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
134
57. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
e. Legal Matters
continued The Bank replied the letter on December 28, 2005 stating that in accordance with the procedures
and regulation the liquidation of customers’ demand deposit and time deposit requires liquidation letter from the customer and the time deposit certificate.
Aside from the above legal case, Bank Mandiri has also received a letter from a customer giran dated January 27, 2005 regarding the customer’s plan to include in its balance sheets, receivables
from Bank Mandiri amounting to US10,000,000 full amount and request to the Bank to credit their account amounting to US10,000,000 full amount.
That customer request is related to the foreign exchange transaction conducted by the customer through Bank Mandiri, which was later on checked by the investigators and proposed to the court at
Central Jakarta High Court. In the litigation process, it is determined that the accused and the defendant is the customer’s employeeofficial.
In this matter, Bank Mandiri opined that the Bank does not have the obligation to fulfill the customer’s request and decides not to pay the customer, since not one of Bank Mandiri’s employeesofficials
have been named as the accuseddefendant, and there is no court verdict obliging Bank Mandiri to pay to the customer.
Furthermore, Bank Mandiri opined that in relation to the content of the above letter, there is no liability that should be acknowledged or adjustment that should be made in the financial statement of
PT Bank Mandiri Persero Tbk. and Subsidiaries as of December 31, 2005.
The Bank’s total potential exposure arising from outstanding lawsuits as of December 31, 2005 and 2004 amounts to Rp2,615,232 and Rp2,822,761, respectively. As of December 31, 2005 and 2004,
Bank Mandiri has provided a provision included in “Other Liabilities” for a number of lawsuits involving Bank Mandiri amounting to Rp471,706 and Rp751,707, respectively Note 28.
Management believes that the provision is adequate to cover possible losses arising from pending litigation, or litigation cases currently in progress.
f. On January 25, 2005, Bank Mandiri has entered into an agreement with PT SCS Astragraphia Technologies for the implementation of mySAP Human Resource Solution. mySAP is the
methodology used for projects implementation management, including data compilation activity and procedures, documentation of work results and human resource management. The contract is
estimated to be completed in 2006 with contract value of US1,441,001 full amount. Up to December 31, 2005, Personnel Management Module had been implemented and on the next stages
Compensation, Benefit and Employee Self Service will be implemented.
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
135
58. ECONOMIC CONDITIONS
The operations of the Bank have been affected, and may continue to be affected for the foreseeable future by the economic conditions in Indonesia. Despite the recent improvement in the key economic indicators,
Indonesian banks have engaged in limited lending activities. Any worsening of the economic conditions, including a significant depreciation of the Rupiah or increase in interest rates, could adversely affect the
ability of the Bank’s customers including borrowers and other contractual counterparties to fulfill their obligations when they mature, and consequently negatively impact the Bank’s profitability and its capital
adequacy. Economic improvements and sustained recovery are dependent upon several factors such as the fiscal and monetary actions being undertaken by the Government and others, actions that are beyond the
control of the Bank.
The accompanying consolidated financial statements include the effects of the adverse economic conditions to the extent they can be determined and estimated. Economic improvements and sustained
recovery are dependent upon the fiscal and monetary action being undertaken by the Government to achieve the economic recovery, actions that are beyond the control of the Bank and Subsidiaries. It is not
possible to determine the future effects a continuation of the adverse economic conditions may have on Bank Mandiri’s and its Subsidiaries’ liquidity, earnings and realization of their earning assets, including the
effects from their customers, creditors, shareholders and other stakeholders. The ultimate effect of these uncertainties on the stated amounts of assets and liabilities at the balance sheet date cannot presently be
determined. Related effects will be reported in the consolidated financial statements as they become known and can be estimated.
59. GOVERNMENT GUARANTEE OF OBLIGATIONS OF LOCALLY INCORPORATED BANKS
Based on the Decree of the Minister of Finance of Republic Indonesia No. 26KMK.0171998 dated January 28, 1998, which was replaced by the Decree of the Minister of Finance No. 179KMK.0172000
dated May 26, 2000, the Government of the Republic of Indonesia is guaranteeing certain obligations of locally incorporated banks namely demand deposits, savings, time deposits and deposits on call, bonds,
marketable securities, inter-bank placements, fund borrowings, currency swaps and contingent liabilities such as bank guarantees, standby letters of credit and other liabilities, excluding subordinated loans and
amounts due to directors, commissioners and related parties. Based on Joint Decrees of the Directors of Bank Indonesia and Head of IBRA No. 3246KEPDIR and
No. 181BPPN0599 dated May 14, 1999, the guarantee period is automatically extended, unless otherwise i.e. that within six months from the maturity of this guarantee, IBRA decides not to extend its maturity. In
2001, the Joint Decrees of the Directors of Bank Indonesia and the Head of IBRA were replaced by BI regulation No. 37PBI2001 and the Decree of the Head of IBRA No. 1035BPPN0401.
The Head of IBRA issued Decree No. SK-1036BPPN0401 in 2001 that provides for specific operational guidance in respect of the Government of the Republic of Indonesia’s Guarantee of obligations of locally
incorporated banks. The Government charges a premium in respect of its guarantee program in accordance with prevailing
regulations Note 44.
