-g V-II-f V-II-ğ 10.463.791 164.426 0 0 10.463.791 5.999.193 164.426 757.078 0 0 5.999.193 757.078 895.529 46.820.814 47.716.343 2.028.706 39.292.335 41.321.041 27.907 27.907 0 0 709.826 709.826 737.733 737.733 0 0 0 0 11.191 11.191 0 0 680.513 680.513 691.704 691.704 0 0 0 0 3.060.665 7.030.436 10.091.101 7.097.196 6.981.331 14.078.527 3.060.665 7.030.436 10.091.101 7.097.196 6.981.331 14.078.527 0 0 0 0 0 0 0 0 0 0 0 0 1.326.947 316.106 1.643.053 983.934 255.780 1.239.714 54.155.322 13.137.153 67.292.475 27.864.420 7.744.897 35.609.317 0 0 0 0 0 0 5.886.941 6.798 5.893.739 2.572.040 4.391 2.576.431 Insurance Technical Provisions (Net) 23.985.529 11.602.637 35.588.166 12.951.315 6.572.513 19.523.828 Other Provisions CURRENT TAX LIABILITY DEFERRED TAX LIABILITY LIABILITIES RELATED TO ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Held for Sale Discontinued Operations SUBORDINATED DEBT Loans Other Debt Instruments OTHER LIABILITIES SHAREHOLDERS' EQUITY Paid-in capital Capital Reserves Share Premium Share Cancellation Profits Other Capital Reserves Accumulated Other Comprehensive Income or Loss Not Reclassified Through Profit or Loss Accumulated Other Comprehensive Income or Loss Reclassified Through Profit or Loss Profit Reserves Legal Reserves Status Reserves Extraordinary Reserves Other Profit Reserves Profit or Loss Prior Periods' Profit or Loss Current Period Profit or Loss Minority Shares 24.282.852 1.527.718 25.810.570 12.341.065 1.167.993 13.509.058 V-II-h V-II-h V-II-ı 8.077.499 1.599.383 0 0 0 48.488 0 0 0 0 8.125.987 1.599.383 2.537.054 120.438 24.082 4.511 2.561.136 124.949 0 0 0 0 0 0 0 0 0 0 0 0 V-II-i 2.277.824 31.280.921 33.558.745 2.296.445 39.182.832 41.479.277 0 0 0 0 0 0 2.277.824 31.280.921 33.558.745 2.296.445 39.182.832 41.479.277 V-II-e V-II-j 143.167.968 20.960.184 164.128.152 74.142.355 9.890.864 84.033.219 213.719.591 -3.666.898 210.052.693 98.923.927 -2.755.748 96.168.179 10.000.000 1.218.092 138.551 0 1.079.541 0 0 0 0 0 10.000.000 4.500.000 1.218.092 1.203.468 138.551 143.633 0 0 1.079.541 1.059.835 0 0 0 0 0 4.500.000 1.203.468 143.633 0 1.059.835 20.231.121 -429 20.230.692 8.054.093 100 8.054.193 44.402.975 -4.867.474 39.535.501 11.320.953 -3.031.910 8.289.043 58.255.995 539.625 58.795.620 51.379.015 7.063.017 289.294 28.268 0 7.091.285 289.294 5.832.370 225.558 4.619 1.930 0 51.383.634 5.834.300 225.558 50.903.684 511.357 51.415.041 45.321.087 2.689 45.323.776 0 60.681.842 -10.877 60.692.719 0 789.181 -116.770 905.951 0 0 61.471.023 13.085.039 -127.647 -263.478 61.598.670 13.348.517 0 417.874 225.331 192.543 0 13.502.913 -38.147 13.541.060 V-II-k 18.929.566 -127.801 18.801.765 9.381.359 -146.431 9.234.928 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 869.833.310 845.598.259 1.715.431.569 437.131.776 687.272.297 1.124.404.073 I. II. III. IV. 4.1 4.2 4.3 V. 5.1 5.2 VI. VII. 7.1 7.2 VIII. IX. X. 10.1 10.2 10.3 10.4 XI. XII. XIII. 13.1 13.2 XIV. 14.1 14.2 XV. XVI. 16.1 16.2 16.2.1 16.2.2 16.2.3 16.3 16.4 16.5 16.5.1 16.5.2 16.5.3 16.5.4 16.6 16.6.1 16.6.2 16.7 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 314 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 315 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Consolidated Statement of Off-Balance Sheet Items Consolidated Statement of Off-Balance Sheet Items Foot notes CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total THOUSAND TL A. OFF-BALANCE SHEET CONTINGENCIES and COMMITMENTS (I+II+III) 486.977.283 950.378.400 1.437.355.683 302.695.310 836.880.350 1.139.575.660 GUARANTEES AND SURETYSHIPS V-III 91.557.242 158.958.679 250.515.921 46.412.927 153.202.866 199.615.793 Letters of Guarantee 85.483.077 95.269.548 180.752.625 46.048.608 86.618.355 132.666.963 Guarantees Subject to State Tender Law 1.344.063 1.143.615 2.487.678 865.540 764.138 1.629.678 Guarantees Given for Foreign Trade Operations 11.143.447 40.340.109 51.483.556 4.204.824 46.612.126 50.816.950 Other Letters of Guarantee Bank Acceptances Import Letter of Acceptance Other Bank Acceptances Letters of Credit Documentary Letters of Credit Other Letters of Credit Prefinancing Given as Guarantee Endorsements Endorsements to the Central Bank of Turkey Other Endorsements Purchase Guarantees for Securities Issued Factoring Guarantees Other Guarantees Other Suretyships COMMITMENTS Irrevocable Commitments Forward Asset Purchase Commitments Forward Deposit Purchase and Sales Commitments Capital Commitments to Associates and Subsidiaries Loan Granting Commitments Securities Underwriting Commitments Commitments for Reserve Deposit Requirements Commitments for Cheque Payments Tax and Fund Liabilities from Export Commitments Commitments for Credit Card Expenditure Limits Commitments for Credit Cards and Banking Services Promotions Receivables from Short Sale Commitments Payables for Short Sale Commitments Other Irrevocable Commitments Revocable Commitments Revocable Loan Granting Commitments Other Revocable Commitments 72.995.567 53.785.824 126.781.391 40.978.244 39.242.091 80.220.335 5.576.890 2.476.617 8.053.507 111.350 13.694.523 13.805.873 0 5.576.890 492.132 455.314 704.717 1.771.900 704.717 7.348.790 0 582.983 582.983 111.350 13.111.540 13.222.890 56.376.383 56.868.515 244.637 48.629.112 48.873.749 36.316.518 36.771.832 36.818 20.059.865 20.096.683 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 191.272 53.365 34.944.022 35.135.294 13.685.090 13.738.455 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5.143 4.836.131 4.841.274 8.332 4.260.876 4.269.208 0 0 0 0 0 0 197.736.666 40.558.403 238.295.069 101.316.731 55.685.820 157.002.551 194.762.484 22.659.219 217.421.703 99.221.331 36.748.294 135.969.625 55.113 4.658.659 4.713.772 9.373.110 18.354.232 27.727.342 0 1.000.000 65.197.193 0 0 5.447.537 22.490 112.111.363 277.375 0 0 0 0 138.750 1.138.750 0 0 0 0 157.380 157.380 2.105.370 67.302.563 34.174.955 1.702.867 35.877.822 0 0 0 0 0 0 0 0 0 0 0 0 5.447.537 3.291.900 22.490 41.377 112.111.363 46.524.830 277.375 208.406 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3.291.900 41.377 46.524.830 208.406 0 0 10.651.413 15.756.440 26.407.853 5.606.753 16.533.815 22.140.568 2.974.182 2.939.182 35.000 17.899.184 20.873.366 2.095.400 18.937.526 21.032.926 17.899.184 20.838.366 2.045.400 18.937.526 20.982.926 0 35.000 50.000 0 50.000 DERIVATIVE FINANCIAL INSTRUMENTS 197.683.375 750.861.318 948.544.693 154.965.652 627.991.664 782.957.316 Derivative Financial Instruments Held for Risk Management Fair Value Hedges Cash Flow Hedges Net Foreign Investment Hedges 0 0 0 0 26.497.037 26.497.037 26.497.037 26.497.037 0 0 0 0 0 0 0 0 27.012.103 27.012.103 27.012.103 27.012.103 0 0 0 0 I. 1.1 1.1.1 1.1.2 1.1.3 1.2 1.2.1 1.2.2 1.3 1.3.1 1.3.2 1.4 1.5 1.5.1 1.5.2 1.6 1.7 1.8 1.9 II. 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8 2.1.9 2.1.10 2.1.11 2.1.12 2.1.13 2.2 2.2.1 2.2.2 III. 3.1 3.1.1 3.1.2 3.1.3 Foot notes CURRENT PERIOD (31/12/2022) PRIOR PERIOD (31/12/2021) TL FC Total TL FC Total THOUSAND TL Derivative Financial Instruments Held for Trading 197.683.375 724.364.281 922.047.656 154.965.652 600.979.561 755.945.213 Forward Foreign Currency Buy/Sell Transactions 10.640.362 58.699.042 69.339.404 15.504.070 58.953.279 74.457.349 Forward Foreign Currency Buy Transactions Forward Foreign Currency Sell Transactions Currency and Interest Rate Swaps Currency Swap Buy Transactions Currency Swap Sell Transactions Interest Rate Swap Buy Transactions Interest Rate Swap Sell Transactions Currency, Interest Rate and Security Options Currency Call Options Currency Put Options Interest Rate Call Options Interest Rate Put Options Securities Call Options Securities Put Options Currency Futures Currency Buy Futures Currency Sell Futures Interest Rate Futures Interest Rate Buy Futures Interest Rate Sell Futures Other 9.117.920 25.804.206 34.922.126 11.384.803 25.669.590 37.054.393 1.522.442 32.894.836 34.417.278 4.119.267 33.283.689 37.402.956 172.439.374 579.101.581 751.540.955 127.095.137 489.865.606 616.960.743 14.912.056 201.323.125 216.235.181 9.433.744 177.256.130 186.689.874 155.910.430 85.151.884 241.062.314 116.999.171 81.523.710 198.522.881 808.444 808.444 146.313.286 146.313.286 6.223.543 23.979.673 3.160.239 2.560.163 0 0 102.031 401.110 1.468.797 531.608 937.189 0 0 0 8.188.384 8.138.756 3.822.162 3.822.162 8.209 0 2.388.511 1.878.869 509.642 0 0 0 147.121.730 147.121.730 30.203.216 11.348.623 10.698.919 3.822.162 3.822.162 110.240 401.110 3.857.308 2.410.477 1.446.831 0 0 0 331.111 331.111 8.943.556 4.557.856 4.026.900 115.542.883 115.873.994 115.542.883 115.873.994 21.274.918 6.309.858 30.218.474 10.867.714 6.553.948 10.580.848 0 0 4.205.556 4.205.556 36.407 322.393 760.477 40.052 720.425 0 0 0 0 0 1.540.698 1.481.995 58.703 0 0 0 4.205.556 4.205.556 36.407 322.393 2.301.175 1.522.047 779.128 0 0 0 6.911.299 60.195.474 67.106.773 2.662.412 29.345.060 32.007.472 3.2 3.2.1 3.2.1.1 3.2.1.2 3.2.2 3.2.2.1 3.2.2.2 3.2.2.3 3.2.2.4 3.2.3 3.2.3.1 3.2.3.2 3.2.3.3 3.2.3.4 3.2.3.5 3.2.3.6 3.2.4 3.2.4.1 3.2.4.2 3.2.5 3.2.5.1 3.2.5.2 3.2.6 B. CUSTODY AND PLEDGES RECEIVED (IV+V+VI) 1.116.249.656 1.495.889.698 2.612.139.354 796.887.897 993.775.709 1.790.663.606 IV. 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 V. 5.1 5.2 5.3 5.4 5.5 5.6 5.7 VI. ITEMS HELD IN CUSTODY Customers' Securities Held Investment Securities Held in Custody Cheques Received for Collection 126.082.554 177.367.218 303.449.772 101.820.670 125.221.499 227.042.169 0 0 0 0 0 0 73.694.920 9.302.513 82.997.433 73.423.758 8.234.913 81.658.671 46.921.949 93.195.648 140.117.597 24.886.014 68.776.278 93.662.292 Commercial Notes Received for Collection 3.969.225 36.196.124 40.165.349 2.994.936 26.962.386 29.957.322 Other Assets Received for Collection Assets Received for Public Offering Other Items Under Custody Custodians PLEDGED ITEMS Marketable Securities Guarantee Notes Commodity Warranty Real Estates Other Pledged Items Pledged Items-Depository ACCEPTED BILL, GUARANTEES AND SURETIES TOTAL OFF-BALANCE SHEET COMMITMENTS (A+B) 0 0 0 0 0 0 0 0 0 0 0 0 1.496.460 38.672.933 40.169.393 515.962 21.247.922 21.763.884 0 0 0 0 0 0 1.195.674.627 2.329.723.738 3.525.398.365 818.808.243 1.504.428.098 2.323.236.341 70.796.111 214.601.746 285.397.857 55.405.889 148.526.695 203.932.584 22.783.627 73.150.399 95.934.026 15.393.327 58.309.803 73.703.130 261.292.144 230.129.478 491.421.622 167.725.673 118.466.297 286.191.970 0 0 0 0 0 0 612.933.020 1.140.910.774 1.753.843.794 407.968.742 739.657.751 1.147.626.493 227.869.725 670.931.341 898.801.066 172.314.612 439.467.552 611.782.164 0 0 0 0 0 0 0 0 0 0 0 0 1.808.734.464 3.457.469.356 5.266.203.820 1.223.324.223 2.466.529.947 3.689.854.170 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 316 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 317 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Consolidated Statement of Profit or Loss Consolidated Statement of Profit or Loss and Other Comprehensive Income STATEMENT OF PROFIT OR LOSS INTEREST INCOME Interest Income on Loans Interest Income on Reserve Deposits Interest Income on Banks Interest Income on Money Market Placements Interest Income on Marketable Securities Portfolio Financial Assets At Fair Value Through Profit or Loss Financial Assets At Fair Value Through Other Comprehensive Income Financial Assets At Measured at Amortised Cost Financial Lease Income Other Interest Income INTEREST EXPENSE (-) Interest on Deposits Interest on Funds Borrowed Interest on Money Market Funds Interest on Securities Issued Financial Lease Expense Other Interest Expenses NET INTEREST INCOME (I - II) NET FEES AND COMMISSIONS INCOME Fees and Commissions Received Non-cash Loans Other Fees and Commissions Paid Non-cash Loans Other DIVIDEND INCOME TRADING INCOME /(LOSS) (Net) Gains/(Losses) on Securities Trading Derivative Financial Transactions Gains/Losses Foreign Exchange Gains / (Losses) OTHER OPERATING INCOME GROSS OPERATING INCOME (III+IV+V+VI+VII) EXPECTED CREDIT LOSS (-) OTHER PROVISION EXPENSES (-) PERSONNEL EXPENSE (-) OTHER OPERATING EXPENSES (-) NET OPERATING INCOME/(LOSS) (VIII-IX-X-XI-XII) AMOUNT IN EXCESS RECORDED AS GAIN AFTER MERGER PROFIT/LOSS FROM ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD NET MONETARY POSITION GAIN/LOSS PROFIT/LOSS ON CONTINUING OPERATIONS BEFORE TAX (XIII+...+XVI) TAX PROVISION FOR CONTINUING OPERATIONS (±) Current Tax Provision Deferred Tax Income Effect (+) Deferred Tax Expense Effect (-) NET PERIOD PROFIT/LOSS FROM CONTUNUING OPERATIONS (XVI±XVII) INCOME ON DISCONTINUED OPERATIONS Income on Assets Held for Sale Gain on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Other Income on Discontinued Operations EXPENSE ON DISCONTINUED OPERATIONS (-) Expense on Assets Held for Sale Loss on Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Other Expense on Discontinued Operations PROFIT/LOSS ON DISCONTINUED OPERATIONS BEFORE TAX (XX-XXI) TAX PROVISION FOR DISCONTINUED OPERATIONS (±) Current Tax Provision Deferred Tax Expense Effect (+) Deferred Tax Income Effect (-) NET PERIOD PROFIT/LOSS FROM DISCONTINUED OPERATIONS (XXII±XXIII) NET PERIOD PROFIT/LOSS (XIX+XXIV) Group's Profit / Loss Non-controlling Interest Profit / Loss (-) Earnings per Share (*) Foot notes V-IV-a V-IV-b V-IV-c V-IV-ç V-IV-d V-IV-e V-IV-e V-IV-f V-IV-g V-IV-ğ V-IV-h V-IV-g V-IV-ğ V-IV-h V-IV-ı I. 1.1 1.2 1.3 1.4 1.5 1.5.1 1.5.2 1.5.3 1.6 1.7 II. 2.1 2.2 2.3 2.4 2.5 2.6 III. IV. 4.1 4.1.1 4.1.2 4.2 4.2.1 4.2.2 V. VI. 6.1 6.2 6.3 VII. VIII. IX. X. XI. XII. XIII. XIV. XV. XVI. XVII. XVIII. 18.1 18.2 18.3 XIX. XX. 20.1 20.2 20.3 XXI. 21.1 21.2 21.3 XXII. XXIII. 23.1 23.2 23.3 XXIV. XXV. 25.1 25.2 (*) Expressed in exact TL. THOUSAND TL CURRENT PERIOD (01/01-31/12/2022) PRIOR PERIOD (01/01-31/12/2021) THOUSAND TL CURRENT PERIOD (01/01-31/12/2022) PRIOR PERIOD (01/01-31/12/2021) I. II. 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.2 2.2.1 2.2.2 2.2.3 2.2.4 2.2.5 2.2.6 III. PROFIT/LOSS FOR THE PERIOD OTHER COMPREHENSIVE INCOME Other comprehensive income that will not be reclassified to profit or loss Revaluation Surplus on Tangible Assets Revaluation Surplus on Intangible Assets Gains/(Losses) on remeasurements of Defined Benefit Plans Other Income/Expense Items of Other Comprehensive Income not to be Reclassified to Profit Or Loss Taxes Relating To Components Of Other Comprehensive Income not to be Reclassified To Profit Or Loss Other Income/Expense Items not be Reclassified to Profit or Loss Exchange Differences on Translation Valuation and/or Reclassification Profit or Loss from Financial Assets at Fair Value through Other Comprehensive Income Income/(Loss) Related with Cash Flow Hedges Income/(Loss) Related with Hedges of Net Investments in Foreign Operations Other Income/Expense Items of Other Comprehensive Income to be Reclassified to Other Profit or Loss Taxes Relating To Components Of Other Comprehensive Income to be Reclassified To Profit Or Loss TOTAL COMPREHENSIVE INCOME (I+II) 69.057.682 45.775.586 13.867.929 11.710.234 0 -2.718.358 5.265.037 -388.984 31.907.657 2.141.102 33.631.708 0 0 4.492.270 -8.357.423 114.833.268 15.560.258 7.207.376 3.824.663 2.692.577 0 -732.441 1.888.340 -23.813 3.382.713 1.796.559 -1.414.575 0 0 2.760.779 239.950 22.767.634 140.591.973 88.814.283 284.989 1.192.676 1.235.823 45.597.027 295.244 26.924.548 18.377.235 1.656.789 1.810.386 54.160.597 32.510.139 5.536.809 4.642.178 8.236.025 247.662 2.987.784 86.431.376 14.671.415 22.118.215 2.329.047 19.789.168 7.446.800 40.129 7.406.671 263.526 19.477.788 10.507.138 -10.163.186 19.133.836 32.573.886 153.417.991 13.055.945 6.175.130 17.710.092 42.171.552 74.305.272 0 10.205.448 0 84.510.720 15.453.038 20.565.318 2.936.091 8.048.371 69.057.682 0 0 0 0 0 0 0 0 0 0 0 0 0 0 69.057.682 61.598.670 7.459.012 0,246392462 69.449.187 48.414.707 850.107 686.021 401.957 17.499.167 168.216 10.801.345 6.529.606 887.340 709.888 32.530.364 18.048.238 2.612.115 5.396.609 6.048.417 163.612 261.373 36.918.823 6.691.855 10.490.764 1.327.072 9.163.692 3.798.909 12.754 3.786.155 68.548 703.452 1.882.678 -179.759 -999.467 16.883.690 61.266.368 12.667.759 4.142.731 7.715.533 22.665.876 14.074.469 0 4.874.850 0 18.949.319 3.389.061 2.621.921 3.774.382 3.007.242 15.560.258 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15.560.258 13.541.060 2.019.198 0,054163753 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 318 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 319 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Consolidated Statement Of Changes In Shareholders’ Equity Consolidated Statement Of Changes In Shareholders’ Equity CHANGES IN SHAREHOLDERS’ EQUITY Foot notes Paid-in Capital Share Premium Accumulated Other Comprehensive Income That will not be Reclassified in Profit/(Loss) Accumulated Other Comprehensive Income That will be Reclassified in Profit/(Loss) Share Certificate Cancellation Profits Other Capital Reserves Tangible assets accumulated revaluation reserve Increase / (Decrease) Accumulated gains/ (losses) on remeasurements of defined benefit plans Other (1) Exchange differences on translation reserve Accumulated gains/ (losses) due to revaluation and/ or reclassification of financial assets measured at fair value through other comprehensive income Profit Reserves Prior Period Profit/(Loss) Net Current Period Profit/ (Loss) Other (2) Total Shareholders' Equity Except Non- controlling Interest Non- controlling Interest Total Shareholder's Equity V-V PRIOR PERIOD ( 31/12/2021) Beginning Balance Adjustment in accordance with TAS 8 The Effect of Adjustments The Effect of Changes in Accounting Policies New Balance (I+II) Total Comprehensive Income Capital Increase in Cash Capital Increase Through Internal Reserves Paid-in-Capital inflation adjustment difference Convertible Bonds Subordinated Debt Increase/(Decrease) Through Other Changes (*) Profit Distribution Dividend Paid Transfer to Reserves Other (**) 4.500.000 124.549 1.091.758 3.508.193 (303.280) 1.444.996 2.066.912 1.285.771 1.285.388 44.064.828 8.378.887 67.448.002 7.413.718 74.861.720 4.500.000 124.549 1.091.758 3.508.193 (303.280) 1.444.996 2.085.048 (579.952) 1.888.340 2.066.912 1.794.485 1.285.771 1.285.388 44.064.828 8.378.887 67.448.002 7.413.718 74.861.720 (902.173) 2.757.991 13.541.060 20.584.799 2.182.835 22.767.634 19.084 (31.923) 10.816 32 18 651 22.664 (340.005) (318.663) (70.178) (388.841) 7.296.142 (8.077.029) (661.415) 7.281.290 (7.281.290) 14.852 (134.324) (780.887) (661.415) (291.447) (1.072.334) (299.226) (960.641) (119.472) 7.779 (111.693) Ending Balance (III+IV+…...+X+XI) 4.500.000 143.633 - 1.059.835 5.604.057 (883.232) 3.333.368 3.861.415 384.249 4.043.379 51.383.634 (38.147) 13.541.060 86.933.251 9.234.928 96.168.179 CURRENT PERIOD ( 31/12/2022) Beginning Balance Adjustment in accordance with TAS 8 The Effect of Adjustments The Effect of Changes in Accounting Policies New Balance (I+II) Total Comprehensive Income Capital Increase in Cash 4.500.000 143.633 1.059.835 5.604.057 (883.232) 3.333.368 3.861.415 384.249 4.043.379 51.383.634 13.502.913 86.933.251 9.234.928 96.168.179 4.500.000 143.633 1.059.835 5.604.057 (883.232) 3.333.368 8.866.109 (1.950.954) 5.266.266 3.861.415 2.137.596 384.249 4.043.379 51.383.634 13.502.913 86.933.251 9.234.928 96.168.179 24.630.342 4.478.519 61.598.670 105.026.548 9.806.720 114.833.268 Capital Increase Through Internal Reserves 5.500.000 (5.500.000) Paid-in-Capital inflation adjustment difference Convertible Bonds Subordinated Debt Increase/(Decrease) Through Other Changes (*) Profit Distribution Dividend Paid Transfer to Reserves Other (**) (5.082) 19.706 (4.916) (6) 1 425.707 152.261 587.671 (16.876) 570.795 12.486.279 (13.782.821) (1.296.542) (223.007) (1.519.549) (1.307.884) (1.307.884) (226.322) (1.534.206) 12.474.937 (12.474.937) 11.342 11.342 3.315 14.657 I. II. 2.1 2.2 III. IV. V. VI. VII. VIII. IX. X. XI. 11.1 11.2 11.3 I. II. 2.1 2.2 III. IV. V. VI. VII. VIII. IX. X. XI. 11.1 11.2 11.3 Ending Balance (III+IV+…...+X+XI) 10.000.000 138.551 - 1.079.541 14.465.250 (2.834.186) 8.599.628 5.999.012 25.014.591 8.521.898 58.795.620 -127.647 61.598.670 191.250.928 18.801.765 210.052.693 (1) Other Comprehensive Income of Associates and Joint Ventures Accounted for Using Equity Method that will not be Reclassified to Profit or Loss and Other Accumulated Amounts of Other Comprehensive Income that will not be Reclassified to Profit or Loss. (2) Accumulated gains/(losses) on cash flow hedges, Other Comprehensive Income of Associates and Joint Ventures Accounted for using equity method that will be classified to Profit/(Loss), Other Accumulated Amounts of Other Comprehensive Income that will be Reclassified to Profit or Loss (*) Includes changes in the Group Shares. (**) In accordance with TMS 19 "Benefits to Employees", the provisions allocated in the relevant period for the dividend to be distributed to the personnel were added to the distributable profit figure. In the prior period, the amount of dividends distributed to bank personnel according to the main contract of the Parent Bank is also included. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 320 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 321 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Consolidated Statement of Cash Flows Consolidated Statement of Profit Distribution Table Foot notes THOUSAND TL CURRENT PERIOD (01/01-31/12/2022) PRIOR PERIOD (01/01-31/12/2021) THOUSAND TL CURRENT PERIOD (01/01-31/12/2022) PRIOR PERIOD (01/01-31/12/2021) A. 1.1 1.1.1 1.1.2 1.1.3 1.1.4 1.1.5 1.1.6 1.1.7 1.1.8 1.1.9 1.2 1.2.1 1.2.2 1.2.3 1.2.4 1.2.5 1.2.6 1.2.7 1.2.8 1.2.9 CASH FLOWS FROM BANKING OPERATIONS Operating Profit Before Changes in Operating Assets and Liabilities Interest Received Interest Paid Dividend Received Fees and Commissions Received Other Income Collections from Previously Written Off Loans and Other Receivables Cash Payments to Personnel and Service Suppliers Taxes Paid Other Changes in Operating Assets and Liabilities Net (Increase) / Decrease in Financial Assets at Fair Value Through Profit or Loss V-VI Net (Increase) / Decrease in Due From Banks Net (Increase) / Decrease in Loans Net (Increase) / Decrease in Other Assets Net Increase / (Decrease) in Bank Deposits Net Increase / (Decrease) in Other Deposits Net Increase/ (Decrease) in Financial Liabilities at Fair Value Through Profit or Loss Net Increase / (Decrease) in Funds Borrowed Net Increase / (Decrease) in Matured Payables 1.2.10 Net Increase / (Decrease) in Other Liabilities V-VI I. B. II. 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 C. III. 3.1 3.2 3.3 3.4 3.5 3.6 IV. V. VI. VII. Net Cash Provided From Banking Operations CASH FLOWS FROM INVESTING ACTIVITIES Net Cash Provided from Investing Activities Cash Paid for the Purchase of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Cash Obtained from Sale of Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Cash Paid for the Purchase of Tangible Asset Cash Obtained from the Sale of Tangible Asset Cash Paid for Purchase of Financial Assets at Fair Value Through Other Comprehensive Income Cash Obtained from Sale of Financial Assets at Fair Value Through Other Comprehensive Income Cash Paid for Purchase of Financial Assets Measured at Amortised Cost Cash Obtained from Sale of Financial Assets Measured at Amortised Cost (*) Other CASH FLOWS FROM FINANCING ACTIVITIES Net cash provided from financing activities Cash obtained from funds borrowed and securities issued Cash used for repayment of funds borrowed and securities issued Equity Instruments Dividends Paid Payments for Finance Leases Other Effect of change in foreign exchange rate on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period V-VI V-VI V-VI (*) Includes Redeemed Financial Assets measured at amortized cost. 65.423.795 118.786.745 (49.665.722) 1.040.005 22.118.215 25.750.270 3.590.123 (25.862.712) (16.911.467) (13.421.662) 23.009.505 (15.496.512) (8.121.373) (187.313.018) (49.948.337) (625.735) 236.383.401 0 (15.257.022) 0 63.388.101 88.433.300 24.798.475 61.253.858 (31.171.346) 356.764 10.490.764 8.259.735 3.082.969 (12.745.696) (4.041.939) (10.686.634) 79.558.425 (5.146.832) (12.513.917) (63.596.525) (17.844.555) (1.053.465) 127.371.908 0 3.054.383 0 49.287.428 104.356.900 (77.786.425) (10.310.109) (3.689) 0 (2.396.667) 1.387.612 (79.595.524) 44.385.721 (60.382.102) 21.574.387 (2.756.163) (29.800.559) 48.911.840 (76.093.320) 0 (1.894.206) (724.873) 0 975.670 (18.178.014) 132.322.602 114.144.588 (5.113) 0 (830.154) 423.335 (44.706.318) 35.474.175 (16.224.952) 16.481.168 (922.250) (12.728.598) 20.594.682 (31.720.839) 0 (1.094.965) (507.476) 0 (1.317.136) 80.001.057 52.321.545 132.322.602 I. 1.1 1.2 1.2.1 1.2.2 1.2.3 A. 1.3 1.4 1.5 B. 1.6 1.6.1 1.6.2 1.6.3 1.6.4 1.6.5 1.7 1.8 1.9 1.9.1 1.9.2 1.9.3 1.9.4 1.9.5 1.10 1.11 1.12 1.13 II. 2.1 2.2 2.2.1 2.2.2 2.2.3 2.2.4 2.2.5 2.3 2.4 III. 3.1 3.2 3.3 3.4 IV. 4.1 4.2 4.3 4.4 DISTRIBUTION OF CURRENT YEAR PROFIT (1) CURRENT PERIOD PROFIT (2) TAXES AND DUES PAYABLE (-) Corporate Tax (Income Tax) Income Tax Withholding Other Taxes and Dues Payable (3) NET PROFIT FOR THE PERIOD (1.1-1.2) PRIOR YEARS’ LOSSES (-) FIRST LEGAL RESERVES (-) OTHER STATUTORY RESERVES (-) NET PROFIT ATTRIBUTABLE TO [(A-(1.3+1.4+1.5)] FIRST DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Preferred Shares To Preferred Shares (Preemptive Rights) To Profit Sharing Bonds To Holders of Profit / Loss Share Certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO THE BOARD OF DIRECTORS (-) SECOND DIVIDEND TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Privileged Shares To Owners of Preferred Shares To Profit Sharing Bonds To Holders of Profit / Loss Share Certificates STATUTORY RESERVES (-) EXTRAORDINARY RESERVES OTHER RESERVES SPECIAL FUNDS DISTRIBUTION FROM RESERVES DISTRIBUTED RESERVES DIVIDENDS TO SHAREHOLDERS (-) To Owners of Ordinary Shares To Owners of Privileged Shares To Owners of Preferred Shares To Profit Sharing Bonds To Holders of Profit / Loss Share Certificates DIVIDENDS TO PERSONNEL (-) DIVIDENDS TO THE BOARD OF DIRECTORS (-) EARNINGS PER SHARE TO OWNERS OF ORDINARY SHARES (4) TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PRIVILEGED SHARES (4) TO OWNERS OF PRIVILEGED SHARES (%) DIVIDEND PER SHARE TO OWNERS OF ORDINARY SHARES (4) TO OWNERS OF ORDINARY SHARES ( % ) TO OWNERS OF PRIVILEGED SHARES (4) TO OWNERS OF PRIVILEGED SHARES (%) 73.949.048 12.411.168 17.082.925 121.205 (4.792.962) 61.537.880 0 0 0 61.537.880 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0,2461 615 0 0 0 0 0 0 21.250.467 2.007.986 1.057.464 46.314 904.208 19.242.481 0 1.103.071 143.605 17.995.805 270.000 269.998 2 0 0 0 359.481 0 1.076.790 1.076.756 24 10 0 0 0 16.289.534 0 0 0 0 0 0 0 0 0 0 0 0,1197 299 0 0 0,0120 29,93 0,0086 85,87 (1): The decision for dividend payment is made at the Annual General Meeting. Annual General Meeting has not been held as of the reporting date. (2): In accordance with "TAS 19 Employee Benefits", TL 360.000 allocated for the profit share to be distributed to the personnel in 2021 and added to the profit distribution base of the same year, and TL 5.414.586 retained earnings added to the profit distribution base of the same year are added to the previous period's profit in the table. (3): Deferred Tax Expense/Income. (4): Expressed in exact TL. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 322 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 323 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 SECTION THREE: EXPLANATION ON ACCOUNTING POLICIES I. Basis of Presentationr The consolidated financial statements, related notes and explanations in this report are prepared in accordance with the “Regulation on Accounting Applications for Banks and Safeguarding of Documents” and other regulations on accounting records of Banks published by Banking Regulation and Supervision Agency and circulars and interpretations published by Banking Regulation and Supervision Authority, (together referred as “BRSA Accounting and Financial Reporting Legislation”) and requirements of Turkish Financial Reporting Standards (TFRS) published the Public Oversight Accounting and Auditing Standards Authority for the matters not regulated by the aforementioned legislations. COVID-19 outbreak, which started in China and spread globally in the first half of 2020, caused serious effects on both economic and social life. In addition to the social life effects of the cautions taken to ensure the control of outbreak in many countries, there are also consequences observed which is negatively affecting economic activity both on regional and global scale. As in other countries where the pandemic is effective, various cautions also have been taken in our country in social and economic terms. The Bank sustains its activities with the consolidated companies for the period precisely by closely monitoring the processes related to outbreak, postponing retail and non-retail customers' due debts, restructuring with grace period and existing or additional limit allocations in respect with customers’ needs. Assessments regarding to possible effects of the COVID-19 outbreak through the measurement of expected credit losses are explained in the Section Three “VIII. “Explanations on Impairment of Financial Assets”. “Interest Rate Benchmark Reform- Stage 2”, brought changes in various TAS / TFRSs effective from January 1, 2021, was released in December 2020 within the scope of the project of transition of the benchmark interest rates carried out by the International Accounting Standards Board (IASB). It was concluded that as of December 31, 2022, the changes have not occurred significantly on the Bank's financial statements. TAS 29 Financial Reporting in Hyperinflation Economies requires entities whose functional currency is that of a hyperinflationary economy to prepare their financial statements in terms of the measuring unit current at the end of the reporting period. TAS 29 describes characteristics that may indicate that an economy is hyperinflationary, and it requires all entities that report in the currency of the same hyperinflationary economy apply this Standard from the same date. Therefore, it is expected that TAS 29 will start to be applied simultaneously by all entities with the announcement of Public Oversight Accounting and Auditing Standards Authority to ensure consistency of the application required by TAS 29 throughout the country. However, the Authority has not published any announcement that determines entities would restate their financial statements for the accounting period ending on 31 December 2022 in accordance with TAS 29. In this context, TAS 29 is not applied and inflation adjustment has not been reflected in the financial statements as of December 31, 2022. The tension between Russia and Ukraine since January 2022 has turned into a crisis and an armed conflict as of the date of the report. The Bank does not carry out any activities in these two countries that are subject to the crisis. Considering the geographies in which the Bank operates, the crisis did not have a direct impact on the Bank's operations as of 31 December 2022. However, since the course of the crisis is still uncertain as of the date of this report, developments that may occur on a global scale, and the effects of these developments on the global and regional economy and on the Bank's operations, are closely monitored. Since the Bank's risks to both countries are at a very low level, these developments are not expected to have an significant impact on the Bank's operations and the aforementioned developments do not have a significant impact on the operations of our subsidiary, JSC İşbank, which is within the scope of consolidation. The accounting policies applied in the current period are in line with the prior period financial statements. The accounting policies and the valuation principles used in the preparation of the consolidated financial statements are presented below in detail. Strategy for Use of Financial Instruments and Foreign Currency Transactions 1. The Group’s Strategy on Financial Instruments The Group’s main financial activities comprise a wide range of activities such as banking, insurance and reinsurance services, brokerage services, investment consulting, real estate portfolio and asset management, financial lease, factoring services, portfolio and asset management. The liabilities on the Group’s balance sheet are mainly composed of relatively short-term deposits, parallel to general liability structure of the banking system, which is its main field of activity. As for the non-deposit liabilities, funds are collected through medium and long-term instruments. The liquidity risk that may arise from this liability structure can be easily controlled through deposit continuity, as well as widespread network of the correspondent banks, market maker status (The Parent Bank is one of the market maker banks) and by the use of liquidity facilities of the Central Bank of the Republic of Turkey (CBRT). As a result, the liquidity of the Group and the banking system can be easily monitored. On the other hand, foreign currency liquidity requirements are met by the money market operations and currency swaps. Most of the funds collected bear fixed-interest, and by closely monitoring the developments in the sector, both fixed and floating rate placements are made based on the yields of alternative investment instruments. Some of the fixed interest liabilities that are issued/used by the Group companies are subject to fair value hedge accounting. The fair value risk of the related fixed interest financial liabilities is protected by interest rate swaps. Explanations on hedge accounting are explained in Section Three, footnote IV.2. The principle of safety is prioritized in placement works, placements are directed to high yield and low risk assets by considering their maturity structures, while taking global and national economic expectations, market conditions, expectations and tendencies of current and potential loan customers, interest rate, liquidity, currency risks and etc, into consideration. In long term placements, a pricing policy aiming at high return is applied in general and attention is paid to maximizing non-interest income generation opportunities. In addition, the Bank and its subsidiaries within the scope of consolidation act in parallel with these strategies and within the legal limits in management of Financial Statements. The primary objectives related to balance sheet components are set by the long-term plans shaped along with budgeting; and the Parent Bank takes the required positions against the short-term currency, interest rates and price fluctuations in accordance with these plans and the course of the market conditions. Foreign currency, interest rate and price fluctuations in the markets are monitored instantaneously. While taking positions, in addition to the legal limits, the Parent Bank’s own transaction and control limits are also effectively monitored in order to avoid limit overrides. The Parent Bank’s asset-liability management is executed by the Asset-Liability Management Committee, within the risk limits determined by the Board of Directors, in order to keep the liquidity risk, interest rate risk, currency risk and credit risk within certain limits depending on the equity adequacy and to maximize profitability. 2. Foreign Currency Transactions The financial statements of the Parent Bank’s branches and financial institutions that have been established abroad are prepared in functional currency prevailing in the economic environment that they operate in; and when they are consolidated, they are presented in TL, which are the functional currency of the Parent Bank and also the currency used in presentation of the financial statements. Foreign currency monetary assets and liabilities on the balance sheet are converted into Turkish Lira by using the prevailing exchange rates at the balance sheet date. Non-monetary items in foreign currencies carried at fair value are converted into Turkish Lira by the rates at the date of which the fair value is determined. Exchange rate differences arising from the conversions of monetary foreign currency items and the collections of and payments in foreign currency transactions are reflected to the income statement. While the Parent Bank and Türkiye Sınai Kalkınma Bankası A.Ş. one of the consolidated subsidiaries, use their own foreign currency exchange rates for their foreign currency transactions, other consolidated institutions residing domestically use the CBRT rates for their foreign currency transactions. Assets and liabilities of the foreign branches of the Parent Bank and financial institutions that have been established abroad are converted into TL by using the prevailing exchange rates at the balance sheet date. Income and expenses of foreign branches are converted by at exchange rates at the dates of the transactions. Incomes and expenses of foreign financial institutions are converted into TL at average foreign currency rates of the balance sheet date as long as there is not a significant fluctuation in currency rates during the period. The exchange rate differences arising from the conversion to TL are recognized in the shareholders’ equity. III. Information on the Consolidated Companies 1. Basis of Consolidation: The consolidated financial statements have been prepared in accordance with the procedures and principles listed in the “Communiqué Related to Regulation on the Preparation of the Consolidated Financial Statements of Banks” published in the Official Gazette numbered 26340 dated November 8, 2006. a. Subsidiaries: A subsidiary is an entity that is controlled by the Parent. Control; is the power of the Parent Bank to appoint or remove from office the decision-taking majority of members of board of directors through direct or indirect possession of the majority of a legal person’s capital irrespective of the requirement of owning minimum fifty-one per cent of its capital; or by having control over the majority of the voting right as a consequence of holding privileged shares or of agreements with other shareholders although not owning the majority of capital. As per the “Communiqué Related to the Preparation of Consolidated Financial Statements of Banks” published in the Official Gazette numbered 26340 dated November 8, there is no subsidiary or financial institution that is not included in the scope of consolidation as of the current period. Detailed information about the Bank’s subsidiaries related to credit and financial institution is given in Section Five Note I.i.3 Under full consolidation method, the assets, liabilities, income and expenses, and off-balance sheet items of subsidiaries are combined with the equivalent items of the Parent Bank. The book value of the Parent Bank's investment in each of the subsidiaries and the Group’s portion of equity of each subsidiary are eliminated. All significant transactions and balances between consolidated subsidiaries are eliminated reciprocally. Non-controlling interests in the net period profit/loss and in the equity of consolidated subsidiaries are calculated separately from the Group’s net period profit/loss and the Group’s shareholders' equity. Non-controlling interests are presented separately in the balance sheet and in the period profit/loss statement. In preparing its consolidated financial statements, the Bank performed necessary corrections to ensure consistency of accounting policies used by consolidated subsidiaries. On the other hand, insurance companies under consolidation are obliged to carry their activities in accordance with the regulations and other legislations issued by Republic of Turkey Ministry t of Treasury and Finance and in the accompanying consolidated financial statements, financial reporting presentations of these companies are maintained in accordance with the insurance legislation. TFRS 3 “Business Combinations” standard prescribes no depreciation to be recognized for goodwill arising on the acquisitions on or after March 31, 2004, realizing positive goodwill as an asset and application of impairment analysis as of balance sheet dates. In the same standard, it is also required from that date onwards that the negative goodwill, which occurs in the case of the Group’s interest in the fair value of acquired identifiable assets and liabilities exceeds the acquisition cost to be recognized in profit or loss. In the prior period, positive consolidation goodwill amounting to TL 27,994 resulting from the acquisition of Moka Payment and Electronic Para Organization Inc. is included in the consolidated financial statements. The structured entity that is established within the Bank’s securitization loan transactions are included in the consolidated financial statement although the bank does not have any subsidiaries. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 324 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 325 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 b. Associates: V. Interest Income and Expenses An associate is a domestic or foreign entity which the Parent Bank participates in its capital and over which it has a significant influence but no control. Significant influence is the power to participate in the financial and operating policy of the investee. If the Parent Bank holds qualified shares in the associate, it is presumed that the Parent Bank has significant influence unless otherwise demonstrated. A substantial or majority ownership by another investor does not necessarily preclude the Parent Bank from having significant influence. Interest income is calculated by using the effective interest rate method (the rate that equals the future cash flows of a financial asset or liability to its present net book value) to gross carrying amount of financial asset in conformity with “TFRS 9 Financial Instruments” except financial asset that is not a purchased or originated credit-impaired financial asset but subsequently has become credit-impaired. Under the scope of TFRS 9 application, the Group does not reverse the interest accruals and rediscounts of non-performing loans and other receivables and monitors the related amounts under interest income and calculates expected credit loss on these amounts according to the related methodology. Qualified share is the share that directly or indirectly constitutes ten or more than ten percent of an entity’s capital or voting rights and irrespective of this requirement, possession of privileged shares giving right to appoint members of board of directors. VI. Fees and Commission Income and Expenses Equity method is a method of accounting whereby the book value of the investor’s share capital in the subsidiary or the joint venture is either added to or subtracted in proportion with investor’s share from the change in the subsidiary’s or joint venture’s equity within the period. The method also foresees that profit will be deducted from the subsidiaries’ or joint venture’s accordingly recalculated value. Arap-Türk Bankası A.Ş. is a subsidiary of the Bank acting as a credit institution or financial institution, is accounted under the equity method in the consolidated financial statements according to the "Communiqué on the Preparation of Consolidated Financial Statements”. Accounting policies of Arap Türk Bankası A.Ş. are not different than the Parent Bank’s accounting policies. Detailed information about Arap Türk Bankası A.Ş. is given in Section Five Note I.h.2. c. Jointly controlled entities: A joint venture is an agreement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. The Bank does not have any jointly controlled entities which are credit or financial institutions in nature and to be consolidated in the financial statements by the equity method according to the “Regulation on Preparation of Consolidated Financial Statements of Banks”. d. Principles applied during share transfer, merger and acquisition: None. Wages and commissions those that are not an integral part of the effective interest rate of the financial instruments measured at amortized cost are accounted for in accordance with "TFRS 15 - Revenue from Customer Contracts". Fees and commission income and expenses are recognized either on accrual basis or by using the effective interest method. Income earned in return for services rendered contractually or due to operations like sale or purchase of assets on behalf of a third-party real person or corporate body are recognized in income accounts in the period of collection. VII. Financial Assets The Bank and its companies within the scope of “TFRS 9 Financial Instruments”, classifies and accounts its financial assets as “Financial Assets at Fair Value Through Profit or Loss”, “Financial Assets at Fair Value Through Other Comprehensive Income” or “Financial Assets at Measured at Amortized Cost” by taking into account their business model and contractual cash flow characteristics. Financial assets are recognized or derecognized according to TFRS 9 “Recognition and Derecognition in Statement of Financial Position” requirements. Financial asset is recognized in the statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are measured at their fair value on initial recognition in the financial statements. The Group has three different business models for classification of financial assets; ੵ Business model aimed at holding financial assets in order to collect contractual cash flows: Financial assets held under the mentioned business model are managed to collect contractual cash flows over the life of these assets. The Group manages its assets held under this portfolio in order to collect certain contractual cash flows. ੵ Business model aimed at collecting contracted cash flows of financial assets and selling; in this business model, the Group intends both to collect 2. Presentation of subsidiaries, associates and jointly controlled entities which are not credit or financial institutions in consolidated financial contractual cash flows of financial assets and to sell these assets. statements: The subsidiaries, associates and jointly controlled entities which are not credit or financial institutions owned by the Bank and its subsidiaries are accounted accordingly to the equity method described in TAS 28 “Investments in Associates and Joint Ventures”. IV. Forward, Option Contracts and Derivative Instruments Derivative transactions of the Group consist of foreign currency and interest rate swaps, forwards, foreign currency options and interest rate options. The Group has no derivative instruments decomposed from the main contract. ੵ Other business models; A business model in which financial assets; are not held within the scope of a business model aimed at collection of contractual cash flows and within the scope of a business model aimed at collecting and selling contracted cash flows, are measured by reflecting fair value in profit or loss. The Group is able to reclassify all affected financial assets in case it changes the business model that is used for the management of financial asset. In the event of the termination of the rights related to the cash flows from a financial asset, the transfer of all risks and rewards of the financial asset to a significant extent or has no longer control of the financial assets, the financial asset is derecognized. The Group classifies derivative products “Derivative Financial Instruments at Fair Value through Profit or Loss” or ‘’Derivative Financial Instruments through Other Comprehensive Income’’ according to the “TFRS 9-Financial Instruments” principles. 1. Financial Assets at Fair Value Through Profit or Loss 1. Derivative Financial Instruments Derivative transactions are recorded at their fair values as of the date of the contract and receivables and payables arising from these transactions are recorded in off-balance sheet accounts. Derivative transactions are measured at their fair values in the reporting periods after their recognition and if the valuation difference is positive, difference is presented under the “Derivative Financial Assets at Fair Value through Profit or Loss” and if the valuation difference is negative, then it is presented under the “Derivative Financial Liabilities at Fair Value through Profit and Loss”. The differences arising from the valuation of derivative transactions are associated with the income statement. On off-balance sheet items table, options which generated assets for the Group are presented under “call options” line and which generated liabilities are presented under “put options” line. 2. Hedging Derivative Financial Instruments TFRS 9 “Financial Instruments” rules that TAS 39 “Financial Instruments: Recognition and Measurement” value hedge accounting may continue to be implemented to hedge the fair value changes against interest rate risk. In this context, the principles of TAS 39 regarding hedge accounting for fair value hedge accounting continue to be applied in the accompanying financial statements. Interest rate swaps are performed in order to hedge the changes in fair value of fixed interest rate financial instruments. In this context, if the valuation differences of the derivative transactions are positive, they are included in “Derivative financial assets at Fair Value through Profit or Loss” and if the valuation differences are negative, they are included in “Derivative Financial Liabilities at Fair Value through Profit or Loss”. Changes in the fair value of the fixed rate financial liabilities subject to hedge accounting and changes in the fair value of interest rate swaps as hedging instruments are recorded under “Trading Profit/Loss” in the income statement. At the beginning of the hedging transaction and in each reporting period, it is expected that the hedging transaction will offset the changes in the hedged risk arising from the hedged transaction (related to the hedged risk) and effectiveness tests are performed in this context. Efficiency tests are carried out with the “Dollar off-set method” and the hedging accounting is continued if the efficiency is between 80% and 125%. The hedge accounting is terminated if the hedging instrument is terminated, realized, sold or the effectiveness test is ineffective. In the case of termination of fair value hedge accounting, the valuation effects of the fair value hedge accounting applied on the hedged financial instruments is reflected to the statement of profit or loss on a straight-line basis over the life of the hedged financial instrument. Financial assets except financial assets measured at amortized cost or at fair value through other comprehensive income, are measured at fair value through profit or loss. Financial assets at fair value through profit or loss are financial assets held for the purpose of generating profit from short-term fluctuations in price or similar factors in the market or being part of a portfolio for profitability in the short term, regardless of the acquisition reason or financial assets that are not held in a business model that aims at collecting and/or selling contractual cash flows of financial assets. Financial assets at fair value through profit or loss are initially measured at fair value on the balance sheet and are subsequently re-measured at fair value. Gains or losses arising from the valuation are related to profit and loss accounts. In some cases, restructuring, alteration or counterparty changes of contractual cash flows of loans may lead to derecognition of related loans in accordance with TFRS 9. When the change in the financial asset results from derecognizing the existing financial asset from the financial statements and the revised financial asset is recognized in the financial statements, the revised financial asset is considered as a new financial asset in accordance with TFRS 9. When it is determined that there are significant changes between the new conditions of the revised financial asset and the first conditions in related agreements, the Group evaluates the new financial asset according to the current business models. When it is determined that the contractual conditions do not only result in cash flows that include principal and interest payments at certain dates, the financial asset is recognized at fair value and is subject to valuation. The differences arising from the valuation are reflected in the nominal accounts. The Group recognizes loans at fair value through profit or loss, if the contractual terms of the loan, do not result in cash flows including the principal payments and interest payments generated from principal amounts at certain dates. These loans are valued at their fair values after their recognition and the losses or gains arising from the valuation are included in the profit and loss accounts. 2. Financial Assets at Fair Value Through Other Comprehensive Income: Financial assets at fair value through other comprehensive income are financial assets that are held under a business model that aims both to collect contractual cash flows and to sell financial assets, and financial assets with contractual terms that lead to cash flows that are solely payments of principal and interest on the principle amount outstanding at specific dates. Financial assets at fair value through other comprehensive income are initially recognized at their fair value including their transaction costs on the financial statements. The initial recognition and subsequent valuation of such financial assets, including the transaction costs, are carried out on a fair value basis and the difference between amortized cost and the cost of borrowing instruments is recognized in profit or loss by using the effective interest method. Dividend income arising from investments in equity instruments that are classified as at fair value through other comprehensive income is also recognized in income statements. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 326 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 327 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Gains and losses, except impairment gain or loss and foreign exchange gain or loss, arising from changes in the fair value of financial assets at fair value through other comprehensive income are reflected to other comprehensive income until derecognized or reclassified. When the value of the financial asset is collected or financial asset is disposed, the related fair value differences accumulated in the shareholders’ equity are transferred to the profit/loss statement. During the initial introduction to financial statements, amendments to the fair value of an investment in an equity instrument within the framework of TFRS 9 that are not held for trading or that are not valued in a financial statement of an entity that acquires business combinations under the “TFRS 3 Business Combinations” may be subject to an irreversible preference regarding these amendments being accounted in other comprehensive income. In such case, dividends taken from mentioned investment will be accounted in financial statement as profit or loss. 3. Financial Assets Measured at Amortized Cost Financial assets measured at amortized cost are those financial assets that are held within the framework of a business model aimed at collecting contractual cash flows over the life of the asset and which result in cash flows that include principal and interest on the principal amount outstanding at specific dates. Financial assets measured at amortized cost with the initial recognition at fair value including transaction costs are subject to valuation with their discounted cost value by using the effective interest rate method, after eliminating any provision for impairment if there is any. Interest income measured by using the effective interest rate method are recognized in the income statement as an “interest income”. The Bank and subsidiaries evaluate their loans within the framework of current business models and depending on these evaluations, they can be classified as Financial Assets measured at Amortized Cost. On the other hand, the Parent Bank’s securities portfolio includes consumer price indexed government bonds classified (CPI) as financial assets at fair value through other comprehensive income, financial assets at fair value through profit or loss, and financial assets measured at amortized cost. In the valuation of mentioned securities, the realized CPI index announced by TURKSTAT, and the estimated inflation curve created by using the “Annual CPI Expectation for the Next 12 Months” in the CBRT Market Participants Survey is used. The future cash flows of the securities are estimated by the previously mentioned inflation data and the valuation is made according to the effective interest method within the framework of reference index formula given by the CPI Indexed Bonds Investor’s Guide of the Undersecretariat of Treasury. The Parent Bank also holds consumer price indexed government bonds (“CPI”) in its securities portfolio, reclassified as financial assets measured at fair value through other comprehensive income, financial assets measured at fair value through profit or loss and financial assets measured at amortised cost. In the valuation of the mentioned securities, the estimated inflation curve created by using the CPI index announced by Turkish Statistical Institute (“TÜİK”) and the “Annual CPI Expectation After 12 Months” from the CBRT Market Participants Survey is used. Future cash flows of securities are estimated by using the mentioned inflation data and valuation is made according to the effective interest method within the framework of the reference inflaiton index formula specified in the Undersecretariat of Treasury’s Investor Guide of CPI. VIII. Impairment of Financial Assets In accordance with the “TFRS 9- Financial Instruments” and the regulation “Procedures and Principals regarding Classification of Loans and Allowances Allocated for Such Loans” issued by BRSA, the Bank recognizes expected credit loss allowance on financial assets at fair value through other comprehensive income, financial assets measured at amortized cost, impaired credit commitments and financial guarantee contracts. Within the scope of TFRS 9, the expected credit loss is calculated according to the “three-stage” impairment model based on the change in the loan quality of financial assets after the initial recognition and detailed in the following headings: While estimating the expected credit loss, statistical models, methods and tools are used in accordance with the relevant legislation and accounting standards. Expected credit loss is measured using reasonable and supportable information by taking current and forecasts of future economic information into consideration, including macroeconomic factors. Three scenarios, base scenario, optimistic scenario and the worst scenario, are used in forecasting studies made by macroeconomic models. The variables used in these macroeconomic estimates include Industrial Production Index, Employment Ratio and Credit Default Swap indicators. The validity of the risk parameter estimates used in the calculation of expected credit losses is reviewed and evaluated at least annually within the framework of model validation processes. Macroeconomic forecasts and risk delinquency data used in risk parameter models are re-evaluated every quarter to reflect the changes in economic conjuncture and are updated if needed. In the expected credit loss calculations, macroeconomic information is taken into account under multiple scenarios.In this framework, necessary updates were made in 2022. Except for demand or revolving loans, the maximum period for which expected credit losses are to be determined is the contractual life of the financial asset. For demand or revolving loans, maturity is determined by taking the future risk mitigation processes into account such as behavioral maturity analyses performed by the Bank and cancellation/revision of the Bank’s credit limit. While calculating the expected credit loss, aside from assessment of whether there is a significant increase in credit risk or not, basic parameters expressed as probability of default, loss given default and exposure at default are used. Probability of Default: Represents the probability of default on the loan over a specified time period. In this context, the Bank has developed models to calculate 12-month and life-time default probabilities by using internal rating based credit rating models. As for the Group Companies historical probability of default data has also been observed. Loss Given Default (LGD): Defined as the damage caused by the default of borrower to the total balance of the exposure at the time of default. The LGD estimates are determined in terms of credit risk groups that are detailed in the Bank’s data resources and system facilities. The model used for the estimation of the LGD was established by taking into account the direct cost items during the collection process based on the historical data of the Bank’s collection, and cash flows are discounted at effective interest rates. Exposure at Default: For cash loans, the cash balance at the date of report, for non-cash loans the balance calculated using the Credit Conversion Factor (CCF) is represented by Exposure at Default. Credit Conversion Factor: It is calculated for non-cash loans (undrawn limit for revolving loans, commitments, non-cash loans etc.) The historical limit usage data of the Bank for revolving loans are analyzed and the limit amount that can be used until the moment of default is estimated. For non-cash loans, the cash conversion ratio of the loan amount is estimated by analyzing the product type and the past compensation amount of the Group. Credit risks, which require qualitative assessments due to their characteristics and differ followed by grouping in this manner, are considered as individual within the internal policies. Calculations are made by the method of discounted cash flows with the effective interest rate expected from the relevant financial instrument. Discounted cash flows are estimated for 3 different scenarios in which parameters are differentiated, and individual expected credit loss is calculated by taking into consideration the cash deficit amounts weighted according to probabilities. As mentioned above, the Bank allocated expected credit losses by reflecting additional provisions through individual assessments performed for the customers that operates in sectors where the impact might be high in accordance with the Bank’s risk policies. Expected credit loss is reflected in the income statement. Released provisions in the current year are accounted under “Expected Credit Loss Expenses” and released provision which is carried from the prior year are accounted under “Other Operating Income”. Receivables evidenced through the Legal Process that collection is not possible can be written-off by fulfilling the requirements of the Tax Procedure Law. Besides, loans for which specific provision is allocated and for which there is no reasonable expectation of recovery might be written-off. Stage 1: IX. Offsetting Financial Instruments An important determinant for calculating the expected credit loss in accordance with TFRS 9 is to assess whether there is a significant increase in the credit risk of the financial asset. Financial assets that have not experienced a significant increase in credit risk since the initial recognition are monitored in the stage 1. Impairment for credit risk for the Stage 1 financial assets is equal to the 12-month expected credit losses. Financial assets and financial liabilities shall be offset and the net amount shall be presented in the balance sheet only when a party currently has a legally enforceable right to set off the recognized amounts or intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Stage 2: Financial assets that experienced a significant increase in the credit risk since initial recognition, are transferred to Stage 2. The expected credit loss of these financial assets are measured at an amount equal to the instrument’s lifetime expected credit loss. In order to classify a financial asset in the Stage 2, the following criteria is considered: ੵ Overdue between 30-90 days ੵ Restructuring of the loan ੵ Significant deterioration in the probability of default In case of a significant deterioration in the probability of default, the credit risk is considered to be increased significantly and the financial asset is classified as stage 2. The absolute and gradual thresholds used to increase the probability of default are differentiated on the basis of portfolio and product group. In this manner, for the commercial portfolio, definition of increase in the probability of default is the comparison between the probability of default on loan’s opening date, obtained from the integrated rating/score based on internal rating and probability of default of the same loan on reporting date, obtained from the integrated rating/score based on internal rating. For the individual portfolio, it is accepted that the probability of default is worsened in cases where the behavioral score falls below the thresholds determined on the basis of the product and the probability of default exceeds the thresholds determined on the basis of the product. Stage 3: Financial assets with sufficient and fair information for impairment at the reporting date, are classified in the third stage. Expected credit loss of these financial assets is measured at an amount equal to the lifetime expected credit loss. The following basic factors are considered for the classification of a financial asset in the stage 3. ੵ More than 90 days past due ੵ Whether the credit rating is weakened, has suffered a significant weakness or cannot be collected or there is a certain opinion on this matter X. Sale and Repurchase Agreements and Securities Lending Transactions Marketable securities subject to repurchase agreements are classified under “Financial Assets at Fair Value through Profit and Loss”, “Financial Assets at Fair Value through Other Compre hensive Income” or “Financial Assets Measured at Amortized Cost” in the portfolio and they are valued according to the valuation principles of the related portfolios. Funds obtained from the repurchase agreements are recognized under “Funds from Repurchase Transactions” account in liabilities. For the difference between the sale and repurchase prices determined by the repo agreements for the period; expense accrual is calculated using the effective interest rate method. Reverse repo transactions are recognized under the “Receivables from Reverse Repo Transactions” account. For the difference between the purchase and resale prices determined by the reverse repo agreements for the period, income accrual is calculated using the effective interest rate method. XI. Non-current Assets Held for Sale and Discontinued Operations and Related Liabilities Assets that meet the criteria to be classified as held for sale within the scope of “TFRS 5 – Non-current Assets Held for Sale and Discontinued Operations” are measured at the lower one of their fair value and their carrying amount which from the costs to sell are deducted and presented separately within the financial statements. In order to classify a tangible fixed asset as held for sale, the asset (or the disposal group) should be available for an immediate sale in its present condition subject to the terms of any regular sales of such assets (or such disposal groups) and the sale should be highly probable. For a highly probable sale, the appropriate level of management must be committed to a plan to sell the asset (or the disposal group), and an active programme to complete the plan should be initiated to locate a customer. Also, the asset (or the disposal group) should have an active market sale value, which is a reasonable value in relation to its current fair value. Events or circumstances may extend the completion of the sale more than one year. Such assets are still classified as held for sale if there is sufficient evidence that the delay in the sale process is due to the events and circumstances occurred beyond the control of the entity or the entity remains committed to its plan to sell the asset (or disposal group). A discontinued operation is a component of a group that either has been disposed of or is classified as held for sale. Gains or losses relating to discontinued operations are presented separately in the income statement. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 328 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 329 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 XII. Goodwill and Other Intangible Assets The Group’s intangible assets consist of consolidation goodwill, software programs and rights. Goodwill arising from the acquisition of a subsidiary represents the excess of cost of acquisition over the fair value of Group’s share of the identifiable assets, liabilities, or contingent liabilities of the acquired subsidiary at the date of acquisition of the control. Goodwill is recognized as an asset at cost and then carried at cost less accumulated impairment losses. In impairment-loss test, goodwill is allocated between the Group’s every cash-generating unit that is expected to benefit from the synergies of the business combination. To control whether there is an impairment loss in the cash-generating units that goodwill is allocated, impairment- loss test is applied every year or more often if there are indications of impairment loss. In the cases, recoverable amount of cash-generating unit is smaller than its book value; impairment loss is firstly used in reduction of book value of the cash-generating unit, and then the other assets proportionally. Goodwill which is allocated for the impairment losses could not be reversed. When a subsidiary is to be sold, related goodwill amount is combined with the profit/loss relating to this disposal. Positive goodwill arising from the Group’s investments in its subsidiaries is recognized in “Intangible Assets”. Explanations on consolidation goodwill are given in Section Three, Note III.1.a.As for other intangible assets, the purchased items are presented with their acquisition costs less the accumulated amortization and impairment provisions. In case there is an indication of impairment, the recoverable amount of the related intangible asset is estimated within the framework of TAS 36 “Impairment of Assets” and impairment provision is set aside in case the recoverable amount is below its acquisition cost. The related assets are amortized by the straight-line method considering their estimated useful life. The amortization method and period are periodically reviewed at the end of each year. XIII. Tangible Assets The Bank and Group companies follow their real estates in use, which are recorded under tangible fixed assets, according to the revaluation model within the framework of "TAS 16 – Property, Plant and Equipment" since 2015. The positive difference between the net book value of real estate property values and the renewed expertise values which are determined by the licensed valuation in 2022 companies are recorded under the shareholders’ equity. In case there is an indication of impairment, the recoverable amount of the related intangible asset is estimated within the framework of “TAS 36 – Impairment of Assets” and impairment provision is set aside in case the recoverable amount is below its acquisition cost. Tangible assets other than the land and construction in progress are amortized by the straight-line method, according to their estimated useful lives. The estimated useful life, residual amount and the method of amortization are reviewed every year for the possible effects of the changes that occur in the estimates and if there is any change in the estimates, they are recognized prospectively. Assets held under finance lease are depreciated over the expected useful life of the related assets. Assets subject to leasing are depreciated according to relevant contract periods. Leasehold improvements are amortized in equal amounts considering their useful life. However, in any case the useful life cannot exceed leasing term. When the lease period is not certain or longer than 5 years, the amortization period is recognized as 5 years. The difference between the sales proceeds arising from the disposal of tangible assets or the inactivation of tangible asset and the book value of the tangible assets are recognized in the profit and loss accounts. Regular maintenance and repair cost incurred for tangible assets are recognized as expense. There are no pledges, mortgages and similar encumbrances on tangible assets. The “Regulation on Procedures and Principles for the Trading of Precious Metals by Banks and the Disposal of Commodities and Real Properties acquired by Banks due to their Receivables” has been abolished by BRSA effective from January 1, 2017. Real properties acquired by Group due to their receivables and not treated in the scope of “TFRS 5 - Non-current Assets Held for Sale and Discontinued Operations" has been started to follow under “Other Assets” in accordance with the related accounting standard from the current period. The depreciation rates used in amortization of tangible assets and their estimated useful lives are as follows: Buildings Safe Boxes Other Movables 50 2-50 2-25 2% 2% - 50% 4% - 50% Estimated Economic Life (Year) Depreciation Rate XIV. Investment Property Investment properties are kind of properties held by the Group to earn rent income or benefit from valuation surplus. The investment properties of the Group are measured at their fair values in the consolidated financial statements in accordance with “TAS 40 Investment Property”. Any gains or losses arising from changes in fair values of investment properties are recognised in “Other Operating Incomes” and “Other Operating Expenses” for the related period. XV. Leasing Transactions Assets acquired through financial leases are carried at the lower of their fair values or amortized value of the lease payments. Leasing payables are recognized as liabilities in the balance sheet while the interest payable portion of the payables is recognized as a deferred amount of interest. Finance lease payments are separated as financial expense and principal amount payment, which provides a decrease in finance lease liability, thus helps a fixed rate interest on the remaining principal amount of the debt to be calculated. Within the context of the consolidation general borrowing policy, financial expenses are recognized in the income statement. Assets held under financial leases are recognized under the tangible assets account and are depreciated by using the straight line method. There is one company which exclusively does finance leases (İş Finansal Kiralama A.Ş.) and one bank (Türkiye Sınai Kalkınma Bankası A.Ş.) which operates finance lease activities as per provisional article No 4 of the Banking Law No 5411. Finance lease activities are operated according to the “Law on Financial Leasing. Factoring and Financing” No 6361. The Bank and the Companies in scope of consolidation have accounted for recognized operating leases in accordance with the TFRS 16 "leases" standard. Operating leases within the framework of the aforementioned standard are monitored in a similar manner to financial leases. For the agreements within the scope of TFRS 16, the right-of-use-asset and the lease payments are reflected to the financial statements and they are presented under "Tangible Assets" and "Liabilities from Financial Leases", respectively. The lease liability is calculated by discounting the future lease payments by the use of the Banks or alternative borrowing interest rates at the date of initial application or contract date. Fixed assets, which are accounted as right- of-use assets, are subject to depreciation considering the period of the contract. Interest expenses and foreign exchange differences related to the lease liabilities are associated with profit and loss statement. XVI. Insurance Technical Income and Expensealar In insurance companies, premium income is obtained after diminishing the shares transferred from arranged policy income to reassurer. Claims are recorded in expense on accrual basis. Outstanding loss provisions are recognized for the claims reported but not paid yet and for the claims that incurred but not reported. Reassurer’ shares of outstanding and paid claims are offset in these provisions. XVII. Insurance Technical Provisions TFRS 4 “Insurance Standards” requires that all contracts issued by insurance companies be classified as either insurance contracts or investment contracts. Contracts with significant insurance risk are considered insurance contracts. Insurance risk is defined as risk, other than financial risk, transferred from the holder of a contract to the issuer. Contracts issued by insurance companies without significant insurance risk are considered investment contracts. Investment contracts are accounted for in accordance with TAS 39 “Turkish Accounting Standard for Financial Instruments: Recognition and Measurement”. Within the framework of the current insurance regulation, insurance technical provisions accounted by insurance companies for unearned premium claims, unexpired risk reserves, outstanding claims and life-mathematical reserves are presented in the consolidated financial statements. Unearned premium reserve is recognized on accrued premiums without discount or commission which extends to the next period or periods on a daily basis for the current insurance contracts. In case the expected loss premium ratio is over 95%, the unexpired risk reserves are recognized for the main branches specified by the Undersecretariat of Treasury. For each main branch, the amount found by multiplying the ratio exceeding 95% by the net unearned premium provision, is added to the unearned premium provision of that main branch. If the outstanding claim reserve is established and confirmed by approximation and if there are unpaid or unidentified compensation amounts in both prior and current accounting periods; it is separated for estimated yet unreported compensation amounts. Mathematical reserve is recognized on actuarial bases in order to meet the requirements of policyholders and beneficiaries for life, health and personal accident insurance contracts for a period longer than a year. On the other hand, actuarial chain ladder method is used to estimate the reserve amount to be set aside in the current period by looking at the data of the past materialized losses. If the reserve amount found as a result of this method exceeds the amount of reserve for the amount of uncertain indemnity, additional reserve must be set aside for the difference. Reinsurance companies recognize for the outstanding claims that is declared by the companies, accrued and determined on account. Insurance companies of the Group cede premium and risks in the normal course of business in order to limit the potential for losses arising from risks accepted. Insurance premiums ceded to reinsurers on contracts that are deemed to transfer significant insurance risk are recognized as an expense in a manner that is consistent with the recognition of insurance premium revenue arising from the underlying risks being protected. Costs which vary and are directly associated with the acquisition of insurance and reinsurance contracts including brokerage, commissions, underwriting expenses and other acquisition costs are deferred and amortized over the period of contract, consistent with the earning of premium. XVIII. Provisions and Contingent Liabilities As of the end of the reporting period, a past event is deemed to give rise to a present obligation if, taking account of all available evidence, it is more likely than not that a present obligation exists, the entity recognizes a provision in the financial statements. As of the end of the reporting period where it is more likely that no present obligation exists at the end of the reporting period, the entity discloses a contingent liability on footnotes unless the possibility of an outflow of resources embodying economic benefits is remote. In the financial statements, a provision is made for an existing commitment resulted from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the reliable estimates of management of the Parent Bank and subsidiaries on the expenses to incur as of the balance sheet date to fulfill the liability by considering the risks and uncertainties related to the liability. In case the provision is measured by using the estimated cash flows required to fulfill the existing liability, the book value of the related liability is equal to the present value of the related cash flows. If the amount is not reliably estimated and there is no probability of cash outflow from the Group to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 330 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 331 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 XIX. XIX. Contingent Assets The contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the Parent Bank and the Group. Since showing the contingent assets in the financial statements may result in the accounting of an income, which will never be generated, the related assets are not included in the financial statements, but if there is a possibility that an inflow of economic benefits of these assets may occur then it is explained in the footnotes of the financial statements. Nevertheless, the developments related to the contingent assets are constantly evaluated and if it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. XX. Liabilities Regarding Employee Benefits 1. Severance Indemnities and Short-Term Employee Benefits According to the related regulation and the collective bargaining agreements, the Parent Bank and consolidated Group companies (excluding the subsidiaries residing outside Turkey) are obliged to pay termination benefits for employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or (for the female employees) who have voluntarily quit within one year after the date of their marriage. Within the scope of TAS 19 “Employee Benefits”, the Parent Bank allocates severence indemnity provisions for employee benefits by estimating the present value of the probable future liabilities. According to TAS 19, all actuarial gains and losses occurred are recognized under shareholders’ equity. As the legislations of the countries in which the Parent Bank’s non-resident subsidiaries operate do not require retirement pay provision, no provision liability has been recognized for the related companies. In addition, provision is also allocated for the unused paid vacation. 2. Retirement Benefit Obligations İşbank Pension Fund (Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı), of which each employee of the Parent Bank is a member, has been established according to the provisional Article 20 of the Social Security Act No 506. As per provisional article numbered 23 of the Banking Law numbered 5411, it is ruled that Bank pension funds, which were established within the framework of Social Security Act, will be transferred to the Social Security Institution, within 3 years after the publication of such law. Methods and principles related to transfer have been determined as per the Cabinet decision dated 30 November 2006 numbered 2006/11345. However, the related article of the act has been cancelled upon the President’s application dated November 2, 2005, by the Supreme Court’s decision dated March 22, 2007. Nr.E.2005/39. K.2007/33, which was published on the Official Gazette dated March 31, 2007 and numbered 26479 and the execution decision was ceased as of the issuance date of the related decision. After the justified decree related to cancelling the provisional Article 23 of the Banking Law was announced by the Constitutional Court on the Official Gazette dated December 15, 2007 and numbered 26731. Turkish Grand National Assembly started to work on establishing new legal regulations, and after it was approved at the General Assembly of the TGNA, the Law numbered 5754 “Emendating Social Security and General Health Insurance Act and Certain Laws and Decree Laws”, which was published on the Official Gazette dated May 8, 2008 and numbered 26870, came into effect. The new law decrees that the contributors of the Bank pension funds, the ones who receive salaries or income from these funds and their rightful beneficiaries will be transferred to the Social Security Institution and will be subject to this Law within 3 years after the release date of the related article, without any need for further operation. The three-year transfer period can be prolonged for maximum 2 years by the Cabinet decision. However related transfer period has been prolonged for 2 years by the Cabinet decision dated, March 14, 2011. which was published on the Official Gazette dated April 9, 2011 and numbered 27900, In addition, by the Law “Emendating Social Security and General Health Insurance Act”, which was published on the Official Gazette dated March 8, 2012 and numbered 28227, this period of 2 years has been raised to 4 years after that related transfer period has been prolonged for one more year by the Cabinet decision dated April 8, 2013, which was published on the Official Gazette dated May 3, 2013 and numbered 28636 also this period has revalidated one more year by the Cabinet decision dated February 24, 2014, which was published on the Official Gazette dated April 30, 2014 and numbered 28987. The Council of Ministers has been lastly authorized to determine the transfer date in accordance with the last amendment in the first paragraph of the 20th provisional article of Law No.5510 implemented by the Law No. 6645 on Amendment of the “Occupational Health and Safety Law and Other Laws and Decree Laws” published in the Official Gazette dated April 23, 2015 and numbered 29335. This authority was transferred to the President with the delegated legislation No.703 which published in the repetitive Official Gazette No. 30473 dated July 9, 2018. On the other hand, the application made on June 19, 2008 by the Republican People’s Party to the Constitutional Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article 20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the meeting of the afore-mentioned court on March 30, 2011.. The above mentioned Law also states that; ੵ Through a commission constituted by the attendance of one representative separately from the Social Security Institution, Ministry of Finance, Turkish Treasury, State Planning Organization. Banking Regulation and Supervision Agency. Savings Deposit Insurance Fund, one from each pension fund, and one representative from the organization employing pension fund contributors, related to the transferred persons, the cash value of the liabilities of the pension fund as of the transfer date will be calculated by considering their income and expenses in terms of the lines of insurance within the context of the related Law, and technical interest rate of 9.8% will be used in the actuarial calculation of the value in cash ੵ And that after the transfer of the pension fund contributors, the ones who receive salaries or income from these funds and their rightful beneficiaries to the Social Security Institution, these persons’ uncovered social rights and payments, despite being included in the trust indenture that they are subject to, will be continued to be covered by the pension funds and the employers of pension fund contributors. In line with the new law, the Bank obtained a technical actuarial valuation report from a licensed actuary for the year ended December 31, 2022. In related period’s financial statements, Bank provided full provision for the total amount of technical and actual deficit stated in the actuarial report of the aforementioned period The actuarial assumptions used in the related actuarial report are given in Section Five Note II-h-4-1. Besides the Parent Bank; Anadolu Anonim Türk Sigorta Şirketi, Milli Reasürans T.A.Ş. and Türkiye Sınai Kalkınma Bankası A.Ş. also had actuarial valuations as of December 31, 2022 for their pension funds. The provision amount of actuarial and technical deficit, which was measured according to actuarial report of Milli Reasürans T.A.Ş., is added in the financial statements for the current period. According to actuarial report of Anadolu Anonim Türk Sigorta Şirketi and Türkiye Sınai Kalkınma Bankası, there is not any additional operational or actuarial liability. İşbank Members’ Supplementary Pension Fund has been founded by the Parent Bank to provide beneficiaries with additional social security and solidarity rights to compulsory social security benefits as per the provisions of the Turkish Commercial Code and Turkish Civil Code. Those are also valid for the supplementary pension funds of the employees of Anadolu Anonim Türk Sigorta Şirketi, Milli Reasürans T.A.Ş. and Türkiye Sınai Kalkınma Bankası A.Ş. which are among the other financial institutions of the Group. XXI. Taxation 1. Corporate Tax: Turkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, provisions for taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a separate-entity basis. In accordance with the Provisional Article 13 added to the Corporate Tax Law Numbered 5520 with the Law Numbered 7316, the 20% rate foreseen in the calculation of the corporate tax for the corporate earnings of the 2021 taxation period is determined as 25% (starting from the declarations to be submitted as of July 1, 2021 and to be valid for the corporate earnings for the taxation period starting from January 1, 2021), and as 23% for the corporate earnings for the 2022 taxation period. On the other hand, in accordance with the amendment made in Article 32 of the Corporate Tax Law with the Law No. 7394 published in the Official Gazette dated 15.04.2022 and numbered 31810, the corporate tax rate should start from the declarations that must be submitted as of 01.07.2022 and taxation starting from 01.01.2022. It has been determined as 25% to be valid for the corporate earnings of the period. The Group has calculated deferred tax using the 25% rate (31 December 2021: 20%, 23% and 25% rates are used). As per the Corporate Tax law, temporary tax is calculated and paid quarterly in line with the principles of the Income Tax Law and at the corporate tax rate. The temporary tax payments are deducted from the current period’s corporate tax. The 4th provisional tax for the year 2022 will be paid in February 2023 for to be deducted from the corporate tax of the current taxation period. Tax provision consists of current tax provision and deferred tax income/expense. The current tax liability is calculated over the portion of the period subject to taxation. The taxable profit differs from the profit involved in the statement of profit and loss, as the income and expense items that can be taxable or deductible at other periods, and items that are not taxable or deductible are excluded. The current tax amounts payable is netted off with prepaid tax amounts and presented on the financial statements. Within the framework of the Corporate Tax Law numbered 5520, 75% of the gains on the sale of the participation shares, which were held in the assets for a minimum of 2 whole years and 75% of the gains on the sale of immovable are exempt from tax provided that they are added to the capital as set forth by the Law or that they are kept in a special fund under liabilities for a period of 5 years. However, in accordance with Article 89 / a of the Law No. 7061 and Article 5.1.e and Article 5.1.f of the Corporate Tax Law, which were published in the Official Gazette dated December 5, 2017 and numbered 30261, the 75% applied in terms of immovable sales mentioned above has been reduced to 50% which is effective from the date of publication of the Law. In accordance with the provision of Article 298 / A of the Tax Procedure Law, the necessary conditions for inflation adjustment in the calculation of corporate tax as of the end of the 2021 calendar year have been met. However, the application of inflation adjustment in the calculation of corporate tax was postponed to 2023 with the regulation made with the "Law on the Amendment of the Tax Procedure Law and the Corporate Tax Law" numbered 7352 published in the Official Gazette dated 29.01.2022 and numbered 31734. Accordingly, VUK (Tax Procedure Law) financial statements for the 2021 and 2022 accounting periods, including the provisional tax periods, will not be subject to inflation adjustment, and the 2023 accounting period will not be subject to inflation adjustment as of the temporary tax periods. will be subject to inflation adjustment regardless. 2. Deferred Tax: Deferred tax asset or liability is determined by calculating the tax effects of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts considered in the legal tax base account, by taking the legal tax rates into account. Deferred tax debts are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Free provisions that are allocated for possible future risks and they are not subject to deferred tax calculation. No tax assets or liabilities are recognized for the temporary timing difference that affects neither the taxable profit nor the accounting profit and that arises from the initial recognition in the balance sheet, of assets and liabilities, other than the goodwill and mergers. The Bank calculates deferred tax for the provisions allocated for Stage 1 and Stage 2 expected credit loss. The carrying values of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is measured at enacted tax rates prevailing in the period or about to be enacted when the assets are realized or liabilities are settled, and the tax is recognized as income or expense in the income statement. Nonetheless, if the deferred tax is related to assets directly associated with the equity in the same or different period, it is directly recognized in the equity accounts. In accordance with the Provisional Article 13 added to the Corporate Tax Law Numbered 5520 with the Law Numbered 7316, the 20% rate foreseen in the calculation of the corporate tax for the corporate earnings of the 2021 taxation period is determined as 25% (starting from the declarations to be submitted as of July 1, 2021 and to be valid for the corporate earnings for the taxation period starting from January 1, 2021), and as 23% for the corporate earnings for the 2022 taxation period. On the other hand, in accordance with the amendment made in Article 32 of the Corporate Tax Law with the Law No. 7394 published in the Official Gazette dated 15.04.2022 and numbered 31810, the corporate tax rate should start from the declarations that must be submitted as of 01.07.2022 and taxation starting from 01.01.2022. It has been determined as 25% to be valid for the corporate earnings of the period. The Bank has calculated deferred tax by using 25% rate considering the periods when deferred tax assets and liabilities are realized (December 31, 2021: 20%, 23%, and 25% rates are used). Deferred tax assets and liability of the Bank and consolidated companies are shown by way of offsetting in separate financial statements of each entity. In the consolidated financial statements, on the other hand, the deferred tax assets and liabilities that come from the companies as offset are separately involved in the assets and liabilities. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 332 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 333 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 3. Tax Practices in the Countries that Foreign Branches Operate: 4. Transfer Pricing: Turkish Republic of Northern Cyprus (TRNC) In accordance with TRNC tax legislation, 15% income tax is accrued on the remaining tax base after 10% corporate tax is deducted from corporate income. The tax bases for companies are determined by adding the expenses that cannot be deducted according to TRNC regulations, to commercial gains and by subtracting exemptions and deductions from commercial gains. Income tax is paid in June, and corporate tax payment is made in two equal installments, in May and in October. On the other hand, withholding tax is paid in TRNC over interest income and similar gains of the companies. The related withholding tax payments and provisional tax paid every quarter during the year are deducted from corporate tax payable and the difference between withholding and provisional tax amounts and corporate tax payable is discounted from income tax provided that the withholding tax and paid provisional tax amounts are higher than corporate tax amount. England Corporate earnings are subject to 19% corporate tax in England. The relevant rate is applied to the tax base that is determined by adding the expenses that cannot be deducted due to the regulations, to commercial gains and by subtracting exemptions and deductions from commercial gains. In other respect, if the tax base calculated in accordance with the country legislation is within a certain range, the temporary corporate tax is paid in July, October of the relevant year and in January and April of the following year; If it is over a certain amount, it is paid in 4 installments in March, June, September and December of the relevant year. The corporate tax amount must be finalized and paid by the end of September of the year following the year of profit. In case the corporate tax payable as a result of the calculation is below the temporary taxes paid, the difference amount is deducted later or paid back to the Branch by the authority. Bahrain Banks in Bahrain are not subject to tax according to the regulations of the country. The Republic of Iraq (Iraq) The corporate tax rate in Iraq is 15%, and the corporate tax is paid on a consolidated basis to the tax office of the foreign bank's central branch. The first branch established in Iraq is considered as the central branch. Foreign bank branches whose central branch is within the boundaries of the Central Government must present their consolidated financial statements and pay accrued tax to the relevant tax office by the end of May of the following year, and branches of foreign banks whose central branch is within the boundaries of the Northern Iraq Regional Government must present their financial statements and pay accrued tax by the end of June of the following year at the latest. Northern Iraq Regional Government tax offices can accrue fixed taxes other than the specified rate and can postpone the due date. Kosovo Corporate earnings are subject to income tax rate of 10% according to the Kosovo legislation. This ratio is applied to the tax base that will be calculated as a result of the implementation of exemptions, deductions, addition of disallowable expenses, to the corporate income and that are calculated in accordance with the tax laws. Tax has to be paid in advance until April, July, October and the 15th day of January of the following year by four installments. If those prepaid taxes are lower than the final corporate tax, the difference is paid until the end of March of the following year, in case of a claim made by company, if it is higher, then the difference is returned to the institution by the tax authorities after the inspection conducted by those institution. Georgia Corporate earnings are subject to income tax rate of 15% according to the Georgian legislation. This ratio is applied to the tax base that will be calculated as a result of the implementation of exemptions, deductions, addition of disallowable expenses, to the income of corporations and that are calculated in accordance with the tax laws. In addition, in accordance with the legislation of Georgia, each year during May, July, September and December the amount of tax, that calculated according to the previous year income tax, is paid to the tax office by four equal installments of the probable income that is likely to be obtained the current year. If those prepaid taxes are lower than the final corporate tax, the difference is paid until the beginning of April of the following year, if it is higher, then the difference is returned to the institution by the tax authorities. Germany According to the tax regulations in Germany, corporate gains are subject to 15% corporate tax, 16.7% income and industrial tax. In addition to this, a solidarity tax of 5.5% is calculated over this corporate tax. The tax bases for corporate, income and industrial services are determined by adding the expenses that cannot be deducted according to Germany regulations, to interest, commissions and other operating gains and by subtracting exemptions and deductions from these. The corporate tax payments are made as temporary tax payments in four installments and are deducted from the corporate tax that is finalized at the end of the current year. Russia According to the Russian regulations, corporate gains are subject to 20% corporate tax. The corporate tax base is determined on accrual basis and it is measured by adding the non-deductible expenses to the corporate income gained during the period. Companies in Russia make quarterly tax returns and make provisional tax payment by offsetting the advance taxes paid during the period. Final taxation period for corporate tax is one year and the corporate tax is paid until the end of March of the following year, by considering the provisional taxes paid during the year. Coupon income from government bonds of the Russian Federation and Belarus, as well as the Ruble and some other private bonds issued by Russian companies after January 1, 2017 and traded on the stock exchange are subject to a corporate tax of 15%. The securities in the question income is paid within 10 business days from the end of the month following the bond sale or coupon payment and tax on remaining securities is paid on the day of payment of corporate tax. Transfer pricing is regulated through Article 13 of Corporate Tax Law titled “Transfer Pricing through Camouflage of Earnings”. Detailed information for the practice regarding the subject is found in the “General Communiqué Regarding Camouflage of Earnings through Transfer Pricing”. According to the aforementioned regulations, in the case of making purchase or sales of goods or services with relevant persons/corporations at a price that is determined against “arm’s length principle”, the gain is considered to be distributed implicitly through transfer pricing and such distribution of gains is not subject to deductions according to article 11 of Corporate Tax Law in means of corporate tax. XXII. Additional Information on Borrowings The Parent Bank and its consolidated companies, whenever required, generates funds from individuals and institutions residing domestically and abroad by approaching the borrowing instruments in the form of syndication, securitization, collateralized borrowing and issue of bonds/bills. Such transactions are at first carried at acquisition cost, and in the following periods they are valued at amortized cost measured by using the effective interest rate method. Part of the bills issued by the Group with fixed interest and a part of its liabilities with fixed interest are subject to fair value hedge accounting. While the rediscounted credit risk and accumulated interest amount subject to hedging liability are recognized in “Interest Expenses” under profit/loss statement; net amount resulted of the hedge accounting other than the credit risk and accumulated interest amount are recognized in “Derivative Financial Transactions Gains/Losses” under profit/loss statement by using fair value model. In the balance sheet, these valuations are presented with the related liabilities. XXIII. Information on Equity Shares and Their Issuance Share issuance related to costs is recognized as expenses. Dividend income related with the equity shares are determined by the General Assembly of the Shareholders. Weighted average number of shares outstanding is taken into account in the calculation of earnings per share. In case the number of shares increases by way of bonus issues as a result of the capital increases made by using the internal sources, the calculation of earnings per share is made by adjusting the weighted average number of shares, which were previously calculated as at the comparable periods. The adjustment means that the number of shares used in calculation is taken into consideration as if the bonus issue occurred at the beginning of the comparable period. In case such changes in the number of shares occur after the balance sheet date, but before the ratification of the financial statements to be published, the calculation of earnings per share are based on the number of new shares. The Parent Bank’s earnings per share calculations taking place in the consolidated profit/loss statement are as follows. Group’s net profit Weighted average number of shares (thousands) Earnings per share – (in exact TL) XXIV. Bank Acceptances and Bills of Guarantee Current Period 61,598,670 250,002,250 0.246392462 Prior Period 13,541,060 250,002,250 0.054163753 Bill guarantees and acceptances are realized simultaneously with the customer payments and they are presented as possible liabilities and commitments in the off-balance sheet accounts. XXV. Government Incentives There are no government incentives utilized by the Bank or the companies included in consolidation, during the current or prior accounting periods. XXVI. Segment Reporting Business segment is the part of an enterprise. ੵ which conducts business operations where it can gain revenues and make expenditures (including the revenues and expenses related to the transactions made with the other parts of the enterprise). ੵ whose operating results are regularly monitored by the authorities with the power to make decisions related to the operations of the enterprise in order to make decisions related to the funds to be allocated to the segment and to evaluate the performance of the segment and ੵ which has its separate financial information. Information on business segmentation and related information is explained in Section IV Footnote VIII. XXVII. Other Disclosures None. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 334 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 335 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 SECTION FOUR: INFORMATION ON THE FINANCIAL POSITION AND RISK MANAGEMENT OF THE GROUP 1. Explanations on Shareholders’ Equity: 1. Explanations on Consolidated Shareholders’ Equity The Bank’s consolidated capital adequacy ratio is 21.84%. (31.12.2021: 18.69%). The capital adequacy standard ratio has been calculated based on the Regulation on Shareholder’s Equity of Banks, the Regulation on Measurement and Assessment of Capital Adequacy of Bank and other legal regulations related with BRSA decisions dated 21.12.2021, numbered 9996 and dated 28.04.2022, numbered 10188. Within the scope of the BRSA decisions, the amount subject to credit risk has been calculated by using the CBRT exchange rates as of 31.12.2021, and the shareholders’ equity has been calculated without taking into account the negative effects of financial assets in the portfolio of “Financial Assets Through Other Comprehensive Income” as of 21.12.2021. COMMON EQUITY TIER I CAPITAL Paid-in Capital to be Entitled for Compensation after All Creditors Share Premium Legal Reserves Other Comprehensive Income According to TAS Profit Net Current Period Profit Prior Period Profit Bonus Shares from Associates, Subsidiaries and Joint-Ventures not Accounted in Current Period’s Profit Minority Shares Common Equity Tier I Capital Before Deductions Deductions From Common Equity Tier I Capital Valuation adjustments calculated as per the article 9, (i) of the Regulation on Bank Capital Current Period Prior Period 11,615,938 6,115,938 138,551 143,633 58,096,893 50,721,897 68,326,750 23,224,481 61,471,023 13,502,913 61,598,670 13,541,060 (127,647) (1,117) (38,147) (1,117) 3,350,917 2,286,331 202,998,955 95,994,076 Current Period Prior Period 7,376,514 3,779,378 195,622,441 92,214,698 2,931,155 1,586,764 2,931,155 1,586,764 Total Deductions from Common Equity Tier 1 Total Common Equity Tier I capital ADDITIONAL TIER I CAPITAL Privileged stocks not included in common equity and share premiums Debt Instruments and the Related Issuance Premiums Defined by the BRSA Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Covered by Temporary Article 4) Shares of Third Parties in Additional Tier I Capital Shares of Third Parties in Additional Tier I Capital (Covered by Temporary Article 3) Additional Tier I Capital before Deductions Deductions from Additional Tier 1 Capital Direct and Indirect Investments of the Bank on its own Additional Core Capital Investments in Equity Instruments Issued by Banks or Financial Institutions Invested in Bank’s Additional Tier I Capital and Having Conditions Stated in the Article 7 of the Regulation Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share Capital Other items to be defined by the BRSA Items to be Deducted from Tier 1 Capital during the Transition Period Goodwill and Other Intangible Assets and Related Deferred Taxes not deducted from Tier 1 Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Evaluation of Capital Adequacy of Banks (-) Net Deferred Tax Asset/Liability not deducted from Tier 1 Capital as per the Temporary Article 2, Clause 1 of the Regulation on Measurement and Evaluation of Capital Adequacy of Banks (-) Current and prior periods' losses not covered by reserves, and losses accounted under equity according to TAS 2,921,913 1,144,288 Deduction from Additional Tier 1 Capital when there is not enough Tier II Capital (-) 138,681 27,994 89,996 27,994 3,739,302 1,965,525 548,624 551,575 Leasehold improvements on operational leases Goodwill Netted with Deferred Tax Liabilities Other Intangible Assets Netted with Deferred Tax Liabilities Except Mortgage Servicing Rights Remaining after deducting from the related deferred tax liability with the deferred tax asset based on future taxable income, except for deferred tax assets based on temporary differences Differences Arise When Assets and Liabilities Not Held at Fair Value, are Subjected to Cash Flow Hedge Accounting Total Credit Losses That Exceed Total Expected Loss Calculated According to the Regulation on Calculation of Credit Risk by Internal Ratings Based Approach Securitization Gains Unrealized Gains and Losses from Changes in Bank’s Liabilities’ Fair Values due to Changes in Creditworthiness Net Amount of Defined Benefit Plans Direct and Indirect Investments of the Bank on its own Tier 1 Capital Shares Obtained against Article 56, Paragraph 4 of the Banking Law Total of Net Long Positions of the Investments in Equity Items of Consolidated Banks and Financial Institutions where the Bank owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital Total of Net Long Positions of the Investments in Equity Items of Consolidated Banks and Financial Institutions where the Bank owns more than %10 % of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital Mortgage Servicing Rights (amount above 10% threshold of above Tier I capital) Deferred Tax Assets Arising from Temporary Differences (amount above 10% threshold of above Tier I Capital) Amount Exceeding the 15% Threshold of Tier 1 Capital as per the Article 2, Clause 2 of the Regulation on Measurement and Evaluation of Capital Adequacy of Banks The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital not deducted from Tier I Capital Excess Amount arising from Mortgage Servicing Rights Excess Amount arising from Deferred Tax Assets from Temporary Differences Other Items to be Defined by the BRSA Deductions from Tier I Capital in Cases where there are no Adequate Additional Tier I or Tier II Capitals Total Deductions from Additional Tier I Capital Total Additional Tier I Capital 2,931,155 1,586,764 Total Tier I Capital (Tier I Capital= Common Equity Tier I Capital + Additional Tier I Capital) 198,553,596 93,801,462 TIER II CAPITAL Debt Instruments and the Related Issuance Premiums Defined by the BRSA Debt Instruments and the Related Issuance Premiums Defined by the BRSA (Covered by Temporary Article 4) Shares of Third Parties in Additional Tier I Capital Shares of Third Parties in Additional Tier I Capital (Covered by Temporary Article 3) 25,342,500 22,518,677 1,418,336 1,046,800 884,387 Provisions (Amounts explained in the first paragraph of the article 8 of the Regulation on Bank Capital) 12,249,588 7,483,983 Tier II Capital before Regulatory Adjustments Deductions from Tier II Capital Direct and Indirect Investments of the Bank on its own Tier II Capital (-) Investments in Equity Instruments Issued by Banks and Financial Institutions Invested in Bank’s Tier II Capital and Having Conditions Stated in the Article 8 of the Regulation Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital (-) The Total of Net Long Position of the Direct or Indirect Investments in Additional Tier I Capital and Tier II Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital Exceeding the 10% Threshold of Tier I Capital 39,010,424 31,933,847 Other items to be Defined by the BRSA (-) Total Deductions from Tier II Capital Total Tier II Capital Total Equity (Total Tier I and Tier II Capital) Deductions from Total Equity Loans Granted against the Articles 50 and 51 of the Banking Law Net Book Values of Movables and Immovables Exceeding the Limit Defined in the Article 57, Clause 1 of the Banking Law and the Assets Acquired against Overdue Receivables and Held for Sale but Retained more than Five Years 39,010,424 31,933,847 237,564,020 125,735,309 2,650 2,650 1,274 1,194 Other items to be Defined by the BRSA 80 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 336 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 337 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Current Period Prior Period 2. Information on instruments to be included in the consolidated capital calculation: Items to be Deducted from the Sum of Tier I and Tier II Capital (Capital) during the Transition Period The Portion of Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital not deducted from Tier I Capital, Additional Tier I Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation The Portion of Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% of the Issued Share Capital Exceeding the 10% Threshold of above Tier I Capital not deducted from Additional Tier I Capital or Tier II Capital as per the Temporary Article 2, Clause 1 of the Regulation The Portion of Net Long Position of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or more of the Issued Share Capital, of the Net Deferred Tax Assets arising from Temporary Differences and of the Mortgage Servicing Rights not deducted from Tier I Capital as per the Temporary Article 2, Clause 2, Paragraph (1) and (2) and Temporary Article 2, Clause 1 of the Regulation CAPITAL Total Capital (Total of Tier I Capital and Tier II Capital) Total Risk Weighted Assets CAPITAL ADEQUACY RATIOS Consolidated CET1 Capital Ratio (%) Consolidated Tier I Capital Ratio (%) Consolidated Capital Adequacy Ratio (%) BUFFERS Total Additional Common Equity Requirement Ratio (a+b+c) a) Capital Conservation Buffer Ratio (%) b) Bank-specific Counter-Cyclical Capital Buffer Ratio (%) c) Systemic Bank Buffer Ratio (%) Additional CET1 Capital Over Total Risk Weighted Assets Ratio Calculated According to the Article 4 of Capital Conservation and Counter-Cyclical Capital Buffers Regulation (%) Amounts Lower Than Excesses as per Deduction Rules Remaining Total of Net Long Positions of the Investments in Equity Items of Unconsolidated Banks and Financial Institutions where the Bank Owns 10% or less of the Issued Share Capital 237,561,370 125,734,035 1,087,995,231 672,862,034 17.98 18.25 21.84 4.060 2.500 0.060 1.500 12.25 13.71 13.94 18.69 4.060 2.500 0.060 1.500 7.94 Remaining Total of Net Long Positions of the Investments in Tier I Capital of Unconsolidated Banks and Financial Institutions where the Bank Owns more than 10% or less of the Issued Share Capital 385.225 280.196 Remaining Mortgage Servicing Rights Net Deferred Tax Assets arising from Temporary Differences Limits for Provisions Used in Tier II Capital Calculation 974,110 3,118,976 Optional call date. contingent call dates and redemption amount General Loan Provisions for Exposures in Standard Approach (before limit of one hundred and twenty-five per ten thousand) 20,463,080 17,706,672 General Loan Provisions for Exposures in Standard Approach Limited by 1,25% of Risk Weighted Assets 12,249,588 7,483,983 Total Loan Provision that Exceeds Total Expected Loss Calculated According to Communiqué on Calculation of Credit Risk by Internal Ratings Based Approach Total Loan Provision that Exceeds Total Expected Loss Calculated According to Communiqué on Calculation of Credit Risk by Internal Ratings Based Approach, Limited by 0,6% Risk Weighted Assets Debt Instruments Covered by Temporary Article 4 (effective between January 1, 2018 - January 1, 2022) Upper Limit for Additional Tier I Capital Items subject to Temporary Article 4 Amount of Additional Tier I Capital Items Subject to Temporary Article 4 that Exceeds Upper Limit Upper Limit for Additional Tier II Capital Items subject to Temporary Article 4 Amount of Additional Tier II Capital Items Subject to Temporary Article 4 that Exceeds Upper Limit 1,046,800 17,272,200 Issuer Türkiye İş Bankası A.Ş. Unique identifier (CUSIP, ISIN etc.) US900151AF84- XS1003016018 US90016BAF58- XS1623796072 XS2106022754 Governing law(s) of the instrument Taking into account in equity calculation It is subject to English Law except for certain articles that will be subject to Turkish Law. Issued within the scope of BRSA Regulation on Banks’ Equity. It is subject to English Law except for certain articles that will be subject to Turkish Law. Issued within the scope of BRSA Regulation on Banks’ Equity. It is subject to English Law except for certain articles that will be subject to Turkish Law. Issued within the scope of BRSA Regulation on Banks’ Equity. Subject to 10% deduction as of 01.01.2015 No No No Eligible at unconsolidated / consolidated Unconsolidated -Consolidated Unconsolidated -Consolidated Unconsolidated -Consolidated Instrument type (types to be specified by each jurisdiction) Bond Amount recognized in regulatory capital (Currency in mil. as of most recent reporting date) Par value of instrument (Expressed in million TL) 7,460 Bond 9,325 9,325 Bond 13,988 13,988 Accounting classification Original date of issuance Perpetual or dated Original maturity date Issuer call subject to prior supervisory approval Subordinated Liabilities Subordinated Liabilities Subordinated Liabilities 10.12.2013 Dated 10 Years Yes 29.06.2017 22.01.2020 Dated 11 Years Yes Dated 10 Years Yes The Bank; (1) provided that subject to having obtained the prior approval of the related legislation, can purchase or otherwise acquire treasury stock (2) provided that subject to having obtained the prior approval of the BRSA, (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity. The Bank has the option to repay all of the related bonds on June 29, 2023 provided that subject to having obtained the prior approval of the BRSA. The Bank; (1) provided that subject to having obtained the prior approval of the related legislation, can purchase or otherwise acquire treasury stock (2) provided that subject to having obtained the prior approval of the BRSA, (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity. The Bank has the option to repay all of the related bonds on January 22, 2025 provided that subject to having obtained the prior approval of the BRSA. The Bank; (1) provided that subject to having obtained the prior approval of the related legislation, can purchase or otherwise acquire treasury stock (2) provided that subject to having obtained the prior approval of the BRSA, (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity. Subsequent call dates. if applicable None Coupons / dividends Fixed or floating dividend/coupon Coupon rate and any related index Existence of a dividend stopper Fully discretionary, partially discretionary or mandatory Existence of step up or other incentive to redeem Fixed 7.85 % None None None None Fixed 7 % None None None None Fixed 7.75 % None None None Noncumulative or cumulative Noncumulative Noncumulative Noncumulative An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 338 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 339 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Convertible or non-convertible None None None Issuer Türkiye İş Bankası A.Ş. If convertible, conversion trigger (s) If convertible, fully or partially If convertible, conversion rate If convertible, mandatory or optional conversion If convertible, specify instrument type convertible into If convertible, specify issuer of instrument it converts into Write-down feature If write-down, write-down trigger(s) In accordance with Regulations on Equities of Banks.Article 8.2.ğ. bonds have deleted option from records. In accordance with Regulations on Equities of Banks.Article 8.2.ğ bonds have deleted option from records. In accordance with Regulations on Equities of Banks.Article 8.2.ğ. bonds have deleted option from records. Due to the losses incurred, where the Bank is at the point at which the BRSA may determine pursuant to Article 71 of the Banking Law that: (i) its operating license is to be revoked and the Bank is liquidated or (ii) the rights of all of its shareholders (except to dividends), and the management and supervision of the Bank, are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable). Due to the losses incurred, where the Bank is at the point at which the BRSA may determine pursuant to Article 71 of the Banking Law that: (i) its operating license is to be revoked and the Bank is liquidated or (ii) the rights of all of its shareholders (except to dividends), and the management and supervision of the Bank, are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) Due to the losses incurred, where the Bank is at the point at which the BRSA may determine pursuant to Article 71 of the Banking Law that: (i) its operating license is to be revoked and the Bank is liquidated or (ii) the rights of all of its shareholders (except to dividends), and the management and supervision of the Bank, are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) If write-down, full or partial Partially or completely Partially or completely Partially or completely If write-down, permanent or temporary Permanent Permanent Permanent If temporary write-down, description of write-up mechanism Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument) Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Incompliance with article number 7 and 8 of “Own fund regulation” Yes. Yes. Yes. Details of incompliances with article number 7 and 8 of “Own fund regulation” To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. Unique identifier (CUSIP, ISIN etc.) TRSTISB72712 TRSTISB62911 TRSTISB92918 Governing law(s) of the instrument Taking into account in equity calculation Is subject to Turkish Law. Has been issued in accordance with the BRSA Communiqué regarding the Equity of Banks. Is subject to Turkish Law. Has been issued in accordance with the BRSA Communiqué regarding the Equity of Banks. Is subject to Turkish Law. Has been issued in accordance with the BRSA Communiqué regarding the Equity of Banks. Subject to 10% deduction as of 01.01.2015 No No. No. Eligible at unconsolidated / consolidated Instrument type (types to be specified by each jurisdiction) Amount recognized in regulatory capital (Currency ın TL million, as of most recent reporting data) Unconsolidated – Consolidated Bond 880 Nominal value of instrument (TL Million) 1,100 Unconsolidated - Consolidated Unconsolidated - Consolidated Bond 800 800 Bond 350 350 Accounting classification Original date of issuance Perpetual or dated Original maturity date Issuer call subject to prior supervisory approval Subordinated Liabilities Subordinated Liabilities Subordinated Liabilities 08.08.2017 19.06.2019 26.09.2019 Dated 10 Years Yes Dated 10 Years Yes Dated 10 Years Yes Optional call date, contingent call dates and redemption amount The Bank; (1) can purchase bills that subject to having obtained the prior approval of the BRSA and the date which may not be earlier than fifth anniversary of the Issue Date (2) (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity The Bank; (1) can purchase bills that subject to having obtained the prior approval of the BRSA and the date which may not be earlier than fifth anniversary of the Issue Date (2) (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity The Bank; (1) can purchase bills that subject to having obtained the prior approval of the BRSA and the date which may not be earlier than fifth anniversary of the Issue Date (2) (a) can redeem all bonds if any taxes imposed or levied (b) can redeem all bonds in case of the deduction from equity Subsequent call dates, if applicable None. Interest/Dividend Payment Fixed or floating coupon/dividend payments Floating None. Floating None. Floating Coupon rate and any related index Government Debt Security for 5 years+350 base points Turkish Lira Overnight Reference Interest Rate (TLREF) + 193 base points Government Debt Security for 5 years + 350 base points Existence of a dividend stopper Fully discretionary, partially discretionary or mandatory Existence of step up or other incentive to redeem None. None. None. None. None. None. None. None. None. Noncumulative or cumulative Non-cumulative Non-cumulative Non-cumulative Convertible into equity shares None. None. None. If convertible, conversion trigger (s) If convertible, fully or partially If convertible, conversion rate An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 340 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 341 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 If convertible, mandatory or optional conversion If convertible, specify instrument type convertible into If convertible, specify issuer of instrument it converts into Write-down feature If write-down, write-down trigger(s) In accordance with Regulations on Equities of Banks, Article 8.2.ğ, bonds have deleted option from records. In accordance with Regulations on Equities of Banks, Article 8.2.ğ, bonds have deleted option from records. In accordance with Regulations on Equities of Banks, Article 8.2.ğ, bonds have deleted option from records. Due to the losses incurred, within the framework of Article 71 of the Banking Law, (1) the Bank’s operating license is to be revoked and liquidated or (2) the rights of all of its shareholders (except to dividends) and the management and supervision of the Bank are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) based on the decision of the BRSA. Due to the losses incurred, within the framework of Article 71 of the Banking Law, (1) the Bank’s operating license is to be revoked and liquidated or (2) the rights of all of its shareholders (except to dividends) and the management and supervision of the Bank are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) based on the decision of the BRSA. Due to the losses incurred, within the framework of Article 71 of the Banking Law, (1) the Bank’s operating license is to be revoked and liquidated or (2) the rights of all of its shareholders (except to dividends) and the management and supervision of the Bank are to be transferred to the SDIF on the condition that losses are deducted from the capital of existing shareholders (occurrence of either condition means the issuer has become non-viable) based on the decision of the BRSA. If bond can be written-down, full or partially Partially or Completely Partially or Completely Partially or Completely If bond can be written-down, permanent or temporary If temporary write-down, description of write- up mechanism Permanent Permanent Permanent Posıtıon in subordination hierarchy in case of liquidation (instrument type immediately senior to the instrument) Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Paid before shares and the primary of subordinated debt and after all the other debts. Incompliance with article number 7 and 8 of Regulation on Bank Capital Yes. Yes. Yes. Details of incompliances with article number 7 and 8 of Regulation on Bank Capital To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. To vest conditions stated in clause of the Article 8 and don’t vest the conditions stated in clause of the Article 7. 3. Explanations on Reconciliations of Amounts in the Consolidated Capital Items Table and Carrying Amounts in the Consolidated Financial Statements: Carrying Amount Amounts in Equity Calculation (1) Shareholders’ Equity Group Share Minority Interest Leasehold improvements on operational leases Goodwill and intangible assets Provisions Subordinated debt Deductions from shareholders’ equity Capital 210.052.693 210,052,693 191,250,928 18,801,765 138,681 4,079,813 20,463,080 33,558,745 20,967 203.896.226 203,896,226 196,195,818 7,700,408 (138,681) (3,767,296) 12,249,588 25,342,500 (20,967) 237,561,370 II. Explanations on Credit Risk 1. Credit risk is defined as the possibility of incurring loss where the counterparty in a transaction, partially or completely fails to meet its contractual obligations in due time in an agreement with the Bank and its consolidated financial subsidiaries. Banks and financial institutions subject to consolidation, carry out their placement activities in accordance with the credit limitations stipulated by legal regulations of the countries in which they operate. The Parent Bank’s position against the credit risk limits defined by the current legislation is monitored by the Board. Within this framework, loans extended to Risk Groups and the Parent Bank’s Risk Group, including the Parent Bank; loans in high amounts and limitations regarding the shares in participations are monitored according to the limits determined in connection with the size of the shareholders’ equity calculated on a bank-only and consolidated basis. Credit risk limits of customers are determined depending on the financial situation and loan requirements of the borrowers, in strict compliance with the relevant banking legislation, within the framework of loan authorization limits of Branches, Regional Offices, Loan Divisions, and the Deputy Chief Executives responsible for loans, the CEO, the Credit Committee and the Board of Directors. These limits may be changed as may be deemed necessary by the Bank. Moreover, all commercial credit limits are revised periodically, provided that each period does not exceed a year. Furthermore, the borrowers and borrower groups forming a large proportion of the overall placement are subject to risk limits in order to provide further minimization of potential risk. The geographical distribution of borrowers is consistent with the concentration of industrial and commercial activities in Turkey. The distribution of borrowers by sector is monitored closely for each period and sectoral risk limits have been determined to prevent concentration of risk in sectoral sense. The creditworthiness of customers is monitored on a consistent basis by using company rating and scoring models specially developed for this purpose, and the audit of statements of account received is assured to have been made in accordance with the provisions as stipulated by the relevant legislation The Parent Bank and its financial affiliates give utmost importance to ensure that loans are furnished with collaterals. In accordance with the credit risk policy, the allocation decision is not based on the assumption that the collateral can be collected by redeeming it in principle. However, to minimize the credit risk, an appropriate level of collateral is obtained by accurately analyzing the credit worthiness and credit need of the customer. Legal recourse of collaterals in case of default, their redemption period, and their ability to maintain their expected value are taken into account from the beginning of the loan allocation process. Most of the loans extended are collateralized by taking real estate, movable or commercial enterprise under pledge, promissory notes and other liquid assets as collateral, or by acceptance of bank letters of guarantee and individual or corporate guarantees. The absence of concentration in terms of collateral is an important element of the credit policy. Non-performing and impaired loans have been classified in accordance with the “TFRS 9-Financial Instruments” and BRSA’s “Regulation on Procedures and Principles for Classification of Loans and Provisions to be set aside”. The detailed descriptions of these methods correspond with accounting practices, are included in Section Three Note VIII. Credit risk is the risk reduction effects without taking into consideration the total amount of exposures after offsetting transactions with different risk classes according to the types and amounts of disaggregated risks are listed below the average for the period. Amount subject to credit risk (1) Risk Classifications Conditional and Unconditional Exposures to Central Governments or Central Banks Conditional and Unconditional Exposures to Regional Governments or Local Authorities Conditional and Unconditional Exposures to Administrative Bodies and Non- Commercial Undertakings Conditional and Unconditional Exposures to Multilateral Development Banks Conditional and Unconditional Exposures to International Organizations Conditional and Unconditional Exposures to Banks and Brokerage Houses Conditional and Unconditional Exposures to Corporate Conditional and Unconditional Retail Exposures Exposures Secured by Residential Real Estate Property Exposures Secured by Commercial Real Estate Property Past Due Loans Items in Regulatory High-risk Categories Exposures in the Form of Bonds Secured by Mortgages Short Term Exposures to Banks, Brokerage Houses and Corporates Exposures in the Form of Collective Investment Undertakings Stock Investments Other Items Current Period Risk Amount Average Risk Amount (2) 451,227,825 396,384,082 192,167 165,994 779,142 81,826,562 539,617,731 265,426,197 34,914,768 32,987,925 6,344,324 92,625,822 9,051,377 88,264,935 44,442,556 256,564 221,724 569,814 78,392,969 498,585,963 211,469,337 29,389,949 31,306,379 6,839,938 61,667,994 5,944,426 58,741,070 33,631,821 (1) The related amounts are calculated in accordance with “Regulation on Equities of Banks”. In this context, part of the expected credit loss of stage 1 and stage 2 up to 1.25 % of amount subject to credit risk, part; subordinated loans according to fourth article of the regulation, have been taken into consideration in equity calculation. On the other hand, in the calculation, the amount of equity calculated in accordance with the regulation dated 21.12.2021 and numbered 9996 of the BRSA and the amount based on the credit risk calculated in accordance with the regulation dated 28.04.2022 and numbered 10188. (1) The figures represent total risk amounts after credit risk mitigation and after credit conversion factor. (2) Average risk amount is identified by using arithmetical averages of risk amounts calculated quarterly in the current period reports. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 342 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 343 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 2. There are certain control limits on forward transactions in terms of counter parties, and the risks taken for derivative instruments are evaluated along with other potential risks resulting from the market fluctuations. 10. The net values of the collaterals of the Group’s non-performing loans are given below in terms of collateral types and risk matches. 3. As a result of the current level of customers’ needs and the progress in the domestic derivatives market in this particular area, the Parent Bank uses derivative transactions either for hedging or for commercial purposes. Type of Collateral Current Period Prior Period Net Value of the Collateral Loan Balance Net Value of the Collateral Loan Balance Derivative instruments are monitored with consideration that they can always be liquidated in case of need. Real Estate Mortgage (1) 6,507,435 6,507,435 6,516,872 6,516,872 4. Indemnified non-cash loans are considered as having the same risk weights as unpaid cash loans. The rating and scoring systems applied by the Parent Bank, includes detailed company analysis and enables rating of all companies and loans without any restrictions regarding credibility. Loans and companies, which have been renewed, restructured or rescheduled, are rated within the scope of this system. Specialized loans are evaluated by a special rating system, which is based on the credibility of the counterparty as well as the feasibility and risk analysis of the cash flows created mainly by the projects undertaken or the asset financed. 5. Determining the country risks of the countries concerned in the context of the current rating system credit transactions carried out abroad, market conditions, legal constraints and risks related to the country on this issue into account. In addition, banks and other financial institutions credit worthiness abroad, foreign rating agencies by based on credit ratings that are determined and CDS-IR (based on credit default swaps) a supported developed degree approach is allocated and monitored. 6. (i) The share of the Group’s receivables from the top 100 and 200 cash loan customers in the overall cash loan portfolio stands at 27% and 36% respectively (December 31, 2021: 30%, 39%). (ii) The share of the Group’s receivables from the top 100 and 200 non-cash loan customers in the overall non-cash portfolio stands at 42% and 54% respectively (December 31, 2021: 46%, 58%). (iii) The share of the Group’s cash and non-cash receivables from the top 100 and 200 credit customers in the overall assets and non-cash loans stands at 14% and 19% (December 31, 2021: 16%, 22%). Companies that are among the top loan customers ranked according to cash, non-cash and total risks are leaders in their own sectors, the loans advanced to them are in line with their volume of industrial and commercial activity. A significant part of such loans is extended on a project basis, with their repayment sources being analyzed in accordance with the banking principles to be considered as satisfactory, and associated risks are determined and duly covered by obtaining appropriate guarantees when deemed necessary. 7. Total value of the Stage 1 and Stage 2 expected credit loss allocated for the credit risk carried by Parent Bank and consodilated companies is TL 16,926,688 (December 31, 2020: TL 11,659,777). 8. The Parent Bank measures the quality of its loan portfolio by applying different rating/scoring models on cash commercial/corporate loans, retail loans and credit cards. The breakdown of the rating/scoring results, which are classified as “Strong”, “Standard” and “Below Standard” by considering their default features, is shown below. The loans whose borrowers’ capacity to fulfill their obligations is very good, are defined as “Strong”, whose borrowers’ capacity to fulfill its obligations in due time is reasonable, are defined as “Standard” and whose borrowers’ capacity to fulfill their obligations is poor, are defined as “Below Standard”. Strong Standard Below Standard Table shows rating/scoring results. Current Period Prior Period 50.00% 44.71% 5.29% 45.06% 49.68% 5.26% 9. The net values of the collaterals of the Group’s closely monitored loans are given below in terms of collateral types and risk matches. Type of Collateral Personal Current Period Commercial and Corporate Credit Cards Personal Prior Period Commercial and Corporate Credit Cards Real Estate Mortgage (1) 1,417,099 13,961,519 1,091,254 12,261,832 Cash Collateral (Cash, securities pledge, etc.) 48,410 571,392 50,628 544,608 Cash Collateral Vehicle Pledge Other (Suretyship, commercial enterprise under pledge, commercial papers, etc.) 1,884 257,315 1,884 257,315 1,523 274,128 1,523 274,128 9,965,770 9,965,770 8,598,774 8,598,774 (1) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports; and after comparing the results to the mortgage/pledge amounts and loan balances, the smallest figures are considered to be the net value of collaterals. 11. The aging analysis of the recievables past due but not impaired in terms of financial asset classes, is as follows: Current Period Loans (1) Corporate / Commercial Loans (3) Consumer Loans Credit Cards Lease Receivables (1) Insurance Receivables Total 31-60 Days (2) 855,693 173,399 229,354 452,940 70,092 35,541 961,326 61-90 Days (2) 496,431 184,153 128,202 184,076 53,594 31,006 581,031 Total 1,352,124 357,552 357,556 637,016 123,686 66,547 1,542,357 (1) The loans classified under close monitoring that are not past due or past due for less than 31 days is TL 77,377,390. (2) Related figures show only overdue amounts of installment based commercial loans and installment-based consumer loans; the principal amounts of the loans which are not due as of the balance sheet date are equal to TL 980,910 and TL 1,915,515 respectively. (3) Includes factoring receivables. Prior Period Loans (1) Corporate / Commercial Loans (3) Consumer Loans Credit Cards Lease Receivables (1) Insurance Receivables Total 31-60 Days (2) 669,979 120,934 155,926 393,119 2,996 35,737 708,712 61-90 Days (2) 964,455 689,981 70,167 204,307 92,609 18,038 Total 1,634,434 810,915 226,093 597,426 95,605 53,775 1,075,102 1,783,814 (1) The loans classified under close monitoring that are not past due or past due for less than 31 days is TL 63,984,188. (2) Related figures show only overdue amounts of installment based commercial loans and installment-based consumer loans; the principal amounts of the loans which are not due as of the balance sheet date are equal to TL 1,572,925 and TL 1,393,092 respectively. (3) Includes factoring receivables Pledge on Wages and Vehicles 3,092,378 Cheques & Notes Other (Suretyship, commercial enterprise under pledge, commercial papers, etc.) 369,527 70,586 2,344,742 345,122 13,667 456,308 38,558,904 450,396 36,912,380 Non-collateralized Total 7,040,513 12,221,280 3,941,709 3,411,799 9,047,472 2,206,344 12,054,708 65,753,208 3,941,709 7,348,819 59,125,081 2,206,344 (1) The mortgage and/or pledge amounts on which third parties have priorities are deducted from the fair values of collaterals in expertise reports; and after comparing the results to the mortgage/pledge amounts and loan balances, the smallest figures are considered to be the net value of collaterals. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 344 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 345 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 12. Profile of Significant Risk Exposures in Major Regions Current Period Domestic European Union OECD Countries (2) Off-Shore Banking Regions USA, Canada Other Countries Investments in Associates, Subsidiaries and Jointly Controlled Entities Unallocated Assets/Liabilities (3) Total Prior Period Domestic European Union OECD Countries (2) Off-Shore Banking Regions USA, Canada Other Countries Investments in Associates, Subsidiaries and Jointly Controlled Entities Unallocated Assets/Liabilities (3) Total 437,104,238 4,009,835 1,136,971 8,976,781 451,227,825 279,429,592 3,418,735 1,136,972 3,909,363 287,894,662 Risk Groups (1) Receivables from Central Governments or Central Banks Receivables from Regional Government or Domestic Government Receivables from Administrative Units and Non-Commercial Enterprises Receivables from Multilateral Development Banks Receivables from International Organizations Receivables from Banks and Intermediaries 192,141 165,859 657,915 121,227 26 135 45,976,674 19,005,741 11,164,932 5,730 2,531,125 3,142,360 Corporate Receivables 513,925,870 6,007,066 5,226,167 1,802,060 358,182 12,298,386 Retail Receivables 262,831,684 436,757 221,429 2,824 73,375 1,860,128 Receivables Secured by Residential Property Non-Performing Receivables Receivables are identified as high risk by the Board Secured Marketable Securities Short-term Receivables and Short-term Corporate Receivables from Banks and Intermediaries Investments as Collective Investment Institutions 66,636,467 246,958 58,801 3,294 65,415 891,758 6,203,804 122,606 4,759 1 1,917 11,237 91,559,085 209,372 34,256 437 18,387 804,285 9,051,377 Other Receivables 88,033,703 119,358 10,484 976 100,414 Stock Investments 44,442,556 192,167 165,994 779,142 81,826,562 539,617,731 265,426,197 67,902,693 6,344,324 92,625,822 9,051,377 88,264,935 44,442,556 Risk Groups (1) Receivables from Central Governments or Central Banks Receivables from Regional Government or Domestic Government Receivables from Administrative Units and Non-Commercial Enterprises Receivables from Multilateral Development Banks Receivables from International Organizations Receivables from Banks and Intermediaries 343,323 593,628 10,452 28 74 341,632 22,291 24,705,086 19,110,911 10,029,676 1,405 5,045,838 1,767,373 Corporate Receivables 359,817,099 4,240,863 4,547,213 678,401 577,216 9,653,672 Retail Receivables 169,270,774 260,917 143,745 1,545 37,789 1,546,299 Receivables Secured by Residential Property Non-Performing Receivables Receivables are identified as high risk by the Board Secured Marketable Securities Short-term Receivables and Short-term Corporate Receivables from Banks and Intermediaries Investments as Collective Investment Institutions 52,329,727 212,708 45,683 85 34,547 653,554 7,577,907 157,363 4,358 1,349 32,721 23,489,023 92,613 12,713 1,377 13,994 267,888 2,683,178 Other Receivables 37,697,899 124,282 456,265 603 85,235 Stock Investments 23,010,720 343,351 604,154 363,923 60,660,289 379,514,464 171,261,069 53,276,304 7,773,698 23,877,608 2,683,178 38,364,284 23,010,720 Total 1,521,680,902 30,815,608 16,842,055 1,814,346 4,186,348 28,085,510 44,442,556 1,647,867,325 Total 957,937,236 27,628,844 15,581,285 682,813 6,848,308 17,938,498 23,010,720 1,049,627,704 (1) The figures represent total risk amounts before credit risk mitigation and after credit conversion factor. (1) The figures represent total risk amounts before credit risk mitigation and after credit conversion factor. (2) OECD Countries other than EU countries, USA and Canada. (3) Assets and liabilities that are not consistently allocated. (2) OECD Countries other than EU countries, USA and Canada. (3) Assets and liabilities that are not consistently allocated. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 346 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 347 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 13. Risk Profile by Sectors or Counterparties: Current Period Consolidated Current Period Consolidated (1) (**) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) TL FC Total Sectors/Counterparty (*) Agriculture Farming and Stockbreeding Forestry Fishing Industry Mining Production 93,906 74,933 6,232 12,741 548 509 39 4,317,552 8,727,370 2,670,615 8,622,333 60,752 1,586,185 49,604 55,433 1,075,738 996,712 7,850 71,176 31,312 29,995 56 1,261 554,570 526,825 2,955 24,790 12,284,767 2,516,229 14,800,996 12,058,260 863,662 12,921,922 125,500 1,988 127,488 101,007 1,650,579 1,751,586 3,825,286 4,736 684 255,018,678 16,807,779 11,013,641 3,060,991 11,199,334 38,975,666 186,638,614 153,268,181 339,906,795 114,809 3,707,496 8,991,229 402,755 215,983 33,347 597,064 3,738,014 6,617,173 10,355,187 165,898,698 16,043,915 10,478,706 611,333 8,270,758 38,975,666 166,509,633 77,476,939 243,986,572 Electricity, gas, and water 2,981 4,736 Construction Services Wholesale and Retail Trade Hotel, Food and Beverage Services 1,166,280 170,342,226 1,698,675 250,673 684 2,590 80,128,751 361,109 318,952 2,416,311 2,331,512 45,233,394 8,520,505 5,973,513 727,692 2,684,460 16,390,967 69,174,069 85,565,036 30,771,930 33,536,504 64,308,434 152,193 779,142 81,772,789 195,998,461 71,671,784 29,250,888 1,170,425 18,684,209 7,096,580 2,080,173 4,246,779 243,744,023 339,501,626 583,245,649 79,313,118 41,758,661 15,032,527 414,948 11,838,937 155,804 110,163,400 40,049,270 150,212,670 10,351,450 3,888,329 3,590,014 238,079 634,169 9,688,043 9,264,671 18,952,714 Transportation and Telecommunication 5,883,279 47,480,801 17,262,286 3,465,426 383,812 2,509,097 117,093 32,635,752 44,466,042 77,101,794 Financial Institutions 162,271,082 1 779,142 81,772,789 34,149,134 1,650,773 9,180,663 2,612,080 1,417,444 1,668,724 1,144,398 622,355 12,961,453 2,208,576 629,948 4,083,656 511,512 1,098,580 839,225 1,582 69,464 50,185 4,865 7,490 665,112 7,096,580 2,080,173 3,973,882 71,848,130 223,222,068 295,070,198 1,742,612 407,104 394,238 492,940 9,683,161 8,082,965 17,766,126 3,247,464 961,064 4,208,528 1,812,697 1,487,990 3,300,687 4,665,376 11,967,556 16,632,932 Real Estate and Renting Services Self-Employment Services Education Services Health and Social Services 23,874 59,116 32,985 122,542 Other Total 53,777 94,443 3,266 706 9,979 275,800,127 187,431 53,773 39,049,646 159,698,759 20,588,913 1,353,904 59,503,249 1,954,797 86,184,762 1,220,111 581,093,039 64,512,412 645,605,451 451,227,825 192,167 165,994 779,142 81,826,562 539,617,731 265,426,197 67,902,693 6,344,324 92,625,822 9,051,377 88,264,935 44,442,556 1,054,532,373 593,334,952 1,647,867,325 (1) Receivables from Central Governments or Central Banks (2) Receivables from Regional Governments or Local Authorities (10) Past due receivables (11) Receivables in regulatory high-risk categories (3) Receivables from Administrative Bodies and Non-commercial Undertakings (12) Investments in the nature of collective investment enterprise (4) Receivables from Multilateral Development Banks (5) Receivables from International Organizations (6) Receivables from Banks and Brokerage Houses (7) Receivables from Corporate Receivables (8) Receivables from Retail Receivables (9) Receivables from Secured by Real Estate Property (13) Other Receivables. (14)Stock Investments. (*) Risk amounts after the credit conversions and the effects of credit risk mitigation (**) Credit Guarantee Fund guaranteed by the undersecreteriat of treasury are included in the receivables from central governments. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 348 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 349 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 14. Analysis of maturity-bearing exposures according to remaining maturities: 16. Miscellaneous Information According to Type of Counterparty of Major Sectors Risk Groups (1) Receivables from Central Governments or Central Banks Receivables from Regional Governments or Domestic Governments Receivables from Administrative Units and Non-Commercial Enterprises The multilateral development banks and non-contingent receivables Receivables from Banks and Intermediaries Corporate Receivables Retail Receivables Collateralized Receivables with Real Estate Mortgages Receivables are identified as High Risk by the Board Current Period Remaining Maturities 1 Month 1-3 Months 3-6 Months 6-12 Months Over 1 Year Total 20,908,630 7,621,802 7,994,514 15,707,658 202,582,657 254,815,261 1,518 4,127 28,719 16,047 141,753 192,164 6,228 3,365 10,841 1,833 93,183 115,450 555,476 13,487 36,309 171,850 777,122 43,550,130 8,055,535 6,079,379 1,365,919 6,349,794 65,400,757 62,891,194 68,222,367 78,813,656 66,991,109 252,985,763 529,904,089 84,130,312 3,669,684 7,384,229 26,171,353 58,068,129 179,423,707 6,807,665 1,979,415 3,717,384 8,148,099 42,618,363 63,270,926 5,352,329 6,806,407 11,146,787 13,757,131 55,417,773 92,480,427 Total 224,203,482 96,376,189 115,211,818 132,330,999 618,257,415 1,186,379,903 (1) The figures represent total risk amounts before credit risk mitigation and after credit conversion factor. 15. Information on Risk Classes: In the calculation of the amount subject to credit risk, determining the risk weights related to risk classes stated on the article “Regulation on Measurement and Evaluation of Capital Adequacy of Banks”, is based on the Fitch Ratings’ and JCR Avrasya Derecelendirme A.Ş. international rating. “Receivables from Banks and Intermediaries” are receivables from related parties residing in foreign countries against the risk evaluated in class with “Receivables from Central Governments or Central Banks” are receivables that are evaluated in the class will be the subject of risk weights determined in accordance with Fitch Ratings issued by the rating of the risk. “Receivables from Banks and Intermediaries” in the class with resident banks and brokerage firms in the dorm evaluated risk “Corporate Receivables” in the class evaluated dorm resident companies and financial institutions in the TL-denominated receivables, the risk weights that will be the subject of JCR Avrasya Derecelendirme A.Ş. international rating grades assigned by it are used. If a receivable-specific rating is performed, risk weights to be applied on the receivable are determined by the relevant credit rating. The table related to mapping the ratings used in the calculations and credit quality grades, which is stated in the Annex of Regulation on Measurement and Evaluation of Capital Adequacy of Banks, is given below: Significant Sectors/Counterparty Current Period 1 Agricultural 1.1 1.2 1.3 Farming and Raising Livestock Forestry Fishing 2 Industry 2.1 2.2 2.3 Mining Production Electricity, gas, and water 3 Construction 4 Services 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 Wholesale and Retail Trade Hotel, Food and Beverage Services Transportation and Telecommunication Financial Institutions Real Estate and Renting Services Self-Employment Services Education Services Health and Social Services 5 Other 6 Total Loans Depreciated (TFRS 9) Provisions Significant Increase in Credit Risk (Stage 2) Non-Performing (Stage 3) Expected Credit Loss (TFRS 9) 663,441 538,527 2,447 122,467 28,864,701 57,053 8,309,606 20,498,042 4,463,901 31,148,829 5,052,379 6,194,339 7,006,805 96,492 6,749,205 1,403,184 78,011 4,568,414 16,608,753 81,749,625 148,819 137,567 877 10,375 12,051,336 196,505 2,281,964 9,572,867 4,035,295 6,845,823 2,010,067 686,120 1,841,693 83,729 1,956,824 182,231 34,211 50,948 4,131,485 27,212,758 182,123 157,807 1,100 23,216 16,407,961 162,861 3,400,474 12,844,626 3,721,587 10,550,405 2,178,284 900,425 2,852,176 25,987 3,356,954 552,021 36,171 648,387 4,341,281 35,203,357 17. Information on Value Adjustments and Change in Credit Provisions Beginning Balance Provisions Reversal of Provisions Other Value Adjustments Ending Balance Stage 3 Provisions Stage 1 and Stage 2 Provisions 15,898,604 14,229,253 (9,562,267) 16,926,688 16,266,440 (13,836,572) 20,565,590 19,356,556 Credit Quality Grades 1 2 3 4 5 6 Risk Rating AAA via AA- A+ via A- BBB+ via BBB- BB+ via BB- B+ via B- CCC+ and lower 18. Exposures Subject to Countercyclical Capital Buffer Explanations about exposures subject to consolidated private sector receivables: Risk Amounts according to Risk Weights: Risk Weight 0% 20% 35% 50% 75% 100% 150% 250% Other Mitigation in Shareholders’ Equity Amount Before Credit Risk Mitigation (1) Amount After Credit Risk Mitigation 518,653,850 104,139,408 35,026,240 103,532,942 174,789,442 629,416,463 61,200,551 385,225 38,736,580 3,905,977 531,929,037 102,489,634 34,914,768 102,807,950 169,278,670 606,445,362 60,880,099 385,225 38,736,580 3,905,977 (1) The figures represent total risk amounts before credit risk mitigation and after credit conversion factor. Turkey TRNC England Germany Albania Cayman Islands Malta Kosovo Georgia Iraq Other Country RWA Calculations for Private Sector Loans in Banking Book RWA calculations for Trading Book Total 711,879,245 4,719,899 716,599,144 5,860,718 4,801,700 3,033,620 1,910,228 1,801,937 1,523,732 1,517,770 1,287,639 1,268,420 4,939,039 492 1,696 5,860,718 4,802,192 3,035,316 1,910,228 1,801,937 1,523,732 1,517,770 1,287,639 1,268,420 67,619 5,006,658 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 350 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 351 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 III. Explanations on Currency Risk The exposed currency risk of the Group is result of the difference between the assets denominated in and indexed to foreign currencies and liabilities denominated in foreign currencies. Furthermore, parity fluctuations of different foreign currencies are another element of the currency risk. The currency risk of the Parent Bank is managed by the internal currency risk limits which are established as a part of the Parent Bank’s risk policies. The Assets and Liabilities Committee and the Assets and Liabilities Management Unit meet regularly to take the necessary decisions for hedging exchange rate and parity risks, within the framework of the determined by the “Net Foreign Currency Overall Position/ Shareholders’ Equity” ratio, which is a part of the legal limits requirement and the internal currency risk limits specified by the Board of Directors. Foreign exchange risk management decisions are strictly applied. In measuring the exposed currency risk of the Group, the Standard Method, the Value at Risk Model (VAR) and Expected Shortfall Model are used as applied in the statutory reporting. Measurements made for the Parent Bank within the scope of the Standard Method are carried out on a monthly basis and form the basis of determining the capital requirement for hedging currency risk. Risk measurements made within the context of the VAR are practiced on a daily basis using the historical and Monte Carlo simulation methods. Scenario analyses are conducted to support the calculations made within the VAR context. Expected loss calculations are also carried out daily. The results of the measurements made on currency risk are reported to the Key Management and the risks are closely monitored by taking into account the market and the economic conditions. The Parent Bank’s foreign currency purchase rates at the date of balance sheet and for the last five working days of the period announced by the Parent Bank in TL are as follows: Date USD EUR December 31, 2022 December 30, 2022 December 29, 2022 December 28, 2022 December 27, 2022 December 26, 2022 18.6500 18.6500 18.6150 18.6031 18.5821 18.5344 19.9247 19.9247 19.8629 19.7565 19.7900 19.7020 The Parent Bank’s last 30-days arithmetical average foreign currency purchase rates: USD: 18,5001 TL EURO: 19,6013 TL Sensitivity to currency risk: The Group’s sensitivity to any potential change in foreign currency rates has been analyzed. Within this framework, 10% change is anticipated in USD, EUR, RUB and GEL currencies and the possible impact of the related change is presented below. 10% is the ratio that is used in the internal reporting of the Parent Bank. % Change in Foreign Currency Effects on Profit/Loss (1) Current Period Priod Period USD EURO RUB GEL (1) Indicates the values before tax. 10 % increase 10 % decrease 10 % increase 10 % decrease 10 % increase 10 % decrease 10 % increase 10 % decrease 875,154 (875,154) 969,497 (969,497) 368,974 (368,974) 170,580 (170,580) 416,075 (416,075) 471,624 (471,624) 155,517 (155,517) 84,092 (84,092) Information on currency risk: Current Period Assets EUR USD Other FC Total Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey (1) 59,015,579 88,221,144 32,890,577 180,127,300 Banks 12,136,851 9,224,403 10,445,874 31,807,128 Financial Assets at Fair Value through Profit/Loss (2) 3,052,881 10,631,762 8,846,315 22,530,958 Money Market Placements Financial Assets at Fair Value through Other Comprehensive Income 6,775,124 63,021,449 10,121 69,806,694 Loans (2) (3) 190,609,167 193,487,274 8,414,492 392,510,933 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) 190,321 190,321 Financial Assets measured at Amortized Cost 2,138,078 10,794,897 2,711,201 15,644,176 Derivative Financial Assets Held for Risk Management (2) Tangible Assets (2) Intangible Assets (2) Other Assets (2) Total Assets Liabilities Bank Deposits Foreign Currency Deposits (4) Money Market Funds Funds Provided from Other Financial Inst, Marketable Securities Issued (5) Miscellaneous Payables 214,278 138,162 2,794 146,316 138,162 363,388 2,502,024 11,122,208 1,984,561 15,608,793 276,634,303 386,644,093 65,449,457 728,727,853 4,635,462 2,929,950 422,848 7,988,260 182,137,536 276,372,336 105,120,711 563,630,583 586,948 12,771,070 104,263 13,462,281 49,389,441 94,410,183 80,481 143,880,105 77,342,752 758,983 78,101,735 3,328,297 9,799,690 1,153,723 14,281,710 Derivative Financial Liabilities Held for Risk Management 134,010 134,010 Other Liabilities (2) (6) Total Liabilities Net Balance Sheet Position Net Off Balance Sheet Position Derivative Financial Assets (7) Derivative Financial Liabilities (7) Non-Cash Loans Prior Period Total Assets Total Liabilities Net Balance Sheet Position Net Off Balance Sheet Position Derivative Financial Assets Derivative Financial Liabilities Non-Cash Loans 8,181,651 15,781,825 1,496,917 25,460,393 248,259,335 489,541,816 109,137,926 846,939,077 28.374.968 -102.897.723 -43.688.469 -118.211.224 -20.551.336 115.206.059 44.954.458 139.609.181 44.021.624 180.200.359 49.667.448 273.889.431 64.572.960 64.994.300 4.712.990 134.280.250 68.534.599 81.161.704 9.262.376 158.958.679 258,292,181 292,085,026 45,057,884 595,435,091 214,594,131 393,606,930 77,543,134 685,744,195 43,698,050 (101,521,904) (32,485,250) (90,309,104) (38,937,607) 107,856,716 34,162,909 103,082,018 30,518,476 170,928,671 39,148,208 240,595,355 69,456,083 63,071,955 4,985,299 137,513,337 63,318,833 81,181,608 8,702,425 153,202,866 (1) Precious metals accounts amounting TL 31,128,501 are included. (2) In accordance with the principles of the “Regulation on the Calculation and Implementation of Foreign Currency Net General Position/Equity Standard Ratio by Banks on Consolidated and Non-Consolidated Basis”, Derivative Financial Instruments Foreign Currency Income Accruals (TL 6,383,060) Operating Lease Development Costs (TL 6,957), Deferred Tax Asset (TL 10,425), Prepaid Expenses and Taxes (TL 400,1478, expected credit loss for stage 1 and stage 2 (TL (13,356,566) Intangible Assets (TL 199,443) Assets Held for Sale and Related to Discontinued Operations(Net)(TL 20,359) in assets and Derivative Financial Instruments Foreign Currency Expense Accruals (TL 2,155,543), Shareholders’ Equity (TL (3,666,898)) and expected credit loss for stage 1 and stage 2 for non-cash loans (TL 170,537) are not taken into consideration in the currency risk measurement. (3) Includes leasing and factoring receivables and foreign currency indexed loans which are recognized under TL account. Of the total amount of TL 1,882,112 of the aforementioned loans; TL 989,073 is USD indexed, TL 887,872 is EUR indexed, TL 401 is CHF indexed and TL 4,766 is GBP indexed. (4) The item includes TL 74,492,798 precious metals deposit accounts. (5) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. (6) The borrower funds are presented in the “Other Liabilities” according to their type of currency. (7) The derivative transactions in the context of forward foreign currency options and foreign currency forwards definitions included in the Communiqué above are taken into consideration. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 352 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 353 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 IV. Explanations on Interest Rate Risk a. Interest sensitivity of assets, liabilities and off-balance sheet items (Based on time remaining to repricing date): Interest rate risk is defined as the impairment in the value of the interest sensitive assets, liabilities and off-balance sheet items due to interest rate fluctuations. A method which takes into consideration the effect of standard interest shocks on the economic values of the Parent Bank’s on, and off- balance sheet interest sensitive accounts is used for measuring the interest rate risk arising from the banking accounts, whereas the interest rate risk related to interest sensitive financial instruments followed under trading accounts is assessed within the scope of market risk. Potential effects of interest rate risk on the Parent Bank’s assets and liabilities, market developments, the general economic environment and expectations are regularly followed in meetings of the Asset-Liability Management Committee, where further measures to reduce risk are taken when necessary. The Parent Bank’s on and off-balance sheet interest sensitive accounts other than the assets and liabilities exposed to market risk are monitored and controlled by the limits on the ratio of structural interest rate risk to equity and tier 1 capital determined by the Board within the scope of “Asset-Liability Management Risk Policy”. Moreover, scenario analyses formed in line with the average maturity gaps and the historical data and expectations are also used in the management of the related risk. In addition, the effect of the change in interest rates on the Parent Bank's net interest income is analyzed regularly. Within this scope, the ratio of the change expected to occur in net interest income under carious scenarios to the limit on Tier I capital is monitored and regularly reported to the top management. Interest rate sensitivity: In this part, the sensitivity of the Bank’s assets and liabilities to the interest rates has been analyzed assuming that the yearend balance figures were the same throughout the year. Mentioned analysis shows how the FC and TL changes in interest rates by one point during the one-year period affect the Group's income accounts and shareholders' equity under the assumption maturity structure and balances are remain the same all year round at the end of the year. During the measurement of the Group’s interest rate sensitivity, the profit/loss on the asset and liability items that are evaluated with market value are determined by adding to/deducting from the difference between the expectancy value of the portfolio after one year in case there is no change in interest rates and the value of the portfolio one year later, which is measured after the interest shock, the interest income to be additionally earned/to be deprived of during the one year period due to the renewal or repricing of the related portfolio at the interest rates formed after the interest shock. On the other hand, in the profit/loss calculation of assets and liabilities that are not evaluated by the current market prices, it is assumed that assets and liabilities with fixed interest rates will be renewed at maturity date and the assets and liabilities having variable interest rates will be renewed at the end of repricing period with the market interest rates generated after the interest shock. Within this context, ceteris paribus, the possible changes that may occur in the Bank’s profit and shareholders’ equity in case of 100 base point increase/ decrease in TL and FC interest rates on the reporting day are given below: % Change in the Interest Rate (1) Effect On Profit/Loss Effect on Equity (2) TL FC Current Period Prior Period Current Period Prior Period 100 bps increase 100 bps increase 100 bps decrease 100 bps decrease 1,008,028 (1,166,480) 977,167 (1,068,195) (3,977,233) 4,308,848 (2,608,623) 2,871,166 (1) Changes in interest rates is calculated assuming that the expectations reflected in inflation. The effects on the profit/loss and shareholders’ equity are stated with their before tax values. (2) The effect on the shareholders’ equity is arising from the change of the fair value of securities followed under Financial Assets at Fair Value through other comprehensive income. Current Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Non-interest Bearing Total Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 7,453,621 194,392,278 201,845,899 Banks 20,803,477 2,766,863 210,855 15,213,620 38,994,815 Financial Assets at Fair Value through Profit/ Loss (1) Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income Loans (2) Financial Assets Measured at Cost Other Assets (3) 6,895,940 8,859,810 4,802,754 9,381,655 80,451 23,114,891 53,135,501 5,032,776 685,950 476,616 6,195,342 45,203,231 27,170,040 46,089,905 44,113,918 37,416,879 2,131,604 202,125,577 236,210,546 102,037,625 293,405,120 222,419,187 57,350,982 940,273 912,363,733 17,770,899 22,876,252 25,522,859 27,002,656 13,783,495 106,956,161 13,105,004 153,130 287,067 221,470 180,047,870 193,814,541 Total Assets 352,475,494 164,549,670 370,795,176 303,138,886 108,631,807 415,840,536 1,715,431,569 Liabilities Bank Deposits Other Deposits 4,621,637 2,508,509 2,756,604 228,279 1,192,084 11,307,113 366,805,419 100,178,746 39,502,856 3,446,087 884,470 430,511,241 941,328,819 Money Market Funds 44,232,857 5,347,374 1,648,534 Miscellaneous Payables 13,202,152 164,956 184,831 11,391 43,442 51,240,156 136,757,803 150,353,184 14,199,907 4,368,607 10,823,154 37,789,516 24,722,121 91,903,305 155.981.599 155,981,599 45.719.157 65.261.065 35.110.948 7.629.899 2.260.530 Institutions 45,719,157 65,261,065 35,110,948 7,629,899 2,260,530 Other Liabilities (5) (6) 4,253,060 3,722,352 3,373,765 351,926 1,408,118 300,208,172 313,317,393 Total Liabilities 493,034,189 181,551,609 93,400,692 49,500,540 29,275,239 868,669,300 1,715,431,569 Balance Sheet Long Position Balance Sheet Short Position Off Balance Sheet Long Position Off Balance Sheet Short Position 277,394,484 253,638,346 79,356,568 610,389,398 (140,558,695) (17,001,939) (452,828,764) (610,389,398) 7,997,276 21,622,707 29,619,983 (6,956,126) (10,009,441) (7,856,740) (24,822,307) Total Position (132,561,419) 4,620,768 270,438,358 243,628,905 71,499,828 (452,828,764) 4,797,676 (1) Includes Derivative financial assets (2) Includes leasing and factoring receivables. (3) The expected loss provisions are shown in non-Interest column. (4) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. (5) Shareholders’ equity is included in “non-interest bearing” column. (6) The borrower funds are presented in “Up to 1 month” column in other liabilities. Marketable Securities Issued (4) Funds Provided from Other Financial An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 354 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 355 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Interest rate sensitivity of assets, liabilities and off-balance sheet items (Based on time remaining to repricing date): b. Parasal finansal araçlara uygulanan ortalama faiz oranları: Prior Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Non-interest Bearing Total Current Period EUR % USD % JPY % TL % Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 14,634,682 169,386,543 184,021,225 Banks Assets Cash (Cash in Vault. Foreign Currency Cash. Money in Transit. Cheques Purchased) and Balances with the Central Bank of Turkey Banks 7,522,586 1,446,001 159,067 26,067,588 35,195,242 Financial Assets at Fair Value through Profit/ Loss (1) Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income Loans (2) Financial Assets Measured at Cost Other Assets (3) 9,268,937 10,152,530 7,785,436 6,127,712 300,260 5,596,590 39,231,465 2,061,138 775,354 156,572 2,993,064 21,648,338 19,425,001 17,779,889 26,013,946 23,874,084 1,202,401 109,943,659 115,872,992 60,061,057 177,179,502 206,721,651 53,925,304 982,214 614,742,720 8,800,527 13,843,894 17,813,725 8,513,617 2,573,565 51,545,328 5,055,341 76,608 236,851 149,824 81,212,746 86,731,370 Total Assets 184,864,541 105,780,445 221,111,042 247,526,750 80,673,213 284,448,082 1,124,404,073 Liabilities Bank Deposits Other Deposits 1,639,400 1,720,923 713,064 1,050,890 1,302,757 6,427,034 255,680,706 36,249,663 24,356,836 3,437,720 962,851 290,564,393 611,252,169 Money Market Funds 46,847,607 2,541,576 4,322,725 Miscellaneous Payables 2,230,493 60,121 46,585 25,945 26,822 53,737,853 73,969,740 76,333,761 Marketable Securities Issued (4) Funds Provided from Other Financial Institutions 2,104,244 11,647,841 22,621,436 35,838,166 17,344,902 89,556,589 12,455,710 53,579,724 50,954,407 9,616,624 2,317,218 128,923,683 Other Liabilities (5) (6) 5,230,548 4,443,819 3,981,506 1,373,120 1,376,106 141,767,885 158,172,984 Money Market Placements Total Liabilities 326,188,708 110,243,667 106,996,559 51,369,287 22,001,077 507,604,775 1,124,404,073 Financial Assets at Fair Value Through Other Comprehensive Income Balance Sheet Long Position Balance Sheet Short Position Off Balance Sheet Long Position Off Balance Sheet Short Position 114,114,483 196,157,463 58,672,136 368,944,082 (141,324,167) (4,463,222) (223,156,693) (368,944,082) 3,422,542 16,148,347 19,570,889 (1,052,722) (9,325,566) (6,159,597) (16,537,885) Total Position (137,901,625) 11,685,125 113,061,761 186,831,897 52,512,539 (223,156,693) 3,033,004 (1) Includes Derivative financial assets. (2) Includes leasing receivablesand factoring receivables. (3) The expected loss provisions are shown in non-Interest column. (4) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. (5) Shareholders’ equity is included in “non-interest bearing” column. (6) The borrower funds are presented in “Up to 1 month” column in other liabilities. Loans (1) Financial Assets Measured at Amortized Cost Liabilities Bank Deposits Other Deposits Money Market Funds Miscellaneous Payables Debt Securities Issued (2) Funds Funds Provided from Other Financial Institutions (1) Includes leasing receivablesand factoring receivables. (2) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. Financial Assets at Fair Value through Profit/Loss Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income Loans (1) Financial Assets Measured at Cost Liabilities Bank Deposits Other Deposits Money Market Funds Miscellaneous Payables Debt Securities Issued (2) Funds Funds Provided from Other Financial Institutions (1) Includes leasing receivables and factoring receivables. (2) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. 2.50 1.22 3.00 3.89 5.94 3.58 0.77 0.12 1.48 1.50 3.39 4.25 2.77 5.23 5.84 8.12 6.91 4.70 0.65 6.61 6.59 2.50 6.11 7.27 20.21 13.59 16.47 31.73 20.59 23.92 12.64 11.63 9.71 20.49 7.50 15.26 Prior Period EUR % USD % JPY % TL % Assets Cash (Cash in Vault. Foreign Currency Cash. Money in Transit. Cheques Purchased) and Balances with the Central Bank of Turkey Banks Financial Assets at Fair Value through Profit/Loss 0.35 1.92 (2.60) 3.86 4.29 3.11 0.35 0.06 0.65 0.10 1.57 0.22 2.70 5.21 5.30 5.03 1.09 0.14 1.45 6.43 0.20 2.01 8.50 18.39 15.78 16.63 21.47 18.30 19.21 15.50 11.57 14.19 18.37 11.00 16.69 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 356 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 357 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 V. Explanations on Equity Shares Risk Arising from Banking Book VI. Explanations on Liquidity Risk Management and Consolidated Liquidity Coverage Ratio a. Accounting policies related to equity investments in associates and subsidiaries can be seen in the Section Three Note III.2. b. Balance sheet value of equity investment, fair value and for publicly traded, if the market value is different from the fair value comparison to the market price: Book Value Comparison Fair Value Market Value Investment in Shares Quoted Investment in Shares Group A Subsidiaries Financial Subsidiaries Non-Financial Subsidiaries (1) 39,036,192 132,854,654 Non-Quoted Associate and Subsidiaries Financial Subsidiaries (2) Non-Financial Subsidiaries Subsidiaries Financial Subsidiaries Non-Financial Subsidiaries (1) Türkiye Şişe ve Cam Fabrikaları A.Ş. 385,225 20,120 3,412,997 (2) Accounted under the equity method in the consolidated financial statements according to TAS 28 and 1st clause of Article 5 of the “Communiqué on the Preparation of Consolidated Financial Statements”. (3) Refers to the total market value of the company. c. Information on revaluation surpluses and unrealised gains/losses on equity securities and results included in Common Equity and Tier II Capital: Portfolio Private Equity Investments Shares Traded on a Stock Exchange Other Stocks Total Realised Gains/losses During the period Revaluation Increases Unrealized Gains and Losses Total Including into Tier I Capital (1) Total Including into Tier I Capital Total 37,446,292 37,446,292 1,110,254 1,110,254 38,556,546 38,556,546 (1) Represents the amounts reflected to equity according to the equity method. d. Capital requirement based on per equity shares: Portfolio Carrying Value Total RWA Minimum Capital Requirement Private Equity Investments Share Traded on a Stock Exchange Other Stocks Total 39,036,192 3,818,342 42,854,534 39,036,192 4,396,180 43,432,372 3,122,895 351,694 3,474,589 Liquidity risk may occur as a result of funding long-term assets with short-term liabilities. The Groups’ liquidity is managed by the Asset-Liability Management Committee in accordance with the business strategies, legal requirements, current market conditions and expectations regarding the economic and financial conjuncture. The Parent Bank’s principal source of funding is deposits. Although the average maturity of deposits is shorter than that of assets as a result of the market conditions, the Bank’s wide network of branches and stable core deposit base are its most important safeguards of funding. Additionally, the Bank borrows medium and long-term funds from institutions abroad. Concentration limits are generally used in deposit and non-deposit borrowings in order to prevent adverse effects of concentrations in the liquidity risk profile of the Bank. In order to meet the liquidity requirements that may arise from market fluctuations, considerable attention is paid to the need to preserve liquidity and efforts in this respect are supported by projections of Turkish Lira and Foreign Currency (FC) cash flows. The term structure of TL and FC deposits, their costs and amounts are monitored on a daily basis. During these studies historical events and future expectations are taken into account as well, based upon cash flow projections, prices are differentiated for different maturities and measures are taken accordingly to meet liquidity requirements. Moreover, potential alternative sources of liquidity are determined to be used in case of extraordinary circumstances. The liquidity risk exposure of the Group has to be within the risk capacity limits which are prescribed by the legislation and the Group’s risk appetite defined in its business strategy. It is essential for the Group to have an adequate level of unencumbered liquid asset stock which can be sold or pledged, in case a large amount of reduction in liquidity sources occurs. The level of liquid asset buffer is determined in accordance with the liquidity risk tolerance which is set by the Board of Directors. Asset-Liability Management Committee is responsible for monitoring the liquidity position, determining appropriate sources of funds and deciding the maturity structure in accordance with the limits which are set by the Board of Directors. The Treasury Division is responsible for monitoring the liquidity risk, in accordance with the Asset-Liability Management Risk Policy limits, objectives set out in the business plan and the decisions taken at the meetings of Asset-Liability Management Committee. The Treasury Division is also responsible for making liquidity projections and taking necessary precautions to reduce liquidity risk, by using the results of stress testing and scenario analysis. Within this scope, Treasury Division is monitoring the Turkish Lira (TL) and foreign currency (FC) liquidity position instantly and prospectively based on the information provided from the branches, business units and IT infrastructure of the Bank. The assessment of long-term borrowing opportunities is carried out regularly in order to balance the cash inflows and outflows and to mitigate the liquidity risk. The Bank creates liquidity through repurchase agreements and secured borrowings based on the high quality liquid asset portfolio, through securitization and other structured finance products which are created from the asset pools like credit card receivables and retail loans. The Bank applies liquidity stress tests to measure liquidity risk. In this approach, in liquidity stress scenarios in which parameters are determined by the Board of Directors, the ability of the Bank’s liquid assets’ in covering cash outflows within a one-month horizon has been described. Liquidity adequacy limits for TL and FC are determined by Board of Directors, based on the liquidity requirements and risk tolerance of the Bank. The liquidity risk is measured by the Risk Management Division and results are reported to the related executive functions, senior management and Board of Directors. It is essential for the Bank to monitor the liquidity position and funding strategy continuously. In case of a liquidity crisis that may arise from unfavorable market conditions, extraordinary macroeconomic situations and other reasons which are beyond the control of the Bank. “Emergency Action and Funding Plan” is expected to be commissioned. In that case, related committees have to report the precautions taken and their results to the Board of Directors through Audit Committee. October 31, 2021 November 30, 2021 December 31, 2021 October 31, 2020 November 30, 2020 December 31, 2020 TL+FC TL+FC Current Period 160,65 155,09 154,99 Prior Period 156,66 172,64 199,25 FC FC 457,48 467,81 487,23 434,83 468,88 507,82 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 358 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 359 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 The Bank’s Foreign Currency (FC) and total (TL+FC) liquidity coverage ratio (LCR) averaged for the last three months are given below. Liquidity Coverage Ratio: Current Period High Quality Liquid Assets High Quality Liquid Assets Cash Outflows Total Unweighted Value (1) Dikkate Alınma Oranı Uygulanmış Toplam Değer (1) TL+FC FC TL+FC FC 308,711,858 204,903,813 Retail and Small Business Customers, of which; 611,317,338 377,077,839 56,151,478 37,707,784 Stable deposits Less stable deposits 99,605,132 4,980,257 511,712,206 377,077,839 51,171,221 37,707,784 Unsecured wholesale funding, of which; 334,798,824 187,403,972 168,815,630 98,329,464 Operational deposits Non-operational deposits Other unsecured funding Secured funding Other cash outflows, of which; Derivatives cash outflow and liquidity needs related to market valuation changes on derivatives or other transactions Obligations related to structured financial products Commitments related to debts to financial markets and other off- balance sheet obligations Other revocable off-balance sheet commitments and contractual obligations 3,005,540 36,219 739,822 9,055 227,527,733 151,835,763 100,701,866 66,519,903 104,265,551 35,531,990 67,373,942 31,800,506 8,511,344 19,369,975 8,511,344 19,369,975 3,273,748 14,132,379 3,273,748 14,132,379 5,237,596 5,237,596 5,237,596 5,237,596 80,267,478 73,076,139 4,013,374 3,653,807 Other irrevocable or conditionally revocable off-balance sheet obligations 426,353,159 175,080,021 36,996,071 15,510,864 274,712,653 174,585,625 Total Cash Outflows Cash Inflows Secured lending Unsecured lending Other cash inflows Total Cash Inflows Total HQLA Stock Total Net Cash Outflows Liquidity Coverage Ratio (%) (1) The simple arithmetic average calculated for the last three months of weekly simple arithmetic average. 224,756 13,731 Obligations related to structured financial products Prior Period High Quality Liquid Assets High Quality Liquid Assets Cash Outflows Total Unweighted Value (1) Dikkate Alınma Oranı Uygulanmış Toplam Değer (1) TL+FC FC TL+FC FC 196,731,749 137,922,605 Retail and Small Business Customers, of which; 385,342,542 255,632,298 35,792,010 25,563,230 Stable deposits Less stable deposits Unsecured funding, of which; Operational deposits Non-operational deposits Other unsecured funding Secured funding Other cash outflows, of which; Derivatives cash outflow and liquidity needs related to market valuation changes on derivative or other transactions 54,844,879 2,742,244 330,497,663 255,632,298 33,049,766 25,563,230 187,046,797 112,910,239 95,886,913 56,879,781 1,255,644 16,359 313,911 4,090 134,597,977 98,576,273 60,491,359 43,239,644 51,193,176 14,317,607 35,081,643 13,636,047 8,505,992 12,874,684 8,505,992 12,874,684 65,495 53,327 4,375,826 8,744,518 4,375,826 8,744,518 Commitments related to debts to financial markets and other off- balance sheet obligations Other revocable off-balance sheet commitments and contractual obligations 4,130,166 4,130,166 4,130,166 4,130,166 53,066,816 46,671,687 2,653,341 2,333,584 Other irrevocable or conditionally revocable off-balance sheet obligations 287,990,929 156,050,151 29,290,631 17,577,368 Total Cash Outflows Cash Inflows Secured lending Unsecured lending Other cash inflows Total Cash Inflows 172,194,382 115,281,974 112,194 36,588 1,571 1,356 63,377,888 46,531,386 52,758,960 40,975,721 7,972,830 61,206,589 7,972,830 61,206,589 71,462,912 107,774,563 60,733,361 102,183,666 Upper Limit Applied Values 196,731,749 137,922,605 111,461,021 29,261,943 176,18 470,51 4,195,089 500,968 100,584,121 65,700,311 74,655,489 54,622,443 2,727,740 116,821,011 2,727,740 116,821,011 Total HQLA Stock Total Net Cash Outflows Liquidity Coverage Ratio (%) 107,506,950 182,521,322 77,884,197 171,443,454 (1) The simple arithmetic average calculated for the last three months of the monthly simple arithmetic average. Upper Limit Applied Values 308,711,858 204,903,813 196,828,456 43,646,406 156,91 470,84 Compared to the prior priof, it is observed that the liquidity coverage ratio decreased in the fourth quarter of 2022 due to the increase in net cash outflows both in total and in foreign currency. Foreign currency liquidity coverage rate decreased due to the increase in net cash outflows, while the total liquidity coverage rate increased due to the increase in the stock of high-quality liquid assets. Total and Foreign Currency liquidity coverage ratios are continuing to hover far above the minimum level (respectively 100% and 80%) pursuant to legal legislations. The Liquidity Coverage Ratio which has been introduced to ensure banks to preserve sufficient stock of high-quality assets to meet their net cash outflows that may occur in the short term is calculated as per the Communiqué on “Measurement and Assessment of the Liquidity Coverage Ratio of Banks’ published by BRSA. The ratio is directly affected by the level of unencumbered high-quality assets which can be liquidated at any time and net cash inflows and outflows arising from the Group’s assets, liabilities and off-balance sheet transactions. The Group’s high quality liquid asset stock primarily consists of cash and the accounts held at CBRT and unencumbered government bonds which are issued by Turkish Treasury. The Bank’s principal source of funding is deposits. In term of non-deposit borrowing, funds received from repurchase agreements, marketable securities issued, and funds borrowed from financial institutions are among the most significant funding sources. In order to manage liquidity effectively, concentration of liquidity sources and usages should be avoided. Due to the strong and stable core deposit base of the Bank, deposits are received from a diversified customer portfolio. In addition, to provide diversification in liquidity sources and usages, liquidity concentration limits are used effectively. Total amount of funds borrowed from a single counterparty, or a risk group is closely and instantaneously monitored, taking liquidity concentration limits into account. In addition to these, the cumulative liquidity deficits that the Parent Bank is exposed to in various maturity tranches are periodically monitored and reported to the senior management. Cash flows of derivatives that will take place within 30 days are taken into account in calculation of liquidity coverage ratio. Cash outflows of derivatives that arise from margin obligations, are reflected to the results in accordance with the methodology articulated in the related legislation. Liquidity risk of the Bank, its foreign branches and subsidiaries that are to be included in consolidation are managed within the regulatory limits and in accordance with the Group strategies. For the purposes of effectiveness and sustainability of liquidity management, funding sources of Group compaiesy and funding diversification opportunities in terms of markets, instruments and tenor are evaluated and liquidity position of the group companies are monitored continuously by the Parent Bank. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 360 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 361 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Presentation of assets and liabilities according to their remaining maturities: Current Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Unallocated (1) Total In compliance with the “TFRS 7”, the following table indicates the maturities of the Group’s major financial liabilities which are not qualified as derivatives. The following tables have been prepared by referencing the earliest dates of payments without discounting the liabilities. The interest to be paid to the related liabilities is included in the following table. Adjustments column shows the items that may cause possible cash flows in the following periods. The values of the related liabilities registered in balance sheet do not include these amounts. Loans (3)(4) 31,842,932 133,372,179 108,340,248 298,108,761 247,484,905 66,001,950 27,212,758 912,363,733 (1) Includes bonds that have the nature of issued secondary subordinated loans, which are classified as subordinated loans on the balance sheet. Assets Cash (Cash in Vault, Foreign Currency Cash, Money in Transit, Cheques Purchased) and Balances with the Central Bank of Turkey 79,748,724 122,097,175 Banks 19,346,828 16,670,269 2,766,863 210,855 Financial Assets at Fair Value through Profit/Loss (2) Money Market Placements Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets Measured at Amortized Cost Other Assets Total Assets Liabilities Bank Deposits Other Deposits Funds Provided from Other Financial Institutions Money Market Funds 23,111,597 7,384,835 8,561,711 4,628,881 9,377,593 70,884 5,032,776 685,950 476,616 2,131,604 1,793,833 6,858,790 22,485,163 104,870,290 63,985,897 202,125,577 1,665,017 3,364,926 10,014,167 57,972,059 33,939,992 106,956,161 42,335,176 19,159,690 365,493 177,702 2,576,476 129,200,004 193,814,541 198,516,861 307,175,774 130,943,981 336,102,145 422,281,323 163,998,723 156,412,762 1,715,431,569 1,192,084 4,621,637 2,508,509 2,756,604 228,279 430,511,241 366,804,733 100,178,092 39,499,739 3,450,544 884,470 10,660,466 10,450,266 55,030,579 51,420,421 28,419,867 44,232,857 3,247,827 3,748,081 11,391 Marketable Securities Issued (5) 13,077,343 3,213,348 10,823,154 38,912,080 25,877,380 Miscellaneous Payables 89,840,898 59,261,233 441,273 16,961,168 602,083 9,137,558 182,978 3,741,168 465,992 694,157 319,823 282,022,246 313,317,393 521,985,496 515,619,437 129,337,683 115,782,303 95,182,864 55,501,540 282,022,246 1,715,431,569 Other Liabilities (6) Total Liabilities 201,845,899 38,994,815 53,135,501 6,195,342 11,307,113 941,328,819 155,981,599 51,240,156 91,903,305 150,353,184 Current Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Adjustments (-) Balance Sheet Value Liabilities Deposits Funds Provided from Other Financial Institutions Money Market Funds Marketable Securities Issued (Net) (1) Leasing Liabilities 431,703,325 372,404,269 104,427,790 43,495,850 3,819,539 986,180 956,836,953 4,201,021 952,635,932 10,608,924 11,111,093 60,778,311 62,841,187 35,646,503 180,986,018 25,004,419 155,981,599 44,287,582 3,310,657 3,863,524 11,591 51,473,354 233,198 51,240,156 13,592,407 3,461,102 15,080,451 49,361,501 28,795,298 110,290,759 18,387,454 91,903,305 49,799 116,174 460,864 1,223,794 608,706 2,459,337 816,284 1,643,053 Prior Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Adjustments (-) Balance Sheet Value Liabilities Deposits Funds Provided from Other Financial Institutions Money Market Funds Marketable Securities Issued (Net) (1) Leasing Liabilities 291,867,150 257,817,496 38,441,570 25,318,327 4,584,375 1,145,789 619,174,707 1,495,504 617,679,203 5,179,465 10,843,245 48,493,365 46,585,229 23,859,359 134,960,663 6,036,980 128,923,683 46,912,274 2,550,211 4,360,066 26,546 53,849,097 111,244 53,737,853 2,348,478 9,678,950 26,563,296 46,508,859 23,533,539 108,633,122 19,076,533 89,556,589 35,971 82,418 272,940 922,507 506,016 1,819,852 580,138 1,239,714 (1) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. The following table shows the remaining maturities of non-cash loans of the Group. Liquidity Gap (323,468,635) (208,443,663) 1,606,298 220,319,842 327,098,459 108,497,183 (125,609,484) Current Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Net Off Balance Sheet Position (2,790,449) (3,320,632) 1,584,643 2,846,840 550,941 Derivative Financial Assets Derivative Financial Liabilities 189,216,660 72,157,698 45,268,853 90,901,222 76,163,585 192,007,109 75,478,330 43,684,210 88,054,382 75,612,644 Non-cash Loans 131,529,790 7,843,265 19,534,617 66,168,088 17,943,149 7,497,012 (1,128,657) 473,708,018 474,836,675 250,515,921 Prior Period Total Assets Total Liabilities Liquidity Gap 169,573,968 174,612,538 78,545,534 188,657,776 319,514,247 108,583,650 84,916,360 1,124,404,073 342,908,302 347,075,584 66,693,216 103,208,681 85,833,703 43,502,176 135,182,411 1,124,404,073 (173,334,334) (172,463,046) 11,852,318 85,449,095 233,680,544 65,081,474 (50,266,051) Net Off Balance Sheet Position Derivative Financial Assets Derivative Financial Liabilities 1,303,544 2,537,428 314,978 1,850,956 494,422 154,345,598 63,995,026 43,416,267 67,227,055 65,745,376 153,042,054 61,457,598 43,101,289 65,376,099 65,250,954 Non-cash Loans 117,111,116 3,824,077 10,279,933 47,548,648 14,381,524 6,470,495 6,501,328 394,729,322 388,227,994 199,615,793 (1) Assets, such as Tangible Assets, Subsidiaries and Associates, Office Supply Inventory, Prepaid Expenses and Non-Performing Loans, which are required for banking operations and which cannot be converted into cash in short-term, other liabilities such as Provisions which are not considered as payables and Shareholders’ Equity, are shown in ‘Unallocated” column. (2) The balances include financial derivative assets. (3) Includes leasing and factoring receivables. (4) Stage 3 Non performing loans are included in “Unallocated” column. (5) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. (6) The borrower funds are presented in “Up to 1 month” column in other liabilities. Letters of Credit Letters of Guarantee Acceptances Other Total 21,031,210 109,360,483 137,720 1,000,377 4,990,207 2,525,641 327,417 8,488,974 10,142,096 864,033 39,514 21,584,064 37,774,002 6,723,990 502,220 16,297,174 347 86,032 1,143,408 131,529,790 7,843,265 19,534,617 66,168,088 17,943,149 271,840 56,868,515 4,653,229 180,752,625 2,571,943 7,497,012 8,053,507 4,841,274 250,515,921 Prior Period Demand Up to 1 Month 1-3 Months 3-12 Months 1-5 Years 5 Years and Over Total Letters of Credit Letters of Guarantee Acceptances Other Total 39,975,559 75,667,646 583,828 884,083 1,442,386 1,355,867 1,010,984 14,840 1,343,837 6,702,245 2,233,851 4,648,587 32,852,294 9,932,465 115,302 1,266,738 11,984,768 44,745 1,085,273 196,642 4,104,143 2,169,710 48,873,749 132,666,963 13,805,873 4,269,208 117,111,116 3,824,077 10,279,933 47,548,648 14,381,524 6,470,495 199,615,793 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 362 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 363 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 The following table shows the remaining maturities of derivative financial assets and liabilities of the Group. c. Explanations on consolidated leverage ratio Current Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years Forwards Contracts- Buy Forwards Contracts- Sell Swaps Contracts -Buy Swaps Contracts -Sell Futures Transactions-Buy Futures Transactions-Sell Options-Call Options-Put Other Total Forwards Contracts - Buy Forwards Contracts - Sell Swaps Contracts - Buy Swaps Contracts - Sell Futures Transactions - Buy Futures Transactions - Sell Options - Call Options – Put Other Total 5 Years and Over Total 34,922,126 34,417,278 8,245,045 8,292,895 11,228,799 10,969,931 12,917,860 12,661,924 2,530,422 2,492,528 152,309,275 44,576,936 19,903,500 87,599,199 72,341,423 376,730,333 169,988,158 55,485,647 19,253,119 84,790,253 71,790,482 401,307,659 130,537 129,888 3,643,935 3,641,727 2,224,899 1,266,177 1,561,858 1,870,756 55,041 50,766 5,545,458 4,879,934 34,842,309 18,451,025 13,685,461 707,612 707,612 127,978 3,822,162 3,822,162 2,410,477 1,446,831 15,281,025 14,922,191 67,106,773 381,223,769 147,636,028 88,953,063 178,955,604 151,776,229 948,544,693 9,789,528 10,177,720 7,650,678 7,694,897 120,101,356 48,549,092 133,617,738 49,670,442 7,696 7,967 5,122,288 5,201,143 23,362,216 922,465 175,595 2,949,375 2,919,767 4,920,313 14,817,597 14,931,354 22,481,946 22,068,513 591,886 595,566 4,012,940 3,962,813 3,054,941 5 Years and Over Total 37,054,393 37,402,956 62,720,302 316,039,342 62,225,880 327,933,504 4,796,590 4,598,985 62,186,646 60,350,931 3,025,074 3,025,074 670,002 1,522,047 779,128 15,109,677 15,108,797 32,007,472 307,387,652 125,452,624 86,517,556 132,603,154 130,996,330 782,957,316 Prior Period Up to 1 Month 1-3 Months 3-12 Months 1-5 Years VII. Explanations on Leverage Ratio a. Explanations on Differences Between Current and Prior Years’ Leverage Ratios The Bank’s consolidated leverage ratio is calculated in accordance with the principles of the “Regulation on Measurement and Evaluation of Banks’ Leverage Level”. The Bank’s consolidated Leverage ratio is 8.14% (December 31, 2021: 6.12%). According to Regulation the minimum leverage ratio is 3%. The changes in the leverage ratio are mostly due to the increase in the Tier I Capital amounts. b. Summary Comparison Table Related to Total Amount of Asset and Risk Situated in The Consolidated Financial Statements Prepared in Accordance with TAS: Summary Comparison Table Related to Total Amount of Asset and Risk Situated in The Consolidated Financial Statements Prepared in Accordance with TAS The difference between Total Amount of Asset in the Consolidated Financial Statements Prepared in Accordance with TAS and the Communiqué on Preparation of Consolidated Financial Statements of Banks The difference between total amount and total risk amount of derivative financial instruments with credit derivative in the Communiqué on Preparation of Consolidated Financial Statements of Banks (2) The difference between total amount and total risk amount of risk investment securities or commodity collateral financing transactions in the Communiqué on Preparation of Consolidated Financial Statements of Banks (2) The difference between total amount and total risk amount of off-balance sheet transactions in the Communiqué on Preparation of Consolidated Financial Statements of Banks (2) The other differences between amount of assets and risk in the Communiqué on Preparation of Consolidated Financial Statements of Banks (2) Total Exposures (2) Current Period Prior Period 1,411,809,015 (1) 1,138,221,128 28,842,201 (1) 13,817,055 (7,562,976) (4,521,050) 39,516,082 41,010,346 21,574,281 19,341,737 (1,672,308) 7,102,851 2,134,786,443 1,376,092,005 (1) As the consolidated financial statements dated 31.12.2022 prepared per paragraph 6 of article 5 of the "Communiqué on the Preparation of Consolidated Financial Statements of Banks" have not yet been published as of the report date pursuant the legal regulations, the consolidated financial statement balances of 30.06.2022 are included. (2) The amounts in the table represents the average of three months. On-Balance Sheet Items On-balance sheet items (excluding derivatives and SFTs. but including collateral) 1,639,991,435 1,025,401,026 Current Period (1) Prior Period (1) Asset amounts deducted in determining Basel III Tier 1 capital The total amount of risk on-balance sheet exposures Derivative exposures and credit derivatives (3,634,115) (1,968,196) 1,636,357,320 1,023,432,830 Replacement cost associated with derivative financial instruments and credit derivatives The potential amount of credit risk with derivative financial instruments and credit derivatives The total amount of risk on derivative financial instruments with credit derivatives 18,799,552 7,562,976 26,362,528 23,322,566 4,521,050 27,843,616 Investment securities or commodity collateral financing transactions The amount of risk investment securities or commodity collateral financing transactions (Excluding on balance sheet items) Risk amount of exchange brokerage operations 14,350,224 5,751,181 The total amount of risk investment securities or commodity collateral financial transactions 14,350,224 5,751,181 Off -Balance Sheet Items Gross notional amount for off-balance sheet items Adjustments for conversion to credit equivalent amounts The total amount of risk for off-balance sheet items Capital and Total Exposures Tier 1 Capital Total Exposures Leverage Ratio Leverage Ratio (1) Three-month average of the amounts in Leverage Ratio table. VIII. Explanations on Other Price Risk 477,654,908 (19,938,537) 457,716,371 337,285,014 (18,220,636) 319,064,378 174,084,953 83,746,667 2,134,786,443 1,376,092,005 8.14 6.12 The Group is exposed to stock price risk due to its investments in companies being traded on the BIST. The Group's sensitivity to stock price risk at the reporting date was measured with an analysis. In the analysis, with the assumption of all other variables were held constant and the data (stock prices) used in the valuation method are 10 % higher or lower. According to this assumption in shares traded in Borsa Istanbul and followed under Financial Assets at Fair Value through Profit or Loss account, expected to have an effect amounting to TL 1,187,352 increase/decrease. 1. 1. Explanations on Presentation of Assets and Liabilities at Fair Value Information on fair values of financial assets and liabilities Financial Assets Money Market Placements Banks Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets Measured at Amortized Cost Loans (1) Financial Liabilities Banks Deposits Other Deposits Funds Provided from Other Financial Institutions Marketable Securities Issued (2) Miscellaneous Payables and funds borrowed Book Value Fair Value Current Period Prior Period Current Period Prior Period 6,195,342 38,994,815 2,993,064 35,195,242 6,195,342 39,037,629 2,993,064 35,181,094 202,125,577 109,943,659 202,125,577 109,943,659 106,956,161 885,150,975 11,307,113 941,328,819 155,981,599 91,903,305 151,090,917 51,545,328 127,548,531 50,990,529 590,297,628 871,796,926 569,711,027 6,427,034 10,949,385 6,185,928 611,252,169 941,495,895 610,797,007 128,923,683 152,058,375 123,962,706 89,556,589 77,025,465 89,153,363 151,090,917 85,380,759 77,025,465 (1) Factoring and Leasing Receivables are included. (2) Includes Tier 2 subordinated bond which is classified on the balance sheet as subordinated loan. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 364 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 365 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Strike prices, quotations, market prices determined by the CBRT and published in the Official Gazette and the values calculated by using alternative models, are taken as the basis in the fair value determination of financial assets at fair value through other comprehensive income. Properties that are recorded under tangible assets at fair value by the Bank and consolidated companies are classified in the 3rd level, whereas investment properties are clasiffied both in the 2nd and 3rd level. When the prices of the financial assets measured at amortized cost cannot be measured in an active market, fair values are not deemed to be reliably determined and amortized cost, calculated by the internal rate of return method, are taken into account as the fair values. Fair values of banks, loans granted, deposits and funds borrowed from other financial institutions are calculated by discounting the amounts in each maturity bracket formed according to repricing periods, using the rate corresponding to relevant maturity bracket in the discount curves based on current market conditions. 2. Information on fair value measurements recognized in the financial statements TFRS 13 – “Fair Value Measurement” standard requires the items, which are recognized in the balance sheet at their fair values to be shown in the notes by being classified within a range. According to this, the related financial instruments are classified into three levels in such a way that they will express the significance of the data used in fair value measurements. At the first level, there are financial instruments, whose fair values are determined according to quoted prices in active markets for identical assets or liabilities, at the second level, there are financial instruments, whose fair values are determined by directly or indirectly observable market data, and at the third level, there are financial instruments, whose fair values are determined by the data, which are not based on observable market data. The financial assets, which are recognized in the balance sheet at their values, are shown below as classified according to the aforementioned principles of ranking. Current Period Level 1 Level 2 Level 3 Financial Assets at Fair Value Through Profit and Loss Debt Securities Equity Securities Derivative Financial Assets at Fair Value through Profit and Loss Other Financial Assets at Fair Value Through Other Comprehensive Income(1) Debt Securities Equity Securities Other Derivative Financial Liabilities 4,574,363 11,874,735 5,124,774 74,381,684 47,760 531,003 5,807,344 333,165 19,560,649 5,770,724 121,851,511 1,416,134 10,091,101 89,747 3,760,778 (1) Since they are not traded in an active market, the equity securities (TL 136,707) under the financial assets at fair value through other comprehensive income are shown in the financial statements at acquisition cost and the related securities are not shown in this table. Prior Period Level 1 Level 2 Level 3 Financial Assets at Fair Value Through Profit and Loss Debt Securities Equity Securities Derivative Financial Assets Held for Trading Other Financial Assets Available-for-Sale(1) Debt Securities Equity Securities Other Derivative Financial Liabilities 710,080 2,368,275 700,327 6,028,045 458,185 24,750,427 2,066,313 2,149,813 65,501,109 41,450,375 1,789,775 140,975 243,653 745,821 24,966 14,078,527 (1)Since they are not traded in an active market, the equity securities (TL 46,985) under the financial assets available-for-sale are shown in the financial statements at acquisition cost and the related securities are not shown in this table. X. X. Explanations on Transactions Carried Out on Behalf of Third Parties and Fiduciary Transactions The Group gives trading, custody, fund management services in the name and on the account of its customers. The Group has no fiduciary transactions. X. XI. Explanations on Risk Management Objectives and Policies The explanations prepared in accordance with the “Communiqué on Public Disclosures on Risk Management by Banks” published in the Official Gazette dated 23.10.2015 and numbered 29511 are as follows; Standard Approach is used by the Bank in calculating capital adequacy and other explanations within the scope of IRB (Based on Internal Rating) approach are not included. a. General Information on Risk Management and Risk Weighted Amounts a.1 Risk Management Approach of the Group The Group is exposed to financial and non-financial risks which are required to be analyzed, monitored and reported within specific risk management principles and with the perspective of Group risk management. The risk management process is organized within the framework of risk management and serves the creation of a common risk culture in corporate level; which brings “corporate governance” to forefront, the independence of the internal audit and monitoring units from the business units that undertake risks is established risk is defined in accordance with international regulations and in this context measurement, analysis, monitoring, reporting and control functions are carried. Risk management process and the functions involved in the process is one of the primary responsibilities of the Board of Directors. The Risk Committee operates to prepare the Group's risk management strategies and policies, submit them to the Board of Directors for approval and monitor the implementations. Evaluating the capital adequacy and observing the active use of results in planning and decision-making processes, establishing and monitoring limits related to main risks, monitoring the activities of risk management (determining, defining, measuring, evaluating and managing risk) and monitoring results and methods in measuring risk are also under their authority and responsibility of the Committee. Committee reports activity results to the Board of Directors through Audit Committee. The Operational Risk Committee operates to determine strategies and policies for managing operational risks that the Bank may be exposed to, to develop an operational risk management framework and to strengthen the governance model for operational risks. The Committee reports the results of the activity to the Board of Directors through the Audit Committee. The Risk Management Department, which reports to the Board of Directors of the Parent Bank through the Internal Systems Manager; organized as Asset-Liability Management Unit, Credit Risk Management Unit, Credit Risk Analytics and Control Unit, Operational Risk and Affiliate Risk Unit, Model Risk and Validation Unit, Internal Capital Assessment Process and Economic Capital Unit. The Group’s risk management process is carried out within the framework of risk policies which are issued by the Board of the Directors by taking the recommendations of the Risk Management Department into account and which include the written standards that are implemented by the business units. These policies which are entered into force in line with the international practices are general standards which contain organization and scope of the risk management function, risk measurement policies, duties and responsibilities of the risk management group, procedures for determining risk limits, ways to eliminate limit violations, compulsory approvals and confirmations to be given in a variety of events and situations. In the aforementioned risk policies, the Group’s risk appetite framework is defined as a set of approaches that determine the risk capacity, the risk appetite, the risk tolerance and that include the policies, procedures, controls and systems for reporting and monitoring of the limits set for the Group’s risk profile and the indicators in the framework. The Group's risk appetite framework, which is formed in accordance with the above-mentioned factors and entered into force with the Board of Directors approval, includes indicators that are aligned with the business plan, the strategic programme, capital and remuneration planning and comparable on a business unit level to the extent possible. The compliance to the limits within the framework is periodically monitored and the realization of the risk appetite indicators are reported to the Risk Committee and the Boards on a monthly basis. In order to build a strong corporate culture that has a risk management perspective, the Group has policies, processes, systems and a control system that is integrated with the risk management system. All employees of the Group essentially perform their duties in a responsible manner that aims to develop controls to reduce or eliminate the probability of the Group to incur losses related to the operational risks. In the process risk analysis studies, risks and the related controls are evaluated together with employees performing the relevant process in a holistic approach. Procedures to be followed in case of a risk threshold breach and risk definitions are given in the risk politics. Code of conducts, operation manuals, the sharing of duties between business units and risk units are announced to staff. The risk reports that analyse the results reached by the Parent Bank and the comprehensive risk assessment and comparison of these results with a risk management perspective are periodically submitted to the Risk Committee and to the Board through the Audit Committee. The content of the above- mentioned reports could be summarised as follows: ੵ Capital adequacy ratio, the progression of the components of this ratio and the issues that affect the aforementioned ratio, ੵ Monitoring the compliance status of the limits set by the Board of Directors as a part of therisk appetite framework and based on the components of The movement table of financial assets at level 3 is given below: the main risk types, Balance at the Beginning of the Period Purchases Redemption or Sales (1) Valuation Difference Transfers Balance at the end of the Period Current Period Prior Period 3,939,588 1,922,461 (2,785,690) 673,556 100,610 3,850,525 3,015,526 1,018,018 (300,848) 307,502 (100,610) 3,939,588 (1) As the details are given in the Fifth Section Note I-b.3, between the company and the TVF for the sale of all A group registered shares corresponding to 55% of the capital of the company owned by the special purpose company to the Turkish Wealth Fund (TVF). A share transfer agreement was signed, and the sale and transfer transaction were realized on 31.03.2022. ੵ In addition to the assesment of the loan portfolio on the basis of counterparties and loan types, monitoring of the portfolio as a whole according to parameters such as maturity, sector, geography, risk ratings, arrears, defaults, ੵ Measuring the assets and liabilities management risk, and reporting of measurement results, ੵ Monitoring all risks assessed within the scope of non-financial risks, including operational risk, reputational risk and climate change risk, and operational risk qualified loss events and risk indicators occurring at the Bank, ੵ Testing measurement results for their integrity and reliability, ੵ Analysing the level of risk indicators under various stress scenarios, ੵ Examining various concentration indicators and the course followed by these indicators. In addition, analyzes and evaluations regarding the risk level of the companies included in the consolidated risk policies are also included in the mentioned report.. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 366 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 367 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 As per the communique on “Bank’s Internal Systems and Internal Capital Adequacy and Assessment Process” and “Guidelines for Stress Testing of Banks to Use in Capital and Liquidity Planning”, stress tests are conducted for the entire risks that the Group is exposed to and on the basis of significant risk categories. As a part of the holistic stress tests, risk appetite, capital planning, strategic plan and budget, action plans for emergencies and unexpected situations related to miscellaneous risks and other issues considered as significant are taken into consideration. In the above-mentioned stress tests, the methods that form the basis of regulatory reporting (standard method for credit and market risk, basic indicator method for operational risk) are used. On the other hand, in the stres tests for individual risk types the most advanced approaches used for risk measurement in the Parent Bank are leveraged. In the stress tests, both the first pillar risks (credit risk, market risk, operational risk) in scope of the regulatory framework and all the other risks that the Group is exposed to independent of the regulatory framework are taken into account in a holistic perspective. In determining the course of capital adequacy under various scenarios during the planning horizon, the actions that the Group will take in case of stress conditions and the impact of the diversified growth strategies of business units on the capital adequacy and the balance sheet are considered. The scope and content of the Parent Bank's risk management system in terms of the main risk types are listed below. Risk mitigation strategies and processes for the assessment of their effectiveness are given in Fourth Section II No. "Explanations on Credit Risk" under the Fourth Chapter XI-c.2 notes. No. "The Public Disclosure of Qualitative Information Related to the Market Risk " mentioned in the section. Credit Risk Credit risk is defined as the risk of the failure to comply with the requirements or failing to fulfill its obligations partially or totally of the counter side of the transaction contract with the Parent Bank. The methodology and responsibilities of the credit risk management, controlling and monitoring and the framework of credit risk limitations specified with the credit risk policy. The Bank defines measures and manages credit risk of the all products and activities. Board of Directors review the Parent Bank’s credit risk policies and credit risk strategy on an annual basis as a minimum. Key Management is responsible for the implementation of credit risk policies which are approved by Board of Directors. As a result of loans and credit risks analysis all findings are reported to Board of Directors and Key Management on a regular basis. In addition to transaction and company based credit risk assessment process, monitoring of credit risk also refers to an approach with monitoring and managing the credit as a whole maturity, sector, security, geography, currency, credit type and credit rating. In the Parent Bank’s credit risk management, along the limits as required by legal regulations, the Parent Bank utilizes the risk limits to undertake the maximum credit risk within risk groups or sectors that the Board of Directors determines. These limits are determined such a way that prevents risk concentration on particular sectors. Excess risk limits up to legal requirements and boundaries limits are considered as an exception. The Board of Directors has the authority in exception process. The results of the control of risk limits and the evaluations of these limits are presented by Internal Audit and Risk Management Group to Key Management and Board of Directors. The Bank uses credit decision support systems which are created for the purpose of credit risk management, lending decisions, controlling the credit process and credit provisioning. The consistency of the credit decision support systems with the structure of the Parent Bank’s activities, size and complexity is examined continuously by internal systems. Credit decision support systems contain the Risk Committee assessment and approval of Board of Directors. Asset and Liability Management Risk Asset-liability management risk defined as the risk of Group’s incurring loss due to managing all financial risks that are inflicted from the assets, liabilities and off-balance sheet transactions, ineffectively. Trading book portfolio’s market risk, structural interest rate risk and liquidity risk of the banking portfolio; are considered within the scope of the asset liability management. Complying the established risk limits and being at the limits that stipulated by the legislation are the primary priority of Asset-liability management risk. Risk limits are determined by the Board of Directors by taking into consideration of the Group's liquidity, target income level and general expectations about changes in risk factors Board of Directors and the Audit Committee are responsible for following the Group's capital is used optimally; for this purpose, checking the status against risk limits and providing the necessary actions are taken. Asset and Liability Management Committee is responsible for managing the Asset and Liability risk within the framework of operating principles that are involved in the risk appetite and risk limits are set by the Board of Directors in accordance with the policy statement. Asset and liability management processes and compliance with the provisions of the policy are controlled and audited by the internal audit system. The execution of the audit, reporting the audit results, action plans for the elimination of errors and gaps identified as a result of inspections regarding the fulfillment of the principles, are determined by the Board of Directors. Operational Risk Operational risk is defined as “insufficient or unsuccessful internal processes, people and systems, or external events resulting from and legal it is defined as ”the possibility of causing harm", which also includes the risk that may arise. Studies consisted and are formed of occur by execution of identification, definition, measurement, analysis, monitoring of operational risk, providing and reporting the necessary control related to monitoring the progress of our country and the world, the development of techniques and methods, necessary legal reporting, notification and conduct of follow-up transactions. Studies on the subject are conducted by the Department of Risk Management. Operational risks that arise due to the activities are defined in "Bank Risk Catalogue" and classified in respect of species. Bank Risk Catalogue is kind of the fundamental document that used for identification and classification of all at the risk that may be encountered. It is updated in line with the changes in the nature of the processes and activities. Qualitative and quantitative methods are used in a combination for measurement and evaluation of the operational risks. In this process, information use that obtained from "Impact-Probability Analysis", "Missing Event Data Analysis", "Risk Indicators", “Scenario Analysis”, “Top-Down Risk Assessment”, “Internal Model” methods. Methods prescribed by legal regulations are applied as minimum in determining the capital requirement level for the operating risk. Operational Risk Committee that established by a decision of the board of directors on 30.04.2020, the management of operational risks that the bank may be exposed for the determination of policies and strategies, the development of an operational risk management framework and operational risks include activities with the aim of strengthening the governance model. The Committee works in cooperation with the Risk Committee and reports the results of its activities to the Board of Directors through the Audit Committee. All risks are assessed in the context of operational risk, loss events and the risk indicators same as operational risks that occurred in the Parent Bank, are monitored on a regular basis by the Department of Risk Management and reported periodically to the Risk Committee, Operational Risk Committee and the Board of Directors. Model Risk Management and Validation Operations Model risk is the risk of financial losses and / or loss of reputation that the Bank may be exposed to due to errors and / or malfunctions that occur during the creation, implementation or use of models used in its activities. In order to address the model risk in a holistic manner, the model definition, model life cycle and triple line of defense structure and the duties and responsibilities of all functions of the Bank in this structure are defined in the model risk management policy. Model risk management and validation activities in the second line of defense of the triple line of defense structure; creating the model inventory, determining and approving the model class, validating the models, preparing periodic reports on the Bank's model risk and reporting to the Risk Committee, Audit Committee. and submission to the Board of Directors. Risk measurement models are validated at least once a year under international standardsWithin the scope of validation, activities are carried out to test the performance and validity of models with statistical methods, to examine the quality of the data used in the model development phase and the conceptual soundness of the selected methods, and to evaluate the health of the processes created for the use of the models.The results of the validation activities are reported to the Risk Committee and the Board of Directors. Subsidiaries Risk Operations Corporations within the Bank’s consolidated risk policy, in terms of their own business lines, measure, evaluate and monitor risks, establish risk limits. Risk limits are approved by their own Board of Directors. Risk levels are reported to the Bank’s Risk Committee within the periods set by the Bank, to monitor risk levels on consolidated basis. The Bank’s Risk Committee, assesses the risk levels and report the results to the Board of the Directors of the Bank. a2. General Information on Risk Weighted Amounts Risk Weighted Amount (1) Minimum Capital Requirements Current Period Prior Period Current Period Credit risk (excluding counterparty credit risk) (CCR) 953,524,113 578,238,623 Of which standardised approach (SA) 953,524,113 578,238,623 Of which internal rating-based (IRB) approach Counterparty credit risk Of which standardised approach for counterparty credit risk (CCR) Of which internal model method (IMM) Equity positions in banking book under basic risk weighting or internal rating-based approach 16,407,066 17,096,324 16,407,066 17,096,324 Equity investments in funds – look-through approach 9,051,377 2,683,178 Equity investments in funds – mandate-based approach Equity investments in funds - 1250% weighted risk approach Settlement risk 21,438 Securitization positions in banking accounts Of which IRB ratings-based approach (RBA) Of which IRB Supervisory formula approach (SFA) Of which SA/simplified supervisory formula approach (SSFA) Market risk Of which standardised approach (SA) Of which internal model approaches (IMM) Operational Risk Of which Basic Indicator Approach Of which Standardised approach (SA) Of which Advanced measurement approach 42,220,363 42,220,363 22,674,325 22,674,325 65,807,811 65,807,811 51,469,094 51,469,094 76,281,929 76,281,929 1,312,565 1,312,565 724,110 1,715 3,377,629 3,377,629 5,264,625 5,264,625 The amounts below the thresholds for deduction from capital (subject to a 250% risk weight) 963,063 700,490 77,045 Floor adjustment Total 1,087,995,231 672,862,034 87,039,618 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 368 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 369 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 b. Linkages Between Financial Statements and Risk Amounts b.1 Differences and linkage between scopes of accounting consolidation and regulated consolidation Differences and Linkage Between Accounting Consolidation and Legal Consolidation Scope: Current Period Carrying values in financial statements prepared as per TAS (1) Carrying values in consolidated financial statements prepared as per TAS (2) Carrying values of items in accordance with Turkish Accounting Standards (TAS) (2) Subject to credit risk Subject to counterparty credit risk Securitization Positions Subject to market risk Not subject to capital requirements or subject to deduction from capital 17,047,993 4,677,273 11,111,264 138,681 3,767,296 Assets Cash and CBRT 201,811,531 201,845,899 201,845,899 Banks and Money Market Placements 45,665,900 45,190,157 45,190,157 Financial Assets at Fair Value Through Profit/Loss 18,841,483 33,574,852 16,526,859 Financial Assets at Fair Value Through Other Comprehensive Income Derivative Financial Assets at Fair Value Through Profit/Loss Derivative Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets at Measured at Amortised Cost – Loans (3) Financial Assets at Measured at Amortised Cost – Other Financial Assets Financial Assets at Measured at Amortised Cost – Expected Credit Loss (-) 150,681,869 202,125,577 202,125,577 19,740,263 19,560,649 19,560,649 19,560,649 1,982,488 758,003,869 912,363,733 912,363,733 71,733,585 106,956,161 106,956,161 34,916,253 39,990,816 39,990,816 Assets Held for Sale and Discontinued Operations 1,589,482 1,618,994 1,618,994 Investment in Associates, Subsidiaries and Joint- Ventures Tangible Assets Intangible Assets Investment Properties Current Tax Asset Deferred Tax Asset Other Assets Total Assets Liabilities Deposits Funds Borrowed Money Market Funds Marketable Securities Issued Derivative Financial Liabilities at Fair Value Through Profit/Loss Derivative Financial Liabilities at Fair Value Through Other Comprehensive Income Leasing Liability Provisions Current Tax Liability Deferred Tax Liability Subortinated Debts Other Liabilities Shareholders' Equity Total Liabilities 2,466,588 42,870,444 42,870,444 50,755,101 24,478,118 21,263,195 6,081,880 3,763,045 3,470,339 4,079,813 11,320,190 26,354 974,110 24,478,118 4,079,813 11,320,190 26,354 974,110 88,874,650 148,437,334 148,437,334 1,411,809,015 1,715,431,569 1,698,383,576 19,560,649 32,836,530 3,905,977 751,961,017 952,635,932 165,658,441 155,981,599 55,086,429 51,240,156 63,967,809 58,344,560 12,144,239 10,091,101 203,900 2,730,945 1,643,053 56,005,657 67,292,475 4,461,088 493,636 8,125,987 1,599,383 46,801,726 33,558,745 78,658,138 164,865,885 173,635,990 210,052,693 1,411,809,015 1,715,431,569 9,549,591 41,795,275 10,091,101 51,344,866 10,091,101 (1) June 30, 2022, amounts are represented, as consolidated financial statements dated December 31, 2022, prepared in accordance with Article No 5 of Clause No 6 in the Communiqué on Preparation of Consolidated Financial Statements of Banks are not published as of reporting date. (2) Leasing and Factoring Receivables are included. Prior Period Carrying values in financial statements prepared as per TAS Carrying values in consolidated financial statements prepared as per TAS Carrying values of items in accordance with Turkish Accounting Standards (TAS) (2) Subject to credit risk Subject to counterparty credit risk Securitization Positions Subject to market risk Not subject to capital requirements or subject to deduction from capital 4,776,317 1,474,079 11,111,264 89,996 1,993,519 Assets Cash and CBRT 183,647,187 184,021,225 184,021,225 Banks and Money Market Placements 41,011,671 38,188,306 38,188,306 Financial Assets at Fair Value Through Profit/Loss 12,515,537 14,481,038 9,704,721 Financial Assets at Fair Value Through Other Comprehensive Income Derivative Financial Assets at Fair Value Through Profit/Loss Derivative Financial Assets at Fair Value Through Other Comprehensive Income Financial Assets at Measured at Amortised Cost – Loans (1) Financial Assets at Measured at Amortised Cost – Other Financial Assets Financial Assets at Measured at Amortised Cost – Expected Credit Loss (-) 110,065,911 109,943,659 109,943,659 24,925,472 24,750,427 24,750,427 24,750,427 899,645 612,758,151 614,742,720 614,742,720 55,051,217 51,545,328 51,545,328 32,875,072 32,854,286 32,854,286 Assets Held for Sale and Discontinued Operations 910,871 910,871 910,871 Investment in Associates, Subsidiaries and Joint- Ventures Tangible Assets Intangible Assets Investment Properties Current Tax Asset Deferred Tax Asset Other Assets Total Assets Liabilities Deposits Funds Borrowed Money Market Funds Marketable Securities Issued Derivative Financial Liabilities at Fair Value Through Profit/Loss Derivative Financial Liabilities at Fair Value Through Other Comprehensive Income Leasing Liability Provisions Current Tax Liability Deferred Tax Liability Subortinated Debts Other Liabilities Shareholders' Equity Total Liabilities (1) Leasing and Factoring Receivables are included. 1,985,263 21,918,409 21,918,409 43,214,686 11,407,024 11,407,024 17,266,481 6,070,732 152,861 2,182,025 4,601,916 74,819 2,182,025 4,601,916 74,819 4,312,073 3,118,976 3,118,976 56,308,442 75,371,616 75,371,616 1,138,221,128 1,124,404,073 1,119,627,756 24,750,427 17,361,660 2,083,515 607,250,936 617,679,203 143,646,510 128,923,683 53,737,853 53,737,853 57,083,581 48,077,312 14,098,639 14,078,527 51,639 2,137,509 1,239,714 41,787,985 35,609,317 4,104,365 757,656 2,561,136 124,949 41,474,082 41,479,277 47,118,391 84,724,923 124,971,982 96,168,179 1,138,221,128 1,124,404,073 53,235,157 14,078,527 53,235,157 14,078,527 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 370 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 371 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 b2. The main sources of the differences between the risk amounts and the amounts assessed in accordance with TAS in the financial statements Current Period Total Credit Risk Asset carrying value amount under scope of TAS 1,715,431,569 1,698,383,576 Securitization Position Counterparty credit risk Market risk 19,560,649 32,836,530 (51,344,866) 10,091,101 1,715,431,569 1,698,383,576 70,905,515 22,745,429 Off-balance sheet amounts 998,385,339 170,131,232 26,399,369 13,503,864 Liabilities carrying value amount under scope of TAS Total net amount under regulatory scope of consolidation Repurchase Transactions Valuation Adjustments (1) Differences in valuations Differences due to different netting rules Differences due to consideration of provisions Differences due to prudential filters Differences due to risk mitigation (2) Risk Amounts (212,108,632) (37,580,583) 1,618,825,593 39,903,233 22,745,429 (1) According to the "Regulation on Measurement and Evaluation of Capital Adequacy of Banks", it is the counterparty credit risk amount calculated for repo style transactions. (2) The source of the difference is the collateral for receivables under credit risk mitigation in the calculation of capital adequacy. 1,124,404,073 1,119,627,756 77,985,584 3,283,133 Securitization Position Counterparty credit risk Market risk 24,750,427 17,361,660 (53,235,157) 14,078,527 29,890,333 6,394,736 Priot Period Total Credit Risk Asset carrying value amount under scope of TAS 1,124,404,073 1,119,627,756 Liabilities carrying value amount under scope of TAS Total net amount under regulatory scope of consolidation Off-balance sheet amounts 771,887,904 147,301,592 Repurchase Transactions Valuation Adjustments (1) Differences in valuations Differences due to different netting rules Differences due to consideration of provisions Differences due to prudential filters Differences due to risk mitigation (2) Risk Amounts (177,234,524) (65,728,440) 1,023,966,384 1 2 3 4 5 6 7 8 9 10 11 1 2 3 4 5 6 7 8 9 10 11 Current Period Loans (1) Debt Securities Off-balance sheet exposures Total Current Period Loans (1) Debt Securities Off-balance sheet exposures Total Gross carrying value in financial statements prepared in accordance with Turkish Accounting Standards (TAS) Defaulted Non-defaulted Allowances/ Amortization and Impairments Net Values 27,212,758 885,150,975 301,641,082 20,565,590 891,798,143 301,641,082 1,998,636 465,938,988 1,618,580 466,319,044 29,211,394 1,652,731,045 22,184,170 1,659,758,269 Gross carrying value in financial statements prepared in accordance with Turkish Accounting Standards (TAS) Defaulted Non-defaulted Allowances/ Amortization and Impairments Net Values 24,445,092 1,613,512 590,297,628 153,871,817 333,971,906 15,898,604 598,844,116 153,871,817 1,215,814 334,369,604 26,058,604 1,078,141,351 17,114,418 1,087,085,537 (1) Credit balance which is monitored as Financial Assets at Fair Value Through Profit or Loss is not included in the above table. It is shown in detail in Section 5 footnote 1.b.3. c.1.3. Changes in Stock of Default Loans and Debt Securities (1) Defaulted loans and debt securities at end of the previous reporting period Loans and debt securities that have defaulted since the last reporting period Receivables back to non-defaulted status Amounts written off Other Changes Defaulted loans and debt securities at end of the reporting period Current Period Prior Period 24,445,092 16,050,821 (497,130) (5,620,823) (7,165,202) 27,212,758 23,144,846 6,799,033 (1,017,053) (2,021,889) (2,459,845) 24,445,092 (1) Indemnified non-cash loans or non-cash loans not converted into cash, of the firms which are followed under “Non-performing Loans” accounts are not included in the table. 36,285,069 3,283,133 c.1.4. Additional Information on Credit Quality of Assets (1) According to the "Regulation on Measurement and Evaluation of Capital Adequacy of Banks", it is the counterparty credit risk amount calculated for repo style transactions. (2) The source of the difference is the collateral for receivables under credit risk mitigation in the calculation of capital adequacy. The differences between financial statements resulting from legal consolidation and the ones resulting from accounting consolidation are mainly due to the differences in the scope of companies included in consolidation. Legal consolidation only includes partnerships that are in the form of credit institutions or financial institutions in accordance with Article No 5 of Clause No 1 in the “Communiqué on Preparation of Consolidated Financial Statements of Banks” while accounting consolidation includes all partnerships regardless of them being in the form of credit institutions or financial institutions in accordance with Article No 5 of Clause No 6 in the same communiqué. Bank using the valuation methodology are mainly based on data observed may in accordance with TFRS 13 aims to use methods that measure the fair value. In this context, securities qualification reality in the fair value measurement of financial assets in the transaction prices, quotes, set by the CBRT and as the price published in the Official Gazette as are used also necessary from internal pricing models. As for the derivative transactions interest rates, yield curves, foreign exchange, the basis of valuation models using market data such as volatility curves, valuation service is also available from third parties. The market prices used to value the scope of the independent price verification process, data and / or model inputs for accuracy is regularly subjected to control, as well as compliance of the results provided by the pricing services obtained from third parties with respect to certain ranges tested. c. Explanations on Credit Risk c.1. General Information on Credit Risk c.1.1. General Qualitative Information on Credit risk Relevant information is given in the footnotes below Section Four footnote II “Explanations on Credit Risk” and Section Four footnote numbered XI-a.1. c.1.2. Credit Quality of Assets: Bank’s methods for determining provision amounts and classification of its loans are mentioned in the Section Three Note VIII. The bank is restructuring its loans classified as first and second group as well as non-performing loans and receivables. Restructuring in performing loans are made by granting a new loan or extending the term date of credit given to customer by Bank with changing conditions of contract aiming the enhancing of solvency of customer or customer’s demand. Restructuring in non-performing loans are generally made by establishing a new redemption plan within the context of a protocol aiming the collection of those receivables whose redemption plan are not valid because of delinquency previously. The breakdown of receivables in terms of geographic regions, sectors and remaining maturities are represented in “Explanations on Credit Risk” in the Fourth Section note II. On the basis of sector-based provisions for receivables are presented in the footnote numbered Section Four II-16. The amounts of the receivables that are set aside for the geographical regions are as follows. The amount of non-performing loans which are written off in 2022 is TL 5,620,823. Domestic EU Countries OECD Countries (1) Off-Shore Banking Regions USA, Canada Other Countries Total Current Period Prior Period Non-Performing Loans Specific Provisions Non-Performing Loans Specific Provisions 26,116,918 19,688,391 23,474,995 15,178,041 750,571 120,031 16,142 10,098 198,998 613,000 55,424 16,142 8,182 184,451 641,517 39,671 44,950 7,731 236,228 471,609 34,495 20,185 6,382 187,892 27,212,758 20,565,590 24,445,092 15,898,604 (1) OECD Countries other than EU countries, USA and Canada. The aging analysis of past-due receivables are disclosed under Section Four note II-11. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 372 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 373 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 c.2. Credit Risk Mitigation c.2.1. Qualitative Public Disclosures on Credit Risk Mitigation Techniques c.3.2. Standard Approach: Credit risk exposure and credit risk mitigation effects: In the calculation of the Group’s Credit Risk Mitigation in accordance with the “Communiqué on Credit Risk Mitigation Techniques” published in the Official Gazette numbered 29111 on September 6, 2014, the financial collaterals are taken into consideration. The Group takes local currency and foreign currency deposit pledges into consideration as financial collaterals in calculating regulatory capital adequacy. Colleteral valuation and its management policy and primary features processes are givin are given at Section Four note.II under “Information on Credit Risk” disclosure. Current Period c.2.2. Credit Risk Mitigation Techniques – Standard Approach Exposures to sovereigns and their central banks 434,245,075 Current Period Exposures unsecured Exposures secured by collateral Collateralized amount of exposures secured by collateral Exposures secured by financial guarantees Collateralized amount of exposures secured by financial guarantees Exposures secured by credit derivatives Collateralized amount of exposures secured by credit derivatives Loans 856,149,996 18,966,900 16,617,735 16,681,247 15,067,525 Debt securities 301,641,082 Total 1,157,791,078 18,966,900 16,617,735 16,681,247 15,067,525 Of which defaulted 26,252,601 Prior Period Exposures unsecured Exposures secured by collateral Collateralized amount of exposures secured by collateral Exposures secured by financial guarantees Collateralized amount of exposures secured by financial guarantees Exposures secured by credit derivatives Collateralized amount of exposures secured by credit derivatives Loans (1) Debt securities Total 577,741,977 10,355,755 8,618,981 10,746,384 9,724,012 153,871,817 731,613,794 10,355,755 8,618,981 10,746,384 9,724,012 Of which defaulted 23,623,595 (1) Credit balance which is monitored as Financial Assets at Fair Value Through Profit or Loss is not included in the above table. It is shown in detail in Section 5 footnote 1.b.3. c.3. Credit Risk Under Standardised Approach c.3.1. Qualitative Disclosures on Banks’ Use of External Credit Ratings Under the Standardised Approach for Credit Risk Aformentioned explanations are disclosed under Section Four note XI-a.1. Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Exposures secured by residential property Exposures secured by commercial property Past-due Receivables Exposures in higher-risk categories Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment Undertakings Other exposures Equity investments Total Prior Period Exposures before CCF and CRM Exposures post-CCF and CRM RWA and RWA density On-balance sheet amount Off-balance sheet amount On-balance sheet amount Off-balance sheet amount Risk- Weighted Amount Risk- Weighted Amount Density 192,016 83,618 779,142 13,177 1,581 199,794 447,474,160 3,753,665 9,371,832 191,900 81,656 779,142 267 84,338 96,097 165,994 56,939,132 26,478,824 56,850,323 24,976,239 25,682,713 442,392,789 232,934,925 420,330,000 119,287,731 471,218,676 262,979,575 153,859,482 257,489,378 7,936,819 147,526,675 33,886,107 29,832,148 6,344,324 92,795,173 2,424,138 33,793,420 4,975,290 29,832,148 1,121,348 3,155,777 6,344,324 12,220,169 19,936,999 4,655,385 1,575,017 92,480,332 145,490 155,142,393 167.49% 2.08% 50.01% 100.00% 0.00% 31.39% 87.32% 77.75% 35.00% 60.44% 73.38% 9,016,377 35,000 9,016,377 35,000 9,051,377 100.00% 85,988,169 44,442,556 5,433,668 85,988,169 2,276,766 75,196,954 44,442,556 45,020,394 1,499,916,201 427,930,896 1,485,093,885 162,773,440 975,285,658 85.19% 101.30% 59.18% Exposures before CCF and CRM Exposures post-CCF and CRM RWA and RWA density On-balance sheet amount Off-balance sheet amount On-balance sheet amount Off-balance sheet amount Risk- Weighted Amount Risk- Weighted Amount Density Exposures to sovereigns and their central banks 270,036,409 329,185 278,093,661 9,801,001 3,736,206 Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates Retail exposures Exposures secured by residential property Exposures secured by commercial property Past-due loans 343,195 508,227 363,923 870 231,567 343,084 503,596 363,923 267 100,558 171,690 604,154 42,040,070 21,847,240 42,026,622 18,633,667 19,713,260 297,665,741 163,392,828 286,624,208 92,890,256 349,203,244 168,884,127 74,776,645 165,426,261 5,834,808 97,377,938 24,218,278 25,979,947 7,773,698 1,362,521 3,621,770 24,171,145 605,213 8,671,725 25,979,947 2,519,999 17,569,776 7,773,698 6,179,114 1.30% 50.00% 100.00% 0.00% 32.50% 92.01% 76.00% 35.00% 61.65% 79.49% Exposures in higher-risk categories 24,046,483 1,246,361 23,726,962 150,646 35,579,530 149.01% Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment Undertakings Equity investments Other exposures Total 2,633,178 50,000 2,633,178 50,000 2,683,178 100.00% 38,233,010 23,010,720 21,864,123 38,233,010 131,274 23,010,720 27,051,365 23,431,014 925,737,006 288,723,110 918,910,015 130,717,689 591,972,194 70.47% 101.83% 56.39% An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 374 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 375 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 c.3.3. Standardised Approach: Receivables according to risk classes and risk weights: Current Period Risk Groups Exposures to sovereigns and their central banks Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates 0% (1) 10% 20% 25% 35% 50% 75% 100% 150% 250% Other Total Risk Weights Consolidated 442,251,035 10 8,186,687 790,093 451,227,825 192,141 26 165,994 192,167 165,994 779,142 779,142 47,567 50,119,307 29,313,170 814,209 106,359 1,425,950 81,826,562 289,336 52,262,981 43,654,776 438,365,543 319,085 4,726,010 539,617,731 Önceki Dönem Risk Groups Exposures to sovereigns and their central banks Exposures to regional and local governments Exposures to administrative bodies and non-commercial entities Exposures to multilateral development banks Exposures to international organizations Exposures to banks and securities firms Exposures to corporates 0% 10% 20% 25% 35% 50% 75% 100% 150% 250% Other Total Risk Ağırlıkları Konsolide 283,985,271 346,370 3,563,021 287,894,662 343,323 28 604,154 343,351 604,154 363,923 363,923 36,648,915 22,931,570 897,484 11,190 171,130 60,660,289 782,189 19,999,364 26,602,963 331,589,700 203,638 336,610 379,514,464 Retail exposures 75,579,854 169,278,670 20,567,673 265,426,197 Retail exposures 43,109,482 123,094,596 5,056,991 Exposures secured by residential property Exposures secured by commercial property Past-due loans Exposures in higher-risk categories Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment Undertakings Equity investments Other exposures 12,982,103 107,346 34,914,768 26,101,851 6,886,074 3,382,239 2,957,725 4,360 34,914,768 32,987,925 6,344,324 163,763 217,237 59,660,202 32,584,620 92,625,822 9,051,377 44,057,331 75,175,486 385,225 9,051,377 44,442,556 88,264,935 Exposures secured by residential property Exposures secured by commercial property Past-due loans Exposures in higher-risk categories Exposures in the form of bonds secured by mortgages Short term exposures to banks, brokerage houses and corporates Equity investments in the form of collective investment Undertakings Equity investments Other exposures 11,312,919 24,776,358 21,860,341 6,639,605 3,400,695 4,161,476 211,527 125,189 223,387 23,529,032 171,261,069 24,776,358 28,499,946 7,773,698 23,877,608 2,683,178 22,730,524 27,051,365 280,196 2,683,178 23,010,720 38,364,284 Total 531,929,037 102,489,634 34,914,768 102,807,950 169,278,670 606,445,362 60,880,099 385,225 38,736,580 1,647,867,325 Total 339,553,784 56,648,279 24,776,358 75,610,451 123,094,596 405,200,913 23,955,387 280,196 507,740 1,049,627,704 (1) Yatırım Varlık Kiralama A.Ş. with transactions of one of the group companies that are not subject to credit risk of Anadolu Hayat Emeklilik A.Ş..It also includes securities that the company blocks on behalf of its insured persons, as well as individual pension receivables. (1) Anadolu Hayat Emeklilik A.Ş. of the group companies.it also includes securities that the company blocks on behalf of its insured persons, as well as individual pension receivables. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 376 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 377 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 d. Explanations on Counterparty credit risk d.1. Qualitative Disclosures on Counterparty Credit Risk Approach The counterparty credit risk that the Parent Bank exposed to is managed within the framework of general limit allocation and credit risk mitigaiton that are outlined the Credit Risk Policy of the Bank. In setting general credit limits, the counterparty credit risks of customers as well as their cash and noncash risks are taken into account with a holistic view. Moreover, the total position of the transactions which create counterparty credit risk is also monitored under a separate risk limit. The counterparty credit risk, which stems from derivatives and repo like transactions including transactions with qualified central counterparties that result in liabilities for both sides, is measured according to the Appendix-2 and Appendix-4 of the "Regulation on Measurement and Evaluation of Capital Adequacy of Banks" Counterparty credit risk valuation method based on the calculation of fair values of the derivative transactions is implemented. In the process of calculating the counterparty credit risk, the Standard Approach is used to determine the risk amounts of derivative transactions. In calculating the risk amount related to derivative transactions; 1.4 times the sum of potential credit risk amounts and positive replacement costs is charged. Most of the credit risk related to the derivative transactions with other banks is subject to daily collateral clearing agreements mutually signed with related parties and the counterparty credit risk is hence reduced. There are no guarantees received or sold by credit derivatives by the Bank in the context of trading or banking accounts. d.2. Counterparty Credit Risk (CCR) Approach Analysis: Current Period Replacement Cost Potential Future Exposure EEPE (Effective Expected Positive Exposure) Alpha used for computing regulatory EAD Exposure after Credit Risk Mitigation Risk Weighted Amounts Standardised Approach- CCR (for derivatives) 6,173,921 6,698,105 1,4 12,872,026 7,755,594 Current Period Replacement Cost Potential Future Exposure EEPE (Effective Expected Positive Exposure) Alpha used for computing regulatory EAD Exposure after Credit Risk Mitigation Risk Weighted Amounts Standardised Approach- CCR (for derivatives) 17,111,025 3,145,731 1,4 20,256,756 8,723,392 Internal Model Method (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Simple Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Comprehensive Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Value-at-Risk (VaR) (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Total Internal Model Method (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Simple Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Comprehensive Approach for credit risk mitigation (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Value-at-Risk (VaR) (for repo transactions, securities or commodity lending or borrowing transactions, long settlement transactions and securities financing transactions) Total d.3. Capital obligation for credit valuation adjustment (CVA): Total portfolios subject to the Advanced CVA capital obligation (i) VaR component (including the 3x multiplier) (ii) Stressed VaR component (including the 3x multiplier) All portfolios subject to the Standardised CVA capital obligation Total subject to the CVA capital change d.4. CCR Exposures by risk class and risk weights: Current Period Prior Period Risk Amounts Risk Weighted Amounts Risk Amounts Risk Weighted Amounts 12,872,026 12,872,026 4,648,339 4,648,339 20,256,756 20,256,756 6,743,838 6,743,838 Current Period Risk Groups 0% 10% 20% 50% 75 % 100% 150% Other (1) Risk Weights Total Credit Exposure 3,701,159 609 609 Conditional and unconditional exposures to sovereigns and their central banks 3,701,159 Conditional and unconditional exposures to regional and local governments Conditional and unconditional exposures to administrative bodies and non-commercial entities Conditional and unconditional exposures to multilateral development banks Conditional and unconditional exposures to international organizations Conditional and unconditional exposures to banks and securities firms Retail exposures Other exposures Total 10,017,752 3,868,472 Exposures to corporates 294,945 265,540 7,237,395 5,030,098 6,326,963 1 33,068 11,357,062 7,797,880 33,068 6,151,960 6,151,960 3,701,159 5,325,043 6,592,503 33,068 7,238,005 6,151,960 29,041,738 11,624,066 (1) Diğer alacaklar, “d.7. Merkezi karşı tarafa olan riskler” tablosunda raporlanan tutarları içerir. Prior Period Risk Groups 0% 10% 20% 50% 75 % 100% 150% Other (1) Risk Weights Total Credit Exposure 9,501,019 Conditional and unconditional exposures to sovereigns and their central banks 9,501,019 Conditional and unconditional exposures to regional and local governments Conditional and unconditional exposures to administrative bodies and non- commercial entities Conditional and unconditional exposures to multilateral development banks Conditional and unconditional exposures to international organizations Conditional and unconditional exposures to banks and securities firms 2,822,386 5,339,074 5,788 5,788 4,896,829 1,616,356 Exposures to corporates 256,646 343,990 6,852,442 Retail exposures Other exposures Total 32,240 8,161,460 7,453,078 32,240 507,740 507,740 9,501,019 3,079,032 5,683,064 32,240 6,858,230 507,740 25,661,325 10,339,748 (1) Diğer alacaklar, “d.7. Merkezi karşı tarafa olan riskler” tablosunda raporlanan tutarları içerir. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 378 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 379 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 d.5. Collateral for CCR: Current Period Cash- Domestic Currency Cash- Other Currencies Government bills/bonds-Domestic Total Önceki Dönem Cash- Domestic Currency Cash- Other Currencies Government bills/bonds-Domestic Total d.6. Credit derivatives exposures: None. Collateral used in derivative transactions Received Collateral Given Collateral Collateral used in other transactions Segregated Not Segregated Segregated Not Segregated Received Collateral Given Collateral 27.918.747 14.516.341 176.935 42.612.023 Collateral used in derivative transactions Alınan Teminatlar Verilen Teminatlar Collateral used in other transactions Segregated Not Segregated Segregated Not Segregated Alınan Teminatlar Verilen Teminatlar 40.504.926 10.535.283 297.843 51.338.052 Current Period Prior Period Post CRM risk exposure RWA Post CRM risk exposure RWA 6.151.960 6.141.646 134.661 123.039 122.833 507.740 505.714 12.738 10.155 10.114 10.314 206 2.026 41 276.977 194.244 69.551 11.622 101.545 2.583 d.7. Exposures to central counterparties (CCP): Exposure to Qualified Central Counterparties (QCCPs) (total) Exposures for trades at WCCPs (excluding initial margin and default fund contributions); of which (i) OTC Derivatives (ii) Exchange-traded Derivatives (iii) Repo-reverse transactions, credit securities transactions and securities or commodities lending or borrowing (iv) Netting sets where cross-product has been approved Segregated initial margin Non-segregated initial margin Paid guarantee fund amount Unpaid guarantee fund commitment Exposures to non-QCCPs (total) Exposures for trades at non-QCCPs (excluding initial margin and default fund contributions); of which (i) OTC Derivatives (ii) Exchange-traded Derivatives (iii) Repo-reverse transactions, credit securities transactions and securities or commodities lending or borrowing (iv) Netting sets where cross-product has been approved Segregated initial margin Non-segregated initial margin Pre-funded default fund contributions Unfunded default fund contributions e. Explanations on securitisations: None. f. f. Explanations on Market Risk: f.1. Qualitative information disclosed to the public regarding Market Risk Market risk is defined as the risk that may reduce the market value of the trading portfolio due to the changes in the risk factors named interest rate, exchange rates, equities and the price of commodities and options. The procedures for the management of market risk are discussed in the Parent Bank's "Asset and Liability Management Risk Policy" and those procedures are in line with the risk/return expectations and with the limits that are defined in the risk appetite framework. Limits related to market risk; are established by the Board and are revised periodically in order to reflect market conditions and best practices in the industry. Compliance to those limits is closely monitored by the Risk Management Department, Asset and Liability Management Committee and by the executive departments. Additionally, compliance with the provisions relating to the procedures and policies of market risk management is audited by the internal audit system. Trading activities of the securities that are included in the calculation of market risk is carried out by taking the Asset-Liability Management Committee decisions, risk policies and established limits into consideration and risks arising due to these activities are hedged using derivatives transactions where necessary. Measurement of market risk, reporting of results, and monitoring compliance with the risk limits are among the key responsibilities of the Risk Management Department. Analyses related to market risk are reported to the Risk Comittee and to the Board via the Audit Committee by the Risk Management Deparment. The trading book of the Parent Bank included in market risk calculations consists of on balance-sheet financial assets that are held for trading intent, derivatives that provide hedge to those instruments and foreign currency positions. The market risk carried by the Group is measured and monitored using methods known respectively as the Standard Method and the Value at Risk Model (VAR) and Expected Shortfall in accordance with the local regulations which are established in compliance with the international legislations. In this context, the exchange rate risk emerges as the most important component of the market risk. The market risk calculations using the Standard Method are performed at the end of each month and the measurement results are included in the statutory reports as well as being reported to the Bank’s top management. The Value at Risk Model and Expected Shortfall is another alternative for the Standard Method used for measuring and monitoring market risk. This model is used to measure the market risk on a daily basis in terms of interest rate risk, currency risk and equity share risk and is a part of the Bank’s daily internal reporting. Further retrospective testing (back-testing) is carried out on a daily basis to determine the reliability of the daily risk calculation by the VAR model, which is used to estimate the maximum possible loss for the following day. Scenario analyses which support the VAR model used to measure the losses that may occur in the ordinary market conditions are practiced, and the possible impacts of scenarios that are developed based on the future predictions and the past crises, on the value of the Bank’s portfolio f.2. Standardised Approach Outright Products Interest rate risk (general and specific) Equity risk (general and specific) Foreign exchange risk Commodity risk Options Simplified approach Delta-plus method Scenario approach Securitisations Total Current Period Prior Period RWA 41,380,414 6,589,513 6,289,388 24,489,138 4,012,375 839,949 21,625,301 4,991,613 1,222,400 12,624,138 2,787,150 1,049,024 839,949 1,049,024 42,220,363 22,674,325 g. Explanations on Operational Risk The operational risk capital requirement is calculated according to “Regulation on Measurement and Evaluation of Capital Adequacy of Banks” article number 24, is measured using the Basic Indicator Approach once a year in parallel with domestic regulations. As of December 31, 2022, the consolidated operational risk amount is TL 65,807,811 information about the calculation is given below (December 31, 2021: TL 51,469,094). Current Period 2PP Amount 1PP Amount CP Amount Total/Positive Years of Gross Income Amount Rate (%) Total Gross Income 24,912,326 35,126,147 45,254,025 3 15 5,264,625 Value at operational risk (Total*12.5) 65,807,811 Prior Period 2PP Amount 1PP Amount CP Amount Total/Positive Years of Gross Income Amount Rate (%) Total Gross Income 22,312,078 24,912,326 35,126,147 3 15 4,117,528 Value at operational risk (Total*12.5) 51,469,094 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 380 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 381 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 h. The interest rate risk of the banking book items: XII. Explanations on Segment Reporting Interest rate risk arising from the banking accounts is defined as negative effect risk on capital of the changes in market interest rates due to differences in interest settlement and re-pricing on, differences in interest-earning assets taking part in the banking book; interest-bearing liabilities; interest-bearing derivative transactions inclusive of the policies established by the Board of Directors, is managed within the framework of the strategies set by the Parent Bank Asset-Liability Management Committee. Compliance with internal risk limits for banking portfolio is closely and continuously monitored by the Risk Management Department and Asset-Liability Managemant Committee and the measurement results are reported to the Board of Directors on a monthly basis. Duration and sensitivity analysis are conducted on a monthly basis by the Bank in the scope of monitoring of interest rate risk arising from the banking books about Interest Rate Risk in the Banking Accounts from the Regulation on Measurement and Assessment of Standard Shock Method which is published in the Official Gazette No. 28034 dated August 23, 2011. In the duration analysis, the maturity gap between assets and liabilities of the balance sheet are determined by the calculation of the weighted average maturities based on the asset that sensitive to interest rate and liabilities and off-balance sheet transactions re-pricing period. In the interest rate risk sensitivity analysis, the influence of the various interest rate change scenarios to the economic value of the Bank's capital is examined. In the calculations made within the framework of the said regulation, behavioral maturity modeling is performed for demand deposits with low sensitivity to interest changes and whose original maturity is longer than the contractual maturity. In these studies, which are defined as core deposit analysis, based on historical data, calculations are made for what amount of demand deposits will remain within the bank for what maturity, and these analyzes are used as an input in quantifying the interest rate risk arising from banking accounts in a way that does not contradict legal provisions. Currency Applied Shock (+/- x basis point) Gains Loss Revenue/Shareholders’ Equity – Loss/ Shareholders’ Equity TL TL EUR EUR USD USD Total (for Negative Shocks) Total (for Positive Shocks) i. Remuneration policy: (+) 500 (-) 400 (+) 200 (-) 200 (+) 200 (-) 200 (11,670,706) 10,850,819 1,455,039 (1,457,745) (1,984,592) 3,182,748 12,575,822 (12,200,259) (5.17) % 4.81% 0.64% (0.65) % (0.88) % 1.41% 5.57% (5.41) % The Remuneration Committee, which is established to carry out the duties and activities related to the monitoring and supervision of the Bank's remuneration applications on behalf of the Board of Directors, consists of two members. The Remuneration Committee meets at least twice a year, not exceeding six months, and reports to the Board of Directors on the results of the activities carried out and important matters considered to have an impact on the Bank’s position. As of the end of 2022, the Remuneration Committee met 8 times and made a total of 12 decisions. Regarding compliance with the Corporate Governance Principles, the Remuneration Committee monitors and supervises the practices related to wage management on behalf of the Board of Directors; the fees are in line with the Bank's ethical values, internal balances and strategic objectives; the evaluation of the remuneration policy and its practices in the context of risk management; it is responsible for the presentation of the proposals determined in line with the requirements of the salary policy and the other responsibilities determined by the provisions of the applicable legislation and the fulfillment of the duties given by the Board of Directors in this framework. As of the end of 2022, the number of qualified employees working at the Bank is 29. The monetary and social rights of employees are determined in accordance with the Chartering Policy in the framework of the legislation related to the Collective Labor Agreement. The Bank carries out its practices with regard to remuneration policies within the framework of relevant banking and capital market legislation. This policy includes all managers and employees. Premium payments are made once a year to managers and managers who work in branches and headquarters units. It is considered that managerial premium payments are in line with the Bank's long-term strategy and the risks assumed, as well as the performance of its employees. There are no variable fees for qualified employees in the Bank. The compliance of the wage levels in the bank with the sector wage levels is monitored by participating in independent and anonymous wage surveys, which are held twice a year. Within the scope of the remuneration policy, the Bank's pricing practices are planned and executed on the basis of effective risk management, prevention of excessive risk taking, compliance with relevant legislation and scope and structure of the bank's activities, strategies, long-term objectives and risk management structures. The fees to be paid to the managers and employees of the Bank at every stage; It is essential that the Bank is in line with its ethical values, internal balances and strategic objectives, and that it is not only associated with its short-term performance. Payments made to employees are determined in a manner that will positively impact the Bank's corporate values and on the basis of objective conditions. Payments to be made to the managers of the units within the internal systems and to their staff are determined by taking into account the performance of the relevant personnel in relation to their functions, as they are in the audit or oversight, or are independent of the performance of the activity unit they control. The Group's activities are classified under corporate/commercial banking, retail/private banking, treasury operations and investment activities, insurance and reinsurance activities and others. Services to the large corporations, SMEs and other trading companies are provided through various financial instruments within the scope of the corporate and commercial operations. Services such as project financing, operating and investment loans, deposit and cash management, credit cards, cheques and bills, foreign trade transactions and financing, letter of guarantee, letter of credit, forfeiting, foreign currency trading, bill collections, payrolls, investment accounts, tax collections and other banking services are provided to the aforementioned customer segments. Retail banking services include deposits, consumer loans, overdraft accounts, credit cards, bill collections, remittances, foreign currency trading, safe-deposit boxes, insurance, tax collections, and investment accounts and other banking services for individuals. All kinds of financing and cash management services provided to individuals in the high-income level are recognized as Private Banking activities. Treasury transactions are comprised of medium and long-term funding tools such as securities trading, money market transactions, spot and forward TL and foreign currency trading, and derivative transactions such as forwards, swaps, futures and options, as well as syndications and securitizations. Investment activities of intermediary institutions and venture capital and real estate investment partnerships are also classified in this area. Investments of subsidiaries who operate in the real sector, investments of associates who operate both in financial and real sector and investments of jointly controlled entities that are presented in the consolidated financial statements are evaluated within the scope of investment activities. Insurance and reinsurance activities include individual pension, life/non-life insurance transactions and reinsurance transactions. The Group's financial leasing, factoring, asset management, portfolio management and payment service activities are classified under the ‘Other’ heading. Information about The Group’s segments are presented below. Current Period Corporate / Commercial Banking Individual / Private Banking Treasury Transaction/ Investment Activities Insurance and Reinsurance Activities Other/ Toplam Interest Income Interest Expense Fees and Commissions Income Fees and Commissions Expense Dividend Income Trading Income/Loss (Net) Other Income Expected Credit Loss and Other Provision Expenses Other Operating Expense Income/Loss from Investments in Subsidiaries Accounted by Equity Method Income Before Tax Tax Provision Net Period Profit Group Profit/Loss Minority Interest Profit/Loss 67,042,585 16,977,011 14,347,822 7,894 20,194,594 16,265,665 5,207,277 4,238 3,173,448 7,017,495 5,592,533 503,115 1,568,084 13,410,401 49,296,102 15,667,828 1,541,524 203,956 263,526 19,477,788 6,078,934 141,934 1,321,083 10,205,448 52 169,345 2,449,744 4,058,692 5,250,041 852,247 4,780,968 20,192,624 209,159 22,851,051 2,625,765 10,294,403 16,706,576 140,591,973 54,160,597 22,118,215 7,446,800 263,526 19,477,788 32,573,886 19,231,075 59,881,644 10,205,448 84,510,720 15,453,038 69,057,682 61,598,670 7,459,012 Total Assets Total Liabilities 672,190,029 157,614,122 480,658,344 495,054,758 491,060,752 281,996,061 90,261,982 127,426,701 330,295,705 304,304,684 1,715,431,569 1,715,431,569 Current Period Corporate / Commercial Banking Individual / Private Banking Treasury Transaction/ Investment Activities Insurance and Reinsurance Activities Other/ Toplam Interest Income Interest Expense Fees and Commissions Income Fees and Commissions Expense Dividend Income Trading Income/Loss (Net) Other Income Expected Credit Loss and Other Provision Expenses Other Operating Expense Income/Loss from Investments in Subsidiaries Accounted by Equity Method Income Before Tax Tax Provision Net Period Profit Group Profit/Loss Minority Interest Profit/Loss 35,382,354 6,667,695 6,236,181 13,499 12,353,944 10,642,224 2,709,306 2,633,690 7,091,015 2,543,719 307,201 688,195 6,078,683 19,913,033 13,683,018 837,356 103,959 68,548 703,452 1,121,310 73,446 677,308 4,874,850 21 95,798 1,514,562 1,799,856 1,537,406 612,123 2,166,889 11,010,299 137,851 12,703,259 1,811,190 8,819,983 8,378,440 69,449,187 32,530,364 10,490,764 3,798,909 68,548 703,452 16,883,690 16,810,490 30,381,409 4,874,850 18,949,319 3,389,061 15,560,258 13,541,060 2,019,198 Total Assets Total Liabilities 469,775,712 99,696,826 305,769,418 338,253,903 276,497,395 247,862,699 50,825,252 72,750,401 227,608,888 159,767,652 1,124,404,073 1,124,404,073 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 382 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 383 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 SECTION FIVE: DISCLOSURES AND FOOTNOTES ON THE CONSOLIDATED FINANCIAL STATEMENTS I. a. a.1. DISCLOSURES AND FOOTNOTES ON CONSOLIDATED ASSETS Cash and Central Bank of the Republic of Turkey: Information on Cash and Balances with the Central Bank of the Republic of Turkey: Cash in TL / Foreign Currency 4,109,112 11,719,560 2,627,722 12,234,865 Central Bank of the Republic of Turkey 17,609,487 167,972,940 14,667,660 154,122,778 Current Period Prior Period TL FC TL FC After the collection of the sales process, any special purpose entity that is the subject of the guarantee granted to the company which is under Financial Assets at Fair Value Through Profit and Loss and the loan amounting to TL 4,475,966, for which impairment provision has been made, was classified as non-performing loans as of 30.06.2022 and it was written off within the framework of the " Procedures and Principals regarding Classification of Loans and Allowances Allocated for Such Loans ". The shares in the amount of TL 526,236, which are tracked under “Impairment Losses on Assets Held for Sale and Subject to Discontinued Operations” and were reserved for the entire decrease in value, were deleted from the asset together with the decrease in value provision within the scope of registration of the liquidation of the company in the Türkiye Sicil Gazetesi dated 28.12.2022 and numbered 10735. b.4. TL 2,039,931 of other financial assets consists of the mutual funds; Quasar İstanbul Konut Gayrimenkul and Quasar İstanbul Ticari Gayrimenkul which were founded by İş Portföy Yönetimi A.Ş. c. Positive differences on derivative financial assets held for trading: Other Total 434,800 368,200 21,718,599 180,127,300 17,295,382 166,725,843 Derivative Financial Assets at Fair Value through Profit or Loss (1) a.2. Information on Balances with the CBRT: Unrestricted Demand Deposit Unrestricted Time Deposit Restricted Time Deposit Other (1) Total Current Period Prior Period TL FC TL FC 17,609,487 45,917,045 14,667,660 66,691,645 7,453,446 114,602,449 87,431,133 17,609,487 167,972,940 14,667,660 154,122,778 (1) The amount of reserve deposits held at the Central Bank of the Republic of Turkey. a.3. Explanations on reserve requirement application: As per the Communiqué no. 2013/15 “Reserve Deposits” of the Central Bank of the Republic of Turkey (“CBRT”), banks keep reserve deposits at the CBRT for their TL and FC liabilities mentioned in the communiqué. The reserve deposit rates vary according to their maturity compositions; the reserve deposit rates are realized between 3% - 8% for TL deposits and other liabilities, between 19% - 26% for FC deposits and precious metal deposit accounts and between 5% - 21% for other FC liabilities. Liabilities subject to required reserves are calculated and set aside every two weeks on Friday for 14-day periods. According to the Communique on Required Reserves published in the Official Gazette dated 01.07.2021 and numbered 31528, the possibility of establishing Turkish lira required reserves in foreign currency was terminated as of 01.10.2021. Within the scope of the CBRT's Communiqué numbered 2021/14, additional required reserve and commission application for foreign currency deposit accounts, effective as of 02.09.2022, according to the conversion rate into Turkish lira time deposit accounts; It has been terminated with the Communiqué numbered 2022/30 published in the Official Gazette dated 31.12.2022 and numbered 32060 with the 5th repetition, effective from the liability period dated 23.12.2022. On the other hand, as of 23.12.2022, the commission rate to be calculated over the required reserve amount for foreign currency deposit liabilities; In both real and legal person deposits, it is determined as 8% per annum for banks with a Turkish Lira deposit share below 50%, and 3% per annum for banks with a 50% to 60% deposit share. b. b.1. Information on Financial Assets at Fair Value through Profit and Loss: Financial assets at fair value through profit and loss, which are given as collateral or blocked: Financial assets at fair value through profit and loss, which are given as collateral or blocked as of 31 December 2022, amount to TL 16,575,962 (December 31, 2021: 5,872,223 TL). b.2. Financial assets at fair value through profit and loss, which are subject to repurchase agreements: Financial assets at fair value through profit and loss, which are subject to repurchase agreements as of 31 December 2022, amount to TL 217,562 (December 31, 2021: TL 164,956). b.3. All creditors including the Group reached an agreement on restructuring the loans granted to a company. As previously stated, loans of the company had been planning to be restructured based on required permits and necessary approvals within a new special purpose entity which was already incorporated or will be incorporated in the Republic of Turkey and owned by the creditors either directly or indirectly through takeover of the shares, that have been pledged by the company as a guarantee for the credit risk. Above mentioned process was completed in 2018 and, in this context the Bank owns 11.5972% and Türkiye Sınai Kalkınma Bankası A.Ş, a group company, owns 1.6172% of the newly formed special purpose entity. At the Ordinary Meeting of the General Assembly of 2018 held in 2019, it has been decided to increase the share capital of the mentioned company by TL 3,982,230, all to be covered by common receivables. Whereas the Bank’s and Türkiye Sınai Kalkınma Bankası A.Ş.’ ownership ratio in company share have not changed, the nominal value of the shares owned increased from TL 6 to TL 461,833 and from TL 1 to TL 64,403 respectively. Related amount is held under Assets Held for Sale and Discontinued Operations account, while the loan amount remaining after the capital increase is held under the Financial Assets at Fair Value Through Profit and Loss item on 10.03.2022, a share transfer agreement was signed between the company and TVF for the sale of all A group registered shares, corresponding to 55% of the company's capital, to Türkiye Varlık Fonu (TVF) and On 31.03.2022, the sale and transfer transaction was realized. Forward Transactions Swap Transactions Futures Options Other Total Current Period Prior Period TL 316,139 83,046 214,537 FC 708,561 16,423,805 180,080 1,246,555 TL 329,876 168,837 255,887 FC 1,746,980 20,505,483 456,389 1,030,470 613,722 18,559,001 754,600 23,739,322 (1) Includes informationrelated to derivative financial assets held for trading in derivative financial assets. Information on derivative financial assets for hedging purposes is disclosed in Section Five footnote I.1. d. d.1 Banks Account Information on Banks: Banks Domestic Banks Foreign Banks Foreign Head Office and Branches Total d.2. Information on foreign banks: EU Countries USA, Canada OECD Countries (1) Off-shore Banking Regions Other Total Current Period Prior Period TL FC TP YP 6,541,346 646,341 1,292,499 30,514,629 2.806.065 168.413 1.476.997 30.743.767 7,187,687 31,807,128 2.974.478 32.220.764 Current Period Prior Period Unrestricted Amount Resticted Amount Unrestricted Amount Resticted Amount 11,433,821 2,279,808 4,341,830 5,844,892 23,900,351 1,310,185 977,040 4,973,394 7,260,619 11,894,315 4,947,320 4,458,406 3,914,543 25,214,584 2,569,797 10,603 1,732,114 1,385,082 5,697,596 (1) OECD countries other than the EU countries, USA and Canada. Expected credit loss for cash and cash equivalents: Current Period Prior Period Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Provisions beginning of the period Additional provisions within the period Transfers within the period Write-offs from Assets Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 85,738 74,131 (25,179) Currency Exchange Difference Provisions at the end of the period 35,466 170,156 50,476 52,272 (29,196) 12,186 85,738 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 384 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 385 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 e. e.1. Information on Financial Assets at Fair Value through Other Comprehensive Income: f.3. Information on Maturity analysis of cash loans: Information on financial assets at fair value through other comprehensive income, which are given as collateral or blocked: Financial assets at fair value through other comprehensive income, which are given as collateral or blocked, amount to TL 73,609,538 as of 31 December 2022 (December 31, 2021: TL 30,366,014). e.2. Information on financial assets at fair value through other comprehensive income, which are subject to repurchase agreements: Financial assets at fair value through other comprehensive income which are subject to repurchase agreements amount to TL 39,707,583 as of 31 December 2022 (December 31, 2021: TL 34,943,986). e.3. Information on financial assets at fair value through other comprehensive income: Current Period Prior Period Debt Securities Quoted on a Stock Exchange Not-Quoted (1) Share Certificates Quoted on a Stock Exchange Not-Quoted Provision for Impairment Losses (-) Other Total 204,995,860 76,747,502 128,248,358 1,605,302 21,120 1,584,182 5,943,972 1,468,387 202,125,577 113,649,539 59,680,425 53,969,114 940,712 114,336 826,376 5,382,509 735,917 109,943,659 (1) Refers to the debt securities, which are not quoted on the Stock Exchange, or which are not traded, while quoted, on the Stock Exchange at the end of the related period. Information related to loans: f. Leasing and factoring receivables are considered as loans in the footnotes of this section. f.1. Leasing and factoring receivables are considered as loans in the footnotes of this section. Current Period Prior Period Cash Non-Cash Cash Non-Cash Direct Lending to Shareholders Corporate Shareholders Individual Shareholders Indirect Lending to Shareholders Loans and Other Receivables to Employees Total 598,361 598,361 1,418 1,418 359,600 359,600 1,404 1,404 f.2. Information about the Standard Loans and Loans Under Close Monitoring and Loans Under Close Monitoring that have been restructured: Cash Loans Standard Loans Loans Under Close Monitoring Loans Not Subject to Restructuring Restructured Loans Loans with Revised Contract Terms Refinanced Non-specialized loans Corporation Loans Export Loans Import Loans Loans Extended to Financial Sector Consumer Loans Credit Cards Other Specialized Loans Other Receivables Total 12 Month Expected Credit Losses Significant Increase in Credit Risk 803,401,350 252,406,707 103,263,686 32,072,472 106,705,980 84,734,146 224,218,359 29,401,977 11,182,169 665,196 1,779 9,771,352 2,849,769 4,931,712 31,481,496 18,963,521 48,627 20,866,152 10,938,206 1,042,531 148,556 1,091,940 11,228,852 2,134,800 6,750,615 803,401,350 29,401,977 31,481,496 20,866,152 Current Period Prior Period Standard Loans Loans Under Close Monitoring Standard Loans Loans Under Close Monitoring 4,718,789 4,191,349 14,637,767 12,735,339 Cash Credit Short-term Loans Medium and Long-term Loans Standard Loans 338,314,288 465,087,062 Loans Under Close Monitoring Loans Not Subject to Restructuring Refinanced 6,559,317 22,842,660 3,581,039 48,766,609 f.4. Information on consumer loans, retail credit cards, personnel loans and personnel credit cards: Short-Term Medium and Long-Term Interest and Income Accruals Total Consumer Loans-TL Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Consumer Loans – FC Indexed Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Consumer Loans – FC Real Estate Loans Vehicle Loans 9,476,653 52,801 66,714 9,357,138 100,970,141 28,685,188 3,837,024 68,447,929 1,829 1,829 159,345 207,611 21,627 General Purpose Consumer Loans 159,345 185,984 Other Retail Credit Cards-TL With Installments Without Installments Retail Credit Cards-FC With Installments Without Installments Personnel Loans-TL Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Personnel Loans- FC Indexed Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Personnel Loans-FC Real Estate Loans Vehicle Loans General Purpose Consumer Loans Other Personnel Credit Cards-TL With Installments Without Installments Personnel Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL (real persons) Overdraft Accounts – FC (real persons) 2,831,098 2,831,098 170,597 7,854 2,693 160,050 5,452 1,547 3,905 7,202 7,202 54,909,240 24,789,032 30,120,208 141,814 141,814 36,014 515 35,499 353 353 311,164 148,532 162,632 1,684 1,684 5,785,122 162,020 1,704,011 354,540 44,964 1,304,507 20,024 20,024 1,391 93 1,298 245,890 62,206 183,684 5,187 164 43 4,980 62 14 48 423 423 54,876 112,150,805 29,092,529 3,948,702 79,109,574 21,853 21,853 368,347 21,720 346,627 57,986,228 27,682,336 30,303,892 141,814 141,814 211,798 8,018 3,251 200,529 5,867 1,561 4,306 318,789 155,734 163,055 1,684 1,684 5,839,998 162,020 Total 70,983,409 104,193,930 2,031,864 177,209,203 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 386 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 387 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 f.5. Information on commercial installments loans and corporate credit cards: f.10.2. Information on the movement of total non-performing loans: Commercial Loans with Installments-TL Real Estate Loans Vehicle Loans General Purpose Commercial Loans Other Commercial Loans with Installments-FC Indexed Real Estate Loans Vehicle Loans General Purpose Commercial Loans Other Short-Term Medium and Long-Term Interest and Income Accruals Total 24,126,058 13,434 3,645,983 20,466,641 73,604,896 3,668,187 24,329,585 45,607,124 85,235 1,779 83,456 1,429,058 35,344 281,916 1,111,798 359,634 7,153 99,160,012 3,716,965 28,257,484 67,185,563 444,869 8,932 352,481 435,937 Commercial Loans with Installments-FC 1,014,798 10,513,341 105,500 11,633,639 Real Estate Loans Vehicle Loans General Purpose Commercial Loans Other Corporate Credit Cards-TL With Installments Without Installments Corporate Credit Cards-FC With Installments Without Installments Overdraft Accounts – TL Overdraft Accounts – FC (corporate) Total f.6. Distribution of credits according to users: Public Private Total f.7. Domestic and foreign loans: Domestic Loans Foreign Loans Total 9,628,680 884,661 934,252 934,166 86 82,158 932,640 29,224,515 15,768,852 13,455,663 19,448 19,448 3,233,583 93,271 12,229 49,125 49,125 46,826 9,804,109 1,829,530 30,207,892 16,703,018 13,504,874 19,448 19,448 3,280,409 57,618,402 85,137,724 1,990,143 144,746,269 Current Period Prior Period 7,172,079 877,978,896 885,150,975 Current Period Prior Period 851,121,329 34,029,646 885,150,975 f.8. Loans granted to subsidiaries and associates: Direct Loans Granted to Subsidiaries and Associates Indirect Loans Granted to Subsidiaries and Associates Total f.9. Information on impairment provisions of Loans (Stage 3): Loans with Limited Collectability Loans with Doubtful Collectability Uncollectible Loans Total Current Period Prior Period 2,343,655 2,343,655 Current Period Prior Period 1,533,076 4,047,910 14,984,604 20,565,590 f.10. Information on non-performing loans (Net): f.10.1. Information on non-performing loans, which are restructured by the Group: Current Period (Gross amounts before the provisions) Restructured Loans Prior Period (Gross amounts before the provisions) Restructured Loans Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans 1,486,706 1,486,706 456,906 456,906 1,782,784 1,782,784 1,319,183 1,319,183 6,373,775 6,373,775 3,847,880 3,847,880 7,291,579 583,006,049 590,297,628 563,177,007 27,120,621 590,297,628 2,402,860 2,402,860 1,231,704 1,762,150 12,904,750 15,898,604 Prior Period Ending Balance Corporate and Commercial Loans Retail Loans Credit Cards Other Additions (+) Corporate and Commercial Loans Retail Loans Credit Cards Other Transfers from Other NPL Categories (+) Corporate and Commercial Loans Retail Loans Credit Cards Other Transfers to Other NPL Categories (-) Corporate and Commercial Loans Retail Loans Credit Cards Other Collections (-) Corporate and Commercial Loans Retail Loans Credit Cards Other Write-Offs (-) (1) Corporate and Commercial Loans Retail Loans Credit Cards Other Debt Sale (-) (2) Corporate and Commercial Loans Retail Loans Credit Cards Other Currency Exchange Effect Corporate and Commercial Loans Retail Loans Credit Cards Other Current Period Ending Balance Corporate and Commercial Loans Retail Loans Credit Cards Other Specific Provisions (-) Corporate and Commercial Loans Retail Loans Credit Cards Other Net Balance on Balance Sheet Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans 2,354,561 1,788,214 356,344 210,003 11,006,542 7,099,245 2,743,777 1,163,313 207 1,994 1,994 7,924,347 5,171,431 1,963,070 789,639 207 2,465,737 1,539,110 578,909 347,718 521 179 309 33 32,078 30,319 1,759 3,004,570 2,207,058 561,586 235,926 1,533,076 1,098,434 299,277 135,365 1,471,494 3,517,144 3,064,120 291,794 161,230 393,416 363,794 20,771 8,798 53 7,925,177 5,171,431 1,963,900 789,639 207 4,677,683 3,205,034 1,018,513 453,876 260 1,004,086 436,974 373,169 193,943 2,687 2,333 301 53 31 31 399,774 394,694 5,080 6,551,024 5,349,698 889,562 311,764 4,047,910 3,339,122 514,171 194,617 2,503,114 18,573,387 17,263,217 748,570 436,120 125,480 4,650,863 4,598,803 29,900 2,350 19,810 4,675,689 3,205,034 1,016,519 453,876 260 830 830 5,290,970 4,838,517 310,131 137,960 4,362 5,253,641 5,164,691 8,850 6,308 73,792 363,943 122,715 139,108 92,557 9,563 666,609 646,868 19,682 59 17,657,164 15,587,999 1,355,752 655,521 57,892 14,984,604 13,368,073 1,009,106 559,071 48,354 2,672,560 (1) As part of the amendment to the “Regulation on Procedures and Principles on the Classification of Loans and Provisions to be Set Aside for Them” published in the Official Gazette No. 30961, receivables amounting to TL 5,169,896 were written off. Details of which are given in Note I.b.3 of Section Five, the loan amounting to TL 4.475.966, which is followed in financial assets at fair value through profit or loss classified as non-performing loans in the current period and has been written off within the framework of “Procedures and Principals regarding Classification of Loans and Allowances Allocated for Such Loans”. (2) In the current period, the part of the receivables constitutes non-performing loans amounting to TL 363,974 are transferred to Emir Varlık Yönetim A.Ş. and İstanbul Varlık Yönetim A.Ş by collecting TL 76,500 of sales amount in cash. After the sale of non-performing loans and the write-off, the consolidated non-performing loan ratio decreased from 3.57% to 2.98% as of 31.12.2022. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 388 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 389 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 f.10.3. Information on foreign currency non-performing loans: Group III Group IV Loans with Limited Collectability Loans with Doubtful Collectability Group V Uncollectible Loans Current Period Balance at the End of the Period Provisions (-) Net Balance on Balance Sheet (1) Prior Period Balance at the End of the Period Provisions (-) Net Balance on Balance Sheet (1) 1,449,347 653,655 795,692 931,130 447,079 484,051 3,293,071 1,566,847 1,726,224 2,390,456 1,141,904 1,248,552 10,598,027 9,161,617 1,436,410 11,033,205 6,923,386 4,109,819 (1) In addition to the loans extended in foreign currency, loans which are monitored in Turkish Lira are included. f.10.4. Information on gross and net non-performing loans as per customer categories: Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans Current Period (Net) Loans to Individuals and Corporate (Gross) Provisions (-) Loans to Individuals and Corporate (Net) Banks (Gross) Provisions (-) Banks (Net) Other Loans (Gross) Provisions (-) Other Loans (Net) Prior Period (Net) Loans to Individuals and Corporate (Gross) Provisions (-) Loans to Individuals and Corporate (Net) Banks (Gross) Provisions (-) Banks (Net) Other Loans (Gross) Provisions (-) Other Loans (Net) 1,471,494 3,004,570 1,533,076 1,471,494 1,122,857 2,354,561 1,231,704 1,122,857 2,503,114 6,551,024 4,047,910 2,503,114 1,754,994 3,517,144 1,762,150 1,754,994 2,672,560 17,599,272 14,936,250 2,663,022 57,892 48,354 9,538 5,668,637 18,447,907 12,789,895 5,658,012 125,480 114,855 10,625 ੵ The portion of the receivables, which are followed under the Fifth Group-Loans with a Loss Qualification and for which a lifetime expected credit loss provision has been made due to the default of the debtor, for which there is no reasonable expectation of its collection, can be write-off to the extent of the maximum provision amount, ੵ Write-off is an accounting practice and does not result in the waiver of the receivable, The Bank’s general policy for write-offs of receivables under follow-up is to write of such receivables that are proven to be uncollectible in legal follow-up process within the instructions of Tax Procedure Law. Expected Credit Loss: Current Period Prior Period Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Provisions beginning of the period Additional provisions within the period 4,191,349 7,822,416 12,735,339 15,898,604 3,094,850 8,564,927 14,371,889 6,611,081 12,402,374 3,744,299 6,839,036 4,134,573 Transfers within the period Write-offs from Assets Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 Currency Exchange Difference (7,765,588) (3,892,653) (3,857,344) (2,855,083) (2,394,649) (2,249,174) 492,459 (237,419) (57,539) 273,111 (475,851) 312,730 (1,407,522) 754,643 (5,613,004) (16,608 (75,311) 1,465,061 361,818 506,839 (647,781) (26,272) 374,497 (498,512) 774,317 (1,334,981) 785,201 (2,013,743) (8,327) (126,536) 1,361,253 428,669 Provisions at the end of the period 4,718,789 14,637,767 20,565,590 4,191,349 12,735,339 15,898,604 g. Financial Assets Measured at Amortized Cost: g.1. Financial Assets Measured at Amortized Cost given as collateral or blocked: Financial assets measured at Amortized cost given as collateral or blocked amount to TL 61,281,906 as at December 31, 2022 (December 31, 2021: TL 11,735,769). g.2. Financial Assets Measured at Amortized Cost subject to repurchase agreements: Financial assets measured at Amortized cost, which are subject to repurchase agreements amount to TL 7,166,511 at December 31, 2022 (December 31, 2021: TL 17,843,004). g.3. Information on government securities measured at Amortized cost: Government Bonds Treasury Bills Other Public Debt Securities Total Current Period Prior Period 100,256,173 47,975,957 100,256,173 47,975,957 g.4. Information on financial assets measured at amortized cost: f.10.5. Information on interest accruals, valuation differences and related provisions calculated for non-performing loans: Current Period Prior Period Current Period (Net) Interest accruals and valuation differences Provisions (-) Prior Period (Net) Interest accruals and valuation differences Provisions (-) Group III Loans with Limited Collectability Group IV Loans with Doubtful Collectability Group V Uncollectible Loans 80,448 157,677 77,229 107,756 210,639 102,883 353,634 1,025,286 671,652 424,694 841,748 417,054 251,539 1,519,085 1,267,546 392,732 1,473,886 1,081,154 f.10.6. Outline of the liquidation policy for uncollectible loans and other receivables: In order to ensure the liquidation of non-performing loans, all possibilities evaluated to ensure maximum collection according to the legislation. First of all, administrative initiatives are taken to deal with the borrower. Collection through legal proceedings used if there is no possibility of collection and configuration with the interviews for other receivables. Our receivables that cannot be collected through administrative and legal initiatives can be written off from the assets within the framework of portfolio- based receivables sales or write-offs, by fulfilling the requirements of the Tax Procedure Law. f.10.7. Explanations on write-off policy: Receivables classified as non-performing loans are collected primarily within the framework of administrative contacts with the debtors, and if no result is obtained, through legal means. In this context, if our uncollected receivables are deleted from assets, one of the methods of destruction, receivable sale and deregistration can be applied. In the Bank's write-off policy within the framework following the amendment made in Article 53 of the Banking Law with the Law on Income Tax and amending Certain Laws No. 19.07.2019/7186, along with the "Classification of Loans and the Procedures and Principles for the Reserves to be Allocated for Them" published in the Official Gazette No. 27.11.2019 / 30961, the following statements are issued: Debt Securities Quoted on a Stock Exchange Not Quoted (1) Impairment Losses (-) Total 106,956,161 96,996,697 9,959,464 106,956,161 (1) Indicates unlisted debt securities, and debt securities that have not been traded at the end of the related periods while they are listed. g.5. Movement of financial assets measured at amortized cost within the year: Current Period Prior Period Beginning Balance Foreign Exchange Differences Arising on Monetary Assets Purchases During the Year Transfers Disposals through Sales and Redemption Impairment Losses (-) Valuation Effect Balance at the End of the Period 51,545,328 3,782,273 60,382,102 2,022,376 (21,574,387) 10,798,469 106,956,161 51,545,328 48,798,039 2,747,289 51,545,328 45,604,603 3,677,166 16,224,952 (16,481,168) 2,519,775 51,545,328 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 390 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 391 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Expected credit loss for financial assets measured at amortised cost: Current Period Prior Period Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Provisions beginning of the period Additional provisions within the period Transfers within the period Write-offs from Assets Transfer to Stage 1 Transfer to Stage 2 Transfer to Stage 3 28,994 61,491 (23,194) Currency Exchange Difference Provisions at the end of the period 1,379 68,670 h. Information on Associates (Net): 17,755 21,565 (11,283) 957 28,994 As per the “Communiqué on Preparation of Consolidated Financial Statements of Banks”, credit institutions or financial institutions associates are included In the scope of consolidated financial statements. Within this context, credit institutions and financial associates are accounted in the consolidated financial statements according to TAS 28 - Investments in Associates and Joint Ventures”. h.1. Information on credit institution or financial institution associates that are not accounted by the equity method: None. h.2. Information on credit institution or financial institution associates that are accounted by the equity method: Title Address (City/ Country) Arap-Türk Bankası A.Ş. İstanbul/Turkey Information on financial statements of associates in the above order: Bank’s Share Percentage-If Different. Voting Percentage (%) 20.58 Bank’s Risk Group Share Percentage (%) 79.42 Total Assets Shareholders’ Equity Total Tangible Assets Interest Income (1) Securities Income Current Period Profit/Loss Prior Period Profit/Loss Fair Value 12,228,874 1,872,216 584,891 708,973 63 215,338 163,288 (1) Includes interest income on securities. h.3. Movement of investments in consolidated associates (1): Beginning Balance Movements during the period Purchases Bonus shares acquired Dividends received from the current year profit Sales Revaluation Increase (2) Impairment Balance at the end of the period Capital commitments Contribution in equity at the end of the period (%) 105,029 385,225 38,022 280,196 (1) Includes the information related to associate which is a credit institution in which the Bank has direct shares. (2) Includes the equity method accounting differences. h.4. Sectoral information on consolidated associates and the related carrying amounts (1): Banks Insurance Companies Factoring Companies Leasing Companies Finance Companies Other Financial Participations Total Current Period 385,225 Prior Period 280,196 385,225 280,196 (1) Includes the information related to associate which is a credit institution in which the Bank has direct shares. h.5. h.6. h.7. Consolidated associates traded on a stock exchange: None. Consolidated associates disposed of in the current period: None. Consolidated associates acquired in the current period: None. h.8. Other issues related to associates: The accounting method for non-financial subsidiaries, associates and jointly controlled associates is changed in accordance with TAS 27 “Individual Financial Statements” to the equity method introduced in TAS 28. The effects of these changes are given in Section Three III.2 numbered footnotes in detail. i. Information on subsidiaries (Net): As per the “Communiqué on Preparation of Consolidated Financial Statements of Banks”, the Bank includes credit institutions or financial institutions subsidiaries in the scope of consolidated financial statements.: i.1. Information on the equity of major subsidiaries: Türkiye Sınai Kalkınma Bankası A.Ş. Sigorta / Reasürans Şirketleri İş Gayrimenkul Yatırım Ortaklığı A.Ş İşbank AG İş Yatırım Menkul Değerler A.Ş İş Finansal Kiralama A.Ş COMMON EQUITY TIER I CAPITAL Common Equity Tier I Capital Before Deductions Deductions from Common Equity Tier I Capital (-) Total Common Equity Tier I Capital ADDITIONAL TIER I CAPITAL Additional Tier I Capital before Deductions Deductions from Additional Tier I Capital (-) Total Capital TIER II CAPITAL Tier II Capital Before Deductions Deduction from Tier II Capital (-) Total Additional Tier II Capital Total Capital and Tier II Capital Deductions from Total Capital and Additional Tier I Capital (-) CAPITAL 13,192,070 14,607,148 13,925,551 7,526,750 6,815,919 3,432,832 497,007 461,922 7,969 160,365 111,128 16,363 12,695,063 14,145,226 13,917,582 7,366,385 6,704,791 3,416,469 12,695,063 14,145,226 13,917,582 7,366,385 6,704,791 3,416,469 4,587,995 4,587,995 17,283,058 14,145,226 13,917,582 7,366,385 6,704,791 3,416,469 17,283,058 14,145,226 13,917,582 7,366,385 6,704,791 3,416,469 1 2 3 4 5 6 7 8 9 10 11 12 13 Anadolu Anonim Türk Sigorta Şirketi Anadolu Hayat Emeklilik A.Ş. Efes Varlık Yönetim A.Ş. İş Faktoring A.Ş. İş Finansal Kiralama A.Ş. İş Gayrimenkul Yatırım Ortaklığı A.Ş. İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. İş Portföy Yönetimi A.Ş. İş Yatırım Menkul Değerler A.Ş. İş Yatırım Ortaklığı A.Ş. İşbank AG JSC İşbank JSC Isbank Georgia 14 Maxis Girişim Sermayesi Portföy Yönetimi A.Ş. 15 Maxis Investments Ltd. 16 Milli Reasürans T.A.Ş. 17 Moka Ödeme ve Elektronik Para Kuruluşu A.Ş. 18 19 20 21 TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. Türkiye Sınai Kalkınma Bankası A.Ş. Yatırım Finansman Menkul Değerler A.Ş. Yatırım Varlık Kiralama A.Ş. Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Frankfurt/Germany Moscow/Russia Tbilisi/Georgia Istanbul/Turkey London/England Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey Istanbul/Turkey (1) Indirect share of the Group is considered as the Parent Bank’s share percentage. 50.21 74.81 66.28 46.43 45.33 60.47 35.37 67.47 67.98 24.97 100.00 100.00 100.00 67.98 67.98 87.60 100.00 44.78 50.46 48.90 48.90 49.79 25.19 33.72 53.57 54.67 39.53 64.63 32.53 32.02 75.03 0.00 0.00 0.00 32.02 32.02 12.40 0.00 55.22 49.54 51.10 51.10 Current Period 280,196 Prior Period 242,174 i.2. i.3. Information on unconsolidated subsidiaries: None. Information on consolidated subsidiaries: Title Address (City/ Country) Bank’s Share Percentage-If Different. Voting Rights (%) (1) Bank’s Risk Group Share Percentage (%) An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 392 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 393 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Financial statement information related to consolidated subsidiaries in the above order: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Interest Income (1) Securities Income Current Period Profit/Loss Prior Period Profit/Loss Fair Value (2) Additional Shareholders’ Equity Required 970,550 2,164,228 1,323,552 589,835 7,915,000 1,038,678 513,911 1,391,752 699,988 9,848,720 Total Assets Shareholders’ Equity 29,414,397 4,756,818 90,659,179 3,466,207 214,053 176,588 16,429,140 1,420,458 Total Tangible Assets 711,866 215,301 10,539 15,331 143,097 1,691,251 36,330,079 3,744,045 60,515 3,330,338 17,417,219 13,920,236 13,959,708 1,011,126 1,007,356 508,178 451,600 3,412 8,202 35,809,603 7,267,688 206,268 320,451 313,600 33,318,257 7,920,657 4,525,552 1,633,192 2,917,655 29,360 1,063,857 828,210 18,949 134,575 897 346,362 100,257 57,507 7,111 4,923 44,469 10,362 41,880 76,171 24,973 878,024 408,306 166,509 592 4,255 871 9,872 19,602 51,395 445,386 826,766 23,631 121,372 310,063 5,605,530 277,409 44,469 1,329,920 10,286,429 4,086 54,637 732,001 224,749 11,976 97,016 1,305,000 1,756,373 4,529,607 1,233,477 22,215,545 828,532 51,616 1,384 80,245 323,549 478,226 82,366 8,969 31,829 50,811 143,158 12,739 28,165 4,691 12,484 12,400,448 5,055,936 2,449,885 518,181 222,160 888,620 548,966 468,170 46,570 6,047 1,817,662 1,809,469 1,780,819 4,024 3,624 2,351 2,143 1,069,466 124,879 3,396,900 117,621,660 12,992,456 1,983,415 10,374,234 110,483 4,105,739 1,097,309 12,280,800 3,706,023 346,228 11,486 267,574 87,029 115,122 66,201 178,642 303 66 49 (1) Includes interest income on securities. (2) Fair value is the companies’ market value. i.4. Movement of investments in subsidiaries (1): Balance at the Beginning of the Period Movements in the Period Purchases (2) Bonus Shares Acquired Dividends Received from the Current Year Profit Sales Revaluation Surplus/Deficit (3) Impairment Balance at the End of the Period Capital Commitments Contribution in equity at the end of the period (%) Current Period Prior Period 17,613,057 2,714,715 17,045,598 37,373,370 13,004,921 135,635 4,472,501 17,613,057 (1) Reveals the information related to companies subject to consolidation in which Bank directly owns share. (2) The amount in the current period is due to the capital increase of İşbank AG and the amount in the prior period is due to the purchasing shares of Moka Ödeme ve Elektronik Para Kuruluşu A.Ş. by cash and Türkiye Sınai Kalkınma Bankası A.Ş., İş Gayrimenkul Yatırım Ortaklığı A.Ş. and İş Yatırım Menkul Değerler A.Ş. shares followed in the Financial Assets at Fair Value Through Profit or Loss account is classified under subsidiaries along with the capital increase. (3) Includes accounting differences by equity method. i.5. Sectoral information on consolidated subsidiaries and the related carrying amounts (1): Banks Insurance Companies Factoring Companies Leasing Companies Finance Companies Other Financial Subsidiaries Total Current Period Prior Period 16,800,054 7,310,823 937,316 12,325,177 37,373,370 8,036,340 4,353,568 544,978 4,678,171 17,613,057 (1) Reveals the information related to companies subject to consolidation in which Bank directly owns share. i.6. Consolidated subsidiaries traded on stock exchange (1): Traded on domestic stock exchanges Traded on foreign stock exchanges Current Period Prior Period 22,198,019 10,063,540 (1) Reveals the information related to companies subject to consolidation in which Bank directly owns share. i.7. i.8. i.9. Consolidated subsidiaries disposed of in the current period: None Subsidiaries acquired in the current period: None Other issues on subsidiaries: As explained in Note III.2 of Section Three, non-financial subsidiaries, associates and jointly controlled associates are accounted by using the equity method defined in TAS 28 “Investments in Subsidiaries and Associates” within the scope of TAS 27 “Individual Financial Statements”. j. Information on jointly controlled entities (Net): As per the “Communiqué on Preparation of Consolidated Financial Statements of Banks”, jointly controlled entities as credit institutions or financial institutions are included in the scope of consolidated financial statements. There are no jointly controlled entities which are excluded in the scope of the consolidation. On the other hand, as explained in Note III.2 of Section Three, non-financial subsidiaries, associates and jointly controlled associates are accounted by using the equity method defined in TAS 28 “Investments in Subsidiaries and Associates” within the scope of TAS 27 “Individual Financial Statements”. k. k.1. Information regarding finance lease receivables (Net): Presentation of finance lease receivables according to their remaining maturities: Less than 1 Year 1-4 Years More than 4 Years Total Current Period Prior Period Gross 8,698,663 10,780,717 1,271,472 Net 7,065,854 9,443,616 1,133,105 Gross 5,518,419 7,264,644 701,434 Net 4,652,503 6,428,916 622,103 20,750,852 17,642,575 13,484,497 11,703,522 k.2. Information regarding net investments made on finance lease: Gross Finance Lease Investment Unearned Finance Revenue from Finance Lease (-) Net Finance Lease Investment Current Period Prior Period 20,750,852 3,108,277 17,642,575 13,484,497 1,780,975 11,703,522 k.3. Presentation of operating lease receivables according to their remaining maturities: As at December 31, 2022 the remaining maturities of the Group's operating lease receivable is less than 1 year the total amount is TL 35,795 (December 31, 2021; TL 23,537). l. Positive differences table for hedging derivative financial assets: Part of Derivative Financial Assets at Fair Value Through Profit Loss (1) Current Period Prior Period Net Gross Net Gross Hedging Derivative Financial Assets Hedging Cash Flow Protection from Net Investment Risk Abroad Total 387,926 256,505 387,926 256,505 (1) Includes information on derivative financial assets for hedging purposes classified under derivative financial assets. Explanations on hedging derivative financial assets: Derivative Financial Liabilities at Fair Value through Profit/Loss Interest Rate Swap Transactions FC TL Currency Swap Transactions FC TL Contract Sum 15,582,944 15,582,944 Current Period Prior Period Assets Liability Contract Sum Assets Liabilty 134,010 19,085,248 134,010 19,085,248 208,148 208,148 10,914,093 10,914,093 387,926 387,926 7,926,855 7,926,855 48,357 48,357 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 394 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 395 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Information on fair value hedge accounting is given below. Current Period: Hedging Instrument Hedging Item Risk Exposure Fair Value Difference of Hedging Assets (1) Net fair value of hedging instrument (1) Assets Liabilities Income statement effect (profit / loss from derivative financial transactions) Interest Rate Swap Transactions Interest Rate Swap Transactions Cross Currency Swap Transactions Fixed Interest rate Eurobond and Greenbond Interest Risk 8,201 Fixed Rate Loans Used Interest Risk 93,402 (3,496) (94,182) Fixed Interest Rate Eurobond Interest Risk (76,245) 80,846 4,705 (780) 4,601 (1) The fair value of the protected assets and the hedged assets subject to hedge accounting is shown as the net market value excluding the credit risk and the accumulated interest. Prior Period: Hedging Instrument Hedging Item Risk Exposure Fair Value Difference of Hedging Assets (1) Net fair value of hedging instrument (1) Assets Liabilities Income statement effect (profit / loss from derivative financial transactions) Interest Rate Swap Transactions Interest Rate Swap Transactions Fixed Interest rate Eurobond and Greenbond Interest Risk (111,338) 117,468 Fixed Rate Loans Used Interest Risk (24,900) 24,016 6,130 (884) Cross Currency Swap Transactions (1) The fair value of the protected assets and the hedged assets subject to hedge accounting is shown as the net market value excluding the credit risk and the accumulated interest. Fixed Interest Rate Eurobond Interest Risk (72,869) 73,489 620 m. Information on Tangible Assets: Current Period Real Estate Right-to-Use Assets Buildings Under Construction Vehicles Other MDV Total Previous Period Cost 8,903,796 2,520,198 292,153 49,778 3,915,335 15,681,260 Accumulated Depreciation (26,723) (1,398,981) (31,123) (2,817,409) (4,274,236) Net Book Value Current Period Net Book Value at the Beginning of Period Current Period Changes (Net) (1) Depreciation Fee Provision for Impairment (Net) Foreign Exchane Differences (Net) (1) End of Term Cost 8,877,073 1,121,217 292,153 18,655 1,097,926 11,407,024 8,877,073 11,904,498 1,121,217 811,955 (157,735) (488,609) 292,153 19,268 18,655 1,097,926 11,407,024 26,287 1,258,930 14,020,938 (8,418) (481,401) (1,136,163) 28,990 21,792 59,664 1,077 74,796 28,990 157,329 20,694,380 3,502,559 311,421 78,021 5,160,629 29,747,010 Accumulated Depreciaton at the End of the Period (19,762) (1,998,332) (40,420) (3,210,378) (5,268,892) Net Book Value at the End of the Period 20,674,618 1,504,227 311,421 37,601 1,950,251 24,478,118 (1) Includes the movements in cost value and accumulated depreciation items. k. Information on Intangible Assets: Explanation regarding consolidation goodwill that is included in intangible assets is given in Section Three under the caption of “XII. Explanations on Goodwill and Other Intangible Assets.” The table consisting movements of other intangible assets are presented below. Current Period Prior Period Net Book Value at the Beginning of the Period Change During the Period (Net)(1) Depreciation Impairment Currency Translation Differences (1) Cost at Period End Accumulated Depreciation at Period End Net Book Value at the End of the Period (1) The balance includes the movements in cost and accumulated depreciation items 2,154,031 2,756,745 (912,870) 53,913 8,199,345 (4,147,526) 4,051,819 1,618,014 921,544 (453,413) 67,886 5,284,771 (3,130,740) 2,154,031 l. Information on investment property: Investment properties are properties that the Group holds to earn rentals. Explanations on these subjects are given in Section Three Note XIV. Total rental income obtained from investment properties during the period is TL 275,199 (December 31, 2021: TL 150,519). Net Book Value at the Beginning of the Period Change During the Period (Net) (1) Revaluations Surplus/Deficit Net Book Value at the End of the Period n. Information on deferred tax asset: Current Period Prior Period 4,601,916 190,204 6,528,070 11,320,190 3,649,631 51,414 900,871 4,601,916 As of December 31, 2021, the Parent Bank and the other consolidated Group companies has deferred tax asset amounting to TL 3,118,976. Such deferred tax asset is calculated based on the temporary differences between the book value of assets and liabilities and their tax basis measured as per the prevailing tax regulation. When the items comprising the temporary differences are followed under equity, the related tax asset/liability is directly recognized under equity items. Tangible Assets Base Differences Provisions (1) Finance Lease Income Accruals Valuation of Financial Assets Other Net Deferred Tax Asset Current Period Prior Period 59,702 (1,292,150) 66,033 259,564 (67,259) (974,110) 743,080 (6,041,695) 32,401 1,946,829 200,409 (3,118,976) (1) Comprised of employee termination benefits, actual and technical deficits of the pension fund, insurance technical provisions, the provisions for credit card bonus points, expected credit loss for Stage 1 and Stage 2 loans and other provisions. n. Information on assets held for sale and discontinued operations: Net Balance at the Beginning of the Period Change during the periods (Net) (1) Amortized Cost Foreign Currency Difference Net Book Value at the End of the Period Current Period Prior Period 910,871 708,104 (7,042) 7,061 1,618,994 1,302,608 (399,379) 7,642 910,871 (1) The TL 1,249,492 portion of the change in the current period relates to the transfer of the 12.28% share in General Energy PLC's capital to the Bank as an offset to the receivable. Investment in a special purpose company whose details be given in Section Five footnote I.b.3 is classified within the scope of “TFRS-5 Assets Held for Sale and Discontinued Operations”. In 2019 the Bank’s and Türkiye Sınai Kalkınma Bankası A.Ş.’s shares’ nominal values in company’s capital increased from TL 6 to TL 461,833 and TL 1 to TL 64,403 respectively. As announced on KAP at the date of 31.03.2022, the sale and transfer of these shares to Türkiye Varlık Fonu has been completed and the provision for a decrease in value has been reserved for the entire investment classified under “TFRS 5- Fixed Assets Held for Sale and Discontinued Operations”. The sale and transfer to TVF has been completed, and a provision for impairment has been set aside for the entire investment classified within the framework of "TFRS 5- Non-current Assets Held for Sale and Discontinued Operations". Shares amounting to TL 526,236, which were tracked under the Assets Held for Sale and Discontinued Operations item and all of which were reserved for impairment, were written off together with the impairment provision within the scope of the registration of the liquidation of the company in the Trade Registry Gazette dated 28.12.2022 and numbered 10735. . The other assets classified as “Fixed Assets Held for Sale” mostly consist of real estates. Announcements about the real estates subject to sale are made by using newspaper advertisements and similar media. Additionally, the Parent Bank’s real estates subject to sale are announced on the Bank’s web site. The Group has no discontinued operations. o. Information on other assets of the group: Other assets item does not exceed 10% of the balance sheet total. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 396 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 397 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 II. a. DISCLOSURES AND FOOTNOTES ON CONSOLIDATED LIABILITIES Information on Deposits: a.1. The maturity structure of deposits: Current Period Demand 7 Days Notice Up to 1 Month 1-3 Months 3-6 Months 6 Months to 1 Year 1 Year and Over Accumulated Deposits Total Savings Deposits 52,201,388 13,192,421 57,543,852 89,132,133 5,629,299 4,469,259 4453 222,172,805 Foreign Currency Deposits 259,519,298 44,938,425 142,216,242 14,994,589 6,031,447 21,436,452 1,332 489,137,785 Residents in Turkey 217,729,950 41,659,997 120,084,874 11,660,457 2,295,737 4,755,227 1,312 398,187,554 Residents Abroad 41,789,348 3,278,428 22,131,368 3,334,132 3,735,710 16,681,225 20 90,950,231 Public Sector Deposits 948,455 41,996 218,359 2,352 412 5 Commercial Deposits 54,943,461 49,548,292 11,835,853 19,297,798 8,470,551 4,974,482 Other Institutions Deposits Precious Metals Deposits 933,998 1,585,467 2,555,476 126,370 11,971 30,133 61,964,641 10,925 3,864,020 221,532 8,091,907 339,773 Interbank Deposits 1,192,084 2,933,032 2,021,365 56,837 1,398,107 3,705,688 The Central Bank of Turkey Domestic Banks Foreign Banks Participation Banks 756 37,492 1,153,256 580 2,297,918 322,705 400,126 635,114 1,698,660 56,837 997,981 3,705,688 1,211,579 149,070,437 5,243,415 74,492,798 11,307,113 756 3,058,241 8,247,536 580 Other Total 431,703,325 112,250,558 220,255,167 123,831,611 29,633,694 34,955,792 5,785 952,635,932 Prior Period Demand 7 Days Notice Up to 1 Month 1-3 Months 3-6 Months 6 Months to 1 Year 1 Year and Over Accumulated Deposits Total Savings Deposits 29,130,181 10,101,438 62,338,966 8,091,893 879,420 1,026,512 6,422 111,574,832 Foreign Currency Deposits 195,521,622 34,766,109 129,130,825 8,364,528 6,984,141 18,549,447 2,293 393,318,965 Residents in Turkey 171,143,280 32,092,855 111,457,042 5,338,216 1,907,736 4,904,765 1,517 326,845,411 Residents Abroad 24,378,342 2,673,254 17,673,783 3,026,312 5,076,405 13,644,682 776 66,473,554 Public Sector Deposits 1,205,680 11,796 139,914 1,073 374 200 Commercial Deposits 18,091,217 16,649,887 11,071,146 173,276 515,975 28,850 Other Institutions Deposits Precious Metals Deposits 602,088 571,697 3,160,538 40,352 2,411 51,875 46,013,605 1,055,562 150,880 6,508,325 311,651 Interbank Deposits 1,302,757 555,375 1,133,496 59 848,077 2,587,270 The Central Bank of Turkey Domestic Banks Foreign Banks Participation Banks 480 288,796 1,013,416 65 450,260 105,115 538,289 595,207 148,477 59 699,600 2,587,270 1,359,037 46,530,351 4,428,961 54,040,023 6,427,034 480 1,425,822 5,000,667 65 Other Total 291,867,150 62,656,302 208,030,447 16,822,061 15,738,723 22,555,805 8,715 617,679,203 Total Within the framework of the ""Communiqué on Supporting the Transformation into Turkish Lira Deposits and Participation Accounts" published in the Official Gazette dated 24.02.2022 and numbered 31760 and the CBRT's communiques numbered 2021/14, 2021/16, 2022/7 and 2022/11, Parent Bank offers its customers a TL deposit product with exchange rate protection. As of 31.12.2022, the amount of the foreign exchange-protected deposits opened within this scope is TL 129,809,134 (31.12.2021: 6,116,412 TL). a.2. Savings deposits which are under the guarantee of Savings Deposits Insurance Fund exceeding the insurance limit: Savings Deposits Savings Deposits Foreign Currency Savings Deposits Other Deposits in the Form of Savings Deposits Foreign Branches’ Deposits Under Foreign Authorities’ Insurance Off-shore Banking Regions’ Deposits Under Foreign Authorities Insurance Under the Guarantee of Savings Deposits Insurance Fund Exceeding the Limit of Deposit Insurance Fund Current Period (1) Prior Period Current Period Prior Period 98,271,661 76,393,000 26,836,200 54,291,725 58,931,256 19,430,372 122,016,357 221,588,222 41,995,951 56,062,849 175,476,819 31,613,866 21,388,501 14,734,281 4,438,625 4,059,511 (1) With the Official Gazette dated 27.08.2022 and numbered 31936, a change was made in the determination of the deposits subject to insurance, and all deposits except those belonging to official institutions and credit and financial institutions were covered by insurance. Within this framework, there are commercial deposits amounting to TL 21,845,052 within the scope of the insurance, and the related amount is not shown in the table. a.3. Savings deposits which are not under the guarantee of deposit insurance fund: Foreign Branches’ Saving Deposits and Other Accounts Deposits and Other Accounts held by Main Shareholders and their Relatives Deposits and Other Accounts of the Chairperson and Members of Board of Directors, Chief Executive Officer, Senior Executive Officers and their Relatives Deposits and Other Accounts Covered by Assets Generated Through the Offenses Mentioned in Article 282 of the Turkish Criminal Code Numbered 5237 and Dated 26 September 2004 Deposits in the Banks to be Engaged Exclusively in Off-shore Banking in Turkey b. Negative Differences on Derivative Financial Liabilities Held for Trading: Current Period Prior Period 4,438,625 4,059,511 39,447 29,224 Derivative Financial Liabilities at Fair Value through Profit/Loss (1) Forward Transactions Swap Transactions Current Period Prior Period TL 115,054 2,910,812 FC 601,553 6,050,298 TL 2,282,720 4,682,562 Futures Options Other Total 34,799 244,575 131,914 3,060,665 6,896,426 7,097,196 FC 265,681 6,127,648 461,757 126,245 6,981,331 (1) Includes information related to derivative financial liabilities held for trading and clsassified under derivative financial liabilities. Information on derivative financial liabilities for hedging purposes is disclosed in Note II.g of Section Five. c. Banks and Other Financial Institutions: c.1. Information on banks and other financial institutions: Funds borrowed from the CBRT Domestic banks and institutions Foreign banks, institutions and funds Current Period Prior Period TL FC TL FC 9,536,923 2,564,571 12,101,494 8,805,823 135,074,282 143,880,105 3,736,112 2,283,386 6,019,498 9,586,758 113,317,427 122,904,185 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 398 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 399 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 c.2. Maturity analysis of funds borrowed: e. Concentration of the liabilities of the Group: Short-term Medium and Long-term Total c.3. Information on funds borrowed: Current Period Prior Period TL 9,704,698 2,396,796 12,101,494 FC 8,339,020 135,541,085 143,880,105 TL 4,072,916 1,946,582 6,019,498 FC 8,797,761 114,106,424 122,904,185 Information on funds received through syndicated loans and securitization deals, which take a significant place among funds borrowed, are given below. Syndication loans: Date of Use June 2022 July 2022 Funds Borrowed USD 257,000,000 + EUR 482,960,000 USD 17,500,000 + EUR 90,000,000 November 2022 USD 191,000,000 + EUR 330,500,000 Maturity 1 Year 1 Year 1 Year Securitization deals: The Parent Bank obtained funds by putting on securitization deals all its claims and receivables based on diversified payment rights in USD, EUR and GBP through its consolidated structured entity TIB Diversified Payment Rights Finance Company (TIB) which was established in abroad. The Parent Bank monitors securitization credits under the “Borrowings” on its financial statements as per its nature. Information on funds received through securitization is given below. Date June 2012 December 2013 December 2014 March 2015 October 2015 October 2016 December 2016 December 2017 December 2017 August 2022 Amount Final Maturity Remaining Debt Amount as at December 31, 2021 EUR 125,000,000 EUR 50,000,000 USD 220,000,000 USD 15,000,000 USD 221,200,000 USD 55,000,000 USD 158,800,000 USD 55,000,000 USD 125,000,000 USD 227,000,000 12 year 12 year 14 year 15 year 10 year 12 year 10-13 year 7 year 9 year 5 year EUR 21,875,000 EUR 15,000,000 USD 120,000,000 USD 13,593,750 USD 76,037,500 USD 32,195,112 USD 77,648,334 USD 22,000,000 USD 101,190,476 USD 227,000,000 Other Transactions: The Parent Bank, the financing transaction amounting to USD 500 million, with a maturity of 10 years, obtained within the scope of the Diversified Payment Rights (DPR) securitization programme, which had been disclosed on August 2014, has been increased to USD 600 million by an additional funding of USD 100 million with the identical maturity profile on September 2017. d. Information on Debt Securities Issued (Net): Bills Asset backed security Bonds Total Current Period Prior Period TL 10,463,791 164,426 895,529 11,523,746 FC TL FC 46,820,814 46,820,814 5,999,193 757,078 2,028,706 8,784,977 39,292,335 39,292,335 Group’s liabilities 56% are comprised of deposits, 9% are comprised of funds borrowed, 5% are comprised subordinated debt and marketable securities issued and 3% are comprised of debt from money markets. Deposits are distributed among a large variety of customers with different characteristics. The borrowings, on the other hand, are comprised of various funds obtained from financial institutions through syndication, securitization, post-financing and money market operations. f. Information on Other Liabilities: Other liabilities do not exceed 10% of the balance sheet total. g. Information on Lease Payables (Net): Less than 1 year 1-4 years More than 4 years Total Current Period Prior Period Gross Net Gross Net 54,887 546,849 1,857,601 2,459,337 29,467 390,839 1,222,747 1,643,053 54,978 263,475 1,501,399 1,819,852 38,505 188,386 1,012,823 1,239,714 h. Negative differences related to derivative financial instruments for hedging purposes: Part of Derivative Financial Liabilities at Fair Value Through Profit Loss (1) Current Period Prior Period Gross Net Gross Net Fair Value Hedge Purpose Cash Flow Hedges Net Investment Hedge Abroad Total 134,010 134,010 (1) Includes the negative differences related to derivative financial assets for hedging purposes classified under derivative financial assets. The transactional details for the hedging derivative financial instruments are disclosed in Note I.l of Section Five. i. i.1. Information on Provisions: Reserves for employee benefits: According to the related regulation and the collective bargaining agreements, the Parent Bank is obliged to pay employee termination benefits to employees who retire, die, quit for their military service obligations, who have been dismissed as defined in the related regulation or to the female employees who have voluntarily quit within one year after the date of their marriage. In accordance with the related regulations, the amount of employee termination benefits is TL 15,371.40 (exact TL amount as of December 31, 2022), which is one-month salary for each service year and cannot exceed the base salary ceiling for employee termination benefits. A provision for severance pay to allocate that employees need to be paid upon retirement is calculated by estimating the present value of probable amount. A provision for severance pay to allocate that employees need to be paid upon retirement is TL 5,605,220 as of December 31, 2022 (December 31, 2020; TL 2,424,212). Main actuarial assumptions used in calculation of severance pay liability are as follows: ੵ In the calculation, the discount rate is 22.45%, the inflation rate is 19.80%, and the real wage increase rate is 2%. ੵ In the calculation, the ceiling of 15,371.40 TL (full TL amount) valid as of 31.12.2022 was taken as basis. ੵ Retirement age is taken into account as the earliest age at which individuals can retire. ੵ CSO 1980 mortality table is used for probability of death for women and men. The movements related to provision for employee termination benefits are given below: Present value of defined benefit obligation at the beginning of the period Current Service Cost Interest Cost Benefits paid Loss/(Gain) due to Settlements / Reductions / Terminations Prior Year Service Cost Actuarial loss/(gain) Defined benefit obligation at the end of the period Current Period Prior Period 2,424,212 194,109 452,379 (195,616) 9,837 1,941 2,718,358 5,605,220 1,501,616 110,009 185,885 (116,836) 11,097 732,441 2,424,212 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 400 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 401 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 In addition to the retirement pay liability, the Bank and the Group companies included in the consolidation reserve provisions for unused vacation. As of December 31, 2022, the unused vacation provision amount is TL 288,519 (December 31, 2021: TL 152,219). i.2. Provisions for exchange losses in the principal amount of foreign currency indexed loans: Since foreign currency indexed loans are followed based on the rates on the lending date, the Parent Bank incurs a loss if the exchange rates decrease and makes profit if the exchange rate increases. As of December 31, 2022, and December 31, 2021 there is no provision amount for the currency evaluation losses in the principal amount of foreign currency indexed loans. i.3. Specific provisions for non-cash loans, which are not indemnified and not converted into cash: As of December 31, 2022, TL 618,580 provision (December 31, 2021: TL 1,215,914) is allocated for the non-cash loans of companies whose loans are followed under non-performing loans accounts. i.4. Information on other provisions: i.4.1. Liabilities arising from retirement benefits: Liabilities of pension funds founded as per the Social Security Act: Within the scope of the explanations given in. Section Three Note XX.2, in the actuarial report which was prepared as of December 31, 2022 for Türkiye İş Bankası A.Ş. Emekli Sandığı Vakfı (İşbank Pension Fund) by a licensed actuary, of which each Bank employee is a member, and which has been established according to the provisional Article 20 of the Social Security Act numbered 506, the amount of actuarial and technical deficit stands at TL 8,379,741.According to the actuarial report as at December 31, 2022 of Milli Reasürans T.A.Ş. besides the Parent Bank, the amount of actuarial and technical deficit was determined to be TL 235,267. There is a provision on financial statements to compensate the deficit in mentioned period, the mentioned provision is preserved on current year financial statements as well. In the financial statements for the said period, there are as many provisions as the said deficit amounts, and the said provision amount has been retained in the financial statements for the current period. The above-mentioned actuarial audit, which was made in accordance with the principles of the related law, measures the cash value of the liability as of December 31, 2022, in other words, it measures the amount to be paid to the Social Security Institution by the Parent Bank. Actuarial assumptions used in the calculation are given below. ੵ 9.8 % technical deficit interest rate is used. ੵ 34.5 % total premium rate is used. ੵ CSO 1980 woman/man mortality tables are used. Below table shows the cash values of premium and salary payments of the Parent Bank as of December 31, 2021, taking the health expenses within the Social Security Institution limits into account. Net Present Value of Total Liabilities Other Than Health Net Present Value of Long Term Insurance Line Premiums Net Present Value of Total Liabilities Other Than Health Net Present Value of Health Liabilities Net Present Value of Health Premiums Net Present Value of Health Liabilities Pension Fund Assets Amount of Actuarial and Technical Deficit The assets of the pension fund are as follows: Cash and Cash Equivalents Securities Portfolio Other Total Current Period Prior Period (30,350,164) 13,123,522 (17,226,642) (2,986,675) 9,514,553 6,527,878 2,319,023 (8,379,741) (15,810,869) 5,858,707 (9,952,162) (1,873,541) 4,247,562 2,374,021 1,483,086 (6,095,055) Current Period Prior Period 1,240,842 742,714 335,467 2,319,023 984,609 439,018 59,459 1,483,086 Health benefits that are still being paid will be determined within the framework of the Social Security Institution legislation and related regulations with the transfer. i.4.2. Provision of credit cards and promotion of banking services applications: The Bank has recognized provisions amounting to TL 235,129 for the amount which is recognized within the framework of credit card expenses of credit card customers or promotions for banking services as of December 31, 2022. (December 31, 2021: TL 108,873) i.4.3. As mentioned public disclosures of the Bank on December 31, 2012 and December 19, 2013; an inspection has been made by the inspectors of Tax Inspection Board to "Türkiye İş Bankası A.Ş. Mensupları Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı" ("İşbank Supplementary Pension Fund"), which was founded as per the provisions of the Turkish Commercial and Civil Codes, regarding the payments that fulfill İşbank's liabilities within the framework of the Articles of Foundation of the Pension Fund and the relevant legislation. As a result of this investigation, tax audit reports were prepared for the years 2007, 2008, 2009, 2010, 2011 claiming that the aforementioned liabilities should be taxed in terms of wage base, thus, they should be subject to withholding tax and stamp duty. According to this report, the total amount of tax and penalties notified to Bank was TL 74,353 for 2007 and 2008; and as of reporting date TL 151,899 for 2009, 2010 and 2011 and it was stated that the Bank applied to tax courts to cancel these tax notifications and some of the court decisions were determined in favor of the Bank and some others were determined against the Bank. In this context, for the finalized decisions of Regional Administrative Courts related to the years 2007 and 2008 against the Bank, the Bank applied to the Constitutional Court. According to decisions made by Constitutional Court up to reporting date, there is no predictability in legal conformity for taxing the Bank's contributions to the Pension Fund in terms of wage base and for this reason it was accepted that property right of the Bank has been violated according to the 35th article of Constitution. The Court decided that the amount of tax, penalties and default interest which was paid by the Bank should be paid back to the Bank as for compensation with its legal interest. Besides of the Bank, an inspection was conducted by Tax Audit Committee Inspectors regarding to the contribution obligations mentioned above for the period 2007-2011 on Munzam Sosyal Güvenlik ve Yardımlaşma Sandığı Vakfı Mensupları which is founded according to Turkish Commercial Law and Civil Law, owned by “Türkiye Sınai Kalkınma Bankası A.Ş”. “Milli Reasürans T.A.Ş”, and Anadolu Anonim Türk Sigorta Şirketi. As a result of the issued report that companies a total of TL 33 million (exact amount) tax penalty notices were notified. Assessments made on the subject by the company’s application in accordance with the legislation, which was suspended for Tax Administration concluded that the lack of legal basis of assessment and said assessment were filed in court against the various tax. A number of cases concluded in favor of the Bank; another part of lawsuits concluded against the Bank. In the last decision of the constitutional court numbered 2016/2400 regarding the legal proceedings initiated upon the conclusion of the lawsuits amounting to TL 61,060 for the 20 periods in 2012 and 2013 against the bank; it was accepted that the predictability criterion was realized after the 2012 tax review, and it was concluded that the Bank’s ownership rights were not violated for December 2012 and beyond periods. However, since the aforementioned periods were filed by making a reservation and paying taxes, the mentioned decision had no additional effect on the financial statements. In addition, at two case files, which was one of the lawsuits regarding the repayment of income tax stoppage and stamp tax which has been paid by reservation statement beginning from December 2013, of which its court decision was rendered in favour of the Bank, has been reversed by the majority of the votes of the Assembly after it was submitted to the General Assembly of Tax Courts and the decisions were finalized against the Bank. Regarding the mentioned issue, the legal process is ongoing. In this process, the Group companies are acting together with the Parent Bank and in this regard TL 12,662 (December 31, 2021: TL 162,960) have been transferred to the provision expense accounts in the current period. i.4.4. In 1993, Dışbank A.Ş. shares which were owned by the Parent Bank were sold to Lapis Holding A.Ş. In 2008, it was claimed that USD 52.6 million of the amount, which was paid upfront within the context of the sale agreement, had been provided from the funds of the insolvent TYT Bank A.Ş. by the buyer and payment of the mentioned amount as well as the interest to be calculated to the Savings Deposit Insurance Fund (SDIF) was demanded. The administrative actions initiated by the SDIF in 2008 were revoked by Council of State Administrative Law Chambers 13th upon the application of the Bank. The decisions which were in favour of the Bank were reversed by Plenary Session of the Law Chamber upon the appeal of the SDIF, Council of State Administrative Law Chambers 13th decided to reject the applications of the Bank in January 2016 due to their obligation to obey the decisions of reversal. After the aforementioned court decisions, although the legal process was still in progress, the collection procedures were carried out within the context of Law No. 6183 and TL 298,466 including the default interest, was collected from the Bank by the SDIF at prior periods and made provision for the whole amount. As a part of the legal process, individual application to the Constitutional Court of Republic of Turkey has been made by the Bank was not concluded positively. Regarding the ongoing lawsuits, the negative declaratory action brought against the Bank to determine that the Bank is not a debtor has been finalized against the Bank. In this context, necessary provision has been made by the Bank in the financial statements dated 31.12.2022 for the difference between the down payment regarding the sales contract stated above and the amount of 52.6 million USD paid in 2016. legal process is still ongoing i.4.5. Except the other provisions indicated above, free provision within conservatism principle, for negative circumstances which may arise from the possible changes that may arise in the economy and market conditions, amounting to TL 8,475,000 of which TL 4,075,000 provided in prior years and TL 4,400,000 was provided in the current period. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 402 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 403 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 j. j.1. Information on Tax Liability: Information on current tax liability: j.1.1. Information on tax provision: Explanations on taxation and calculations are explained in Note XXI of Section Three. As of December 31, 2022, as a result of the clarification of the Group's corporate tax liability and temporary taxes paid, the remaining corporate tax liability amounts to TL 6,356,595 and as a result of the separate clarification process of each partnership and tax authority, current tax asset amounting to TL 26,354 occurs. j.1.2. Information on taxes payable: Corporate Tax Payable Tax on Securities Income Tax on Real Estate Income Banking Insurance Transaction Tax Foreign Exchange Transaction Tax Value Added Tax Payable Other Total i.1.3. Information on premiums: Social Security Premiums – Employees Social Security Premiums – Employer Bank Pension Fund Premiums – Employees Bank Pension Fund Premiums – Employer Pension Fund Membership Fees and Provisions-Employees Pension Fund Membership Fees and Provisions-Employer Unemployment Insurance – Employees Unemployment Insurance – Employer Other Total j.2. Information on deferred tax liabilities: Current Period Prior Period 6,356,595 439,514 8,285 823,231 52,378 114,629 269,451 8,064,083 1,496,283 304,755 6,180 442,711 117,926 46,696 120,263 2,534,814 Current Period Prior Period 10,348 12,478 18,065 23 6,965 13,942 83 61,904 4,149 5,100 8,250 5 2,999 5,811 8 26,322 The Parent Bank and the consolidated Group companies have TL 1,599,383 deferred tax liability as of December 31, 2022. The related deferred tax debt is calculated over the temporary differences between the book values of assets and liabilities in the records and their tax base values calculated according to tax. Tangible Assets Base Differences Provisions Valuation of Financial Assets Other Deferred Tax Liability Movement of the deferred tax asset is as follows: Beginning Value Deferred Tax Income / (Expense) (Net) Deferred Tax Accounted Under Equity Deferred Tax Accounted Under Previous Year P / L Exchange rate differences Other Deferred Tax Asset (1) Current Period Prior Period 2,170,487 (7,697,538) 7,153,981 (27,547) 1,599,383 107,919 (1,754) 14,098 4,686 124,949 Current Period Prior Period 2,994,027 5,112,280 (8,745,726) 14,146 (625,273) 3,528,305 (767,140) 216,138 16,360 364 2,994,027 (1) In the consolidated financial statements, there are deferred tax assets of TL 974,110 and deferred tax liabilities of TL 1,599,383 in the current period. Explanations on deferred tax liability are given in Section Five, Note II.h.2. k. Information on Payables for Assets Held for Sale and Discontinued Operations The Bank does not have any payables for assets held for sale and discontinued operations. l. Information on subordinated loans The Bank; ੵ As of December 10, 2013, issued 10 year-term bills with a nominal value USD 400,000,000; as of June 29, 2017, issued 11 year-term bills with recall option on 6th year and a nominal value USD 500,000,000 and as of January 22, 2020, issued 5 year-term with nominal value of USD 750,000,000 which all have the characteristic of subordinated loans for the purpose of making available to the individuals and legal persons who are resident abroad. Interest rates of aforementioned bonds are 7.85%, 7.00% and 7.75% respectively. ੵ As of August 8, 2017, June 19, 2019, and September 26, 2019; the Bank has issued 10 year-term bills with a nominal value of TL 1,100,000,000, 800,000,000 and 350,000,000 (full TL amount) respectively, with floating interest rates for qualified investors without being offered to the public in Turkey, Nominal value contribution capital has issued borrowing instruments that will be included in the calculation of bonds. The bills mentioned are amounting to TL 33,558,745 as of December 31, 2022 (December 31, 2021 TL 37,470,997). Current Period Prior Period TL FC TL FC Debt Instruments To Be Included In Additional Capital Calculation Subordinated Loans Subordinated Debt Instrument Debt Instruments To Be Included In Contribution Capital Calculation Subordinated Loans Subordinated Debt Instrument Total m. Information on consolidated shareholders’ equity: m.1. Presentation of paid-in capital: Common shares Preferred shares Total 2,277,824 31,280,921 2,296,445 39,182,832 2,277,824 2,277,824 31,280,921 31,280,921 2,296,445 2,296,445 39,182,832 39,182,832 Current Period Prior Period 9,999,970 30 10,000,000 4,499,970 30 4,500,000 j.2. Explanation as to whether the registered share capital system ceiling is applicable at bank, if so, the amount of registered share capital: Capital System Registered Capital System Paid-in Capital 10,000,000 Ceiling 10,000,000 BRSA and CMB approvals regarding the increase of the registered capital ceiling to 25,000,000 TL have been obtained and the approval of the Ministry of Commerce has been applied. m.3. The capital increase made in current period: It has been decided to increase the paid-in capital of the Bank from TL 4,500,000 to TL 10,000,000, fully covered by internal resources (extraordinary reserves). Accordingly, the process of capital increase was completed during the period and the registration of the new capital was carried out on 16.06.2022 m.4. Capital increase through transfer from capital reserves during the current period: None. m.5. Significant commitments of the Parent Bank related to capital expenditures within the last year and the following quarter, the general purpose thereof, and the estimation of funds required for them: There is no capital commitment. Information on shares acquired by the Company: The Parent Bank has repurchased shares amounting to TL 530,307 in accordance with the m.6. Board of Directors Decision dated August 17, 2018. Previous periods’ indicators related to income, profitability and liquidity, and the estimated effects of forecasts, which are to be made by taking m.7. into consideration the uncertainties of these indicators, on the Group’s equity: The Parent Bank’s and the Group companies’ balance sheets are managed in a prudent way to ensure that the effect of risks arising from interest rates, exchange rates and loans is at the lowest level. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 404 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 405 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 m.8. Privileges Granted to Shares: Turkish Commercial Law and related registration are kept conditionally; Group (A) shares each with a nominal value of 1 Kurus have the privileges of; ੵ receiving 20 times the number of shares in the distribution of bonus shares issued from conversion of extraordinary and revaluation reserves generated in accordance with the relevant laws (Article 18 of the Articles of Incorporation), ੵ exercising the preference rights as 20 times (Article 19 of the Articles of Incorporation) and despite having a lower nominal value, Group (B) shares, each with a nominal value of 1 Kurus, have the same rights with the Group (C) shares having a nominal value of 4 Kurus each. Furthermore, Group (A) and (B) shares, each with a nominal value of 1 Kurus are granted privileges in distribution of profits pursuant to Article 58 of the Articles of Incorporation. m.9. Information on marketable securities value increase fund: III. DISCLOSURES AND FOOTNOTES ON CONSOLIDATED OFF-BALANCE SHEET ITEMS a. a.1. Explanations to Liabilities Related to Off-Balance Sheet Items: Types and amounts of irrevocable loan commitments: Commitment for customer credit card limits amounts to TL 112,111,363 and commitment to pay for cheque leaves amounts to TL 5,447,537. The amount of commitment for the forward purchase of assets is TL 2,354,710 and for the forward sale of assets is TL 2,359,062. a.2. The structure and amount of probable losses and commitments resulting from off-balance sheet items, including those below: The Group’s provisions for indemnified non-cash loans balance is TL 1,618,580 as of December 31, 2022 (December 31, 2021: TL 1,215,814) which is allocated for the non-cash loans of companies whose loans are followed under “Non-performing Loans” accounts, Commitments are shown in the table of “Off-balance sheet items”. a.3. Guarantees, bank acceptances, collaterals that qualify as financial guarantees, and non-cash loans including other letters of credit: Financial Assets At Fair Value Through Other Comprehensive Income Valuation Difference Deferred Tax Effect on Valuation Foreign Exchange Differences Current Period Prior Period TL FC TL FC 29,879,045 (4,864,454) 3,409,376 (3,025,127) 39,560,096 (9,768,524) 87,473 (6,237,059) 1,372,605 4,134,003 (777,305) 52,678 3,409,376 (3,656,824) 631,697 (3,025,127) Total 29,879,045 (4,864,454) n. Information on minority interest Balance at the beginning of the period Distributed Dividend Subsidiaries Profit/Loss on minority interest Effect of change in subsidiaries equity Effect of change in Group’s minority interest Period Ending Balance m. Information on Dividend Distribution Current Period Prior Period 9,234,928 (226,322) 7,459,012 2,312,603 21,544 18,801,765 7,413,718 (299,226) 2,019,198 184,536 (83,298) 9,234,928 At the Bank’s Ordinary General Assembly, held on March 25, 2022, it was decided to allocate net profit from operating acitivities of 2021, amounting to TL 13,467,895 thousand as follows; ੵ Resulting from the disposal of certain immovables, which are realized within the framework of the equity method specified in the “TAS 27 - Individual Financial Statements” accounting standard, resulting from the application of the “TFRS 9 - Financial Instruments” reporting standard, and which are followed within the scope of the “TAS 16 - Tangible Fixed Assets” accounting standard, adding a total of 5,414,586 TL, ੵ Addition of the provision amount of TL 360,000 allocated during the period for the profit share to be distributed to the personnel within the framework of the accounting standard "TAS 19-Benefits Provided to the Employees", ੵ The total amount of TL 143,605, which includes TL 35,132 from real estate sales profits to use for capital increase and TL 108,473 from the amount allocated as venture capital fund, of the balance sheet profit to be distributed amounting to TL 19,242,481 allocation as special reserve fund, of the amount as a basis for distribution of TL 19,098,876; ੵ TL 1,346,780 to A, B and C group shares as cash, ੵ TL 10 to the founding shares as cash, ੵ TL 359,481 as cash dividend to employees to be distributed, ੵ TL 17.392.605 as legal and extraordinary reserves to be reserved, has been decided. As at March 28, 2022; TL 17,536,210 was transferred to reserves account, cash dividends were distributed to the shares other than the shares acquired by the Bank, as of April 1, 2022. Since the Bank's Ordinary General Assembly Meeting for the year 2022 was not held as of the date of the report, the distribution of profits from the activities of the said period was not carried out. Bank Acceptances Letters of Credit Other Guarantees Total Current Period Prior Period 8,053,507 56,868,515 4,841,274 69,763,296 13,805,873 48,873,749 4,269,208 66,948,830 a.4. Certain guarantee, provisional guarantees, suretyships and similar transactions: Letters of Tentative Guarantees Letters of Certain Guarantees Letters of Advance Guarantees Letters of Guarantee Given to Customs Offices Other Letters of Guarantee Total a.5. Total Non-cash Loans: Non-cash Loans against Cash Risks With Original Maturity of 1 Year or Less With Original Maturity More Than 1 Year Other Non-cash Loans Total Current Period Prior Period 2,855,259 109,153,663 21,968,649 9,508,835 37,266,219 180,752,625 1,708,305 72,902,038 15,463,646 6,090,285 36,502,689 132,666,963 Current Period Prior Period 39,218,113 11,916,800 27,301,313 211,297,808 250,515,921 38,252,155 9,601,819 28,650,336 161,363,638 199,615,793 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 406 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 407 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 a.6. Sectoral risk concentration of non-cash loans: Agriculture Farming and Livestock Forestry Fishery Industry Mining and Quarrying Manufacturing Industry Electricity, Gas, Water Construction Services Wholesale and Retail Trade Hotel and Restaurant Services Transport and Communications Financial Institutions Real Estate and Rental Services. Self-Employment Services Education Services Health and Social Services Other Total Current Period (%) FC (%) 82,994 44,531 TL 612,476 490,047 107,093 15,336 33,356,650 1,003,885 25,722,487 6,630,278 10,052,780 47,177,829 27,079,113 1,283,859 5,338,287 9,689,863 2,320,371 812,991 111,558 541,787 357,507 0.05 0.03 0.00 0.02 56.54 0.48 48.51 7.55 15.51 27.07 12.75 0.58 7.52 4.95 0.97 0.09 0.00 0.21 0.83 91,557,242 100.00 158,958,679 100.00 38,463 89,881,397 763,041 77,110,974 12,007,382 24,651,767 43,029,313 20,274,689 914,027 11,961,045 7,869,063 1,546,769 142,340 6,549 314,831 1,313,208 0.67 0.54 0.12 0.01 36.43 1.10 28.09 7.24 10.98 51.53 29.58 1.40 5.83 10.58 2.53 0.89 0.12 0.60 0.39 TL 296,207 199,806 82,391 14,010 12,430,773 320,570 8,203,756 3,906,447 7,523,221 25,875,351 15,532,556 450,043 3,083,759 4,552,217 1,418,580 502,777 73,900 261,519 287,375 46,412,927 Prior Period (%) FC 499,227 154,015 1,734 343,478 93,956,535 928,731 83,044,828 9,982,976 21,058,983 36,774,135 18,241,371 1,876,235 7,462,048 7,488,074 1,145,172 239,200 5,300 316,735 913,986 0.33 0.10 0.00 0.23 61.33 0.61 54.21 6.51 13.75 24.00 11.91 1.22 4.87 4.89 0.75 0.16 0.00 0.20 0.59 100.00 153,202,866 100.00 0.64 0.43 0.18 0.03 26.78 0.69 17.68 8.41 16.21 55.75 33.47 0.97 6.64 9.81 3.06 1.08 0.16 0.56 0.62 a.7. Non-cash Loans classified under Group I and Group II: Non-cash Loans Letters of Guarantee Bank Acceptances Letters of Credit Endorsements Group I TL 90,104,172 84,031,507 5,575,390 492,132 FC 153,272,110 90,131,981 2,435,720 55,921,155 Group II TL FC 1,181,740 1,180,240 1,500 4,126,126 3,632,062 40,897 453,167 Underwriting Commitments of the Securities Issued Factoring Related Guarantees Other Guaranties and Warranties 5,143 4,783,254 b. Information on derivative financial instruments: The derivative transactions of the Group mainly consist of money and interest swaps and forward foreign exchange purchase and sale transactions. In addition to these, money, interest and security options and futures transactions are also performed. Although the Group's derivative transactions accounted for trading purposes, there are derivative transactions that are accounted for trading purposes, as all the conditions required to be defined as an item suitable for financial risk hedge accounting are not fulfilled, although they provide economic hedging. On the other hand, derivative transactions, which are carried out to protect against changes in the fair values of financial instruments and have all the necessary conditions for their evaluation within the scope of hedge accounting, are classified as hedging purposes. c. Explanations Related to Contingencies and Commitments: The balance of the “Other Irrevocable Commitments” account, which comprised the letters of guarantees, guarantees and commitments submitted by the Group pursuant to its own internal affairs and guarantees given to third parties by other institutions in favor of the Parent Bank and the commitments due to housing loans extended within the scope of unfinished house projects followed, amounts to TL 26,407,853. The cheques given to customers is presented under off balance sheet commitments, as per the related regulations is amounting to TL 5,447,537 in case the cheques presented for payment to beneficiaries are not covered, the Parent Bank will be obliged to pay the uncovered amount up to TL 3,000 (in exact TL amount) for the cheques that are subject to the Law numbered 3167 on “the Regulation of Payments by Cheque and Protection of Cheque Holders”, and up to TL 3,600 (in exact TL amount) for the cheques that are subject to the “Cheque Law” numbered 5941, The uncollected amount will be followed under “Indemnified Non-Cash Loans. d. Explanations related to transactions made on behalf of or on the account of others: It is explained in Note X under Section Four. (%) IV. a. a.1. DISCLOSURES AND FOOTNOTES ON THE CONSOLIDATED INCOME STATEMENT Interest Income Information on interest income on loans: Interest Income on Loans (1) Short-term Loans Medium and Long-term Loans Interest on Non-performing Loans Premiums Received from State Resource Utilization Support Fund Current Period Prior Period TL FC TL FC 23,507,304 40,324,541 2,581,728 4,332,358 18,049,045 19,307 10,115,449 24,465,421 1,052,273 1,588,844 11,164,912 27,808 Total 66,413,573 22,400,710 35,633,143 12,781,564 (1)Includes fee and commission income on cash loans. a.2. Information on interest income on banks: The Central Bank of Turkey Domestic Banks Foreign Banks Foreign Head Offices and Branches Total a.3. Information on interest income from securities: Current Period Prior Period TL FC TL FC 737,608 39,480 52,130 134,658 228,800 576,388 31,929 42,304 35,400 777,088 415,588 608,317 77,704 Current Period Current Period TL FC TP YP Financial Assets at Fair Value through Profit and Loss 102,873 192,371 88,439 79,777 Financial Assets at Fair Value through Other Comprehensive Income Financial Assets Measured at Amortized Cost Total 23,120,222 3,804,326 8,946,071 1,855,274 17,828,194 41,051,289 549,041 4,545,738 6,317,828 15,352,338 211,778 2,146,829 As detailed in Note VII of Chapter III, the Bank has consumer price indexed (CPI) government bonds classified as financial assets at fair value through other comprehensive income, financial assets at fair value through profit or loss and financial assets measured by amortized cost in its securities portfolio. In the case of CPI forecast changes by 100 basis points in a positive or negative direction, as of 31 December 2022, the Parent Bank’s pre-tax profit will increase by approximately TL 127 million (full amount) or decrease by the same amount. a.4. Information on interest income received from associates and subsidiaries: Interest Received From Affiliates and Subsidiaries 455,651 409,863 Current Period Priod Period An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 408 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 409 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Interest Expense Information on interest expense from funds borrowed: b. b.1. Banks Central Bank of Turkey Domestic Banks Foreign Banks Foreign Head Offices and Branches Other Institutions Total (1) (1) Includes fee and commission expenses from cash loans. b.2. Information on interest paid to associates and subsidiaries: Current Period Prior Period TL FC TL FC 1,111,691 2,727,892 689,455 1,279,070 815,666 296,025 1,363 1,113,054 267,315 2,460,577 1,695,863 4,423,755 426,628 262,827 1,088 690,543 184,463 1,094,607 642,502 1,921,572 Interest Paid to Associates and Subsidiaries 447,325 108,487 Current Period Prior Period b.3. Information on interest paid on marketable securities issued: Interest on Securities Issued 2,365,094 5,870,931 1,611,372 4,437,045 Current Period Prior Period TL FC TL FC b.4. Information on Interest Expense on Deposits According to Maturity Structure: Prior Period Demand Deposits Up to One Month Up to Three Months Up to Six Months Up to One Year Over One Year Accumulated Deposits Total Time Deposits TL Bank Deposits Savings Deposits Public Sector Deposits Commercial Deposits Other Institutions Deposits Deposits with 7 Days Notice Total FC Foreign Currency Deposits Bank Deposits Deposits with 7 Days Notice Precious Metals Deposits 236,834 1,089,360 109,341 10,622,231 10 622,976 87,086 115,091 346,175 645 12,537,399 1,257 11,337 328 47 9 12,978 58 1,799,009 2,068,714 58,396 283,679 3,184 4,213,040 44,565 438,198 51,297 446 4,064 538,570 68 3,171,025 13,249,821 732,997 371,258 122,348 645 17,648,162 1,091 31,584 192,184 8,345 389 566 9,973 1,289 8,551 116,522 1 359,906 7,785 6,774 25,148 3,363 411 10,611 637 15,022 Total TOTAL 9,436 31,973 196,113 11,673 26,947 123,933 1 400,076 9,504 3,202,998 13,445,934 744,670 398,205 246,281 646 18,048,238 Current Period Demand Deposits Up to One Month Up to Three Months Up to Six Months Up to One Year Over One Year Accumulated Deposits Total c. Explanations on dividend income: Time Deposits TL Bank Deposits Savings Deposits Public Sector Deposits Commercial Deposits Other Institutions Deposits Deposits with 7 Days Notice Total FC Foreign Currency Deposits Bank Deposits Deposits with 7 Days Notice Precious Metals Deposits Total TOTAL 75 8 215,542 1,540,779 132,256 8,305,750 9,067,691 536,973 396,682 347,873 464 19,848,347 2,663 23,780 10 42 2 26,497 Financial Assets with Fair Value Differences Recognized in Profit/Loss Financial Assets with Fair Value Differences Recognized in Comprehensive Income Other Total 129 4,516,737 1,540,121 2,438,509 1,455,146 376,488 10,327,130 d. Information on trading profit/losses (Net): 117,461 562,135 18,097 1,699 223 699,615 212 6,393,182 10,564,042 11,524,307 1,993,860 773,395 464 31,249,462 1,410 162,334 660,935 74,422 25,328 238,676 2 1,163,107 11,446 7,276 6,060 2,525 19,697 25,975 72,979 Profit Securities Trading Gains Gains on Derivative Financial Instruments (1) Foreign Exchange Gains Losses (-) Securities Trading Losses Losses on Derivative Financial Instruments (1) Foreign Exchange Losses Trading Income/Losses (Net) Current Period Prior Period 213,750 45,674 4,102 263,526 47,533 20,057 958 68,548 Current Period Prior Period 1,808,795,913 2,033,732,717 128,986,395 108,952,062 1,570,857,456 1,789,318,125 118,479,257 119,115,248 1,551,723,620 19,477,788 42,406,767 47,875,675 1,943,450,275 2,033,029,265 40,524,089 48,055,434 1,944,449,742 703,452 11 6,524 744 16,422 890 24,591 (1) Income arising from foreign currency changes related to derivative transactions amounting TL 83,206,057 and the losses amounting TL 98,296,587 and the amount of net loss is TL 15,090,530. (December 31, 2021: profit TL 39,998,909,156 loss TL 40,803,221 and net loss amount TL 804,312) 12,856 169,621 673,519 77,691 61,447 265,541 2 1,260,677 e. Information on other operating income: 13,068 6,562,803 11,237,561 11,601,998 2,055,307 1,038,936 466 32,510,139 As at reporting period, TL 18,824,865 of other operating income sources from inclusion and classification of operations of insurance and reinsurance companies; 91% of which is from insurance premiums. (December 31, 2021: TL 10,723,838, 91%). The remaining amount mainly consists of expected credit loss reversals or collections from Stage 3 loans, and income from fees received from customers in return for various banking services and sales of fixed assets. On the other hand, the judicial process regarding the refund of the administrative fine paid by the Bank in accordance with the decision of the Competition Board in 2013 was concluded in favor of the Bank, and the administrative fine of TL 109,992 paid by the Bank was refunded. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 410 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 411 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 f. Information on expected credit loss and other provision expense: h. Information on provision for taxes from continuing and discounted operations Current Period Prior Period The Group's profit before tax arises from continuing operations. As of 31.12.2022, the profit before tax consists of TL 86,431,376 of net interest income, TL 14,671,415 of net fees and commission income, and the total of personnel expenses and other operating expenses is TL 59,881,644. Expected Credit Loss Expected Credit Loss for 12 Months (Stage 1) Significant Increase in Credit Risk (Stage 2) Non-Performing Loans (Stage 3) Impairment Losses on Marketable Securities Financial Assets at Fair Value through Profit and Loss Financial Assets at Fair Value Through Other Comprehensive Income Impairment Losses on Associates, Subsidiaries and Joint-Ventures Associates Subsidiaries Jointly Controlled Entities Other (1) Total 13,055,945 1,209,566 1,963,033 9,883,346 91,472 18,954 72,518 12,667,759 1,683,950 4,533,215 6,450,594 21,627 14,145 7,482 h1. Explanations on net profit / loss of continued and discontinued operations: As of 31.12.2022, the Group's tax provision amounting to TL 15,453,038 consists of current tax provision of TL 20,565,318 and deferred tax income of TL 5,112,280. The Group does not have any discontinued operations. h2. Explanations on net profit / loss of continued and discontinued operations: The net profit of the Group from its ongoing operations as of 31.12.2022 is TL 69,057,682. i. Information on net period profit/loss: Income and expenses resulting from ordinary banking activities: There is no specific issue required to be disclosed for the Group’s performance i.1. for January 1, 2022-December 31, 2022. i.2. Effects of changes in accounting estimates on the current and future periods’ profit/loss: There is no issue to be disclosed. “The Other’’ item which is located at the bottom “Fees and Commissions Received” in the income statement consist of various fees and i.3. commissions received from transactions such as credit card transactions, capital market transactions and insurance-reinsurance transactions. 6,083,658 19,231,075 4,121,104 16,810,490 i.4. Net profit / loss of Minority Interest: Current Period Prior Period 7,459,012 2,019,198 (1) The current period balance is the impairment loss expense of the assets held for sale and discontinued operations detailed in section five i.4.4, litigation provision expense of TL 825,000 and TL 4,400,000 Includes free provision expense detailed in section five i.4.5. Net Profit / Loss of Non-controlling Interest g. Other operating expenses: Reserve for Employee Termination Benefits Bank Pension Fund Deficit Provisions Impairment Losses on Tangible Assets Depreciation Expenses of Tangible Assets Impairment Losses on Intangible Assets Impairment Losses on Goodwill Amortization Expenses of Intangible Assets Impairment Losses on Investments Accounted Under Equity Method Impairment Losses on Assets to be Disposed Depreciation Expenses of Assets to be Disposed Impairment Losses on Assets Held for Sale and Subject to Discontinued Operations Other Operating Expenses Leasing Expenses Related to Exceptions to TFRS 16 Repair and Maintenance Expenses Advertisement Expenses Other Expenses Loss on Sale of Assets Other Total Current Period Prior Period 464,172 2,416,955 4,587 1,136,163 912,870 33,675 378 12,629,150 217,764 550,271 808,529 11,052,586 4,361 24,569,241 42,171,552 190,474 1,892,381 5,795 802,974 35,974 453,413 70 4,972,087 153,700 331,078 362,939 4,124,370 2,056 14,310,652 22,665,876 (1) The Group's expenditure within the scope of donation, aid and social responsibility projects in the current period is TL 79,971 (31.12.2020: TL 104,006). In the table above, TL 20,610,199 of the operating expenses in the “Other” group arises from the insurance and reinsurance companies because of the classification of their activities in the "Other" group, and significant portion of the related expenses is compensation expenses paid (December 31, 2021: TL 11,565,656). The Group's fees, taxes, duties and fund expenses amounting to TL 731,958 and savings deposit insurance fund expense amounting to TL 1,513,216 (December 31, 2021: TL 1,016,208) are other expense items in the current period "Other" group. j. Explanation on other items in income statement Other items do not exceed 10% of the total amount of the income statement. k. Fees for services received from an independent audit firm In accordance with the decision of KGK dated 26.03.2021, the fees for the reporting period regarding the services received from the independent auditor or independent audit firm are given in the table below. In addition to the Bank, the fees for services rendered to the Bank's domestic/foreign subsidiaries and jointly controlled partnerships are included in the aforementioned fees, which are stated as VAT excluded. Independent Audit Fee for the Reporting Period Other Assurance Services and Other Non-Audit Fees Total Current Period Prior Period 30,347 8,029 38,376 22,258 5,243 27,501 V. DISCLOSURES AND FOOTNOTES ON CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY The paid-in capital is TL 10,000,000 in legal records. As of balance sheet date, the balance of legal reserves is TL 7,091,285 the balance of extraordinary reserves is TL 289,294 and the balance of statuary reserves is TL 51,415,041. The details of revaluation surplus account of securities are shared in the Note Section V-II-l-9. TL (8,395,919) of this amount is the deferred tax effect on marketable securities at fair value through other comprehensive income (December 31, 2021: TL (145,608)). An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 412 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 413 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 VI. DISCLOSURES AND FOOTNOTES ON THE CONSOLIDATED STATEMENS OF CASH-FLOWS VII. DISCLOSURES AND FOOTNOTES ON THE GROUP’S RISK GROUP The consolidated operating profit of TL 65,423,795 before the changes in operating assets and liabilities mostly comprised of TL 118,786,745 of interest received from loans and securities, and TL 49,665,722 of interest paid on deposits, money market transactions and funds borrowed by the Bank. An important part of other revenues, TL 25,750,270 consists of premium collections of insurance companies. The account “Other” classified under operating profit other than fees and commissions paid, cash payments to personnel and service suppliers and taxes paid consists of other operating expenses and foreign exchange gains/losses accounts is TL (13,421,662) (December 31, 2021: TL (10,686,634)). Net Increase (Decrease) in Other Liabilities account classified in changes of assets and liabilities resulting from the changes in Funds Provided Under Repurchase Agreements, miscellaneous payables, other liabilities and taxes, duties, charges, and premiums is decreased by TL 63,388,101 (December 31, 2021: TL 49,287,428 decrease). The Net Cash Provided from Other Investing Activities account includes net cash flows from the sale of intangible assets and declined by TL 2,756,163 (December 31, 2021: TL 922,250 decrease). Foreign currency exchange differences on cash and cash equivalents are on the positive side TL (975,670) (31.12.2021 TL 1,317,136) as of December 31, 2022. Due to the high rate of turnover of related foreign currency assets, the difference between the last 30 days’ arithmetic average of currency exchange rates and the year-end currency exchange rate is used to calculate the effect of change in foreign exchange rate. Under the same assumption, the effect of change in foreign exchange rate on cash and cash equivalents is calculated. Information on the volume of transactions relating to the Group’s risk group, incomplete loan and deposit transactions and period’s profit a. and loss: a.1. Information on loans held by the Group’s risk group: Current Period: Group’s Risk Group Loans Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders of the Bank Other Real Persons and Corporate Bodies that have been Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Balance at the beginning of the period Balance at the end of the period Interest and commission income received 2,402,860 2,343,655 455,651 16,824,670 17,111,566 5,747 1,916,562 2,920,845 295,514 608,306 1,309,864 7,447 Cash, cash in foreign currency, unrestricted deposits in Central Bank of Turkey, money in transit, cheques purchased, money market operations as well as demand deposits and time deposits up to 3 months are defined as cash and cash equivalents. Prior Period: Cash and cash equivalents at beginning of period: Cash Cash in TL and Foreign Currency Central Bank of Turkey and Other Cash Equivalents Receivables from Money Market Operations Banks’ Demand Deposits and Time Deposits Up to 3 Months Total Cash and Cash Equivalents December 31, 2021 December 31, 2020 96,316,663 14,862,587 81,454,076 36,005,939 2,950,824 33,055,115 132,322,602 32,519,831 9,136,817 23,383,014 19,801,714 2,179,919 17,621,795 52,321,545 The total amount resulting from the transactions made in the previous period shows the total cash and cash equivalents as of the beginning of the current period. Cash and Cash equivalents as of end of the period: Cash Cash in TL and Foreign Currency Central Bank of Turkey and Other Cash Equivalents Receivables from Money Market Operations Banks’ Demand Deposits and Time Deposits Up to 3 Months Total Cash and Cash Equivalents December 31, 2022 December 31, 2021 79,788,516 15,828,672 63,959,844 34,356,072 6,101,378 28,254,694 96,316,663 14,862,587 81,454,076 36,005,939 2,950,824 33,055,115 114,144,588 132,322,602 Group’s Risk Group Loans Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders of the Bank Other Real Persons and Corporate Bodies that have been Included in the Risk Group Cash Non-Cash Cash Non-Cash Cash Non-Cash Balance at the beginning of the period Balance at the end of the period Interest and commission income received 2,857,404 2,402,860 409,863 9,877,588 16,824,670 2,468 1,232,269 1,916,562 168,639 495,030 608,306 4,397 a.2. Information on deposits held by the Group’s risk group: Current Period: Group’s Risk Group Deposits Balance at the beginning of the period Balance at the end of the period Interest expense on deposits Prior Dönem: Group’s Risk Group Deposits Balance at the beginning of the period Balance at the end of the period Interest expense on deposits Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders of the Bank Current Period Current Period Other Real Persons and Corporate Bodies that have been Included in the Risk Group Current Period 10,076,451 13,305,929 447,325 302,826 130,226 58,439 1,710,018 5,589,672 172,982 Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders of the Bank Other Real Persons and Corporate Bodies that have been Included in the Risk Group 7,520,649 10,076,451 108,487 157,226 302,826 25,060 1,153,201 1,710,018 62,988 a.3. Information on forward and option and other similar agreements made with the Group’s risk group: Group’s Risk Group Investments in Associates, Subsidiaries and Jointly Controlled Entities (Joint Ventures) Direct and Indirect Shareholders of the Bank Other Real Persons and Corporate Bodies that have been Included in the Risk Group Current Period Prior Period Current Period Prior Period Current Period Prior Period Transactions in which the Difference in Fair Value is Reflected in Profit or Loss Balance at the beginning of the period Balance at the end of the period Total Profit/Loss 422,104 14,841,605 23,306 422,104 7,737 Transactions for hedging purposes Beginning of the period End of the period Total Profit/Loss (1,400) (2,052) An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 414 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 415 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 b. Disclosures for the Group’s risk group: The relations of the Group with corporations in its risk group and under its control regardless of whether there are any transactions between the b.1. parties: All types of corporate and retail banking services are provided to these corporations in line with the articles of Banking Law. The type and amount of transaction carried out, and its ratio to the overall transaction volume, values of principal items and their ratios to overall b.2. items, pricing policy and other items in addition to the structure of the relationship: The transactions carried out are mainly loan and deposit transactions, The ratio of loans extended to the risk group to the overall loans is 0.62%, while the ratio to the overall assets is 0.31% the ratio of deposits of the risk group corporations to the overall deposits is 2%, while the ratio to overall liabilities is 1.11%, The comparable pricing method is used for the transactions. Purchase and sale of real estates, other assets and services, agency agreements, finance lease contracts, transfer of information obtained b.3. through research and development, license agreements, funding (including loans and provision of support as cash capital or capital-in-kind), guarantees and collaterals and management agreements: The Parent Bank’s branches act as agents of Anadolu Anonim Türk Sigorta Şirketi and Anadolu Hayat Emeklilik A.Ş. Furthermore, through its branches, the Bank mediates the order transmission for İş Yatırım Menkul Değerler A.Ş. and carries out agency activities of İş Portföy Yönetimi A.Ş. 34 mutual funds which are founded by the Anadolu Hayat Emeklilik A.Ş. are managed by İş Portföy Yönetimi A.Ş. Securities purchases, when required, are made by İş Finansal Kiralama A.Ş., a subsidiary of the Bank, through leasing. If requested, the cash and non-cash loan needs of the risk group companies are met in accordance with the limits imposed by Banking Law and the prevailing market conditions. b. 4. As of December 31, 2022, total worth of the shares, which the Parent Bank purchased from its subsidiaries that are traded on Istanbul Stock Exchange and accounted under the Financial Assets at Fair Value Through Profit or Loss in accordance with the Board of Directors decision dated December 25, 2015 and relevant following decisions is TL 164,806 (December 31, 2021: TL 51,582). c. Total salaries and similar benefits paid to the (executive members and senior executives) In the current period, the net payment provided to the key management of Group amounts TL 309,172 (December 31, 2021: TL 167,759). Milli Reasürans T.A.Ş Domestic Branches (1) Foreign Representative Offices Foreign Branches Off-Shore Branches JSC İşbank Domestic Branches (1) Foreign Representative Offices Foreign Branches Off-Shore Branches Number Employees 1 1 3 Number 187 Country of Incorporation Total Assets Legal Capital 12 Singapore 775.554 618.156 Employees 97 Country of Incorporation Total Assets Legal Capital VIII. DISCLOSURES ON THE GROUP’S DOMESTIC, FOREIGN, OFF-SHORE BRANCHES OR PARTICIPATIONS AND REPRESENTATIVE (1) The branches of the company, which is headquartered in Moscow, in Russia are shown as domestic branches. OFFICES The Parent Bank – Türkiye İş Bankası A.Ş. Domestic Branches (1) 1.110 22.971 Number Employees Country of Incorporation China Egypt England TRNC Iraq Kosovo Bahrain 3 2 49 207 40 31 6 140 Country of Incorporation Foreign Representative Offices Foreign Branches 1 1 2 14 2 2 1 Off-Shore Branches (1) Türkiye’de bulunan Serbest Bölge şubeleri yurt içi şube sayısına dahil edilmiştir. İşbank AG Domestic Branches (1) Foreign Representative Offices Foreign Branches Off-Shore Branches Number Employees 8 1 (1) The branches of the company, which is headquartered in Germany, in Germany are shown as domestic branches 6 Netherlands 3,424,635 Total Assets Legal Capital JSC İşbank Georgia Domestic Branches (1) 2 62 Number Employees Country of Incorporation Foreign Representative Offices Foreign Branches Off-Shore Branches Total Assets Legal Capital (1) The branches of the company, which is headquartered in Tiflis, in Georgia are shown as domestic branches. Number of employees of consolidated companies that does not have agencies and branches abroad: Employees Total Assets Legal Capital 53,147,779 28,264,019 6,837,919 3,157,421 8,094,514 2,248 80,000 842,061 199,247 Anadolu Anonim Türk Sigorta Şirketi Anadolu Hayat Emeklilik A.Ş. Efes Varlık Yönetimi A.Ş. İş Faktoring A.Ş. İş Finansal Kiralama A.Ş. İş Gayrimenkul Yatırım Ortaklığı A.Ş. İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. İş Portföy Yönetimi A.Ş. İş Yatırım Menkul Değerler A.Ş. İş Yatırım Ortaklığı A.Ş. Maxis Girişim Sermayesi Yatırım Ortaklığı A.Ş Maxis Investments Ltd (1) Moka Ödeme ve Elektronik Para Kuruluşu A.Ş. TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. Türkiye Sınai Kalkınma Bankası A.Ş. Yatırım Finansman Menkul Değerler A.Ş. 1,577 1,044 103 120 142 72 5 79 468 5 15 9 48 11 438 148 (1) The Company, which is headquartered in London, does not have any branch or representative office beside its head office. Yatırım Varlık Kiralama A.Ş. which is included to scope of consolidation during the current period does not have any employees. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 416 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 417 Türkiye İş Bankası A.Ş. Türkiye İş Bankası A.Ş. Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 Notes to the Consolidated Financial Statements for the Year Ended December 31, 2022 IX. SUBSEQUENT EVENTS Within the scope of the decision of the Board of Directors regarding the issue of debt instrument on October 7, 2022, the Parent Bank issued a financial bond with a nominal value of TL 1,481,892 after December 31, 2022. It has been noted that a state of emergency involving 10 provinces in the region will be declared due to the negativity caused by the earthquakes centered in Kahramanmaraş, affecting many of our provinces and shaking our entire country. Developments related to this natural disaster are being closely monitored, and efforts for the assessment of this situation is ongoing. SECTION SIX: OTHER EXPLANATIONS I. EXPLANATIONS ON THE GROUP’S CREDIT RATINGS: Türkiye İş Bankası A.Ş. MOODY’S Long-term Foreign Currency Deposit Long-term Local Currency Deposit Long-term Foreign Currency Senior Debt Short-term Foreign Currency Deposit Short-term Local Currency Deposit FITCH RATINGS Long-term Foreign Currency Issuer Default Rating Long-term Local Currency Issuer Default Rating Short-term Foreign Currency Issuer Default Rating Short-term Local Currency Issuer Default Rating National Long-term Rating Viability Rating The dates when the Bank's credit ratings/outlooks were last updated are given below: Moody's: 16.08.2022, Fitch Ratings: 26.07.2022 İş Finansal Kiralama A.Ş. FITCH RATINGS Long-term Foreign Currency Issuer Default Rating Long-term Local Currency Issuer Default Rating Short-term Foreign Currency Issuer Default Rating Short-term Local Currency Issuer Default Rating National Long-term Rating Support Rating Rating Outlook (*) B3 B3 B3 Not-Prime Not-Prime B- B B B A+ (tur) B Stable Stable Stable - - Negative Negative - - Negative - Rating Outlook (*) B- B B B A+(tur) B- Negative Negative - - Negative - The date when the credit ratings/outlooks of İş Finansal Kiralama A.Ş were last updated are given below: Fitch Ratings: 26.07.2022 Türkiye Sınai Kalkınma Bankası A.Ş. MOODY’S Long-term Foreign Currency Issuer Rating Long-term Local Currency Issuer Rating Long-term Counterparty Risk Rating Counterparty Risk Asessment Basic Credit Assessment Adjusted Basic Credit Assessment Priority Unsecured Debt Rating Foreign Currency GMTN Program Rating FITCH RATINGS Long-term Foreign Currency Issuer Default Rating Long-term Local Currency Issuer Default Rating Short-term Foreign Currency Issuer Default Rating Short-term Local Currency Issuer Default Rating Long-term National Rating Financial Capacity Rating Short-Term Priority Unsecured Debt Rating Rating Outlook (*) B3 B3 B3 B3(cr) caa1 caa1 B3 (P)B3 B- B B B ns b- B Stable Stable - - - - Stable - Negative Negative - - - - - The date when the credit ratings/outlooks of TSKB were last updated are given below: Moody's: 16.08.2022, Fitch Ratings: 26.07.2022 (*) Outlook: “Stable” indicates that the current rating will not be changed in the short term; “positive” indicates that the current rating is very likely to be upgraded and “negative” indicates that the current rating is very likely to be downgraded. SECTION SEVEN: EXPLANATIONS ON THE INDEPENDENT AUDITORS’ REPORT I. EXPLANATIONS ON THE INDEPENDENT AUDITORS’ REPORT: The consolidated financial statements and disclosures for the year ended December 31, 2022 have been reviewed by Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi (A member firm of Ernst&Young Global Limited) and the independent auditor’sreport dated February 7, 2022, is presented preceding the consolidated financial statements. I. EXPLANATIONS AND FOOTNOTES OF THE INDEPENDENT AUDITORS REPORT There are no significant issues or necessary disclosures or notes in relation to the Group’s operations other than those mentioned above. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 418 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 419 Annexes Activities for which Support Services are Received in Accordance with the Regulation on Procurement of Support Services for Banks Activities for which Support Services are Received in Accordance with the Regulation on Procurement of Support Services for Banks ੵ Support services received from Atos Müşteri Hizmetleri A.Ş. for sales-oriented external calls, ੵ Support services received from ATP Ticari Bilgisayar Ağı ve Elektrik Güç Kaynakları Üretim ve Pazarlama Ticaret A.Ş. regarding the ੵ Support services received from KKB Kredi Kayıt Bürosu A.Ş. regarding the use of Anadolu Data Center hard disk space, ੵ Support services received from Kurye Net Motorlu Kuryecilik ve Dağıtım Hizmetleri A.Ş. for delivery of credit card products to transfer of right to use software and documents, customer addresses, ੵ Support services received from Austriacard Turkey Kart Operasyonları A.Ş. for production and customization of credit cards and ੵ Support services received from Loomis Güvenlik Hizmetleri A.Ş. for transporting cheques, promissory notes, other commercial debit cards following purchase of credit card and debit card plastics, papers and documents, ੵ Support services received from Bilişim Bilgisayar Hizmetleri Ltd. Şti. for use of the payment application on Cash Registers, ੵ Support services received from Brink's Güvenlik Hizmetleri A.Ş. for international transportation, ੵ Support services received from CMC İletişim ve Çağrı Merkezi Hizmetleri A.Ş. aimed at calling customers and reminding them about deferrals regarding retail loans and credit cards payments, ੵ Support services received from Comdata Teknoloji ve Müşteri Hizmetleri A.Ş. aimed at calling customers and reminding them about deferrals regarding retail loans and credit cards payments, ੵ Support services received from Definex Danışmanlık A.Ş. for the development of a project loans app, risk center queries and foreign trade processes, ੵ Support services received from Edata Elektronik San ve Tic A.Ş. for maintenance of and running the Bank’s application on cash registers, ੵ Support services received from E-Kart Elektronik Kart Sistemleri San. Tic. A.Ş. for production and customization of credit cards and debit cards following purchase of credit card and debit card plastics, ੵ Support services received from Enuygun Com İnternet Bilgi Hizmetleri Teknoloji ve Ticaret A.Ş. for marketing of consumer loans, ੵ Support services received from Erişim Müşteri Hizmetleri A.Ş. to meet the demands of customers using the telephone branch, ੵ Support services received from Hangisi İnternet ve Bilgi Hizmetleri A.Ş. for marketing of consumer loans, ੵ Support services received from Hobim Arşivleme ve Basım Hizmetleri A.Ş. for printing and/or enveloping bank statements of the ੵ Support services received from Loomis Güvenlik Hizmetleri A.Ş. for transporting cash, ੵ Support services received from Loomis Güvenlik Hizmetleri A.Ş. for transporting cash abroad, ੵ Support services received from Loomis Güvenlik Hizmetleri A.Ş. for customer collection, transportation, processing and storage, ੵ Support services received from Mikrosaray Mikrobilgisayar Paz. ve Tic. A.Ş. for directing customers to the Bank’s branches to upload the Bank's application to cash registers, ੵ Support services received from Mikrosaray Mikrobilgisayar Paz. ve Tic. A.Ş. for maintenance of and running the Bank’s application on cash registers, ੵ Support services received from MT Bilgi Teknoloji Dış Ticaret A.Ş for maintenance of and running the Bank’s application on cash registers, ੵ Support services received from Obase Bilgisayar Danışmanlık Hizmetleri Ticaret San. A.Ş. for outsourcing data analytic activities, ੵ Support services received from Panaroma Bilişim Teknolojileri San. ve Tic. A.Ş. for maintenance of and running the Bank’s application on cash registers, ੵ Support services received from Payten Teknoloji A.Ş. regarding secure e-payment infrastructure for electronic commerce, ੵ Support services received from Plastik Kart Akıllı kart İletişim Sistemleri San. ve Tic. A.Ş. for production and customization of credit cards and debit cards following the purchase of credit card and debit card plastics, ੵ Support services received from Postkom Basım ve Posta İletişim Hizmetleri A.Ş. for printing and/or enveloping bank statements of credit cards and contracted merchants, and other documents such as letters and notices, credit cards and contracted merchants, and other documents such as letters and notices, ੵ Support services received from Hugin Yazılım Teknolojileri San. ve Tic. A.Ş. for maintenance of and running the Bank’s application on ੵ Support services received from R2 Servis Elektrik, Elektronik ve Bilgisayar Teknolojileri San. ve Tic. A.Ş. for maintenance of and cash registers, running the Bank’s application on cash registers, ੵ Support services received from Iron Mountain Arşivleme Hizmetleri A.Ş. regarding physical archive services, ੵ Support services received from Iron Mountain Arşivleme Hizmetleri A.Ş. for opening archive boxes, scanning of contracts and uploading them into the Bank's system by firm personnel, in addition to physical archive services, ੵ Support services received from Ingenico Ödeme Sistem Çözümleri A.Ş. for maintenance of and running the Bank’s application on cash registers, ੵ Support services received from Innova Bilişim Çözümleri A.Ş. regarding the use of virtual POS, ੵ Support services received from Infina Yazılım A.Ş. regarding purchasing, installation, and maintenance of software and support services to be rendered throughout the term of the contract, ੵ Support services received from İnfoteks Bilgisayar Elektronik Telekom San. Tic. LTD. Şti. for maintenance of and running the Bank’s application on cash registers, ੵ Support services received from İş Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim Hizmetleri A.Ş. regarding the provision of required resources for the operation, management and maintenance of data processing application servers and server operating systems, and the operation, management and maintenance of communication networks, ੵ Support services received from Jetizz Hızlı Taşımacılık A.Ş. for delivery of card products to our customers’ addresses, ੵ Support services received from Jetizz Hızlı Taşımacılık A.Ş. for sending Banking Services Agreements to the addresses of applicants who apply for "Anında Müşteri" and delivering the signed contracts to the Bank, ੵ Support services received from Karbil Yazılım ve Bilişim Teknolojileri Tic. A.Ş. for maintenance of and running the Bank’s application on cash registers, ੵ Support services received from Key Yazılım Çözümleri A.Ş. regarding expertise software, ੵ Support services received from Konut Kredisi Com Tr Danışmanlık A.Ş. for marketing of consumer loans, ੵ Support services received from Softtech Yazılım Teknolojileri Araştırma Geliştirme ve Pazarlama Tic. A.Ş. for information systems management, information systems infrastructure support, software development, project development, business analysis, systems analysis, project and product consulting, and technical support, ੵ Support services received from Softtech Yazılım Teknolojileri Araştırma Geliştirme ve Pazarlama Tic. A.Ş. for digitalization of financial analysis processes, ੵ Support services received from Token Finansal Teknolojiler A.Ş. for maintenance of and running the Bank’s application on cash registers. ੵ Support services received from Emlakjet İnternet Hizmetleri ve Gayrimenkul Danışmanlığı A.Ş. for marketing of consumer loans, ੵ Support services received from Arabam Com İnternet ve Bilgi Hizmetleri A.Ş. for marketing of consumer loans, ੵ Software development and maintenance services from Topkapı Danışmanlık Elektronik Hizmetler Pazarlama ve Ticaret A.Ş., ੵ Document Scanning and Barcode Reading Contract from İş Merkezleri Yönetim ve İşletim A.Ş., ੵ Support services received from Paygo Finansal Teknolojileri A.Ş. for maintenance of and running the Bank’s application on cash registers, ੵ Software development and support service received from Softtech Yazılım Teknolojileri Araştırma Geliştirme ve Pazarlama Tic. A.Ş. within the framework of the Capital Markets Infrastructure Transformation Program, ੵ Support services received from Figo Ticari Bilgi ve Uygulama Platformu A.Ş. regarding supplier financing needs, ੵ Support services received from AVI Gayrimenkul Yatırım Değerleme ve Danışmanlık A.Ş. regarding mortgage establishment transactions, ੵ Support services received from FU Gayrimenkul Yatırım Danışmanlık A.Ş. regarding mortgage establishment transactions, ੵ Support services received from İPOTEKA Gayrimenkul Yatırım Danışmanlık A.Ş. regarding mortgage establishment transactions An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 420 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 421 Additional Information Provided Within the Scope of Relevant Legislation Additional Information Provided Within the Scope of Relevant Legislation Duties undertaken by İşbank’s Board Members outside the Bank Name-Surname Duty Duties Undertaken Outside İşbank Adnan Bali Chairperson of the Board of Directors Chairperson of the Board of Directors of Türkiye Sınai Kalkınma Bankası A.Ş., Chairperson of the Board of Directors of Türkiye İş Bankası A.Ş. Members' Supplementary Social Security and Charity Fund Foundation, Chairperson of the Board of Directors of Softtech Ventures Teknoloji A.Ş., Member of the High Advisory Board of Darüşşafaka Society Yusuf Ziya Toprak Deputy Chairperson of the Board of Directors None Hakan Aran Board Member Trakya Yatırım Holding A.Ş., İşbank AG Feray Demir Board Member Ersin Önder Çiftçioğlu Board Member Fazlı Bulut Board Member Durmuş Öztek Board Member Board Member of Türkiye İş Bankası A.Ş. Members' Supplementary Social Security and Charity Fund Foundation None None None ੵ I am capable of dedicating sufficient time to be able to observe İşbank’s activities and to fulfill the requirements of the duties I undertake, ੵ I have not been a member of the Board of Directors of İşbank for more than six years in total within the last decade, ੵ I am not an independent member of the Board of Directors in more than three of the companies controlled by İşbank or by the shareholders who control the management of İşbank, and in more than five of the publicly traded companies in total, ੵ I have not been registered and announced on behalf of the juridical person elected as a member of the Board of Directors, ੵ I still have all the qualifications as per the Corporate Governance Principles to be an independent member, and I will protect all these conditions during the term of duty in case I am appointed as an independent member. In the event that a situation arises that compromises my independence, I will immediately notify the Board of Directors of İşbank, together with its justification, and simultaneously notify the Capital Markets Board of this situation and its justification in writing. And thus, I am independent.” Remuneration ੵ In accordance with the General Assembly decision taken on 25.03.2022, a net allocation of TL 57,820 is paid to the members of the Board of Directors on an individual basis every month. Benefits paid to key management personnel in 2022 amount to TL 78,529 thousand. Moreover, expenses for allowance, travel, accommodation, representation, as well as the opportunities in cash and in kind, insurance and similar guarantees for key management personnel in the same year amount to TL 19,987 thousand. Dividend Payments: Recep Hakan Özyıldız Board Member Part-time academic tutor at Ankara University, Faculty of Political Sciences Mustafa Rıdvan Selçuk Board Member BDD Bağımsız Denetim ve Danışmanlık A.Ş. Independent Auditor, Girişim YMM Ltd. Şti. Partner Information on İşbank’s dividend payment policy as set out in detail in Article 58 of the Bank’s Articles of Incorporation is provided in the integrated annual report. The said information is also available on the Bank’s corporate website under the title of Investor Relations, in Turkish and English. Ahmet Gökhan Sungur Board Member Sadrettin Yurtsever Board Member None None Independence declaration of Mr. Ahmet Gökhan Sungur, Independent Member of the Board Mr. Ahmet Gökhan Sungur was nominated as Independent Member of the Board to the Corporate Governance Committee that performs the tasks of the Nomination Committee, and the Corporate Governance Committee’s “Evaluation Report of Independent Member Nominee” dated 29.01.2020 was submitted to the Board on the same date. The independence declaration of Mr. Ahmet Gökhan Sungur, who was elected as an Independent Member of the Board at the Ordinary General Meeting dated 31.03.2020, is quoted below: “As per the requirements of the legislation, Corporate Governance Principles of the Capital Markets Board and the Articles of Incorporation of İşbank, due to my nomination as an “independent member” to the Board of Directors of İşbank, I hereby declare to the committee, İşbank shareholders and all the related parties that; ੵ Within the last five years, there has not been any employment relationship in a managerial position to assume important duties and responsibilities, any joint or sole ownership of more than 5% of capital, voting rights, or privileged shares, nor has there been any significant commercial relationship established between (i) İşbank, partnerships where İşbank has management control or significant impact and partners that have management control of İşbank or significant impact on İşbank, (ii) and I, my spouse and my relatives by blood or by marriage up to the second degree; ੵ Within the last five years, I have not worked as an executive manager, been a board member, or a partner owning 5% and above shares assuming important duties and responsibilities in companies, particularly in companies that provide auditing (including tax audit, legal audit, internal audit), rating, and consulting services to İşbank, from which İşbank purchases or to which İşbank sells products and services within the framework of agreements signed during the timeframe of selling/purchasing products and services, ੵ I possess the professional education, knowledge, and experience necessary to fulfill the duties I will assume as an independent board member, ੵ I am not working full-time in public institutions and organizations, ੵ I am considered as a resident in Türkiye according to the Income Tax Law (no.193) dated 31/12/1960, ੵ I have high ethical standards, a professional reputation, and the experience necessary to positively contribute to İşbank’s activities, to maintain my objectivity in conflicts of interest between İşbank and its shareholders, and to decide independently by taking into account the rights of stakeholders, Company Share Information: İşbank’s Group A and Group B shares are listed on the Main Market with the ISATR and ISBTR symbols; İşbank’s Group C shares are listed on the Stars Market with the ISCTR symbol. İşbank’s Group C shares are traded on the London Stock Exchange as Global Depositary Receipts, being subject to “Regulation S”; they are also traded on over-the-counter markets in the USA as American Depositary Receipts, being subject to “Rule 144A”. Changes in the Organizational Structure in 2022 ੵ Information Security, Internal Control, Corporate Compliance, and Risk Management Divisions were affiliated to the Deputy Chief Executive reporting to the Audit Committee. ੵ Five of our regional departments operating under the Retail Loans Underwriting Division were terminated. ੵ Loans Monitoring Regional Departments were established. Other Issues ੵ No custom audits were carried out at İşbank within the scope of Articles 207, 438, and 439 of the Turkish Commercial Code in 2022. Our bank is subject to public auditing, especially public institutions such as BRSA, CMB, Competition Board, and the Central Bank. If there is a situation that needs to be disclosed to the public regarding the audits of the aforementioned public institutions in our Bank, they are disclosed via the KAP platform. ੵ Mr. Adnan Bali, Chairperson of the Board of Directors, also serves as the Chairperson of the Board of Türkiye Sınai ve Kalkınma Bankası A.Ş. (TSKB), a subsidiary of İşbank, within the framework of the consent obtained regarding the prohibition to trade with and compete against the company based on related regulations of the Turkish Commercial Code. ੵ Companies within the İşbank group do not have any shares in the Bank's capital. ੵ At the Board of Directors meeting of our Bank dated 16.01.2023, our application to the Banking Regulation and Supervision Agency and the Capital Markets Board regarding the increase of the registered capital ceiling of our Bank from TL 10 billion to TL 25 billion, the extension of the Authorization Period for the Registered Capital Ceiling until the end of 2027, and the amendment of Article 5 of the Articles of Incorporation was approved. ੵ The actions required with respect to the decisions made at the Ordinary General Shareholders’ Meeting of 2022 were performed. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 422 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 423 Information on the Transactions Carried Out with the Bank's Risk Group İşbank's Subsidiaries All financial services provided to companies within İşbank’s Risk Group are provided on an arm’s length basis, subject to the same procedures and policies applicable to third parties. Credit lines and other lending transactions allocated to companies within İşbank’s Risk Group are analyzed and monitored to ensure that such transactions are within regulatory limits. In 2022, the loans extended to Group companies were all below the regulatory risk limits. On July 26, 2022, Fitch Ratings assigned TSKB, which had a consolidated shareholder equity of TL 13 billion and total assets of TL 117.6 billion as of end-December 2022, a long-term local currency credit rating of B and a foreign currency credit rating of B- with negative outlooks. Finally, TSKB was assigned a national long-term rating of AA (tur) and Viability Rating of (b-) with a stable outlook. On August 16, 2022, Moody’s affirmed TSKB’s Credit Assessment rating as caa1, and Long-Term Domestic and Foreign Currency Issuer ratings as B3 and updated the outlooks as stable. İşbank's Subsidiaries Finance İşbank has financial services subsidiaries that are active in the business lines of banking, insurance, private pension, capital market brokerage, portfolio management, venture capital, factoring, reinsurance, financial leasing, asset management, securities investment trust, investment banking, payment services and real estate investment trust. Financial services subsidiaries enrich the range of products and services offered by İşbank to individual and corporate customers in different business lines while also creating complementary and cross-product delivery and sales opportunities. TSKB Türkiye’s first privately-owned development and investment bank TSKB, as a leader among the privately-owned development and investment banks, has undertaken a significant role in Türkiye’s economic development since its incorporation in 1950. The Bank continues to add sustainable value for stakeholders and the national economy with the value it generates in economic, environmental and social areas. Offering its customers a wide range of innovative services with its in-depth knowledge in corporate banking, investment banking and advisory services, TSKB has adopted it as its mission to contribute continued and increasing support to the inclusive and sustainable development of the country. Within the scope of the resources obtained from development finance institutions and international financial institutions, TSKB provides loans in the area of renewable energy and adaptation, as well as social loans related to women’s employment, supporting employment management in underdeveloped areas, and indirectly transfers funds to SMEs’ investments in diverse sectors through APEX loans provided to financial institutions. Undertaking a key role in the development and sustainable growth of the Turkish economy, TSKB maintained its No. 1 position in Türkiye and strengthened its position globally by ranking in the lowest risk group with 7.9 points as a result of a 5.6 point improvement in the Environmental, Social and Governance (ESG) risk rating as of September 2022 by Sustainalytics, an independent specialized organization. TSKB is also one of the leading organizations when it comes to corporate governance. The Bank's corporate governance rating, which was 9.56 out of 10 and increased to 9.59 in October 2021, was maintained in 2022 as well. TSKB signed a USD 650 million funding agreement with development finance institutions in 2022. With the “JBIC GREEN 2” loan agreement signed in February, TSKB aims to provide financing for renewable energy and energy efficiency investments and advanced technology-supported projects that aim to reduce greenhouse gas emissions across Türkiye. In March, the Bank signed a USD 100 million loan agreement with the International Finance Corporation (IFC) to provide financing to companies in Türkiye that support women's participation in employment and observe gender equality in the working environment. In December, the Bank secured a USD 200 million “Sustainable Energy and Infrastructure Loan” from the Asian Infrastructure Investment Bank, with the guarantee of the Republic of Türkiye Ministry of Treasury and Finance, to finance investments in renewable energy, energy efficiency, climate change adaptation compliance, and supporting industries with a focus on climate change prevention and climate change compliance of private sector companies in Türkiye. Also in December, the Bank signed a EUR 80 million loan agreement with the French Development Agency (AFD) to finance investments in Türkiye that serve the circular economy and investments to be made by companies aiming to develop circular economy practices. TSKB, which ranks first in Türkiye and is among the best banks in the world with its ESG rating, signed its third syndication loan agreement indexed to sustainability criteria on July 25, 2022 and secured financing amounting to USD 109 million. TSKB is one of Türkiye’s leading institutions in the field of sustainability, taking into account the environmental and social impact dimensions of all investment and operating loans it extends. Currently, the Bank’s loans related to Sustainable Development Goals (SDGs) account for 91 percent of its total portfolio, while the share of loans contributing to climate and environment-related SDGs is 60 percent. In 2017, TSKB broke new ground and became the first institution in the Turkish financial sector to publish an Integrated Report. In 2016, the Bank broke new ground in Türkiye and the CEEMEA region with its Green/Sustainable Bond issuance, and in March 2017, the Bank issued the first subordinated sustainable bond in the world. In 2019, TSKB became a signatory to the UNEP-FI Principles for Responsible Banking. In the same year, TSKB became the 10th member of the Management Committee of IDFC, of which it has been a member together with leading international development banks since 2011. In October 2022, the Bank became a signatory to the Net-Zero Banking Alliance established by the United Nations Environment Program Finance Initiative (UNEP FI) and committed to aligning its loan and investment portfolio with zero emission targets by 2050. www.tskb.com.tr/en İşbank Germany A leading financial institution backed by Turkish capital in Europe Founded in 1992, İşbank Germany has grown and thrived within the financial system in Europe over the course of the past 30 years and helped customers in Türkiye to access the European financial system. Having successfully adapted to the changing dynamics throughout its operations for more than a quarter of a century, İşbank Germany operates in Germany with 8 branches and in the Netherlands with one branch. As of December 2022, the Bank had 146 employees and EUR 1.7 billion in total assets and EUR 386 million in total shareholder equity. İşbank Germany provides finance solutions for foreign trade transactions between Türkiye and EU member states with a focus on corporate banking. www.isbank.de İşbank Georgia İşbank’s organization in Georgia The presence of İşbank in Georgia, Türkiye’s border neighbor which is the gateway to the Caucasus, started with the branch opened in Batumi in 2012. The Tbilisi branch became operational in 2014, and from 2015 onwards, the existing branches were transformed into a subsidiary bank under JSC İşbank Georgia. Mainly offering corporate banking services and having 62 employees, İşbank Georgia had total assets worth USD 156 million (GEL 420 million), and its shareholder equity amounted to USD 44 million (GEL 119 million) as of December 2022. www.isbank.ge İşbank Russia Serving customers at 3 locations in Russia İşbank has been cultivating its presence and operations in Russia, one of Türkiye’s important trade partners, since 2011. With 97 employees on its payroll, İşbank Russia has 1 branch in Moscow, one representative office in Saint-Petersburg and one in Kazan. Concentrated mostly on corporate banking services, İşbank Russia’s total assets were worth USD 255 million (RUB 18,263 million) and its shareholder equity was registered as USD 92 million (RUB 6,584 million) as of year-end 2022. www.isbank.com.ru Anadolu Hayat Emeklilik The first publicly-traded private pension and life insurance company Launched in 1990 as Türkiye’s first life insurer, Anadolu Hayat Emeklilik A.Ş. is also the first publicly-traded company operating in the private pension and life insurance sector. As of year-end 2022, the Company had total assets of TL 90.7 billion and shareholder equity of TL 3.5 billion on a consolidated basis. At the same time, total customer assets managed by the Company in private pension and life insurance funds was TL 85.3 billion. As of year-end 2022, Anadolu Hayat Emeklilik maintained its leadership among privately-owned companies in the categories of number of voluntary PPS participants and fund size comprising the sum of voluntary PPS and automatic enrollment and continued to be the company with the highest number of participants throughout the year with its private pension product “Private Pension for My Child” for participants under the age of 18. Focusing on a sustainable future, the Company accelerated its activities in this area and continued to generate added value in the sector with its pioneering practices. In addition to its Sustainability Equity Fund, continued efforts to zero carbon emissions since 2016, and strong position in the BIST Sustainability Index, Anadolu Hayat Emeklilik invited everyone to be a part of the “Upcycling Movement” with its upcycling ideas to reduce the amount of waste. It launched a corporate social responsibility project called “My Seed Moneybox” with workshops for first and second grade primary school students living in big cities, whose relationship with nature is limited, to make them realize that seeds are not waste but a precious treasure. In 2022, it published its second Sustainability Report, the first of which was published in 2021. www.anadoluhayat.com.tr/en An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 424 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 425 İşbank's Subsidiaries İşbank's Subsidiaries Anadolu Sigorta Leading organization of the Turkish insurance sector Anadolu Anonim Türk Sigorta Şirketi - one of the leading non-life insurance companies in Türkiye - generated TL 23.8 billion worth of premiums as of year-end 2022. The company had total assets of TL 29.4 billion and shareholder equity of TL 4.8 billion on a consolidated basis as of year-end 2022. The Company's rating was raised from 9.55 to 9.57 in the Corporate Governance Rating Report issued in November 2022. Anadolu Sigorta continues to be included in the BIST Sustainability Index, which it joined in 2021. In 2022, an Integrated Sustainability Report focusing on economic, social, and environmental added value was published for the first time and CDP-Carbon Disclosure Project Climate Change reporting was prepared, again for the first time. The Company aims to increase its portfolio in this area in the coming periods with innovative products and services such as Electric Vehicle Motor Insurance and Individual Rooftop Solar Energy Panel Insurance to promote renewable energy investments and low carbon emissions. Regarding equality, one of the components of sustainable development, the #DahaEşit Gender Equality Program was launched, and an Equality Committee was established. Awareness trainings were provided, and automatic correction of discriminatory words in emails and office applications was initiated. The Equality Policy, which includes the Company’s commitments in this regard, was published. www.anadolusigorta.com.tr/en İş Leasing Türkiye’s pioneering financial leasing company As one of the pioneers of the leasing sector in Türkiye since its foundation in 1988, İş Finansal Kiralama A.Ş. (İş Leasing) operates with the mission of prioritizing SMEs in its funding activities, developing and maintaining a large and high-quality portfolio, and meeting customer demands with effective, quick and quality solutions. İş Leasing had TL 36.3 billion in total assets and TL 3.7 billion in shareholder equity on a consolidated basis, while its leasing receivables amounted to TL 17.2 billion as of December 2022. In its latest report published on 26.07.2022, the international credit rating agency Fitch Ratings downgraded the credit ratings of 7 financial leasing companies and 25 Turkish banks, and updated the Company’s Long-Term Local Currency Credit Rating from B+ to B, Long-Term Foreign Currency Credit Rating from B to B-, and Shareholder Support Rating from b to b-. İş Leasing aims to be a part of the solution in the combat against all environmental and social problems facing the world today, including climate change. Accordingly, the company introduced the Environmental and Social Risk Governance System (ESRG) Project. Displaying İş Leasing's approach to sustainability, this project also defines the governance mechanisms and all necessary processes put in place to manage the company's environmental and social impact. İş Leasing is committed to continuing its sustainability-driven activities at full pace as a pioneering company in the sector. İş Leasing's corporate governance rating remained unchanged in December 2022 year-on-year and maintained its level of 9.29 out of 10. www.isleasing.com.tr/en Moka All shares of Moka Ödeme Kuruluşu Anonim Şirketi, a payment services company, were purchased in January 2021, electronic money issuance was added to the company's fields of activity as per the permission obtained from the CBRT in December 2021, and the company's name was changed to Moka Ödeme ve Elektronik Para Kuruluşu A.Ş. at the end of the same year. As of December 2022, the Company reached TL 468.2 million in assets with TL 46.6 million in shareholders' equity and continues its operations with 42 employees. www.moka.com/en Millî Reasürans Millî Reasürans - Uninterrupted reinsurance services since 1929 Established in 1929 and having undertaken an important role in the formation and development of the Turkish insurance sector, Millî Reasürans T.A.Ş. (Millî Reasürans) has total assets worth TL 39 billion and shareholder equity worth TL 7 billion on a consolidated basis as of year-end 2022. Millî Reasürans has a branch operating in Singapore in line with the Company’s strategy to export its know-how and reinsurance experience acquired in the national market to global markets. As of year-end 2022, premiums generated abroad accounted for 23% of the Company’s total premiums. Since 1994, the Company has been supporting the arts and has a chamber orchestra. www.millire.com/ing/anasayfa.html İş Faktoring An innovative approach to the accounts receivable factoring sector Being one of the pioneering companies in the sector since its incorporation in 1993 with its robust financial structure and customer- oriented approach to business, İş Faktoring A.Ş. (İş Faktoring) has been offering quick and competitive services in the areas of finance, guarantee and collection. As of December 2022, İş Faktoring has TL 16.4 billion in total assets and TL 1.4 billion in shareholder equity. As a company that operates in line with the Sustainable Development Goals (SDGs) announced in 2015, a Sustainability Working Group was established within İş Faktoring employees in June 2022 and comprehensive studies on the subject were initiated. https://www.isfaktoring.com.tr/home-page İş GYO One of Türkiye’s largest real estate investment trusts Being one of the sector’s leading actors with its solid portfolio and financial structure, İş Gayrimenkul Yatırım Ortaklığı A.Ş. (İş GYO) focuses on maintaining and developing a diversified and well-balanced portfolio. As of December 2022, the Company’s total assets amounted to TL 17.4 billion, and its shareholder equity totaled TL 13.9 billion. Based on the review conducted by Saha Kurumsal Yönetim ve Kredi Derecelendirme Hizmetleri A.Ş. in August 2022, the Company’s Long-Term National (TR) and Short-Term National (TR) ratings were affirmed as AA and A1+, respectively, with a stable outlook assigned to both, and thus the Company was assessed within the investment category. Sales of the Company's Topkapı İnistanbul and Ömerli Kasaba Evleri projects have been completed. Within the projects under development, 99% of the Istanbul Finance Center project was completed, the construction of Üsküdar Altunizade (Litus Istanbul) project is ongoing, and a new phase project is being planned in Ömerli Kasaba. https://www.isgyo.com.tr/Home İş Yatırım A leading and pioneering investment house in capital markets İş Yatırım Menkul Değerler A.Ş. (İş Yatırım) offers brokerage services in domestic and international capital markets, investment advisory, and corporate finance services. Being one of the 7 publicly-traded brokerage houses in the sector, the Company is the only brokerage house in Türkiye traded on BIST 100. Having long and short-term national credit ratings of "AAA" and "A1+", respectively, as affirmed by SAHA Kurumsal Yönetim ve Kredi Derecelendirme Hizmetleri A.Ş. on September 19, 2022, with a stable outlook, İş Yatırım had TL 35.8 billion in total assets and TL 6.8 billion in shareholder equity on a consolidated basis as of December 2022. İş Yatırım stands out in the sector with its outstanding return on equity and the remarkable increase in its market value. https://www.isyatirim.com.tr/en-us/pages/default.aspx İş Portföy (İş Asset Management) The customer portfolio of İş Portföy Yönetimi A.Ş. (İş Asset Management) mainly consists of corporate customers such as investment funds, pension funds, venture capital funds, real estate funds, insurance companies and foundations. Pension funds managed by İş Asset Management include Anadolu Hayat and Axa Hayat funds. The size of the managed portfolio amounted to TL 171 billion as of December 2022, with the real estate investment fund and venture capital investment fund reaching TL 5.6 billion and TL 3.2 billion in size, respectively. Being one of the first portfolio management companies to set up a venture capital fund in the sector, it offers its participants a successful return performance. There is an exponential increase in global interest in thematic funds with a portfolio that consists of investment instruments based on specific themes such as environmental, social and corporate governance, sustainability, clean energy and digitalization. Defining 2021 as the "Year of Transformation", İş Asset Management has gone beyond classical approaches when developing its investment strategies, focusing on "Thematic Investment Funds" that display rapid growth and have an investment strategy based on the transformations in business models, industries, economies or social norms. İş Asset Management divided its Thematic Funds into two main groups: "Technology" and "Environmental, Social and Corporate Governance". The Company offers the ability to invest in rapidly growing global sectors such as Block Chain Technologies, Cyber Security Technologies, Digital Gaming, and Semi-Conductor Technologies. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 426 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 427 İşbank's Subsidiaries İşbank's Subsidiaries When it comes to the environmental, social and corporate governance theme, the İş Asset Management Tema Variable Fund, the İş Asset Management Electric Vehicles Mixed Fund, and the İş Asset Management Women’s Equity Fund, which promotes gender equality in business life and offers the opportunity to invest in companies that give importance to the employment of women, are the first of their kinds. İş Asset Management is one of the pioneering companies in the portfolio management sector in the thematic and renewable energy area with the İş Asset Management Electric Vehicles Mixed Fund, İş Asset Management Renewable Energy Mixed Fund, İş Asset Management Renewable Energy Venture Capital Investment Fund and İş Asset Management Infrastructure Venture Capital Investment Fund, all set up and managed by the Company. https://www.isportfoy.com.tr/en/Home Software Softtech Experienced solution partner in information technologies Established in İstanbul in 2006, Softtech is the largest software company in Türkiye, with more than 1,700 employees and total assets close to TL 550 million. Besides its experience in the banking and finance sector, Softtech develops customer-oriented solutions in the domestic and international markets with products in diverse fields and takes initiatives aimed at creating new opportunities and collaborations with a focus on technology. The Company has offices in Ankara and Cyprus and has subsidiaries in İstanbul, San Francisco, and Shanghai at the heart of the startup ecosystem to monitor, develop and invest in innovation on-site. https://softtech.com.tr/en/homepage/ Health Bayek Bayındır Healthcare Group (Bayek), a group of companies operating in the healthcare sector with 3 hospitals, 1 medical center and 6 dental clinics, offers quality healthcare services in İstanbul, Ankara and İzmir with its expert staff and robust technological infrastructure. Bayek is the first organization in Türkiye to be issued accreditation certificates for two hospitals simultaneously by the Joint Commission International (JCI) and was re-accredited by JCI for the sixth time in November 2021. https://www.bayindirhospitals.com/ Glass Şişecam The founder and the unchanging leader of the Turkish glass industry Founded in 1935, Türkiye Şişe ve Cam Fabrikaları A.Ş. (Şişecam) has a broad portfolio of products, especially flat glass, glassware, glass packaging and chemicals, mainly soda ash and chromium chemicals. The Şişecam Group carries out production in facilities and plants located in Türkiye as well as in the USA, Egypt, Russia, Georgia, Bulgaria, Bosnia-Herzegovina, Italy, Ukraine, Romania, Germany, Hungary, Slovakia and India. Having produced 42% of the total glass output outside Türkiye (as measured on a tonnage basis) and generated 63% of total sales revenues from facilities based abroad and exports from Türkiye as of December 2022, the Şişecam Group’s exports to more than 150 countries amounted to USD 1.1 billion as of year-end 2022. Positioned as one of the world’s and Europe’s leading companies in the industry, the Şişecam Group was ranked between second and fifth in the world and Europe in terms of production capacity in glass manufacturing as of December 2022. Ranking fourth in Europe and second in the world in terms of soda production capacity, the Group is the world leader in the production of basic chromium sulphate and ranks second in the production of sodium bichromate. As of December 2022, Şişecam had TL 163.9 billion in total consolidated assets and TL 95 billion in shareholder equity. Fitch Ratings downgraded the Company’s credit rating from "B+" to "B" with a "negative" outlook in the assessment made in July 2022. In Moody's assessment dated August 12, 2022, the Company's credit rating was downgraded from "B2" to "B3" and the outlook was changed to "stable". The Company’s Corporate Governance Rating Score was 9.60 in December 2022. Türkiye Şişe ve Cam Fabrikaları A.Ş. ranked 22nd in the ISO Türkiye's Top 500 Industrial Enterprises list for 2021. Şişecam's installed patterned glass production capacity in Türkiye will reach 324 thousand tons/year by the end of 2024, in line with the decision to invest in a patterned glass furnace in Mersin/Tarsus to meet the needs of the energy glass market. In February 2022, Şişecam acquired Italian Refel S.p.A., one of the world's leading producers of refractory materials used in the construction and maintenance of glass melting furnaces with an annual production capacity of 6 thousand tons, with the aim of eliminating the risks associated with supply chain disruption in the AZS refractory supply processes, further strengthening its strategic position in the European and global glass market. Şişecam decided to invest in Basalia Technology, a groundbreaking solution in the green and circular economy space developed to turn any kind of waste into value-added products and to support research & development projects in this area; Şişecam became a 10% shareholder in the Swiss-based 7Cbasalia Global AG company. Basalia bio-loop technology was first used at the Şişecam Mersin facility. https://www.sisecam.com.tr/en Platform Topkapı With its marketplace model bringing together firms of any size operating in Türkiye, Topkapı Danışmanlık Elektronik Hizmetler Pazarlama ve Ticaret A.Ş. aims to contribute to the development of the online shopping sector in Türkiye, offer an improved customer experience supported with next-generation, secure payment solutions by processing customer data, and develop business models that can create maximum stakeholder value. In addition to its payment system solutions, the company also owns the Pazarama platform, which is designed to introduce a unique and innovative approach to the e-commerce sector for all stakeholders. www.topkapidanismanlik.com.tr Telecommunication İşNet Founded in 1999, İşNet has expanded its field of activity and range of services over the years, providing services to companies and public institutions of all sizes in voice, data center, internet, virtual network-VPN, satellite services, digitalization solutions, security products, and e-transformation. As of December 2022, İşNet, which continues its activities with 260 employees, will continue to offer innovative, high value-added solutions suitable for sectoral needs with its investments in robotic process automation systems, internet of things, cybersecurity, cloud and artificial intelligence, with the vision of becoming the "digital transformation friend" of companies in the coming period. https://www.isnet.net.tr/en/ Facility Management İşmer Within the "ISO Integrated Management System Project”, for which procedural work was initiated by İş Merkezleri Yönetim ve İşletim A.Ş. in 2021 and whose certification audit was successfully completed in 2022, ISO 45001 Occupational Health and Safety Standard, ISO 41001 Facility Management Standard, ISO 9001 Quality Management Standard, and ISO 14001 Environmental Management Standard certificates have been added to the management system certificates. In the integrated management system established, these standards are monitored from a single point. As a result of this project, customer demands were reviewed in accordance with predefined processes, customers were provided with the right services based on their needs, the services were regularly reviewed, and the processes that can be improved began to be evaluated. The study was process-oriented. and "Process improvement proposal submitted to the management" was added as a performance parameter to each process. In addition, for processes that were directly related to customers, “Customer satisfaction rate” was added as a performance parameter. In this way, continuous improvement is aimed in service quality and processes. In addition, stakeholders and their needs and expectations are included in the established management system, and these needs and expectations are regularly evaluated and reviewed. In addition to these four essential certifications, the Company also holds ISO 50001 Energy Management System and ISO 27001 Information Security Management System certifications, which are of great importance. The Company has been the first 100% Turkish capital company that is a member of TRFMA with 6 management system certifications. Şişecam's investment in natural soda ash in the USA with Ciner Group is ongoing, and Şişecam is expected to become the world leader in soda ash once the natural soda plant investments are realized. www.ismer.com.tr An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 428 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 429 Direct and Indirect Subsidiaries Direct and Indirect Subsidiaries* Changes in the Portfolio of Direct and Indirect Subsidiaries between 31.12.2021-31.12.2022 DIRECT SUBSIDIARIES Name Anadolu Hayat Emeklilik A.Ş. Arap Türk Bankası A.Ş. İş Finansal Kiralama A.Ş. İş Gayrimenkul Yatırım Ortaklığı A.Ş. İş Merkezleri Yönetim ve İşletim A.Ş. İş Net Elektronik Bilgi Üret. Dağ. Tic. ve İlet. Hizm. A.Ş. İş Yatırım Menkul Değerler A.Ş. İşbank AG JSC Isbank Georgia JSC İşbank Kredi Kayıt Bürosu A.Ş. Kültür Yayınları İş Türk A.Ş. Milli Reasürans T.A.Ş. Moka Ödeme ve Elektronik Para Kuruluşu A.Ş. Trakya Yatırım Holding A.Ş. Türkiye Sınai Kalkınma Bankası A.Ş. Türkiye Şişe ve Cam Fabrikaları A.Ş. 31.12.2022 INDIRECT SUBSIDIARIES Direct Share Bank’s Risk Group Share Percentage Name 31.12.2022 Direct Share Bank’s Risk Group Share Percentage 62,00% 20,58% 27,79% 52,06% 86,33% 100,00% 65,74% 100,00% 100,00% 100,00% 9,09% 100,00% 87,60% 100,00% 100,00% 47,68% 50,93% 83,00% 20,58% 58,24% 64,84% 100,00% 100,00% 70,78% 100,00% 100,00% 100,00% 9,09% 100,00% 87,60% 100,00% 100,00% 51,37% 57,02% Anadolu Anonim Türk Sigorta Şirketi Anavarza Otelcilik A.Ş. Batı Karadeniz Elektrik Dağıtım ve Tic. A.Ş. Bayek Tedavi Sağlık Hizmetleri ve İşletmeciliği A.Ş. Camiş Ambalaj Sanayii A.Ş. Camiş Egypt Mining Ltd. Co. Camiş Elektrik Üretim A.Ş. Camiş Madencilik A.Ş. Casaba Yönetim İşl.İmal.İth.İhr.Paz.Sağ.Tem.Güv.Ulş.Tic.ve San.A.Ş. Sisecam Resources LP Sisecam Resource Partners LLC Sisecam Wyoming LLC CJSC Brewery Pivdenna Convera Uluslararası Yazılım Arge Teknoloji Yatırımları A.Ş. Covision Medical Technologies Limited Covision Medical Technologies San. Tic. A.Ş. Cromital SPA Efes Varlık Yönetim A.Ş. Enaş Enerji Yatırımları A.Ş. Erişim Müşteri Hizmetleri A.Ş. Gullseye Lojistik Teknolojileri A.Ş. İş Enerji Yatırımları A.Ş. İş Faktoring A.Ş. İş Girişim Sermayesi Yatırım Ortaklığı A.Ş. İş Portföy Yönetimi A.Ş. İş Sanat A.Ş. İş Yatırım Ortaklığı A.Ş. JSC Mina Kanyon Yönetim İşletim ve Pazarlama A.Ş. Kasaba Gayrimenkul İnşaat Taahhüt ve Ticaret A.Ş. Koridor Incorporated Livewell Giyilebilir Sağlık Ürün Hizm. A.Ş. M4 Otelcilik ve Turizm A.Ş. Maksmarket Danışmanlık Elektronik Hizm Tic A.Ş. 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 64,31% 50,00% 65,00% 99,90% 100,00% 99,70% 100,00% 100,00% 100,00% 74,00% 60,00% 51,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 56,78% 100,00% 100,00% 38,66% 100,00% 50,00% 100,00% 74,66% 100,00% 40,09% 95,00% (*) Includes the direct and indirect subsidiaries in which İşbank’s share is equal to or exceeds five percentage points. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 430 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 431 Direct and Indirect Subsidiaries* Direct and Indirect Subsidiaries* INDIRECT SUBSIDIARIES Name Maxi Digital GmbH Maxis Girişim Sermayesi Portföy Yönetimi AŞ. Maxis Investments Ltd. Maxitech Inc. Merefa Glass Company Ltd. Mikla Yiyecek ve İçecek A.Ş. Miltaş Turizm İnşaat Ticaret A.Ş. Nevotek Bilişim Ses ve İletişim Sistemleri San. ve Tic. A.Ş. Nevotek Intercorporation Nevotek Middle East FZ Limited Liability Company OOO Energosystems OOO Posuda OOO Ruscam Glass Packaging Holding OOO Ruscam Management Company Ortopro Tıbbi Aletler San. Tic. A.Ş. Oxyvit Kimya Sanayii ve Ticaret A.Ş. Pacific Soda LLC Pasabahce Bulgaria EAD Pasabahce Egypt Glass Manufacturing SAE Paşabahçe (Shanghai) Trading Co. Ltd Paşabahçe Glass Gmbh Paşabahçe Mağazaları A.Ş. Paşabahçe Spain SL Paşabahçe SRL Paşabahçe USA Inc Radore İnternet Hizmetleri A.Ş. Radore Veri Merkezi Hizmetleri A.Ş. Refel SpA Richard Fritz Prototype Spare Parts Gmbh Rudnik Krecnjaka "Vijenac" D.O.O SC Glass Trading BV Sisecam Automotive Germany GmbH Sisecam Automotive Hungary Kft Sisecam Automotive Romania SA Sisecam Automotive Rus JSC Sisecam Automotive Rus Trading LLC 31.12.2022 INDIRECT SUBSIDIARIES Direct Share Bank’s Risk Group Share Percentage Name 31.12.2022 Direct Share Bank’s Risk Group Share Percentage 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 100,00% 100,00% 100,00% 100,00% 100,00% 83,57% 100,00% 95,37% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 97,22% 100,00% 60,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 25,50% 25,50% 100,00% 100,00% 50,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% Sisecam Automotive Slovakia S.R.O. Sisecam Chemicals Resources LLC Sisecam Chemicals USA Inc Sisecam Chemicals Wyoming LLC Softtech (Shanghai) Technology Co. Ltd. Softtech Ventures Teknoloji A.Ş. Softtech Yazılım Teknolojileri Araştırma Gel. ve Paz. Tic. A.Ş. Şişecam Automotive Bulgaria EAD Şişecam Bulgaria EOOD Şişecam Çevre Sistemleri A.Ş. Şişecam Dış Ticaret A.Ş. Şişecam Elyaf Sanayii A.Ş. Şişecam Enerji A.Ş. Şişecam Flat Glass India Private Limited Şişecam Flat Glass Italy S.r.l. Şişecam Flat Glass South Italy SRL Sisecam Glass Packaging Investment B.V. Şişecam Glasspackaging Hungary Kft Şişecam Otomotiv A.Ş. Şişecam Sigorta Aracılık Hizmetleri A.Ş. Şişecam Soda Lukavac DOO Şişecam Trading co. Tatilbudur Kurumsal Hizmetler Turizm ve Ticaret A.Ş. Tatilbudur Seyahat Acenteliği ve Turizm A.Ş. TBC Seyahat Acenteliği ve Turizm A.Ş. Toksöz Spor Malzemeleri Tic. A.Ş. Topkapı Danışmanlık Elektronik Hizmetler Pazarlama ve Ticaret A.Ş. Trakya Glass Bulgaria Ead Trakya Glass Rus AO Trakya Glass Rus Trading OOO Trakya Investment BV TRSG Glass Holding BV TSKB Gayrimenkul Değerleme A.Ş. TSKB Gayrimenkul Yatırım Ortaklığı A.Ş. TSKB Sürdürülebilirlik Danışmanlığı A.Ş. Yatırım Finansman Menkul Değerler A.Ş. Yatırım Varlık Kiralama A.Ş. 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 100,00% 60,00% 100,00% 60,00% 100,00% 100,00% 100,00% 100,00% 100,00% 90,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 100,00% 40,09% 40,09% 40,09% 90,63% 100,00% 100,00% 100,00% 100,00% 100,00% 70,00% 100,00% 88,74% 100,00% 98,42% 100,00% (*) Includes the direct and indirect subsidiaries in which İşbank’s share is equal to or exceeds five percentage points. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 432 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 433 Changes in Share Percentages in Subsidiaries COMPANIES Companies Entering the Bank’s Risk Group in 2022 Direct Share of İşbank as of December 2021 Direct Share of İşbank as of December 2022 Bank's Risk Group Share Percentage as of December 2021 Bank's Risk Group Share Percentage as of December 2022 REASON Enaş Enerji Yatırımları A.Ş. İş Enerji Yatırımları A.Ş. İş Sanat A.Ş. Maksmarket Danışmanlık Elektronik Hizm Tic A.Ş. Refel SpA Companies Whose Share Ratio Changed in the Bank's Risk Group in 2022 Bayek Tedavi Sağlık Hizmetleri Ve İşlet Tatilbudur Kurumsal Hizmetler Turizm ve Ticaret A.Ş. Tatilbudur Seyahat Acenteliği ve Turizm A.Ş. İş Gayrimenkul Yatırım Ortaklığı AŞ Kültür Yayınları İş Türk Anonim Şirketi Miltaş Turizm İnşaat Ticaret AŞ TSKB Gayrimenkul Yatırım Ortaklığı AŞ M4 Otelcilik ve Turizm A.Ş. TBC Seyahat Acenteliği ve Turizm A.Ş. - - - - - 0,00% 0,00% 0,00% 52,06% 99,17% 0,00% 0,00% 0,00% 0,00% 0% 0% 0% 0% 0% 0,00% 0,00% 0,00% 65,44% 100,00% 88,00% 88,85% 0,00% 0,00% - - - - - 99,80% 40,00% 40,00% 52,06% 100,00% 0,00% 0,00% 40,00% 40,00% 100,00% Company establishment 100,00% Company establishment 100,00% Company establishment 95,00% Company establishment 100,00% Purchasing 99,90% Share purchase from a partner 40,09% Use of preferential rights not used in the purchase of shares from cash capital increase by the parent bank 40,09% Use of preferential rights not used in the purchase of shares from cash capital increase by the parent bank 64,84% Sale of shares of our Bank's group company to Borsa İstanbul 100,00% Purchase of shares of our Bank's group company 100,00% Share purchase from a partner 88,74% Sale of shares of our Bank's group company to Borsa İstanbul 40,09% Use of preferential rights not used in the purchase of shares from cash capital increase by the parent bank 40,09% Use of preferential rights not used in the purchase of shares from cash capital increase by the parent bank Companies Removed From the Bank's Risk Group in 2022 Atlantic Soda LLC 0,00% - 60,00% - Merger Companies whose Titles Changed in the Risk Group of the Bank in 2022 Former Title New Title Ciner Resources General Partners LLC Sisecam Resource Partners LLC Ciner Wyoming LLC Sisecam Wyoming LLC Şişecam Glass Packaging B.V. Sisecam Glass Packaging Investment B.V. Ciner Resources LP Sisecam Resources LP Change of title Change of title Change of title Change of title An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 434 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 435 İşbank Credit Ratings Tax Breakdowns in the Countries where İşbank Operates VII. VII. Compliance on Public Disclosure Obligations, Accuracy, Frequency and Compliance of Said Disclosures, Credit Ratings Assigned by Rating Agencies to the Bank and Related Explanations: As of FY2021, İşbank has reported on the taxes paid in each country it operates in. Please see below: (Thousand TL) Tax Jurisdiction Profit (Loss) Before Income Tax Income Tax Paid on cash Basis Income Tax Accured Current Year Number of Employees Türkiye Singapore England Russia Germany Netherlands Georgia Bahrain Kosovo Iraq 16.145.898 3.824.354 2.787.551 26.919 13.198 46.642 18.494 123.221 20.559 36.583 52.951 2.269 53.202 0 14.534 8.703 52.113 5.687 5.219 0 4.016 3.199 0 0 0 40.864 7.812 5.219 0 810 9.179 12 54 94 149 7 63 6 32 39 MOODY’S Long-term Foreign Currency Deposit Rating Long-term Local Currency Deposit Rating Long-term Foreign Currency Senior Debt Rating Short-term Foreign Currency Deposit Rating Short-term Local Currency Deposit Rating FITCH RATINGS Long-term Foreign Currency Issuer Default Rating Long-term Local Currency Issuer Default Rating Short-term Foreign Currency Issuer Default Rating Short-term Local Currency Issuer Default Rating National Long-term Rating Viability Rating Rating Outlook (*) B3 B3 B3 NP NP B- B B B A+ (tur) B Stable Stable Stable - - Negative Negative - - Negative - The dates on which the Bank's credit ratings/outlook were last updated are given below: Moody’s: 16.08.2022, Fitch Ratings: 24.02.2023 (*) Outlook: "Stable" indicates that the current rating will not be changed in the short term; "positive" indicates that the current rating is very likely to be upgraded, and "negative" indicates that the current rating is very likely to be downgraded. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 436 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 437 Amendments to the Articles of Incorporation in 2022* Corporate Memberships Article No Previous 5 Capital New Capital The Company adopted the registered capital system in accordance with the provisions of the Capital Markets Law and switched to the registered capital system with the permission of the Capital Markets Board dated 06.03.1997 and numbered 2683. The registered capital ceiling of the Company is TL 10,000,000,000 (TenBillion). The Company adopted the registered capital system in accordance with the provisions of the Capital Markets Law and switched to the registered capital system with the permission of the Capital Markets Board dated 06.03.1997 and numbered 2683. The registered capital ceiling of the Company is TL 10,000,000,000 (TenBillion). The fully paid issued capital of the Company is TL 4,500,000,000 (fourbillionfivehundredmillion), of which TL 1,000 is composed of Group A shares each worth 1 Kuruş, TL 29,000 is composed of Group B shares each worth 1 Kuruş, and TL 4,499,970,000 is composed of Group C shares each worth 4 Kuruş. The fully paid issued capital of the Company is TL 10,000,000,000 (tenbillion), of which TL 1,000 is composed of Group A shares, each worth 1 Kuruş, TL 29,000 is composed of Group B shares, each worth 1 Kuruş and TL 9,999,970,000 is composed of Group C shares, each worth 4 Kuruş. The registered capital ceiling permission granted by the Capital Markets Board is valid for the years 2020-2024 (5 years). At the end of 2024, even if the authorized capital ceiling has not been reached, in order for the Board of Directors to take a capital increase decision after 2024, it is mandatory to obtain authorization from the General Assembly for a new period not exceeding five years by obtaining permission from the Capital Markets Board for the previously permitted ceiling or a new ceiling amount. In the event that the said authorization is not obtained, no capital increase can be made with the decision of the Board of Directors. The registered capital ceiling permission granted by the Capital Markets Board is valid for the years 2020-2024 (5 years). At the end of 2024, even if the authorized capital ceiling has not been reached, in order for the Board of Directors to take a capital increase decision after 2024, it is mandatory to obtain authorization from the General Assembly for a new period not exceeding five years by obtaining permission from the Capital Markets Board for the previously permitted ceiling or a new ceiling amount. In the event that the said authorization is not obtained, no capital increase can be made with the decision of the Board of Directors. The Board of Directors is authorized to increase the issued capital by issuing registered shares up to the registered capital ceiling whenever it deems necessary in accordance with the provisions of the Capital Markets Law and the relevant legislation. The Board of Directors is authorized to increase the issued capital by issuing registered shares up to the registered capital ceiling whenever it deems necessary in accordance with the provisions of the Capital Markets Law and the relevant legislation. However, no new shares may be issued unless all of the issued shares are sold and the consideration is collected. However, no new shares may be issued unless all of the issued shares are sold and the consideration is collected. All shares of the Company must be issued against cash, and all of them must be registered shares. All shares of the Company must be issued against cash, and all of them must be registered shares. *Article 5 of the Articles of Incorporation was amended due to the increase in the capital of our Bank from TL 4,500,000,000 to TL 10,000,000,000 as per the registered capital ceiling. Domestic Foreign The Research Institute of Banking and Commercial Law The Institute of International Finance (IIF) Block Chain Türkiye (BCTR) Institut International d’Etudes Bancaires (IIEB) Turkish Marine Environment Protection Association (TURMEPA) International Chamber of Commerce (ICC) Türkiye National Committee - The Commission on Banking Techniques and Practices Foreign Economic Relations Board of Türkiye (DEİK) European Association for Banking and Financial History (EABH) DEİK Türkiye - Iraq Business Council UN Global Compact Network Türkiye ERTA Elginkan Community Fintech Association (FINTR) Global Relations Forum United Nations Environment Program Finance Initiative (UNEP-FI) Net-Zero Banking Alliance (NZBA) European Association of Communication Directors (EACD) Turkish Chamber of Commerce in China (ÇTTO) İstanbul Foundation for Culture and Arts (İKSV) Mobile Marketing Association - MMA Türkiye Association of Corporate Communicators (KİD) National Education Foundation The Advertisers Association The Banks Association of Türkiye (TBB) Turkish Informatics Foundation Economic and Social History Foundation of Türkiye (History Foundation) Vehbi Koç Foundation Artificial Intelligence and Technology Association 30% Club An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 438 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 439 As of 31.12.2022, İşbank's Outstanding Loans Obtained from International Financial Institutions Numbers of Social Media Followers International Financial Institution Date of Signature Amount Maturity (years) Purpose of Extending Loans Account Platform Link LinkedIn https://www.linkedin.com/company/isbankasi 13.04.2009 € 250,000,000 09.12.2011 € 150,000,000 28.06.2012(1) € 75,000,000 12 10 12 European Investment Bank (EIB) 09.05.2014 € 200,000,000 10 30.10.2015(1) $221,200,000 01.12.2016(1) $111,200,000 $47,600,000 27.10.2011 $6,660,000 28.06.2012(1) € 50,000,000 18.12.2013(1) € 50,000,000 30.03.2015(1) $15,000,000 21.10.2016(1) $55,000,000 06.12.2017(1) $55,000,000 25.08.2022(1) $76,000,000 $51,000,000 10 13 10 15 12 12 15 12 7 5 European Bank for Reconstruction and Development (EBRD) 1.03.2013 € 50,000,000 10 PROPARCO 30.06.2020 € 25,000,000 10 DFC (OPIC) 10.12.2014(1) $220,000,000 14 Financing SMEs Financing SMEs Financing of energy efficiency and renewable energy projects as part of the MidSEFF Program Financing the loans to be extended to residential buildings that fall under the scope of Law No. 6306 and conform to the EIB criteria in order to improve earthquake safety and energy efficiency in residential buildings Financing of SMEs and enterprises with 250 to 3,000 employees Financing of energy efficiency and renewable energy projects as part of the MidSEFF Program Financing of SMEs and enterprises with 250 to 3,000 employees Financing of energy efficiency projects as part of the TurSEFF Program Financing of energy efficiency and renewable energy projects as part of the MidSEFF Program Financing of energy efficiency and renewable energy projects as part of the MidSEFF Program Financing of energy efficiency in residences as part of the TurEEFF Program Financing of energy efficiency and renewable energy projects as part of the MidSEFF Program Financing of renewable energy and resource efficiency investments as part of the TurSEFF Program Financing women entrepreneurs under the second phase of the Women in Business (TurWIB) Program Financing renewable energy, energy efficiency, and resource efficiency projects under the third phase of the TurSEFF Program Financing of loans extended to residential buildings conforming to domestic energy efficiency criteria in Türkiye Financing agriculture and the energy and resource efficiency activities of small and medium-sized companies operating in the agricultural sectors Financing of SMEs, prioritized regions in development, and women entrepreneurs $105,000,000 Financing of housing loans, including green mortgages conforming to IFC energy efficiency criteria 28.12.2017(1) IFC $20,000,000 25.08.2022(1) $100,000,000 12.09.2022 $100,000,000 Asian Infrastructure Investment Bank (AIIB) 9 5 5 Financing "green mortgage" loans ensuring energy efficiency with the fund provided by the Clean Technology Fund ("CTF") through IFC Financing of housing loans, including green mortgages conforming to IFC energy efficiency criteria Financing SMEs and small-scale corporate firms affected by the COVID-19 pandemic (1) Funding obtained through the transactions made within the scope of the diversified payment rights securitization program based on cash flows. Türkiye İş Bankası A.Ş. Youtube https://www.youtube.com/c/işbankası Twitter https://twitter.com/isbankasi Facebook https://www.facebook.com/isbankasi Instagram https://www.instagram.com/isbankasi/ Tiktok https://www.tiktok.com/@isbankasi LinkedIn - Youtube https://www.youtube.com/c/iscep İşcep Twitter https://twitter.com/iscepisbankasi Facebook https://www.facebook.com/iscep Instagram https://www.instagram.com/iscepisbankasi/ LinkedIn - Youtube https://www.youtube.com/user/maximumkart Maximum Twitter https://twitter.com/MaximumKart Facebook https://www.facebook.com/maximum Instagram https://www.instagram.com/maximumkart/ LinkedIn - Youtube https://www.youtube.com/c/MaximilesKart Maximiles Twitter https://twitter.com/MaximilesKart Facebook https://www.facebook.com/MaximilesKart Instagram https://www.instagram.com/maximileskart/ LinkedIn https://www.linkedin.com/company/isbankworkup/ Youtube https://www.youtube.com/c/Workup%C4%B0%C5%9FBankas%C4%B1 Workup Twitter https://twitter.com/workupisbankasi Facebook https://www.facebook.com/workupisbankasi Instagram https://www.instagram.com/workupisbankasi/ LinkedIn - Youtube https://www.youtube.com/c/maximumgenc Maximum Youth Twitter https://twitter.com/maximumgenc Facebook https://www.facebook.com/maximumgenc Instagram https://www.instagram.com/maximumgenc/ Total Number of Followers 141,641 45,200 229,375 628,321 138,208 15,712 - 6,270 60,061 413,540 75,164 - 23,700 57,560 349,637 48,422 - 401 31,814 136,081 17,633 7,643 2,360 10,124 17,967 11,170 - 6,150 25,257 185,358 13,941 2,698,710 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 440 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 441 Human Resources Data Human Resources Data Total Number of Employees✓ Number of Employees✓ Female Male Number of Employees Covered by Collective Bargaining Agreements Female Male Number of Employees by Employment Type✓ Full-time Partial Time Part-time Part-Time Total Number of Employees by Region and Branch Head Office Branch Region Total Number of Employees by Gender and Age Upper Management (Members of the Board of Directors and Executive Committee) 50 years of age and older 30-50 years of age 30 years of age and younger 2020 23.518 11,907 11,611 11,432 11,702 2020 23,381 135 2 0 2021 22.802 11,506 11,296 11,309 11,126 2021 22,678 123 1 0 2022 23.309 11,782 11,527 11,455 11,266 2022 23,148 137 1 23 23,518 22,802 23,309 2020 7,022 15,733 763 23,518 2021 7,083 14,968 751 22,802 2022 7,562 15,034 713 23,309 2020 2021 2022 Female Male Female Male Female Male 3 15 2 3 0 0 3 16 0 5 0 0 4 18 0 4 0 0 Employees in Management Positions (Division Manager and above) 50 years of age and older 2020 2021 2022 Female Male Female Male Female Male 30-50 years of age 30 years of age and younger Total Breakdown of Employees by Age 50 years of age and older 30-50 years of age 30 years of age and younger Total Number of Employees by Seniority 0-4.99 years 5-9.99 years 10+ years Total Employee Turnover Rate (%)✓ Key Personnel Turnover Rate (%) Breakdown of Employees by Educational Background Primary School High School College (2 or 3-year Associate Degree) University (4-year College) Post Graduate PhD Degree Total 8 27 7 37 0 0 79 2020 492 21,417 1,609 23,518 2020 1,935 4,146 17,437 23,518 1.60 NA 2020 57 3,516 534 18,262 1,127 22 8 29 8 37 0 0 82 2021 686 20,914 1,202 22,802 2021 1,609 3,314 17,879 22,802 2.01 NA 2021 44 3,299 523 17,815 1,100 21 7 32 10 35 0 0 84 2022 961 20,272 2,076 23,309 2022 2,358 3,230 17,721 23,309 1.90 16.05 2022 36 3,125 528 18,470 1,128 22 23,518 22,802 23,309 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 442 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 443 Human Resources Data Human Resources Data Number of Employees Eligible for Parental Leave 2019 2020 2021 2022 Number of Employees Eligible for Parental Leave Number of female employees Number of male employees 12,252 11,801 11,907 11,611 11,506 11,296 11,782 11,527 Occupational Health and Safety Data Injury Rate✓ Direct Employment 2019 2020 2021 2022 Contractor Employees Numbers of Employees Taking and Returning From Maternity Leave✓ Number of Female Employees Eligible for Maternity Leave Number of Female Employees Returning to Work from Maternity Leave Rate of Return from Maternity Leave (%) Retention Rate After Maternity Leave (%) Number of Male Employees Whose Wife Took Maternity Leave Total Employment Created with Subsidiaries Number of Subsidiaries Under Our Control 780 1,072 99.5 96.2 734 2019 111 642 880 99.7 96.5 580 2020 106 592 758 99.9 98.2 550 2021 109 499 692 99.7 98.5 443 2022 113 Number of Employees in Subsidiaries 34,207 34,390 35,973 39,184 Employee Trainings*✓ Average Annual Training Hours Per Employee Average Annual Training Hours Per Female Employee Average Annual Training Hours Per Male Employee 2019 2020 25.7 22.3 29.9 25.4 23.2 28.1 2021 29.3 26.7 32.7 2022 43 39.5 47.5 * Training figures exclude participants of refresher trainings, and Private Security Officers and Servant Staff are also not included. Employee Trainings 2019 2020 2021 2022 Anti-Bribery and Anti-Corruption Training✓ Number of Trainees Person*Hours Ethical Principles Training✓ Number of Trainees Person*Hours Human Rights Training✓ Number of Trainees Person*Hours Sustainability Training*✓ Number of Trainees Person*Hours Sustainability E-Training✓ Number of Trainees Person*Hours **Includes sustainability e-training man*hour data. 7,577 3,115 664 506 260 733 538 4,760 - - 7,830 857 438 331 128 315 5,716 627 2,214 1,305 272 727 17,015 2,130 2,700 1,480 2,019 4,887 1,552 5,946 8,637 14,392 12,291 27,994 - - 775 388 2,110 981 Female Male Female Male Occupational Disease Rate (ODR)✓ Direct Employment Contractor Employees Female Male Female Male Number of Occupational Diseases✓ Direct Employment Contractor Employees Lost Day Rate (LDR)✓ Direct Employment Contractor Employees Days of Absence Due to Accident✓ Direct Employment Contractor Employees Female Male Female Male Female Male Female Male Female Male Female Male 2021 2022 Absentee Rate (AR)✓ Direct Employment 2021 2022 0,000079 0,000045 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,98 1,49 0,49 0 0 0 444 335 109 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,12 0,50 0,62 0 0 0 263 118 145 0 0 0 Female 0,00006 0,000020 Male 0,000019 0,000025 Contractor Employees Female Male Number of Work-related Fatalities✓ Direct Employment Contractor Employees Female Male Female Male Number of Fatal Incidents✓ Direct Employment Contractor Employees Number of Incidents✓ Direct Employment Contractor Employees Female Male Female Male Female Male Female Male Accident Frequency Rate*✓ Direct Employment Female Male 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 46 32 14 0 0 0 0,20 0,14 006 Number of Employees Carrying Out Tasks with a High Risk of Occupational Diseases✓ Direct Employment Contractor Employees 0 0 * Accident frequency rate: Total number of incidents / (Total working hours - Lost hours)*200,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 61 39 22 0 0 0 0,26 0,17 0,09 0 0 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 444 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 445 Summary Financial Highlights and Key Ratios for the Five-Year Period Summary Financial Highlights and Key Ratios for the Five-Year Period 2018/12 2019/12 2020/12 2021/12 2022/12 KEY RATIOS 2018/12 2019/12 2020/12 2021/12 2022/12 4,888,627 5,661,559 9,463,666 15,170,894 16,145,165 Interest Earning Assets (9) / Total Assets 89.3% 89.0% 89.8% 89.3% 88.2% 43,630,394 60,525,991 77,492,256 190,881,628 205,819,117 Interest Earning Assets (9) / Interest Bearing Liabilities 109.4% 109.0% 109.9% 106.4% 112.4% NON-CONSOLIDATED 68,133,659 84,246,760 109,485,041 142,653,302 278,281,335 Securities / Total Assets NON-CONSOLIDATED ASSETS (TL Thousand) Cash Receivables from Banks and Interbank Money Markets (1) Securities (Net) (2) Loans (3) Partnership Investments (Subsidiaries and Affiliates) (Net) Fixed Assets (Net) Other Assets (4) Total Assets 260,316,291 270,360,084 345,150,130 493,378,191 759,289,191 17,638,720 21,070,554 26,002,383 39,461,345 79,859,474 5,996,958 8,478,257 9,161,214 11,277,602 22,312,006 15,782,955 17,716,266 17,147,742 33,746,062 46,616,380 416,387,604 468,059,471 593,902,432 926,569,024 1,408,322,668 LIABILITIES (TL Thousand) 2018/12 2019/12 2020/12 2021/12 2022/12 Deposits 245,268,846 295,922,002 368,876,491 595,628,376 931,077,289 Funds Borrowed and Money Markets (5) 94,468,343 86,102,534 116,407,089 181,993,730 173,427,490 Provisions Other Liabilities Shareholders' Equity Total Liabilities 6,256,462 7,042,357 10,224,590 15,487,318 30,539,092 20,673,329 20,119,113 30,612,810 46,620,309 81,902,722 49,720,624 58,873,465 67,781,452 86,839,291 191,376,075 416,387,604 468,059,471 593,902,432 926,569,024 1,408,322,668 INCOME/EXPENSE ITEMS (TL Thousand) 2018/12 2019/12 2020/12 2021/12 2022/12 Interest Income (6) Interest Expenses (6) Net Interest Income Net Trading Profit/Loss 38,840,381 43,042,350 42,516,332 60,904,343 123,454,753 21,788,130 23,183,222 17,274,293 29,963,074 48,251,300 17,052,251 19,859,128 25,242,039 30,941,269 75,203,453 -4,071,660 -6,397,400 -3,341,357 -5,149,127 4,522,593 Net Fees and Commissions Income 4,405,201 5,569,128 5,617,613 7,619,945 16,146,898 Dividend Income Other Operating Income Total Operating Income Operating Expenses (7) 6,425 9,098 21,487 20,735 38,604 1,912,307 3,146,751 2,436,205 4,401,570 6,080,548 19,304,524 22,186,705 29,975,987 37,834,392 101,992,096 8,039,721 9,792,544 11,796,986 15,911,689 34,029,278 Loans / Total Assets Loans / Deposits Personal Loans / Total Loans NPL Ratio Coverage Ratio Demand Deposits / Total Deposits Shareholders’ Equity / Total Liabilities Capital Adequacy Standard Ratio Return on Average Assets (10) Return on Average Equity (10) OPEX / Operating Income (11) 16.4% 62.5% 106.1% 22.4% 4.1% 58.7% 24.4% 11.9% 16.5% 1.7% 14.8% 36.4% 18.0% 57.8% 91.4% 23.6% 6.5% 54.7% 28.4% 12.6% 17.9% 1.4% 11.4% 39.2% 18.4% 58.1% 93.6% 25.0% 5.6% 63.7% 41.7% 11.4% 18.7% 1.3% 10.9% 35.3% 15.4% 53.2% 82.8% 22.2% 4.1% 66.2% 47.9% 9.4% 20.4% 1.9% 18.4% 34.7% 19.8% 53.9% 81.5% 23.3% 3.0% 74.4% 45.5% 13.6% 24.4% 5.3% 46.8% 27.5% OTHER INFORMATION (TL Thousand) 2018/12 2019/12 2020/12 2021/12 2022/12 Regulatory Capital Core Capital Free Capital (12) Demand Deposits 58,950,530 69,198,849 84,540,460 116,325,684 229,090,694 49,052,634 57,971,231 66,666,192 90,161,889 192,857,543 29,896,338 30,903,681 38,469,439 46,673,837 120,650,947 59,961,577 84,040,178 153,998,446 285,308,452 423,357,161 (1) Includes balances at the Central Bank and Required Reserves. (2) 2019/12, 2020/12 and 2021/12 periods do not include the loan balance granted to the special purpose entity, which is classified under Other Financial Assets at Fair Value Through Profit and Loss. (3) Excludes Non-performing Loans. 2018/12 period includes the loan balance granted to the special purpose entity, which is classified under Other Financial Assets at Fair Value Through Profit and Loss. (4) 2019/12, 2020/12 and 2021/12 periods include the loan balance granted to the special purpose entity, which is classified under Other Financial Assets at Fair Value Through Profit and Loss. (5) Includes Turkish Lira and foreign currency debt instruments issued and subordinated debts. NET OPERATING PROFIT/LOSS (8) 11,264,803 12,394,161 18,179,001 21,922,703 67,962,818 (6) Fees and Commissions Received from Cash Loans are shown in Interest Income, Fees and Commissions Given to Cash Loans are shown in Interest Expenses. Provision for Losses on Loans and Other Receivables Profit/Loss from Subsidiaries Based on Equity Method 6,343,674 8,325,906 12,729,920 14,450,167 15,804,444 (7) Includes Personnel Expenses. (8) Net Operating Profit / Loss = Total Operating Income - Operating Expenses (9) Interest Earning Assets include Turkish Lira and foreign currency required reserves. 2,808,736 2,806,196 3,406,471 8,003,345 21,790,674 (10) Averages calculated based on quarterly balances. (11) Operating Income = Total Operating Income + Profit/Loss from Subsidiaries Based on Equity Method (12) Free Capital = Shareholders’ Equity - (Fixed Assets + Non-Financial Associates and Subsidiaries + Net Non-performing Loans) PROFIT/LOSS BEFORE TAXES 7,729,865 6,874,451 8,855,552 15,475,881 73,949,048 Provision for Taxes 960,780 806,864 2,044,635 2,007,986 12,411,168 NET PERIOD PROFIT/LOSS 6,769,085 6,067,587 6,810,917 13,467,895 61,537,880 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 446 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 447 Summary Financial Highlights and Key Ratios for the Five-Year Period Summary Financial Highlights and Key Ratios for the Five-Year Period CONSOLIDATED ASSETS (TL Thousand) Cash Receivables from Banks and Interbank Money Markets (1) 2018/12 2019/12 2020/12 2021/12 2022/12 4,931,787 5,700,435 9,504,086 15,230,787 16,263,472 51,202,701 70,109,172 87,017,464 206,978,744 230,772,584 Securities (Net) (2) 77,942,727 97,304,703 128,082,066 173,820,212 342,656,590 Loans, Factoring Receivables and Lease Receivables (3) 303,495,889 316,028,505 403,934,870 590,297,628 885,150,975 Partnership Investments (Subsidiaries and Affiliates) (Net) Fixed Assets (Net) Other Assets (4) Total Assets 9,418,560 11,190,991 13,052,096 21,918,409 42,870,444 11,975,301 13,826,688 14,706,181 19,101,836 41,497,115 40,940,392 50,891,344 61,855,500 97,056,457 156,220,389 499,907,357 565,051,838 718,152,263 1,124,404,073 1,715,431,569 LIABILITIES (TL Thousand) 2018/12 2019/12 2020/12 2021/12 2022/12 Deposits 248,981,402 302,791,204 381,693,393 617,679,203 952,635,932 OTHER INFORMATION (TL Thousand) 2018/12 2019/12 2020/12 2021/12 2022/12 Regulatory Capital Core Capital Free Capital (12) Demand Deposits 64,189,820 75,055,619 90,577,700 125,734,035 237,561,370 51,413,549 60,581,141 69,037,761 93,801,462 198,553,596 28,971,576 31,093,535 38,572,660 46,881,642 119,423,191 61,655,721 86,043,036 157,339,437 291,867,150 431,703,325 (1) Includes balances at the Central Bank and Required Reserves. (2) 2019/12, 2020/12 and 2021/12 periods do not include the loan balance granted to the special purpose entity, which is classified under Other Financial Assets at Fair Value Through Profit and Loss. (3) Excludes Non-performing Loans. 2018/12 period includes the loan balance granted to the special purpose entity, which is classified under Other Financial Assets at Fair Value Through Profit and Loss. (4) 2019/12, 2020/12, and 2021/12 periods include the loan balance granted to the special purpose entity, which is classified under Other Financial Assets at Fair Value Through Profit and Loss. (5) Includes Turkish Lira and foreign currency debt instruments issued and subordinated debts. (6) Fees and Commissions Received from Cash Loans are shown in Interest Income, Fees and Commissions Given to Cash Loans are shown in Interest Expenses. Funds Borrowed and Money Markets (5) 137,945,969 130,065,019 167,635,067 272,909,829 299,862,793 (7) Includes Personnel Expenses. Provisions Other Liabilities Shareholders' Equity Total Liabilities 15,161,685 17,860,585 24,027,066 35,609,317 67,292,475 42,203,408 48,633,563 69,935,017 102,037,545 185,587,676 55,614,893 65,701,467 74,861,720 96,168,179 210,052,693 499,907,357 565,051,838 718,152,263 1,124,404,073 1,715,431,569 INCOME/EXPENSE ITEMS (TL Thousand) 2018/12 2019/12 2020/12 2021/12 2022/12 Interest Income (6) Interest Expenses (6) Net Interest Income Net Trading Profit/Loss 44,078,656 48,453,830 47,960,977 69,449,187 140,591,973 24,492,384 25,654,752 18,898,262 32,530,364 54,160,597 19,586,272 22,799,078 29,062,715 36,918,823 86,431,376 -2,293,686 -4,633,920 -1,206,769 703,452 19,477,788 Net Fees and Commissions Income 3,756,035 4,611,770 4,919,413 6,691,855 14,671,415 Dividend Income Other Operating Income Total Operating Income Operating Expenses (7) 19,655 20,819 31,057 68,548 263,526 8,120,963 10,942,888 11,733,929 16,883,690 32,573,886 29,189,239 33,740,635 44,540,345 61,266,368 153,417,991 14,656,126 17,512,911 21,179,158 30,381,409 59,881,644 NET OPERATING PROFIT/LOSS (8) 14,533,113 16,227,724 23,361,187 30,884,959 93,536,347 Provision for Losses on Loans and Other Receivables 7,012,853 9,236,283 14,150,040 16,810,490 19,231,075 Profit/Loss from Subsidiaries Based on Equity Method 1,569,036 1,462,479 1,455,956 4,874,850 10,205,448 PROFIT/LOSS BEFORE TAXES Provision for Taxes NET PERIOD PROFIT/LOSS CONSOLIDATED KEY RATIOS Interest Earning Assets (9) / Total Assets Interest Earning Assets (9) / Interest Bearing Liabilities Securities / Total Assets Loans / Total Assets Loans / Deposits Personal Loans / Total Loans NPL Ratio Coverage Ratio Demand Deposits / Total Deposits Shareholders’ Equity / Total Liabilities Capital Adequacy Standard Ratio Return on Average Assets (10) Return on Average Equity (10) OPEX / Operating Income (11) 9,089,296 8,453,920 10,667,103 18,949,319 84,510,720 1,517,912 1,422,289 2,915,351 3,389,061 15,453,038 7,571,384 7,031,631 7,751,752 15,560,258 69,057,682 2018/12 2019/12 2020/12 2021/12 2022/12 86.4% 111.7% 15.6% 59.1% 118.6% 19.8% 4.1% 56.5% 24.8% 11.1% 15.3% 1.6% 14.8% 35.9% 85.8% 112.0% 17.2% 54.5% 101.6% 20.8% 6.4% 53.5% 28.4% 11.6% 16.4% 1.3% 11.8% 39.8% 86.2% 112.7% 17.8% 54.6% 102.7% 22.1% 5.6% 62.1% 41.2% 10.4% 17.0% 1.2% 11.2% 36.0% 86.2% 108.9% 15.5% 50.9% 92.6% 19.3% 4.1% 65.0% 47.3% 8.6% 18.7% 1.8% 19.2% 34.5% 84.2% 115.4% 20.0% 49.7% 89.4% 20.8% 3.1% 75.6% 45.3% 12.2% 21.8% 4.9% 48.1% 27.5% (8) Net Operating Profit / Loss = Total Operating Income - Operating Expenses (9) Interest Earning Assets include Turkish Lira and foreign currency required reserves. (10) Averages calculated based on quarterly balances. (11) Cost and income are netted against “Insurance Technical Income / Expense”. Operating Income = Total Operating Income + Profit/Loss from Subsidiaries Based on Equity Method (12) Free Capital = Shareholders’ Equity - (Fixed Assets + Non-Financial Associates and Subsidiaries + Net Non-performing Loans) UN Women's Empowerment Principles Progress Statement PRINCIPLES GRI STANDARDS RELATED SECTION Principle 1 - Corporate Leadership Supporting Gender Equality 405-1, 405-2 Principle 2 - Equal Opportunity, Participation and Anti-discrimination 202-1, 401-1, 401-3, 405-1, 405-2, 406-1 Principle 3 - Health, Safety and Freedom from Violence 406-1 Principle 4 - Education and Training 404-1; 404-3 Principle 5 - Business Development, Supply Chain and Marketing Practices 204-1; 103-1; 103-2; 103-3 Principle 6 - Community Leadership and Participation 413-1 Principle 7 - Measurement and Transparent Reporting for Gender Equality 405-1; 405-2; 103-1; 103-2; 103-3 Message from the General Manager, Initiatives Supported in the Field of Sustainability, Equal Opportunity and Diversity Equal Opportunity, Diversity, Gender Equality Equal Opportunity, Diversity, Gender Equality, Employee Health and Safety Equal Opportunity, Diversity, Gender Equality, Talent Management Supply Chain Management, Business Ethics Initiatives Supported in the Field of Sustainability Equal Opportunity, Diversity, Gender Equality An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 448 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 449 Independent Auditor’s Report on the Annual Report of the Board Of Directors Independent Auditor’s Report on the Annual Report of the Board Of Directors To the General Assembly of Türkiye İş Bankası Anonim Şirketi 1. Qualified Opinion We have audited the annual report of Türkiye İş Bankası A.Ş. (“the Bank”) and its subsidiaries (“the Group”) for the period of January 1, 2022 – December 31, 2022. In our opinion, except for the matter described in the Basis for Qualified Opinion section of our reports, the consolidated and unconsolidated financial information provided in the annual report of the Board of Directors and the discussions made by the Board of Directors on the situation of the Group are presented fairly and consistent, in all material respects, with the audited full set consolidated and unconsolidated financial statements and the information we obtained during the audit. 2. Basis for Qualified Opinion As described in the Basis For Qualified Opinion section of Independent Auditor’s Reports on the complete set of audited unconsolidated and consolidated financial statements of the Bank and the Group for the period between January 1, 2022 and December 31, 2022 dated February 6, 2023 and February 7, 2023 on the unconsolidated and consolidated financial statements respectively, as at December 31, 2022 include a free provision at an amount of TL 8,475,000 thousands of which TL 4,075,000 thousands was provided in prior years and TL 4,400,000 thousands provided in the current period by the Bank and the Group management for the possible effects of the negative circumstances which may arise from the possible changes in the economy and market conditions which does not meet the recognition criteria of “Turkish Accounting Standard” (TAS) 37 “Provisions, Contingent Liabilities and Contingent Assets”. We conducted our audit in accordance with “Regulation on independent audit of the Banks” published in the Official Gazette no.29314 dated April 2, 2015 published by Banking Regulation and Supervision Agency (BRSA Independent Audit Regulation) and Independent Auditing Standards (InAS) which are part of the Turkish Auditing Standards as issued by the Public Oversight Accounting and Auditing Standards Authority of Turkey (POA). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Annual Report section of our report. We are independent of the Group in accordance with the Code of Ethics for Independent Auditors (Code of Ethics) as issued by the POA, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. 3. Our Auditor’s Opinion on the Full Set Consolidated and Unconsolidated Financial Statements We have expressed qualified opinions in our auditor’s reports dated February 6, 2023 and February 7,2023 on the full set unconsolidated and consolidated financial statements of the Group for the period of 1/1/2022-31/12/2022 respectively. 4. The Responsibility of the Board of Directors on the Annual Report In accordance with Articles 514 and 516 of the Turkish Commercial Code 6102 (“TCC”) and communique on ‘Principles and procedures set out by the regulations on preparation and issuance of annual reports of Banks’, the management of the Group is responsible for the following items: a. Preparation of the annual report within the first three months following the balance sheet date and submission of the annual report to the general assembly b. Preparation and fair presentation of the annual report; reflecting the operations of the Group for the year, along with its financial position in a correct, complete, straightforward, true and honest manner. In this report, the financial position is assessed according to the consolidated and unconsolidated financial statements. The development of the Group and the potential risks to be encountered are also noted in the report. The evaluation of the board of directors is also included in this report c. The annual report also includes the matters below: ੵ Subsequent events occurred after the end of the fiscal year which have significance, ੵ The research and development activities of the Group, ੵ Financial benefits such as salaries and bonuses paid to the board members and to those charged governance, allowances, travel, accommodation and representation expenses, financial aids and aids in kind, insurances and similar deposits. ੵ Other matters prescribed in the communique on ‘Principles and procedures set out by the regulations on preparation and issuance of annual reports of Banks’ published in official gazette no.26333 dated November 1, 2006. When preparing the annual report, the board of directors takes into account the secondary legislative arrangements published by the Ministry of Trade and related institutions 5. Auditor’s Responsibilities for the Audit of the Annual Report Our aim is to express an opinion, based on the independent audit we have performed on the annual report in accordance with provisions of the Turkish Commercial Code and the Communique on ‘Principles and procedures set out by the regulations on preparation and issuance of annual reports of Banks’ published in official gazette no.26333 dated November 1, 2006 , Banking Regulation and Supervision Agency (“BRSA”) Accounting and Financial Reporting Legislation which includes, “Regulation on Accounting Applications for Banks and Safeguarding of Documents” published in the Official Gazette no.26333 dated 1 November 2006 and other regulations on accounting records of Banks published by Banking Regulation and Supervision Agency (BRSA) and Turkish Financial Reporting Standards (“TFRS”) for those matters not regulated by the aforementioned regulations, on whether the consolidated and unconsolidated financial information provided in this annual report and the discussions of the Board of Directors are presented fairly and consistent with the Group’s audited consolidated and unconsolidated financial statements and to prepare a report including our opinion. The independent audit we have performed is conducted in accordance with InAS and BRSA Independent Audit Regulation. These standards require compliance with ethical provisions and the independent audit to be planned and performed to obtain reasonable assurance on whether the consolidated and unconsolidated financial information provided in the annual report and the discussions of the Board of Directors are free from material misstatement and consistent with the consolidated and unconsolidated financial statements. The name of the engagement partner who supervised and concluded this audit is Fatma Ebru Yücel. 8 Mart 2023 İstanbul, Türkiye An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 450 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 451 Reporting Guidance Environmental Indicators Total Energy Consumption (GJ) Total energy consumption including energy sources covers electricity natural gas, fuel-oil, coal and diesel consumption figures. Electricity consumption was initially calculated in kWh and then converted to GJ. In this conversion, 1 kWh = 0.0036 GJ conversion factor was used. After calculating monthly natural gas consumption in m3, monthly coal consumption in kg, monthly fuel-oil and consumption in lt in 2022, it was converted to kWh by using the monthly-based lower heat values on the invoices. The annual total consumption is calculated by summing these monthly consumptions. Annual total consumption was converted to GJ using the conversion factor mentioned above and added to the total energy consumption. Reporting boundary for this KPI covers Turkey operations of İş Bankası. Greenhouse Gas Emissions ı Greenhouse gas emissions refer to carbon emissions from energy consumption during the reporting period. ੵ Scope 1 Emissions (tCO2e) ੵ Scope 2 Emissions (tCO2e) ੵ Scope 3 Emissions (tCO2e) Greenhouse gas emissions resulting are calculated in accordance with The Greenhouse Gas Protocol: A Revised Corporate Accounting and Reporting Standard by Demir Energy, a firm offering strategy, management and reporting services in the area of sustainability Greenhouse gas emissions are calculated in 3 different scopes: Scope 1 (Direct Greenhouse Gas Emissions), Scope 2 (Indirect Greenhouse Gas Emissions) and Scope 3 (Other Indirect Greenhouse Gas Emissions). IPCC 5th Assessment Report factors were used for emission factors. Network Emission Factor has been calculated in accordance with the data provided by TEİAŞ. Direct greenhouse gas (GHG) emissions (Scope 1) and indirect energy greenhouse gas (GHG) emissions (Scope 2) were made according to the GHG Protocol – According to location-based criterion. Other indirect greenhouse gas (GHG) emissions (Scope 3) are reported according to the GHG Protocol. DEFRA emission factors were used for air travel emissions and Environmental Paper Network emission factors were used for paper consumption. While calculating greenhouse gas emissions, the following sources causing carbon emissions were considered: Scope 1 Emissions*: ੵ Natural gas, diesel, LPG, fuel oil and coal consumption for heating purposes, ੵ Fuels used in generators (Diesel), ੵ Company vehicles fuel Consumption (Diesel and Gasoline) ੵ Refrigerants (Leaks reported during installation and maintenance phases are taken into account) Scope 2 Emissions*: ੵ Electricity Consumption Scope 3 Emissions*: ੵ Fuel consumption of Personnel Service Vehicles ੵ Local Business Travels (Flight, Bus, Taxi) ੵ International Business Travels (Flight, Bus, Taxi) ੵ Fuel consumption of Private Car Used for Business Purposes ੵ Paper Consumption * Reporting boundary for this KPI covers Turkey operations of İş Bankası. * The impact of remote working is not included in the resource consumption and emission calculations in the reporting period. Fuel consumption of vehicles ੵ Fuel consumption by personnel service vehicles (Lt) ੵ Fuel consumption by personel vehicles (Lt) ੵ Fuel consumption by company vehicles (Lt) Personnel service vehicles include the vehicles transporting İş Bankası employees at İş Kuleleri Kule 1, ATOM, TUTOM and branches. Fuel consumption was calculated over total distance figures, provided by the supplier firm, transporting İş Bankası employees. Fuel consumption by personal vehicles: Personal vehicles include the vehicles used for business purposes by the working personnel in the Headquarters buildings (Business Towers Tower 1, ATOM, TUTOM and ATLAS buildings) and in all stores. Company vehicles cover all vehicles in the Bank's fleet also including transportation vehicles. Fuel consumption data by those vehicles was provided by the supplier firm. Total Water Consumption (m3) ੵ Total municipal water consumption (m3) ੵ Total rainwater (recovered/reused) (m3) ੵ Total drinking water consumption (m3) ੵ Total wastewater production (m3) Emission Intensities ੵ Emissions Per Employee (tCO2 e/ Number of Employees) ੵ Emissions by Consolidated Asset Size (tCO2e/million TL) ੵ Emissions by Consolidated Asset Size (tCO2e/million USD) ੵ Emissions by Consolidated Net Profit (tCO2e/ million TL) ੵ Emissions by consolidated net profit (tCO2e/million USD) ੵ USD Balance Sheet Rate Total amount of waste recycled (tons) ੵ Amount and types recycled hazardous waste ੵ Amount and types of recycled non-Hazardous Waste ੵ Amount of recycled paper Municipal water and rainwater are used locally in Türkiye operations. The reporting scope includes the total amount of water used and withdrawn for consumption purposes. Water consumption is evaluated in 3 different categories as Municipal water, Rainwater and Drinking water. The amount of water purchased from municipalities or other operating systems such as İSKİ is included in the total municipal water. Consumption values are followed from invoices and prepaid counters located in the buildings. Consumptions at all locations are tracked and reported throughout the year. For a small number of (28) service buildings whose water consumption amounts could not be determined in any way, estimated consumption value information was calculated based on the number of employees in accordance with the TS1258 standard. Rainwater is collected and filtered through the rainwater collection channels installed in the Headquarters buildings; stored in the reservoirs, and the water used from this reservoir is measured and monitored by the building management via watermeter readings. Rainwater includes the amount of water recovered/reused. Total drinking water refers to the amount of water consumed for drinking purposes in the Headquarters buildings. Drinking water for these buildings is supplied by tankers and bottled water; which have been recorded since 2021. In service buildings that own ISO14001 certificate, total drinking water is supplied by bottled water. The water consumed in service buildings is not included in the reporting scope. The total amount of wastewater was calculated as the sum of the amount of water purchased as municipal water and collected as rainwater and reused in various activities. It includes the greenhouse gas emission intensity values calculated by dividing the Bank's Scope 1 and Scope 2 greenhouse gas emissions by its consolidated assets, the total number of employees in Turkey and its consolidated net profit. The Bank's total assets and net profit are taken from the 31 December 2022 financial statements approved by the independent auditor. ੵ The total amount of waste recycled; consists of recycled non-hazardous waste, recycled hazardous waste, paper waste and electronic waste. ੵ Plastic, metal and glass wastes collected within the scope of recycled non-hazardous wastes are evaluated. ੵ Battery, fluorescent lamp, battery, car battery and toner cartridge wastes collected within the scope of recycled hazardous wastes are evaluated. ੵ Recycled paper waste, paper, cardboard, parcels etc. indicates the amount of waste. ੵ Waste reporting limits include ATOM, TUTOM, Kule-1, ATLAS buildings and Branch buildings included in the ISO14001 environmental management certificate. Receipts from authorized recycling companies have been taken into account in calculating the amount of recycled waste. Renewable Energy Portfolio of İş Bankası ੵ Number of renewable energy Renewable energy projects financed in 2022 included, projects financed in 2022, installed capacity (MW) and loan amount provided to these projects ੵ Total installed capacity of renewable energy projects financed by İşbank ੵ Hydroelectric Power Plant (HEPP) ੵ Wind Power Plant (WPP), ੵ Biomass Power Plant (BES) ੵ Solar Power Plant (GES) ੵ Geothermal Power Plant (GPP) The loan amount provided for the projects has been determined over the total limit information by taking the sum of cash and non-cash loans extended by the Corporate Loans Allocation, Commercial and Retail Loans Allocation and Project Finance Departments of the Bank. In this process, the loan allocation files of the projects were taken as reference in determining the total loan amounts provided to the projects along with the information on installed capacity. The number of renewable energy projects covers the number of power plants financed. When calculating Installed power capacity for projects financed by consortium structures, bank shares are not taken into consideration in calculating and total installed power information of the power plant/plants is reported. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 452 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 453 Reporting Guidance Indicators for Environmental and Social Risk Assessment Number of financed projects subjected to environmental and social risk assessment and risk categories Field visits within the scope of Environmental and Social Risk Assessment Talent Management Indicators ੵ Average annual training hours per employee ੵ Average training hours per female employee ੵ Average training hours per male employee Within the scope of the Environmental and Social Risk Assessment Model (ÇESMOD), whose details are given under the heading Responsible Finance in the Responsible Banking section, projects with an investment amount of 10 million USD or more in the reporting period, for which loans have been allocated and/or committed, are evaluated. Projects entering the ÇESMOD evaluation process; It is evaluated with reference to national legislation and national and international regulations such as IFC (International Finance Corporation) Performance Standards, EBRD (European Bank for Reconstruction and Development) Performance Requirements, Equator Principles, and a Project Environmental and Social Assessment Document is issued for each project. Definition of this indicator covers the number of field visits carried out within the scope of environmental and social risk assessment during the reporting period to monitor the projects financed in 2022 or before. Training hours are calculated considering all trainings, excluding private security renewal trainings given to employees during the year. In this context, the calculations are made by dividing the total hours of training given to the employees during the reporting period by the number of employees as of 31 December 2022 (private security and servant staff are not included in these calculations.). ੵ Number of employees received "Anti-Bribery and Anti-Corruption" training and total training time ੵ Number of employees received "Ethical Principles / Business Ethics" training and total training time ੵ Number of employees received "Human Rights" training and total training time ੵ Number of employees received "Sustainability" training and total training time ੵ Number of employees received “Information Security” training and total training time “Anti-Bribery and Anti-Corruption”, “Ethical Principles”, “Human Rights” and “Sustainability” trainings are covered by the training modules including those subjects. Calculations for this indicator consider the number of employees participated in those trainings and the amount of time allocated to those issues within these trainings. There are no trainings directly devoted to “Anti-Bribery and Anti-Corruption”, “Ethical Principles”, “Human Rights” and “Sustainability” issues within the Bank. However, these issues have been addressed within certain training programs for certain periods of time. Therefore, when calculating the total hours of training and the number of participants, the time allocated for these titles is taken into account within the existing training programs. On the other hand, when calculating the training periods, the duration of the training given in these areas in the training programs organized by the Board of Inspectors for the Board Members are not included. The subject of human rights is also mentioned in the course of " Law on Private Security Services and Individual Rights”, which is provided to private security personnel as part of the renewal trainings at certain time intervals. This subject was not included in calculations, since it is a subject mentioned within the 10-hour renewal trainings provided by different suppliers in different provinces. Calculations for total hours of information security trainings, considered the number of employees participated in trainings covering information security related issues (cyber security, social engineering and information security etc.) and the number of hours devoted those subjects. ੵ Hours of training per newly recruited employees in the first year ੵ Hours of Management and Leadership Development Program training per person ੵ Hours of IT Competence Development Trainings per person ੵ Share of digital trainings in total trainings Human Resources Indicators Total Number of Employees Breakdown of employees by gender and type of employment Hours of training per newly recruited employees in the first year indicates the ratio of the total hours of training received by new employees during the reporting period to the number of newly recruited employees. In calculation of the relevant indicator, private security staff, members of the administrative council and servant staff were excluded. Hours of management and leadership development programs per person is calculated by dividing the total hours of training management and leadership development programs by the number of managers (sub Manager and above) as of 31 December 2022. Hours of IT competence development training per person is calculated by dividing the total hours of “IT Business Line Trainings” during the reporting period with the number of employees within the Department of Information Technologies and Data Management (excluding private security and servant staff) as of 31 December 2022. Digital trainings include distanced education such as videos, e-trainings and e-games. The share of digital trainings in total trainings is calculated by dividing the total duration of Digital Trainings completed in the reporting period by the total hours calculated for all trainings. Total number of employees covers all employees of Türkiye İş Bankası those are employed at Turkey and overseas operations as of 31st of December 2022. Interns; subcontractors; employees of Bank-Finance and Insurance Workers Union (BASİSEN) and Türkiye İş Bankası A.Ş. Mensupları Emekli ve Munzam Sandık Vakıfları; and subsidiary employees at Turkey and overseas operations are excluded from the total number of employees. This indicator refers to breakdown of total number of employees by gender and employment type (Full Time / Part Time and Partial Time Status). Employment types include full time, part time and partial time status employees. Part time employees include those, for whom, a working day consists of 4 hours. Whereas partial time status employees include those, for whom a working day consists of 5 hours. Partial time status is provided to contract-based employees as well as permanent staff who had returned from maternity leave or their partners. Employee Turnover Rate Covers the ratio of the total number of employees who resigned during the year to the average number of employees. The average number of employees is calculated by dividing the sum of number of Bank’s employees determined at each month by 12. Women Ratio in senior Management (%) Covers the ratio of total number of female employees with the title of sub manager and above to the total number of employees working with the title of sub manager and above, as of 31 December 2022. (sub manager and above titles include second manager, IT manager, managers and members of the Board of Directors.) Unionization rate This İndicator covers the ratio of employees who are members to BASİSEN to the total number of employees as of 31st of December 2022. Number of employees benefited from maternity leave Covers the number of employees who had left for paid or unpaid maternity leave during the reporting period. Number of employees returned from maternity leave Covers the number of employees who had returned from paid or unpaid maternity leave during the reporting period. Rate of return from maternity leave The ratio of return from maternity leave is defined as the ratio of female employees who had returned to work from (paid or unpaid) maternity leave during the reporting period to the total number of female employees whose date of return from (paid or unpaid) maternity leave was within the reporting period. Retention rate after maternity leave Number of employees benefited from paternity leave Retention rate after maternity leave covers the female employees those who continue to work at İş Bankası as of the end of reporting period. Reporting and calculations for those employees cover one year prior to the reporting period. The rate of retention reported for 2022 reflects the rate of female employees who had returned from (paid or unpaid) maternity leave in 2021 and continued to work at İş Bankası for 1 year to the number of female employees who had returned from (paid or unpaid) maternity leave in 2021. Covers the number of employees who had left for paid or unpaid paternity leave during the reporting period. OHS data on the basis of female and male employees Number of Incidents Occupational Health and Safety related data covers İş Bankası employees within the borders of the Republic of Turkey. It covers the definition of work accident within laws numbered 6331 and 5510. In this context, calculations are made by considering the statements of the employees who reported work accidents, the hospital reports, the workplace doctor or the institution doctor reports. Injury Rate It is the ratio of the number of injuries resulting from occupational accidents to the total number of full-time employees. Number of Fatal Incidents and Number of Work Related Fatalities It is the number of fatalities resulting from accidents. As a result of the incident, it is evaluated according to the result of the fatalities report submitted by the competent authorities together with the judicial authorities. Number of Occupational Disease It is the number of temporary or permanent diseases that are exposed due to a recurring reason caused by the nature of the work or related conditions of the work. These calculations are made in-line reports that have been prepared by the Health Boards authorized by the Turkish Ministry of Health. Absence due to accident Calculated by considering the days of absence due to work accidents. In this regard, calculations are made according to the periods as stated in the doctor/hospital reports of the employees those had reported work accidents to Human Resources Management Division. Total Injury Frequency Rate (IR - Injury Rate) The ratio of accidents during the year to total working time is calculated. In this regard, calculations are made by the formula of “Total number of accidents/ (Total working hours - Lost hours) * 200,000”. The number of accidents in this formula is obtained from the accident report forms filled out by employees. While calculating total working hours, official holidays within the year are subtracted and 1 workday is accepted as 8 hours. Lost hour data is reported by calculating total number of work hours lost by the number of daily absences due to accidents. Lost Day Rate (LDR) Covers the ratio of the number of days lost due to work accidents to total work hours. This calculation uses the following formula “(Total number of lost days * 200,000)/Total work hours”. The lost days in the formula covers absences due to accident. Occupational Disease Rate (ODR) It is calculated by taking into account the ratio of total working hours of employees who are exposed to temporary or permanent occupational diseases due to a recurring reason caused by the nature of the work or due to conditions of the work. In this calculation, the formula used was as the following: “(Number of Occupational Diseases * 200,000) / Total Working Hours”. Absentee Rate (AR) Covers the ratio of lost work hours to total work hours. This calculation uses the formula “Lost work hours/Total human work hours”. Number of OHS Committees established and the total number of members and representatives working on the committees The indicator covers the number of OHS committees established at İş Bankası buildings with an employee population of 50 or more, in accordance with the law number 6331 on OHS. In this context total number of members corresponds to the total number of members to OHS committees. Union representatives are considered as natural employee representatives. An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 454 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 455 Reporting Guidance Limited Assurance Report Other Indicators Total amount of loan agreements signed with international financial institutions within the sustainable framework for the year of 2022 Number of customers In 2022, the amount of loans obtained from international financial institutions such as KfW, EIB, EBRD, Proparco, OPIC and IFC to create environmental and social benefits through bilateral agreements or securitization transactions were controlled. A list of l loan agreements that are in-line with the sustainable framework signed with international financial institutions was obtained from the Financial Institutions Department, and the relevant loan agreements and loan proceeds and related supporting documents were reviewed. Criteria such as signing date, official signatures, loan proceed and use of proceed date and principal amount, interest amount, original currency type in these contracts and loan proceed documents were analysed. The bank system screenshots of the relevant loans were obtained and compared with the screenshots of the amounts reported to the TCMB and the BDDK. The indicator covers all İş Bankası clients (including real and legal persons) as of 31 December 2022 except for cancelled customers (customers whose accounts were closed) and customers with non-performing loans, also including individual clients with inactive accounts and persons who had engaged with the Bank (those who made a credit application or a money transfer as well as those who possess a supplementary card and those who represent an İş Bank client) hence seen as a potential client. Number of digital banking customers The number of customers who have successfully logged into any of the individual İşCep, commercial İşCep, Maximum Mobil, Maximum İş Yerim, Individual Internet Branch or Commercial Internet Branch channels with their customer number and password during the reporting period. Number of mobile banking users The number of customers who have successfully logged into any of the individual İşCep, commercial İşCep, Maximum İş Yerim or Maximum Mobil channels with their customer number and password during the reporting period. Customer Satisfaction Score Net Promoter Score Paper savings through digitized processes (Number of pages printed) Number of trees planted during the year within the scope of the project carried out with the TEMA Foundation Number of graduates from “81 Students from 81 Cities” Project conducted with Darüşşafaka Total Amount of Cash Loans Extended to the Agricultural Sector (billion TL) The indicator covers scores reflected in individual and commercial customer experience surveys conducted by independent research companies during the reporting period. The indicator reflects the difference of the total number of pages printed in same brand printers in İş Bankası branches during the reporting period compared to the previous year. During the calculations number of print reports provided by the printers were taken into account. Includes the number of trees which will be planted in 2022 in exchange to the paper waste (papers belonging to the expired files collected from archives) donated by İş Bankası to TEMA in between 31 January 2022 -1 March 2022. 1 tree is planted for every 100 kg of paper waste donated. In this context, receipts of collected paper waste from İş Bankası archives were examined. Includes the number of graduates during the reporting period from Daruşşafaka within the scope of the scholarship program, 81 Students from 81 Cities, conducted by İş Bankası with Darüşşafaka. An official letter provided by Darüşşafaka was taken into consideration. Covers the total amount of retail and commercial cash loans extended to the agriculture and livestock sector during the reporting period and also includes loans covered by the NACE A code. The labelling and classification of loans on the system has been checked and tested. Total Amount of Loans Provided to SMEs (billion TL) Definition of this indicator in previous years, covered individual and commercial cash loans extended to SMEs. During the reporting period of 2022, the definition was extended to cover individual and commercial cash and non-cash loans extended to SMEs. Number of views of İŞ'TE KOBİ Includes the number of users logged into İş Bankası’s www.istekobi.com.tr website which has been active since 2008, during the reporting period. Calculations within this indicator took into account Google Analytics data. Number of ATMs Includes the total number of ATMs belonging to İş Bankası in Turkey and Turkish Republic of Northern Cyprus (TRNC) as of the reporting period. In this context data provided by the Interbank Card Center for December 2022 has been taken into account. Number of Disabled-friendly ATMs Total Amount of Cash Loans Extended to the Women Entrepreneurs Includes the total number of ATMs belonging to İş Bankası, located in Turkey and TRNC which are accessible to a wheelchair and/or includes a headphone jack as of the reporting period. In the year of 2022, total amount of loans extended to the female customers whom definition is in-line with the BDDK’s SME loan definition in TL among the loans extended to SMEs was checked and tested. KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. İş Kuleleri, Kule 3, Kat:2-9 Levent 34330 İstanbul +90 212 316 60 00 +90 212 316 60 60 www.kpmg.com.tr Limited Assurance Report To the Board of Directors of T. İş Bankası A.Ş. We were engaged by T. İş Bankası A.Ş. (hereinafter “Bank” or “İş Bankası”), to provide independent limited assurance on the “Selected Information” contained in the Integrated Annual Report of İş Bankası (hereinafter "the Report") for the year ended 31 December 2022. The scope of our assurance is limited to the Selected Information listed for İş Bankası below: ੵ Number of renewable energy projects financed during the year, their installed capacity (MW) and the loan amount provided to these projects (million USD) ੵ Number of projects financed after undergoing environmental and social risk evaluation, and risk categories ੵ Number of field visits made as part of environmental and social risk management ੵ Total amount of cash commercial loans extended to the agricultural sector (billion TL) ੵ Total amount of loan agreements signed with international financial institutions within the sustainable framework during the year ੵ Amount of supplied renewable energy ੵ Total amount of loans provided to SMEs (billion TL) ੵ Number of İŞ'TE KOBİ SME website views ੵ Total amount of financing provided to women entrepreneurs ੵ Number of saplings planted during the year under the project with the TEMA Foundation ੵ Number of Customers ੵ Net Promoter Score ੵ Customer satisfaction score ੵ Number of ATMs ੵ Number of disabled-friendly ATMs ੵ Ratio of disabled-friendly ATMs (%) ੵ Number of digital banking customers ੵ Number of mobile banking users ੵ Total paper savings due to digitized processes (pages) ੵ Total number of employees ੵ Breakdown of employees by gender and type of employment ੵ Employee turnover rate (%) ੵ Women employee ratio in senior management (%) ੵ Unionization rate (%) ੵ Numbers of employees taking and returning from maternity leave ੵ Rate of return from maternity leave and retention rate after maternity leave (%) ੵ Number of employees using paternity leave ੵ OHS data on the basis of female Number of incidents Number of fatal incidents Number of occupational diseases Days of absence due to accident Accident frequency rate Lost day rate (LDR) Occupational disease rate (ODR) Absentee rate (AR) Injury rate Number of work-related fatalities Number of employees carrying out tasks with a high risk of occupational diseases An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 456 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 457 Limited Assurance Report Limited Assurance Report ੵ Number of Occupational Health and Safety Committees (OHS Committees) and the total numbers of members and employee representatives in the committees ੵ Average training hours per employee, average training hours per female employee, average training hours per male employee ੵ Hours of training per newly recruited employee in their first year ੵ Number of employees receiving "Anti-Bribery and Anti-Corruption", "Ethical Principles / Business Ethics", "Human Rights" and "Sustainability" training and total training hours ੵ Number of participants of information security trainings and total training hours ੵ Share of digital trainings within all trainings (%) ੵ Hours of training per person in the management and leadership development program ੵ Hours of training per person in Information Technologies (IT) competence development trainings ੵ Number of graduates from the "81 Students from 81 Cities" ੵ Greenhouse Gas Emissions; Scope 1 (ton CO2e) Scope 2 (ton CO2e) Scope 3 (ton CO2e) ໜ Category 1: Purchased Goods and Services (resulting from paper consumption) ໜ Category 5: Waste Generated in Operations ໜ Category 6: Business Travel ໜ Category 7: Employee Commuting ੵ Refrigerants consumption (kg) ੵ Total energy consumption (GJ) Electricity consumption (kWh) Natural gas consumption (m3) Fuel-oil consumption (lt) Coal consumption (kg) Diesel consumption (lt) ੵ Fuel consumption of vehicles (lt) (fuel consumption of company vehicles, fuel consumption of personnel service vehicles, fuel consumption due to business travel with private cars) ੵ Total water consumption (m3) Total consumption of municipal water (m3) Total rainwater (recovered/reused) (m3) Total drinking water (m3) Total wastewater production (m3) ੵ Amount of total waste and type of waste ੵ Amount of domestic waste (tons) and type of waste ੵ Hazardous waste (batteries, fluorescent lamps, car batteries, toner cartridges) Amount (tons) and type of recycled waste Amount (tons) and type of recycled non-hazardous waste (paper, plastic, metal, glass) Amount (tons) and type of recycled hazardous waste Amount of electronic waste recycled ੵ Emission intensities (per employee (tonnes of CO2e/number of employees), per consolidated total assets (tonnes of CO2e/millions TL), and per consolidated net profit (tonnes of CO2e/millions TL)) Management's responsibilities Management is responsible for the preparation and presentation of the Report for the Selected Information in accordance with the İş Bankası’s Reporting Guidance as described in the Report, and the information and assertions contained within it; for determining the İş Bankası’s objectives in respect of sustainable development performance and reporting, including the identification of stakeholders and material issues; and for establishing and maintaining appropriate performance management and internal control systems from which the reported performance information is derived. Management is responsible for preventing and detecting fraud and for identifying and ensuring that İş Bankası complies with laws and regulations applicable to its activities. Management is also responsible for ensuring that staff involved with the preparation and presentation of the description and the Selected Information are properly trained, information systems are properly updated and that any changes in reporting encompass all significant business units. Our responsibilities Our responsibility is to carry out a independent limited assurance engagement and to express a conclusion based on the work performed. We conducted our engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board. That Standard requires that we plan and perform the engagement to obtain limited assurance about whether the Selected Information is free from material misstatement. We apply the International Standard on Quality Control 1 (ISQC1) and, in conformity with this Standard, maintain a comprehensive system of quality control including documented policies and procedures regarding the compliance with ethical principles, professional standards and applicable legal and regulatory requirements. We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. Procedures performed A limited assurance engagement on a Selected Information consists of making inquiries, primarily of persons responsible for the preparation of information presented in the Selected Information, and applying analytical and other evidence gathering procedures, as appropriate. These procedures included: ੵ Interviews with relevant staff at the corporate and business unit level responsible for providing the information in the Selected Information, ੵ Using the Reporting Guidance of the Report to measure and evaluate the Selected Information, ੵ Evaluating the design and implementation of key processes and controls over the Selected Information, ੵ Re-performing, on a sample basis, the calculations used to prepare the Selected Information for the reporting period, ੵ Evaluating the disclosure and presentation of the Selected Information in the Report to determine whether it is in line with our overall knowledge of, and experience with, the sustainability performance of İş Bankası, ੵ Comparing the information presented in the Selected Information to corresponding information in the relevant underlying sources to determine whether all the relevant information contained in such underlying sources has been included in the Selected Information, ੵ Reading the information presented in the Selected Information to determine whether it is in line with our overall knowledge of, and experience with, the sustainability performance of İş Bankası. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less wide than a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is lower than that of a reasonable assurance engagement. Inherent limitations Due to the inherent limitations of any internal control structure it is possible that errors or irregularities in the information presented in the Selected Information may occur and not be detected. Our engagement is not designed to detect all weaknesses in the internal controls over the preparation and presentation of the Selected Information, as the engagement has not been performed continuously throughout the period and the procedures performed were undertaken on a test basis. Conclusion Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusions. Based on the procedures performed and the evidence obtained, as described above, nothing has come to our attention that causes us to believe that the Selected Information as defined in the Report of İş Bankası for the year ended 31 December 2022 is not presented, in all material respects, in accordance with the İş Bankası’s internally developed reporting criteria as explained in the Reporting Guidance. In accordance with the terms of our engagement, this independent limited assurance report on the Selected Information has been prepared for İş Bankası in connect with reporting to İş Bankası and for no other purpose or in any other context. Restriction of use of our report Our report should not be regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than İş Bankası, for any purpose or in any other context. Any party other than İş Bankası who obtains access to our report or a copy thereof and chooses to rely on our report (or any part thereof) will do so at its own risk. To the fullest extent permitted by law, we accept or assume no responsibility and deny any liability to any party other than İş Bankası for our work, for this independent limited assurance report, or for the conclusions we have reached. KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi Şirin Soysal, Partner İstanbul, 8 March 2023 An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 458 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 459 GRI Content Index GRI Content Index Statement of Use Use of GRI 1 İşbank has prepared its report covering the period January 1, 2022-December 31, 2022 in accordance with GRI Standards. GRI 1: Foundation 2021 Applicable GRI Sector Standard(s) / GRI STANDARD/ OTHER SOURCE General Disclosures DISCLOSURE LOCATION OMISSIONS Requirement(s) Omitted Reason Explanation 2-1 Organizational details An Overview of İşbank, pp.: 10-14 https://www.isbank.com.tr/en/about-us/who-we-are 2-2 Entities included in the organization's sustainability reporting About the Report, p. 6 2-3 Reporting period, frequency and contact point About the Report, p. 6; Contact - Back Cover 2-4 Restatements of information GRI Content Index: There is no restated information in the report. 2-5 External assurance Independent Assurance Report will be added as soon as the audit report is completed. 2-6 Activities, value chain and other business relationships https://www.isbank.com.tr/en/about-us/who-we-are İşbank Overview, page: 8 2-7 Employees Human Resources Data, pp.: 446-447 2-8 Workers who are not employees Human Resources Data, pp.: 446-447 2-9 Governance structure and composition Management Structure, pp. 135-137 2-10 Nomination and selection of the highest governance body Management Structure, p. 135 2-11 Chair of the highest governance body Management Structure, pp. 135, 145 2-12 Role of the highest governance body in overseeing the management of impacts Management Structure, p. 135 2-13 Delegation of responsibility for managing impacts Sustainability Management, p. 34; Management Structure, pp. 135, 145 GRI 2: General Disclosures 2021 2-14 Role of the highest governance body in sustainability reporting Sustainability Management, p. 34 2-15 Conflicts of interest Management Structure, p. 135 2-16 Communication of critical concerns Our Stakeholders, pp. 35-37 2-17 Collective knowledge of the highest governance body 2-18 Evaluation of the performance of the highest governance body Board of Directors, pp. 136-143 Board of Directors, pp. 147-153 2-19 Remuneration policies Employee Rights, page:; Remuneration Policy, https://www.isbank.com.tr/ bankamizi-taniyin/Documents/yatirimci-iliskileri/ucretlendirme-politikasi.pdf 2-20 Process to determine remuneration Remuneration Policy https://www.isbank.com.tr/bankamizi-taniyin/ Documents/yatirimci-iliskileri/ucretlendirme-politikasi.pdf - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2-21 Annual total compensation ratio Remuneration Policy https://www.isbank.com.tr/bankamizi-taniyin/ Documents/yatirimci-iliskileri/ucretlendirme-politikasi.pdf 2-21 a; 2-21 b; 2-21 c Confidentiality constraint 2-22 Statement on sustainable development strategy Our Business Model: İşbank Banking, pp. 28-33 2-23 Policy commitments Sustainability Management, p. 34 2-24 Embedding policy commitments Sustainability Management, p. 34 2-25 Processes to remediate negative impacts 2-26 Mechanisms for seeking advice and raising concerns Our Stakeholders, pp. 34-37; Sustainability Management, p. 34 Prioritization Process in İşbank pp. 38-45, Our Stakeholders, pp. 35-37 2-27 Compliance with laws and regulations Footnote: pp. 299, 407, 415, 2-28 Membership associations Initiatives Supported in the Field of Sustainability, pp. 47-49; Corporate Memberships, p. 443 2-29 Approach to stakeholder engagement Our Stakeholders, p. 34; Prioritization Process in İşbank pp. 38-45 2-30 Collective bargaining agreements Key Performance Indicators, p. 446 - - - - - - - - - - - - - - - - - - İşbank does not disclose this information due to confidentiality. - - - - - - - - - For the Content Index - Core Service, the GRI Services reviewed that the GRI content index is presented in a clear and consistent manner with the Standards and that references to disclosures 2-1 to 2-5, 3-1, and 3-2 are consistent with the relevant sections of the report. This service was performed on the Turkish version of the report. DISCLOSURE LOCATION OMISSIONS Requirement(s) Omitted Reason Explanation GRI STANDARD/ OTHER SOURCE Material Topics GRI 3: Material Topics 2021 3-1 Process to determine material topics Prioritization Process in İşbank pp. 38-45 3-2 List of material topics Materiality matrix, p. 39 Financial Performance and Profitability GRI 3: Material Topics 2021 GRI 201: Economic Performance 2016 3-3 Management of material topics Sustainability Priorities, p.: 39; Financial Performance, pp. 57-58 201-1 Economic value generated Value Creation Model, pp. 32-33; Financial Performance, pp.: 57-58 201-4 Financial assistance received from government GRI Content Index: No government support was received. Business Ethics, Transparency and Reporting GRI 3: Material Topics 2021 GRI 205: Anti- Corruption 2016 3-3 Management of material topics Sustainability Priorities, p. 39; Management Approach, pp.: 135-137 205-1 Total number and percentage of operations assessed for risks related to corruption and significant risks identified 205-2 Communication and training about anti-corruption policies and procedures Business Ethics, p.: 162 Business Ethics, p.: 162; Anti-Bribery and Anti-Corruption, p. 163 205-3 Incidents of corruption Business Ethics, p.: 162; Anti-Bribery and Anti-Corruption, p. 163 GRI 408: Child Labor 2016 408-1 Operations and suppliers at significant risk for incidents of child labor GRI 409: Forced or Compulsory Labor 2016 409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labor GRI 410: Security PracticeS 2016 410-1 Kuruluşun insan hakları politikaları veya prosedürleri konusunda eğitim görmüş güvenlik personelinin yüzdesi GRI Content Index: Among the recruitment conditions in our Bank's Personnel Regulations, there is a regulation that requires employees "to be over the age of 18". GRI Content Index: The working conditions of employees at İşbank are determined within the framework of the provisions of the labor legislation, the Bank's internal regulations, and the provisions of the Collective Bargaining Agreement. In this context, the principle of freedom of employment and contract as expressed in the Constitution is valid at İşbank. In addition, İşbank is among the organizations with the highest rate of unionized employees in the sector. Therefore, İşbank does not have any operations with the risk of forced / compulsory labor. GRI Content Index: In accordance with Law No. 5188 on Private Security Services and the provisions of the regulation on the implementation of this Law, persons whose Private Security Identity Card validity will expire must take this training. The validity period of the Identity Card is 5 years. Accordingly, 191 Private Security Officers received the relevant training in 2022. On 31.12.2022, the number of our Private Security Officers was 1869 and 10.22% of them attended the refresher training. GRI Content Index: İşbank does not make donations to any political parties. 415-1 Political contributions GRI 415: Public Policies 2016 GRI 206: Anti- Competitive Behavior 2016 206-1 Anti-Competitive Behaviors Footnotes: pp. 299, 415 Efficient Risk Management GRI 3: Material Topics 2021 GRI 201: Economic PerformanCE 2016 Digital Banking GRI 3: Material Topics 2021 Customer Centricity GRI 3: Material Topics 2021 3-3 Management of material topics Sustainability Priorities, p. 39; Efficient Risk Management, pp.: 158-161 201-2 Risks due to climate change Climate Action, pp.: 76-78; Risks, Opportunities & Future Insights, p.: 23 3-3 Management of material topics Sustainability Priorities, p. 39; Digital Banking, pp.: 88-91 3-3 Management of material topics Sustainability Priorities, p. 39; Customer Centricity, pp.: 65-67 417-1 Product and Service Information and Labeling Responsible Marketing, p.: 68; Financial Literacy, p.: 71 GRI 417: Marketing And Labeling 2016 417-2 Incidents of non-compliance concerning product and service information and labeling GRI Content Index: There are no cases associated with non-compliance with the regulations and rules on product and service information and labeling during the reporting period. 417-3 Incidents of non-compliance concerning marketing communications GRI Content Index: There are no cases associated with non-compliance with the regulations and rules on marketing communication during the reporting period. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 460 İşbank 2022 Integrated Annual Report İşbank 2022 Integrated Annual Report 461 GRI Content Index GRI Content Index GRI STANDARD/ OTHER SOURCE Cyber Security and Customer Privacy DISCLOSURE LOCATION GRI 3: Material Topics 2021 GRI 418: CUSTOMER PRIVACY 2016 3-3 Management of material topics Sustainability Priorities, p. 39; Information Security at İşbank, pp.: 99-100 418-1 Customer Data Privacy GRI Content Index: The number of complaints is not disclosed due to data privacy. Responsible Financing and Investment Integrating ESG Criteria GRI 3: Material Topics 2021 GRI 304: Biodiversity 2016 3-3 Management of material topics Sustainability Priorities, p. 39; Environmental and Social Risk Management in Loans, pp.: 82-83 304-2 Impact of activities on biodiversity Environmental and Social Risk Management in Loans, pp.: 82-83 GRI 413: LOcal Communities 2016 413-2 Operations with negative impacts on local communities Environmental and Social Risk Management in Loans, pp.: 82-83 Responsible Products and Services GRI 3: Material Topics 2021 3-3 Management of material topics Sustainability Priorities, p. 39; Responsible Products and Services, pp.: 68-70 Employee Rights and Satisfaction GRI 3: Material Topics 2021 GRI 202: Market PresenCE 2016 3-3 Management of material topics Sustainability Priorities, p. 39; Employee Rights, p.: 122 202-1 Entry level wage by gender Employee Rights, p.: 122; Remuneration Policy, https://www.isbank. com.tr/bankamizi-taniyin/Documents/yatirimci-iliskileri/ucretlendirme- politikasi.pdf 401-1 New employee hires and employee turnover Key Performance Indicators, p.: 115 GRI 401: Employment 2016 401-2 Benefits provided to full-time employees that are not provided to part-time employees Employee Rights, p.: 122; Remuneration Policy, https://www.isbank. com.tr/bankamizi-taniyin/Documents/yatirimci-iliskileri/ucretlendirme- politikasi.pdf 401-3 Parental Leave Human Resources Data, pp.: 448 GRI 402: Labor/ Management Relations 2016 402-1 Notice Periods GRI Content Index: In case of significant operational changes, legal notice periods are followed. GRI 404: Training and EducatION 2016 404-1 Hours of training per employee Talent Management, pp.: 126-127 404-2 Talent management and lifelong learning program 404-3 Percentage of employees receiving regular performance and career development reviews 403-1 Percentages of employees represented in management-worker health committees 403-2 Type of injury and accident frequency rates, occupational diseases, lost days and absenteeism, and total number of work- related fatalities Talent Management, pp.: 126-127 Talent Management, pp.: 126-127 Employee Health and Safety, p.: 125 Employee Health and Safety, p.: 125 GRI 403: Occupational Health And Safety 2018 403-3 Occupational health services Employee Health and Safety, p.: 125 403-4 Employee participation Employee Health and Safety, p.: 125 403-5 Training on occupational health and safety Employee Health and Safety, p.: 125 403-6 Promotion of employee health Employee Health and Safety, p.: 125 403-8 Scope of occupational health and safety management system Employee Health and Safety, p.: 125 403-9 Work-related accidents Human Resources Data, pp.: 449 403-10 Work-related deaths Human Resources Data, pp.: 449 GRI 407: Freedom of Association or Collective Bargaining 2016 407-1 Collective bargaining agreements and union rights Employee Rights, p.: 118 Equal Opportunity, Diversity and Gender Equality GRI 3: Material Topics 2021 GRI 201: Economic Performance 2016 GRI 405: DIversity and Equal Opportunity 2016 3-3 Management of material topics 201-3 Retirement plans Sustainability Priorities, p. 39; Equal Opportunity, Diversity and Gender Equality pp.: 121-123 2020 Activity Report, pp.: 162, 225-227, https://www.isbank.com.tr/ bankamizi-taniyin/finansal-bilgiler 405-1 Diversity of governance bodies and employees Human Resources Data, pp.: 450-454; Equal Opportunity, Diversity and Gender Equality, pp.: 125-127 405-2 Ratio of basic salary and remuneration of women to men GRI Content Index: Remuneration is managed through transparent and measurable processes and systems, and there is no gender-based wage differentiation. This rate is 1 as there is no difference in wages based on gender. Employee Rights, p.: 122 OMISSIONS Requirement(s) Omitted Reason Explanation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - GRI STANDARD/ OTHER SOURCE DISCLOSURE LOCATION GRI 406: Non- Discrimination 2016 406-1 Incidents of discrimination Responsible Purchasing and Supply GRI Content Index: İşbank makes all decisions about its employees independent of race, religion, language, sect or any belief, sexual orientation/preference, gender, mental or physical disability, age, cultural or social class and thought/opinion differences; it refuses any discrimination against or among the employees and managers. GRI 3: Material Topics 2021 3-3 Management of material topics Sustainability Priorities, p. 39; Sustainability Priorities, pp.: 110-112 GRI 204: Procurement Practices 2016 204-1 Amount of local procurement budget and its ratio in the total procurement budget Responsible Purchasing, p.: 112 GRI 308: Supplier Environmental Assessment 2016 GRI 414: Supplier Social Assessment 2016 308-1 Suppliers Subject to Environmental Assessment 308-2 Significant actual and possible negative environmental impacts of the supply chain and actions taken 414-1 Ratio and number of new suppliers that were screened using social criteria Responsible Purchasing, p.: 110-112 Responsible Purchasing, p.: 110-112 Responsible Purchasing, p.: 110-112 414-2 Actual and possible negative social impacts of the supply chain and actions taken GRI Content Index: No negative social impacts were observed in the supply chain. The Bank's Environmental Footprint GRI 3: Material Topics 2021 3-3 Management of material topics Sustainability Priorities, p. 39; Environmental Impact Management, p. 108; Environmental and Social Impacts Policy https://www.isbank.com. tr/bankamizi-taniyin/politikalarimiz 302-1 Energy consumption within the organization 302-2 Energy consumption outside the organization Key Performance Indicators, p.: 106 Key Performance Indicators, p.: 106 GRI 302: Energy 2016 302-3 Energy intensity Key Performance Indicators, p.: 106 302-4 Reduction of energy consumption Environmental Impact Management, p.: 108 302-5 Reduction in energy requirements of products and services Environmental Impact Management, p.: 108, Paperless Banking, p. 92 GRI 303: Water and Effluents 2018 303-3 Water withdrawal Key Performance Indicators, p.: 106 303-5 Water consumption Key Performance Indicators, p.: 106 GRI 305: Emissions 2016 305-1 Scope 1 Emissions Key Performance Indicators, p.: 106 305-2 Scope 2 Emissions Key Performance Indicators, p.: 106 305-3 Scope 3 Emissions Key Performance Indicators, p.: 106 305-4 Emissions intensity Key Performance Indicators, p.: 107 GRI 306: Effluents and Waste 2020 305-5 Reduction of GHG emissions Environmental Impact Management, p.: 108 306-2 Management of significant waste- related impacts Environmental Impact Management, p.: 108 306-3 Waste generation Key Performance Indicators, p.: 106-107 306-4 Disposed Waste Key Performance Indicators, p.: 106-107 Contribution to Social Welfare GRI 3: Material Topics 2021 GRI 203: Indirect Economic Impacts 2016 GRI 413: Local Communities 2016 3-3 Management of material topics Sustainability Priorities, p. 39; Contribution to Social Welfare, pp.: 188-189 203-1 Infrastructure investments Financial Performance and Profitability, pp.: 57-58 203-2 Significant indirect economic impacts Financial Performance and Profitability, pp.: 57-58 413-1 Operations with impact assessments Environmental and Social Risk Management in Loans, pp.: 82-83 Combating Climate Change GRI 3: Material Topics 2021 Financial inclusion GRI 3: Material Topics 2021 3-3 Management of material topics Sustainability Priorities, p. 39; Climate Action, pp.: 76-79 3-3 Management of material topics Sustainability Priorities, p. 39; Financial Inclusion, pp.: 72-75 The future of business and new working models GRI 3: Material Topics 2021 3-3 Management of material topics Sustainability Priorities, p. 39; The Future of Business and New Working Models pp.: 119-120 OMISSIONS Requirement(s) Omitted Reason Explanation - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - An Overview Of İşbankLooking Into the FutureHow We Create ValueReliable Financial ActorResponsible OperationsFinancial Reports and AnnexesGood Corporate Citizen 462 İşbank 2022 Integrated Annual Report Company Information Corporate Title: Türkiye İş Bankası Anonim Şirketi Trade Registry Number: 431112 Address: İş Kuleleri 34330 Levent/İstanbul Website: www.isbank.com.tr Contact Information of Branches: Please visit www.isbank.com.tr Company Announcements and Financial Data: İşbank’s financial statements, independent auditor’s reports, annual reports, press releases and disclosures of material events are available on the Bank’s corporate website under the title of Investor Relations, in both Turkish and English. Contact Information Telephone: +90 (212) 316 00 00 Fax: +90 (212) 316 04 04 Call Center: (0850) 724 0 724 E-posta: musteri.iliskileri@isbank.com.tr Social Media Accounts Reporting Constultant and Design Kıymeti Harbiye Yönetim Danışmanlık This report has been printed on recycled paper. isbank.com.tr