risK PErForManCE rEViEw CORPORATE GOVERNANCE

PT Bank Mandiri Persero Tbk. Rp.billion 2012 Core Capital Paid-in Capital 11,667 Disclosed Reserves 44,369 Deduction Factor of Tier 1 Capital 1,597 Total Core Capital 54,439 Tier 2 Capital 7,509 Total Capital 61,948 Weighted Assets ATMR Credit Risk Standardized Approach 350,761 Market Risk Standardized Model 1,044 Operational Risk α 15 Basic Indicator Approach 48,385 Total ATMR 400,190 CAR Core Capital 13.60 CAR Total Capital 15.48 Based on BI regulations, a minimum 5 Core Capital from ATMR and a minimum 8 Total Capital from ATMR. Based on the calculation simulation of capital expense on operational risk with the Standardized Approach, the ATMR was posted at Rp47.3 trillion compared with Basel II Basic Indicator Approach amounting to Rp48.4 trillion. Capital expense for credit risk with Standardized Approach as of December 2012 has provided assets composition based on risk weight as stated on the right pie chart: The Bank applies Advance IRBA Internal Rating Based Approach in calculating the credit capital expense simulation. The Bank’s simulation with the Advanced IRBA approach could lead to a higher capital adequacy of around 1 compared with the current approach. Composition Asset Base On Risk weight Credit Risk SA - December 2012 1 1 1 14 11 41 27 4 Risk weight 0 Risk weight 20 Risk weight 35 Risk weight 40 Risk weight 50 Risk weight 75 Risk weight 100 Risk weight 150 The Bank is currently measuring the economic capital needs both for credit risk and operational risk. This will be used as the base to implement vBM value Based Management through the measurement of RORAC Return On Risk Adjusted Capital. One of Bank Mandiri business focuses in 2012 is the micro segment; this was evident by signiicant growth of 60.4 yoy in micro segment that was justiied with high rating of RoRAc. Bank Mandiri has prepared Basel iii implementation that refers to Basel documents as well as regulations and initiatives presented by Bank indonesia. Bank Mandiri is active in the working group participation of Basel iii and Quantitative impact study Qis held by Bank indonesia. Based on June 2012 position, Qis results generally present Bank Mandiri’s stance in meeting the Basel iii guideline, with higher simulation result of capital Adequacy Ration compared with Basel ii capital adequacy calculation. This was due to Bank Mandiri capital structure that was dominated by Tier 1 common equity. Qis results also present Bank Mandiri operations at a low-risk level, by the leverage ratio adequacy and high liquidity ratio, as the result of tight risk controlling of balance sheet exposure. The position of liquidity assets and the Bank’s balance sheet composition is consistent towards Basel iii requirements. suPPoRTing uniTs RevieW RisK MAnAgeMenT THRougH oPeRATionAl AcTiviTies Risk management through operational activities was intended for the management of credit risk, market risk and operational risk on an acceptable level. Bank Mandiri implements risk appetite and risk tolerance in the form of a limit policy and limit system. This system is developed and proposed by business units to the risk management unit, and approved by the Risk capital committee. The limit was determined based on overall limits, limit per risk type and limit per certain functional activity that possess risk exposure. The limit policy function is not only for the risk controlling process but also to boost business strategy and expansion into a growth corridor with an optimum risk- reward proile. credit risk is managed through front end, middle end and back end. Market risk and liquidity management is implemented through limit systems. All working units manage the operational risk on products and activity of the Bank, while risk management units will do a bankwide review as well as measure their efectiveness assurance by an Audit internal unit. 1. credit Risk Management credit risk arises from loan activity, placement of securities at other banks, sales to customers and trading activity. ProCEss FLow oF CrEdiT and CrEdiT risK ManaGEMEnT loan Proposal Pre- screen Approval loan Analysis Booking Monitoring Review collection, loan Work out Account Portfolio strategy credit Policy Bank Mandiri KPBM, standart Procedure credit sPK, product manuals, standard operating Procedures integrated end-to-end loan processing systems loAn oRiginATion sysTeM los inTegRATeD PRocessing sysTeM iPs Front end Middle end Back end Four-eye, Portfolio guideline industry class, industry Acceptance criteria, Application Modules, credit scoringRating, spreadsheet, nota Analisa Kredit, limit, Bi checking, Appraisal, check on the spot, loan Pricing loan Monitoring, Watch list, credit Risk Proile, Portfolio Management industry limit, stress Testing, validation collection system, loan Work out, Portfolio Management Phase out, Portfolio sales stages loan Processes Methods Tools Policies integrated systems RISK MANAGEMENT