129
2013 Annual Report BNI
With reference to the regulation minimum CAR of 6 for core capital to be effective in 2014, the 5-year capital position of BNI is described below:
10.10 13.78
16.63 15.88
15.17 18.63
17.63 16.67
15.09 14.17
2009 2010
2011 2012
2013
Tier-1 Capital Total Capital
Minimum Tier-1 CAR of 6
2. BNI Consolidated
The capital structure of BNI consolidated is also dominated by core capital 92.4 of the total
consolidated capital of BNI, consisting of paid-in capital and additional paid-in capital reserves.
BNI consolidated capital is relatively the same as those of BNI bank only, as the amounts of
BNI’s equity participation in subsidiaries are not material enough to have a significant difference
to the amount of capital of BNI consolidated. The actual position of BNI consolidated capital
as of December 2013 amounted to Rp44.9 trillion and BNI consolidated CAR position in
December 2013 is 14.9. This demonstrates that BNI consolidated capital position is capable
of supporting business growth for BNI and its subsidiaries, at present and in the future.
In accordance with Bank Indonesia regulations on the implementation of consolidated risk
management for banks with controlling interest in subsidiaries, exposure to the insurance company
subsidiary is excluded from the calculation of RWA.
Quantitative disclosure on the capital structure of the bank - bank only and consolidated - is given in
Table 1.a.
3. ICAAP and Stress Testing
BNI has implemented the following components as part of the Internal Capital Adequacy
Assessment Process ICAAP, namely: a. Establishment of Risk Appetite levels in
alignment with business objectives and strategies.
b. Establishment of the minimum capital adequacy levels in accordance with the Bank’s
risk profiles in the 8 eight types of risk, namely credit risk, market risk, operational
risk, liquidity risk, legal risk, strategic risk, compliance risk, and reputation risk.
c. Regular stress testing, which is once every 6 months for market risk, while stress testing
for credit risk is done at least once a year, or whenever a change in macro economic
conditions occurs. This comprehensive approach to stress testing scenarios is
undertaken to assess the capital adequacy levels in accordance with requirements by
regulators as well as conditions in macro economy.
The processes have been documented in the ICAAP document.
4. Anticipation of Basel III
Bank Indonesia Regulation PBI No. 1512 PBI2013 on Minimum Capital Requirement
for Commercial Banks has accommodated the relevant bank capital adequacy requirement in
Basel III standards. Starting in 2016, in addition to minimum capital adequacy in line with bank
risk profile, banks are also required to establish additional capital as buffer, comprising the Capital
Conservation Buffer, Countercyclical Buffer, and Capital Surcharge for Domestic Systematically
Important Bank D-SIB.
The regulation also requires the calculation of potential gainloss arising from an increasedecline
in fair value of financial assets classified in the category of Available for Sale AFS assets.
Banks have a number of alternatives to comply with the minimum capital adequacy requirement,
including through a corporate action in capital raising, limiting its exposure to AFS securities,
improving its risk profile, and closely monitoring the growth of its Risk Weighted Assets RWA.
130
2013 Annual Report BNI
Risk Management
Implementation of BNI Risk Management for Each Risk Type
The comprehensive and effective management of risk require a risk infrastructure that includes
Governance and Organization including HR, Policies and Procedures, Risk Management Process, Tools and
Methods of Measurement including Quantification of Risk Model, and supported by Information Technology
and a strong Risk Culture.
The management of each type of risk is developed and implemented on the basis of such infrastructure:
1. Credit Risk
During 2013, BNI has been successful in managing and containing its credit risks, with its loan portfolio
growing by 24.9, its Non Performing Loan NPL ratio declining to 2.2, and an increase in the non
performing loan provision coverage to 128.4. Sectoral concentration of loans also improved as
marked by the decline in the Herfindahl Index to 13.88 from 14.00 a year previously.
Governance and Organization To manage and improve the quality of credit, the
loan analysis process is segregated between the business unitsmarketing functions performed by
a Relationship Manager and the risk unitscredit analysis function performed by a Credit Analyst.
Afterward, the loan approval process is carried out by a Credit Committee, comprising loan officers
from the business units and the business risk units with the authority to grant loan approval
in accordance with the established limits. The business units and business risk units act as the
first line of defense or risk owners who manage and control credit risk in the daily operations of the
unit.
To support the Customer Centric approach, the credit risk organization has been designed in
accordance with the respective business segment. The business risk units at BNI comprise of the
Corporate Business Risk Division, Commercial Business Risk Division, and the Consumer Retail
Business Risk Division, which are responsible to the Chief of Business Risk Officer.
According to its function, the credit risk organization is basically divided into 3 three types
of activities, namely: a. Credit Risk Operation
A partner of the business unit in the loan process from credit analysis, approval,
monitoring and loan remedial and recovery. b. Credit Policy
In charge of setting up credit policies and procedures that are required in the loan
process, such as limit of authority, credit requirements, and so on. These functions are
carried out by the Policy Governance Unit as the second line of defense.
c. Credit Risk Management Includes portfolio planning, credit risk
measurement, internal rating system, pricing, etc. These functions are carried out by
Enterprise Risk Management Division as a second line of defense.
Policies and Procedures In order to support business expansion goals
while still maintaining the quality of the loan portfolio, the Bank has a Bank Credit Policy KPB
established by the Credit Policy Committee KKP and approved by the Board of Commissioners.
The KPB is translated into Loan Guidelines through the decision of the Credit Procedure
Committee KPP, which are formalized into Company Guidelines for Business Banking Loans
and Company Guidelines for Consumer Retail Loans, as the guiding manuals for all credit
activities at BNI. Currently, the various Company Guidelines at BNI are available in an online format
ePP.
Process The process of credit risk management takes
place continuously in the value chain activity, beginning from customer insight, portfolio
planning, product development, loan origination monitoring, loan administration and portfolio
optimization.
At the level of individual loan exposures, the credit risk management processes are implemented by
the business units and business risk units through risk identification such as verifying the data
accuracy, measurement using a credit analysis tools, monitoring through regular visits to
customers and customer review rating, and risk control including limits setting, loan covenants,
and mitigant factor.
At the level of loan portfolio exposure, credit exposure are constantly monitored and reported
regularly to Management in the form of reports such as Loan Portfolio Report or in the form of
Risk and Capital Committee on Risk Management Forum. The Risk and Capital Committee on
Risk Management forum evaluates targets
131
2013 Annual Report BNI
achievement, determines measures and coordination for follow-up corrective measures, and evaluates the effectiveness of the corrective measures.
Credit governance and processes in BNI is described in the following:
Strategic, Planning
Budgeing Customer
Insight Product
Dev. Loan Originaion Acquisiion
Monitoring Control Porfolio
Opimizaion
Relaionship Business
Unit Cr
edit Risk Oicer
Supporing Business Unit
Fir st line of
de fense
Sec ond line
of de fense
1 2
4 3
5
6 7
8
9
•
Business strategy
•
Risk appeite
•
General policies
•
Loan Porfolio Planning
•
Segmentaion
•
Value preposiion
•
Manage develop product
•
Markeing comm.
•
Business intelligence
•
Targeing
•
Prospecing
•
Sales
•
Relaionship
•
Pre-screening
•
Facility structure
•
Credit approval
•
Credit Commitee
•
Credit administraion
•
Booking transacion
•
Legal documentaion
•
Restructuring
•
Liigaion
•
Collecion recovery
•
Porfolio risk overview
•
Customer proitability
•
Stress tesing
•
Aggregate porfolio risk overview
•
Regulatory and economic capital
•
Stress tesing
•
Credit policy
•
Raing model
•
Loan pricing model
•
Legal admin monitoring
•
Porfolio monitoring
•
Credit analysis
•
Credit oicer
capability
•
Early warning
•
Watchlist
Analysis Approval
Monitoring Opimizaion
Crd. Adm. Remedial
Collecion Porfolio
Analysis
Tools and Methods To support the business processes and
management of credit risk, BNI has developed a number of credit risk management tools both at
the level of individual loan exposure as well as loan portfolio exposure.
At the individual loan exposure level, BNI has built and developed debtor rating models
covering all segments Corporate, Commercial, Retail and Consumer in order to determine the
quality of debtors in the credit analysis process and determination of credit risk parameters that
includes Probability of Default PD, Loss Given Default LGD, and Exposure at Default EAD in
accordance with Basel II requirements. These quantitative models are regularly reviewed and
validated.
At the loan portfolio exposure level, the Loan Exposure Limit LEL provides the maximum limit
at year-end for domestic loans for each economic sector in their respective segments, which serves
as a guide for loan expansion and also as an effort to reduce loan concentration risk. In addition, the
Bank also establish the Industry Risk Rating IRR, which is an assessment of the industry’s risk level,
as well as the financial ratios reference of each segment.
As part of the credit risk measurement, stress testing is performed in order to assess the Bank’s
resilience in terms of credit risk during extreme conditions.
Establishment of Allowance for Impairment Impairment or the decline in value is a condition
in which the book value of an asset exceeds the recoverable value of the asset.
BNI performs impairment evaluation on all financial assets except for financial assets that
are classified as Fair Value through the Income Statement Fair Value Through Profit and Loss.
On each balance sheet date end of the month, BNI evaluates whether there is objective evidence
that the financial asset or group of financial assets has been impaired.
The objective evidence represents proof of loss event resulting as a consequence of one or more
events that occurred after the initial recognition of those assets, and the loss event have an impact
on the estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
132
2013 Annual Report BNI
Risk Management
The objective evidence of impaired financial assets are as follows:
a. Significant financial difficulty of the issuer or debtor
b. Breach of contract, namely a default or delinquency in payment of debtor’s liability in
loan principal, loan interest or penalties. c. BNI, for economic or legal reasons related to
the financial difficulties experienced by the borrower, provide facilities concessions to the
borrower that can not be given if the borrower is not experiencing financial difficulties
d. There is a possibility that the borrower will enter into bankruptcy or other financial
reorganization e. Disappearance of an active market for that
financial asset because of financial difficulties, or
f. Observable data indicating a measurable decrease in the estimated future cash flows
of a group of financial assets since the initial recognition of the asset, although the decrease
can not yet be identified to the individual financial assets in the asset group.
The impairment assessment calculation of CKPN at BNI uses 2 two methods: individual
assessment and collective assessment.
Individual calculation for CKPN is performed when a significant financial asset has had an objective
evidence of impairment. Assets classified as significant are financial assets of the Corporate
and Medium Enterprises segments, as well as securities portfolio. Individual calculation of CKPN
is carried out using the present value of estimated cash flows of a financial asset. The process of
cash flows estimation for loans is performed directly by the loan officer of the respective
debtor.
Collective calculation of CKPN is computed by using historical loss data calculations based on
the estimated Incurred Loss Probability of Default and Loss Given Default from each certain assets
group. Calculation methods of PD and LGD for collective CKPN uses a migration analysis and roll
rate analysis with a data observation period of 5 years.
Collective calculation of CKPN is performed for all financial assets with the following conditio:
a. Not evaluated individually, which include loans to the Small Enterprises sector, Consumer
loans, Credit Card, Acceptances, Bills Document and Facilities.
b. There is no objective evidence of impairment of financial assets being evaluated, namely
loans in the corporate segment and medium- sized businesses that do not show objective
evidence of impairment.
c. There is objective evidence of impairment of the financial assets that are evaluated on an
individual basis but there is no impairment loss..
Disclosure of net receivables and movements of allowance for impairment losses of the bank
- bank only and consolidated - are given in Table 2.1.a and Table 2.1.b; Table 2.2.a and Table 2.2b;
Table 2.3.a and Table 2.3.b; Table 2.4.a and Table 2.4.b; Table 2.5.a and Table 2.5.b; Table 2.6.a and
Table 2.6.b.
Implementation of Credit Risk Measurement Using the Standard
Approach
Using External Rating Agencies The policies for the use of rating in the calculation
of Risk Weighted Assets RWA refers to the Circular Letter of Bank Indonesia No. 136DPnP
dated February 18, 2011, namely: a. Rating of a company is only applicable to the
respective company, so that a company in a group of companies cannot use the rating of
another company in the group to calculate its risk weighted assets.
b. Domestic Rating Pefindo, Fitch and ICRA Indonesia is only used for the determination
of risk weight of receivables denominated in Rupiah, while international ratings Moody’s,
SP and Fitch are used for determining risk weight of receivables in foreign currency.
c. Determination of risk weight on receivables in the form of securities is based on the rating
of the securities referred to issue rating. In the case of securities which are not rated,
the determination of risk weight is based on the risk weighting of unrated receivables. The
determination of risk weight on receivables other than securities is based on the rating
133
2013 Annual Report BNI
of the debtor issuer rating. In the event the receivables other than securities are not rated,
the determination of risk weight is based on the risk weighting of an unrated receivables.
d. Short-term ratings are used for determining the risk weight of the securities that are rated
short-term and published by parties within the scope of Receivables on Bank or Receivables
on Corporations. In the event that the short- term receivables has no short-term rating, the
determination of risk weight is by done using a long-term rating.
e. If an exposure has more than one eligible rating, then the rating that gives the second
lowest risk weight is used. In case of only two ratings, the lowest rating is used.
Risk weight exposures ranked as described above is only applied to the portfolio categories as
follows: a. Receivables on Government of other countries
b. Receivables on Public Sector Entities c. Receivables on Multilateral Development
Banks and International Institutions d. Receivables on Bank Long Term and Short
Term e. Receivables on Corporations Long Term and
Short Term
1.76 Weight 35 8.61 Weight 75
0.01 Weight 45 0.49 Weight 150
23.30 Weight 0 0.42 Weight 40
49.31 Weight 100 7.72 Weight 50
0.50 Others 7.88 Weight 20
Risk-Weighted Credit Risk Exposures as at 31 December 2013
The ratings used are the latest ratings issued by rating agencies approved by Bank Indonesia in
accordance with Bank Indonesia regulations as per Circular Letter of Bank Indonesia No. 1331
DPNP dated December 22, 2011 regarding Rating Agency and Ratings approved by Bank Indonesia.
The list of rating agencies and ratings as accessed on the website of Bank Indonesia are as follows:
a. Fitch Ratings
b. Moody’s Investor Service
c. Standard and Poor’s
d. PT Fitch Ratings Indonesia
e. PT ICRA Indonesia
f. PT Pemeringkat Efek Indonesia
Disclosure of net receivables based on portfolio type and scale of rating - bank only and
consolidated - is presented in Table 3.1.a and 3.1.b.
Derivative Transaction
Derivative transactions often carried out by the Bank in general are Foreign Exchange Swap,
Currency Forward, Cross Currency Swap CCS, and the Interest Rate Swap IRS. Based on
analysis by the respective business units and risk units, a transaction limit is determined, as well as
the minimum margin deposit amount that must be paid by the customer in accordance with the type
and the inherent risk in derivative transactions.
Disclosure of counterparty credit risk - derivative transactions, is presented in Table 3.2.a.
Repo and Reverse Repo Transactions
In general, BNI only conducts Repo and Reverse Repo transactions with underlying assets of
Indonesian Government Bonds..
Disclosure of BNI’s positions in Reverse Repo transactions as at year-end 2013 is given in Table
3.2.c1 and 2..
Implementation of Credit Risk Mitigation Techniques with the Standardized
Approach
The types of primary collateral accepted in order to mitigate credit risk is the objects that are
financed by the Bank. Meanwhile, as an addition collateral, Bank may accept other collateral. The
types of primary and complementary collateral can be grouped into:
a. Collateral, which may include physical assets land, buildings, machinery, equipment, etc
and financial assets cash collateral, margin deposits, gold, receivables, debentures and
other securities. In the credit risks mitigation techniques, physical assets are not counted as
credit risk mitigation techniques.
b. Guarantee, received from the Government of the Republic of Indonesia, correspondent
100
134
2013 Annual Report BNI
Risk Management
bank, and insurance company. In the credit risk mitigation techniques, the guarantees that are
accepted are only guarantees that are issued by the party within the scope of the category
of Receivables on the Indonesian Government, Receivables from the Government of Other
States, Receivables of Banks and guarantee institutionsinsurance with respect to the
fulfilment of the warranty and warranty publishers.
c. Credit insurance, is issued by an insurance company with respect to compliance with
the requirements of the insurance policy, the insurance issuer and recipient of the insurance
portfolio category.
BNI establish the policies, procedures and processes to assess and manage the collateral by
type of exposure and financing schemes given. Currently, the maximum loan ceiling for productive
loans in the small business segment is determined at 110 of the assessed value of fixed asset
collateral given. Meanwhile, for productive loans in the medium business and corporate segments,
the adequacy assessment of collateral accepted is calculated by the existence of cash equivalent
value. The collateral appraisal should be done at least every 24 months.
Issuer of guaranteeswarranties recognized in the calculation of credit risk mitigation techniques are
generally the correspondent banks that qualify as prime bank or the acknowledged as State-Owned
Enterprises. The use of guarantee as a form of risk mitigation technique is limited at present to trade
services transactions.
Disclosure of net receivables - bank only and consolidated - based on risk weighing after
calculation of credit risk mitigation impact is presented in Table 4.1.a and 4.1.b.
Disclosure of net receivables and credit risk mitigation techniques - bank only and consolidated
- is presented in Table 4.2.a and 4.2.b.
Securitization Exposures
BNI securitization activities are limited to ownership of credit-linked notes, however, as
of December 31, 2013, we have no securitized assets exposure.
Calculation of RWA for Credit Risk using the Standardized Method
Calculation of RWA for credit risk using the standardized method - bank only - is presented
in Table 6.1.1, Table 6.1.2, Table 6.1.3 and Table 6.1.7.
Calculation of RWA for credit risk using the standardized method - consolidated - is presented
in Table 6.2.1, Table 6.2.2, Table 6.2.3, Table 6.2.6 and Table 6.2.7.
2. Market Risk
