PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated
125
55. RISK MANAGEMENT continued
Risk Management Directorate together with other business unit are responsible in maintaining or coordinating all risks which are credit risk, market risk, operational risk, liquidity risk, legal risk, reputation
risk, strategic risk and compliance risk including establishing risk management policies and standards. All risks will be disclosed in quarterly risk profile report to portrait all risks embedded in Bank’s business
activities, including consolidation with subsidiaries’ risk. Credit Risk
The Bank’s credit risk management is mainly directed to improve the balance of the performing loans expansion and prudential loans monotoring in order to prevent asset impairment or to become Non
Performing Loan NPL and to optimize capital utilization allocated for optimal Risk Adjusted Return On Capital RAROC.
To support this matter, Bank has established written policies and procedures which includes the Bank Mandiri Risk Management Policy KMRBM, Bank Mandiri Credit Policy KPBM, Credit Standard
Procedures SPK for each business segment, and temporary Memorandum Credit Policy and Procedures which regulated the policies and procedures which have not been accommodated in KPBM and SPK. The
four policies and procedures purpose are to provide a comprehensive loan risk management manual related to credit risk identification, measurement and mitigation of risks in loan granting process from target
market, credit analysis, approval, documentation, loan disbursement, monitoringsupervising, also problem loan settlementloan restructuring.
In order to ensure prudential loan granting process, Bank reviews and improves credit policies and procedures periodically to fit with current business development. In alignment with the Strategic Business
Unit SBU implementation, the Bank prepared Credit Standard Procedures SPK for each business segment in order to have better focus in capturing business need by each business segment.
In principles, 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 Credit Risk Management Unit independently to obtain an objective decision. Four-eye principle process is conducted by the Credit Committee within the authority limit and loan approval process
is conducted through the Credit Committee meeting process. The holder of Loan Approval Authorization as Credit Committee member has high competence, abilities and integrity. Therefore, the loan granting
process becomes more comprehensive and prudent. As part of prudential banking practice, the authority holder in giving loan disbursement approval beside
using the financial spread sheet and the Loan Analysis Form NAK also using Rating Tools like Bank Mandiri Rating System BMRS and Scoring Tools Micro Banking Scoring System MBSS and Small
Medium Enterprise Scoring System SMESS to perform more accurate credit risk assessment and interest rate determination with 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 credit rating and credit scoring model. Bank has also developed Rating System for the Financial Institution - Bank which is Bank
Mandiri Financial Institution Rating BMFIR, so that Bank can identify and measure the level risk of Counterparty Bank which can be tolerated in providing Credit Line facility. Furthermore, Bank has also
developed scoring model for SME segment focusing on potential debtor using EBITDA approach.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2008 and 2007 Expressed in millions of Rupiah, unless otherwise stated
126
55. RISK MANAGEMENT continued
Credit Risk continued To monitor the performance of credit rating and credit scoring model, the scoring and rating result
performed by Business Units is reviewed periodically. Continuously monitored performance model is developed by reviewing model rating using validation methodology approach. The reviews are performed
to minimize analysis error in credit risk measurement, especially in determining both Probality of Default value and debtor’s rating. As monitoring, rating scoring managed in the database, the Bank produced
Credit Scoring Review and Rating Outlook issued quarterly and semi annually. Those reports also stated information regarding attributeparameter scoring and rating arranged by economic sectors. It is valuable
for Business Unit especially as guidance in establishing targeted customer with performing classification in order to support prudential loan expansion.
To increase the Turn Around Time of loan granting, the Bank has performed initiatives such as enhancement of Loan Origination System LOS for Corporate Banking into Integrated Loan Process ILP
which covered; Origination System, Spreadsheet financial data, Rating System, Loan Analysis Form, Loan Monitoring System, and Wacth List Checking. Beside, Bank has also improved Loan Analysis Form Credit
Memo for Corporate, Commercial, Small Business, Financial Institution and Overseas Office that are more oriented with comprehensive risk analysis in order to support quick and accurate prudential banking credit
decision. To monitor loans granted to debtors, in order to prevent non-performing loans, the Bank has developed and implemented Loan Monitoring System and Watch List Early Warning Analysis process for
performing debtors to identify potential debtors to be downgraded to non performing loans. In the global crisis condition, Bank has leverage the parameter sensitivity watch list tool by emphasizing on parameters
related to the current crisis. Therefore, Management could decide the account strategies and early actions to minimize the Bank’s NPL growth.
Non-performing loans are managed by special unit Credit Recovery Group so that the settlements are managed more focus and faster and Business Units could focus on managing the current debtors and loan
expansion. At the portfolio level the Bank has Portfolio Guideline PG which can be used to direct the loan expansion
to achieve optimum portfolio composition based on economic, industry, business segment and product sectors. Optimum portfolio allocation prevents the Bank from taking risk over the Bank’s risk appetite. PG
reflects attractiveness of an economicindustrybusiness segment sectors supply demand, industry structure, profitability and regulation and the Bank’s expertise in the related sector and diversification
factor. Bank has determined tolerable portfolio limit for each industry to be monitored periodically monthly.
In order to test the accuracy level of PG, the Bank has performed back testing periodically so that the predictive value of PG stays at the acceptable level. Beside back testing, PG also equipped with Risk
Acceptance Criteria RAC currently developed by industry. RAC provides financial and description at the industry level, that become a benchmark for Business Unit in determining the customer target in each
industry sectors in order to get better credit decision. Portfolio analysis is performed periodically monthly and semi annually in order to monitor the changes in
economic and sector industrial variables which influence the optimum allocation and to make the anticipative actions both tactical and strategic portfolio rebalancing.
At the portfolio level, routine or ad hoc stress testing is performed to test the portfolio quality elasticity NPL and profit and loss over economic variable changes both by individual debtors or by portfolio. With stress
testing, the Bank could anticipate early portfolio management actions and optimal solution determination. Stress testing also provides description of long term strategy that are most suitable for the Bank’s portfolio
condition and its economic environment.
