PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003, April 30, 2003 and December 31, 2002 Expressed in millions of Rupiah, unless otherwise stated
143
49. RISK MANAGEMENT continued
Market Risk continued a. Liquidity Risk
Liquidity risk arises in the funding of lending activities, the repayment of deposits, and in the management of working capital needs. It includes both the risk of unexpected increases in the cost
of funding the asset portfolio at appropriate maturities and the risk of being unable to liquidate a position in a timely manner at a reasonable price. Hence, liquidity risk management is one of
important focuses in Bank Mandiri’s risk management in order to retain customers’ trust and confidence and to maintain earnings stability. The goal of liquidity management is for the Bank to
be able, even under adverse conditions, to meet all of its contractual and regulatory financial obligations and to maintain an optimal liquid asset position.
The Bank’s emphasis is on maintaining adequate liquidity to meet commitments to the customers and counterparties, both in terms of loan demand and repayment of deposits and in terms of
satisfying operational liquidity requirements. The function of managing these liquidity requirements is carried out by the Treasury Group, while the strategic function of measurement and
maintenance of liquidity risk is performed by the Market Risk Group. Primary cash reserves consist of statutory reserves and cash held at branches. The Bank
complies with Bank Indonesia regulations which require Indonesian banks to maintain statutory reserves, on a daily basis, in the form of non-interest bearing deposits with Bank Indonesia equal
to at least 5.0 of Rupiah-denominated third party liabilities excluding banks and 3.0 of foreign currency-denominated third party liabiities including banks.
The primary means of measuring liquidity risk is static liquidity gap analysis, which provides a static view of the cash inflows and outflows and the balance sheet positions on certain dates
based on remaining maturities. The static gap report is prepared by scheduling all assets and liabilities according to maturity dates determined through the agreements contract, or assumption
of a date when changes are anticipated to occur. To the extent that there is a difference in the amount of assets and liabilities in that schedule, for one particular period and cumulatively through
the whole rescheduling period, the Bank is exposed to liquidity risk, that is the occurrence of a positive or negative gap.
In addition to the static gap analysis, the Bank also prepares dynamic liquidity gap analysis which represents a similar analysis of future balance sheet projections by taking into account changes in
balance sheet positions based on the related business units’ budget projections.
Using the gap analysis and other key measures, such as reserve ratios, interbank borrowing limits, and deposit concentration limits, the Bank is able to anticipate future liquidity requirements and
manage its liquidity efficiently.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003, April 30, 2003 and December 31, 2002 Expressed in millions of Rupiah, unless otherwise stated
144
49. RISK MANAGEMENT continued
