Purpose
The purpose is to define the concept of Conduct Risk for our bank, explain its principles and the factors contributing to the risk, establish the framework of the Conduct Risk management, and determine the roles and responsibilities expected to be undertaken by the relevant departments within this framework.
Scope
All units and employees of our bank bear responsibility in the matters stated in this policy, and all employees contribute to the management of the process and participate within the framework of the responsibilities mentioned in the policy.
Definition
The unjust practices or behaviors of the bank and its employees that impact customers, stakeholders, or markets, leading to customer harm, financial penalties, or reputation loss, are defined as Conduct Risk. Within the framework of Conduct Risk, in addition to complying with legal regulations in the practices and behaviors towards customers, consideration of customer benefit is also necessary for our bank and employees. Conduct Risk is managed according to the principles set by our bank. Conduct Risk principles are important for better management of operational and reputation risks, mitigation of potential legal risks, and sustainable customer relationships. Although the most frequently encountered Conduct Risk in the banking sector is mis-selling transactions, Conduct Risk also includes designing banking principles in line with the Conduct Risk principles, providing necessary training to employees, targeting process and performance management, reward and punishment processes, campaign design processes, customer information before/during and after sales, new product/service design, evaluation and approval process, customer approval, after-sales rights, cancellation/refund processes and customer complaint management.
Conduct Risk Principles
Conduct Risk Principles within our bank have been categorized into 9 categories to cover unjust practices and behaviors that could lead to customer harm, financial penalties, or reputation loss:
Suitability: Providing services or selling products to customers that are appropriate for their risk profile, expectations, needs, financial situation, and financial literacy level.
Information: Providing necessary information to customers about products/services before, during, and after sales, ensuring that the information is understandable by customers with low financial literacy.
Customer Consent: Documents requiring customer consent must be clear and comprehensible, doubts must be clarified with customers, interfaces/workflows must be designed for clear customer consent for products/services offered through remote channels, and documents, voice recordings, and other audit trail records indicating customer consent must be preserved.
Terms and Conditions: Customers must be informed in a timely, accurate, complete, and transparent manner regarding the terms and conditions of the contract and risks arising from the product/service, and customer rights and responsibilities should be clearly stated.
Pricing: Determining, announcing and implementing the prices according to the Bank's policies and standardizing the fee, commission, expense collection and refund processes are among the Conduct Risk Principles. Legal limits and interest, fee, commission and expense lists announced by the Bank are taken into consideration in pricing.
Non-Discrimination: No discrimination should be made based on religion, language, race, gender, political beliefs, etc., and product/service quality should not vary based on these characteristics.
Market Integrity: Market collusion and public interest should be considered in transactions. Transactions that undermine competition and market integrity are contrary to Conduct Risk Principles.
Care for Vulnerable Customers: Customers who are able to understand and use information about the content, returns and risks of banking products and services to a limited extent due to their age, health status, education level, income level and language of communication are defined as vulnerable. Additional attention is paid to vulnerable customers who are likely to be exposed to Conduct Risk.
Categories of Vulnerable Customers:
- Education Level: Customers who cannot perform basic numerical calculations and lack financial literacy due to their educational level.
- Health Status: Customers who cannot make timely and accurate decisions due to physical/mental conditions.
- Income Level: Customers who cannot perform a sound financial assessment due to low income or financial burden.
- Age: Customers with limited financial transaction experience due to their young age, resulting in vulnerability in evaluation competence.
- Language Barrier: Customers who do not understand or speak Turkish at a level that allows them to comprehend banking services, returns, and risks.
Conflict of Interest: One element of Conduct Risk is conflicts of interest that arise among customers, employees, and the institution. Potential conflict of interest areas within bank processes are identified, and precautions are taken against possible conflict areas. Areas with potential conflicts of interest and potential areas of conflict that may arise due to changing conditions are continuously evaluated by the first line of defense. The information asymmetry element that constitutes Conduct Risk can also lead to conflicts of interest. If a conflict of interest occurs, it damages the long-term mutually beneficial relationship with our customers, and only short-term gains are achieved at the expense of this relationship.
Functional Management and Governance Structure of Conduct Risk
A three step defense line model has been adopted to manage Conduct Risk.
1st Line Of Defense – Risk Management
Conduct Risk coordinators on behalf of the business units that design and manage processes in contact with customers work on identifying, preventing, and communicating Conduct Risk. The Customer Experience Department organizes committees that facilitate information flow and ensures necessary coordination for managing risk at the first line.
2nd Line Of Defense – Risk Control
Secondary control related to Conduct Risk management and monitoring, reporting of the relevant risks, and management of the Monitoring and Tracking Module are the responsibilities of our bank's internal systems teams. Our risk management units provide support to this tier in defining the metrics used to measure the risk.
3rd Line Of Defense – Risk Audit
The audit of the risk is carried out by our bank's audit units.
Activities for Promoting Conduct Risk Culture
Our bank's activities are conducted in line with the principle of customer-centric operation. The Top Management supports the dissemination of Conduct Risk Principles and the promotion of a customercentric working principle and employees are encouraged with the help of this culture.
To foster the spread of Conduct Risk Principles within the institution, their adoption by employees, their internalization as a working principle, and various tools are utilized tools are utilized.
Conduct Risk Trainings:
Our Academy Department organizes training sessions to ensure that Conduct Risk Principles are learned, understood, and applied across the bank. These trainings cover Conduct Risk Principles, cases that violate these principles, and examples of good behavior that could serve as benchmarks. The aim is to promote examples aligned with Conduct Risk Principles and prevent deviations.
Our Ethical Principles:
One of the most important elements of Conduct Risk Principles is ethical behavior. Our Ethical Principles foresee that employees fulfill their responsibilities towards customers in a honest, transparent, impartial, and reliable manner. Customer-centric operations, consideration of customer benefit, and transparent customer communication are highlighted in our Ethical Principles document.
Rewards and Penalties:
Employees who adhere to Conduct Risk Principles and conduct transactions while considering customer benefit are evaluated and rewarded within specified reward categories. Employees engaging in behavior that violates Conduct Risk Principles are subject to sanctions in accordance with the relevant articles of the Discipline Regulation.