Annual Report
2013
PT Bank Mandiri Persero Tbk.
Board of Commissioners’ Supervisory Report
The Board of Commissioners in performing its supervisory and advisory duties, as mandated by the Articles of Incorporation of the Company, always focuses on the strategic activities being undertaken by the Company. The
Board of Commissioners proactively provides guidance and input to the Board of Directors on strategy formulation, program implementation, performance monitoring, risk management, shareholder value and corporate
governance, and to ensure that these are implemented in a comprehensive, efective and eicient manner as part of the Company policy framework.
The development of Bank Mandiri’s business in 2013 was inluenced by developments in the global economy, which was overshadowed by a high level of uncertainty. This was because of continued weakness in the economies
of the developed countries such as the United States U.S., Europe and Japan. Meanwhile, the country’s economy continues to be overshadowed by growing downside risks to economic growth, the current account deicit and the
depreciation of the national currency, which has afected the availability of foreign exchange.
Indonesia’s economy is still in a consolidation phase as the process of correcting the current account deicit continues. This process is expected to reduce the current account deicit as imports are better controlled. In
addition, the cycle of high world commodity prices is coming to an end and this could hamper national economic recovery. Both trends will impinge upon the inancial performance of Bank Mandiri.
Based on the observations of the Board of Commissioners, the Board of Directors has managed the Company well as regards strategy and strategy execution, risk management, human resources development, and implementation
of Good Corporate Governance. This is evident from the inancial performance of the Company, which continues to show improvement, as may be seen from the following indicators:
1. Opinion on the Bank’s Consolidated Financial Results
Bank Mandiri recorded a satisfactory performance in 2013. Pre-tax proit in 2013 reached Rp24.06 trillion or an increase of 17.35 from 2012, while proit after tax amounted to Rp18.20 trillion, up 17.41 from 2012. The
increase in proit was primarily to a rise in fee-based income, which reached Rp14.50 trillion and the fact that other operating expenses came in under budget Rp21.50 trillion. As of December 31, 2013, total assets stood
at Rp733.10 trillion, up 15.34 from the previous year. Overall, the Company’s inancial performance in 2013 was satisfactory, with a number of key inancial ratios coming in ahead of target, namely:
a. Gross NPL ratio of 1.90 and net NPL of 0.58. b. Provision-to-NPL ratio of 185.30.
c. ROA of 3.54. d. ROE based on average equity of 22.23
e. NIM of 5.57. f. BOPO of 67.66 and Eiciency Ratio of 42.93.
g. CAR after accounting for credit, market and operational risks: 14.76. h. Loan-to-Deposit Ratio of 84.46.
2. Opinion on the Bank’s Prospects
Despite increased competition for Third Party Funds, as well as slower lending in the short term, the Board of Commissioners believes that over the medium the banking sector in Indonesia will continue to grow and be
proitable.
Annual Report
2013
PT Bank Mandiri Persero Tbk.
As a major milestone in the achievement of our vision of becoming Indonesia ‘s Most Admired and Progressive Financial Institution, we are the opinion that the Board of Directors has directed the company’s business well by
focusing on the following three 3 key areas: a.
Strengthening leadership in wholesale transaction banking business which ofers comprehensive transaction solutions, and forging holistic relationships with corporate and commercial customers.
b. Strengthening the retail deposit segment by providing a diferentiated customer experience and
innovative transaction solutions. c.
Strengthening the retail inancing segment so as to beat the competition in the mortgage, personal loan and credit card business, and to become a major player in micro banking.
To support these three focus areas, the Board of Directors has taken the right approach to strengthening the organization so as to deliver integrated service solutions, improved infrastructure oices, IT, operations, risk
management and enhanced human resources HR capabilities. The progress of the Company’s business is evident from the following indicators:
1 Deposits
In 2013, the Bank attracted Rp556.34 trillion in customer deposits, representing an increase of 15.20 over the previous year, with Rp123, 44 trillion being placed in current accounts and Rp236, 51 trillion in savings
accounts, up 16.96 from 2012. A variety of strategies were employed by Management to achieve its 2013 third party funds target,
including optimizing infrastructure and technology so as to support branch operations, expanding the distribution network, the development of new products, improved services based on a customer oriented
focus, ongoing promotion and marketing programs, and new retail business development initiatives so as to achieve more aggressive growth in the segment while continuing to maintain existing customers
through an improved customer retention program. Thanks to the growth in customer deposits, the Company successfully retained its market share of around 13.90.
2 Funds Placement
Lending in 2013 reached Rp472.43 trillion. The Bank’s loan book grew by Rp83.60 trillion or 21.5 compared to the same period the previous year, when the igure was at Rp388.83 trillion. Growth in Bank
Mandiri lending over the period was above the national average of 21.20 YoY, giving the Company a market share of 12.60.
Bank Mandiri’s NPL Ratio also improved despite a higher increase in lending than the previous period. In 2013, the Bank’s Gross NPL Ratio stood at 1.90, while Net NPLs were 0.58, a very safe level that is far
below the maximum 5 permitted by Bank Indonesia.
3 Corporate Governance, Risk Management and Internal Control
Implementation of corporate governance, risk management and internal control in general has been good, and continues to be pursued in a sustainable manner. In this regard, the Board of Commissioners
has noted the following:
a Corporate Governance
The Board of Directors has been successfully implementing the long term Good Corporate Governance GCG Transformation Process, which will provide beneits in the form of sustainable
value. GCG has been instituted through internal processes involving the Board of Commissioners, Board of Directors and all of our employees. Since the GCG Transformation Process was launched,
Bank Mandiri has experienced many changes for the better, particularly in the form of better Human
Board of Commissioners’ Supervisory Report
Annual Report
2013
PT Bank Mandiri Persero Tbk.
Board of Commissioners’ Supervisory Report
Resources HR, so that our people are now able to work more eiciently, efectively, competitively and professionally, supported by a highly developed work culture and ethic. In addition to better
quality human resources, the GCG Transformation has helped to consistently improve the Bank’s inancial performance, something that has strengthened its competitive position, which in turn has
boosted investor interest and conidence in Bank Mandiri, thus helping it to grow sustainably over the long term.
The GCG Transformation is based on 5 ive pillars, namely, Governance Commitment, Governance Structure, Governance Mechanism, Socialization Evaluation and Walking the Talk.
To comply with Bank Indonesia Regulations, the Board of Directors has regularly evaluated the adequacy of corporate governance in Bank Mandiri, and conducted assessments through various. The
assessments conducted to date are as follows:
1 Bank Indonesia Self Assessment
Bank Indonesia Regulation PBI. 84PBI2006 as amended by Bank Indonesia Regulation No.. 814PBI2006, and Bank Indonesia Circular No. 1515DPNP, dated 29 April 2013, requires a
commercial bank to conduct a self – assessment on the application of the principles of good corporate governance based on 11 eleven factors each semester. The scores for each of these
factors are combined to provide a composite score. During a meeting with Bank Indonesia on 9 October 2013, Bank Mandiri was informed that its GCG Composite Score is 2 Good.
2 Corporate Governance Perception Index Rating
In order to evaluate and obtain feedback on the implementation of good corporate governance, Bank Mandiri has for many years participated in the Corporate Governance Perception Index
surveys conducted by The Indonesian Institute for Corporate Governance. Based on the indings of these surveys, Bank Mandiri has received the award for “Most Trusted Company” for 7
consecutive years 20062007 to 20122013.
3 Indonesian Institute for Corporate Directorship IICD
In 2012, Bank Mandiri was awarded the highest predicate as “Best Overall” in the application of GCG out of approximately 100 public companies with the largest market capitalizations on the
Indonesia Stock Exchange, as assessed by the IICD. In 2013, Bank Mandiri was recognized as Best
Financial Institution. 4 SOE Awards
Bank Mandiri takes part in the assessments conducted by BUMN Track, and took the award in the Innovation in Human Resources category in both 2012 and 2013.
5 Corporate Governance Asia
In addition to participating in surveys conducted by independent domestic agencies, Bank Mandiri also participates in the surveys conducted by independent international agency
Corporate Governance Asia, which publishes the leading quarterly journal in the region on corporate governance. In recognition of its achievements, Bank Mandiri received a “Corporate
Governance Asia Recognition Award” in each of the 5 ive years between 2009 and 2013. These Corporate Governance Asia Annual Recognition Awards show that the implementation of GCG in
Bank Mandiri has gained recognition around Asia.
Annual Report
2013
PT Bank Mandiri Persero Tbk.
b Risk Management
In line with the growth of Bank Mandiri’s business, the Board of Directors regularly makes improvements to the human resources policies, infrastructure and quality, having regard to the
relevant Bank Indonesia Regulations PBI, the provisions of Basel II and international best practices, particularly as regards credit, market and operational risk management through optimum risk
management in each business line.
The Board of Commissioners, through the GCG Risk Monitoring Committee, and the Board of Directors through the Assets Liability Committee ALCO and the Risk Management Committee
RMC, are actively involved in conducting risk monitoring. The Board of Directors also have its Risk Management Unit, which comes under the auspices of the Risk Management Directorate, so as to
allow risk management to be conducted in a more comprehensive, integrated, measurable and controllable manner.
For the purpose of carrying out its operational duties, the Risk Management Directorate is divided into 2 two major sections, namely, the Credit Approval Unit, which serves as the partner of business
units in the lending process based on the four-eye principle, and the Independent Risk Management Unit, which conducts portfolio risk management in respect of credit risks, operational risks and
market risks.
Bank Mandiri has also adopted the Bank Mandiri Risk Management Policies KMRBM, which are reviewed every year. The KMRBM serve as references so as to ensure that risk management is more
detailed and speciic.
The Board of Directors also applies the Enterprise Risk Management ERM concept, which involves integrated risk management having regard to strategic planning, risk appetite, execution, risk
assessment and performance evaluation as part of the efort to maximize shareholder value through a comprehensive and integrated risk management strategy that is customized to the business and
operational needs of Bank Mandiri.
c Internal Control
The strategic measures taken by Management to overcome competition and other policies requires the continuing development of the Bank Mandiri Internal Control System. The application of
the Internal Control System helps the bank to maintain assets, ensure the availability of accurate information and reporting, improve the compliance of Bank Mandiri with the legislation, and reduce
the risk of losses, irregularities and violations of prudential banking principles.
The improvements that have been instituted to the Internal Control System Bank include the reining of Compliance Policies and the formulation of an Anti Fraud Strategy.
Board of Commissioners’ Supervisory Report
Annual Report
2013
PT Bank Mandiri Persero Tbk.
1 Compliance Policy
In order to create and develop a Culture of Compliance and to enhance the implementation of the compliance function, as mandated by Bank Indonesia Regulation 132 PBI2011, dated 12
January 2011, the Board of Directors and Board of Commissioners have incorporate principles governing the Compliance Function in the Bank Mandiri Compliance Policies. These principals
are as follows: a The purpose of the supervision function is to ensure that all Bank Mandiri operations
transactions are carried out in accordance with legislation and applicable regulations. b The supervision function is exercised through built-in controls by each individual at every
level in the organization and in all bank operations in accordance with the relevant ield. c Monitoring the implementation of the Compliance Function in the line units is conducted
through evaluation by the Compliance Unit so as to ensure the efectiveness of the Compliance Function in the Bank’s line units.
d Monitoring also includes reviews by the Internal Audit Unit to assess the adequacy and efectiveness of Compliance Function plans and programs, and their implementation by the
Compliance Unit. In implementing an efective compliance function, attention needs to be paid to 3 fundamental
aspects, namely, the People aspect, the Policy and Procedure aspect, and the Technology Data aspect, as further described below:
a People Aspect:
i. Applying standardization and improving the competencies of compliance personnel
ii. Applying the Compliance Executive Oicer concept;
b Policy Procedure Aspect:
i. The conducting of reviews and assessments by independent third parties on the
implementation of the compliance function in Bank Mandiri so as to ensure that it is in accordance with international best practices;
ii. Preparing a long-term compliance roadmap 2015-2020;
iii. Strengthening coordination between the units responsible for the assurance function
Compliance Unit, Risk Management Unit and Internal Audit Unit, through the application of the Governance, Risk Compliance GRC concept;
c Technology Data Aspect:
i. Managing compliance risks by optimizing the application of ERM;
ii. Using a 1 one same database to support the implementation of the assurance
function.
2 Anti-Fraud Strategy
a In order to comply with Bank Indonesia Circular Letter No. 1328DPNP dated 9 December 2011 on the Application of Anti-Fraud Strategies in Commercial Banks and as a further
improvement to the Bank Mandiri Internal Control System, an Anti-Fraud Strategy has been formulated and adopted by the Bank. Prior to this, Bank Mandiri’s anti-fraud strategy was
dispersed among various Policies, Standard Operating Procedures, Technical Operational Guidelines, and other instruments. In accordance with the aforementioned Bank Indonesia
Board of Commissioners’ Supervisory Report
Annual Report
2013
PT Bank Mandiri Persero Tbk.
Circular Letter and the formulation of a uniform Anti-Fraud Strategy, Bank Mandiri will harmonize every Policy, Standard Operating Procedure, Technical Operational Guideline and
other instruments so as to ensure they conform to the provisions of the said Bank Indonesia
Circular. The adjustments referred to cover the matters set forth in the Anti-Fraud Strategy, namely:
a Prevention Function
This is the responsibility of all employees of the Bank and forms part of the Fraud Control System in the context of reducing the potential for fraud.
b Detection Function
This is the responsibility of all units, both in the 1st line of defense, 2nd line of defense, and 3rd line of defense, and forms part of the Fraud Control System in the context of identifying
and locating fraud in Bank Mandiri operations.
c Investigation, Reporting Sanctions Function This is the responsibility of the Internal Audit Directorate and forms part of the fraud control
system in the context of the investigation of fraud that has occurred and the reporting of indings to the CEO, Board of Commissioners, and Bank Indonesia, including proposed
sanctions for the perpetrators of the fraud.
d Monitoring, Evaluation Follow-up Function This is the responsibility of the Internal Audit Directorate and forms part of the Fraud
Control System in the context of monitoring follow-up action on investigation indings and the evaluation of the incidences of fraud so as to remedy deiciencies and reinforce the
Internal Control System so as to prevent the reoccurrence of fraud through the exploitation of similar weaknesses.
4 Human Resources Development
In terms of human resources development, the Board of Commissioners is of the view that the Board of Directors has properly implemented the relevant programs. Good, integrated and efective infrastructure
allows programs to be implemented in line with the Bank’s Business Plan and targets. Among the initiatives that the Board of Commissioners believes are worthy of note are the following:
Bank Mandiri is committed to fulilling and further improving the human resources development plan so as to create world-class human capital in 2014 through the following strategies:
a Enhancing Fulillment Capability:
1 Establishing a recruitment strategy and deining sourcing channels 2 Developing an award winning career website
3 Developing an Employee Referral Strategy
b Better aligning the Human Capital Management System HCMS so as to support the implementation of the Corporate Plan 2015-2020:
1 Improving the Individual Performance Management System 2 Improving Talent Succession Management
3 Developing a Total Rewards System 4 Employee Self Service
Board of Commissioners’ Supervisory Report
Annual Report
2013
PT Bank Mandiri Persero Tbk.
5 Organization Development
6 Capacity Fulillment
7 Learning Development 8 Employee
Relations c P Alignment of HCMS through various Human Capital initiatives, namely:
1 Flexi Time Roll Out 2 Flexible Beneit Roll Out
3 Talent and succession readiness 4 Internalization Employee Value Proposition New Horizon TIPCE
d Strengthening Mandiri University 1 Development of Mandiri University infrastructure
2 Development eKMS
3 Development of a Competency Based Learning Curriculum Bank Mandiri is committed to fulilling and continually enhancing its human resources development plan
so as to create world-class human capital. In this way, Bank Mandiri employees will not only be marked by their probity and integrity, but also their resilience, competencies and capabilities, and their ability to
compete not only at the domestic level but also at the regional and international levels. To bring this goal to fruition, besides improving competencies Bank Mandiri will also apply the following initiative
a Enhancing fulillment capability so as to secure the best talent in the market. b Improving the Human Capital Management System HCMS in line with the Corporate Plan 2010-
2014. c The alignment of the HCMS with strategic human capital initiatives.
d Strengthening and supporting the role of Mandiri University
3. Membership of the Board of Commissioners and Committees under the supervision of the Board of
