Annual Report
2013
PT Bank Mandiri Persero Tbk.
risk management
To integrate risk management on a bankwide basis, Bank Mandiri has adopted the ERM system so as to facilitate the holistic monitoring of risk management, including calculating the capital needed to cover all types of risk. The ERM
system has the capacity to calculate capital charges using the Standardized Approach and Advanced Approach, and to apply operational risk management tools, active portfolio management, stress testing and value-based
management.
4. METHODOLOGY MODEL ANALYTICS
Bank Mandiri consistently conducts risk assessment based on international best practices using both the quantitative and qualitative modeling approaches through the development of risk models such as rating, scoring,
value at risk VaR, portfolio management, stress testing and other models so as to support judgmental decision making. The Bank’s risk models are regularly recalibrated and validated by the independent Risk Model Validator
Unit, whose function is to maintain the reliability and validity of models and ensure that they satisfy the regulatory requirements
RISK MANAGEMENT THROUGH FINANCING
Risk management through inancing in Bank Mandiri includes the diversiication of inancing sources through policies that are harmonized with our long-term strategic plans, and eicient capital allocation policies in business
segments that have optimal risk-return proiles including placements in subsidiaries. This is intended to meet the expectations of our stakeholders, including investors and regulators.
Bank Mandiri consistently ensures that it has suicient capital to cover all credit risks, market risks and operational risks based both on regulatory requirements regulatory capital and internal needs economic capital. Bank
Mandiri adheres to the Bank Indonesia regulations on Basel II in the calculation of its capital adequacy for credit risks, market risks and operational risks.
In the case of credit risks, Bank Mandiri uses the Basel II standardized approach 1 and has commenced simulations of the Internal Ratings-Based Approach. While the Basel II Standardized Approach to credit risks does not require
the use of external ratings data from a bank’s borrowers, Bank Mandiri has nevertheless initiated simulations involving the use of such external ratings data. In the market risk ield, Bank Mandiri uses the Standard Model 2,
while internally it uses the Value at Risk model. For operational risks, Bank Mandiri applies the Basel II Basic Indicator Approach 4 and has also conducted simulations of the Standardized Approach. As per end December 2013, AMTR
and capital adequacy were as shown in the following table: 5
1. See SE BI No.136DPNP dated February 18, 2011 on the calculation of Credit Risk RWA using the Standardized Approach. 2. See SE BI No.1421DPNP dated July 18, 2012 on the Amendment to Bank Indonesia Circular No. 933DPNP dated December 18, 2007, on
Guidelines for the Use of the Standardized Method of Calculating the Mandatory Minimum Capital Adequacy of Commercial Banks having regard to Market Risk.
3. See SE BI No.931DPNP dated December 12, 2007 on Guidelines for the Use of Internal Models in Calculating the Capital Adequacy of Commercial Banks having regard to Market Risk.
4. See SE BI No.113DPNP dated January 27, 2009 on the calculation of Risk Weighted Assets RWA for Operational Risks using the Basic Indicator Approach PID.
5. Bank Mandiri adheres to the Bank Indonesia regulations governing transparency, publication and annual reports in the banking sector Regulation Number 1414 PBI2012 on Transparency and Publication of Bank Reports, and SE BI 1435DPNP on Commercial Bank Annual Reports and Certain
Other Annual Reports that are submitted to Bank Indonesia.
Annual Report
2013
PT Bank Mandiri Persero Tbk.
Tabel 1.a Quantitative Disclosure of Commercial Bank Capital Structure
CAPITAL COMPONENT 31 December 2013
31 December 2012 Bank
Consolidated Bank
Consolidated I CAPITAL COMPONENTS
A Core Capital
65.853.989 71.606.641
54.438.380 58.932.922
1 Paid up capital 11.666.667
11.666.667 11.666.667
11.666.667 2 Additional Capital Reserves
55.739.397 60.219.128
44.369.337 47.655.277
3 Innovative capital -
- -
- 4 Factors reducing core capital
1.552.075 628.743
1.597.624 679.384
5 Minority interests -
349.589 -
290.362
B Supplementary Capital
7.491.432 9.001.217
7.509.124 9.003.821
1 Upper Tier 2 6.691.917
7.160.629 5.755.636
6.226.427 2 Lower Tier 2
Maximum 50 of core capital 2.351.590
2.351.590 3.351.112
3.351.112 3 Factors reducing supplementary
capital 1.552.075
511.002 1.597.624
573.718
C Factors reducing core capital and
supplementary capital -
- -
- Securitization exposure
- -
- -
D Additional Supplementary Capital
that Satisies Requirements Tier 3 -
- -
- E
Additional Supplementary Capital allocated to anticipate market risks
- -
- -
II TOTAL CORE CAPITAL AND SUPPLEMENTARY CAPITAL A + B - C
73.345.421 80.607.858
61.947.504 67.936.743
III TOTAL CORE CAPITAL, SUPPLEMENTARY CAPITAL AND ADDITIONAL SUPPLEMENTARY CAPITAL
ALLOCATED TO ANTICIPATE MARKET RISK A + B - C + E 73.345.421
80.607.858 61.947.504
67.936.743 IV RISK WEIGHTED ASSETS RWA
FOR CREDIT RISKS 431.632.851
476.508.651 350.761.176 388.424.480
V RISK WEIGHTED ASSETS RWA FOR OPERATIONAL RISKS
57.671.278 67.642.899
48.384.624 55.735.767
VI RISK WEIGHTED ASSETS RWA FOR MARKET RISK
1.972.041 1.990.242
1.044.148 1.244.238
A Standardized Approach
1.972.041 1.990.242
1.044.148 1.244.238
B Internal Model
1.759.446 1.759.446
566.650 566.650
VII RATIO OF MINIMUM CAPITAL ALLOCATIONS FOR CREDIT RISKS, OPERATIONAL RISKS AND
MARKET RISKS [III : IV + V + VI] 14,93
14,76 15,48
15,25
Based on simulations using the Basel II Basic Indicator Approach, RWA for operational risks amount to Rp 57.67 trillion compared with Rp 47.3 trillion using the Standardized Approach.
risk management
Annual Report
2013
PT Bank Mandiri Persero Tbk.
The credit risk capital load using the Standardized Approach based on risk weighting as per end December 2013 is as shown below:
Asset Composition by Credit Risk Weighting Standardized Approach – December 2013
Bobot Risiko 0 Bobot Risiko 20
Bobot Risiko 35 Bobot Risiko 40
Bobot Risiko 50 Bobot Risiko 75
Bobot Risiko 100 Bobot Risiko 150
0,33 0,65
13,14 12,92
44,25 0,20
24,90 3,60
The Bank also has to conduct lending capital load simulations using Advanced IRBA Internal Rating Based Approach, which calculates the capital adequacy ratio more eiciently.
Currently, Bank Mandiri is also developing economic capital needs models for credit risk and operational risk assessment, while at the same time providing a basis for the Bank to commence the application of VBM Value
Based Management through the measurement of RORAC Return On Risk Adjusted Capital. As a irst step in the implementation of VBM, Bank Mandiri has begun to use RORWA Return On Risk Weighted Asset indicators that are
more intuitive for business units as part of the preparations for the full implementation of RORAC.
Bank Mandiri has been preparing for the implementation of Basel III based on the Basel documentation and the regulations and initiatives issued by Bank Indonesia 6. The Bank actively participates in Basel III working groups
and the Quantitative Impact Studies QIS conducted by Bank Indonesia. Based on the position per June 2013, the QIS results showed that in general Bank Mandiri is in compliance with the Basel III guidelines, with a higher Capital
Adequacy Ratio resulting from the simulations than is required under Basel II. This is because Bank Mandiri’s capital structure is dominated by Tier 1 Common Equity. The QIS results also showed that Bank Mandiri operates at a low
risk level, as shown by a satisfactory leverage ratio and a high liquidity ratio, which results from the tight control exercised by the Bank over of balance sheet exposure. In addition, Bank Mandiri’s liquid asset position and balance
sheet composition were consistent with the Basel III requirements.
RISK MANAGEMENT THROUGH OPERATIONS
Risk management through operations intended to maintain credit risks, market risks and operating risks at an acceptable level. Bank Mandiri manages risk appetite and risk tolerance by applying policy limits and system
limits, which are prepared and proposed by the business units, in collaboration with the risk management unit, for approval by the Risk Management Committee. The determination of limits is based on overall limits, limits per risk
type and speciic limits per functional activity that entails risk exposure. These limit policies not only function in the risk management process, but also encourage business strategies and business expansion plans to adhere to
optimal risk-reward proiles.
risk management
Annual Report
2013
PT Bank Mandiri Persero Tbk.
Credit risk management is performed at the front end, middle end and back end, while market and liquidity risk management is conducted through system limits. Operational risk management in respect of the Bank’s products
and activities is conducted by each line unit, and is reviewed bankwide by the risk management unit, with the efectiveness of assurance being assessed by the Internal Audit unit.
1. CREDIT RISK MANAGEMENT
