PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2005 and 2004 Expressed in millions of Rupiah, unless otherwise stated
129
56. RISK MANAGEMENT continued
Credit Risk The Bank has written credit policies and guidelines on loan administration, which includes the Bank
Mandiri Loan Policy Manual KPBM, Loan Implementation Guidelines PPK, and various circular letters that constitute a more detailed administration manual. The purpose of the guidelines is to provide a
comprehensive formal loan management manual relating to application, analyzing process, approval, recording, monitoring and restructuring processes, including risk analysis and assessment. In order to
make the loan process to be more prudent, the Bank has improved the KPBM and PPK with current business periodically.
In general the credit risk management is implemented on both transactional and portfolio level. In the transactional level, the Bank implements four-eye principal which is every loan approval will involve
business unit and risk unit independently to obtain an objective decision. Since establishment of Credit Approval Committee on June 16, 2005, the loan approval process is conducted through Credit Committee
meeting. Therefore, the loan disbursement process becomes more comprehensive and more prudent.
In this loan approval process, the decision makers are equipped with Tools Rating and Scoring System which enable a more accurate risk quantification and enable a more accurate risk based pricing. To
ensure the availability of Credit Risk model which is proven and reliable, the Bank has guidance in designing and developing the Credit Rating and Credit Scoring model, which is a comprehensive guidance
for the Bank in preparing the capital that will be implemented into the Credit Risk Tools as one of the tools to make credit decision. Periodically they issued review on the scoring and rating result performed by the
business units in Credit Scoring Review and Rating Outlook.
Non-performing loans are managed by special unit Credit Recovery Group in order to obtain a comprehensive resolution and the Business Unit can stay focus on the performing debtors and loan
expansion. In accordance with the organization need, Credit Recovery Group was developed from 1 one group into 2 two groups in order to have a faster and more effective non-performing loans resolution.
At the portfolio level the Bank has Portfolio Guideline which is utilized to guide the loan expansion for maintaining optimum portfolio, both on economy, geographical, segment and product sectors. Optimum
portfolio allocation enables to prevent taking the risk over the Bank’s risk appetite and to obtain optimum return. Portfolio analysis is performed periodically monthly and semi annually in order to monitor the
changes in economic and sectoral industrial variables which influence the optimum allocation and to make the anticipation actions both tactical and strategic portfolio rebalancing.
In accordance with the implementation of the risk measurement tools and as supporting analysis in credit risk management, the Bank uses Customer Profitability Analysis based on risk, which can show the economical
value added to the shareholders on loans activities performed by the Bank. The Bank will continue to increase the credit risk measurement tools in order to obtain the lower economic capital allocation incentive
when the New Basel II Capital Accord is implemented in the future.
Market and Liquidity Risk a. Liquidity Risk Management
Liquidity Risk is measured by knowing the existing liquidity condition liquidity provision, interbank borrowing position and funding structure and projecting the cashflow in the future. Methodology used
in measurement of liquidity risk are liquidity risk indicatorratio and liquidity gap.
PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2005 and 2004 Expressed in millions of Rupiah, unless otherwise stated
130
56. RISK MANAGEMENT continued Market and Liquidity Risk continued
