PT BANK MANDIRI PERSERO AND SUBSIDIARIES
Notes to the Consolidated Financial Statements Continued December 31, 2002 and 2001
Expressed in millions of Rupiah, unless otherwise stated
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117
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48. BANK GUARANTEES RECEIVED AND ISSUED AND STANDBY LETTERS OF CREDIT Continued
Standby Letters of Credit “SBLC” 2002
2001 PT Perusahaan Listrik Negara Persero
1,209,170 1,405,069
PT Perusahaan Gas Negara 901,637
706,351 PT Garuda Indonesia
895,000 1,040,000
PT Kaltim Methanol 150,450
166,296 PT Citra Jimbaran Indah Hotel
30,000 30,000
PT Bisma Narendra 27,465
37,234 Pertamina
- 411,179
Others 21,467
14,180 3,235,189
3,810,309 Based on the Risk Sharing Agreement No. 11 dated February 16, 1993 that was legalized by Mr.
Soedarno S.H., notary in Jakarta, Bank Mandiri, together with PT BNI Persero and PT BRI Persero agreed to issue Standby Letters of Credit on behalf of PT Perusahaan Listrik Negara Persero for 20
years starting April 1, 1993 until March 31, 2013. The maximum SBLC facility amounts to US300,943,500 full amount, of which 60.476 represents Bank Mandiri’s portion. The amount
utilized as of December 31, 2002 and 2001 amounted to US223,399,000 full amount and US223,399,000 full amount, respectively, of which Bank Mandiri’s portion amounts to
US135,102,815 full amount and US135,102,815 full amount, respectively. The Bank issued an Irrevocable Transferable Letter of Credit on behalf of “Perusahaan Gas Negara”
“PGN” for a maximum amount of US91,051,582 full amount to support PGNs obligation under the Sales and Purchase Agreement between Pertamina and PGN for the gas produced by PGN at Muara
Karang and Surabaya. As of December 31, 2002 the total limit has been utilized by the issuance of two SBLCs amounting to US48,937,500 and US42,114,082 full amount. In 2002 the Bank also
issued an Irrevocable Standby Letters of Credit of behalf of PGN amounting to US9,400,000 and US290,000 full amount to support the payment under the Sales and Purchase Agreement between
PGN and Daewoo International Corporation. Based on the Issuance Agreement of Standby Letters of Credit “SBLC” dated September 14, 2001
which was legalized by Imas Fatimah S.H., notary in Jakarta, Bank Mandiri agreed to issue a SBLC of US100,000,000 full amount on behalf of PT Garuda Indonesia Persero for 3 three years
commencing November 2, 2001 through to November 2, 2004 with annual extensions. The issuance of the SBLC is in connection with the agreed loan restructuring schemes between Bank
Mandiri and PT Garuda Indonesia Persero on September 14, 2001. The restructuring agreement also provides for the conversion of loans equivalent to US103,000,000 full amount into 5-year
Mandatory Convertible Bonds “MCBs” Note 12.B.g. The issuance of the SBLC and conversion of loans into MCBs was approved and guaranteed by the Committee on Financial Sector Policy KKSK
through Decision Letter No. Kep.02K.KKSK112000 dated November 3, 2000 and the Minister of Finance through Decision Letter No. SR-653MK.052001 dated July 20, 2001.
PT BANK MANDIRI PERSERO AND SUBSIDIARIES
Notes to the Consolidated Financial Statements Continued December 31, 2002 and 2001
Expressed in millions of Rupiah, unless otherwise stated
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118
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49. RISK MANAGEMENT
The Bank is exposed to specific risks in connection with the deposit-taking and lending businesses, the management of the investment portfolio, and the environment within which the Bank operates.
The Bank’s goal in risk management is to ensure that the Bank understands, measures and monitors the various risks that arise, and that the Bank’s organization adheres, as far as reasonably
and practically possible, to the policies and procedures which are established to address these risks. The Bank has only recently implemented new risk management procedures and produced its
risk management manual. The Bank is also in the process of improving the policies and procedures to meet international best practices.
The Bank is primarily exposed to credit risk, market risk including liquidity risk, interest rate risk, trading risk, foreign exchange risk and derivative instrument risk, and operational and legal risks.
Historically, the Bank focused on credit risk through the Risk Management Committee, while the management of market risk was undertaken by the Assets and Liabilities Committee, the Treasury
and Global Markets Division and the Market Operations and Legal Risk Division. However, the Bank instituted a major internal reorganization to establish a centralized and independent risk
management structure, which is able to focus on strengthening the internal risk management policies and procedures.
Accordingly, on August 1, 2001 the Bank established a central Risk Management Directorate to identify, assess, monitor and manage all principal risks in accordance with defined policies and
procedures. The Risk Management Directorate 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, and supports the Risk and Capital Committee. The Risk and Capital Committee reports directly to the Board of Directors and the Board of
Commissioners. The committee is comprised of members of the Board of Directors and group heads of various business units within the Bank, including the Risk Management Directorate, and is
chaired by the director in charge of risk management. The Risk and Capital Committee, together with the Risk Management Directorate, is responsible for establishing bank-wide risk management
policies, reviewing internal limits, establishing the credit policies and interest rates, monitoring the implementation of credit policies and procedures and establishing the criteria for risk identification,
measurement and mitigation. The Bank has engaged in the past, and continue to engage, the services of international consultants to assist in this process.
