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We talked about how a central bank can increase the money supply. One of the ways a central bank can provide this, is by changing its interest rates. In this part, discuss how an interest rate increase will affect your bank, based on its balance sheet and income statement for 2018. Focus on profitability and risk.

(You can find the income statement and the balance sheet of the bank for year 2018 in the attachment.)

Yap ve Kredi Bankas A.. Unconsolidated Financial Statements As of December 31, 2018 (Unless otherwise stated amounts are expressed in thousands of Turkish Lira ("TL"]] 1. Balance sheet (Statement of Financial Position) Current Period (31/12/2018) Note (Section Five) Liabilities TL FC Total 2.1 2.3.1 92.782.018 271.691 330.175 2.678.882 1.373.498 109.767.118 37.077.647 1.215.446 13.706.130 202.549.136 37.349.338 1.545.621 16.385.012 1.373.498 2.3.4 2.3.4 1.305,384 13.706.130 15.011.514 2.3.3.2 2.2 330.910 6.388.957 5.846.062 542.895 7.634.494 892.348 823.837 68.511 7.965.404 7.281.305 6.669.899 611.406 2.5 219 228 219 228 2.5.2 2.6 3.000.839 9 306.818 9 3.307.657 658.112 658.112 I. DEPOSITS II. LOANS RECEIVED III. MONEY MARKET FUNDS IV. MARKETABLE SECURITIES ISSUED (Net) 4.1 Bills 4.2 Asset backed securities 4.3 Bonds V. FUNDS 5.1 Borrower funds 5.2 Other VI. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS VII. DERIVATIVE FINANCIAL LIABILITIES 7.1 Derivative financial liabilities at fair value through profit or loss 7.2 Derivative financial liabilities at fair value through other comprehensive income VIII. FACTORING PAYABLES IX. LEASE PAYABLES 9.1 Finance lease payables 9.2 Operating lease payables 9.3 Other 9.4 Deferred finance lease expenses (-) X. PROVISIONS 10.1 Provision for restructuring 10.2 Reserves for employee benefits 10.3 Insurance technical reserves (Net) 10.4 Other provisions XI. CURRENT TAX LIABILITIES XII. DEFERRED TAX LIABILITIES XIII. LIABILITIES RELATED TO NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) 13.1 Held for sale 13.2 Related to discontinued operations XIV. SUBORDINATED DEBT 14.1 Loans 14.2 Other debt instruments XV. OTHER LIABILITIES XVI. SHAREHOLDERS' EQUITY 16.1 Paid-in capital 16.2 Capital reserves 16.2.1 Equity share premiums 16.2.2 Share cancellation profits 16.2.3 Other capital reserves 16.3 Other accumulated comprehensive income that will not be reclassified in profit or loss 16.4 Other accumulated comprehensive income that will be reclassified in profit or loss 16.5 Profit reserves 16.5.1 Legal reserves 16.5.2 Statutory reserves 16.5.3 Extraordinary reserves 16.5.4 Other profit reserves 16.6 Profit or loss 16.6.1 Prior years' profits or losses 16.6.2 Current period net profit or loss 2.6.4 2.7 306.818 2.342.727 1.091.311 2.649.545 1.091.311 2.8 2.9 2.4 2.10 14.829.942 36.539.132 8.447.051 1.995,493 556.937 13.557.153 13.557.153 5.574.724 5.574.724 7.982.429 7.982.429 3.177.994 18.007.936 2.464.367 39.003.499 8.447.051 1.995.493 556.937 1.438.556 2.369.395 (909.935) 19.969.702 869.410 435.591 2.028.776 1.438.556 2.804.986 1.118.841 19.969.702 869.410 19.099.217 1.075 4.667.426 19.099.217 1.075 4.667.426 4.667.426 4.667.426 TOTAL LIABILITIES 158.243.857 189.799.734 348.043.591 The accompanying explanations and notes form an integral part of these financial statements, INTRODUCTION BANK MANAGEMENT AND CORPORATE GOVERNANCE PRACTICES FINANCIAL INFORMATION AND RISK MANAGEMENT Yap ve Kredi Bankas A.. Unconsolidated Statement of Changes in Shareholders' Equity as of December 31, 2018 (Unless otherwise stated amounts are expressed in thousands of Turkish Lira ("TL"]] 3 5. Statement of changes in shareholders' equity Other Accumulated Comprehensive Income Current Period That Will Not Be Reclassified In (31/12/2018) Profit and Loss Share certificate Other CHANGES IN SHAREHOLDER'S Paid-in Share cancellation capital EQUITY capital premium profits reserves 1 2 1. Balance at the beginning of the period 4.347.051 543.881 1.340.087 1.360.019 (178.038) 1.356.685 II. Adjustment in accordance with TMS 8 - (181.350) 2.1 Effect of adjustment 2.2. Effect of changes in accounting policies (181.350) III. New balance (l+II) 4.347.051 543.881 1.340.087 1.360.019 (178.038) 1.175.335 IV. Total comprehensive income (loss) 485.503 (40.032) 2.199 V. Capital increase in cash 4.100.000 13.056 (29.472) VI. Capital increase through intemal reserves VII. Issued capital inflation adjustment difference VIII. Convertible bonds IX. Subordinated debt X. Increase (decrease) through other changes, equity 108 XI. Profit distribution 127.833 11.1. Dividends distributed 11.2. Transfers to legal reserves 127.833 11.3. Other Period end balance (III+IV +......+X+X1) 8.447.051 556.937 1.438.556 1.845.522 (218.070) 1.177.534 1. Tangible assets revaluation reserve, 2. Accumulated gains / losses on remeasurements of defined benefit plans 3. 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 4. Exchange differences on translation reserve for associates and joint ventures accounted for using equity method 5. Accumulated gains (losses) due to revaluation and/or reclassification of financial assets measured at fair value through other comprehensive income 6. Accumulated gains or losses) on cash flow hedges and net investment hedges. The accompanying explanations and notes form an integral part of these financial statements. Yap ve Kredi Bankas A.. Unconsolidated Financial Statements As of December 31, 2018 (Unless otherwise stated amounts are expressed in thousands of Turkish Lira ("TL"]] 1. Balance sheet (Statement of Financial Position) Current Period (31/12/2018) Note (Section Five) Liabilities TL FC Total 2.1 2.3.1 92.782.018 271.691 330.175 2.678.882 1.373.498 109.767.118 37.077.647 1.215.446 13.706.130 202.549.136 37.349.338 1.545.621 16.385.012 1.373.498 2.3.4 2.3.4 1.305,384 13.706.130 15.011.514 2.3.3.2 2.2 330.910 6.388.957 5.846.062 542.895 7.634.494 892.348 823.837 68.511 7.965.404 7.281.305 6.669.899 611.406 2.5 219 228 219 228 2.5.2 2.6 3.000.839 9 306.818 9 3.307.657 658.112 658.112 I. DEPOSITS II. LOANS RECEIVED III. MONEY MARKET FUNDS IV. MARKETABLE SECURITIES ISSUED (Net) 4.1 Bills 4.2 Asset backed securities 4.3 Bonds V. FUNDS 5.1 Borrower funds 5.2 Other VI. FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS VII. DERIVATIVE FINANCIAL LIABILITIES 7.1 Derivative financial liabilities at fair value through profit or loss 7.2 Derivative financial liabilities at fair value through other comprehensive income VIII. FACTORING PAYABLES IX. LEASE PAYABLES 9.1 Finance lease payables 9.2 Operating lease payables 9.3 Other 9.4 Deferred finance lease expenses (-) X. PROVISIONS 10.1 Provision for restructuring 10.2 Reserves for employee benefits 10.3 Insurance technical reserves (Net) 10.4 Other provisions XI. CURRENT TAX LIABILITIES XII. DEFERRED TAX LIABILITIES XIII. LIABILITIES RELATED TO NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Net) 13.1 Held for sale 13.2 Related to discontinued operations XIV. SUBORDINATED DEBT 14.1 Loans 14.2 Other debt instruments XV. OTHER LIABILITIES XVI. SHAREHOLDERS' EQUITY 16.1 Paid-in capital 16.2 Capital reserves 16.2.1 Equity share premiums 16.2.2 Share cancellation profits 16.2.3 Other capital reserves 16.3 Other accumulated comprehensive income that will not be reclassified in profit or loss 16.4 Other accumulated comprehensive income that will be reclassified in profit or loss 16.5 Profit reserves 16.5.1 Legal reserves 16.5.2 Statutory reserves 16.5.3 Extraordinary reserves 16.5.4 Other profit reserves 16.6 Profit or loss 16.6.1 Prior years' profits or losses 16.6.2 Current period net profit or loss 2.6.4 2.7 306.818 2.342.727 1.091.311 2.649.545 1.091.311 2.8 2.9 2.4 2.10 14.829.942 36.539.132 8.447.051 1.995,493 556.937 13.557.153 13.557.153 5.574.724 5.574.724 7.982.429 7.982.429 3.177.994 18.007.936 2.464.367 39.003.499 8.447.051 1.995.493 556.937 1.438.556 2.369.395 (909.935) 19.969.702 869.410 435.591 2.028.776 1.438.556 2.804.986 1.118.841 19.969.702 869.410 19.099.217 1.075 4.667.426 19.099.217 1.075 4.667.426 4.667.426 4.667.426 TOTAL LIABILITIES 158.243.857 189.799.734 348.043.591 The accompanying explanations and notes form an integral part of these financial statements, INTRODUCTION BANK MANAGEMENT AND CORPORATE GOVERNANCE PRACTICES FINANCIAL INFORMATION AND RISK MANAGEMENT Yap ve Kredi Bankas A.. Unconsolidated Statement of Changes in Shareholders' Equity as of December 31, 2018 (Unless otherwise stated amounts are expressed in thousands of Turkish Lira ("TL"]] 3 5. Statement of changes in shareholders' equity Other Accumulated Comprehensive Income Current Period That Will Not Be Reclassified In (31/12/2018) Profit and Loss Share certificate Other CHANGES IN SHAREHOLDER'S Paid-in Share cancellation capital EQUITY capital premium profits reserves 1 2 1. Balance at the beginning of the period 4.347.051 543.881 1.340.087 1.360.019 (178.038) 1.356.685 II. Adjustment in accordance with TMS 8 - (181.350) 2.1 Effect of adjustment 2.2. Effect of changes in accounting policies (181.350) III. New balance (l+II) 4.347.051 543.881 1.340.087 1.360.019 (178.038) 1.175.335 IV. Total comprehensive income (loss) 485.503 (40.032) 2.199 V. Capital increase in cash 4.100.000 13.056 (29.472) VI. Capital increase through intemal reserves VII. Issued capital inflation adjustment difference VIII. Convertible bonds IX. Subordinated debt X. Increase (decrease) through other changes, equity 108 XI. Profit distribution 127.833 11.1. Dividends distributed 11.2. Transfers to legal reserves 127.833 11.3. Other Period end balance (III+IV +......+X+X1) 8.447.051 556.937 1.438.556 1.845.522 (218.070) 1.177.534 1. Tangible assets revaluation reserve, 2. Accumulated gains / losses on remeasurements of defined benefit plans 3. 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 4. Exchange differences on translation reserve for associates and joint ventures accounted for using equity method 5. Accumulated gains (losses) due to revaluation and/or reclassification of financial assets measured at fair value through other comprehensive income 6. Accumulated gains or losses) on cash flow hedges and net investment hedges. The accompanying explanations and notes form an integral part of these financial statements

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