Regulatory Changes Related to Subordinated Notes

Regulatory changes, including with respect to $1,000,000,000 of 6% Subordinated Notes due 2022 and $400,000,000 of 7.85% Subordinated Notes due 2023

The Banking Regulation and Supervision Agency of the Republic of Turkey (the "BRSA") recently published several amendments to its regulations and communiqués in accordance with the Basel Committee's Regulatory Consistency Assessment Programme, which is conducted by the Bank for International Settlements and reviews Turkey's compliance level with Basel regulations. These amendments, published in the Official Gazette dated 20 January 2016 and numbered 29599, enter into force on 31 March 2016.

One of these amendments introduced certain changes to the limitations to the items that are included in the capital calculations of banks that have issued Tier 2 instruments prior to 1 January 2014. According to these amendments, Tier 2 instruments that were issued: (a) between 12 September 2010 and 1 January 2013 will (so long as they satisfied certain conditions) continue to be included in Tier 2 calculations after being reduced by 20% for the period between 1 January 2014 and 31 December 2014 and by 10% for each subsequent year (the calculations being made based upon the total outstanding amount of the debt instruments as of 1 January 2013) and (b) after 1 January 2013 will be disqualified unless they satisfy all of the new conditions.

In October 2012, the bank issued $1,000,000,000 of 6% Subordinated Notes due 2022 that will be affected by the reductions described in clause (a) above. In December 2013, the bank issued $400,000,000 of 7.85% Subordinated Notes due 2023 that were included in its Tier 2 capital as of 31 December 2015 but, as a result of the amendments described in clause (b) above, will be fully disqualified from Tier 2 treatment as of 31 March 2016.

As a result of the recent amendments to the BRSA's regulations and communiqués, the bank's management estimates that (based on 31 December 2015 figures) the bank's capital adequacy ratio will be negatively impacted by approximately 35 basis points each from the amendments described in clause (a) and clause (b) as described in the second preceding paragraph.