Page 25 - BKT Annual Report 2024 EN

Internal The Internal Control System (ICS)

Control consists of a set of rules, procedures and
organizational structure which aim to:
System • ensure that corporate strategy is implemented;

• achieve effective and efficient corporate processes;
• safeguard the value of corporate assets;
• ensure the reliability and integrity of accounting and data management;
• ensure that operations comply with all the existing rules and regulations.
The BKT Internal Control System lays on the 3 LoD model by bringing together risk-
taking, risk oversight and risk assurance under one umbrella.

Line of Defense (Control) Organizational Unit of Each Defense Line Control Type & Frequency
First Line Business Units Continuous / Based on the
transactions.
Risk administrations units, financial Continuous / Periodic Based
Second Line
control, compliance, etc. on risk.
Third Line Internal Audit Group Periodic / Based on risk.

The classifications and organization of the executive III. Internal Audit Group provides to the Board
Bank governance as per the three lines of defense of Directors and Senior Management
model is realized in compliance with the function of risk comprehensive assurance based on the highest
management within the Bank: level of independence and objectivity within
the organization. Internal Audit Group provides
I. The first line of defense owns and manages risks. The assurance on the effectiveness of governance, risk
units under the first line of defense are responsible management, and internal controls, including the
for maintaining effective internal controls and for manner in which the first and second lines of defense
executing risk and control procedures on a day- achieve risk management and control objectives, as
to-day basis. Operational management identifies, well as, follow up the recommendations left by the
assesses, controls, and mitigates risks, guiding regulator.
the development and implementation of internal
policies and procedures and ensuring that activities At the top of the three lines of defense model stands
are consistent with goals and objectives. The units the Shareholder Assembly/Sole Shareholder, Board
under this line are also responsible for implementing of Directors and the respective Committees which
corrective actions in order to address process and operate within the Bank. In BKT, the well-functioning of
control deficiencies. the “Three Lines of Defense” model is as a result of the
active support of the governmental bodies within the
II. The second line of defense has the primary role Bank and Senior Management. Concretely, there are;
to ensure that the first line of defense is properly
designed, in place, and operating as intended. o Clear lines of authority and responsibility for
Each of these functions has some degree of monitoring and implementing internal policies and
independence from the first line of defense, but they requirements by oversight institutions.
are by nature management functions. The typical o Management structures that allow timely and
units under second line of defense are: Operational flexible management of financial, operational and
& Fraud Risks Department, Market Risks Department, legal risks / issues.
Credit Risks Department, Compliance Unit, Financial o Appropriate procedures for asset management and
Control Unit, etc. Among the main functions of the administration.
Departments of the second line of defense is that of o Effective risk assessment framework, constantly
risk management generated during the performance evolving with market requirements and international
of the activity by business units by facilitating and directives.
monitoring the processes of the first line within the o Functional system of compliance with applicable
implementation of an effective risk management. laws and regulations.
Through the development of practices and o Proper segregation of duties, controls and
procedures, the second line assists business units in authorization of transactions by more than one
setting risk exposure limits / limits, thus developing person.
information reporting systems within the Bank. o Appointment of qualified and trained staff for the
functioning of control processes.
o Appropriate safeguards for access / use of financial
assets / data.

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