CHANNELING LOANS Laporan Tahunan 2016 PT Bank Mandiri (Persero) Tbk versi B.Inggris

PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 219

61. RISK MANAGEMENT continued

A. Credit risk continued The collateral that can be accepted by the Bank includes Movable Assets among others cash, receivables, inventory, and marketable securities, Non-Movable Assets among others property, land, and equipment, and personalcorporate guarantee. The collateral coverage criteria for each segment is divided as follows: Segment Collateral Minimum Coverage Amount Wholesale Funded project 100 - 150 of credit limit Inventory Receivable Fixed Asset Land or land and property Other collateral accepted by the Bank Retail Fixed asset 100 - 200 of credit limit Inventory Receivable Land or land and property Other collateral accepted by the Bank Collateral coverage amount is determined by type and limit of credit facility, type and value of collateral and evaluation of debtor. To guarantee the credit facility, fixed asset such as land and building are preferable than other types of collateral. The fair value of collateral is assessed by internal assessors Credit Operation Unit and an external assessors who have already been appointed by the Business UnitCredit Recovery Unit. Collateral can be exchanged as long as the new collateral fulfills marketability and collateral value adequacy criteria. If debtors failed to pay off their loan, the collateral will be liquidated as a second way out to ensure credit recovery. To identify and measure risk of each credit application processed in the transactional level, as part of implementation of prudential banking, the Bank utilises Credit Risk Tools, which includes Credit Rating and Credit Scoring Tools, financial spread sheet, comprehensive Credit Analysis Memorandum. In portfolio has been carried out through master limit, ICLS Integrated Credit Liabilities and name cleareance. The Rating and Scoring systems consist of Bank Mandiri Rating System BMRS, Small Medium Enterprise Scoring System SMESS, Micro Banking Scoring System MBSS and Consumer Scoring System application, behaviour, collection and anti-attrition. BMRS that has been developed by the Bank consists of Rating System for Corporate Commercial segment, Rating System for Wholesale SME, Rating System for Project Finance, Rating System for Financial Institution - Bank, Rating System for Financial Institution - Non Bank Multifinance, and Rating System for Bank Perkreditan Rakyat BPR. The Bank has also developed a Rating System for Financial InstitutionsBanks, called Bank Mandiri Financial Institution Rating BMFIR, so that the Bank can identify and measure the risk level of Bank Counterpart which can be tolerated in granting Credit Line facilities. PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2016 and for the year then ended Expressed in millions of Rupiah, unless otherwise stated 220

61. RISK MANAGEMENT continued