annual report 2017 - teb banka në kosovë · 2018-05-18 · teb sh. a kosova - 2017 annual report...

TEB Sh. A Kosova - 2017 Annual Report 1

Annual Report 2017

TEB Sh. A Kosova - 2017 Annual Report2

Expanding Your World

Our Values

Focusing on the future: we will strive to further increase our customers’ satisfaction.

The best service for both individual clients and enterprises - that is what drives TEB Sh. A. with ethical business practice central to that service and our mission. That is why today our number one asset is the relationship of trust we have built up with customers over time.

• Honest and trustworthy

• Leading, pioneering and innovative

• Customer oriented with a strong focus on high quality

• Respectful of society, human rights and the environment

• Transparent


Table of Contents1. About TEB Sh. A1.1. Corporate Profile1.2. Our Mission, Vision and Strategy1.3. Our Core Values1.4. Shareholder Structure

2. 2017 Overview and 2018 Outlook2.1. From the Chairman2.2. From the CEO

3. TEB Sh. A in 20173.1. TEB Sh. A. in Figures3.2. Key Financial Indicators

4. Business Units4.1. Individual Banking4.2. Card Business4.3. SME Banking4.4. Commercial and Corporate Banking4.5. Trade Finance4.6. Payment Systems4.7. Treasury and ALM4.8. Human Resources4.9. Organization and Process Development4.10. Information Technology4.11. Information Security and Data Protection

5. Management / Corporate Governance5.1. TEB Sh. A. Organizational Structure5.2. Board of Directors5.3. Committees 5.4. Internal Audit5.5. Risk Management and Operational Risk & Business Continuity5.6. Compliance 5.7. Internal Control

6. Auditor’ s Report6.1. Independent Audit Report at 31 December 2017 and Notes to the Financial Statements


TEB Sh. A Annual Report 2017

Report date: 01.01.2017 — 31.12.2017

Address: “Preoc no no. Graçanica 10500, 7th km main road Prishtina-Ferizaj, Republic of Kosova”

Telephone: +381 (0) 38 230 123 Fax: +381 (0) 38 224 699

Email: [email protected]

Web: www.teb-kos.com


About TEB Sh. A


1.1. Corporate Profile

Expanding your world…

Focusing on the future: we will strive to further increase our customers’ satisfaction.

After ten (10) successful years in Kosovo, TEB Sh. A. (TEB) has become one of the foremost names in the banking sector, earning a well-deserved reputation for excellent service. Throughout our history, we have systematically pioneered meeting the banking and financial needs of individuals and businesses by launching numerous ‘firsts’ for the Kosovo market.

In a rapidly changing world, TEB is there to consistently support customers and employees. This ability is also based on our position as a prominent member of the TEB Group. The Group was formed through a joint venture between one of the world’s strongest financial institutions, BNP Paribas, and one of the most reputable banks in Turkey, Turk Ekonomi Bankasi.We aim to be a responsible bank. That is why we pursue a range of socially responsible activities that contribute to social development. For TEB, corporate social responsibility is a highly valuable and fundamental tool that complements our economic mission. So, in addition to providing excellent, innovative and responsible service to our customers, we also undertake projects that are designed to make a difference in education, culture and sports - all aimed at positive impacts for the greatest possible number of people in Kosovo.

Value, Service, Excellence…For TEB, the customer is at the center of everything we do. Our customers are special and

valued. This is expressed in all of the specially-designed products and services that we offer to different groups of customers, ranging from entrepreneurs to senior citizens and from employees to students.We believe the systematic, year-on-year growth in number of customers, our service network, transaction volumes and our personnel is recognition of our efforts to:• Continually expand the range of non-branch banking products and services and add functionality to our innovative multi-channel banking network. We offer all manner of quality-focused banking products and services that people need at different stages in their lives - all through our extensive and multi-channel delivery network.• Offer optimal financial solutions to private banking customers based on ‘personalized service’. • Outperform the industry in terms of growth in credit cards, growth that is enhanced continuously by new products and services, as well as through specific card campaigns organized with another customer group, our merchant members. Through the segmentation of the card business, we identify specific groups, serving them with products such as the She Card for Ladies, the Woman Entrepreneurship Credit Card, and the Business Card for owners of SMEs. • Maintain our strong position in retail cash management services. • Provide the commercial banking support that is a key driver in the roadmap to future economic growth in Kosovo. Every year, we reinforce our already strong focus on supporting TEB’s hundreds of thousands of commercial and SME customers as they play an increasingly important role in the economic development process.


Real, Smart, Value…As a member of two strong international financial groups – TEB A.S., a highly reputable and premier financial institution in the Turkish banking sector, and BNP Paribas, one of the Eurozone’s top banks with an extensive and international network – TEB benefits from Group experience, solidity and range. This enables us to generate the best outcomes for our clients. From these sound foundations, TEB continues to progress by enhancing the quality of its services and by developing products tailored to customer’s expectations. In line with rapid advances in technology, we systematically improve our innovative multi-channel banking network (such as Internet and Mobile Banking, Call Center, SMS Services, ATMs, POS) allowing customers to utilize the most suitable distribution channel for their banking transactions - conveniently, quickly and reliably.

More community commitment…Since TEB was established in 2008, we have had a pioneering position. As a strong full-service bank, we have focused on responding to customer demand for financial services. Over the years, we have been able to put our corporate competencies and vision to work effectively, producing added value for both customers and shareholders. In 2016, we continued to pursue our – now expected - balanced and healthy growth, further reinforcing our position as the country’s one of the strongest financial institution. This gives us an even firmer foundation for our future as an important force in Kosovo. Corporate social responsibility plays a significant role. Our policy is to contribute to Kosovo’s social development. We have created a framework of long-term initiatives based on a range of projects that will create the greatest social

benefits. In terms of business support, we are working through the Women’s Entrepreneurship Support Program, the Business Academy and the Business Forum.

Exceeding your expectations…TEB owes its success to our people who bring our innovative and proactive approach to customers, work hard to maintain and grow the quality of our services and the assets our brand name represents. Our goals are to help people and businesses build their future, to realize their ambitions and to help them manage their financial risks. We want to be a financial institution our customers feel comfortable with.

After ten successful years in Kosovo, TEB Sh. A (TEB)

has become one of the foremost names in the

banking sector, earning a well-deserved reputation

for excellent service.


Exceeding your expectations…TEB owes its success to our people who bring our innovative and proactive approach to customers, work hard to maintain and grow the quality of our services and the assets our brand name represents. Our goals are to help people and businesses build their future, to realize their ambitions and to help them manage their financial risks. We want to be a financial institution our customers feel comfortable with.

TEB owes its success to our people who bring our innovative and proactive approach to customers...

Our customers are special and valued.

Our goals are to help people and businesses build their future, to realize their ambitions and to help

them manage their financial risks.


1.2. Our Vision, Mission and Strategy

Our VisionOur vision is to be the best bank in Kosovo.

Our Mission

To continually create and increase outstanding value for our customers, shareholders, employees and society.

Our Strategy

In line with our vision and mission, our strategy is to provide an outstanding and efficient banking experience for all our customers. We achieve this by offering innovative and practical products and services to achieve continuous and sustainable growth. TEB’s offering is always founded on our commitment to being a responsible bank. This is embedded in all our values and is reflected in our business, the way we develop products and services and how we deliver on our goals and promises.

To continually create and increase outstanding value for our customers, shareholders, employees

and society.


1.3. Our Core Values:Customer-centricity

Our success is based on complete commitment to our customers at all times, earning us the trust and loyalty of our customer base. We maintain that trust by always placing our customers at the heart of everything we do. Customer needs and expectations are our drivers through our fast, proactive approach and response to rapidly-evolving requirements. This enables us to create and deliver true value as we serve our customers with innovative, above-expectation, tailored and trend-setting products and services.

IntegrityWe have embraced the highest standards of integrity in everything we say and do and we commit to creating added value for our customers, shareholders and employees by always doing more than just what is right. We communicate openly and honestly, we invite and appreciate challenging views aimed at generating better ideas and reaching more appropriate and balanced decisions.We generate value for our shareholders through long-term success rather than short-term gain. So our objective is for our core business to deliver sound and strong operating profitability and dividends through an entrepreneurial spirit that balances risks and returns responsibly.

InnovationWe aspire to innovations that matter. TEB values enthusiasm coupled with intellectual curiosity in our people as they continuously seek to create products that will facilitate our customers’ success and provide suitable solutions to their needs.

Operational EfficiencyWe build processes and products that are user-friendly, easy to access and designed to add value. We strive to ensure that the services offered to our customers are priced in a way that equates fairly with the actual cost of providing them.

DisciplineWe think and act like owners of the Bank, so we protect its resources and focus on shared rather than individual goals. We are proud of TEB’s successes and the value we create for our shareholders and customers. Every one of our 555 employees feel responsible if we fail to meet customer expectations and we are all accountable for delivering on our promises – there are no excuses. We strive for operational excellence by getting it right first time.

Competent HRWe seek to strengthen our position as an employer of choice and strive to create a culture that attracts talented individuals, fosters diverse yet responsible and agile collaborative teamwork, nurturing and investing in the best talent, and management based on merit and equal opportunities.

PartnershipWe pursue lasting and mutually beneficial customer and employee relationships in which the value created is shared fairly. We are responsible partners with all our stakeholders and regulators, and in serving society.

Strong distribution channels

We strive to offer services and support to our customers at their own convenience by providing diverse distribution channels, including our branch offices, call center, direct sales and extensive alternative distribution channels.


1.4. Shareholder’s Structure

The Bank’s share capital is €24,000,000 based on 2,400,000 issued shares each with a par value of €10. Number of shares relates to ordinary shares with no rights, preferences or restrictions attached to them.

*50%-50% BNP Paribas Fortis Yatırımlar Holding A.Ş.and Çolakoğlu Group Joint Venture.

Shareholder as of December 31 2017

TEB Holding A.Ş.*

Shares ownership paid in capital (€)

24,000,000

Share

100%


2017 Overviewand 2018 Outlook


2.1. Message from the Chairman

As for the previous years, 2017 was a year where TEB maintained its strategy to support the realeconomy of Kosovo through its banking operations and strive to support its customers with adedicated high quality service standard which they have been used to.

To our Customers, Business Partners and Shareholders,

We continue to developing resources that serve all our customers in all segments of the economy with a high standard of financial and corporate responsibility.

TEB, one of the largest players in the Kosovo banking sector, reported in 2017 strong results, increasingits assets base by 13.1% to reach €486.7 million, expanding its loan portfolio by 11.1% to €365.4 million and growing deposits by 14% to €380.4 million.

To meet the growing needs of our customers, we continued to develop products and services with easier access to all financial services to individual and corporate clients. TEB objective is to maintain healthy and profitable growth and revenues, keep a low cost of risk, and a sustainable leadership position in the banking industry. To achieve this goal, we continued to grow in all sectors with a specific focus onagriculture, SMEs, individual entrepreneurs as well as startups. In those areas we have developed a good relationship with international institutions. TEB has strengthened its leading position in retail banking, and especially in credit cards.

In term of innovation, the Bank has succeeded to transfer more customers from conventional bankingchannel to digital ones. This strategy will be pursued.

TEB is proud to have been recognized through awards by well-known organizations, the Banker, Euromoney and European Bank for Reconstruction and Development (EBRD), we owe those awards toour customers, partners and employees with whom we have developed trust and confidence. We wouldlike to thank all of you for this.

Finally, we would like to thank all our employees and our stakeholders for their dedication and supportduring this year.

Jacques Roger Jean Marie Rinino

Chairman of the Board of Directors


2.2. Message from the CEO

I am delighted to inform you about another exceptional year for TEB. As a result of the great efforts of the management team and all of our employees, TEB continues to build on its strength with a leading role with its products and services that add high value in every phase of economic and business activity.

To our Customers, Business Partners and Stakeholders,

I am very pleased to report that we continued our support of the Kosovo economy throughout 2017 andwe further enhanced our expertise and leadership in our priority sectors. We delivered a healthy growth performance based on sound principles. We achieved a record in net profit of €13.9 million in 2017 with return on equity of 35.7 per cent compared to 51.1 per cent in 2016. Total assets at the end of the year were €486.7 million compared to €430.2 million in 2016. The Bank is well capitalized, has a strong deposit base and a well-diversified client base, all of which we believe makes us well-positioned to take advantage of future business growth opportunities.

We continued to offer innovations and opportunities that make difference in our customers’ lives during 2017:

• We continued to organize Business Academies through the year in different cities and municipalities of Kosovo (Peja, Pristina, Gjakova, Ferizaj, and Mitrovica) which are part of non-financial services that TEB offers to its customers with the aim of spreading contemporary practices of doing business and capacity building. The objective of these Academies, as well as those of the past, is to offer to all participants new opportunities to exchange experiences with prominent professors and consultants from Turkey,

• On the occasion of International Women's Day March 8th, we organized an event to promote women entrepreneurs, which was followed by networking opportunities among this community.During the event, some of the businesses funded by TEB have exposed their products. The businesses were of different domains and diversity of activities was noted among women entrepreneurs. Furthermore, on April 27th , we organized “Women in Business” seminar in Prishtina with the European Bank for Reconstruction and Development (EBRD) and Frankfurt School. On May 30th, TEB and the European Bank for Reconstruction and Development (EBRD) continue with the series of non-financial services for women entrepreneurs, second seminar on “Women in Business” in Gjilan. During the year, they are repeated in Peja, on September 28th, and in Gjakova, on October 11th,

• We opened a new branch in Ferizaj by redesigning the branch with new technology. By considering the importance of the investment in digital banking as being the driver to increase customer acquisition, cross-selling and satisfaction, we have inaugurated the start of operations ofthe new branch in the town of Ferizaj, thus continuing the expansions of new units to serve customers. With the new branch, customers can perform services 24 hours a day through ATM terminals within the facility, allowing


them to withdraw or deposit money, as well as providing means of access to online services through alternative channels such as E-banking and TebMobile.

• We again have supported the Kosovo basketball and football national teams this year. Following the support provided during Eurobasket 2017 qualifications, the Bank has also decided to support the KBF in their pre-qualification phase for the 2019 Basketball World Cup in China.

• We are extremely pleased that TEB Sh. A has been recognized as best bank in Kosovo once more in 2017 by prestigious publications, such as The Banker-Financial Times and Euromoney. In addition to these, projects of TEB for women entrepreneurship have gained high rating from EBRD (European Bank for Reconstruction and Development - EBRD). At the EBRD annual meeting (European Bank for Reconstruction and Development) held in Cyprus, TEB has been awarded with the “Gender Award”. This award comes following the active joint programs between TEB and EBRD for women in business. All these awards are external industry acknowledgements of our Bank and its achievements. In this regard, I would like to use this special opportunity to thank all our staff for their contribution in Bank’s overall performance which has resulted in all those prestigious rewards.

Besides, in the period ahead, I can remark that we will continue to diversify our services that addressconsumer needs and expectations, while at the same time, increasing the number of active customers; and additionally we will continue o support Kosovo’s growth with its key focus on creating value. Ourgreatest resources in this quest are three-fold: the dedicated efforts of our staff, comprised of the bestprofessionals in the sector; the continuous support of our shareholders; and our strong synergy with all our stakeholders. I would like to take this opportunity to offer my sincere gratitude to all our invaluableemployees, shareholders, and stakeholders.

I am looking forward to sharing the results and delight of many other accomplishments with all of you in the coming year, with the backing of the deep-seated banking experience and the business culture of our shareholder BNP Paribas.

Orçun Özdemir

Managing Director


TEB Sh. A in 2017


3.1. TEB in Figures

Balance Sheet Indicators

Income Statement Indicators

Profitability Ratios

Solvency & Liquidity Ratios

Other Indicators

2017 2016Increase\(Decrease) Percentage


3.2. KEY FINANCIAL INDICATORS

The fruits of continuous prudent portfolio management, well balanced risk and growth strategy and enduring customer satisfaction resulted in exceptional profit figures, steady loan portfolio growth and further market share increase in 2017.

At year-end 2017, the Bank’s total assets reached €488.519 million, increasing by €59.3 million or 13.8% compared to 2016, keeping the bank’s asset size at the targeted level. The gross loan portfolio increased to €376.511 million, an increase of 6.8% or a volume increase of €23.8 million on the previous year’s. Gross loans now comprise 77.1% of total Bank assets in TEB’s balance sheet.

The Non-Performing Loan (NPL) ratio (loans over 90 days in arrears) at the end of 2017 was 2.5% compared to 6.1% in 2016, a decrease of 367 basis points. Total customers’ deposits at the end of 2017 reached €381.1 million, an increase of €46.6 million or +13.9% compared to the end of 2016. Shareholders’ equity increased from €71.3 million in 2016 to €87.9 million in 2017, due to increased retained earnings during the year. Altogether this represents a 23.4% increase in shareholders’ equity compared to 2016.

13.8%€59.3M

Increase in total assets (€488.5M total)

23.4%€ 16.7M Increase in shareholders’ equity

(€87.9M total)


Income statement indicators also show slight decrease in performance compared to the previous year. Net interest income reached €27.6 million, a decrease of €1.4 million or -5.0% compared to 2016. Net non-interest income amounted to €6.8 million, an increase of €0.2million or a 2.8% increase in comparison with 2016.

The cost-to-income ratio in 2017 increased further to 55.3% from 48.4% in 2016. Net banking income at year-end was €35.3 million compared to the €36.0 million realized in 2016. The Bank ended the year with €16.6 million profit after tax compared to €18.3 million in 2016 or decrease of 9.2%.

In terms of profitability indicators, at the end of 2017 the Bank generated a Return on Equity (ROE) yield of 24.0% compared to 35.7% in 2016, while Return on Assets (ROA) stood at 3.4%

compared to 4.3% in the previous year. The Net Interest over Average Interest Earning Assets ratio was 7.3% compared to 8.3% in the previous year. As for bank capital management at the end of 2017, the Bank’s Capital Adequacy Ratio (CAR) was 21.01%, exceeding the Central Bank of Kosovo (CBK) minimum requirement of 12%, and up from 19.7% at the end of 2016 due to increased retained earnings during the year. The Liquid Assets to Total Assets ratio stood at 22.1% at the end of 2017 compared to 19.5% in 2016, while Risk Weighted Assets (RWA) reached €423.0 million, up from €388.5 million in the previous year following growth in the loan portfolio during 2017.

In 2017, the Bank has opened one branch, increasing the total number to 27 (2017: 27) while the number of employees increased to 593 compared to 580 at the end of 2016.

The Bank ended the year with €16.6M profit

after tax compared to €18.3M in 2016 decrease of 9.2%


Business Units


4.1. Individual Banking

In 2017 TEB Sh.A has strengthened its position as the leading actor in Kosovo Banking Sector and Retail Banking’s customer groups in all products area.

During 2017 Retail Banking has shown a significant increase in Loan Outstanding in amount of €17 million or 13.8% net growth in comparison with year 2016. The biggest effort in loan development has come from different campaigns (50 campaigns) which were advertised massively during 2017. As a result of loan campaigns and system improvements, we were able to increase our market share to 21% with a €17 million net increase in loans with a consistently low risk in NPL.

In terms of deposits, the year 2017 has been one of the most successful years of Retail Banking. Net increase in deposits was €31 million or 13.7% net growth in comparison with year 2016.

The bank can offer all products that are important in making customer finances simpler and more secure and in finding solutions together with the customer. Production tasks and solutions are becoming digital and we believe there is a need for advice and a sense of security in financial choices among all customer groups of this business line.

In 2017 we have paid much more attention to ensure the right activity in all functions in all channels. Our business has a strong standing among our customers and shows a good trend in customer satisfaction.

We achieved a lending growth of 13.8% per

cent. What distinguishes last year's growth from more normal years is that a higher proportion of the growth is down to new customers. Some competitors' decision to close offices in parts of our region gave us an opportunity to bring in good, solid customers with good risk profiles – and we took that opportunity. The increased activity has also been devoted to enhancing product coverage across our 300,000 retail customers. A good trend in product sales and across all channels was noted in 2017.

In addition to following the industry’s norms and requirements on good advisory practices, we must, as a bank contribute knowledge and insight that continuously improve the quality and relevance of advisory content to our customers. Our strongest part is our ability to meet an ever larger part of our customers’ needs for financial services in an industry in which many actors focus on selling individual products.

We believe that maintaining a strong local presence with relations to our customers gives the bank a business advantage. On a general level we develop a splendid digital bank staffed by competent customer advisers in many, but cost-effective, locations across our region. Customer acquisition is one effect, but we also see that it has provided and will continue to provide us with even stronger advantages in terms of developing product coverage, long-lasting customer relationships, positive margins, ensuring a better basis for delivering services and relevant initiatives and achieving higher customer satisfaction.

Year 2017 has been the focus of the recent development of alternative distribution channels. ATM has been the main focus where we have added many extra functions that have


improved customer service and as a result we have managed to reduce branch transactions.Significant developments have also occurred in the product of TEB Mobile and E banking where are added many new features and as a result we have managed to increase transaction through these channels.

What’s next?

Expectations for 2018 are ambitious. Our 2018 budget is expected to be focused on loans, deposits, cross sell and digital banking, based upon the principle of growth and meeting the medium and long-term objectives.

It is worth noting that Retail Banking in 2018 will bring innovation to the banking market with new and innovative products and services. One of them is Merchant Loan and SMS Loan, which are the digital platforms and facilitate the way of applying for a loan, which directly affects the quality of customer service.

Green Loan is one of the new products that will be launched in the first quarter of 2018. We will enable customers to apply for a green loan, which is specifically designed to encourage individuals to make more energy – saving improvements on their homes by granting them with up to 20 % of their investments.

The result, in the future as at present, will be that we acquire many, and appropriate, customers, strengthen cross-sales and synergies with other parts of the group, enhance product coverage, deliver one service expectations, enjoy high customer satisfaction – and by this means to achieve best profitability.

4.2. Card BusinessWith over 9,000 new cards approved during 2017, StarCard remains the most used and pre-ferred credit card in the market. Our position as the customer’s first choice gives us an even greater responsibility to be wherever our cus-tomers are and to listen actively to their needs. Unrivalled competence, expertise, active listen-ing and implementation capabilities have once again proved to be the key to another notable year for our card business. By blending custom-er needs and new technological developments, we have continued to introduce new products, expanded services and new utilization channels so that our customers can bank at their conve-nience, wherever they are and without the lim-itations imposed by traditional banking hours.There are more than 300 card campaigns orga-nized by TEB where half of them are organized in corporation with our merchants which allows us to create strong relationship with merchants and bring the best offers to our clients. There are various campaigns organized, extra bonuses, shifting, extra installments and premium prizes like a brand new Harley Davidson, just to name a few.

We have distributed over 500,000€ in bonus points on cards or as bonuses in other forms.

In 2017, Kosovo’s market had an increase of 3.3% in total POS Turnover, while 72% of the total in-crease has been contributed by TEB POS termi-nal network. This significant development shows the commitment of our bank on POS network ex-pansion and activation of card users with various bonus driven campaigns. Also there have been investments on POS Terminals, replacing the old models with new contactless function, main-taining the leadership on POS numbers in Kosovo


market with over 4,000 POS covering more than 2,000 merchants. While our total POS turnover had an increase of 5.6% compare to 2016 maintaining the leader-ship in market with 42% of market share in Koso-vo. Since TEB POS terminal network acquired MasterCard, “not on us payments” (cards not is-sued by TEB) increased by 64% from 2016 in TEB POS, making our POS most desirable from our merchants and abroad clients.

Fast & Secure is what we aim with our cards. With MasterCard Contactless transactions are done within 5 seconds. Contactless payments up to 15€ are done pin less, while above 15€ up to 100€ pin is required on contactless transactions. This function makes the clients use their cards even on small amounts and saves their time.

Security of cards is one of our biggest priorities therefore regular investments are being made on the infrastructure of our network. This is man-aged by our highly vigilant real-time monitoring team. We believe the security of transactions is one of our undoubted successes, as attempted fraudulent transactions using our cards and in our network remains well under sector trends.

Visa 3D Secure makes online purchases and payments safe and fast with our debit or credit cards.

As technology becomes even more sophisticated, card fraud around the world is proliferating at a dynamic pace. TEB has invested heavily in ad-vanced security for our infrastructure network. We believe the security of transactions is one of our undoubted successes, as attempted fraudu-lent transactions using our cards and in our net-work remains well under sector trends. TEB Bank Sh. A., one of the leading and innova-

tive financial institutions in the banking sector, which provides special attention to its clients, introduces something new for all bank clients. In order to facilitate customer service, MasterCard are accepted at TEB Bank’s POS terminals and ATMs. During 2017 TEB increased the number of ATM deposits. Covering each branch with ATM deposit and main locations for offsite ATM, such as shopping malls, city center.

With the dynamism of life and global trends, the speed of payment service delivery represents a challenge to all, while in order to improve quali-ty TEB Sh. A introduced the Contactless payment system. Apart from this, our clients can pay with MasterCard at TEB Bank’s POS terminals with the new Contactless method. The main goal of TEB Bank continues to be the improvement of the level of services to its clients, and it believes strongly in the value of the services that it con-tinues to expand in order to make clients more satisfied with these services, but also offer-ing services of the most advanced levels in the banking market. We care so that our clients re-ceive the most professional service they deserve, because we believe in the values of innovative and indispensable services in the banking sector.

Believing in the value of services with transpar-ency, we provide these services with maximum correctness for our customers, because we try to follow the newest trends in the banking sector.

With a growing customer base, the need to guar-antee better services is a priority. So we have expanded our direct sales team and its activities. We are now even closer to customers and able to respond faster and even more reliably to their needs. The direct sales team is also available to provide information on special offers to which the customer may be entitled. It also advises on


new products and services made available by the Bank to clients and which we think may be of in-terest and benefit to them. Throughout the year and in partnership with merchants, the Bank ini-tiated numerous personalized campaigns, offer-ing various propositions that feature additional installment plans, discounts, grace periods, and bonus products.

What’s next?

As the e-commerce business keeps growing in Kosovo, we are developing an e-commerce platform that will be unique in our market. Our platform will allow StarCard users to purchase online with up to 24 installments without com-mission, for the first time in our market or re-gion. As the leaders in card business and with the unique e-commerce platform, we are aiming to being the best option for merchants and cli-ents for domestic online purchases.TEB is constantly following and investing on the newest card business features that are trend-ing globally. This is allowing us to maintain the leadership in our market and be the best option for customers and merchants.

4.3. SME BANKINGAs an important segment for Kosovo’s economy in terms of generating employment and introduc-ing new ideas in the market, the SME segment once again drew the interest of the commercial banks in the banking sector. In this situation, the SME segment in TEB invested in its sales activities and operations in order to generate a healthy growth, effective NPL management and expansion of its relations with its client base.

In this regard, 2017 was another successful year for SME in TEB as the segment managed to in-crease its loan portfolio for €9.5 million or 7.7% and its deposit portfolio for €5.6 million or 8.3%. These numbers demonstrate the commitment of the bank to the SME sector and the positive response of the market on TEB's concept and business model. Simultaneously, positive results were achieved in the NPL management as it de-creased from 9.7% to 4.1% (write off included). In order to achieve these results, several strate-gies and approaches were employed. The strat-egies and approaches ranged from organization-

In 2017 and as part of our social responsibility,

we continued to highly recommend the e-statement option to

customers.

As in previous years, during 2017 TEB

continued to invest in SME sub-segment that correlate strongly to

the country’s economic development.


al changes, new partnerships, new approaches in campaigns and added focus on client needs. Thus as one of the main developments, the de-partment was re-organized in regional basis as different branches were grouped in two main re-gions. The idea behind this re-organization was that a higher efficiency will emerge as the com-munication with branches will concentrate and on the other side the sales insight and activities will be more focused. The results of the change were positive as both regions realized growth.

Through the Agro department the bank was also very active in crediting and developing the Agro-businesses. This segment is especially important for balancing the economic development as it provides opportunities to inhabitants in rural ar-eas to utilize the land and create value for them-selves and the society. TEB tried to capitalize on the sectors strategic importance for the country and through its know-how and sales activities managed to generate growth and increase mar-ket share. In this regard, the government sub-ventions in the forms of grants played an im-portant role as €1.6 million of loans were issued to finance grant receivers and their projects. The department was also active in designing tailored campaigns such as seasonal campaigns and campaigns with clients that were attractive for the market and supported different investment activities of the clients. In this regard the de-partment managed to realize a growth of €2.7 million and on the same time managed to de-crease the NPL from 5.9% to 4.8%.

A very significant support for the increased cred-iting in the SME segment was the guarantee fa-cility that we had with Kosova Credit Guaran-tee Fund. At the end of 2016 the bank signed an agreement for a limit of €5.0 million guarantee that would be utilized for overcoming collateral

challenges of the SME clients and increases the access to capital. The guarantee facility proved to be a very valuable tool as in total 240 loans were disbursed through it in a total amount of €10.2 million The crediting activity through the guarantee facility is in line with the departments strategy of increasing the access to capital for fast growing SME’s that would contribute to in-creased employment and higher competitive-ness in the market.

The increased crediting activity was also sup-ported from improved operational processes in loan proposals. The bank aims to achieve a simple and efficient process where each request and interaction of the client with the bank will be processed as swiftly as possible. This will contribute to better quality of service, higher efficiency within the bank and capitalization on commercial opportunities on the client’s side. On the activities related with non-financial ser-vices, the bank during 2017 continued to con-tribute to the enhancement of management ca-pacities of the SME companies by sharing best practices through its programs. Thus, the bank organized 5 “Business Academies” that focus on challenges and opportunities arising from glo-balization, the importance of strategic planning and growth management. Simultaneously, the bank was active in promoting the women en-trepreneurship program as in partnership with EBRD it organized 10 Women in Business” events where through a tailored content it continued to empower women to engage in business activ-ities. As a result of its continuous investments and advancement in the “Women Entrepreneur-ship” program, the bank was recognized with the “Gender Award” from EBRD in the annual meeting held in Cyprus. The program was also recognized from the Global Banking Alliance


for women association who invited the bank to share its program as a best practice in the an-nual meeting of its members which was held in London. These recognitions make us very proud and provide additional incentive on continuing with program advancements and new programs of this nature.

In aspiring to extend and advance its alterna-tive delivery channel, the bank focused a lot on promoting the different features and services of its E-banking channel. The platform offers a very user friendly experience on a wide range of func-tionality that both saves time and bank expenses for the client. In this regard, one of the services that was highly promoted and received positive-ly from the market was the salary processing through Business E-Banking. Through this fea-ture, the bank was able to further enhance its cash management services and contribute to the service quality towards its clients.

The business e-banking and alternative delivery channels will remain a focus for the bank in the coming year, as well as, more features will be added that will improve the costumer experi-ence of our clients.

As a novelty, the launch of Business M-Banking is expected to increase the value of the relation-ship with our bank as several services such as money transfer, tax and custom payments will be available. A special focus will be dedicated to the acquisition of - cash management of SME businesses as the bank will target their turnover and salary payments through specially designed campaigns. We are very confident that our mul-tiple strength places the bank in a favorable po-sition to capitalize the opportunities in the SME market and grow sustainably.

What’s next?

The achievements and positive results of 2017 both in terms of numbers and business devel-opment encourage us to continue with the same ambitions 2018. The bank will continue to offer solutions and access to finance to SME’s with the aim of capitalizing on their dynamism and new ideas for the market.

Intensive focus was dedicated to the development

of the Women Entrepreneurs

program which aims to stimulate higher

participation of women in business.


4.4. Commercial and Corporate BankingThrough its close relationships with clients and solution-oriented approach, TEB Sh. A. is a highly visible player in the commercial and corporate segment. At TEB, we recognize that this particular cli-ent segment is the most complex in terms of needs and as such we have developed a strategy of tai-lor-made solutions and advanced cash management services to provide our clients with a value added system that also benefits the Bank. As in previous years, our strategy in 2017 focused on growing our market share and profitability. The latter proved challenging as the market dictated a significant drop in interest rates whereas the limited number of clients in this segment demanded a proactive approach from the Bank. The department achieved a €6.3 million growth in loans, or an increase of 9.1% compared to the previous year. The market values the Bank’s quality offering in services, such as transfers, POS payments and other transactions. We continued to provide advanced cash manage-ment solutions, such as an expanded POS network, differentiated business-related debit and credit cards, and state-of-the art business e-banking with many features and options. Expanding alternative delivery channels and enhancing cash management solutions is an important strategic approach for the coming years as the business market is seeking more efficient and broader partnerships. One of the most innovative payment channels in the market which we have launched during 2017 is invoice payments through SMS.

One of the Bank's special priorities in 2017 was enhanced efficiency in operations. We have invested considerable time and effort in promoting the vast range of options and the multiple benefits business e-banking has to offer. This initiative proved quite successful as many clients adopted e-banking for their day-to-day banking needs. As a result, 71% of total national transfer transactions were conducted using e-banking, while increasing for approximately 4% international transfers using the same channel to 70% of total international transfers transactions conducted using e-banking. This shift in customer behavior represents a significant achievement for the department as it also reduces the workload in branches and enables branch teams to spend more time on advisory and support for customers. In strengthening the relationship with clients, the Bank continued offering non-financial services in the form of business advisory to corporate clients. This shows that the scope of cooperation with corporate clients is constrained only by creativity and imagination as the opportunities are endless.

What’s next?

We are committed to increase our cooperation with the corporate segment and we have a clear idea on how to achieve this objective. We will continue to launch new cash management products in 2018 to ease life of our corporate clients and also achieve efficiency improvement through our operations. As a bank, we will continue to rely on innovation and customized solutions to achieve a higher share of our corporate clients’ business and increase our market share and profitability. At the same time, we will be actively targeting projects in the production and export sector as they are seen as strategic for further corporate growth and also for the overall growth of the economy. We will continue to be aware of our responsibilities in a growing economy.


4.5. Trade FinanceTEB Sh. A. understands that international business in a globalized world is a challenge - success demands extensive professional knowledge and an effective network. TEB has both.

During 2017, we continued to support our customers by creating and adapting trade finance solutions for their business needs. Moreover, we worked consistently on expanding our networks, strengthening relationships with other banks, and further enhancing our high standards of professionalism and competence. Supported by the BNP Paribas and TEB A.Ş. global presence and expertise in international trade, we are continually broadening our geographic cover and product range.

Trade Finance products for documentary operations include import and export letters of credit, discount on letters of credit, national and international guarantees, stand-by letters of credit and collections. The agreement signed in 2011 with the International Finance Corporation’s (IFC) trade facility program has provided us with a great opportunity and even more flexibility in responding to demand related to confirmed letters of credit and counter guarantees. During the reporting year, we also further expanded our relationships with new correspondent banks.

TEB Sh. A. has maintained consistent support for its clients and it aims to always be the most reliable and preferred business partner in Kosovo, by continuing to share professionalism and expertise in trade finance products to its clients and also providing innovative solutions.

What’s next?

In the coming year, we will continue to support our clients by providing a safe bridge to new opportunities. Professionalism and expertise will be our guidelines as we see these as differentiators in a fast-moving world. We are also aiming to add new international trade products to our range in 2018.

4.6. Payment SystemsTEB pioneered the Direct Debiting System (DDS), a unique product in the Kosovo market that is designed to support B2B commercial cooperation. Its core function is to improve our business customers’ financial liquidity by offering complete management of receivables and payables.

It is considered the most effective cash-flow management system as it is supported by cutting-edge technology and interfaces to facilitate complete and automatic invoice payment processing. This allows customers to authorize us to automatically debit (withdraw) funds directly from their bank account to make various monthly payments to different public and private companies. Only an authorization form (signed by the customer) is needed and the related transaction will be performed automatically.

DDS customers are provided with a dedicated credit line that facilitates payments to suppliers and guarantees that invoice payment terms are fully respected. The next logical step was the introduction of DDS discounting that guarantees receivables. By applying DDS discounting, the customer consolidates finances and benefits from early collection of receivables. Our ultra-


modern online e-banking service employs the most advanced security systems and gives access to secure, convenient and time-saving banking services 24/7. Our customers can transfer funds electronically to beneficiaries worldwide and process national payments, including utility and other regular debits, such energy, water and telephone). Moreover, customers can also make their Tax Administration of Kosovo (TAK) payments automatically using e-banking.

The RTGS – Real Time Gross Settlement System project was completed successfully in July 2016 and all national payments including the high value payments are now processed in real time.Today, rapid and safe international money transfers are of paramount importance for customers with cross-border ambitions. That is why we provide a service that is the easiest, fastest and most reliable way to make international payments.

Through our extensive network of over 50 foreign correspondent relationships and 10 placement banks, outgoing international payments can be executed to foreign beneficiaries worldwide. As a member of SWIFT, the world’s largest payments network, our customers enjoy a clear advantage, especially in international outgoing payments. International incoming payments can be managed using the same system. This means we are able to offer market-leading payment services, also through highly efficient internal operations and the continual expansion of our global network.

In 2017, we again received an award the high quality of our International Outgoing Payments from KBC Bank NV, Belgium. We achieved the extraordinary rate of 98% STP. The award recognized transactions in 2016.

4.7. Treasury & ALM (Asset and Liability Management)

TEB Sh.A. Treasury & ALM department is responsible for effectively managing the cash flow, liquidity and balance sheet risks of the bank according to limits that are set by the international and national regulators. Department’s role is crucial to ensure the continuity of the bank’s daily operations and being in line with the identified risk levels that require constant fine tuning with the developments and the expectations in the markets and the economy.

It is extremely important that the bank has the required level of liquidity in all active currencies to be in the service of its customers and meet with all of its obligations with the minimum possible cost. This is being done by effective daily cash flow, medium and long term liquidity management by using the department’s exclusive access to national and international capital and money markets.

Interest rate gaps and FX risks of the balance sheet that are inherent due to nature of the business are also being managed by the department by using various on and off balance sheet hedging instruments.

Today, rapid and safe international money

transfers are of paramount importance for customers

with cross-border ambitions.


Treasury & ALM has a very strong risk awareness in conducting its businesses that is in line with the prudent approach of TEB Sh. A. In order to do this the department tries to maintain optimal funding mix with consistent liquidity and interest rate gap management in accordance with the balance sheet targets, business strategies and economic expectations. Moreover, in terms of risk management, Treasury& ALM manages the assets and liabilities by continuously analyzing potential risks and market opportunities within the framework of rules established by the Central Bank of Kosovo, the Board of Directors and the Asset and Liability Committee (ALCO).

FTP desk within the department performs the Fund Transfer Pricing function for the Bank’s business units to guide and achieve in their business targets while protecting the profitability and centralizes the interest rate risk.

The Treasury Marketing desk serves customers in all segments with an extensive range of products that include foreign exchange transactions, forward foreign exchange transactions, foreign currency swap transactions, government bonds and bills.

The department enjoys the strong support of its both French and Turkish parent companies in controlling its risks and performing its duties.

What’s next?

Kosovo economy continues to outperform many other countries in the region, GDP growth in 2018 is expected to be around 4% and inflation as 1.8%. Banks are well capitalized and NPL ratios are the lowest in the region. These are causing for an increase in competition among

the financial institutions and system is growing even faster than GDP.

Political risks remain high worldwide and major economies are showing signs of heating up and central banks are preparing to take preventive actions. New liquidity conditions will eventually put more pressure on costs. New regulatory rules in line with the international standards are reshaping the way that the market functions more strictly.

Although these are indicating for a tougher 2018, contribution of production in Kosovar growth is rising, remittances are getting stronger, all economic indicators are performing in line with the IMF requirements. Government is planning to invest heavily to reduce the infrastructure gap. After the recent political improvements visa liberalization with the EU is expected to be finalized this year. IMF, World Bank, EBRD strongly supports the development and observing new interests from international names to move in to country.

Despite the harder market conditions, Kosovo will remain as a growing economy and continue to enjoy liquidity inflow while we will remain supporting the economy by ensuring the strength of our liquidity and solvency with our strict risk management and compliance principles together with utmost respect on national and international laws.


4.8. Human ResourcesHuman Resources Policy

Employees are TEB Sh. A.’s most important asset, as with their efforts help the bank to achieve its strategic objectives. The Human Resources Department strives to:• Having friendly working environment, open door policy, ensuring a synergy among teams with the aim of crating best working environment for our employees. • Recruit and retain dynamic employees that are willing and ready to adapt to our dynamic working culture, who are good team members and have potential to grow.

• Training and development of employees with our in-house and external programs as well as continuous training programs of BNP Paribas, so employees are informed about bank policies, procedures, processes, new products and services and are continuously updated with group requirements.

• Contributing to the development of our best performers while organizing development programs, with the aim of creating management pool for bank’s future needs, and making employees aware of their importance for the bank.

• Providing equal opportunities to each person during recruitment, transfer, advancement or development plans, on merit basis.

Bank had a successful growth on 2017 in the region thanks to the contribution of its young, devoted, energetic employees.

The main focus of the Human Resources policy

is therefore internal mobility, continuous development of employees’ skills and knowledge, as well as continued promotion of all forms of diversity.

Career Progression and Development

At year-end 2017, the full TEB team had 598 employees. Total 113 banking and financial services professionals were recruited during the year. In terms of geographical and functional mobility, 259 TEB people were promoted or given new challenges during 2017. While opening new positions we always gave a chance for change to our employees. 90 employees more were able to take up new challenges in different locations, and 7 existing employees were promoted to manager title.

TEB Sh.A. gives opportunities for employment and during employment offers equal opportunity for their development and future career plan.

Information about vacant positions is published besides externally, always also internally, with the aim that our employees are informed first about possibilities they have to apply in new positions or new location where the vacant position is, and as a chance for them to learn about career opportunities to show interest for.

During 2017 different internship programs were launched, where we strived to find the best students in the market and give them a chance to do an internship in our bank. Internship training programs were organized with the aim of offering students’ knowledge about bank in practice, and while doing on-job training enriching their knowledge about bank products,


services and processes. After the training period, the interns were given tasks and were engaged in daily duties, while being informed that if they show good performance they have a chance to be considered for future vacant positions. Those programs were very beneficial for the bank as well, as continuously we had potential candidates in our recruitment pool, and already a feedback for their engagement in practice as very valuable information to be considered.

The aim of the bank is to give a chance to best performers to be considered for managerial positions. Due to that, continuously during last four years we organized Assessment Center Program, and through it created the pool of potential managers to be considered for future bank needs. Total 65 employees attended this program during last four years, among which 23 have been promoted to managerial position; 14 of them appointed Branch Managers while 9 Managers in Head Office. The program continued with two Modules of Development Programs for all participants of Assessment Center Program.

The Assessment Center/Development programs were highly appreciated programs by the employees that attending it, it even changed their way of thinking and understanding management topics better, and increased their motivation and confidence while knowing they will be potential for future manager positions opened, and made them aware that the bank is acknowledging their performance, and believes they can and do have potential to offer even more for the bank.

During 2017, continuous training programs were organized, both in-house and externally; held by our management as well as by very well-known training companies. There were 128 training events with 5,941 participation training

days during 2017. 91% of these trainings were conducted internally with internal trainers. 15 candidates were out of country trained in external trainings, and 68 candidates were trained in external local trainings. Furthermore, continuously our staff visited TEB AS in Turkey for exchange of experience.

Special focus was given to mandatory Compliance trainings and all active employees where at least once trained in this topic in classroom. Moreover, on 2017 was also emphasized for refreshment training on Customer Satisfaction and Services for Front Office staff in all categories: Business, Retail and Operations, and, as well, preparations for New Entry Programme for interns to be launched on 2018. As per group requirements also all e-learning trainings and quizzes in BNP Paribas platform My Development were assigned and followed by HR to ensure completion on given deadline.

Also the in-house platform e-campus was used during 2017 for necessary trainings foreseen for staff, in order that they are aware of standards, changes and requirements of the institution in different topics for: Information Security, Operational Risk and Compliance.

Employee Benefits

Besides competitive salaries for the market, our employees are offered different opportunities for additional benefits based on their achievements. Sales Premium schemes are applicable, as incentive scheme for the best ones to be rewarded.

Also throughout the year special campaigns are launched and employees got a chance for reward


either monetary or materially for reaching the campaign targets. While applying those schemes we enhance the competitive spirit and differentiate on merit bases employee benefits.

Social Activities

We do care for our employees’ happiness and their motivation. Besides working synergy, we care that they have social activities to enhance their relations and think about how to arrange working environment to be friendlier. Due to that, management also created Staff Welfare Committee that was held in regular basis during 2017. Ideas for events to organize that would increase staff motivation were shared in those meeting, and the action topics decided were followed.

During 2017 those new activities/events were organized by HR:

• Coffee time with Executives - each month one Executive member had a morning coffee with selected employees. The aim of this event was that employees feel more close to management and that management hears their concerns as well. Executive members on those events shared their career way and challenges faced. Those events were considered very valuable for employees, as they felt the open door policy with management, and could share any concerns they have, as well as management got very good feedback for any possible difficulties employees stated and followed finding a solution for their concerns.

• Managers’ rotations - during 2017 HR organized each month a number of managers to visit different branches. The aim of those visits

was that managers that normally have office job to do, to visit branches while spending a day with branch staff, in order to understand their daily work, their concerns and challenges they face, while also offering them your support from your field of expertise.

• Halloween party- organized for children of our employees. This event was appraised as one of the most cheerful events organized. This event was held at a place with playground, presents and mascots, where children had fun while playing among themselves. While seeing their children happy, employees were having fun too.

• Happy Fridays - With the aim of staff socializing among themselves, a Happy Hour event was held in bank's restaurant with music. Such event will be held time after time.

• Bank announced on 2017 the program “Employee of the Month”. The purpose of the Employee of the Month Program was to recognize employees who have served TEB Sh. A. in an exceptional manner by exemplifying outstanding service through his or her work and exhibiting a positive and supportive attitude. Proposals for nominees are discussed and analyzed in Staff Welfare Committee, where the decision for the winner is taken. Employee chosen as employee of the month is announced to TEB All Users, certificate is given to employees and a symbolic gift to remember this event.


Other activities were organized throughout the year 2017 as well:

• Different parties:• Party in the nature• Barbeque party• Travel/ party in different places, including out of country , in Albania• Hiking – recreational walk • Football tournament held in Prishtina where the winning team was awared to travel in Turkey to attend the Tournament organized by TEB AS.

Employee Survey

During 2017, we organized the Staff Satisfaction Survey. The results of this survey showed us that employees are satisfied with their work, challenges they face, involvement, supervision, compensation, opportunities for advancement, trainings, and that they are proud to be part of TEB.

What’s next?

Human Resources team will continue during 2018 to:

• Give the full support of employees and management on recruiting and retaining best employees. It will be focused on development of employee skills and knowledge, and offer them new career paths and opportunities for internal mobility. • Will be organizing and following continuously in house and e-trainings, to make sure that our staff development is in line with groups’ requirements and standards. • Will arrange different internship programs to create potential pool of candidates for recruitment through initiation of agreements

with Ministry of Education and respective Universities, to target and engage best students who are in process of completion of their studies and possible candidates for the programme, with possibility to be recruited.• Will continue organizing staff activities / events to contribute to their motivation• Will finalize the new module for Performance Evaluation to be used for evaluation of 2018 performance• Enhance the training data maintenance through automatized training module.

4.9. Organization and Process Development

Through our corporate culture in which customer value and quality service is at the center of everything we do, we have continued to leverage our strength by further adapting our vigorous and risk-aware business model.

As a proud member of two strong international financial groups, we are taking full advantage of their wide-ranging expertise so that TEB can become even more robust in facing every challenge. We continued our efforts to embed Group values and strategies into our business activities and processes. The emphasis is always on compliance with laws and regulations, a strong culture of ethics, and the quality of services provided to our customers.

Policies and procedures are an essential factor for the communication of corporate values and professional standards. They serve as the cornerstone for the proper management of the Bank’s activities, compliance with regulatory and legislative requirements, control of the risks and the quality of services offered to customers.


As such, throughout the year, the Bank has invested extensive efforts in drafting and revising exhaustive policy and procedure documents, covering all its activities, to ensure these are of a high quality and align business strategies and business activities.

Customer satisfaction is at the heart of the brand image which in turn strengthens our reputation. That is why we have a comprehensive quality management program at Group level.

The priorities are to make customer satisfaction a central pillar of strategy to ensure that every contact with the Bank results in a greater appreciation for the Bank and a better image of our profession. It also aims to measure customer satisfaction and set targets for improvement. While listening to any expression of customer dissatisfaction. It supports our endeavor to respond quickly in the most appropriate way, and to protect the interests of clients by behaving in an exemplary manner at all times and by offering products and services which meet their needs.

We work in a dynamic banking environment. The bank continues to rise to the challenge of providing bespoke products and services to meet their needs. The initiatives for development and operational efficiency that we undertake are aimed at controlling and optimizing our processes in order to secure customer operations, and to improve the efficiency and speed of our services.

The operational efficiency program, its methodology and its principles, aims to enrich the customer experience and satisfaction by significantly reducing lead times while contributing to internal productivity.

What’s next?

Looking ahead, we will continue to optimize and develop essential organizational structures and process infrastructures in line with the Bank’s business strategy. Customer satisfaction and operational efficiency will remain one of the drivers for value creation.

4.10. Information Technology

Shaping our visions into technology always was a challenge, especially adapting for unique human behavior to shape the quality of the customer journey and the effectiveness of technology solutions. As IT Department our line was to initiate the change through simplicity is always a good way to guide customers.

In 2017, many projects were implemented to improve our services to our customers. We simplified the loan application and allocation process for business customers as well as individual customers. Besides that, we improved account opening process in order to serve to our customers faster and with higher quality.

IT is fast growing, changing sector in banking business, working hard to cope with clients , see through their eyes ; our strengths is giving priority to client perspective, changing things as they want to interpret things. TEB Mobile Application, E-Banking services, website and some products we offer are built based that.

While providing the services and products to our client’s security was one most important topics for us. Cyber-attack volume and types are growing in sector day by day, TEB Sh. A is working


hard to apply up-to-date security technologies to keep its information systems secure and under control. For this purpose, we implemented in 2017 new technologies and functions to mitigate security risks.

Achievements 2017 was productive year for department, many new services launched and so many of existing ones improved. We introduced our first digital branch concept with improved services in 2017. For Customs and Electricity payments, we enabled the SMS channel, so customers are able to make these payments with a simple SMS after being registered for this service. In addition to that, we added in our service list in our ATMs; i) the phone top-up transaction and ii) we enabled an option for our customers to verify and update own registered phone number. For card business, we started issuing in 2017 contactless cards of Mastercard, supported both in debit and credit cards.

Secure Banking and Strong InfrastructureWe closely monitor any security vulnerabilities both at home and abroad, taking action to protect the Bank and our customers accordingly. A number of upgrades in our production systems were completed to provide a more stable and more responsive infrastructure. A small but important practical change that contributes to our environmental commitment is the move to double-sided printing on all our printers. This is now standard practice at the Bank.

What’s next?

TEB Sha always keeps customer needs in the core while evaluating technology investments. Our aim is to provide the best services and alternative channels to our customers. Therefore we will focus on bringing new innovative services which will increase the value for our customers. Digitization is a crucial area we will invest in 2018. Not only in banking sector, in every sector daily basis we see and hear digital transformation. As IT department of the bank, we observe the new trends in the world and we choose the best solutions possible to present for our customers and market. With digitization, we transform our services and introduce new channels, as well as we improve internal processes in the bank. In accordance with this strategy, we will continue in enhancing our mobile banking and internet banking channels, by adding new features in these channels. Besides that, one of the projects in 2018, we plan to develop a new mobile banking application for our business clients. On the other hand, internally, we will increase the digitization ratio in internal processes for a paperless environment, which is aligned with our corporate social responsibility strategy.


4.11.Information Security and Data Protection

- Information Security

Even this year, the Bank maintained its main principle “Information Security is everybody’s responsibility”. That principle is improved and strengthened with newly added culture and programs as is Cyber Security Culture and Cyber Security Programs. Addition to that, the Information Security Committee Meeting frequency was increased. New SIEM solution was purchased for monitoring and intervention to cyber incidents. New controls are added for improving the Bank’s information security management system. Information Security Awareness trainings is kept as compulsory for all Bank’s Employees as well as new comers, in order to increase their awareness on information security and to instill cyber security culture to them. By reminder notifications sent each month, it is supported.

- Data Protection

The Unit acts fairly and lawfully while proceeding the personal data and respectful its privacy and rights. The Bank Data Protection Unit took appropriate technical and organizational measures against unauthorized or unlawful processing of personal data and against accidental loss or destruction of, or damage of, personal data. The Bank shows the same due care while transferring personal data to a country or territory outside the European Economic Area as well. The Data Protection Unit responds to each complaints and/or request of data owner in accurate manner and on time. Therefore, it is constantly in contact and in cooperation with the National Agency for Personal Data Protection. The Data Protection Unit aims to increase the importance of and awareness of the personal data. With this perspective, it performs ad-hoc control visits to the Bank’s Branches and organizes compulsory training program for all employees and newcomers in each year.


Management andOrganizational Structure

5.1. TEB Sh. A. Organizational Structure – (Functional Presentation)

*Reports to the Audit Committee of Board of Directors**Reports to the Risk Management Committee of Board of Directors


5.2. Board of Directors

TEB Sh. A. Board of Directors

Jacques Roger Jean Marie RininoChairman

Dr. İsmail YanıkVice-Chairman

Alp YılmazVice-Chairman

Ayşe AşardağMember

Birol DeperMember

Esra Peri AydoğanMember

Orçun ÖzdemirMember

Osman DurmuşMember

Sabri DavazMember

Tuğbay KumoğluMember

Governance

TEB Sh. A (the Bank/TEB) has a Board of Directors currently comprising eight members. All have extensive banking experience (please see biographies of members). The Board carries out its duties and responsibilities according to requirements set out in the Bank’s charter and Board of Directors’ By-laws and in line with all relevant legislation and requirements imposed by the Central Bank of Kosovo (CBK) and regulators. The Board meets at least quarterly.

The role of the Board of Directors

Although the details are defined in the Articles 26, 27 and 28 of the Law No. 04/L-093 on Banks, Microfinance Institutions and Non-Bank Financial Institutions, the Board’s primary task is to supervise the financial and business activities of

the Bank. It is responsible for defining the Bank’s organizational and administrative structure, its business policy including operational and administrative units, their sub-units and functions, supervisory positions and reporting relationships. Moreover, the Board is also tasked with the supervision of senior management activities. The Board of Directors determines and establishes the Bank’s banking structure and exposure levels, reviews and approves necessary adjustments and measures. Furthermore, the Board is responsible for adopting the report of senior management on business operations based on the semi-annual balance sheet, profit and loss statement, annual balance sheet and internal and external audit reports. Decisions taken by the Board require a majority vote from members who are either present or voting by proxy.


5.3. Committees

Committees of the TEB SH. A. Board

In line with TEB SH. A.’s Charter, regulations and the Bank’s requirements, our Board had appointed an Audit Committee, a Risk Management Committee, an Asset and Liability Committee, an Upper Credit Committee that are all made up of members of the Board with relevant experience and external experts. The Board can also establish ad hoc committees and determine their composition and tasks, where relevant and appropriate. As per Article 22 of the Charter of TEB SH. A., dated 24 June 2013, Committees may be selected from the ranks of the Bank’s shareholders, directors and employees, as well as from the ranks of other persons outside the bank, subject to any restrictions in the Charter. Committees shall not take decisions in lieu of the BoD or shareholders, but shall act as advisors to them.

Audit Committee

Sabri DavazChairman

Ayşe AşardağMember

Esra Peri AydoğanMember

Birol DeperMember

Nexhat Kryeziu (external expert member)Member


Duties and Responsibilities:

The audit committee has clear duties and responsibilities that are defined in the audit committee by-laws and are in line with relevant legislation and regulations

Its main tasks (not limited to) include:

• Recommending appropriate accounting, operational and administrative internal controls;

• Supervising the Bank’s compliance with policies and procedures;

• Requesting and reviewing reports from the Bank’s head of internal audit;

• Recommending compensation for the head of the internal audit department;

• Monitoring compliance with relevant banking legislation and applicable regulations or requirements;

• Recommending the appointment of an external auditor;

• Monitoring the performance of the external auditor, reviewing the external auditor’s report on the Bank’s financial statements and reporting any findings to the Board of Directors;

• Delivering opinions to the Board of Directors on any matters submitted to it by the Board of Directors, or that the committee wishes to address; and

• Approving internal audit plan of TEB SH. A.

The Audit Committee meets at least quarterly.

Upper Credit Committee (CRECOM)

Osman DurmuşChairman

Haluk KırcalıVice-Chairman

Alp YılmazMember

Alp ÖzateşlerMember


Duties and Responsibilities:

This committee is authorized to take credit decisions on amounts between €500,000 and €2.5 million.

Upper Credit Committee (CRECOM)

Dr Ismail YanikChairman

Orçun ÖzdemirVice-Chairman

Alp YılmazMember

Tolga GürdemMember

Serhan ÖzarslanMember

Duties and Responsibilities:• Monitoring financial markets, checking the situation, movements and changes in the Bank’s balance sheet and taking decisions, all in accordance with the Bank’s Policy and Procedures;

• Guiding and monitoring the Treasury and ALM Department’s operations on an ongoing basis and acting as the decision-making body as defined in the ALM committee by-laws;

• Supervising asset & liability management by the Treasury and ALM Department in terms of the following criteria:

• Ensuring the observance of external (regulatory) ratios set by the Central Bank of Kosovo (CBK) and internal rules set by the Board or ALCO;

• Monitoring minimum requirement reserves set by the CBK.

The Asset & Liability Committee meets at least quarterly.


Risk Management Committee (RMC)

Osman DurmusChairman

Alp YilmazVice-Chairman

Jacques Roger Jean Marie RininoMember

Duties and Responsibilities:The Risk Management Committee is responsible for monitoring all risk-related components and functions involved in credit, market, liquidity, operational, reputational, the Bank’s capital adequacy and other risks.

The Risk Management Committee meets on monthly basis.

5.4. Internal Audit

Internal Audit

The Board of Directors of TEB SH. A. established the Internal Audit Department in February 2013 as one of the key components in the Bank’s governance structure. Prior to that date, the Bank had outsourced its internal audit function to Turk Ekonomi Bankası (TEB) A.Ş. based on a Service Level Agreement (SLA) signed in 2008. The Bank continues to receive audit support from TEB A.Ş. through audit advice to the Internal Audit Department. Moreover, TEB A.Ş. carries out specific audits on selected activities based on pre-prepared audit plans. The Bank’s Internal Audit Department is independent and as such reports directly to the Board of Directors through the Audit Committee and on its own initiative if deemed necessary or appropriate.

The Internal Audit Department has an assurance function, helping the Bank to accomplish its objectives by bringing a systematic and disciplined approach to evaluating and improving the effectiveness of the control environment, including risk management, control and governance processes. It is Internal Audit’s responsibility to assess whether the control environment ensures that risks that could arise from the Bank’s operations are managed in a manner that enables an acceptable level of mitigation. Audit activities are carried out by the Internal Audit Department according to the audit plan, which is prepared at least on an annual basis using a risk-based approach consistent with the Bank’s goals and objectives. Each audit plan is approved by the Bank’s Audit Committee. The plan is updated regularly to


reflect changes inherent to the internal control system and to integrate new business lines. In the same manner, the responsible internal auditor develops and records a risk-focused plan for each audit task, which analyzes the inherent risk items and includes objectives, scope, timing and resource allocation.

The work of the Internal Audit Department is performed in compliance with the International Standards for the Professional Practice of Internal Auditing developed by The Institute of Internal Auditors, which is the governing body for the internal audit profession worldwide, and TEB A.Ş. audit practices.

5.5. Risk ManagementTEB Sh.A has a comprehensive and prudent approach to risk, its identification and continuous management. TEB Sh.A measures and monitors credit, market, liquidity and operational risk and other related bank risks using methods in line with group and international standards. The Risk Management department role is of the second level control and is organized within the framework of TEB A.Ş. and BNP Paribas risk management methodologies (GRM and IRB, respectively). The process is composed of risk identification, analysis, risk acceptance or mitigation and risk monitoring through establishing sound policies and procedures. Group Risk Management (GRM) supervises the overall risk management process within the group. TEB Sh.A Risk Management department works in cooperation with executive management to ensure that the risks assumed by TEB Sh.A are in accordance with the TEB A.Ş. GRM and BNPP’s IRB policies and are in line with bank risk appetite.

With this structure, the Risk Management department maintains its independence in its daily functions as they report directly to the Board of Directors through the Risk Management Committee (RMC) for which risk mitigation

directives are given.

Credit Risk

Credit risk is the most common risk the bank is exposed considering the local market structure and conditions. As definition, credit risk is the loss that may be incurred if the counterparty in a loan relationship fails, partially or entirely, to fulfill its obligations as stipulated in the loan agreement. TEB Sh.A is exposed to credit risk through its lending, trade finance, and treasury activities but credit risk may arise in other circumstances.

The Board of Directors through its power delegation credit authority has the final authority in the allocation of loan facilities and approval of credit policies. This power is delegated to the Upper Credit Committee and the Chief Executive Officer with certain conditions and limits. The exercise of these delegated powers is regularly monitored and reported by internal control, risk management and internal audit, as part of second and third line of defense respectively. The Risk Management department on monthly basis reports to Risk Management Committee- BoD level, the loan development on the portfolio level, including KRI summary, regulatory and BoD limits, loan delinquency, exposure by segment and industry, NPL trend, collection activities etc.

TEB Sh.A primary exposure to credit risk is through its loans and advances to customers. On the other hand, the concentrations of credit risk can arise when a number of customers are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be affected by changes in economic, political or other conditions. As a result of the prudent credit policy adopted by the Bank, the maximum loan limit that can be granted to a single customer or group of related customers is kept below legal limits, thus minimizing the risk of loan concentration and such limits set by the


Board of Directors are monitored and reported on a monthly basis to the Risk Management Committee.

As a general approach, a loan proposal assessment starts at the branch level, were branch portfolio officer visits the customers on the field and obtains financial statements and information related to the customer’s activities and investment plans. A credit loan proposal is prepared containing a commentary on the company’s financial position and other qualitative information’s such as: an industry analysis, information about the partners and managers, other stakeholders as well as references from other available sources. The first level assessment is discussed at the branch level between the portfolio and his/her supervisor and only afterwards it is then submitted to the Credit Allocation Division in HO that does an independent assessment of the applicant’s creditworthiness on individual basis and decides on the file or it forwards the credit file to the Upper Credit Committee for the decision depending on the credit limit request as delegated by the Bod.

After a loan facility is approved and allocated, the Credit Monitoring Department on quarterly or semiannual basis monitors the customer’s investment plan, repayment capability, cash flow in bank account, other bank debts, overall sales trend etc. On the other hand, Credit Quality Unit within Credit Allocation is responsible to follow the credit committee conditions if they are fulfilled by the customers and provides the close follow-up of such conditions. With this approach, the problematic loans are identified at the early stage.

Internally, the bank is also applying credit rating score for its legal entities that contains quantitative and qualitative information’s. Should the credit rating and/or the quality of the collateral raise any doubts, the customer is then closely reviewed and monitored.

Quarterly credit stress testing is another important component in understanding possible events or changes in the market that could impact the Bank’s balance sheet by simulating different default scenarios on the existing bank portfolio.

Regarding the credit control process, the bank implements on regular basis the FMP (Fundamental Monitoring Points) which is BNPP requirements on credit control and based on monthly and/or quarterly samples review the global rating score is generated and action plans are defined in case the rating is equal or over > 3.

Moreover, with the implementation of IFRS 9 from January 2018, the bank besides its 12 months Expected Credit Loss should also calculate impairment for its financial assets for the Lifetime Expected Credit Loss, as a new approach to predict future losses.

Market Risk

Market risk involves possible losses a bank may incur as a result of the exposure of its balance sheet and off-balance sheet accounts to interest-rate risk, equity-position risk or exchange-rate risk resulting from fluctuations in the financial markets. TEB Sh.A’ market risk management is designed to manage and control market-risk exposures in order to optimize returns while maintaining the Bank’s conservative risk profile.

Interest-Rate Risk

As part of market risk, the interest-rate risk arises from the risk that an asset losses value due to change in interest rates. Hedging against interest rates volatility is a top priority for TEB Sh. A.

Interest-rate risk is determined by measuring the rate of sensitivity of assets, liabilities and off-balance sheet items providing 100 basis point


+/- shock simulations over Net Banking Income which are done on monthly basis. As a preventive measure, the bank tries to match each deposit maturity with an asset of the same maturity. Moreover, IRR is monitored closely through GAP and Duration analyses. Possible negative effects of interest-rate fluctuations on financial position and cash flow are minimized by means of prompt decisions. When determining short, medium and long-term pricing strategies, TEB Sh.A Assets and Liabilities Committee manage maturity of balance sheet positions and adopt the principle of working with positive balance-sheet margins as its pricing policy.

Exchange-Rate Risk

Exchange-rate risk is defined as a possible loss that a bank may incur with all of its currency assets and liabilities in the event of changes in exchange rates.

Position limits determined by the Board of Directors are monitored on a daily basis and possible changes in the Bank’s monetary positions that may come about as a result of routine foreign currency transactions are also examined.

Liquidity Risk

Liquidity risk occurs when there is insufficient cash or cash inflows to meet net funding requirements when due. Liquidity risk may also occur when open positions cannot be closed quickly at suitable prices.

The Bank’s policy is to have an asset structure that is sufficiently liquid to meet all kinds of liabilities as they fall due. The Board of Directors regularly monitors and determines liquidity ratios and the relevant standards for maintaining high liquidity at all times. TEB Sh. A has in place an effective system for the timely reporting of the liquidity position to the Board of Directors, senior management and all related departments. Moreover, liquidity stress tests are

another important tool to measure bank liquidity at different business assumptions. Moreover, as part of Basel III directive, the bank on monthly basis calculates Liquidity Coverage Ratio, ensuring that the bank has enough short-term liquidity and is keeping the LCR ratio >100%.

Capital Adequacy

The Bank’s aim is to ensure it has sufficient capital to cover the risks involved in its lending business activities. The Risk Management department monitors and reports capital adequacy ratios to executive management and to the Board of Directors through the Risk Management Committee. As per the Banking Law and Central Bank of Kosovo regulations, there are three capital adequacy ratios that must be met at all times: Tier 1 capital over RWA of ≥ 8%; Total Capital over RWA of ≥ 12% and Total Equity over Total Assets of ≥ 7%.

Operational Risk and Business Continuity Operational risk is defined as the risk of loss that may result from inadequate or failed internal processes, people and systems or from certain external events.

The Risk Management department at TEB and its dedicated operational risk unit is responsible for monitoring operational risk events as defined by Basel Committee. The bank has in place a system appropriate to the nature, extent and complexity of the Bank’s business in order to effectively identify Key Risk Indicators and assess, monitor and control related operational risk events. The Operational Risk unit implements methods to assist other departments in identifying, monitoring, controlling and mitigating potential operational incidents. Operational Risk provides operational risk training for all staff, especially those who are responsible for reporting incidents to the Operational Risk and Business Continuity Unit, and assessing all processes in terms of operational risk and identifying risky processes.


Business Continuity, regardless of its type and reason, consists entirely of plans ensuring the continuity of the Bank’s critical business functions in case of any business interruption arising from internal and external factors. The Operational Risk and Business Continuity Unit are continuously engaged in defining, measuring and reporting risk to the Risk Management department. The results of Operational Risk and Business Continuity activities are reviewed and assessed on a monthly basis to the Board level Risk Management Committee.

5.6. ComplianceOur bank implements the highest standards and international best-practice methods in combating money laundering, terrorist financing and other acts punishable by law. All employees of the bank are committed to adhere to these standards in order to avoid that the bank‘s products and services are misused for the purposes of money laundering, terrorist financing and other acts punishable by law. Bank’s compliance policies and procedures are designed to ensure that our bank complies with the requirements set out in Kosovo’s legislation and industry best practices for the financial services sector by Central Bank of the Republic of Kosovo and BNPP Group standards.

Our bank is committed to act with integrity and responsibility in banking. We believe that in creating value for our customers, shareholders, employees and society, how we do business is just as important as the sustainability of our business model and growth. It goes without saying that adherence to laws and regulations and the highest international standards and guidelines is part of our identity and forms the foundation for how we do business. We set high standards of business integrity and ethical conduct aimed to increase the effectiveness of the compliance framework. In 2016 and 2017, there has been a constant increase in regulatory

requirements in Kosovo and at BNP Paribas Group Level where compliance management is becoming a top priority to be in line with these new requirements. The year 2017 was crucial for implementing new KYC Policy which is in line with new local laws and regulations as well as BNPP group procedures and policies. These policies, in other hand, are in compliance with 4th EU Directive on AML/CFT.

Our team spirit, commitment and the sustainable improvement of our efficiency are all aimed to safeguard the integrity of our institution. The bank’s code of conduct includes ethical business provisions that are aimed at managing preventing money laundering, terrorist financing and any other international financial sanctions. We are committed to adhering to strict laws, regulations and guidelines to combat money laundering, finance of terrorism, and to prevent violation of international financial sanctions.

Our bank applies meticulous mechanisms supported by automated monitoring systems, and the ‘Know Your Customer’ (KYC) Review process, Customer Due Diligence principles as well as risk based approach principles is on the top of our priority. The KYC Review process serves to update clients’ information in order to mitigate money laundering and terrorist financing risks.

In order to promote our AML Compliance Program and to ensure awareness and adherence by our employees, in 2017 we have provided trainings (including e-learning and special modules on key compliance topics) to all staff of the bank. Considering the importance of the fight against money laundering and terrorist financing as well as compliance with international sanctions, all staff receive training on regular basis. The modules of e-learning are available to all employees and can be adapted to the needs of our business lines according to job-specific requirements. Most of the disciplines covered by the professional modules are based on common notions of transparency.


In 2018 the main objective is to focus on strengthen risk based approach principles including but not limited to: KYC review, CDD and ECDD principles, implementing crucial projects to reinforce our IT infrastructure and cross-functional approaches to preventing money laundering, terrorism financing, prevention of international financial sanctions and similar projects which strengthens further our mechanism of KYC.

Our Compliance Division is leaded by Senior Manager and is independent from all other functions of the bank. The Head of Compliance Division reports directly to the Board of Directors through the Audit Committee which ensures the independence of the Division.

5.6. ComplianceThe Internal Control Department aims to ensure a sound internal control environment is in place at TEB SH. A. It handles essential coordination and makes surerelated activities are performed regularly, efficiently, effectively and in line with the Bank’s management strategies and policies, as well as with applicable rules and regulations. At TEB, the Internal Control and Operational Risk functions are structured separately. Within the scope of internal control, controls of critical activities at branches and head-office departments are carried out by the Branch Control Unit, Central Control Unit and Credit Control Unit.A controller performs his/her controls in accordance with check-lists that are prepared in advance and in compliance with internal and external rules and regulations. The check-lists are revised if any changes occur in internal and/or external rules and regulations.

Control points in check-lists are used for:

• Verifying proper adherence to internal rules and procedures and the consistency of internal rules with legal regulations and compliance with them;

• Contributing to safeguarding assets;

• Assessing the adequacy, effectiveness and efficiency of daily operations; and

• Contributing to the identification and assessment of risks related to the organization’s current and proposed future business activities, including new products.

The Internal Control Department reports directly to the Board of Directors through the Audit Committee on a quarterly basis.


Independent Audit Report at 31 December 2017 and Notes

to the Financial Statements

annual report 2017 - teb banka në kosovë · 2018-05-18 · teb sh. a kosova - 2017 annual report...

Documents