Analysis of risks and the exchange rate risk in turkish banking sector

The risks that arise in every moment of life are very important in financial markets, especially in the banking sector. Banks are required to increase their profits while managing their transactions and manage the risks they face. The aim of risk management is to describe and measure the risks then take measures against possible losses, rather than avoiding risks. The. Value-at-Risk (VaR) method, which is widely accepted and widely used in the world, represents the maximum amount of loss as a result of the risks that the bank may face. VaR aims to prevent possible losses due to risks and to avoid extreme losses in financial markets and to create a more stable process for those trading in the market. In this study covering the period 2012-2018, the exchange rate risks encountered in the Turkish Banking Sector were analyzed based on the foreign currency positions and the foreign exchange rates in the balance sheet. By using the net foreign currency position figures in the balance sheet, the legal capital requirements which have to be separated by parametric VaR method have been reached. In parallel with the increase in net foreign currency position amount and volatility, it is concluded that the legal capital requirement of the banks has increased and this situation brings additional capital burden on banks.