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
51
10. DERIVATIVE RECEIVABLES AND PAYABLES continued
Interest Rate Swaps On April 17, 2003 Bank Mandiri entered into interest rate swap agreements with counterparty banks with
nominal values amounting to US125,000,000 full amount and US175,000,000 full amount, respectively. The underlying transaction is the Bank’s US300,000,000 full amount fixed interest rate
Medium-Term Notes MTN issued in April 2003 Note 24. Under this transaction, the Bank receives semi-annual fixed interest at the rate of 7.00 per annum and pays semi-annual floating interest at the
rate of six-month LIBOR + 3.37 per annum until the maturity of the Note on April 22, 2008. The six-month LIBOR interest is stated in arrears. These transactions qualify as hedging for accounting purposes.
The background and purpose of the issuance of the hedging instruments are related to interest rate risk management, whereby the Bank’s positive foreign currency interest rate gap position is exposed to
downward trends in interest rates in the following five years. The Bank decided to convert its MTN’s fixed interest rate into floating interest rates in order to mitigate the risks of a decreased in net interest margin.
The MTN has been settled on April 22, 2008. Cross Currency Swap
Bank Mandiri has entered into cross currency swap contracts, which are associated with the securities sold with agreements to repurchase with several counterparty banks. The contracts were initiated when Bank
Mandiri sold its Government Bonds to the counterparty banks and received Rupiah funds. These funds were used to settle the spot leg of the cross currency swaps and Bank Mandiri will then receive US Dollar
funds. On the settlement date, the Bank will receive Rupiah funds and pay US Dollar funds to the counterparty banks. Bank Mandiri is then obliged to use the Rupiah funds to repurchase the Government
Bonds previously sold to counterparty banks Notes 7 and 22.
A summary of the cross currency swap contracts is as follows:
Type of Buy
Sell Effective Date
Maturity Date Transactions
full amount full amount
November 3, 2004 November 3, 2009
Spot US25 million
Rp285,060 million Forward
Rp285,060 million US25 million
November 4, 2004 November 4, 2009
Spot US25 million
Rp284,062 million Forward
Rp284,062 million US25 million
May 18, 2005 May 18, 2010
Spot US25 million
Rp316,356 million Forward
Rp316,356 million US25 million
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
52
10. DERIVATIVE RECEIVABLES AND PAYABLES continued
As of December 31, 2007, a summary of derivative transactions is as follows:
Notional Amount Fair Value
Derivative Derivative
Transactions Contract
Note 2k Receivables
Payables Third parties
Foreign Exchange Related 1.
Forward - buy US Dollar
1,608,343 1,609,340
3,919 2,922
Others 10,515
10,612 97
- 2.
Forward - sell US Dollar
111,639 111,414
477 252
3. Swap - buy
US Dollar 1,185,249
1,185,632 2,548
2,165 4.
Swap - sell US Dollar
4,001,795 3,681,068
332,162 11,435
Others 81,410
82,479 -
1,069 5.
Option - buy US Dollar
- 70
70 -
Others -
1,178 1,178
- 6.
Option - sell US Dollar -
163 -
163 Others -
2,047 -
2,047 Interest Rate Related
1. Swap - Interest rate
US Dollar -
5,008 -
5,008 Other
- 9,287
- 9,287
Total 340,451
34,348 Less: Allowance for possible losses
3,800 -
336,651 34,348
As of December 31, 2008 and 2007, the collectibility of derivative receivables is as follows:
2008 2007
Current 360,337
340,451 Less: Allowance for possible losses
6,313 3,800
Balance at end of year 354,024
336,651
Movements of allowance for possible losses on derivative receivables:
2008 2007
Balance at beginning of year 3,800
4,260 Provisionreversal during the year Note 36
2,501 467
Others 12
7
Balance at end of year 6,313
3,800
Includes effect of foreign exchange translation.
Management believes that the allowance for possible losses on derivative receivables is adequate.