PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003, and April 30, 2003 Expressed in millions of Rupiah, unless otherwise stated
134
51. RISK MANAGEMENT
Similar with the Basel Accord on risk, the Bank recognizes to three types of risks: credit risk, market risks, and operational risk. Those risks are connected with the deposit-taking and lending businesses,
the management of the investment portfolio, and the environment within which the Bank operates. In risk management, the Bank’s goal is to ensure that the Bank identifies, measures, monitors, manages
and reports risks in accordance with the policies and procedures which are established to address these risks. The Bank has implemented new risk management procedures and issued risk
management guidance and policies in which the policies are being revised in order to comply with and be in accordance with Bank Indonesia’s Regulation and Circular Letter regarding implementation of
risk management for commercial banks. The Bank also continues to improve the policies and procedures to meet international best practices.
The Bank has established a risk management organizational structure which is centralized and independent through the establishment of the Risk Management Directorate on August 1, 2001, and
the Risk and Capital Committee on October 10, 2001. The Risk and Capital Committee performs the functions of both the Risk Management Committee and the Assets-Liabilities Committee ALCO.
Through the Board of Directors’ decision letter dated December 12, 2003 it has rearranged the structure of the organization, duties, responsibilities and regulations and membership of the Risk and
Capital Committee.
The Risk Management Directorate performs the functions of identifying, assessing, monitoring and managing all principal risks in accordance with defined policies and procedures. The Risk
Management Directorate is divided into two departments, which is 1 credit approval as part of the four-eye principle, 2 independent risk management which is divided into a number of groups relating
to credit risk, market risk, portfolio and operating risk and credit recovery. This Directorate is managed by a Director of the Board in charge of risk management, who is also a voting member of the Risk and
Capital Committee. The Risk and Capital Committee is a committee that is made up of members of the Board of Directors
and Group Heads from various business units The Risk and Capital Committee is led by the President Director and supported by permanent and contributing members who are responsible for establishing
bank-wide risk management policies, such as reviewing internal limits, establishing credit policies and policies related to the determination of interest rates for funding and credit, monitoring the
implementation of credit policies and procedures and establishing the criteria for risk identification, measurement and mitigation. To improve the quality and integrity of risk management, the Bank has
engaged in the past, and continues to engage, the services of international consultants to assist in this process.
Credit Risk The Bank has written credit policies and guidelines on loan administration, which include Bank Mandiri
Loan Policies, Loan Administration Guidelines and various circular letters that constitute a more detailed administration manual. The purpose of those three guidelines is to provide a complete formal
loan management manual; from application, approval, recording, monitoring and the restructuring process, including risk analysis and assessment. Therefore, Bank Mandiri expects to optimize the
quality of loan management through appropriate processes, competitive risk-based price determination, portfolio diversification, collateral adequacy and risk-based determination of
performance measurement. The Bank could also identify the added economic value which can be contributed by individual or group debtors should they be given a credit facility with interest rates in
accordance with the risk level contained by those debtors.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003, and April 30, 2003 Expressed in millions of Rupiah, unless otherwise stated
135
51. RISK MANAGEMENT continued
