CORPORATE GOVERNANCE AND COMPLIANCE IN TSKB

Full compliance with laws and regulations
Turkish Banking Industry has gone through a fast changing process and been restructured by implementing various regulations in the last eight years. This structural change has been supported by the broad and determined actions implemented by the legal authority. New legal regulations have sustained a competitive edge in Turkish Banking Industry against international players.

Banking Industry set an example worldwide in the global financial crisis that’s been shaking the world since the last quarter of 2008, by overcoming the crisis with minor deficiencies. The structural changes implemented and the measures taken play an inevitable role in achieving this result.

Legal compliance, transparency and accountability have been TSKB’s priorities since its establishment. Therefore, it has undertaken all necessary infrastructural and super structural actions to comply with new regulations since 2001. Internal audit, internal control and risk management functions have been restructured and reinforced.

TSKB complies with the regulations supervised by BDDK and international standards in its external audit activities. These systematic activities include banking rules and regulations, tax code, international financial reporting standards and information technology regulations.

For TSKB, corporate governance and full compliance with laws are;
  • basis for financial success and honest, ethical competition
  • sole means of balancing and protecting the interests of its stakeholders.


In this context, TSKB considers corporate governance and compliance with laws as the building blocks in exercising responsible banking perception. The aim of TSKB is to assure its position in the market and to reinforce its corporate status. The realization of this goal necessitates compliance with ethical values as well as the laws. Other components of success lie in contributing to society, environment and social life.

TSKB has policies, procedures, risk management principals and systems clearly defined for all business lines and all products and services. The IT infrastructure of TSKB enables policies, procedures and systems to
  • be effectively and rapidly used in service cycle,
  • be productive in delivering the management reports,
  • and implement the internal needs and external audit effectively and rapidly.

The Corporate Governance Structure of TSKB

TSKB's Board of Directors
TSKB's Board of Directors consists of 10 non-executive members and the CEO. This number enables the board to organize all of its activities.

Board chairman and the CEO are two different persons. Since there’s no single person who owns a significant share of TSKB, each member of the Board of Directors is free from any influence and hence, can especially favor the rights of beneficiaries by making decisions neutrally.

TSKB Board of Directors considers certain criteria while making decisions such as;
  • increasing market value of the Bank to a highest possible level,
  • conducting the activities of the Bank in a way to secure long term and stable yield for shareholders,
  • keeping the balance between the Bank’s need for growth and its shareholders.


TSKB Board of Directors meets at least once a month.

TSKB CEO and Executive Management Team
The CEO at TSKB is fully responsible and authorized for the delivery, administration and coordination of daily routine. There are 7 executive vice presidents who are responsible from their business lines. The CEO and the executive vice presidents form the Executive Management Team of TSKB.

TSKB Audit Committee
The Audit Committee within the Board of Directors at TSKB consists of two non-executive Board members that are selected according to the 24th clause of the Banking Legislation.

TSKB Executive Risk Committee
TSKB executive risk committee, with its three members, is responsible for preparation of risk management strategies and policies, submitting them to the Board for approval and monitoring the practice. The committee is the representative of the Risk Management Group at the Board.

TSKB Corporate Governance Committee
TSKB Corporate Governance Committee, compatible with CMB (Capital Markets Board of Turkey) regulation, is set up to assist Board of Directors in fulfilling the corporate governance principles and compliance activities. The committee has been approved by the Board on September 30, 2009. There are two non-executive board members in the committee. The committee is anticipated to meet 4 times a year.

TSKB official website www.tskb.com.tr and 2008 and previous annual reports bear broad information about TSKB organizational structure, Board of Directors and Executive Management, Internal Audit, Internal Control and Risk Management Systems.

Compliance with Corporate Governance Principles

TSKB aims to fully and continuously comply with the Corporate Governance Principles issued by CMB (Capital Markets Board) in Turkey
The Bank believes that implementing these principles has a substantial impact on development of domestic and international capital markets and improving benefits of the Bank and its stakeholders. TSKB prepares its compliance declaration to these principles within the framework of CMB’s (Capital Markets Board of Turkey) statement and international and industry principles.

The Compliance Declaration of Corporate Governance Principles by TSKB can be accessed under Investor Relations Topic in TSKB official website www.tskb.com.tr.

The highest corporate governance rate in the industry
8.77 has been announced in October 20, 2009 as the corporate governance rate of TSKB in its first Corporate Governance Rating Report.

The report issued by SAHA Kurumsal Yönetim ve Kredi Derecelendirme A.Ş states that TSKB has accomplished considerable progress to identify and manage corporate governance risks.

According to the Report, TSKB’s strongest edge with respect to corporate governance principles implementations is its relations with beneficiaries.

This caption is followed by Public Disclosure and Transparency. Below, necessary improvements in order to fully comply with the SPK’s (Capital Markets Board of Turkey) Corporate Governance Principles are listed.

TSKB Corporate Governance Rate 8.77
 
 Caption Weight (%)  Rate  Improvement points according to the report
Shareholders 25 8.55 Shareholders do not have the right to request appointment of special auditors from the general shareholders’ meeting; no enlargement of the scope of minority rights (beyond the required 5%) in the articles of association; lack of cumulative voting procedures; information document relating to agenda items of the general shareholders’ meeting not prepared; no provisions in the articles of association relating to which decisions can only be taken at the general shareholders meeting.
Public Disclosure and Transparency 35 9.31 Unilateral declaration of the board about why certain Principles are not being applied, is not in the compliance report; minutes of important board meetings not posted on the web site; remuneration of executives not disclosed to public; annual report lacking audit firm’s opinion about the internal control system; no declaration of independence by the independent board member.
Stakeholders 15 9.57 No provision in the articles of association regarding the participation of stakeholders in the management of the Bank; no trade union within the Bank.
Board of Directors 25 7.76 Cumulative voting rights not in effect; no signed compliance and joint liability statement by board members; no provisions in the articles of association defining procedures for shareholders or stakeholders to invite the board to convene.

With the addition of TSKB, the number of institutions in the IMKB (Istanbul Stock Exchange) Corporate Governance Index raised to 24.

Corporate Governance Rating Report of TSKB can be accessed through the official website www.tskb.com.tr

Ethical Values of Banking
TSKB has adopted the Code of Banking Ethics published by TBB (The Banks Association of Turkey) on March 16, 2006 Board Meeting.

TSKB voluntary memberships

TSKB is a member of following organizations
  • UNEP - FI – United Nations Environmental Programme
  • IIF – Institute of International Finance
  • ADFIMI – Association of National Development Finance Institutions in Member Countries of the Islamic Development Bank
  • ICC – International Chamber of Commerce
  • TUSIAD – Turkish Industrialists’ and Businessmen’s Association
  • DEIK – Foreign Economic Relations Board
  • TUSIAD Environment Group
  • TBB Environment Working Group
  • KALDER – Quality Association
  • TKYD – Corporate Governance Association of Turkey
  • TSPAKB – The Association of Capital Market Intermediary Institutions of Turkey
  • IKSV – Istanbul Foundation for Culture and Arts

The Bank continues its activities working closely with Ministry of Energy and Natural Resources and Ministry of Environment and Forestry

Prevention of Laundering Proceeds of Crime and Financing of Terrorism
In global money and capital markets, banks and other financial institutions may unconsciously act as intermediaries for the proceeds of crime by transferring or accepting these amounts as deposit. In order to prevent this situation new standards have been introduced against money laundering all around the world to improve the combat strength through cooperation. Also, rigid control and regulatory mechanisms are implemented by governments.

Laundering offence has been firstly identified as “money laundering offence” which was put into force in 1996 and “Prevention of Laundering Proceeds of Crime” law in 2006 in Turkish legal system. MASAK (Financial Crimes Investigation Board) has been carrying out its studies since 1997 in accordance with the related laws that draw the general framework of combating money laundering and preventing financing of terrorism.

In order to prevent laundering proceeds of crime via means of banking system, mandatory Compliance Program is introduced in Turkey.

TSKB has fully adopted the compliance regulations to prevent Laundering Proceeds of Crime and Financing of Terrorism and thereby has implemented necessary control alarms and other mechanisms in its business processes.

TSKB’s Internal Control Centre is responsible for monitoring the daily internal control activities. The efficiency and proficiency of the Compliance Program are inspected and short comings are reported to the Board of Directors. Also, client transactions are reported on a daily, monthly and quarterly basis.