PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 5140 56. RISK MANAGEMENT continued
Market and Liquidity Risk continued
d. Market Risk Management continued
In accordance with Bank Indonesia regulations, the Bank has considered market risk using Standard Model in allocating its capital. The minimum capital adequacy required which has
considered market risk as at 31 December 2009 was Rp127,935, therefore the CAR which has considered market risk and credit risk is 15.43 Note 51.
The Bank continuously reviews and improves the implementation of market risk management with the regulation requirements, up to date condition and best practice.
e. Foreign Exchange Risk Management
The Bank measures and manages the structural foreign exchange risk to understand the impact of the exchange rate movement on the Bank’s revenue and capital. The Bank’s foreign exchange
position is primarily US Dollar-denominated, most of the liabilities are in the form of third party funds and borrowing whilst most of the assets are in the form of loans, inter-bank placements and
marketable securities.
In order to manage and mitigate the foreign exchange risk, foreign currency loans and placements were funded mostly with the same currency and to hedge significant foreign exchange open
position, the Bank used derivative instruments such as FX forward, swap and option.
Bank Mandiri complied with Bank Indonesia’s regulation that requires the Net Open Position NOP in all foreign currencies for on balance sheet and aggregate to be no more than 20.00 of the
Bank’s Capital Tier I and Tier II. For prudential principles, the Bank has established internal limit to be no more than 10.00 of the capital. As at 31 December 2009, the Bank’s NOP was 9.09 and
NOP aggregate absolute was 3.44 from the capital Note 52.
Operational Risk Operational Risk is defined as the risk of loss resulting from inadequate or failed in internal processes,
people and systems or from external events. The Bank proactively implements operational risk management to protect the interests of the Bank’s stakeholders. An effective Operational Risk
Management ORM program will protect the customers’ interest, decrease incidence of operational losses, improve the Bank’s reputation and support the Bank in achieving its business goals. Currently, the
Bank conducts several programs for improving its operational risk management, as follows:
a. Operational Risk Mitigation
- The Bank continues to review its policy and adjust operational risk management procedures in
accordance to the latest developments. The Bank’s standard policy consists of Standard Operating Procedures SOP for Operational Risk Management, SOP for New Product or
Activities NPA, as well as the SOP for Business Continuity Plan BCP as a guide for effective implementation of Operational Risk Management in a holistic manner.
- To improve its Operational Risk management, the Bank conducts several ORM Tools
implementation to be deployed in all its business unit Mandiri Loss Event Database, Risk Control Self Assessment and Key Risk Indicators in order to help the Business units manage
their operational risk in its daily activities.
- To identify the Operational Risk, the Bank regularly reports its operational risk profile and
segregated by its business units, in order capture the magnitude of the Bank’s operational risk exposed by Bank’s and all business units.
PT BANK MANDIRI PERSERO Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 2009, 2008 AND 2007
Expressed in millions of Rupiah, unless otherwise stated
Appendix 5141 56. RISK MANAGEMENT continued
Operational Risk continued
b. Capital Charge Calculation to Cover Operational Risk
Based on Circular Letter from Bank Indonesia No. 113DPNP dated 27 January 2009, the Bank has performed the simulation for the Minimum Capital Requirement for Operational Risk. The result
of the simulation of minimum capital requirement using the Basic Indicator Approach BIA for the year 2009 is Rp2,276,350 unaudited. Starting from the first semester of 2009, the Bank has also
calculated Operational Risk capital requirement using the Standardised Approach SA, as this approach is in line with the implementation of the risk-based performance for Strategic Business
Unit.
57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES a.
Integrated Banking System Agreement with Vendor
On 21 July 2001, Bank Mandiri entered into an agreement with Vendor for software procurement and installation services for an integrated banking system, called eMAS Enterprise Mandiri Advanced
System, for a total contract value of USD47,535,022.70 full amount including 10 VAT. Additional agreements were also held on 23 April 2002, 28 August 2003, 12 April 2004, 4 July 2005, 8
September 2008 and 22 September 2008 with a contract value after VAT of USD20,467,218.20 full amount, USD462,000 full amount, USD1,014,344 full amount, USD44,000 full amount,
USD1,155,000 full amount and USD44,000 full amount, respectively. The actual payment until 31 December 2009 amounting to USD65,398,162 full amount, after VAT was recorded as construction
in progress amounting to USD668,924 full amount, after VAT and as fixed amounting to USD64,729,238 full amount, after VAT. The estimated percentage of project completion of the
contract as at 31 December 2009 was 98.98.
On 1 August 2006, the Bank entered into an agreement to enhance the eMAS feature with Vendor, for a total contract value after VAT of USD2,934,352 full amount. The actual payment until 31
December 2009 amounting to USD2,068,578 full amount, after VAT was recorded as construction in progress amounting to USD524,542 full amount and as fixed assets amounting to USD1,608,386
full amount. Specifically for LOS Consumer LOS Credit Card, the balances are temporarily recorded as liabilities during the process of document completion, amounting to USD64,350 full
amount, after VAT. The estimated percentage of completion of the contract as at 31 December 2009 was 97.22.
On 17 January 2008, the Bank entered into an agreement to enhance the eMAS feature with Vendor for a total contract value of USD871,200 full amount after VAT 10. The actual payments until 31
December 2009 amounting to USD303,494 full amount was recorded as fixed assets amounting to USD259,776 full amount and as construction in progress amounting to USD58,291 full amount.
Specifically for Enhancement Remittance System project, the balance is temporarily recorded as a liability during the process of document completion, amounting to USD14,573 full amount. The
estimated percentage of completion as at 31 December 2009 was 85.59.
On 14 September 2009, the Bank entered into an agreement to enhance the eMAS feature with Vendor for a total contract value of USD693,000 full amount after VAT 10. The payments
realisation until 31 December 2009 amounting to USD453,337 full amount was recorded as construction in progress amounting to USD453,337 full amount. The estimated percentage of
completion as at 31 December 2009 was 63.45.
