These consolidated financial statements are originally issued in Indonesian language.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006 With Comparative Figures For 2005
Expressed in millions of Rupiah, unless otherwise stated
124
55. RISK MANAGEMENT continued
The Risk Management Directorate is led by a Director who reports to the Board of Directors and also a voting member in the Risk and Capital Committee. The Risk Management Directorate is divided into 2 two
main functions: 1 Credit Approval as a part of the four-eye principle, and 2 Independent Risk Management which is divided into several groups in relation with credit and portfolio risk, operational risk
and market risk.
In response to the Bank Indonesia Regulation No. 725PBI2005 regarding Certification of Risk Management for the Management of the Bank, the Bank has prepared preliminary steps such as enrolling their employees
from Risk Management and related Business Units into the Risk Management Training and Risk Management Certification conducted by Badan Sertifikasi Manajemen Risiko BSMR in cooperation with Global
Association of Risk Professionals GARP. Through intensive internal certification training, the Bank will be ready with certified risk management human resources in accordance with BI regulation.
Aside from compliance with Bank Indonesia regulation and Basel II, the Bank also developed Enterprise Risk Management ERM in accordance with the Bank strategic and operational need. Through the ERM
development, the Bank’s risk management will be integrated and becoming embedded process in the Bank business process, especially for supporting the Strategic Business Unit SBU organization plan that started
in 2007, so it will increase the value added for the Bank and its stakeholders. With Basel II as catalyst, ERM implementation will enable the Bank to see the end result of the Bank’s risk based performance in
value.
Credit Risk The Bank’s credit risk management mainly concentrated on increasing healthy loans expansion and
managed existing loans in order to prevent collectibility downgrade or Non Performing Loan NPL. At the end, controlled NPL value minimize loss and optimize capital utilization allocated for credit risk.
To support this matter, Bank has established policies and written guidelines regarding loans disbursement, which includes the Bank Mandiri Credit Policy KPBM, Credit Manual PPK, and various circular letters
that constitute a more detailed operating manual. The purpose of those guidelines is to provide a comprehensive loan management manual related to loan application, analysis process, approval process,
documentation, monitoring and restructuring processes, including risk analysis and assessment. In order to ensure prudential loan process, the Bank reviews and improves its credit policies KPBM PPK
periodically to fit with the current business.
In general, credit risk management is implemented on both transactional and portfolio level. On transactional level, the Bank has implemented four-eye principle whereby every loan approval will involve
Business Unit And Risk Management Unit independently to obtain an objective decision. Four-eye principle process is conducted through the Credit Approval Committee and credit decisions are made by the Bank’s
officials from the Business Unit and Risk Management Unit that has competence, abilities and integrity. Therefore, the loan process becomes more comprehensive and more prudent.
As part of prudential banking practice, the party with authority in deciding loan disbursement beside using the Loan Analysis form and financial spread sheet also using guidance from Tools Rating BMRS and
Scoring System MBSS SBSS to be able to perform credit risk assessment more accurate and interest rate risk based pricing. The Bank has Credit Rating and Credit Scoring Model Design and Development
Guidance, which is a complete guidance for the Bank to create proven and reliable credit rating and credit scoring model and the model is implemented into the Credit Risk Tools as one of the credit decision tools.
To monitor the performance of credit rating and credit scoring model, the scoring and rating result performed by Business Units was reviewed periodically and the result was documented in Credit Scoring
Review and Rating Outlook issued quarterly and semi annually.
These consolidated financial statements are originally issued in Indonesian language.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 2006 With Comparative Figures For 2005
Expressed in millions of Rupiah, unless otherwise stated
125
55. RISK MANAGEMENT continued
