Banking Supervision Report 2004

The Banking Supervision Report

December 2004

bsr

ii

Vision :“To be recognized, domestically and internationally, as a

credible central bank through the strength of our values and

achievement of low, stable rates of inflation”

Mission :“To achieve and maintain price stability by maintaining

monetary stability and by promoting financial system stability

for Indonesia’s long term sustainable development”

Strategic Values of Bank Indonesia :“Competence, Accountability, Integrity, Cohesiveness,

Transparency”

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Table of Contents

Foreword v

Chapter 1 Overview of the Banking System 3

Development of a Commercial Bank Network 3

Conventional Commercial Bank 3

Sharia Commercial Bank 3

The Share of Major Banks 4

The Composition of Commercial Bank Ownership 4

The Development of Rural Bank Network 5

Chapter 2 Banking Regulation and Policy 9

Banking Supervision Policy 9

Post-crisis Banking Recovery Programme 9

Improvement of Banking Supervision Effectiveness 9

The Importance of Good Governance 12

Banking Regulation in 2004 13

Human Resource Development 15

Objective 15

Training Programme 2004 15

Direction of Banking Supervision Policy 16

Chapter 3 Bank Supervision 21

Off-site Supervision 21

Supervision Cycle 21

Objective and Strategy of Banking Supervision 22

Supervision Activities 22

Constraints to Bank Supervision 25

Improvements in the Effectiveness of Bank

Supervision 26

On-site Examination 27

Target and Focus of Bank Examination 27

Risk-based Bank Examination at a Glance 27

The Implications of Risk-based Examination 28

Plan and Realization of Bank Examination 28

Results of the Examination 28


Examination 29

Information System and Bank Licensing 30

Bank Information System 30

Licensing, Management and Ownership of Commer-

cial Bank 32

Investigation of Banking Cases 32

Chapter 4 The Development of the Banking

Industry 37

Commercial Bank 37

Overview 37

Liquidity and the Role of Banking Intermediation 37

Loan Quality and Capital Adequacy 38

Sharia Bank 38

Rural Bank 39

Chapter 5 Sharia Banking: Policy and Supervision

The Development Policy 43

Policy and Regulation 44

Supervision and Examination 44

Licensing 45

Policy Direction – 2005 46

Chapter 6 Rural Banks: Policy and Supervision 51

Development Policy and Regulation 51

Improvements in the Regulation and Supervision

System 52

Capacity Building and Institution 52

Development of Regulations 54

Supervision and Examination 56

Licensing 56

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List of Tables and Figures

Tables

1.1 The Trend of the Number of Commercial

Banks 3

1.2 Share of the Major Banks 4

1.3 The Composition of Commercial Bank

Ownership 4

3.1 Risk-based Supervisory Cycle 21

4.1 Capital Adequacy Ratio (CAR) Trend 38

1.1 Sharia Banking Office Network 4

1.2 Rural Banks’ Office Network 5

2.1 Training Programmes in 2004 16

3.1 Supervisory and Bank Corrective Actions 23

3.2 The Interviews for Controlling Shareholders and

Management 32

3.3 Investigation Results 33

Figures

List of BoxesChapter 2

Box 1 Core Principles for Effective Banking Supervision

10

Box 2 Post-crisis Banking Restructuring Program 11

Box 3 The Importance of Good Governance 12

Box 4 Certification Program for Bank Supervisors and

Examiners 16

Box 5 Financial Safety Net 17

Box 6 Implementation of Indonesian Banking

Architecture (IBA) 17

Chapter 3

Box 1 Problem Banks and Supervision Policy 25

Box 2 On-site Supervisory Presence (OSP) 26

Box 3 The Bank Negara Indonesia (BNI) Case 29

Box 4 The Liquidation of Asiatic Bank and Bank

Dagang Bali 30

Chapter 5

Box 1 Challenges and Policies of Sharia Banking 46

Chapter 6

Box 1 Professional Certification Program for Rural

Banks (CERTIF) 53

List of AppendicesAppendix 1

Core Principles for Effective Banking Supervision

Appendix 2

Banking Key Indicators

Appendix 3

Key Financial Ratios

Appendix 4

Organization Chart of Bank Indonesia’s Banking Sector

Appendix 5

List of Acronyms

4.1 Key Banking Indicators 37

4.2 The Composition of Sharia Banks’ Funding 38

4.3 Key Indicators of Sharia Banks 39

4.4 Sharia Inter-bank Market and Bank Indonesia

Sharia Certificate 39

4.5 Key Indicators of Rural Banks 39

6.1 Plan and Realization of rural bank examination 56

v

With all praise to God Almighty, for His guidance and blessing, this Banking Supervisory Report (BSR) has

been completed as part of the transparency and accountability of Bank Indonesia as the supervisory authority

to the stakeholders and the public. Our appreciation goes to those who have contributed in the preparation

of this report.

Previously, information and policies relating to banking supervision were published by Bank Indonesia in

various reports, namely, Development of Monetar y, Payment System and Banking System (quarterly), Fi-

nancial Stability Review (bi-annually), and Economic Report on Indonesia (annually). However , Bank Indo-

nesia currently publishes an annual banking supervision report to provide more comprehensive information

on the development of polices and regulations, as well as the activities of Bank Indonesia with regard to bank

supervision.

The report comprises of four main aspects, namely: (i) the structure of the banking industry; (ii) the

activities of Bank Indonesia as the supervisory authority: licensing, regulation, off-site supervision, on-site

examination, on-site supervisory presence (OSP), banking investigation, and liquidation; (iii) the development

of banking policies and regulations; (iv) the development of the banking industry, including commercial banks

and rural banks (BPR); and (v) relevant issues in banking supervision.

In addition to micro prudential supervision Bank Indonesia has also has placed more emphasis on macro

prudential supervision through research and surveillance, and developing financial safety nets to maintain

financial system stability.

In 2004, the banking system was relatively stable, despite the fact that there were a number of fraud

cases and the closure of two small failed banks due to poor governance. In general, the performance of the

banking industry is improving, which is supported by adequate liquidity and capital.

Bank Indonesia is continuing to improve the effectiveness of banking supervision in line with interna-

tional standards, especially the Basel Core Principles, among others, through the development of forward

looking and risk-based supervisory approach. The challenge confronted by the banking industry and Bank

Indonesia is becoming more complicated in line with the development of domestic and international economy.

Foreword

vi

In the creation of a sound, efficient and competitive banking system, Bank Indonesia has formulated and

implemented Indonesian Banking Architecture as a basis for the development of the banking industry and

supervision in the future.

We hope that this report can provide valuable information for stakeholders and the general public.

Jakarta, March 2005

Maman H. Somantri

1Chapter 1 Overview of the Banking System

Chapter 1Overview of the BankingSystem

2 Chapter 1 Overview of the Banking System


Institutionally, the banking system in Indonesia

consists of commercial banks and rural banks. The basic

distinction between the two types of banks is in their

roles in the payment system. Commercial banks can

provide demand deposit accounts, whereas rural banks

cannot. Other aspects that distinguish them are capital

requirements and the location for running their

operations. From the nature of its operation, the banking

system is divided into conventional banks and Sharia

banks.

1. DEVELOPMENT OF A COMMERCIAL BANK

NETWORK

Conventional Commercial Bank

Conventional commercial banks have evolved in line

with various banking policies, especially banking

deregulation policy that was stated in the October

Package, 1988. By the end of December 1988, there were

only 111 commercial banks with 1,957 offices. The

quantity of commercial banks reached a peak at the end

Chapter 1Overview of the Banking System

of 1996, with 239 banks and 7,314 offices. The growth

of commercial banks was dominated by the establishment

of new commercial banks during the period of 1988-

1996.

During 1997 and up until December 2002, the

number of conventional commercial banks decreased due

to the closure of 18 banks that were liquidated by the

government (including East Timor Regional Development

Bank), ten banks had their operations frozen, 42 had their

business activities frozen , 28 banks merged and two banks

closed of their own initiative (self-liquidation).

For the past two years, there has been a decrease

in the number of banks, from 141 in December 2002 to

133 in December 2004. This is due to the self-liquidation

of three joint-venture banks, namely: Agricole Indosuez,

Bank Societe Generale Indonesia and Bank Merincorp;

the merger of two joint-venture banks (Bank Keppel Tat

Lee Buana and Bank OCBC, became Bank OCBC

Indonesia) and the issuance of a license for the

establishment of one foreign bank (Bank of China). In

2004, there was another self-liquidation of one joint-

venture bank (ING Bank), three banks merged (Bank Pikko,

Bank CIC and Bank Danpac, became Bank Century) and

two private national banks (Bank Asiatic and Bank Dagang

Bali) were liquidated.

Sharia Commercial Bank

In 2004, the number of Sharia Banks increased to

three commercial sharia banks, 15 Sharia Business Units

and 88 Sharia Rural Banks. This was caused by the

conversion of one Conventional Commercial Bank (Bank

Tugu) into a Commercial Sharia Bank, namely Bank Sharia

Figure 1.1The Trend of the Number of Commercial Banks

Period Before Crisis (1988-1997) dan Post-Crisis (1998-August 2004)

2000

3500

5000

6500

8000

1988 1996 1997 1998 1999 2000 2001 2002 2003 2004100

125

150

175

200

225

250

Number of Offices (left) Number of Bank (right)

4 Chapter 1 Overview of the Banking System

Mega Indonesia and the establishment of seven Sharia

Business Units from conventional commercial banks,

which consist of five regional development banks and

two private national banks1. In addition, operational

licenses have also been issued for five Sharia Rural Banks

(BPRS)2. The network of Sharia bank offices has grown

significantly. In 2004, the number of offices3 reached 96,

as shown in Table 1.1.

3. THE COMPOSITION OF COMMERCIAL BANK

OWNERSHIP

From an ownership standpoint, conventional

commercial banks in Indonesia can be divided into five

categories: State-owned Banks, Private Banks (foreign-

exchange and non foreign-exchange4), Regional

Development Banks (provincial state-owned), Joint-venture

Banks (shared ownership between private national and

foreign banks), and Foreign Banks. Bank Indonesia

maintains a standard supervision policy for all banks.

2. THE SHARE OF MAJOR BANKS

The Indonesian banking industry is dominated by 15

major banks, which have reached 74% market

segmentation of the banking industry’s total assets. In

relation to this, Bank Indonesia has located an On-site

Supervisory Presence Team (OSP) in each bank to assure

effectiveness in supervising these major banks.

Figure 1.2Share of the Major Banks

15 Major banks

Other banks

Assets DPK Credit-

200

400

600

800

1.000Trillions of Rp

Figure 1.3The Composition of Commercial Bank Ownership

Government33.68%

Foreign Banks8.80%

National Private Banks57.52%

December 1997

Government 28.80%

National Private Banks40.06%

Foreign Bank31.14%

June 2004

Before the 1997 economic crisis, foreign ownership

in conventional commercial banks was only 8.80% of the

total deposited capital. In line with the recovery efforts for

the Indonesian banking system carried out by the

Indonesian Bank Restructuring Agency through the1 Bank DKI, BPD Riau, BPD Kalsel, BPD Sumut, BPD Aceh, Bank Niaga and Bank Permata.2 BPRS Situbondo, BPRS Tenggamus, BPRS Buana Mitra Perwira, BPRS Artha Surya Barokah

and BPRS Bhakti Sumekar3 Including cash service and sub-branch office 4 Bank has no activity in foreign exchange transaction

Table 1.1Sharia Banking Office Network

Banking Group 2000 2001 2002 2003 2004

Sharia Commercial Banks 2 2 2 2 3

Sharia Business Unit 3 3 6 8 15

Number of Offices 62 96 127 253 355

Sharia Rural Banks 78 81 83 84 88

TOTALTOTALTOTALTOTALTOTAL 140140140140140 177177177177177 210210210210210 337337337337337 443443443443443


divesture of several banks, foreign ownership increased

to 31.14%. Meanwhile, the decrease in government

ownership from 33.68% in 1997 to 28.80% in June 2004

was not supported by the increase in private national

ownership.

4. THE DEVELOPMENT OF RURAL BANK

NETWORK

The number of rural banks as per the end of the

third quarter of 2004 reached 2 162, not including the

two liquidated banks. Of the 2,162 banks, 89 operated

under a Sharia system.

From a legal status standpoint, there are 1,338 rural

banks in the form of a limited enterprise (62%), 767 rural

banks in the form of a district enterprise (35%) and 57 in

the form of a cooperative enterprise (3%).

Rural banks are not evenly distributed throughout

Indonesia. Eighty-five percent (2,935) of the total number

of rural bank offices in Indonesia (3,454) are concentrated

on Java and Bali by reason of high population density and

economic activity. This concentration has declined by 1.5%

compared to the status at the end of December 2003,

with the establishment of several rural bank offices in

Sumatra, Sulawesi, Kalimantan and Ambon. It is the

intention of Bank Indonesia to spread the establishment

of rural banks outside Java and Bali to encourage equal

economic development throughout Indonesia. This has

been supported by prospective investors who realize the

economic potential of these regions, creating more

demand to establish new rural banks in Sumatera,

Sulawesi, Kalimantan and even Jayapura.

Compared to the end of June 2004, the number of

rural banks has increased by ten, including one Sharia

rural bank. This is because the government has approved

new licensing for offices in Bank Indonesia Branch Office

(BIBO) Solo, Pekanbaru and Semarang along with two

rural banks in each region, one rural bank for each central

district office in BIBO Ambon and Kediri, and in BIBO

Surabaya, one conventional rural bank was converted into

a sharia rural bank. Two problem rural banks, namely, PD

BPR BKK Randublatung and Koperasi BPR Karyawan

Swantara, which did not participate in the Government

Guarantee Program, had their business l icense

withdrawn.

Table 1.2Rural Banks Office Network

Description 1997 1998 1999 2000 2001 2002 20032004

Q1 Q2 Q3

Central 2,140 2,262 2,427 2,419 2,355 2,141 2,141 2,148 2,157 2,164

Branch 48 56 57 62 76 138 140 141 139 136

Cash Service 1 1 1 1 1 468 1,018 1,019 1,146 1,154

TotalTotalTotalTotalTotal 2,1892,1892,1892,1892,189 2,3192,3192,3192,3192,319 2,4852,4852,4852,4852,485 2,4822,4822,4822,4822,482 2,4322,4322,4322,4322,432 2,7472,7472,7472,7472,747 3,2993,2993,2993,2993,299 3,3083,3083,3083,3083,308 3,4423,4423,4423,4423,442 3,4543,4543,4543,4543,454


Chapter 2Banking Regulationand Policy

8 Chapter 2 Banking Regulation and Policy


Banks have a strategic role in a nation’s economy;

they serve as financial intermediaries and provide liquidity

and other financial services to the public. Banks also serve

as a transmission tool in monetary policy. A good banking

system, which dominates the overall financial system, has

to be maintained to accomplish a stable financial and

monetary system. In pursuit of this, banks have to be

managed in a prudent and professional way to avoid any

systemic risk to financial stability. For that reason, banks

need to be supervised and managed according to

international standards.

1. BANKING SUPERVISION POLICY

Bank Indonesia is responsible to supervise banks

according to prevailing regulations1 and international

standards, namely the Basel Core Principles for Effective

Banking Supervision. A summary of the principles is shown

in Box 1, and the complete translation is given in the

Appendix 1.

Banking supervision has three main purposes: (i) to

create and maintain a sound and stable banking system;

(ii) to protect the customers; and (iii) to increase market

confidence. Bank supervision includes different activities:

licensing, regulation and supervision (on-site examination

and off-site supervision), as well as the liquidation of

problem banks, which are unfeasible based on legitimate

standards.

Bank supervisors monitor banks’ operations based

on submitted periodical reports and/or by general or special

inspections. In general, problems faced by banks can be

Chapter 2Banking Regulation and Policy

detected at an early stage by supervisors if banks report

their financial conditions accurately and transparently. In

some cases, banks purposively try to cover their problems

making it difficult for supervisors to identify the problems

early enough. This makes any follow-up actions ineffective.

On-site inspection could reveal a bank’s problems more

accurately, however, these inspections are only carried out

once a year unless there is an indication of deviation.

Post-crisis Banking Recovery Program

To overcome the currency and banking crisis of 1997,

the government and Bank Indonesia implemented a bank

restructuring program in 1998. It is anticipated that the

program will help rejuvenate the banking system to be

more sound, efficient and competitive, based on


Banking restructuring is carried out through two main

programs: (i) a banking recovery program consisting of a

blanket guarantee program, a recapitalization and loan

restructuring program; and (ii) banking system

strengthening program including the improvement of

banking infrastructure, the implementation of good

corporate governance, and improvements in banking

supervision and regulation (see Box 2).

Improvement of Banking Supervision Effective-

ness

Up until now, Bank Indonesia has focused its efforts

towards performing its main task of banking supervision.

Before the crisis, it has been admitted that there were some

weaknesses in the banking supervision system. During the

post-crisis period however, Bank Indonesia has committed1 Act No.13 of 1999 as was amended with Act No. 3 of 2004


In September 1997, The Basel Committee succeeded

in formulating the Core Principles for Effective Banking

Supervision. These principles contain 25 minimum

requirements for an effective supervision system. The

principles (listed in the appendix) can be summarized in seven

main points:

1.1.1.1.1. Preconditions for effective banking supervision.Preconditions for effective banking supervision.Preconditions for effective banking supervision.Preconditions for effective banking supervision.Preconditions for effective banking supervision.

The first principle stresses the necessity of a target

framework and transparent, attainable and consistent

liability for all institutes involved in banking supervision.

This principle shows the necessity of a legal framework

to supervise banks and information exchange among

respective institutions.

2.2.2.2.2. Licensing and structure. (Principles no. 1-5).Licensing and structure. (Principles no. 1-5).Licensing and structure. (Principles no. 1-5).Licensing and structure. (Principles no. 1-5).Licensing and structure. (Principles no. 1-5).

These principles focus on the process of licensing,

ownership and the business coverage of banks and

related banking groups. The supervision system has to

be based on a banking licensing system to identify the

institutions to be monitored, especially on the use of

the word BANK in running their businesses, which needs

to be limited to avoid confusion amongst the public.

The licensing system has to include basic assessment

covering aspects of: ownership, management and the

operational scheme. Supervisors have to be able to

review the acquisition of a bank.

3.3.3.3.3. Prudential regulations and requirements (Principles no.Prudential regulations and requirements (Principles no.Prudential regulations and requirements (Principles no.Prudential regulations and requirements (Principles no.Prudential regulations and requirements (Principles no.

6-15).6-15).6-15).6-15).6-15).

These principles stress the need to identify different types

of risk encountered by banks and methods to ensure

that these risks are well monitored and controlled. The

development and maintenance of prudential guidance

is an integral part of the process. This guidance has to

cover capital adequacy, loan loss reserve, asset

concentration, liquidity, risk management and internal

control that can be either quantitative or qualitative.

Internal control has to cover procedures intended to

prevent crime in banks.

4.4.4.4.4. Methods of ongoing bank supervision (Principles no.Methods of ongoing bank supervision (Principles no.Methods of ongoing bank supervision (Principles no.Methods of ongoing bank supervision (Principles no.Methods of ongoing bank supervision (Principles no.

16-20).16-20).16-20).16-20).16-20).

These principles state that both on-site and off-site

supervision needs to be undertaken. Off-site supervision

includes analyses of the reports and conditions of a bank

and the affiliated entity based on consolidation as well

as individually. The importance of both independent data

validation and the need to interact with bank

management to ensure a bank’s operations are fully

understood is stressed here.

5.5.5.5.5. Information requirements (Principle no. 21).Information requirements (Principle no. 21).Information requirements (Principle no. 21).Information requirements (Principle no. 21).Information requirements (Principle no. 21).

Each bank has to maintain an appropriate record

generated from consistent accounting policy to enable

the supervisor to obtain objective understanding on the

financial condition and profitability of the bank. Each

bank also has to issue periodic financial reports

describing their conditions objectively.

6.6.6.6.6. Formal authority of supervisor (Principle no. 22).Formal authority of supervisor (Principle no. 22).Formal authority of supervisor (Principle no. 22).Formal authority of supervisor (Principle no. 22).Formal authority of supervisor (Principle no. 22).

The supervisor has appropriate authority to take

corrective actions if a bank fails to fulfil prudential

standards, or if the importance of a depositor is

threatened.

7.7.7.7.7. Cross-border banking (Principles no. 23-25).Cross-border banking (Principles no. 23-25).Cross-border banking (Principles no. 23-25).Cross-border banking (Principles no. 23-25).Cross-border banking (Principles no. 23-25).

These principles evaluate the role of home and host

supervisors and stress the need for consolidated

supervision and the authority to exchange information

with other supervisory authorities.

Source: Bank for International Settlements, The Basel

Committee on Banking Supervision, The Core Principles

for Effective Banking Supervision, September 1997.

Box 1 Core Principles for Effective Banking Supervision

to increase the effectiveness of bank supervision through

comprehensive programs, namely the Bank Indonesia

Master Plan. Bank Indonesia has already achieved

significant progress, including compliance to the Basel Core

Principles.

In line with the changes in the environment, the

supervision approach adopted by Bank Indonesia is always

evolving. Before the 1997 crisis, banking supervision

emphasized compliance to the regulations issued. With

this approach, supervision became predominantly focused

on the extent of deviation from Bank Indonesia’s

regulations.

Since 1998, Bank Indonesia has been developing a

risk-based banking supervision system, which is more

future-oriented. With this approach, banking supervision

is more focused on identifying, reviewing and controlling


the risk banks may encounter in their operations.

However, compliance to prevailing regulations is still

important.

The banking supervision effectiveness improvement

program is continuing and will become more integrated

and optimized through the implementation of Indonesian

Banking Architecture . Implementation of risk-based bank

supervision will be synchronized with the improvement

of risk management in the banking industry.

The enhancement of the above-mentioned system

is necessary based on one basic principle; no matter how

good supervision is, it cannot guarantee against all future

bank failures given that it is the management of a bank

who is ultimately responsible for its performance. Based

Box 2 Post-crisis Banking Restructuring Program

To facilitate the recovery of the banking sector from

systemic crisis in 1997, the government and Bank Indonesia

executed the banking restructuring program with two main

agendas: (i) banking recovery; and (ii) banking system

strengthening.

A. Banking Restructuringa. Government guaranteeGovernment guaranteeGovernment guaranteeGovernment guaranteeGovernment guarantee – issued to regain public

confidence, including all claims against bank liabilities

with IBRA (Indonesian Bank Restructuring Agency). The

government guarantee program will be superseded by

a deposit insurance scheme with limited coverage. With

the closure of IBRA, the implementation of the

government guarantee program is now administered

by Government Guarantee Program Unit.

b. RecapitalizationRecapitalizationRecapitalizationRecapitalizationRecapitalization – aimed at strengthening bank capital.

This program began with financial review and bank

classification: solvent or insolvent, followed by

recapitalization with the issuance of government bonds

as a replacement for the non-performing loans that were

transferred to IBRA. This recapitalization program was

completed in 2000.

c. Loan RestructuringLoan RestructuringLoan RestructuringLoan RestructuringLoan Restructuring – initially it was undertaken by three

institutions, namely: IBRA, Indonesian Debt

Restructuring Agency (INDRA) and Jakarta Initiative Task

Force (JITF) as an attempt to expedite the loan

restructuring process, and establish a task force as a

facilitator of the loan restructuring process. After the

closure of the three institutions, loan restructuring was

continued by each bank. Some of the constraints

encountered were some difficulties in settling the loans

syndicate and the group of debtors as well as the poor

legal framework. Bank Indonesia set the NPL indicative

target at a maximum of 5% as of June 2003 to force

banks to improve their loan quality.

B. Banking System Strengtheninga. Improvement of banking infrastructureImprovement of banking infrastructureImprovement of banking infrastructureImprovement of banking infrastructureImprovement of banking infrastructure – undertaken

by the establishment of the Deposit Insurance Company,

Indonesian Banking Architecture implementation, the

development of a financial system stability framework

and the development of sharia banking and rural

banking, including the blueprint. As part of a financial

safety net, the Governor of Bank Indonesia and the

Minister of Finance signed a Memorandum of

Understanding on Emergency Liquidity Assistance (ELA),

which defined the basic principles and decision-making

procedures on ELA, problem banks that have systemic

impact, and funding resources of ELA.

b. The implementation of good governanceThe implementation of good governanceThe implementation of good governanceThe implementation of good governanceThe implementation of good governance – implemented

through the establishment of the National Committee

on Corporate Governance to formulate and recommend

national policy. Corporate governance is expected to

enhance banking transparency, and the competency and

integrity of bankers through fit and proper tests. In

addition, bank compliance is improved by assigning a

compliance director. Bank Indonesia has also formed a

Special Unit for Banking Investigation to follow-up

banking violations and indications of crime.

c. Improving the effectiveness of banking regulation andImproving the effectiveness of banking regulation andImproving the effectiveness of banking regulation andImproving the effectiveness of banking regulation andImproving the effectiveness of banking regulation and

supervisionsupervisionsupervisionsupervisionsupervision - This initiative covers the enhancement of

bank transparency, exit policy and supervision

effectiveness according to Basel Core Principles. The

activities include the adoption of risk-based supervision

and consolidated supervision, and the placement of on-

site supervisory presence teams in 13 major banks to

analyze and monitor risks. Banking regulations that have

been issued are: implementation of risk management,

incorporating market risk in the bank capital calculation,

fit and proper tests for controlling shareholders and bank

management, and bank transparency.


on empirical studies and experience from other countries,

resolving problem banks using open bank resolution is

ineffective and creates moral hazards. Problem banks

without systemic impact need to be resolved by prioritizing

private sector solutions, such as capital injection from

shareholders and/or merger with other banks. If this is

unsuccessful the bank has to be liquidated.

It would be an exaggeration if the failure of one bank

is viewed as a failure of the supervisory authority in carrying

out it its task effectively. Furthermore, it is necessary to

develop partnership and discipline among market players

to act responsibly. Surely this is still the challenge.

The Importance of Good Governance

The bank’s management is responsible for adopting

good governance, effective risk-management systems and

adequate internal control to ensure that a bank is well

managed and in line with prudential principles.

The Importance of Good Governance

Good governance is the core for sound banking

management. Each key player in the bank industry should

act responsibly. Shareholders are responsible for selecting

players -board of commissioners and the directors- who are

ultimately responsible for bank management. While the

supervisory authority is responsible for formulating regulations

and supervising bank operations.

Senior management is responsible for bank operations

and policy implementation, which are set by the board of

commissioners and the directors. The Audit Committee and

Internal Auditor function as the agents of bank management

in supervising bank operations. The external auditor is

responsible for reviewing and providing professional opinion

regarding bank operations. On the other hand, the customers

(the general public) are expected to be responsible for their

deposits and loans received from a bank.

There are four principles in realizing good governance:

(i) clearly define the strategic goals and organizational culture

and communicate them to all staff members; (ii) determine

and maintain clear responsibility and accountability within an

organization; (iii) ensure that management are competent in

their duty, possessing in-depth understanding of their role in

corporate governance and being independent from outside

interference; and (iv) ensure that there is active board oversight.

From experience, it appears that these principles,

especially the last two, are frequently ignored by shareholders

and management alike.

In line with good governance principles, it is necessary

to develop partnership and discipline from all market players

to perform responsibly. Besides a clear legal framework, it is

necessary to have ongoing education and consistent legal

enforcement.

Box 3

Key PlayerResponsibility in

Risk Management

Importance

Policy Level Operational Level

SystemicSystemicSystemicSystemicSystemic

Regulatory Authority Optimize Strategic -

Banking Supervision Supervise Indirect

InstitutionalInstitutionalInstitutionalInstitutionalInstitutional

Shareholders Choose the key players Indirect (Supervise) Indirect

Board of Directors Determine policies Strategic Indirect

Executives Implement policies Strategic (implementation) Strategic

Audit Committee/ Internal Audit Test compliance Indirect (Compliance) Strategic

External Auditor Evaluate and provide opinion Indirect (Evaluation) Indirect

CustomerCustomerCustomerCustomerCustomer

External Stakeholders/Public Act Responsibly - Indirect

Source: Analysing Bank Risk, The World Bank, 2000.


Subsequently, these policies then need to be implemented

consistently according to prevailing regulations and


In cases of bank crime that involve insiders, it can be

difficult for a supervisor to detect the crime at an early

stage. It is very important that the ultimate responsibility

of the bank’s management and control relies on the board

of directors concerned.

2. BANKING REGULATION IN 2004

In 2004, Bank Indonesia issued 14 regulations

concerning conventional banking, which are summarized

as follows:

a)a)a)a)a) Circular (SE) no. 6/12/DPNP dated 26 FebruaryCircular (SE) no. 6/12/DPNP dated 26 FebruaryCircular (SE) no. 6/12/DPNP dated 26 FebruaryCircular (SE) no. 6/12/DPNP dated 26 FebruaryCircular (SE) no. 6/12/DPNP dated 26 February

2004 regarding The Interest Rate Margin for Deposits2004 regarding The Interest Rate Margin for Deposits2004 regarding The Interest Rate Margin for Deposits2004 regarding The Interest Rate Margin for Deposits2004 regarding The Interest Rate Margin for Deposits

Under Blanket GuaranteeUnder Blanket GuaranteeUnder Blanket GuaranteeUnder Blanket GuaranteeUnder Blanket Guarantee

This regulation is the implementation of the

government guarantee program, related to PBI No. 3/5/

PBI/2001 dated 22 March 2001 regarding the Guarantee

for Deposits and Inter-Bank Money Market. This circular

replaces the previous circular No. 5/25 dated 23 October

2003 regarding Interest Rate Margin for Deposits Under

Blanket Guarantee.

b)b)b)b)b) Bank Indonesia Regulation (PBI) No. 6/9/PBI/2004Bank Indonesia Regulation (PBI) No. 6/9/PBI/2004Bank Indonesia Regulation (PBI) No. 6/9/PBI/2004Bank Indonesia Regulation (PBI) No. 6/9/PBI/2004Bank Indonesia Regulation (PBI) No. 6/9/PBI/2004

dated 26 March 2004 regarding The Follow-up Actionsdated 26 March 2004 regarding The Follow-up Actionsdated 26 March 2004 regarding The Follow-up Actionsdated 26 March 2004 regarding The Follow-up Actionsdated 26 March 2004 regarding The Follow-up Actions

for Supervision and Bank Statusfor Supervision and Bank Statusfor Supervision and Bank Statusfor Supervision and Bank Statusfor Supervision and Bank Status

The regulation was issued fol lowing the

dissolution of IBRA to reconcile any aspects related to

bank restructuring and the government guarantee

program.

This regulation deals with the mechanism of

problem bank supervision under the following categories:

(i) Banks under Intensive Supervision (BIS): banks that are

considered to have potential difficulties that can endanger

their operations; (ii) Banks under Special Supervision (BSS):

problem banks that threaten their operations; (iii) Banks

with Systemic Impact: problem banks that can also cause

other banks to fail, which could lead to crises in financial

systems.

Classification of BIS and BSS include different

variables: total assets, capital, liquidity, quality of earning

assets, net foreign-exchange position, and the legal lending

limit. Based on BIS and BSS classification, Bank Indonesia

will formulate the following actions:

– update frequency and improve the evaluation of

banks’ business plans to meet the desired goals;

– request banks to prepare action plans based on the

problems they have encountered;

– place a supervisor at a bank if necessary (on-site

supervisory presence);

– request banks to submit their business plan review,

including setting limits for bank transactions and

expansion;

– request banks to replace board members and

executives, as well as shareholders; and

– request banks to sell part or all their business to other

parties.

If all the attempts to solve bank problems do not

succeed, Bank Indonesia will revoke the license and

liquidate the bank.

In case the problem bank has a systemic impact, its

resolution policies are determined by the Coordinating

Committee that consists of the Minister of Finance and

the Governor of Bank Indonesia.

c)c)c)c)c) Circular No. 6/15/DPNP dated 31 March 2004:Circular No. 6/15/DPNP dated 31 March 2004:Circular No. 6/15/DPNP dated 31 March 2004:Circular No. 6/15/DPNP dated 31 March 2004:Circular No. 6/15/DPNP dated 31 March 2004:

Fit and Proper TestFit and Proper TestFit and Proper TestFit and Proper TestFit and Proper Test

This provision is the implementation of PBI No. 5/25/

PBI/2003 dated 10 November 2003 regarding Fit and

Proper Test, issued previously.

d)d)d)d)d) Bank Indonesia Regulation (PBI) No. 6/10/PBI/Bank Indonesia Regulation (PBI) No. 6/10/PBI/Bank Indonesia Regulation (PBI) No. 6/10/PBI/Bank Indonesia Regulation (PBI) No. 6/10/PBI/Bank Indonesia Regulation (PBI) No. 6/10/PBI/

2004 dated 12 April 2004 regarding the Rating System2004 dated 12 April 2004 regarding the Rating System2004 dated 12 April 2004 regarding the Rating System2004 dated 12 April 2004 regarding the Rating System2004 dated 12 April 2004 regarding the Rating System

for Commercial Banks’ Soundness and Circular No. 6/23/for Commercial Banks’ Soundness and Circular No. 6/23/for Commercial Banks’ Soundness and Circular No. 6/23/for Commercial Banks’ Soundness and Circular No. 6/23/for Commercial Banks’ Soundness and Circular No. 6/23/

DPNP dated 31 May 2004 regarding the Rating SystemDPNP dated 31 May 2004 regarding the Rating SystemDPNP dated 31 May 2004 regarding the Rating SystemDPNP dated 31 May 2004 regarding the Rating SystemDPNP dated 31 May 2004 regarding the Rating System

for Commercial Banks’ Soundness.for Commercial Banks’ Soundness.for Commercial Banks’ Soundness.for Commercial Banks’ Soundness.for Commercial Banks’ Soundness.


This regulation rearranges the evaluation system for

bank soundness in line with the rapid development of the

bank industry that compounds business complexity and

the bank risks, as well as improvements in the methodology

on banking conditions based on international standards.

The assessment on bank soundness covers various

elements that influence the condition and performance

of a bank. It is carried out through qualitative and

quantitative assessment of different elements, namely,

capital, asset quality, management, earnings, liquidity, and

sensitivity to market risk (CAMELS).

In order to determine the value of the elements

above, calculations and analyses of relevant indicators are

required. After the values have been set, then the level for

each factor needs to be determined. This process carried

out through judgment of the significance of each element.

Each element is assigned a composite scale from 1-

5. Composite Level 1 (CL-1) reflects a bank in excellent

condition able to cope with all the negative effects of the

prevalent economic condition and the financial industry;

Composite Level 5 (CL-5) reflects a bank in a weak

condition sensitive to the negative effects of the prevalent

economic condition and the financial industry. Banks in

this category are facing difficulties in their operations.

e)e)e)e)e) Circular No. 6/18/DPNP dated 20 April 2004Circular No. 6/18/DPNP dated 20 April 2004Circular No. 6/18/DPNP dated 20 April 2004Circular No. 6/18/DPNP dated 20 April 2004Circular No. 6/18/DPNP dated 20 April 2004

regarding Implementation of Risk Management on Internetregarding Implementation of Risk Management on Internetregarding Implementation of Risk Management on Internetregarding Implementation of Risk Management on Internetregarding Implementation of Risk Management on Internet

BankingBankingBankingBankingBanking

This circular was issued due to the rapid growth in

internet banking and as a follow-up of Bank Indonesia

Regulation No. 5/6/PBI/2003 dated 19 May 2003 regarding

the implementation of risk management of commercial

banks. The circular states that banks with an internet

banking facility have to apply effective risk management

to their activities, which cover: (i) active oversight by the

Board of Commissioners and Board of Directors; (ii) control

systems; and (iii) risk management, in particular legal and

reputation risk.

f)f)f)f)f) Bank Indonesia Regulation (PBI) No. 6/15/PBI/Bank Indonesia Regulation (PBI) No. 6/15/PBI/Bank Indonesia Regulation (PBI) No. 6/15/PBI/Bank Indonesia Regulation (PBI) No. 6/15/PBI/Bank Indonesia Regulation (PBI) No. 6/15/PBI/

2004 dated 28 June 2004 regarding Statutory Reserves in2004 dated 28 June 2004 regarding Statutory Reserves in2004 dated 28 June 2004 regarding Statutory Reserves in2004 dated 28 June 2004 regarding Statutory Reserves in2004 dated 28 June 2004 regarding Statutory Reserves in

Rupiah and Foreign Currencies for Commercial Banks;Rupiah and Foreign Currencies for Commercial Banks;Rupiah and Foreign Currencies for Commercial Banks;Rupiah and Foreign Currencies for Commercial Banks;Rupiah and Foreign Currencies for Commercial Banks;

Circular No. 6/26/DPNP dated 30 June 2004 regardingCircular No. 6/26/DPNP dated 30 June 2004 regardingCircular No. 6/26/DPNP dated 30 June 2004 regardingCircular No. 6/26/DPNP dated 30 June 2004 regardingCircular No. 6/26/DPNP dated 30 June 2004 regarding

Statutory Reserves in Rupiah and Foreign Currencies forStatutory Reserves in Rupiah and Foreign Currencies forStatutory Reserves in Rupiah and Foreign Currencies forStatutory Reserves in Rupiah and Foreign Currencies forStatutory Reserves in Rupiah and Foreign Currencies for

Commercial Banks; and Circular No. 24/6/DPNP dated 28Commercial Banks; and Circular No. 24/6/DPNP dated 28Commercial Banks; and Circular No. 24/6/DPNP dated 28Commercial Banks; and Circular No. 24/6/DPNP dated 28Commercial Banks; and Circular No. 24/6/DPNP dated 28

June 2004 regarding the Revocation of Several BankJune 2004 regarding the Revocation of Several BankJune 2004 regarding the Revocation of Several BankJune 2004 regarding the Revocation of Several BankJune 2004 regarding the Revocation of Several Bank

Indonesia Circular Letters Concerning Statutory ReservesIndonesia Circular Letters Concerning Statutory ReservesIndonesia Circular Letters Concerning Statutory ReservesIndonesia Circular Letters Concerning Statutory ReservesIndonesia Circular Letters Concerning Statutory Reserves

for Commercial Banks in Rupiah and Foreign Currency atfor Commercial Banks in Rupiah and Foreign Currency atfor Commercial Banks in Rupiah and Foreign Currency atfor Commercial Banks in Rupiah and Foreign Currency atfor Commercial Banks in Rupiah and Foreign Currency at

Bank IndonesiaBank IndonesiaBank IndonesiaBank IndonesiaBank Indonesia

It is crucial to maintain monetary stability to achieve

a conducive and stable economic condition. One of the

monetary tools applied by Bank Indonesia in this regard is

the application of statutory reserves in rupiah for all banks

in Indonesia.

In line with economic development, Bank Indonesia

increased the percentage of statutory reserves in rupiah,

from 5% to a progressive, varied percentage level based

on total bank assets, as follows:

(i) Banks that have deposits in rupiah of more than 50

billion have to maintain 8% statutory reserves in

rupiah of the total deposits in rupiah.

(ii) Banks that have deposits in rupiah of 10 – 50 billion

have to maintain 7% statutory reserves in rupiah of

the total deposits in rupiah.

(iii) Banks that have deposit in rupiah of 1 – 10 billion

have to maintain 6% statutory reserves in rupiah of

the total deposit in rupiah.

As compensation, Bank Indonesia will provide interest

on statutory reserves in rupiah in excess of 5 %.

g)g)g)g)g) Bank Indonesia Regulation (PBI) No. 6/20/PBI/Bank Indonesia Regulation (PBI) No. 6/20/PBI/Bank Indonesia Regulation (PBI) No. 6/20/PBI/Bank Indonesia Regulation (PBI) No. 6/20/PBI/Bank Indonesia Regulation (PBI) No. 6/20/PBI/

2004 dated 15 July 2004 regarding The Amendment of2004 dated 15 July 2004 regarding The Amendment of2004 dated 15 July 2004 regarding The Amendment of2004 dated 15 July 2004 regarding The Amendment of2004 dated 15 July 2004 regarding The Amendment of

Bank Indonesia Regulation Number 5/13/PBI/2003Bank Indonesia Regulation Number 5/13/PBI/2003Bank Indonesia Regulation Number 5/13/PBI/2003Bank Indonesia Regulation Number 5/13/PBI/2003Bank Indonesia Regulation Number 5/13/PBI/2003

concerning the Net Open Position For Commercial Banks.concerning the Net Open Position For Commercial Banks.concerning the Net Open Position For Commercial Banks.concerning the Net Open Position For Commercial Banks.concerning the Net Open Position For Commercial Banks.

To create a favorable climate and maintain financial

system stability it is necessary to have a stable exchange

rate. Therefore, net open position (NOP) regulation is


imperative concerning the composition of banks’ foreign

currency and NOP calculation.

Net open position (NOP) is not only calculated based

on the overall position (balance sheet and off-balance sheet

items), but also on the balance sheet position. For the

overall and balance sheet positions, it is compulsory to

maintain NOP at 20% of the capital. For a bank with

market risk, NOP cannot exceed 30% of the capital.

Overall and balance sheet positions are not only

calculated at the end of the day using the closing exchange

rate, but also midday using the mid-day exchange rate.

h)h)h)h)h) External Circular No. 6/37/DPNP dated 10External Circular No. 6/37/DPNP dated 10External Circular No. 6/37/DPNP dated 10External Circular No. 6/37/DPNP dated 10External Circular No. 6/37/DPNP dated 10

September 2004 regarding Assessment and Imposition ofSeptember 2004 regarding Assessment and Imposition ofSeptember 2004 regarding Assessment and Imposition ofSeptember 2004 regarding Assessment and Imposition ofSeptember 2004 regarding Assessment and Imposition of

Sanctions in regard to the Implementation of ‘Know YourSanctions in regard to the Implementation of ‘Know YourSanctions in regard to the Implementation of ‘Know YourSanctions in regard to the Implementation of ‘Know YourSanctions in regard to the Implementation of ‘Know Your

Customer’ Principles and Other Requirements PertainingCustomer’ Principles and Other Requirements PertainingCustomer’ Principles and Other Requirements PertainingCustomer’ Principles and Other Requirements PertainingCustomer’ Principles and Other Requirements Pertaining

to the Law on Money Laundering.to the Law on Money Laundering.to the Law on Money Laundering.to the Law on Money Laundering.to the Law on Money Laundering.

The regulation was issued in relation to the

compliance of commercial banks in applying customer

identification principles and other obligations related to

Law No. 25, 2003 regarding money-laundering crime.

Violation of this regulation will affect the evaluation of

bank soundness with the penalty ranging from freezing

operations to management dismissal through a fit and

proper test mechanism.

i)i)i)i)i) External Circular No. 6/43/DPNP dated 7 OctoberExternal Circular No. 6/43/DPNP dated 7 OctoberExternal Circular No. 6/43/DPNP dated 7 OctoberExternal Circular No. 6/43/DPNP dated 7 OctoberExternal Circular No. 6/43/DPNP dated 7 October

2004 regarding Implementation of Risk Management for2004 regarding Implementation of Risk Management for2004 regarding Implementation of Risk Management for2004 regarding Implementation of Risk Management for2004 regarding Implementation of Risk Management for

Banks Engaging in Joint Marketing Efforts with InsuranceBanks Engaging in Joint Marketing Efforts with InsuranceBanks Engaging in Joint Marketing Efforts with InsuranceBanks Engaging in Joint Marketing Efforts with InsuranceBanks Engaging in Joint Marketing Efforts with Insurance

Company (Bancassurance).Company (Bancassurance).Company (Bancassurance).Company (Bancassurance).Company (Bancassurance).

This regulation is intended to give protection to the

public and give legal protection to a bank that offers

insurance marketing products (Bancassurance). Banks will

have to manage their reputation and any legal risks that

may come from this activity.

j)j)j)j)j) Bank Indonesia Regulation (PBI) No. 6/25/PBI/Bank Indonesia Regulation (PBI) No. 6/25/PBI/Bank Indonesia Regulation (PBI) No. 6/25/PBI/Bank Indonesia Regulation (PBI) No. 6/25/PBI/Bank Indonesia Regulation (PBI) No. 6/25/PBI/

2004 and External Circular No. 6/44/DPNP dated 222004 and External Circular No. 6/44/DPNP dated 222004 and External Circular No. 6/44/DPNP dated 222004 and External Circular No. 6/44/DPNP dated 222004 and External Circular No. 6/44/DPNP dated 22

October 2004 regarding the Business Plan of CommercialOctober 2004 regarding the Business Plan of CommercialOctober 2004 regarding the Business Plan of CommercialOctober 2004 regarding the Business Plan of CommercialOctober 2004 regarding the Business Plan of Commercial

Banks.Banks.Banks.Banks.Banks.

This provision is intended to improve the regulation

on the business plan of commercial banks; issued in a Bank

Indonesia Director’s Decree No. 27/117/KEP/DIR dated 25

January 1995. This provision aims to enhance sound

banking practices and direct banks to implement good

planning and an effective risk control systems .

3. HUMAN RESOURCE DEVELOPMENT

Objective

An increase in complexity of banking operations

creates higher banking risks accordingly. Subsequently,

Bank Indonesia has enhanced the risk-based supervision

system by developing human resource quality.

This is conducted through comprehensive training

programs, including relevant modules and materials,

as well as qualified trainers. These training programs

include in-house and overseas training. Bank Indonesia

has developed a Certification Program for Bank

Supervisors and Examiners (Box 4). Bank Indonesia also

plans to establish a Banking Supervision Institute in the

future.

Training Program 2004

During 2004, Bank Indonesia sent its supervisors,

examiners and researchers to attend various training

programs, seminars and workshops, held by Bank

Indonesia and also by national and international institutions

(Table 2.1).

In addition, Bank Indonesia selected members of staff

to participate in apprenticeships in leading central banks

and supervisory authorities.

Each member of Bank Indonesia’s staff in the banking

sector (examiners, supervisors and researchers) has to

follow a risk-based supervision certification program with

a duration of 80 hours or 10 working days per year. For

other training, the duration is 56 hours or seven working

days per staff per year.


4. DIRECTION OF BANKING SUPERVISION POLICY

Bank Indonesia will continue to develop banking

supervision policy according to the Basel Core Principles.

To comply with the 25 principles, Bank Indonesia will review

regulations that relate to capital, earning assets, loan

restructuring, asset loss provision and legal lending limit.

Bank Indonesia will also adjust some associated regulations,

Tabel 2.1 Training Programmes in 2004

TrainingsNumber ofParticipants

In-house Training Programs 188

- Information System technology (TSI) basic level banks 80

- Bank Financial Analysis 14

- Prevention of Bank Fraud Workshop 45

- Consolidated Supervision 17

- Seminar Risk Based Supervision 32

Certification Program (Level Foundation Grade 1-4) 137

Other Training Prograns 117

Total 442

Certification Program for Bank Supervisors and ExaminersBox 4

To achieve effective competency development and to

acquire accreditation, the training includes a well-planned,

standardized program, up-to-date modules and qualified

trainers, combined with a certification program.

The aim of the certification program is to provide staff

in the banking sector a professional standard in carrying out

their duty as bank supervisors.

By following the certification process, it is expected

that the staff will gain a high standard of knowledge and

skills, to nurture individual specialty and competency.

To support the implementation of a certification program,

a Governor’s Decree has been issued concerning certification

committee formation. The role of the certification committee

is to maintain the credibility of the certification program through

by reviewing the best practices concerning the modules, the

trainers and the training providers. This committee consists of

experts in banking supervision and human resources from

relevant institutions such as the supervisory authorities, banker

associations, auditors and academics.

The certification program was conducted on 11 August

– 21 October 2004 for the basic level (grade 1-4), attended

by 137 staff at head office. The continuation of the

certification program will commence in 2005 after the

formation of the certification committee.

among others are: Bank Indonesia regulations regarding

exit policy, business license revocation and bank liquidation,

in accordance with Law No. 24, 2004 regarding the Deposit

Insurance Company.

To create a sound and efficient banking system,

besides effective regulation and supervision, appropriate

financial safety nets are required. A financial safety net is

one important element to support a stable financial system,

which is a prerequisite for sustainable economic

development. The government and Bank Indonesia has

completed a financial safety net framework. In such a case,

Bank Indonesia plays the role of ‘lender of the last resort’.

(Box 5).

To achieve a sound, efficient and competitive banking

system, Bank Indonesia has also implemented the

Indonesian Banking Architecture (IBA) as the basis and

future direction of the banking industry. The initiative to

implement IBA began in 2004 (Box 6).


Financial Safety NetsBox 5

Financial Safety Net is one of the main pillars to create

a sound and efficient banking system, in addition to effective

regulation and supervision. In general, comprehensive financial

safety nets cover five elements: (i) effective regulation; (ii)

effective and independent supervision; (iii) an adequate ‘lender

of the last resort’; (iv) appropriate deposit insurance scheme;

and (v) adequate crisis management.

The government and Bank Indonesia have formulated

a policy framework for financial safety nets containing the

role, responsibility and coordination mechanism of related

institutions in financial safety nets, namely, Bank Indonesia,

the Ministry of Finance, Supervisory Authorities, and

Indonesian Deposit Insurance Company (IDIC). The framework

also elaborates the policies of ‘lender of the last resort’ and

deposit insurance to be adopted in the future.

In accordance with the regulations1, under normal

conditions Bank Indonesia can provide Short-Term Financing

Facilities for banks undergoing liquidity difficulties due to cash

flow mismatch. Additionally, Bank Indonesia can also provide

Emergency Liquidity Assistance for banks undergoing financial

difficulties that have systemic impact which could endanger

financial system stability. The funding for ELA will be borne

by the government. Bank Indonesia and the Ministry of

Finance have signed a Memorandum of Understanding

regarding the provision of ELA. The regulations concerning

ELA provision are currently being formulated by Bank

Indonesia and the Ministry of Finance team.

In relation to the phasing out of the Government

Guarantee Program, in September 2004, the People’s

Representative Assembly approved the IDIC law. IDIC will have

two main functions: (i) as insurer of deposits up to a particular

amount; and (ii) handling the resolution and closure of failed

banks.

The implementation of the deposit insurance will be

gradual as follows:

1) Phase I: deposits and inter banks

2) Phase II: deposits

3) Phase III: deposits up to Rp5 billion

4) Phase IV: deposits up to Rp1 billion

5) Phase V: deposits up to Rp100 million

Additionally, Bank Indonesia is actively involved in

maintaining financial system stability through research and

surveillance activities on the development and risks that can

disrupt the financial system. Bank Indonesia publishes

periodically a Financial Stability Review (FSR) covering the

research and surveillance of the financial system.1 Act No.13 of 1999as was amanded with Act No.3 of 2004 chapter 11 verse (4).

Nineteen IBA programs will direct the Indonesian

banking industry towards achieving its vision of a sound,

strong and efficient banking system to create financial system

stability and support national economic growth.

As a first step, Bank Indonesia has conducted internal

restructuring to improve regulation and supervision

effectiveness. Internal restructuring has become the focus of

seven of nineteen IBA programs covering the formation of

banking-specialist panels in Bank Indonesia, the gradual

implementation of Basel Core Principles, improvement of Bank

Indonesia’s coordination with other supervisory authorities,

reorganization of banking supervision functions, improvement

of supervisor and examiner competency through certification,

the development of risk-based supervision, and improvement

of the effectiveness of legal enforcement.

With these programs, Bank Indonesia is expected to

formulate consistent, high-quality and applicable policies by

considering other institutions’ policies and market interest.

Besides, the envisaged higher capabilities of supervisors and

examiners, the improved investigation process through

internal reorganization, and better legal enforcement will

improve the quality of banking supervision quality.

The banking structure to be created by IBA includes

banks with strong capital and appropriate tools to manage

risk. With a minimum capital of Rp100 billion, commercial

banks will be able to absorb confronted risks. Banks will also

be equipped with risk-management tools and internal control

to manage their inherent risks better. The improvement of

risk management is achieved, among other things, through

enhancing the competency of human resources by requiring

bank management and executives to successfully participate

in a risk-management certification program.

Internal control improvement can be achieved with the

enhancement of good governance. The capacity of the banks’

Implementation of Indonesian Banking Architecture (IBA)Box 6


Healthybankingstructure

Effective andindependentsupervisory

system

Adequateinfrastructure

Effectiveregulation

system

Strongbankingindustry

Robustcustomerprotection

Sound, strong, and efficient banking systemto create financial system stability for

promotion of national economic growth

Pillar 2 Pillar 3 Pillar 4 Pillar 5 Pillar 6Pillar 1

Indonesian Banking Architecture

operation will also be increased with the improvement of

human resources and efficiency. As a facility for banks to

improve their loan quality assessment, a Credit Bureau, a

body that will organize and maintain the loan data of banks’

customers, will be formed.

Small and medium enterprises (SME) will receive due

consideration too. Bank Indonesia will stimulate the

development of rural banks to reach areas that hitherto do

not have banking services. The linkage program that has

been established with commercial banks will be improved

to provide more incentives to commercial banks and rural

banks to collaborate. Access of SMEs and the general public

to loans will be increased through guarantee schemes and

partnerships with local government authorities.

A complaint mechanism is currently being formulated

to accommodate the suggestions and complaints of

customers regarding their banking services. In anticipation

of disagreements between banks and their customers in

settling disputes, Bank Indonesia will establish an

independent mediatory institution, or bank-client

ombudsman.

Subsequently, the transparency standard for banks in

promoting their products will clearly be defined, so that banks’

customers can make informed decisions on which of the

bank’s products are suitable and to avoid misleading

information. Banks are also encouraged to conduct ongoing

customer education.

Chapter 3 Banking Supervision 19

Chapter 3Banking Supervision

20 Chapter 3 Banking Supervision


1. OFF-SITE SUPERVISION

Supervision Cycle

Bank Indonesia continues its banking restructuring

program consistently to strengthen banking system

resilience. The various efforts taken include improvements

in the quality of banking supervision in line with

international standards, in particular the 25 Basel Core

Principles. One such program is the implementation of risk-

based supervision.

The risk-based supervision cycle is divided into six

stages: (i) understanding institution (core knowledge); (ii)

quarterly risk assessment; (iii) examination plan; (iv) risk-

focused examination and audit report; (v) Individual

Supervisory Strategy (ISS); and (vi) the implementation of

ISS and supervisory actions.

Based on the aforementioned cycle, off-site

supervision incorporates the first, second, fifth and sixth

stages, the other two (3 and 4) come under on-site

supervision.

Understanding institution or core knowledge is the

supervisory activity best suited to acquire overall

comprehension of banking conditions to support an

effective supervision process. In such a case, the supervisor

analyses different reports submitted by banks, among

others, monthly reports, periodical reports, annual reports,

annual financial reports and other reports from commercial

banks. In addition, supervisors analyse the institution, its

compliance and other financial matters, to obtain

comprehensive core knowledge.

Good comprehension of banks under their

supervision is necessary for supervisors to prepare risk

profiles. Besides, the audit report is also needed, especially

Chapter 3Banking Supervision

as a source of information for risk control systems1. Risk

assessment is conducted quarterly. However, if necessary

the assessment can be more frequent depending upon

the level of the bank’s problems, the supervision status,

the execution and progress of action plans and the

effectiveness of the supervisory actions. Information

sources for the updated risk profile come from audit

reports, information systems and bank reports, as well as

other reports and information, such as the mass media.

Following the risk assessment, an Individual

Supervision Strategy (ISS) is formulated to support risk-

based supervision and to determine the actions required

by the bank. ISS contains the current supervision status of

the bank, the current condition and target of the business

plan, the previous risk profile and supervisory actions. Thus,

Figure 3.1Risk-based Supervisory Cycle

2.

UnderstandingInstitution/Core

Knowledge

1.

Quarterly RiskAssessment

3.Examination

Plan

4.Risk-focused

Examination and AuditReport

5.Individual Supervisory

Strategy (ISS)

ISS Execution&

Supervisory Action

6.

1 Risk control systems is a process to control risk which formulated by bank managementin the policies and procedures in line with effective risk management principles. Riskcontrol systems cover senior boards oversight, policies and procedures, risk assessmentsystem that fit to bank’s condition and adequate information system as well as andinternal control.


ISS becomes a guideline for supervisors, especially for

identifying shortcomings; the potential of a bank’s

business; supervision focus; and the action plans. Through

the ISS, supervisors can monitor and anticipate the

corrective actions that will be undertaken by a bank. In

addition, ISS is also useful for audit trails, planning and

communication. The update of ISS is carried out quarterly

or more often if necessary. Factors affecting the update

are: risk profile, audit report, OSP report, corrective actions,

financial condition trend, and other external events that

affect the condition of a bank, rendering ISS ineffective.

Objective and Strategy of Banking Supervision

In general, the objective of banking supervision is to

create a sound, strong and efficient banking system to

support the growth of national economy. Supervision

strategy is developed according to the needs and

complexity of each bank.

In practice, supervisory activities are divided into two

types: normal action and special action. Normal action is

directed towards the accomplishment of business plans

adhering to prudential principles. This activity is conducted

through several means in the form of financial condition

analyses and bank soundness level through the Supervision

Management Information System (SMIS), analysis of the

reports and bank compliance to regulations, and risk

assessment. In major banks that play a significant role in

the banking system and the economy, an On-site

Supervisory Presence Team (OSP) is assigned to monitor

day-to-day bank operations. The report from the OSP then

becomes important information for bank supervisors.

Meetings between supervisors and bank

management are conducted periodically to discuss bank

conditions and problems. The meetings are not only

conducted with bank management but also with

concerned executives. If the problem encountered is

considered crucial and requires further intensive action,

then a meeting should be held with the controlling

shareholders, including recommendations to perform a

special examination.

Special action is arranged according to specific

problems confronted by banks. It is done by requesting a

bank to take corrective actions by submitting several

reports, including a capital restoration plan, an

organizational improvement plan and the realization of

the action plan. Special action is also applied by holding

more intensive meetings with the bank’s management to

seek more comprehensive information on the bank’s

problems including actions taken and to be taken to solve

the problems. If needed, special examination can be

undertaken. If a problem bank is considered to endanger

the business or the customers’ interests, the bank must:

(i) execute the mandatory supervision actions requested

by Bank Indonesia; (ii) be placed under intensive

supervision; and (iii) be placed under special surveillance.

Supervision Activities

During 2004, Bank Indonesia imposed normal

actions on 123 banks because their conditions were good

or relatively sound and special actions were imposed on

12 banks, where the condition was deemed inadequate.

Such banks were placed under intensive supervision and

special surveillance. Banks in good condition but

undertaking high-risk activities were also placed under

special surveillance.

Based on the supervision results in 2004, the basic

problems confronted by banks are shown in Table 3.1.

Among the basic problem banks during 2004, there

were four banks with a Capital Adequacy Ratio (CAR) of

less than 8%. To these banks, Bank Indonesia followed

procedure for problem banks and took the following steps:

(i) place the bank under special surveillance; (ii) request

the bank to submit a Capital Restoration Plan (CRP); (iii)

instruct the bank to undertake mandatory supervisory


actions (MSA); and (iv) provide a Cease and Desist Order

(CDO) and request a change of management within 15

days of the bank being placed under special surveillance.

The surveillance action aims to improve the condition of

banks to reach the minimum 8% CAR or Minimum

Statutory Reserves (MSR) as regulated. Bank Indonesia

allows six months for listed banks to reach the minimum

CAR and MSR and three month for non listed banks. The

given period can be extended once for up to three months.

With the limited time, the actions taken by banks to

overcome their capital problems are, among others,

augmenting the deposited capital, maintaining adequate

daily liquidity, implement CDO, change management, sell

non-productive assets or attempt a merger with other

banks.

Even though Bank Indonesia has been maintaining

bank soundness, at the beginning of 2004 there were still

two banks where licenses had to be revoked. This is due

to the banks’ management and owners not implementing

the action plans consistently. As a result, they were unable

to improve their bank’s capital to reach the minimum of

8% CAR as scheduled. The business licenses of the two

banks were revoked according to the prevailing regulations

with consideration of the impact on the banking system,

especially on public confidence.

Furthermore, along with the blanket guarantee

program, the banks’ depositors’ claims will be settled by

the Government Guarantee Program Unit under the

Ministry of Finance. The settlement process for the two

banks to have their licenses revoked was carried out

meticulously. This was done to anticipate mistakes in

disbursement and to mitigate the indications of moral

hazard by bank management and staff.

Other steps taken by Bank Indonesia to assist problem

banks include mergers. Currently, the merger of three

banks that have joint ownership is still in process. It is

predicted that through the merger process the three

problem banks can become one sound bank.

Other problems which require attention are the 15

banks with a non-performing loans (NPLs) net ratio of total

loans above the 5% indicator level. As per procedure, Bank

Indonesia will place these banks under intensive supervision,

request them to formulate action plans to reduce the NPLs

and monitor the implementation of the action plan. The

actions being taken by the banks to reduce their NPLs are,

among others, restructure the non-performing loans; sell

Table 3.1Supervisory and Bank Corrective Actions

Problems/difficulties Supervisory Actions Corrective Actions

Place under special surveillance, request a capital restoration plan,

request Mandatory Supervisory Action and monitor the execution.

Place under intensive surveillance, request restoration plan and

monitor the execution.

Place under intensive supervision, request restoration plan and

monitor the execution.

Place under special surveillance, request action plan on liquidity

restoration and monitoring.

Apply cease and desist order.

Monitor liquidity condition and request the bank to find

alternative fund resources.

Request the bank to improve the function and implementation of

internal control and monitor the execution.

Submit and implement a capital restoration plan.

Submit and execute an action plan to decrease NPLs.

Submit and execute an action plan to settle the legal

lending limit.

Submit and execute action plan on liquidity

improvements.

Reduce credit risk.

Improve liquidity position.

Improve internal control complete the legislation.

CAR < 8%

Exceeding Legal Lending Limit

Liquidity (MSR) <5%

Credit risk: High

Liquidity Risk: High

NPL Net > 5

Operational Risk:

High


the non-performing loans; write-off the non-performing

loans; increase loan expansion and maintain adequate

earning assets losses provision. These efforts are ongoing

and the number of banks with a NPL net ratio above 5%

did not change as of the end of 2004.

There were nine banks that exceeded Legal Lending

Limit (LLL) during 2004 due to the alteration of the rupiah

exchange rate. To deal with the excess in LLL, Bank

Indonesia has requested banks to submit their action plan

for LLL settlement with a nine-month time limit, which

begins as of the approval of the action plan. These banks

will be placed under intensive supervision if they are

incapable of overcoming the LLL excess. As of mid 2004,

some banks had resolved LLL excess while others were

still in the final process as stated in the schedule of the

action plan submitted.

During 2004, there were three banks that

continuously could not fulfil the minimum statutory

reserves ratio (MSR). As a supervisory follow-up action,

Bank Indonesia has placed these banks under special

surveillance, requested the banks to submit an action plan

to improve liquidity, to maintain their daily liquidity ratio

and to prepare a contingency plan if the reserves in Bank

Indonesia are inadequate. If the actions taken can not

resolve the liquidity problem, the controlling shareholder

is requested to provide additional capital and assets.

Besides the above mentioned problems, there are

several banks which are categorized as high risk in their

business activity, with a tendency to become stable or

improve. This high risk is caused by the size of inherent risk

and weaknesses in the risk control system. The high risks

encountered in some banks included credit risk, liquidity

risk and operational risk. In anticipation of this, Bank

Indonesia has conducted different types of action as follows:

– For banks with high credit risk, Bank Indonesia applies

a cease and desist order (CDO), which is the restriction

of allocating loans or certain types of loans to the

business sector until the conditions required by the

supervisory authority are fulfilled. Banks are also

requested to reduce and/or settle their non-

performing loans. In line with the supervisors’ actions,

banks are obliged to take several steps to control risk

through a write-off, intensifying the settlement of

non-performing loans by forming a loan recovery unit,

loan restructuring, and temporarily discontinuing loan

expansion in the corporate sector.

– For banks with high liquidity risk, Bank Indonesia will

tightly monitor the liquidity condition and request the

banks to improve their funding structure. For long-

term credit funding in particular, it is suggested to

use long-term funding resources. In line with the

supervisors’ actions, banks are obliged to take several

steps to improve liquidity risks by increasing liquidity

reserves by selling government bonds, issuing bonds

and subordinate debts, as well as reducing

dependency on the main depositor and increasing

the collection of third-party funds.

– For banks with high operational risk Bank Indonesia

will request them to improve their operational

guidelines, to empower the internal control function,

apply a lawsuit for every violation that can cause losses

to the bank, examine and deregulate the

authorization delegation and ask the board of

commissioners and the compliance director to

enhance the bank oversight function.

In line with the supervisors’ actions, banks must

attempt to eliminate losses caused by fraud through the

allowance for loss reserves, settling fraud cases legally,

imposing firm sanctions on any staff involved in fraud or

manipulation, and revising the operational guidelines, as

well as improving the function and implementation of

internal control.


Box 1 Problem Banks and Supervision Policy

In a competitive business environment, banks

encounter various problems which can result in failure.

Subsequently, worldwide, there is no supervisory authority

that can guarantee against bank failure and liquidation. For

example, in the United States, as one of the countries which

has the most advanced supervision system and applies

multiple supervisory agencies, there is still bank failure and

liquidation.

To mitigate the systemic effect of bank failure and

liquidation, which can cause financial instability, good and

efficient management of problem banks is required, as is the

availability of financial safety nets, which have been discussed

previously in Box 4.

The factors affecting problem banks vary and can be

categorized into two groups, namely: (i) internal factors, which

come from within the bank organization, such as: fraud due

to weak internal control and risk management, poor corporate

governance (intrusion by the owner in banking operations),

or mistakes in strategy determination that cause significant

losses; and (ii) external factors, which come from the banking

business environment, such as worsening economic

conditions that can cause business failure for bank debtors

leading to non-performing loans, or financial crisis which can

engulf the whole financial system and the economy..

Post-crisis, the resolution of problem banks in Indonesia

has been carried out by Bank Indonesia and Indonesian Bank

Restructuring Agency (IBRA). For solvent banks with a CAR

above 8%, supervision is carried out by Bank Indonesia.

Referring to Banking Law No.10, 1998, if a bank suffers

from financial difficulties that directly endanger business

operations, Bank Indonesia can take several actions: (i)

shareholders must inject capital; (ii) shareholders must replace

the Board of Commissioners and Board of Directors; (iii) the

bank must merge or consolidate with another bank; or other

actions. If the shareholders and management of insolvent

banks have been unable to take the necessary steps in a given

time, Bank Indonesia assigns the bank to IBRA to be recovered

or freezed its business activity.

Since the closure of IBRA, the recovery of problem

banks, which do not have systemic impact, has been handled

by Bank Indonesia. For banks with systemic impact, recovery

will be handled by the government, in accordance with the

Memorandum of Understanding between the Minister of

Finance and the Governor of Bank Indonesia dated 17 March

2004.

From the experience of other countries and the 1997/

98 financial crisis there are some good lessons to be learned:

(i) a supervisory authority cannot prevent bank failure; (ii)

shareholders are responsible for selecting capable people to

manage their banks; (iii) ultimate responsibility in bank

management lies with the board of directors. For that reason,

board of commissioners, board of directors and executives

have to be fit and proper; (iv) the audit committee and internal

auditors have to be an extension of the bank management in

supervising a bank’s business; (v) external auditors (public

accountants) play an important role in evaluating a bank’s

financial system; and (vi) the public/customers, as market

associates, have to be trained to be responsible for their

savings and deposits.

Constraints to Bank Supervision

Bank Indonesia has continually taken steps to

improve the effectiveness of bank supervision with the goal

of creating a sound banking system. However, in doing so

there are internal and external constraints.

The internal constraints encountered in bank

supervision include the organization of the supervision,

the adequacy of the human resources, supporting tools

and the number of banks to be supervised. From an

organizational side, off-site supervision and on-site

examination conducted by different working units may

influence the effectiveness of supervision. In addition, the

limited number and lower competency of human

resources, as well as inadequate supporting tools, including

a lack of fast and accurate information, cause less optimal

supervision and reduce the speed of the decision-making

process. The problems mentioned are aggravated by the

number of banks to be supervised, which, in turn, creates

a high workload for bank supervisors.

The external constraints include poor legal

enforcement, inadequate risk management and internal

control and the lack of infrastructure to support effective


bank operations. Weak legal enforcement is evident from

the lengthy administrative process of justice for banking

cases.


Supervision

The challenge faced by the banking industry is

growing in line with the more complicated products and

the higher risks confronted by banks, which necessitates

the implementation of effective risk management. In line

with this, Bank Indonesia has developed a supervision

system using a risk-based approach. Risk-based supervision

is a more effective system and able to anticipate and control

bank business risks.

However, supervision concerning aspects of

compliance is still needed because there are still some

violations in banking regulations and business. The

adoption of compliance supervision in general, emphasizes

institutional aspects, prudential principles, a surveillance

system, management information system, as well as

banking management and operations.

The change in the supervision paradigm from

compliance to a more risk-based approach requires the

improvement of supervision tools. In the short term, Bank

Indonesia plans to improve the organization of supervision,

supervisor competency, the management information

system including a bank reporting system, enhance the

assessment of a bank’s soundness and increase the

effectiveness of OSP teams which are currently posted in

13 major banks.

The improvement of bank supervisor competency is

accomplished through either long-term education, or

Box 2 On-site Supervisory Presence (OSP)

OSP is part of banking supervision that places a

supervisor in major banks. This program is implemented in

line with the agreement between the government and IMF

in 2000 regarding the improvement of the supervisory quality

of Bank Indonesia. Initially, Bank Indonesia placed OSP teams

in 9 banks1 but since January 2004, another 4 have been

added making a total of 13.2

Previously, Bank Indonesia adopted compliance based

supervision systems that focused more on the performance

of banks based on historical data and bank compliance toward

prevailing regulations. This type of supervision needs to be

complimented with more forward looking and risk-based

supervision.

This new approach focuses on the evaluation of three

main aspects: the effectiveness of risk management, the

adequacy of internal control and information management

systems. It is expected that OSP team is able to identify bank’s

problem beforehand so that it can be followed up with proper

preventative actions and improvements.

The role of OSP teams in terms of supervision is: (i)

monitor the bank liquidity condition daily; (ii) monitor the

new loan disbursements; and (iii) identify, evaluate and

monitor bank risks, including internal control.

OSP team prepares a report periodically to provide

updated information for bank supervisors regarding the

condition and problems of major banks. Therefore, the

improvements necessary could then be taken to overcome

a bank’s problems.

OSP activities integrate with the off-site bank

supervision. In addition the three key activities mentioned above

OSP teams also monitor the implementation of corrective

actions, analyze the impact of new product launchings, and

provide inputs for updating banks’ risk profiles.

The role of OSP is becoming more important in line

with the change in supervisory strategy with the adoption

of risk-based supervision and capital regulation that

incorporates market risks in 2005. In addition, OSP teams

are also expected to provide inputs for intern control. The

challenge is growing in line with greater complexity and

the innovation of bank products based on technology.

Therefore, bank supervisors, in particular the OSP teams,

should be equipped with appropriate skills and tools.

1 Bank Mandiri, Bank BNI, Bank BRI, Bank BTN, Bank BCA, Bank Danamon, BankNiaga, Bank BII and Bank Lippo.

2 Bank Permata, Bank Panin, Bank Bukopin, and Bank Buana.


short-term courses and seminars. The role of OSP teams

in major banks will also be improved to support the

implementation of risk-based supervision.

The legal system has been improved by imposing

sanctions on banks or management and shareholders

based on prevailing laws. Banks have been requested to

improve internal control, develop a risk-management

culture in banking operations, to develop a realistic business

plan, and to map large debtors to identify their potential

risks. Furthermore, problem banks are placed under

intensive supervision and special surveillance with an

obligation to execute action plans to improve their

condition.

2. ON-SITE EXAMINATION

Target and Focus of Bank Examination

Bank examination intends to obtain the overall

picture of a bank’s business, the financial condition and

constraints which can affect the soundness and the survival

of the bank’s business. Examination is also conducted to

ensure the accuracy of reports submitted to Bank

Indonesia, and the compliance of banks towards prevailing

laws and regulations, as well as internal policies and

procedures, and also to investigate any indication of

banking crime.

The major role of bank examination covers the

formulation of an examination plan, risk-based

examination and report making. Preparing an examination

plan is an important stage because it determines the focus

and coverage of the examination from the very beginning

to improve efficiency in the process. As such, the allocation

of the examiners’ resources can be optimized. The

examination report is important information in determining

an Individual Supervision Strategy (ISS), which is useful to

prepare follow-up examinations and corrective actions.

Since 2003, Bank Indonesia has adopted a risk-based

and forward-looking bank examination approach as an

improvement of the previous approach based on

compliance. This new approach focuses on the inherent

risks of all banking activities and assesses the adequacy of

risk control systems in a bank. It is expected that supervisors

and examiners can assess risk exposure and risk-

management quality to make recommendations for

improvements.

Risk-based Bank Examination at a Glance

With the issuance of the Bank Indonesia Regulation

regarding the Implementation of risk management for

commercial banks in 2004, the examination has been more

focused towards risks. Since the beginning of 2002, this

approach has been tried on large-scale banks. As one of

the stages of the supervision cycle, risk-based examination

focuses on the banks functional activities perceived as high-

risk.

In risk-based examination, the inherent risks of each

bank’s activities and the adequacy of risk control systems

are reviewed so that corrective actions can be taken as

early as possible. The aggregation of inherent risk and risk

control systems produces a composite value that classifies

bank risk status into: low, medium or high. The risk

assessment result can be used to map bank risks and

determine regulation and supervision policies.

In line with the implementation of a Bank Indonesia

Regulation regarding risk management for commercial

banks, banks have submitted their action plan to Bank

Indonesia, containing a work plan measuring the eight

main risks, namely, credit risk, market risk, liquidity risk,

operational risk, legal risk, strategic risk, reputation and

compliance risks, and the application of control systems.

The control systems cover four key areas: (i) active oversight

of the board of commisioners and board of directors; (ii)

policies, procedures and limits, (iii) risk measurement and

monitoring; and (iv) internal control. The application of

risk management in the banking industry is expected to


be based on international standards. Banks are also

expected to apply good governance to strengthen the

banking system.

With the adoption of risk based supervision by Bank

Indonesia and risk management by banks, compliance is

still important. Banks are still obliged to report their

financial condition to Bank Indonesia in a standard

reporting format. This report is useful not only for monetary

policy, but also for the monitoring of bank’s financial

condition. It can also be used by Bank Indonesia to assess

individual bank’s conditions (micro) and systemic impacts

(macro).

The Implications of Risk-based Examination

In response to the adoption of risk management

by commercial banks, Bank Indonesia has carried out

some fundamental steps. The first step is to enhance

examiner competence by participating in training, either

in Indonesia or abroad, and internships in central banks

or supervisory authorities of other countries. Secondly, is

to improve the management information system by

integrating all banking information and the use of Audit

Command Language (ACL) to facilitate the assessment

of bank risks. To increase the effectiveness of bank

supervision, Bank Indonesia is combining the off-site and

on-site supervision functions.

Plan and Realization of Bank Examination

Bank Indonesia carries out examinations once per year,

as stated in Decree No. 23, 1999 regarding Bank Indonesia,

revised in Decree No. 3, 2004. During 2004, 83 banks were

examined as scheduled. That examination is a general

inspection carried out on a regular annual basis.

Additionally, a special examination has been

undertaken that covers the fit and proper test,

examination of assets and deposits, and others. The

special examination can be undertaken as an initiative of

Directorate of Bank Examination and Directorate of Bank

Supervision or other working units, such as The Special

Unit for Banking Investigation. Other directorates can also

execute a special examination, such as Credit Bureau for

Bank Indonesia Liquidity Credit Examination, Directorate

of Reserve Management for monitoring net open position

and on loan allocations for non-residents, and Bank

Indonesia Branch Offices to inspect branch offices of other

banks.

Results of the Examination

Sound banking can be realized, among others, by

applying prudential principles, including Legal Lending

Limit, Net Open Position, Allowance for Earning Assets

Losses, the Minimum Capital Adequacy Requirement to

ensure banks are managed in a proper and prudential way.

Generally speaking, prudential principles have been

implemented in the banking industry. In fact, banks failing

to implement the principles can cause problems for

themselves. The most common basic problems of banks

are weak governance, poor internal control and inadequate

risk management.

For example, the deviation of Export Bill in BNI

caused losses of more than Rp1 trillion and a criminal

lawsuit filed against Asiatic Bank, which ultimately caused

the closure of the bank. In fact, the problems in Asiatic

Bank had been identified in advance. There was an

indication of deviation on the improper asset placement

in other banks. Before the case could be forwarded to

the courts, it was necessary to undertake intensive

inspection to obtain supporting evidence. The bank

violated prevailing rules and regulations leading to a

conflict of interest. The violations in BNI and Asiatic Bank

happened due to weak internal control unable to reveal

the banks’ problems. In addition, there was a weakness

in risk management, which was not supported by

adequate systems (see boxes 3 and 4).


Box 3 The Bank Negara Indonesia (BNI) Case

Bank fraud occurring recently has been very serious.

By the end of 2003, there had been a take over of the Export

Bill at BNI Head Office in Kebayoran Baru, with a total value

of USD 166,781,517 and EUR 56,113,947 or equivalent to

approximately Rp1.7 trillion. The case has so far caused

significant losses to BNI of around Rp1.2 trillion. However,

more importantly, the case not only gave BNI a bad reputation

but also the banking system and the country of Indonesia.

The case against BNI happened because of deception

by one BNI Kebayoran Baru Head Office employee who

conspired with an outsider in the take over of the Export Bill

of Gramarindo Group and Petindo Group, which is not in

accord with internal regulations nor general regulations (UCP

500). The take over was phased from June 2002 until July

2003 with a total of 117 letters of credit (L/C). The fraud

occurred due to the low integrity of the employee, and weak

internal control including board oversight.

In fact, the weak internal control of BNI was detected

by Bank Indonesia beforehand through deviation in the

deposits on call and negotiable certificate deposits. As of

2002, Bank Indonesia warned BNI to resolve these weaknesses

immediately but the recovery effort was never carried out

optimally until the bigger case appeared. Furthermore, Bank

Indonesia has taken firm action, such as requesting the

shareholders to replace the management, postponing the

expansion of the office network and requesting the bank to

prepare an action plan to improve its internal control to avoid

more bank fraud.

To ensure the internal control function is implemented

effectively, Bank Indonesia has requested the banking sector

to do the following:

1. Prepare and adopt the standard internal audit function

of a bank and operational guidelines; and form an

internal audit unit.

2. Employ a compliance director who is liable for

determining steps to ensure compliance to all the

regulations and internal system and operating

procedures.

3. Submit a report to Bank Indonesia every semester and

an incidental report if there are issues that can endanger

the business of the bank. The report has to be signed

by the Chief Director, Commissioner and the

Compliance Director.

4. Provide a risk-management infrastructure (organization,

policies and procedures, management information

system/technology, and human resources) and

appropriate risk control systems.

It is expected that bank can run its business based on

these prudential principles.

Learning from the experience of bank fraud, banks are

obliged to implement good governance and risk management

with an effective internal control system. Banks also need to

maintain the integrity and competency of human resources.

No matter how good the management and control systems

are, it will be worthless if there is still collusion among low

integrity employees and outsiders for personal gain.

Bank Indonesia will continue to attempt to supervise

banks in a more effective way. Special attention will also

be given to banks that have significant roles in the banking

system. The implementation of Indonesian Banking

Architecture (IBA) is expected to help facilitate the

realization of the goals.


Examination

The implementation of risk management is one of

the foundations of IBA. Of the six pillars, the one relating to

bank supervision and examination is the third pillar, namely,

an effective and independent supervision system. The third

pillar contains a program for forming a specialist team of

examiners as part of Bank Indonesia’s banking consolidation

program and to improve bank examiner competency. The

program is in response to the challenge of the rapid growth

and development of banking products nowadays.

Currently, the Directorate of Bank Examination is

forming a core team of examiners encompassing

information system technology, treasury, earning assets,

‘know your customer’, amongst others. In line with

improvements in the examination results, the inspection

process is to be supported by information system

technology, such as Audit Command Language (ACL) and

other bank audit applications.


Box 4 The Liquidation of Asiatic Bank and Bank Dagang Bali

PT. Bank Asiatic and PT. Bank Dagang Bali suffered from

serious financial difficulties due to fictitious lending and the

violation of prudential principles by bank management in the

interest of the shareholders. This was in the form of the

issuance of negotiable certificate deposits, fictitious lending

to some debtors, and the purchase of large amounts of

fictitious repo bonds. These problems caused a severe decline

in the quality of earning assets that inflicted a huge loss on

the banks, which eventually affected the bank’s capital and

liquidity. These, in turn, made the Capital Adequacy Ratio

(CAR) become negative and the Minimum Statutory Reserves

fall below 5%.

To overcome these problems, Bank Indonesia has taken

supervisory actions in accordance with prevailing regulations

as follows:

1. Conduct a Fit and Proper Test on the management and

controlling shareholders, and impose sanctions on

involved parties or those persons considered not to pass,

by asking them to resign.

2. Place bank under special surveillance.

3. Apply a Cease and Desist Order (CDO), such as: (i) the

prohibition of transactions with other parties verified

by Bank Indonesia; (ii) prohibition to withdraw deposits

by related parties; (iii) prohibition of business expansion

including loan disbursement; (iv) prohibition to sell or

reduce assets or make commitments without approval

from Bank Indonesia; (v) prohibition to make any

amendment or alteration in the shareholding, and

request a capital restoration plan to avoid any difficulties

or a lack of Minimum Statutory Reserves.

4. Ask for a written statement from the management

and shareholders to cope with their problematic

Negotiable Certificate Deposit (NCD) and securities,

as well as fictitious lending. This is done by formulating

and submitting a capital restoration plan, and to

execute Mandatory Supervisory Actions (MSA) to

restore the Capital Adequacy Ration (CAR) to a

minimum of 8%.

Although the management and controlling

shareholder were given sufficient time to resolve the banks’

problems, the recovery efforts did not succeed. Ever since

the bank was placed under special surveillance, the financial

condition worsened, as indicated by the negative CAR, high

non-performing loans (NPL), liquidity problems and

continuous violation of Minimum Statutory Reserve. This is

mainly due to bank management and the controlling

shareholder, who did not comply with their commitment as

per the schedule. To secure public funds kept in both banks

and to avoid even worse impacts on other banks, Bank

Indonesia, after coordinating with the Ministry of Finance,

revoked the licenses of the two banks. The procedure of

revoking the licenses was carried out as per Law no. 7, 1992

concerning the banking industry, replaced by Act no. 10,

1998 and Bank Indonesia Regulation No. 6/9/PBI/2004 dated

26 March 2004.

There are two important lessons to be learnt from

the cases, (i) banks can fail for different reasons in their

operations, (ii) the supervisory authority will take firm steps,

including the closure of problem banks which cannot be

recovered.

3. INFORMATION SYSTEM AND BANK LICENSING

Bank Information System

In line with technological development and in an

effort to improve supervision effectiveness, Bank Indonesia

continues to develop banking management information

systems. This aims to accommodate the approach change

towards risk-based supervision. During 2004, efforts were

made to improve the banking information system to

optimize the settlement process of licensing, supervision

and banking research. As an example, the Bank

Performance Report (BPeR) has been developed and

utilized as an analytical tool of a bank’s condition. With

BPeR, supervisors, examiners and bank researchers are able

to identify banks’ conditions in a more comprehensive way,

at individual and industry levels.

In general, banking information system consists of

two main systems, Banking Sector Management

Information System (BSMIS) of Bank Indonesia and Debtor

Information System (DIS) which will be elaborated farther

below:


(1) Banking Sector Management Information System(1) Banking Sector Management Information System(1) Banking Sector Management Information System(1) Banking Sector Management Information System(1) Banking Sector Management Information System

(BSMIS) of Bank Indonesia(BSMIS) of Bank Indonesia(BSMIS) of Bank Indonesia(BSMIS) of Bank Indonesia(BSMIS) of Bank Indonesia

BSMIS is an integrated information system to support

the supervision, examination and regulation of the banking

system of Bank Indonesia. BSMIS comprises of two

modules, Supervisory Management Information System

(SMIS) and Examination Management Information System

(EMIS).

a. Supervisory Management Information System (SMIS).

This is an information system which has been

developed to improve the efficiency and effectiveness

of the supervision system of commercial banks. SMIS

has several uses: (i) expedite the acquisition of

information on a bank’s financial condition (including

bank soundness rating; (ii) increase the security and

integrity of bank data and information; (iii) facilitate

supervisors and researchers in analyzing a bank’s

condition.

In 2004, the development of new SMIS application

modules were completed to accommodate the

alteration of regulations regarding the bank

soundness rating and risk-based supervision, which

will be applied formally at the beginning of 2005.

b. Examination Management Information System (EMIS)

is an information system developed to support

effective commercial bank examinations. Through

EMIS, bank supervisors can acquire integrated data

faster that can assist in analyzing a bank’s condition

and preparing the Examination Report. Thus, it can

increase the control in administration and

documentation systems. The module is constantly

adjusted to accommodate the alteration of regulation

of risk-based supervision.

On top of the two rules mentioned above, BSMIS has

also developed Information System for Banks under

Investigation (ISBI). ISBI is an information system developed

to increase discipline in regulating and supervising in relation

to banking crime through the Special Unit for Banking

Investigation. Through ISBI, it is possible to monitor the

development of an investigation into a bank’s criminal case

conjecture as from the time the deviation report was

accepted (either from the Directorate of Bank Supervision

or from the public), the investigation schedule, the steps

undertaken up to the end results of the investigation activity.

In 2004, Bank Indonesia completed improvements on the

application of ISBI according to the needs of the Special

Unit for Banking Investigation.

(2) Debtor Information System (DIS)(2) Debtor Information System (DIS)(2) Debtor Information System (DIS)(2) Debtor Information System (DIS)(2) Debtor Information System (DIS)

DIS is an information system provided by Bank

Indonesia as a means to exchange information about

debtors among banks that can be used to increase the

efficiency and quality of loan provision. Data processing in

this system is done electronically with the provision of

information for individual debtors (IDI) on-line. The system

is not only utilized by banks but also by other institutions

such as government institutions, international agencies and

academia. The system is also utilized by Bank Indonesia to

support surveillance and examinations.

In 2004, a new DIS application was developed, which

can provide information to all debtors. Previously, only

information for debtors with loans of Rp50 million or more

was available. The aims of the new DIS application are:

- To support micro, small and medium level enterprises

by accelerating the provision of funding with a good

credit information system.

- To expedite the credit information system where the

information requirement in the new system is

punctual.

- To support loan allocation to the real sector with a

controlled risk level where banks can manage credit

risk better.


The new Debtor Information System is expected to

be effective in the first semester of 2005. In accordance

with the policy of the Board of Governors, the new system

will be utilized as a basic information system to form the

Indonesian Credit Information Bureau.

Licensing, Management and Ownership of

Commercial Banks

To stimulate a sound banking system, good

governance in the banking industry is should be improved.

To enable good governance, banks need to be managed

and owned by persons with high competency and integrity.

To find management and shareholders with these

qualifications, fit and proper tests have to be conducted

for management candidates and bank owners. Fit and

proper tests cover an administrative evaluation and only if

candidates have satisfied the administrative requirements

they will then proceed to the interview stage.

In 2004, fit and proper tests were conducted for

applicable candidates, interviewing 239 candidates

consisting of 131 candidates for board of directors, 95

candidates for the Board of Commissioners and 13

candidates to be controlling shareholders. The number of

candidates applying to be controlling shareholders includes

interviews with parties representing the shareholders in

the form of a legal entity. Of the total number of interviews,

Bank Indonesia declared are 181 people as having passed

consisting of 97 directors, 71 commissioners and 13

potential shareholders.

Ever since interviews became part of the fit and

proper test, 1,493 candidates for shareholders and

management have been interviewed, of which 1,287

passed, consisting of 763 director candidates, 482

commissioner candidates and 42 parties representing

controlling shareholders (Table 3.2).

4. INVESTIGATION OF BANKING CASES

Regarding the supervision of banks, there is always

a possibility of Bank Indonesia finding bank fraud thought

to contain criminal aspects. The findings are then

forwarded by the Directorate of Supervision to the Special

Unit on Banking Investigation for follow-up. As well as

coming from the findings of the supervision and

examination teams, fraud information handled by Special

Unit on Banking Investigation also comes from the public.

The main tasks of Special Unit on Banking Investigation,

which was formed on 31 December 1998, is to investigate

indications of banking crime perpetrated by a bank’s

management or owners, including affiliated parties or

other parties. The objective of Special Unit on Banking

Investigation is to improve banks’ compliance to prevailing

regulations by exposing fraud and formulating

recommendations to handle it.

In handling cases of banking crime, Special Unit on

Banking Investigation collaborates with the Police

Department and the Office of the Attorney General. The

collaboration began in 1997 which was described in a

collective decree between the Attorney General of the

Table 3.2The Interviews for Controlling Shareholders and Management

Participants

2003

Directors 135 131 97 34 909 763 146

Commissioner 95 95 71 24 540 482 58

Controlling Shareholder 11 13 13 0 44 42 2

TOTALTOTALTOTALTOTALTOTAL 241241241241241 239239239239239 181181181181181 5858585858 1,4931,4931,4931,4931,493 1,2871,2871,2871,2871,287 206206206206206

Participants Passed Not Passed Participants Passed Not Passed

2004 Accumulation Up to 2004


Republic of Indonesia, the Head of the Police Department

and the Governor of Bank Indonesia dated 6 November

1997. In its development, some regulations that were used

as basic rules for Collective Decree formulation have been

modified or even revoked. Therefore, the collaboration

needs to be improved in accordance with the

organizational development of the related institutions.

Besides, the Collective Decree is expected to provide new

motivaton for related institutions to stimulate, accelerate

and optimize the handling of banking criminal case

conjecture. The Collective Decree of the Republic of

Indonesia Attorney General, Head of the Police Department

and the Governor of Bank Indonesia was signed on 20

December 2004.

Since it became effective in the first quarter 1999

through December 2004, Special Unit on Banking

Investigation has received and handled 251 cases from

131 commercial banks, and 186 cases from 96 Rural Banks.

Of the total, 141 cases in 55 commercial banks and 73

cases in 40 Rural Banks have been investigated and

reported to legal enforcers (Police and Judiciary). During

the period of January to December 2004, Special Unit on

Banking Investigation received 69 cases from 12

commercial banks and 7 cases from 5 rural banks. However,

from all of the received cases, some were not followed-up

because no criminal aspect could be found; because legal

administrators handled the case or it was the domain of

other institutions (tax related cases), the case expired or

because of other aspects that were void.

Considering the importance of Special Unit on

Banking Investigation role in handling banking crime and

related to the initiative of the Indonesian Banking

Architecture, the status of Special Unit on Banking

Investigation will be extended to be a directorate, namely

the Directorate of Banking Investigation and Enforcement

with additional core tasks as mediator of customer

complaints and monitoring the banks’ compliance with

customer protection regulations.

One of the main prerequisites of supporting

investigation activity, which has hitherto been unavailable

to Special Unit on Banking Investigation, is the authority

to investigate banking cases. As a comparison, Bank

Negara Malaysia (BNM) has an investigation unit, namely,

the Special Investigation Unit (SIU) that has the authority

to investigate banking cases. With this authority, the

enforcement of effective banking can be realized in BNM,

which will support stability in the Malaysian financial

system.

Table 3.3Investigation Results

(March 1999 - 31 December 2004 (Cumulative))

DescriptionCommercial Bank Rural Bank TOTAL

1. The number of cases reported to investigate 251 131 186 96 437437437437437 227227227227227

2. The number of cases that have been investigated 237237237237237 121121121121121 169169169169169 8888888888 406406406406406 209209209209209

2.1. The number of cases reported/forwarded to investigator*) 141 55 73 40 214214214214214 9595959595

2.2. The number of cases that have not been followed-up**) 96 66 96 48 192192192192192 114114114114114

3. The number of cases that are still under investigation 1414141414 1010101010 1717171717 88888 3131313131 1818181818

Number ofbanks

Number ofcases

Number ofbanks

Cases BanksNumber ofcases

*) Including 15 banks reported by the Directorate of Legal Affair - Bank Indonesia**) Investigation can not be proceed due to:

- Not committed as a criminal act; or- Have been investigated by other enforcer ; or- Other institution’s authority (such as taxation); or- Expired, or void/null.

Chapter 4 The Development of the Banking Industry 35

Chapter 4The Developmentof the Banking Industry

36 Chapter 4 The Development of the Banking Industry


1. COMMERCIAL BANK

Overview

The condition of the banking industry is satisfactory

and improving. The confidence on banks has been

maintained, which is reflected by the lack of shocks in the

banking system. During 2004, deposits increased to Rp74.5

trillion, equal to 8.4% (y-o-y), and the amount of loans

allocated (including chanelling) increased to Rp117.9

trillion, equal to 24.7% (y-o-y). Loans mainly came from

the increase in deposits and the conversion of the

marketable securities portfolio.

The loan expansion initiated improvements in

banking profitability indicated by the increase in return on

assets (ROA), net interest income (NII) and efficiency. The

loans increase caused a rise in risk-weighted assets;

however, the Capital Adequacy Ratio (CAR) is still sufficient

Chapter 4The Development of the Banking Industry

despite a declining trend. The development of the key

banking indicators is shown in Table 4.1.

Liquidity and the Role of Banking

Intermediation

The measure taken to increase statutory reserves,

which was applied as of July 2004, has succeeded in

acquiring Rp17.4 trillion banking liquidity excess. However,

banks are still confronted by excess of liquidity due to major

constraints in loan allocations that are mainly caused by

the lower capacity of the real sector, which has not

completely recovered.

The low post-crisis Loan to Deposit Ratio (LDR) has

always been interpreted as inefficiency in banking

intermediation. In fact, the low LDR is caused by a relatively

large number of transfers of bad debts by the recap banks

*) including chanelling

Table 4.1Key Banking Indicators

Key Indicators

Total Assets 1196.24 1149.95 1185.70 1213.09 1218.35 1228.10 1272.28 76.04 6.36

Earning Assets 1072.40 1080.33 1102.78 1074.71 1127.77 1114.95 1146.83 74.43 6.94

Loans * 477.19 485.91 528.68 555.06 567.26 573.36 595.06 117.87 24.70

New Loans - non SME 1.30 2.15 11.80 12.88 5.90 13.14 16.76 15.47 1193.19

New Loans - SME 0.63 1.18 5.24 7.54 3.18 5.68 5.34 4.71 750.22

Deposits 888.60 875.13 912.79 926.43 928.11 932.50 963.11 74.51 8.38

Net Interest Income 3.20 5.66 5.41 5.31 6.40 5.02 6.32 3.12 97.34

Loan to Deposit Ratio (%) 43.17 43.72 46.41 48.17 49.16 49.52 49.97

Return on Assets (%) 2.50 2.71 2.67 2.97 2.91 3.03 3.46

Non Performing Loans Gross (%) * 8.21 7.76 7.55 6.89 6.73 6.64 5.75

Non Performing Loans Net (%) * 3.04 2.67 2.10 2.12 2.10 2.01 1.72

Capital Adequacy Ratio (%) 19.39 23.50 20.93 20.52 20.38 19.71 19.36

Efficiency Ratio (%) 88.8 91.6 87.0 83.5 84.8 80.8 76.7

Dec-03 Mar-04 Jun-04 Sep-04 Oct-04 Nov-04 Dec-04Growth

(+/-) (%)

(Trillion of Rp)

1) Compare with December 2003


to IBRA. Therefore, the use of LDR as an intermediation

indicator is misleading. Post-crisis loan growth has been

lower than prior to the crisis, namely 1.51% per month

on average compared to 1.29% (2000-04). However, the

phenomenon of credit crunch has also happened in other

countries suffering from economic crisis. Empirical studies

show that there is a decline and a delay in loan growth in

countries three to five years post crisis. For this reason, it is

recommended to use other measurements, such as the

loan growth level and the LDR incremental.

Loan Quality and Capital Adequacy

Even though it has declined slightly due to the increase

in risk-weighted assets, the Capital Adequacy Ratio (CAR)

of the banking industry (around 19.36%) is still sufficient.

To improve the banking system, especially recap

banks; it is necessary to enhance business efficiency and

the loan portfolio without ignoring prudential principles.

Banks need to enhance their internal control and risk-

management effectiveness as well as improving their

corporate governance.

Some major problems still confronted by banks are

high non-performing loans (NPLs). Gross NPLs in December

2004 were 5.75%, decreasing from 8.21% at the end of

the previous year. However, banks have made more than

adequate loss reserves and earning asset losses provision ;

around 178% of the compulsory earning asset losses

provision. As a result, the net NPL2 is quite low at 1.72%;

a significant decrease on the previous year (3.04%).

2. SHARIA BANK

During 2004, the growth of commercial banks that

operate based on sharia principles was high and increasing

due to the high demand from the public for this kind of

service. This was reflected by the significant growth of

banks and office networks, deposits and financing.

The volume of business of the sharia banking industry

is increasing significantly because of the increase in deposits

and financing. The growth of profit sharing is exceeding

mark-up financing. This is a result of the willingness of

sharia banks to cooperate with non-bank financial

institutions, such as cooperatives and pawnbrokers,

including the development of short-term infrastructure and

public services projects.

The Financing to Deposit Ratio (FDR) for sharia banks

in 2004 remained high, namely 104.0%. This indicates

that the role of sharia bank in intermediation is adequate.

Additionally, the quality of financing for sharia banks is

relatively high, as indicated by the low non-performing

financing (NPF at less than 5%).

In 2004, sharia banks made a profit of Rp173.5 billion

with a ROA of 1.6%. Considering that this type of bank is

Figure 4.1.Capital Adequacy Ratio (CAR) Trend

800

700

600

500

400

300

200

100

-

Percents

20

15

10

5

0

25

2000 2001 2002 2003 2004

Capital RWA CAR

Trillion of Rp

Dec Dec Dec Jun Jul Dec Jan Feb Mar Apr May Jun Jul Ags Sep Oct Nov Dec

Table 4.2The Composition of Sharia Banks Funding

Account Type

2003 2004* 2003 2004* 2003 2004*

Wadiah Account 637.5 1,184.2 77.6% 116.5% 11.1% 11.2%

Mudharabah Saving 1,610.6 3,055.1 97.5% 113.2% 28.1% 28.9%

Mudharabah Deposits 3,476.8 6,319.7 99.4% 98.7% 60.7% 59.9%

TotalTotalTotalTotalTotal 5,724.95,724.95,724.95,724.95,724.9 10,559.010,559.010,559.010,559.010,559.0 96.2%96.2%96.2%96.2%96.2% 104.6%104.6%104.6%104.6%104.6% 100.0%100.0%100.0%100.0%100.0% 100.0%100.0%100.0%100.0%100.0%

AmountGrowth(y-o-y) Share

*as of November

(Billion of Rp)

2 (Nominal Gross NPL - Earning Asset Allowance) / Total Loans


still in the development phase, the profit level of sharia

banks has increased dramatically compared to the same

period from the previous year, namely Rp48.5 billion with

a ROA of 0.9%. Due to the high expansion of financing,

which was not followed by a proportional increase in profit,

the Capital Adequacy Ratio decreased from 20.7% to

11.9%.

The prospect of sharia banks in 2005 is good. The

industry will grow rapidly. With a growth rate of 88.6% in

2004, the volume of business of sharia banks is projected

to reach Rp24 trillion, or 1.8% of the national banking

industry in 2005.

3. RURAL BANK

Although the share of the rural banks in the banking

industry is still very small, the operation of rural banks

(Billion Rp)

Table 4.5Key Indicators of Rural Banks

Selected BalanceSheet Data

1 Total assets 6,474 9,080 40.3 11,759 12,635 39.2 14,416 16,015 26.8 36.2

2 Loans (amount) 4,860 6,683 37.5 8,624 8,985 34.4 10,419 11,639 29.5 35.0

Loans (no. of account)* 1,560 1,825 17.0 2,064 1,993 9.2 2,002 2,161 8.4 4.7

3 Deposits 4,280 6,126 43.1 8,270 8,868 44.8 9,894 10,795 21.7 30.5

Deposit (no. of account)* 4,410 5,329 20.8 5,562 5,535 3.9 5,700 5,692 2.8 2.3

- Savings 1,574 2,002 27.2 2,418 2,617 30.7 2,889 3,223 23.2 33.3

Savings (no. of account)* 3,908 4,891 25.2 5,087 5,046 3.2 5,190 5,372 6.5 5.6

- Time deposit 2,706 4,124 52.4 5,852 6,251 51.6 7,005 7,572 21.1 29.4

Time deposit (no. of acc.)* 502 438 (12.7) 475 489 11.6 510 320 (34.6) (32.6)

4 Profit (loss) current year 223 338 51.6 333 429 26.9 294 466 8.6 39.9

5 LDR 80.9% 77.0% 77.3% 74.5% 78.5% 79.5%

6 NPLs 11.8% 8.7% 8.4% 8.0% 7.9% 8.0%

7 ROA 3.4% 3.7% 2.8% 3.4% 2.0% 2.9%

8 ROE 20.0% 24.7% 20.1% 25.0% 15.4% 22.9%

No Dec 01 Dec 02 Dec 03∆

Dec 02- 01%

Sep 03∆

Dec 03- 02%

Jun 04 Sep 04

∆(Sep 04-Dec 03)

%

∆Sep 04- 03

%

*) Account in Thousand

* as of November

Table 4.3Key Indicators of Sharia Banks

Assets 7,858.9 9,498.8 11,023.3 12,719.6 14,035.6

Financing 5,530.2 6,415.9 8,356.2 10,131.1 10,978.6

Deposits 5,724.9 7,022.8 8,315.9 9,675.7 10,559.0

Profit (loss) 42.7 38.3 85.3 132.0 173.5

current year

Financing to deposit 96.6% 91.4% 100.5% 104.7% 104.0%

ratio (FDR)

NPF 2.3% 2.6% 2.4% 2.8% 2.8%

Indicators Q IV - 2003 Q I -2004 Q II -2004 Q III -2004 Q IV -2004*

(Billion of Rp)

* IMI Volume in November; ** IMI Volume in August1 Interbank Mudharabah Investment Certificate2 Bank Indonesia Sharia Certificate

Table 4.4Sharia Inter-bank Market

and Bank Indonesia Sharia Certificate

IMI1 certificate 6.0 19.0 24.0 4.0 23.5

BISC2 1,623.0 1,567,0 444,0 415,0 1,094.0

Indicators Q IV- 2003* Q I - 2004 Q II - 2004 Q III - 2004** Q IV - 2004

(Billion of Rp)


continues to grow. This is reflected in the growth of total

assets, deposits and loans that have stimulated the increase

in rural banks profitability.

Total assets as of September 2004 were Rp16 trillion,

increasing 26.8% (y-t-d) or 36.2% (y-o-y). The increase

was due to the growth in loans which mainly came from

increases in deposits. Collected deposits up to the end of

September 2004 totaled Rp108 trillion, increasing 21.7%

(y-t-d) or 30.5% (y-o-y).

Total loans as of September 2004 reached Rp11.6

trillion, increasing 29.5% (y-t-d) or 35% (y-o-y). This

pushed the LDR from 74.5% to 79.5%.

The number of customers has increased from 5.54

million in December 2003 to 5.7 million in September

2004. The improvement of rural banks business volume,

especially deposits and the number of depositors show

the increase in public confidence towards rural banks.

Additionally, there is still a prospective market for the

development of rural banks to enhance their roles in

financing small and micro businesses.

Chapter 5 Sharia Banking: Policy and Supervision 4141

Chapter 5Sharia Banking:Policy and Supervision

42 Chapter 5 Sharia Banking: Policy and Supervision


1. THE DEVELOPMENT POLICY

The implementation of the policy for sharia banking

in 2004 referred to the Blueprint for the Development of

sharia Banking in Indonesia. The realization of initiatives

stipulated in the blueprint focus on four development

areas, namely: (i) compliance to sharia principles; (ii)

prudential principles; (iii) operational efficiency and

competitive capacity; and (iv) systemic stability and benefits

to the economy.

The initiative on the compliance of sharia principles

includes efforts to increase the understanding of the sharia

financial concept, to accelerate sharia financial norms and

review the mechanisms of an integrated regulation and

supervision system. Increasing the understanding of the

sharia financial concept is carried out through institutional

support to strengthen the National Sharia Council and

the Sharia Supervisory Board, and facilitating the formation

of sharia financial norms with the improvement of the

Standard Financial Accountancy Statement no. 59 in

collaboration with the Indonesian Accountants Association

and sharia banking officials.

In line with the application of research-based policy,

Bank Indonesia has also undertaken studies related to the

formation and improvement of a regulation and

supervision system for sharia banks. Studies and research

carried out during 2004 include: potential research, public

preferences and attitudes towards sharia banks, research

on sharia guarantees and saving institutions, a study on

Statutory Reserves for sharia banks, a study on problem

Sharia Rural Banks, and a study on the taxation of sharia

financial contracts and linkages between sharia financial

institutions.

Chapter 5Sharia Banking: Policy and Supervision

Bank Indonesia also provided operational assistance

to the National Sharia Arbitrage Body which performs as

the sharia banks’ financial civil dispute settlement body.

Support for systemic stability and benefits to the economy

is undertaken through providing technical and operational

assistance to the Sharia Economic Communication Centre

in terms of public education to improve awareness about

sharia banking.

To establish affiliation with banking authorities in

other countries and IDB, Bank Indonesia is actively involved

in the formulation of international standards, among others

are: Accounting and Auditing Organization for Islamic and

Financial Institutions (AAOIFI) and Islamic Financial Services

Board (IFSB) as well as the International Islamic Financial

Market (IIFM).

AAOIFI is an international institution that has a

function in developing accountancy, audit and governance

standards, as well as sharia contract standards for all

institutions that provide sharia financial services. IFSB is an

international board that has a function to harmonize the

sharia banking regulation and supervision system and to

determine operational guidance for best-practice sharia

banking all over the world. IIFM is an international body

to regulate the mechanism and code of conduct of the

sharia international financial market.

In commemoration of IDB’s 30th anniversary, Bank

Indonesia will hold the Sixth International Conference on

Islamic Economic and Finance in Jakarta, August 2005.

This is a follow up of the successful conference in 2003 on

Islamic Banking: Risk Management, Regulation and

Supervision. The conference was an important contribution

to the development of thoughts regarding international


sharia banking and to promote Indonesian sharia banking

in an international forum

2. POLICY AND REGULATION

In developing the sharia banking industry, Bank

Indonesia has been consistent on four principles: market

driven, objective, a gradual and sustainable approach and

compliance to sharia rules. The implementation of these

policies was then focused into four development areas:

a.a.a.a.a. Compliance to sCompliance to sCompliance to sCompliance to sCompliance to shariahariahariahariaharia principles. principles. principles. principles. principles. The initiatives

include: (i) to increase the understanding of the

sharia financial concept; (ii) to accelerate and

facilitate sharia financial norms; and (iii) to review

the mechanisms of an integrated regulation and

supervision system.

b.b.b.b.b. Prudential principles. Prudential principles. Prudential principles. Prudential principles. Prudential principles. In 2004, Bank Indonesia issued

three Bank Indonesia Regulations (PBI) related to

prudential principles, namely: (i) PBI No. 6/18/PBI/2004

regarding Earning Assets Quality for Sharia Rural

Banks (BPRS); (ii) PBI No. 6/19/PBI/2004 regarding

Allowance for Earning Assets Losses for Sharia Rural

Banks; (iii) PBI No. 6/21/PBI/2004 regarding Minimum

Statutory Reserves in Rupiah and Foreign Currency

for Commercial Banks Conducting Business based on

Sharia Principles.

c.c.c.c.c. The improvement of human resource development.The improvement of human resource development.The improvement of human resource development.The improvement of human resource development.The improvement of human resource development.

To improve the efficiency and quality of sharia banks’

services, in 2004 Bank Indonesia, in collaboration with

the Association of Sharia Banks, held a training

program on murabahah receivables for Sharia Rural

Banks for account officers, covering two levels. In the

same year, Bank Indonesia held five basic training

courses on sharia banking for 200 Bank Indonesia

staff including participants from government

institutions, such as State Development Planning

Agency, the Ministry of Finance, the Ministry of

Industry, the Ministry of Trade, the Ministry of

Religious Affairs and the Ministry of Cooperations.

Bank Indonesia also helped to improve the

competency of human resources in sharia banks by

holding training courses to upgrade sharia bank staff

over two levels. Included in the training were 67

supervisors from 25 Bank Indonesia offices. The

quality of human resources has been strengthened

by involving supervisors, researchers and bank analysts

in various international forums.

d.d.d.d.d. Systemic stability and the effectiveness of theSystemic stability and the effectiveness of theSystemic stability and the effectiveness of theSystemic stability and the effectiveness of theSystemic stability and the effectiveness of the

economy. economy. economy. economy. economy. Public education has been carried out

continuously and intensively by Bank Indonesia since

2000. Proper understanding of the sharia banking

condition and its characteristics by the public will

facilitate increased stability in the sharia banking

system. For that reason, the role of the Sharia

Economic Communication Centre, which was formed

in 2003, has become more important and in 2004

started a networking system with related institutions.

Bank Indonesia also contributed thoughts and

operational assistance.

Another type of support given to develop sharia

banking includes the improvement of office network

regulations, both for commercial sharia banks and sharia

rural banks, which was shown in Bank Indonesia

regulations regarding commercial sharia banks and sharia

rural banks institutions: PBI No. 6/17/PBI/2004 regarding

Rural Banks based on Sharia Principles and PBI No. 6/24/

PBI/2004 regarding Commercial Sharia Banks.

3. SUPERVISION AND EXAMINATION

Since 2001, the approach of sharia bank supervision

has used a dedicated team model, which integrates off-

site and on-site examination, in line with the new risk-

based supervision approach. The implementation of the

new approach will be effective if it is supported by an

appropriate number of competent bank supervisors high


started in 2005, Bank Indonesia will involve the Sharia

Banking Specialist Committee, the SNC, sharia banks and

resource persons involved in sharia business.

Considering the importance of the Sharia Supervisory

Council (SSC) to ensure the proper operation of sharia banks

using sharia principles, Bank Indonesia has always been in

full support of improving the competency of SSC by

providing resource persons, information and other technical

assistance to hold training programs. Additionally, the task

and role of SSC will be strengthened further by the issuance

of Bank Indonesia regulations regarding the requirements

and procedures for recruiting the SSC, as per PBI No. 6/24/

PBI/2004 regarding Commercial Banks that run their

business based on Sharia principles.

To improve the quality of supervision, Bank Indonesia

continuously enhances supervision effectiveness through

periodical and on-time examinations, and follow up on

the findings. The commitment of bank management to

run their businesses in a good way and avoid any moral

hazards is prerequisite. Based on the supervision and

examination results, banks are requested to produce action

plans related to the problems faced, such as to reduce

non-performing financing, to form adequate reserves, to

increase capital and to help facilitate meetings among

shareholders and investors. In addition, banks were

requested to improve their governance.

Even though Bank Indonesia has made all efforts to

improve the management and operation of banks, the

outcome is not always acceptable. If a bank’s problems

cannot be resolved, Bank Indonesia can revoke a bank’s

license and close the business.

4. LICENSING

One of the initiatives of the blueprint is the expansion

of office networks as a foundation for the growth of sharia

banks. Increasing the number of offices and networks

became the main thrust of the sharia bank licensing policy.

in integrity, as well as an accurate information system. For

that reason, in 2004 as part of The Bank Supervisor

Certification Program, bank supervisors’ competency was

improved. Also in 2004, a job training program was

implemented for supervisors of Bank Indonesia’s offices

conducted by sharia bank supervisors in Bank Indonesia’s

Head Office.

In relation to supervision information management,

commercial sharia banks have been required to submit

monthly reports since the end of 2003 and starting in 2004,

sharia banks reported their business based on sharia

principles. The current information system can only provide

the information for each individual office, whereas for

consolidated financial data, the reporting system still uses

a conventional bank report format. In future, the system

will be improved so that it can provide more accurate and

on-time reports.

In anticipation of the rapid growth of sharia banking,

bank supervision policy in 2004 has been directed towards

the application of prudential principles and the compliance

of prevailing rules including sharia principles. This includes

the implementation of good corporate governance

principles and the prevention of money laundering and

other banking crime in all banking institutions through

the application of ‘know your customer’ principles.

One of the constraints to the supervision of sharia

banks is the difference in interpretation of sharia rules and

principles, which can be found in official religious advice

from the Sharia National Council (SNC). Furthermore,

conventional bank practices are still found in sharia banks.

This can be seen from the application of sharia products,

which refers to the conventional banking model. In an

effort to overcome the constraints, the Sharia Supervisory

Council (SSC) of respective banks is coordinating with

the SNC. Bank Indonesia must also revise contract

standardization and the educational program for sharia

bank officials. When formulating the study which is to be


For that reason, Bank Indonesia is fully support to the

establishment of sharia banks, the conversion of

conventional banks to sharia banks, and the opening of

additional sharia business units within conventional banks

with prudential principles. These attempts were described

in Bank Indonesia’s regulations on the improvement of

institutional aspects. During 2004, Bank Indonesia

completed licensing procedures for sharia banks in a timely

manner. As of December 2004, of 135 licensing applications,

98 have been approved and 37 are still being processed.

Within the framework of improving licensing

quality, Bank Indonesia consistently tries to process

applications on time. There are some difficulties in the

bank licensing procedure in Bank Indonesia. The major

difficulty is the lack of knowledge of the bank founders,

management and even SSC regarding licensing

procedures, banking operations and regulations. For this

reason, Bank Indonesia provides technical assistance to

banks through training programs and public education,

and by issuing booklets regarding procedures to establish

sharia banks.

5. POLICY DIRECTION — 2005

In line with the discussion on the draft of Banking

Laws, it is anticipated that in 2005, the draft of Sharia

Banking Laws will also be discussed in the People’s

Representatives Assembly. With Sharia Banking Laws in

place, it is expected that the basic legal principles of sharia

banks will be more solid.

The policy to develop sharia banking in 2005 will

continue on the initiatives already implemented as stated

in the Blueprint. The initiative on compliance with sharia

principles will be reinforced by the implementation of

standard contracts and the evaluation of a bank’s condition

in reference to sharia characteristics. It will be strengthened

further with the harmonization of SNC official religious

advice and sharia banking regulations.

The initiative on prudential principles will be

strengthened through the formulation of guidelines on

the status of a bank’s condition in relation to international

standards and the risk-based supervision system. For this

reason, Bank Indonesia will collaborate actively with

international institutions. As part of the financial safety

net concept, Bank Indonesia will formulate the entry and

exit policy for sharia banks.

The initiative on aspects of improving operational

efficiency and competitive capacity will be executed by

the implementation of good corporate governance. To

enhance the competency of sharia bank officials, Bank

Indonesia will implement a certification program and

provide technical assistance. To encourage strategic

alliance, Bank Indonesia will execute a trial program aimed

at developing a model for financial allocation, especially

for small and micro enterprises.

The initiative regarding aspects of systemic stability

and the benefits to the economy will be carried out through

a continuation of a research program on public preferences

in the banking industry, which will be supplemented by

preference mapping. This will be useful as a reference in

directing sharia banking development in the future.

Additionally, the results of the deposit insurance scheme

study can then be used as a recommendation in

formulating government regulations.

Bank Indonesia will synchronise all initiatives in the

blueprint with Indonesian Banking Architecture (IBA) and

the planned Indonesian Financial System Architecture (IFSA).

To fully support the development of sharia banking, Bank

Indonesia will promote the publishing of standard reference

books, such as sharia economic text books as the main

reference for the acedemia to create qualified sharia bank

officials. Finally, the public education program will be run

in a more systematic and sustainable way, as one of the

efforts to give better understanding regarding the objectives

and the operation of sharia banks in Indonesia.


Box 1 Challenges and Policies of Sharia Banking

The policy direction of sharia banking in 2004 has

continued to build a strong foundation for the development

of sharia banking. In 2005, these policies will focus on efforts

to strengthen the structure of the Sharia banking industry

through the implementation of programs to reinforce the

effectiveness of programs that were implemented in 2004.

Four key principles regarding the development of sharia

banking in 2005 include:

1. Compliance with sharia principles

One of the main issues in the development of sharia

banking is a better understanding of Sharia financial

concepts, especially for sharia bank supervisors. Bank

Indonesia has continuously provided technical training

for the Sharia Supervisory Council (SSC), as well as for

other bank management.

Another issue is to integrate sharia norms with banking

supervision regulations and guidance. For this reason,

Bank Indonesia has developed an evaluation system

for the supervision of a bank’s condition with the

application of specific characteristics of sharia banks.

2. The Implementation of Prudential Regulations

In addition to integrating sharia norms with banking

supervision regulations, Bank Indonesia has also

committed to develop good corporate governance and

update the supervision and examination system for

sharia banks. For that, Bank Indonesia has developed a

risk-based supervision system and issued prudential

regulations.

3. Efficiency and Competitive Capacity

Besides the focus on the development of human

resource competency through different types of training

program, Bank Indonesia will also collaborate with

related institutes to improve the sharia financial market

instrument, such as Sharia Government Bonds and tax

regulations, which will stimulate the development of

sharia banking and the efficiency of the Sharia

Arbitrage Body.

4. Systemic Stabilization and the Economic Benefits

One focus under this activity is the development of

the Sharia Economic Information Center as the

credible information exchange body useful to mitigate

financial crises in sharia financial institutions. It is

planned to have a deposit insurance scheme for sharia

banking products.

Other improvement initiatives include: compliance

with the 25 Basel Core Principles and a review of the entry

and exit policy for sharia banks that relate to the second

key principles and the implementation of Sharia Rural

Banks official certification in relation to the third key

principle.


Chapter 6Rural Banks:Policy and Supervision

50 Chapter 6 Rural Banks: Policy and Supervision


1. DEVELOPMENT POLICY AND REGULATION

Bank Indonesia continually attempts to improve the

effectiveness of the supervision and regulation of rural

banks to achieve a sound rural bank industry through the

implementation of various programs: (i) rural bank

restructuring program; (ii) improvements in the regulation

and supervision system; (iii) enhancement of rural bank

capacity and institution; and (iv) strengthening rural bank

industry infrastructure. These programs are as follows:

a) Restructuring Programa) Restructuring Programa) Restructuring Programa) Restructuring Programa) Restructuring Program

To facilitate the realization of a sound rural bank

industry, Bank Indonesia has implemented a restructuring

program through acquisitions, capital injection and

mergers of problem rural banks that are still feasible.

When the restructuring program fails, Bank Indonesia is

forced to take action either through freezing business

activities or revoking the rural bank license. Since May

2001 until the end of September 2004, Bank Indonesia

has consolidated 66 rural banks into one and has merged

nine rural banks into three.

b) The Implementation of the Government’s Guaranteeb) The Implementation of the Government’s Guaranteeb) The Implementation of the Government’s Guaranteeb) The Implementation of the Government’s Guaranteeb) The Implementation of the Government’s Guarantee

ProgramProgramProgramProgramProgram

As a follow up on the signing of a Memorandum of

Understanding between the Minister of Finance and the

Governor of Bank Indonesia regarding the implementation

of a guarantee program for rural banks dated 15 June

2003, Bank Indonesia issued Bank Indonesia Regulation

No. 5/17 PBI/2003 dated 3 September 2003 as a

replacement of Bank Indonesia Regulation No. 3/12/PBI/

2001 regarding the Requirements and Procedures for the

Chapter 6Rural Banks: Policy and Supervision

Operation of the Government’s Guarantee Program for

the Settlement of the Liabilities of Rural Banks. The aim is

to optimize the implementation of the Government

Guarantee Program to rural bank by including items not

accommodated before, such as the inclusion of mergers,

acquisitions and consolidation in the program.

Based on the above regulation, rural banks have to

follow the Government Guarantee Program by fulfilling

the following requirements: (i) the soundness rating of rural

banks has to be fairly sound and not under a special

surveillance program; (ii) the statement of participation

from the bank management and shareholders; (iii) a fee

must be paid; (iv) a nominative list of deposits must be

provided; and (v) a penalty must be paid.

Up to July 2004, there were 175 rural banks unable

to fulfil the requirement to participate in the Government

Guarantee Program, including five sharia rural banks. Rural

banks failing to meet the requirements have to announce

their status to the public. In such a case, the settlement of

all deposits will be borne by the rural bank according to

prevailing regulations.

If any rural banks fail to announce their participation

status, Bank Indonesia will announce it to the public to

protect the bank’s customers in order to stabilize the rural

banking industry.

c) The Settlement of Deposits for Non-participants of thec) The Settlement of Deposits for Non-participants of thec) The Settlement of Deposits for Non-participants of thec) The Settlement of Deposits for Non-participants of thec) The Settlement of Deposits for Non-participants of the

Guarantee ProgramGuarantee ProgramGuarantee ProgramGuarantee ProgramGuarantee Program

The settlement of deposits for non-participants of

the guarantee program (including five rural banks whose

licenses were revoked in 2004) will be borne by the

respective rural banks through liquidation according to


prevailing regulations. Based on Government Regulation

(PP) No. 25, 1999 and the Director Decree of Bank

Indonesia no. 32/54/KEP/DIR, 1999, the rural bank

liquidation process will be enforced by the Liquidation Team

and Bank Indonesia will act as supervisor.

In practice, the difficulty in settling deposits through

liquidation is attributable to the poor asset quality of rural

banks in liquidation (RBL), meaning the amount of assets

are insufficient to settle the liabilities. Bank Indonesia has

to ensure that the settlement process is in accordance with

prevailing regulations, for example, creditors are given

priority in the settlement process. Bank Indonesia also

requests the shareholders be willing to pay the deposits

through the settlement of RBL’s assets.

Improvements in the Regulation and

Supervision System

Improvements in the regulation and supervision

system were carried out with consideration of the

characteristics of rural banks and international best

practices. In line with this there are some steps to be taken,

namely: (i) improvements in some criteria of rural bank

institution; (ii) the use of a rural bank database as an early

detection system; (iii) legal enforcement efficiency; (iv)

selecting rural bank management candidates through fit

and proper tests; (v) improve the prudential principles,

including CAMEL aspects and the rural bank soundness

rating, which covers the stipulations of CAMEL, capital

adequacy ratio, asset quality, earning assets losses

provision, legal lending limit; and (vi) changes in loan

classification, the allowance of earning assets, as well as

a loan restructuring system.

To improve rural bank institution, Bank Indonesia

issued regulation No. 6/22/PBI/2004 dated 9 August 2004

regarding Rural Banks to replace Director Decree No. 32/

35/KEP/DIR. In the regulation, there is an improvement on

capital rules and regulations, a modification on the

requirements for the opening of a rural bank branch office,

and conditions for selecting a rural bank’s board of

directors. In addition, Bank Indonesia issued Regulation

No. 6/23/PBI/2004 concerning the Fit and Proper Test for

Rural Banks, dated 9 August 2004.

To promote efficiency in the rural bank licensing

procedure, Bank Indonesia has examined the saturation

level of rural banks in a few regions. This research aimed

to identify the affecting factors and determine the

saturation level of rural banks in one region. The result of

the research will be used as a reference for Bank Indonesia

in issuing licenses, address changes or opening rural bank

branch offices. The research has produced a formula to

measure the rural bank saturation level. However, further

research is required to anticipate the tight competition

between commercial banks and rural banks.

Capacity Building and Institution

a) Professional Certification Program (CERTIF)a) Professional Certification Program (CERTIF)a) Professional Certification Program (CERTIF)a) Professional Certification Program (CERTIF)a) Professional Certification Program (CERTIF)

On 12 July 2004, Bank Indonesia launched the rural

bank Professional Certification Program requiring directors

of rural banks to pass the program. The target is for a

minimum of one director by the end of 2006 and for all

directors by the end of 2008. This program intends to

improve the quality of rural bank human resources in an

appropriate and continuous way.

b) Promoting the Use of Information Technologyb) Promoting the Use of Information Technologyb) Promoting the Use of Information Technologyb) Promoting the Use of Information Technologyb) Promoting the Use of Information Technology

The development of rural banks requires the use of

information technology, therefore, rural banks are required

to submit a monthly report via diskette. Currently, Bank

Indonesia is developing software to improve the

microbanking system for rural banks with technical assistance

provided by Food and Agriculture Organization (FAO).

c) The Linkage Program for Commercial Banks and Ruralc) The Linkage Program for Commercial Banks and Ruralc) The Linkage Program for Commercial Banks and Ruralc) The Linkage Program for Commercial Banks and Ruralc) The Linkage Program for Commercial Banks and Rural

BanksBanksBanksBanksBanks

Bank Indonesia stimulates linkages between

commercial banks and rural banks in terms of loan


– A linkage program has positive impacts on both

commercial banks and rural banks, therefore it is

recommended to be continued.

– Bank Indonesia will have to continuously stimulate

the participation of commercial banks in the linkage

program and create policies to increase the

competitive capacity of rural banks. Commercial

banks need to lower their interest rates for rural banks

and continue to monitor and provide technical

assistance to rural banks.

– Support from the credit guarantee institution is

necessary to warrant loan allocation for relatively

sound rural banks.

– Incentives should be given to commercial banks and

rural banks capable of increasing their loan allocation

allocation for Small and Micro Enterprises (SME). The

linkage program is the continuation of the successful Micro

Credit Project oriented towards mutual collaboration

between commercial banks and rural banks, or with other

micro finance institutions to develop a network to allocate

micro credit.

As of June 2004, there was collaboration between

924 rural banks and 25 financial institutions (24 commercial

banks and PNM Ltd.) with a cap of Rp944 billion and a

Rp536 billion outstanding debit. From the survey

conducted by Bank Indonesia in cooperation with the

Economic Faculty of Padjajaran University, concerning the

impact of linkage programs on the improvement of rural

bank performance, there are some important results as

follows:

Box 1 Professional Certification Program for Rural Banks (CERTIF)

In relation to the capacity improvement of the rural

banking institution, a BPR Professional Certification Program

CERTIF was launched on 12 July 2004. The program stipulates

that BPR directors must pass a graduation certificate, at least

for one director by the end of 2006 and for all directors by

the end of 2008.

The CERTIF program in intended to improve the quality

of human resources in rural banks in a systematic and

sustainable way. A pilot project was implemented in East Java

province and Bali with support from Bankakedemie, which

has completed several programs: (i) the establishment of

training institutes as part of the pilot project; (ii) the

composition of a curriculum, training modules and exam

material; (iii) training of trainers (ToT) that has been conducted

twice; and (iv) two certified training courses run by the

consultancy agency IRBA, Malang and one training course

run by IRBA, Bali.

The National Task Force, which has Bank Indonesia

membership (the Directorate of Rural Banks Supervisory, the

head of Bank Indonesia Branch Office in Surabaya, Denpasar

and an official from the Directorate of Sharia Banking), has

conducted twelve meetings with some agreements on the

foundation of a certification institution by the Indonesian

Banking Development Foundation and the expansion of the

certified training program to other parts of Indonesia, such

as: West Java, Jabotabek (Jakarta, Bogor, Tangerang and

Bekasi), South Sumatra, West Sumatra and South Sulawesi

through the Training of Trainers (ToT) program for the training

of candidates in those areas.

In accordance with Bank Indonesia Regulation No. 6/

22/PBI/2004 dated 9 August 2004 and External Circular Letter

No. 6/34/DPBPR dated 13 August 2004 regarding Certification

Institutions for rural banks, the establishment of this institution

must take into consideration Bank Indonesia’s

recommendations. The institution has the right to regulate

the certification system and issue graduation certificates, give

accreditation for trainers and to training institutes, and to set

the test procedures and exam material, all in collaboration

with institutions that have been established from Certification

Council, National Curriculum Committee and Management

Council.

In supporting the implementation of CERTIF, Bank

Indonesia provides training grants as much as 50% of the

total training costs for one rural banks director, in particular

for rural banks that were founded before the issuance of the

regulation.

In future, the development of a human resources

program for rural banks will be self-funded.


to small and micro enterprises.

– Bank Indonesia should provide incentives to

commercial banks, maintain a sound competitive

environment, improve supervision and provide

information regarding rural banks to the public.

d) Intensification of Rural Banking Industry Infrastructured) Intensification of Rural Banking Industry Infrastructured) Intensification of Rural Banking Industry Infrastructured) Intensification of Rural Banking Industry Infrastructured) Intensification of Rural Banking Industry Infrastructure

To stimulate the development of infrastructure which

supports the growth of the rural banking industry, Bank

Indonesia is undertaking the following activities:

– Promoting the formation of a Deposit Insurance

Company for both commercial and rural banks.

– Empowering the role of rural bank associations.

– Stimulating the formation of apex in the rural banking

industry. Apex pools funds to assist rural banks

overcome liquidity mismatch and facilitate a rural bank

settlement system. Apex is expected to be able to

provide training on information technology and

provide working capital for its members. Bank

Indonesia is currently conducting research, in

collaboration with the Institute for Development of

Economics and Finance (INDEF) and the Bogor

Agricultural Institute, to formulate the draft of

regulations for institutional and operational aspects

regarding the establishment of apex for rural banks.

Apex is expected to improve the efficiency and

competitiveness of rural banks.

Development of Regulations

During 2004, Bank Indonesia issued regulations and

circulars regarding rural banks, namely: (i) rural bank

institution; (ii) the improvement of rural bank management

competency through institutional qualifications; and (iii)

fit and proper tests for controlling shareholders and rural

bank management.

The Bank Indonesia regulations and circulars issued

during 2004 can be summarized as follows:

1.1.1.1.1. PBI No. 6/22/PBI/2004 regarding Rural Bank dated 9PBI No. 6/22/PBI/2004 regarding Rural Bank dated 9PBI No. 6/22/PBI/2004 regarding Rural Bank dated 9PBI No. 6/22/PBI/2004 regarding Rural Bank dated 9PBI No. 6/22/PBI/2004 regarding Rural Bank dated 9

August 2004, SE BI No. 6/33/DPBPR dated 13 AugustAugust 2004, SE BI No. 6/33/DPBPR dated 13 AugustAugust 2004, SE BI No. 6/33/DPBPR dated 13 AugustAugust 2004, SE BI No. 6/33/DPBPR dated 13 AugustAugust 2004, SE BI No. 6/33/DPBPR dated 13 August

2004 regarding Rural Bank and SE BI No. 6/34/DPBPR2004 regarding Rural Bank and SE BI No. 6/34/DPBPR2004 regarding Rural Bank and SE BI No. 6/34/DPBPR2004 regarding Rural Bank and SE BI No. 6/34/DPBPR2004 regarding Rural Bank and SE BI No. 6/34/DPBPR

dated 13 August 2004 regarding Certificationdated 13 August 2004 regarding Certificationdated 13 August 2004 regarding Certificationdated 13 August 2004 regarding Certificationdated 13 August 2004 regarding Certification

Program for Rural Bank.Program for Rural Bank.Program for Rural Bank.Program for Rural Bank.Program for Rural Bank.

a. Paid-up capital for the establishment of rural

banks was modified to: (i) Rp5 billion for rural

banks located in DKI Jakarta; (ii) Rp2 billion for

rural banks located in provincial capitals in Java

and Bali and in the region of Bogor, Depok,

Tangerang and Bekasi; (iii) Rp1 billion for rural

banks located in provincial capitals outside of

Java and Bali and in areas outside the regions

mentioned in item two; and (iv) Rp500 million

for rural banks located in the areas outside the

categories already mentioned.

b. Supplementary administrative requirements for

the establishment of rural banks include a letter

of notification, a copy of a bachelor degree or

graduation certificate proving to have completed

110 credits, and the ability to present the

feasibility of potential rural banks.

c. The shareholder and management candidates

have to satisfy all requirements as stated in the

fit and proper test.

d. Members of the board of directors have to hold

a certificate from the certification institution

(CERTIF) according to the following

requirements: (i) At least one board member has

to hold a certificate no later than 31 December

2006; and (ii) the other board members no later

than 31 December 2008.

e. At least one candidate of the board of directors

has to hold a certificate at the time of submitting

the proposal as of 31 December 2006 and all

candidates after 31 December 2008.

f. Dual functions are forbidden for the board of


commissioners and board of directors at Rural

Banks, Sharia Rural Banks and/or Commercial

Banks.

g. Number of commissioners and directors are at

least two.

h. The obligation to increase paid-up capital based

on locality as mentioned in item (a) by the end

of 2010 through several stages: (i) Minimum

40% of paid-up capital on 31 December 2006;

(ii) Minimum 70% of paid-up capital on 31

December 2008; and (iii) 100% of paid-up

capital on 31 December 2010.

Rural Banks failing to satisfy the paid-up capital

requirement by the end of 2010 have to realign

their position to an area with suitable paid-up

capital requirements in line with business

restriction sanctions.

i. The opening of branch office does not require

the addition of paid-up capital but relates to the

ability of rural banks to meet the paid-up capital

requirement, the soundness rating for the past

12 months considered Sound and minimum

15% Capital Adequacy Ratio (CAR) for the past

3 months. Rural Banks can only open one branch

office within a year from the issuance of the

license.

2.2.2.2.2. Bank Indonesia Regulation No. 6/23/PBI/2004Bank Indonesia Regulation No. 6/23/PBI/2004Bank Indonesia Regulation No. 6/23/PBI/2004Bank Indonesia Regulation No. 6/23/PBI/2004Bank Indonesia Regulation No. 6/23/PBI/2004

regarding Fit and Proper Test for Rural Banks dated 9regarding Fit and Proper Test for Rural Banks dated 9regarding Fit and Proper Test for Rural Banks dated 9regarding Fit and Proper Test for Rural Banks dated 9regarding Fit and Proper Test for Rural Banks dated 9

August 2004 and Bank Indonesia Circular Letter No.August 2004 and Bank Indonesia Circular Letter No.August 2004 and Bank Indonesia Circular Letter No.August 2004 and Bank Indonesia Circular Letter No.August 2004 and Bank Indonesia Circular Letter No.

6/35/DPBPR dated 16 August 2004 regarding Fit and6/35/DPBPR dated 16 August 2004 regarding Fit and6/35/DPBPR dated 16 August 2004 regarding Fit and6/35/DPBPR dated 16 August 2004 regarding Fit and6/35/DPBPR dated 16 August 2004 regarding Fit and

Proper Test for Rural Banks.Proper Test for Rural Banks.Proper Test for Rural Banks.Proper Test for Rural Banks.Proper Test for Rural Banks.

a. Fit and proper tests are carried out by Bank

Indonesia for: (i) controlling shareholder

candidates and rural bank management

candidates, and (ii) controlling shareholders,

directors and executives of rural banks, if there

is an indication of violations of sound banking

practices based on the supervision and other

information.

b. Fit and proper tests for controlling shareholders

and new candidates are carried out to evaluate

integrity and financial viability. The evaluation

grades for controlling shareholder candidates

are: Passed or Not Passed, whereas the grades

for existing controlling shareholders are: Passed,

Conditionally Passed and Not Passed.

c. Fit and proper tests for shareholders, directors

and executives are carried out to evaluate

integrity, competence and financial reputation.

The evaluation grades for directors are: Passed

and Not Passed, whereas grades for existing

directors and executives are: Passed,

Conditionally Passed and Not Passed.

d. Persons graded as Passed can keep their position

in rural banks. Persons graded as Conditionally

Passed can still keep their position with a

statement to not commit the same violation,

increase their competency and settle overdue

loans. For those who are Not Passed, they are

not allowed to be in any position of controlling

shareholders, directors or executives at a rural

bank.

e. The grading level is based on the results of

examinations regarding the above mentioned

indications and refers to certain criteria according

to the role of that person in the violation.

f. The sanctions which can be brought against

controlling shareholders, directors and executives

consist of bans from taking specific job

appointments for 2, 3, 5 or 20 years, determined

by the impact of the violation on the rural bank’s

capital condition or by a violation on a statement

made that will cause someone to receive a

particular penalty.


g. In the fit and proper tests, rural banks are given

two opportunities to provide supporting

evidence on the results of Bank Indonesia

supervision.

h. Black-listed persons in the banking industry

under the former regulations will be placed on

the list of Not Passed persons for a period of 20

years.

2. SUPERVISION AND EXAMINATION

a. Off-site supervision

The objective of rural bank supervision is to create a

sound, strong and efficient banking system that

complies with the public’s needs and stimulates

economic growth through the improvement of micro

business.

In conducting the off-site supervision and examination

of rural banks, Bank Indonesia applies a unified system

where the supervision and inspection functions are

integrated. This system is applied taking into

consideration the small coverage of rural banks

compared to commercial banks so that supervisors

can identify problems easier and can provide solutions

as early as possible.

b. On-site examination

The general on-site examination for rural banks is

conducted once a year while a more specific one is

conducted based on the problems confronted by each

rural bank. The plan and realization of rural bank

examinations in 2004 (data up to August 2004) is as

follows:

Based on the examination report, one of the basic

problems confronted by rural banks is poor management

and governance. Some rural bank directors and staff are

not professional, and there is still intervention from the

owner in rural bank operations. As a result, rural banks

are not run properly, and some offenses are committed

Table 6.1Plan and Realization of rural bank examination

Nature of Examination Plan Realization Deviation

General examinations 1,194 1,155 (39) -3,4%

Specific examinations 101 192 91 47,4%

Total examinationsTotal examinationsTotal examinationsTotal examinationsTotal examinations 1,2951,2951,2951,2951,295 1,3471,3471,3471,3471,347 5252525252 3,9%3,9%3,9%3,9%3,9%

mostly for the sake of the owner, the directors or their

cronies. For this reason, Bank Indonesia provides technical

assistance to rural banks to improve the capacity of human

resources through a certification program.

For rural banks committing unsound banking

practices, Bank Indonesia has taken supervisory actions

and/or imposed sanctions according to the prevailing

regulations. For the worst problem banks, including ones

under special surveillance, can be resolved through

acquisition and/or capital injection by the owner to reach

4% minimum CAR and 3% minimum cash ratio.

Additionally, directors and/or the owner who prove to be

the cause of the problems in the rural bank need to be

replaced. Violations that have indications of criminal

behaviour need to be reported to Special Unit on Banking

Investigation for follow-up actions.

From 1987 up to the end of September 2004, 130

rural bank business licenses were revoked without

following frozen operations procedure. Since September

2004, 194 rural banks had their business operations frozen.

Of the 194 rural banks, 182 licenses have been revoked

and two others are still frozen. Meanwhile, 10 other rural

banks were successfully saved through the acquisition

process and capital injection.

3. LICENSING

a. The objective and main activity of licensinga. The objective and main activity of licensinga. The objective and main activity of licensinga. The objective and main activity of licensinga. The objective and main activity of licensing

The objective of licensing is to establish new and

sound rural banks, which are also efficient and able

to develop properly to provide financial services for


the public and micro, small and medium sized

businesses. The target is achieved through the

following main activities:

– Analyze the completion of administrative

requirements, principal licenses and business

licenses according to the prevailing regulations.

– Conduct interviews (fit and proper tests) for

controlling shareholders and directors of rural

banks to be established in Jakarta Head Office

(Jabotabek).

– Discuss the potential and saturation level of rural

banks which are to be established in Jakarta

Head Office following a recommendation by an

independent consultant and candidates for

shareholder and management positions.

– Coordinate with Bank Indonesia’s branch offices

regarding the establishment of rural banks in

branch office areas, in terms of regulation,

compliance, fit and proper tests and assessments

on the potential and saturation point.

b. The number of rural bank licensesb. The number of rural bank licensesb. The number of rural bank licensesb. The number of rural bank licensesb. The number of rural bank licenses

Since May 2001 and up until the end of September

2004, there were 142 license applications for the

establishment of new rural banks. Of the 142

applications, nine have been principally approved, 50

have received business licenses and 74 are still in

processing. The rejection of two applications was

caused by the paid-up capital resources not complying

with the regulations. The high number of license

applications indicates greater investor interest in the

development of SMEs, which are the main market of

rural banks.

c..... Fit and proper test data for controlling shareholdersFit and proper test data for controlling shareholdersFit and proper test data for controlling shareholdersFit and proper test data for controlling shareholdersFit and proper test data for controlling shareholders

and the management of rural banksand the management of rural banksand the management of rural banksand the management of rural banksand the management of rural banks

During 2004, fit and proper tests for controlling

shareholders, the board of commissioners and

directors of rural banks were conducted with regard

to the issuance of licenses for new rural banks. The

number of applicants who passed the test is 266: 96

shareholders, 78 commissioners and 92 directors.

For existing rural banks (until August 2004) there are

around 700 directors and owners following fit and

proper tests in conjunction with the changes in rural

bank directors and owners. Only 339 director

candidates and 247 owner candidates have passed

and been approved, the rest are considered as not

passed due to integrity and competency requirements.

Appendices 5959

Appendices

60 Appendices

Appendices 6161

This document is a revised version of consultative

paper which was published by BIS (Bank for International

Settlement) on April 1997, confirming 25 principles which

are ensured by the Basel Committee to be implemented

for effective supervision.

Basel Core Principles were developed by the Basel

Committee in collaboration with supervisory authorities

from 15 developing countries and have received inputs

from intensive consultation with many supervisory

authorities worldwide. The principles cover basic elements

of an effective supervision system. The principles have

comprehensive coverage including preconditions for

effective bank supervision, licensing and structure,

requirement and prudential regulations, and method of

ongoing supervision.

Basel Core Principles is intended to be a basic

guideline for supervisory authorities worldwide to be

applied to banking supervision in line their own regulations.

Supervision authorities worldwide were urged to apply

these principles at least in October 1998. The

implementation includes a review of the current supervisory

system compared to the principles. The pace of change

varies depending on whether the supervisory authority has

the legal power or not. If changes in the law are required,

legislators of each country are requested to give immediate

consideration to the necessary changes to ensure that the

Appendix 1Core Principles for Effective Banking Supervision

principles are applicable to all important aspects. The

documents of the principles can be downloaded from the

BIS web site: http://www.bis.org.

PRECONDITIONS FOR EFFECTIVE BANKING

SUPERVISION

1. An effective system of banking supervision will have

clear responsibilities and objectives for each agency

involved in the supervision of banking organizations.

Each such agency should possess operational

independence and adequate resources. A suitable

legal framework for banking supervision is also

necessary, including provisions relating to

authorization of banking organizations and their

ongoing supervision; powers to address compliance

with laws as well as safety and soundness concerns;

and legal protection for supervisors. Arrangements

for sharing information between supervisors and

protecting the confidentiality of such information

should be in place.

LICENSING AND STRUCTURE

2. The permissible activities of institutions that are

licensed and subject to supervision as banks must be

clearly defined, and the use of the word “bank” in

names should be controlled as far as possible.

3. The licensing authority must have the right to set

criteria and reject applications for establishments that

do not meet the standards set. The licensing process,

at a minimum, should consist of an assessment of

the banking organization’s ownership structure,

directors and senior management, its operating plan

1 Source: The Core Principles for Effective Banking Supervision, Bank for InternationalSettlements, September 1997.

2 The Basel Committee on Banking Supervision founded by the Governors of CentralBanks of the Group of Ten Countries in 1975. This Committee members include seniormanager from supervisory authorities and central banks from Belgium, Canada, France,Germany, Italy, Japan, Luxembourg, Netherland, Sweden, Switzerland, England and UnitedStates. The Committee, meet regularly at the Bank for International Settlements (BIS) inBasel, Switzerland where the Secretary reside permanently. The Basel Committeecontinuosly develop banking supervisory systems and approach to be implemented in-ternationally.

62 Appendices

and internal controls, and its projected financial

condition, including its capital base; where the

proposed owner or parent organization is a foreign

bank, the prior consent of its home country supervisor

should be obtained.

4. Banking supervisors must have the authority to review

and reject any proposals to transfer significant

ownership or controlling interests in existing banks

to other parties.

5. Banking supervisors must have the authority to

establish criteria for reviewing major acquisitions or

investments by a bank and ensuring that corporate

affiliations or structures do not expose the bank to

undue risks or hinder effective supervision.

PRUDENTIAL REGULATIONS AND

REQUIREMENTS

6. Banking supervisors must set prudent and appropriate

minimum capital adequacy requirements for all banks.

Such requirements should reflect the risks that the

banks undertake, and must define the components

of capital, bearing in mind their ability to absorb

losses. At least for internationally active banks, these

requirements must not be less than those established

in the Basle Capital Accord and its amendments.

7. An essential part of any supervisory system is the

evaluation of a bank’s policies, practices and

procedures related to the granting of loans and

making of investments and the ongoing management

of the loan and investment portfolios.

8. Banking supervisors must be satisfied that banks

establish and adhere to adequate policies, practices

and procedures for evaluating the quality of assets

and the adequacy of loan loss provisions and loan

loss reserves.

9. Banking supervisors must be satisfied that banks have

management information systems that enable

management to identify concentrations within the

portfolio and supervisors must set prudential limits

to restrict bank exposures to single borrowers or

groups of related borrowers.

10. In order to prevent abuses arising from connected

lending, banking supervisors must have in place

requirements that banks lend to related companies

and individuals on an arm’s-length basis, that such

extensions of credit are effectively monitored, and

that other appropriate steps are taken to control or

mitigate the risks.


adequate policies and procedures for identifying,

monitoring and controlling country risk and transfer

risk in their international lending and investment

activities, and for maintaining appropriate reserves

against such risks.


in place systems that accurately measure, monitor and

adequately control market risks; supervisors should

have powers to impose specific limits and/or a specific

capital charge on market risk exposures, if warranted.


in place a comprehensive risk management process

(including appropriate board and senior management

oversight) to identify, measure, monitor and control

all other material risks and, where appropriate, to hold

capital against these risks.

14. Banking supervisors must determine that banks have

in place internal controls that are adequate for the

nature and scale of their business. These should

include clear arrangements for delegating authority

and responsibility; separation of the functions that

involve committing the bank, paying away its funds,

and accounting for its assets and liabilities;

reconciliation of these processes; safeguarding its

assets; and appropriate independent internal or

Appendices 6363

external audit and compliance functions to test

adherence to these controls as well as applicable laws

and regulations.

15. Banking supervisors must determine that banks have

adequate policies, practices and procedures in place,

including strict “know-your-customer” rules, that

promote high ethical and professional standards in

the financial sector and prevent the bank being used,

intentionally or unintentionally, by criminal elements.

METHODS OF ONGOING BANKING SUPERVISION

16. An effective banking supervisory system should

consist of some form of both on-site and off-site

supervision.

17. Banking supervisors must have regular contact with

bank management and thorough understanding of

the institution’s operations.

18. Banking supervisors must have a means of collecting,

reviewing and analyzing prudential reports and

statistical returns from banks on a solo and

consolidated basis.

19. Banking supervisors must have a means of

independent validation of supervisory information

either through on-site examinations or use of external

auditors.

20. An essential element of banking supervision is the

ability of the supervisors to supervise the banking

group on a consolidated basis.

INFORMATION REQUIREMENTS

21. Banking supervisors must be satisfied that each bank

maintains adequate records drawn up in accordance

with consistent accounting policies and practices that

enable the supervisor to obtain a true and fair view

of the financial condition of the bank and the

profitability of its business, and that the bank

publishes on a regular basis financial statements that

fairly reflect its condition.

FORMAL POWERS OF SUPERVISORS

22. Banking supervisors must have at their disposal

adequate supervisory measures to bring about timely

corrective action when banks fail to meet prudential

requirements (such as minimum capital adequacy

ratios), when there are regulatory violations, or

where depositors are threatened in any other way.

In extreme circumstances, this should include the

ability to revoke the banking license or recommend

its revocation.

CROSS-BORDER BANKING

23. Banking supervisors must practice global consolidated

supervision over their internationally-active banking

organizations, adequately monitoring and applying

appropriate prudential norms to all aspects of the

business conducted by these banking organizations

worldwide, primarily at their foreign branches, joint

ventures and subsidiaries.

24. A key component of consolidated supervision is

establishing contact and information exchange with

the various other supervisors involved, primarily host

country supervisory authorities.

25. Banking supervisors must require the local operations

of foreign banks to be conducted to the same high

standards as are required of domestic institutions and

must have powers to share information needed by

the home country supervisors of those banks for the

purpose of carrying out consolidated supervision.

64Appendices

B A N K S TOTALASSETS

L O A N S SECURITIESANDBIS

INTER-BANKPLACEMENT INVESTMENT

OTHERCLAIMS

COMMIT-MENT AND

CONTIGENCYTOTAL DEMAND

DEPOSITSAVING

ACCOUNTTIME

DEPOSITTOTAL

EARNING ASSETS D E P O S I T S

STATE-OWNED BANKSTATE-OWNED BANKSTATE-OWNED BANKSTATE-OWNED BANKSTATE-OWNED BANK

1 PT BANK MANDIRI (PERSERO) Tbk 228,727,465 81,338,713 104,669,283 15,551,812 1,882,069 6,147,665 15,139,023 224,728,565 42,364,778 44,637,844 75,969,286 162,971,908 23,782,691

2 PT BANK NEGARA INDONESIA (PERSERO),Tbk 129,972,228 51,758,953 51,912,983 10,101,085 3,443,442 2,501,826 7,710,914 127,429,203 30,213,329 36,058,973 36,300,793 102,573,085 11,946,676

3 PT BANK RAKYAT INDONESIA (PERSERO) Tbk, 100,086,609 58,381,719 28,794,335 5,118,821 61,308 110,817 2,373,079 94,840,079 12,975,443 41,142,461 24,449,128 78,567,032 11,742,744

4 PT BANK TABUNGAN NEGARA (PERSERO) Tbk, 26,647,428 12,072,920 12,775,474 179,362 4,341 25,032,097 1,364,850 5,743,624 11,426,324 18,534,798 1,166,513

5 PT BANK EKSPOR INDONESIA (PERSERO) 5,737,152 783,198 1,152,246 3,789,665 5,146 5,730,255 0 0 4,570 4,570 3,673,745

PRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANK

6 PT BANK CENTRAL ASIA Tbk, 143,355,044 35,817,736 85,813,176 4,704,806 257,804 791,269 1,731,569 129,116,360 28,552,673 63,498,175 33,626,807 125,677,655 13,672,243

7 PT BANK DANAMON INDONESIA Tbk 53,324,203 25,747,562 20,707,954 1,851,243 974,876 508,852 1,080,942 50,871,429 4,803,090 10,903,421 20,040,235 35,746,746 8,146,186

8 PT BANK INTERNASIONAL INDONESIA Tbk 35,783,117 12,220,471 14,467,745 5,221,642 60,750 707,051 369,750 33,047,409 9,738,434 5,838,607 13,466,902 29,043,943 4,096,127

9 PT BANK PERMATA Tbk (prev. PT, BANK BALI ) 31,391,579 13,297,987 12,638,048 1,473,848 141,028 203,887 452,408 28,207,206 4,982,004 3,988,836 16,593,280 25,564,120 2,205,096

10 PT LIPPO BANK, Tbk 27,353,918 5,428,310 14,732,884 2,558,258 3,464 80,979 637,260 23,441,155 8,524,965 10,291,391 5,690,363 24,506,719 1,723,181

11 PT BANK NIAGA, Tbk 27,239,356 18,370,136 4,915,080 1,393,735 144,451 338,902 707,000 25,869,304 5,303,801 4,639,911 11,832,924 21,776,636 2,175,322

12 PT PAN INDONESIA BANK, Tbk 22,296,369 10,574,709 6,851,417 2,437,938 246,796 130,277 415,151 20,656,288 4,378,863 3,882,903 6,629,424 14,891,190 4,200,571

13 PT BANK MEGA, Tbk 17,215,031 7,314,403 7,683,333 302,873 37,615 55,268 125,894 15,519,386 2,759,719 1,805,326 10,606,917 15,171,962 1,253,234

14 PT BANK NISP, Tbk 16,534,806 9,450,846 3,894,728 981,027 56,215 727,211 593,860 15,703,887 1,634,990 2,562,449 7,736,678 11,934,117 1,229,854

15 PT BANK BUANA INDONESIA Tbk, 15,880,659 7,121,283 5,102,296 2,148,034 88 26,226 250,264 14,648,191 3,918,602 4,532,548 4,583,969 13,035,119 1,923,011

16 PT BANK BUKOPIN 15,620,846 12,632,541 1,312,064 316,013 550 8,637 530,016 14,799,821 2,670,027 1,462,689 8,709,497 12,842,213 1,075,641

17 PT BANK EKONOMI RAHARJA 10,117,253 4,144,738 4,616,757 597,179 31,167 235,661 9,625,502 1,635,377 3,059,129 4,546,093 9,240,599 503,481

18 PT BANK ARTHA GRAHA 8,517,479 5,287,664 1,327,464 569,904 131 2,079 41,687 7,228,929 799,690 687,204 5,263,569 6,750,463 298,130

19 PT BANK CENTURY Tbk,(BANK CIC-6,12,2004) 6,292,682 1,155,645 1,041,875 2,442,498 274,281 11,839 4,926,138 403,148 318,649 3,509,542 4,231,339 446,230

20 PT,BANK SYARIAH MANDIRI, Tbk 6,051,925 5,007,108 369,994 5,478 1,127 118,702 5,502,409 776,780 1,431,134 2,846,170 5,054,084 505,827

21 PT BANK MUAMALAT INDONESIA 4,279,170 3,766,817 80,129 26,083 6,802 53,194 3,933,025 333,864 1,007,860 2,068,248 3,409,972 335,310

22 PT BANK HAGA 3,723,868 1,538,132 1,661,685 215,943 12,046 75,527 3,503,333 1,025,604 715,640 1,718,011 3,459,255 125,975

23 PT BANK BUMIPUTERA INDONESIA 3,579,489 2,651,487 492,812 69,020 17,558 119,934 3,350,811 525,330 374,136 1,848,807 2,748,273 264,495

24 PT BANK MESTIKA DHARMA 2,840,357 1,933,327 647,878 7,653 2,000 110,710 2,701,568 448,537 1,270,134 451,442 2,170,113 578,800

25 PT BANK MAYAPADA INTERNATIONAL 2,437,771 1,426,022 168,072 104,725 13,739 12,387 1,724,945 269,054 106,875 1,636,750 2,012,679 301,662

26 PT, BANK NUSANTARA PARAHYANGAN TBK, 2,125,238 960,228 718,141 262,703 10,183 20,750 1,972,005 558,978 244,433 1,138,596 1,942,007 134,068

Appendix 2Banking Key Indicators

(Million of Rp)

EQUITYNo

65Appendices

27 PT BANK MASPION INDONESIA 1,758,617 1,050,847 426,547 66,330 2,717 19,810 1,566,251 187,237 500,174 868,836 1,556,247 138,199

28 PT BANK BUMI ARTA 1,529,510 377,183 384,273 609,448 7,366 3,152 11,229 1,392,651 447,094 390,531 437,590 1,275,215 194,244

29 PT BANK KESAWAN, Tbk 1,492,810 634,156 594,208 44,358 2,218 1,274,940 238,946 342,613 789,511 1,371,070 106,575

30 PT BANK PIKKO (MERG,CENTURY 6,12,2004) 1,203,163 326,497 228,720 449,430 37,064 14,881 1,056,592 74,417 208,011 967,605 1,250,033 -274,842

31 PT BANK ARTA NIAGA KENCANA 952,184 651,905 167,786 27,274 18 17,102 864,085 125,521 188,287 499,131 812,939 115,143

32 PT BANK IFI 870,658 283,837 405,927 60,420 17,839 768,023 28,614 14,299 420,421 463,334 84,343

33 PT BANK GANESHA 803,885 464,868 158,319 71,278 13,568 33,714 741,747 83,259 48,321 558,273 689,853 85,595

34 PT BANK HAGAKITA 741,853 560,196 48,915 45,239 3,519 11,854 669,723 202,369 123,935 312,261 638,565 72,307

35 PT BANK SWADESI, Tbk 707,509 372,768 258,885 24,583 6 4,630 660,872 82,714 78,789 430,499 592,002 101,921

36 PT BANK ANTAR DAERAH 572,707 369,251 127,127 17,060 6 98 23,896 537,438 92,690 193,348 177,071 463,109 50,910

37 PT, BANK HALIM INDONESIA 463,150 267,562 148,377 11,074 2,300 17,620 446,933 38,477 52,266 251,633 342,376 95,258

38 PT BANK SHINTA INDONESIA 432,871 108,544 259,762 52,865 21,262 442,433 118,128 45,460 167,632 331,220 81,869

39 PT BANK METRO EKSPRESS 361,379 119,356 184,432 30,476 71 6,253 340,588 69,335 54,003 92,510 215,848 137,412

40 PT BANK WINDU KENTJANA 338,671 168,752 48,652 41,182 524 259,110 84,900 131,461 95,540 311,901 17,003

PRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANK

41 PT BANK TABUNGAN PENSIUNAN NASIONAL 3,442,348 2,537,913 356,739 22,387 22 945 2,918,006 8,896 451,889 2,186,923 2,647,708 583,464

42 PT BANK AGRONIAGA Tbk, 2,067,494 1,588,720 326,327 30,307 20 7,830 1,953,204 341,938 46,461 1,232,658 1,621,057 180,898

43 PT BANK VICTORIA INTERNATIONAL 1,964,143 751,777 1,092,078 13 12,721 9,633 1,866,222 68,050 79,012 1,519,543 1,666,605 152,131

44 PT GLOBAL INTL BANK (closed 13,1,2005) 1,848,094 670,935 774,565 42 27,924 1,473,466 16,049 38,674 748,998 803,721 499,041

45 PT BANK JASA JAKARTA 1,802,985 1,214,845 449,906 32,001 7,758 1,704,510 230,278 135,045 1,178,123 1,543,446 226,759

46 PT BANK EKSEKUTIF INTERNASIONAL, Tbk, 1,618,974 1,141,272 129,857 10,947 668 1,282,744 20,089 70,731 1,258,314 1,349,134 195,678

47 PT BANK YUDHA BHAKTI 1,363,262 692,844 384,987 151,260 10 19,117 1,248,218 73,113 52,606 1,048,102 1,173,821 121,231

48 PT BANK HARDA INTERNASIONAL 1,025,251 629,559 293,743 21,544 1,900 946,746 147,181 49,399 738,964 935,544 56,048

49 PT BANK DANPAC (MERG,CENTURY 6,12,04) 905,932 379,943 175,744 289,162 8,703 853,552 71,327 53,103 504,077 628,507 148,206

50 PT BANK INDEX SELINDO 640,627 353,624 215,294 10,381 1,450 580,749 81,307 172,179 332,209 585,695 44,163

51 PT BANK PERSYARIKATAN INDONESIA 606,708 578,831 1,204 7,427 4,525 591,987 56,754 68,280 369,479 494,513 7,514

52 PT BANK UIB 557,430 383,197 123,200 6,271 512,668 37,736 29,374 402,926 470,036 70,045

53 PT DIPO INTERNATIONAL BANK 544,609 417,622 67,481 570 15,405 501,078 197,837 18,027 240,707 456,571 71,001

(Million of Rp)

No B A N K S TOTALASSETS



OTHERCLAIMS

COMMIT-MENT AND


DEPOSITSAVING

ACCOUNTTIME

DEPOSITTOTAL

EQUITY


66Appendices

54 PT BANK HIMPUNAN SAUDARA 1906 527.883 427.013 32.499 2.112 3.727 162 465.513 42.089 68.108 349.958 460.155 62.002

55 PT BANK AKITA 491.574 386.485 43.025 49 588 430.147 66.384 29.703 312.810 408.897 65.636

56 PT BANK SYARIAH MEGA INDONESIA 402.425 303.276 20.663 458 324.397 38.830 4.471 288.951 332.252 64.808

57 PT CENTRATAMA NASIONAL BANK 393.670 308.618 17.351 2.536 6.910 335.415 31.705 60.224 241.031 332.960 46.100

58 PT PRIMA MASTER BANK 391.955 315.351 28.973 5.182 450 349.956 65.239 44.312 245.728 355.279 25.656

59 PT BANK MULTI ARTA SENTOSA (MAS) 328.458 221.506 83.672 410 1.089 306.677 23.057 41.585 222.754 287.396 35.556

60 PT BANK KESEJAHTERAAN EKONOMI 314.558 258.344 38.663 477 297.484 34.387 21.366 134.663 190.416 92.005

61 PT BANK DJASA ARTA 302.926 161.499 67.206 5.397 2.177 236.279 34.652 58.777 172.568 265.997 33.478

62 PT BANK SRI PARTHA 293.676 167.851 16.096 1.010 184.957 5.639 138.778 79.866 224.283 46.368

63 PT BANK INDOMONEX 278.135 206.003 41.128 1.193 358 248.682 22.305 42.971 179.354 244.630 25.198

64 PT BANK MITRANIAGA 243.231 156.954 62.756 5.154 224.864 11.940 16.611 186.903 215.454 26.084

65 PT BANK FAMA INTERNASIONAL 236.412 184.817 28.270 1.345 214.432 15.344 13.019 172.161 200.524 31.560

66 PT BANK MAYORA 200.960 62.327 106.287 15.007 7.969 191.590 35.954 27.451 115.428 178.833 20.200

67 PT BANK ARTOS INDONESIA 188.954 122.469 38.169 233 530 161.401 36.608 23.546 94.892 155.046 25.927

68 PT ANGLOMAS INTERNASIONAL BANK 182.841 84.769 34.960 7.501 1.546 128.776 31.563 30.972 93.726 156.261 22.736

69 PT BANK INA PERDANA 181.209 102.496 55.571 1.673 12 159.752 33.509 29.280 91.393 154.182 -1.658

70 PT BANK BINTANG MANUNGGAL 161.953 114.057 33.943 2.440 1.302 151.742 17.754 12.163 98.254 128.171 27.317

71 PT BANK SINAR HARAPAN BALI 159.146 107.462 23.500 5.377 136.339 2.564 83.280 31.269 117.113 23.945

72 PT BANK HARMONI INTERNATIONAL 145.014 97.294 22.354 913 1.840 122.401 15.591 53.451 50.995 120.037 22.234

73 PT BANK BISNIS INTERNASIONAL 141.053 83.986 32.415 451 1.325 118.177 20.330 14.316 75.130 109.776 28.407

74 PT LIMAN INTERNATIONAL BANK 134.592 45.264 65.336 54 131 110.785 19.022 21.534 26.669 67.225 61.931

75 PT BANK HARFA 124.916 69.882 27.442 199 100 97.623 9.941 17.605 58.611 86.157 25.754

76 PT BANK ROYAL INDONESIA 68.020 4.880 20.714 36.181 10 61.785 39.459 4.357 2.839 46.655 20.068

77 PT BANK PURBA DANARTA 63.408 10.506 46.080 2.715 59.301 5.217 11.104 26.002 42.323 20.034

78 PT ALFINDO SEJAHTERA BANK 49.596 8.834 35.790 267 44.891 9.941 2.766 22.673 35.380 11.797

79 PT BANK SWAGUNA 22.029 13.274 227 66 630 14.197 1.980 2.410 14.461 18.851 2.237

REGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANK

80 PT BPD JAWA BARAT 12.179.500 8.371.867 1.450.918 1.004.062 77.239 10.904.086 3.577.663 1.481.037 5.193.308 10.252.008 1.222.064

(Million of Rp)




OTHERCLAIMS

COMMIT-MENT AND


DEPOSITSAVING

ACCOUNTTIME

DEPOSITTOTAL

EQUITY


67Appendices

81 PT. BPD JAWA TIMUR 8.444.048 3.504.395 821.524 1.869.965 297.374 6.493.258 3.934.206 1.472.314 1.562.874 6.969.394 721.256

82 PT. BPD DKI 7.025.374 2.142.289 3.496.634 680.971 927 147.460 6.468.281 2.063.745 849.785 1.809.271 4.722.801 631.645

83 PT BANK PEMBANGUNAN DAERAH JAWA TENGAH 6.222.361 3.809.456 395.170 1.078.362 2.497 54.867 5.340.352 1.855.168 1.227.475 1.683.771 4.766.414 937.295

84 PT BANK PEMBANGUNAN DAERAH RIAU 4.157.981 997.754 2.080.111 680.946 1.092 73.974 3.833.877 2.764.136 709.203 238.692 3.712.031 310.966

85 PT. BPD SUMATERA UTARA 3.559.120 1.419.949 1.288.932 149.977 750 41.031 2.900.639 1.442.685 690.926 710.830 2.844.441 660.785

86 BPD SUMATERA BARAT 3.145.263 1.926.102 220.497 736.273 250 17.802 2.900.924 940.099 656.403 594.492 2.190.994 278.666

87 BPD KALIMANTAN TIMUR 3.112.290 1.563.397 968.855 183.880 1.035 71 35.388 2.752.626 1.356.490 599.032 448.673 2.404.195 407.166

88 PT. BANK BPD ACEH 3.080.705 1.034.433 1.198.745 397.196 110 24.352 2.654.836 1.696.020 582.842 456.201 2.735.063 220.488

89 BANK PEMBANGUNAN DAERAH BALI 2.951.167 2.178.049 302.997 179.094 635 9.468 2.670.243 690.737 966.608 491.067 2.148.412 417.843

90 PT. BPD PAPUA 2.498.718 856.898 50.000 664.959 32.778 1.604.635 1.667.846 369.123 100.972 2.137.941 280.163

91 BPD SULAWESI SELATAN 2.255.260 935.391 450.573 503.231 65 831 1.890.091 1.002.619 187.580 333.847 1.524.046 291.700

92 PT BPD SUMATERA SELATAN 2.144.898 1.521.952 40.000 58.649 1.250 960 74.896 1.697.707 962.818 382.833 276.002 1.621.653 245.489

93 BPD YOGYAKARTA 1.509.235 746.426 489.254 73.656 130 3.255 1.312.721 531.876 479.278 300.003 1.311.157 122.261

94 PT. BPD KALIMANTAN BARAT 1.295.345 637.038 93.609 78.180 147 15.648 824.622 483.207 463.402 170.228 1.116.837 137.801

95 PD BPD KALIMANTAN SELATAN 1.056.957 460.842 76.920 114.124 545 8.994 661.425 462.410 223.037 188.824 874.271 140.802

96 PT. BPD BANK KALIMANTAN TENGAH 1.054.375 296.092 433.521 184.731 500 18.854 933.698 657.148 210.136 38.810 906.094 83.818

97 PT. BPD NUSA TENGGARA TIMUR 1.005.129 641.878 80.000 176.941 44.076 942.895 596.516 175.937 103.172 875.625 87.658

98 PT. BPD NUSA TENGGARA BARAT 926.841 620.108 7.962 130.024 860 21.734 780.688 332.478 177.696 96.277 606.451 167.384

99 PT. BANK LAMPUNG 874.250 611.884 172.971 477 8.144 793.476 480.302 87.860 108.035 676.197 84.441

100 PT. BPD SULAWESI UTARA 862.809 495.055 59.983 196.531 6.831 758.400 163.672 200.938 308.760 673.370 122.645

101 PT. BPD MALUKU 771.839 310.480 114.317 192.055 616.852 336.628 149.728 113.538 599.894 79.059

102 BPD JAMBI 618.361 305.072 201.624 63 6.038 512.797 234.041 75.374 166.216 475.631 113.429

103 BPD SULAWESI TENGGARA 404.144 196.624 20.000 136.325 300 13.662 366.911 226.376 66.472 29.690 322.538 48.012

104 PT. BANK PEMBANGUNAN DAERAH BENGKULU 394.523 258.214 55.461 80 623 314.378 204.579 64.204 75.968 344.751 30.378

105 PT. BPD SULAWESI TENGAH 245.449 104.510 12.000 87.690 8.119 212.319 168.764 26.646 24.978 220.388 18.923

JOINT VENTURE BANKJOINT VENTURE BANKJOINT VENTURE BANKJOINT VENTURE BANKJOINT VENTURE BANK

106 PT BANK UFJ INDONESIA 6.848.151 5.864.158 466.799 181.405 71.925 187.493 1.016.786 7.788.566 1.715.254 2.106 1.826.193 3.543.553 1.068.702

107 PT BANK SUMITOMO MITSUI INDONESIA 5.388.695 3.259.633 1.096.946 989.459 330 72.700 463.617 5.882.685 1.619.303 0 1.552.976 3.172.279 1.126.704

(Million of Rp)




OTHERCLAIMS

COMMIT-MENT AND


DEPOSITSAVING

ACCOUNTTIME

DEPOSITTOTAL

EQUITY


68Appendices

108 PT BANK MIZUHO INDONESIA 5.283.438 2.549.977 1.640.865 397.868 532.120 1.194.066 6.314.896 2.319.466 5.650 1.271.538 3.596.654 767.803

109 PT BANK DBS INDONESIA 4.203.836 2.949.785 761.252 106.482 228.398 300.864 4.346.781 865.246 9.625 2.117.845 2.992.716 452.313

110 PT BANK RESONA PERDANIA 3.644.256 2.424.649 871.231 169.825 38.217 209.681 364.657 4.078.260 898.854 1.706 915.458 1.816.018 720.859

111 PT BANK UOB INDONESIA 3.017.584 1.315.991 1.249.511 226.430 1.938 136.800 249.659 3.180.329 647.959 50.243 1.318.497 2.016.699 501.562

112 PT ANZ PANIN BANK 2.877.122 1.709.389 511.286 420.797 107.828 725.932 3.475.232 546.942 0 1.358.621 1.905.563 642.941

113 PT BANK CHINATRUST INDONESIA 2.825.802 2.005.279 340.918 69.383 153.455 327.419 2.896.454 520.798 56.687 1.158.339 1.735.824 586.472

114 PT RABOBANK INTERNATIONAL INDONESIA 2.516.190 2.007.345 277.291 263.011 111.883 97.981 252.487 3.009.998 553.464 0 766.323 1.319.787 297.434

115 PT BANK WOORI INDONESIA 2.307.598 824.721 870.755 559.742 32.750 174.070 2.462.038 581.112 96.261 231.364 908.737 580.405

116 PT BANK COMMONWEALTH 2.270.731 78.456 1.239.477 838.669 64 2.921 46.441 2.206.028 227.288 90.499 1.645.470 1.963.257 152.069

117 PT KOREA EXCHANGE BANK DANAMON 1.971.662 1.148.927 702.399 116.508 16.136 258.013 2.241.983 579.858 0 143.787 723.645 463.555

118 PT BANK OCBC-INDONESIA 1.557.834 582.878 864.060 67.702 31.312 101.566 1.647.518 177.617 1.255 653.785 832.657 378.213

119 PT BANK FINCONESIA 989.313 870.076 26.060 128.987 27.239 115.003 1.167.365 42.038 0 506.936 548.974 197.986

120 PT BANK BNP INDONESIA 621.339 492.596 231.663 73.292 12.724 489.863 1.300.138 60.776 0 246.101 306.877 173.650

121 PT BANK MULTICOR 430.519 150.690 173.348 69.765 6.462 400.265 76.397 16.130 203.803 296.330 132.907

122 PT BANK MAYBANK INDOCORP 329.657 104.633 214.432 41.799 1.240 17.553 1.243 380.900 57.802 0 114.306 172.108 127.807

123 PT INTER PACIFIC BANK 254.374 124.201 169.069 15.644 14.749 5.972 329.635 604 0 25.869 26.473 114.692

124 PT. BANK CAPITAL INDONESIA 13.180 11.856 509 12.365 0 0 0 0 13.103

FOREIGN BRANCH BANKFOREIGN BRANCH BANKFOREIGN BRANCH BANKFOREIGN BRANCH BANKFOREIGN BRANCH BANK

125 CITIBANK N.A. 23.814.025 11.899.396 1.833.147 8.823.161 1.500 208.231 1.906.911 24.672.346 6.689.342 1.869.087 10.922.508 19.480.937 2.564.578

126 DEUTSCHE BANK AG. 19.422.063 2.867.231 10.111.670 5.333.914 24.692 118.960 1.073.391 19.529.858 2.706.484 0 10.850.392 13.556.876 1.197.313

127 ABN AMRO BANK 16.556.744 4.437.347 5.581.664 4.639.250 105.519 98.318 547.208 15.409.306 5.510.575 467.436 6.050.336 12.028.347 961.618

128 THE HONGKONG & SHANGHAI B.C. 16.252.035 7.715.205 2.958.082 4.506.222 23.621 572.699 2.665.402 18.441.231 6.762.908 0 6.414.580 13.177.488 257.318

129 STANDARD CHARTERED BANK 13.893.774 5.353.588 4.122.157 2.351.634 1.371.798 1.453.880 14.653.057 3.330.750 726.012 5.112.688 9.169.450 218.180

130 THE BANK OF TOKYO-MITSUBISHI LTD. 8.071.763 6.226.781 1.188.722 229.196 143.817 1.008.504 8.797.020 3.182.489 0 2.353.353 5.535.842 1.641.457

131 AMERICAN EXPRESS BANK 2.297.379 1.553.468 12.754 301.696 8.097 84.610 1.960.625 699.041 31.696 1.144.477 1.875.214 81.099

132 JP. MORGAN CHASE BANK 1.893.794 670.499 536.875 478.895 40.797 134.370 1.861.436 397.721 0 892.728 1.290.449 18.308

133 THE BANGKOK BANK COMP. LTD 1.030.581 583.041 465.477 4.220 57.240 160.427 1.270.405 242.293 0 225.773 468.066 155.203

134 BANK OF CHINA 552.387 11.921 139.004 396.207 219 15.244 562.595 61.035 5.189 32.896 99.120 -12.369

135 BANK OF AMERICA. N.A 299.230 3.178 73.236 182.976 1.033 260.423 143.246 0 55.905 199.151 7.241

(Millions of Rp)




OTHERCLAIMS

COMMIT-MENT AND


DEPOSITSAVING

ACCOUNTTIME

DEPOSITTOTAL

EQUITY


69Appendices

Appendix 3Key Financial Ratios

B A N K

STATE-OWNED BANKSTATE-OWNED BANKSTATE-OWNED BANKSTATE-OWNED BANKSTATE-OWNED BANK

1 PT BANK MANDIRI (PERSERO) Tbk 26.56 7.49 4.91 135.61 3.59 63.41 49.77

2 PT BANK NEGARA INDONESIA (PERSERO),Tbk 18.48 6.12 5.66 165.18 2.43 78.69 50.49

3 PT BANK RAKYAT INDONESIA (PERSERO) Tbk. 19.65 5.75 5.71 223.1 5.81 67.44 74.31

4 PT BANK TABUNGAN NEGARA (PERSERO) Tbk. 17.18 4.81 2.51 245.98 2.08 81.75 65.14

5 PT BANK EKSPOR INDONESIA (PERSERO) 218.38 0 1.91 238.77 5.01 58.12 0

PRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANKPRIVATE NATIONAL FOREX BANK

6 PT BANK CENTRAL ASIA Tbk. 25.84 0.67 0.92 180.3 3.2 65.79 28.5

7 PT BANK DANAMON INDONESIA Tbk 31.87 5.53 4.2 194.28 4.47 59.8 71.93

8 PT BANK INTERNASIONAL INDONESIA Tbk 21.53 7.72 2.56 107.17 2.38 79.68 42.08

9 PT BANK PERMATA Tbk (prev. PT. BANK BALI ) 12 6.6 4.1 203 2.3 85.3 52

10 PT LIPPO BANK, Tbk 18.84 10.5 4.67 142.32 1.2 85.38 22.15

11 PT BANK NIAGA, Tbk 11.01 4.98 2.75 166.11 3.04 74.58 84.36

12 PT PAN INDONESIA BANK, Tbk 39.55 6.9 7.14 143.55 4.23 66.93 71.01

13 PT BANK MEGA, Tbk 13.34 1.85 0.66 100.02 3.25 72.41 48.21

14 PT BANK NISP, Tbk 14.37 1.34 1.22 113.18 2.4 77.6 78.98

15 PT BANK BUANA INDONESIA Tbk. 23.28 1.43 1.04 136.73 2.67 75.18 54.63

16 PT BANK BUKOPIN 17.11 2.68 2.54 124.41 2.08 82.69 98.37

17 PT BANK EKONOMI RAHARJA 11.34 0.86 1.44 211.04 1.52 83.61 44.85

18 PT BANK ARTHA GRAHA 11.05 4.8 2.04 127.1 0.98 94.34 78.3

19 PT BANK CENTURY Tbk.(BANK CIC-6.12.2004) 16.76 1.42 1.28 131.31 0.45 98.86 26.32

20 PT.BANK SYARIAH MANDIRI, Tbk 10.86 1.92 1.71 100.98 2.37 83.4 99.07

21 PT BANK MUAMALAT INDONESIA 13.11 2.21 1.45 98.17 2.26 84.53 110.19

22 PT BANK HAGA 8.84 1.49 1.45 100 1.05 87.79 44.31

23 PT BANK BUMIPUTERA INDONESIA 10.01 4.56 1.77 105.85 1.43 89.62 95.89

24 PT BANK MESTIKA DHARMA 23.66 2.4 3.05 244.19 7.79 51.38 89.07

25 PT BANK MAYAPADA INTERNATIONAL 16.08 2.37 2.39 189.92 2.25 82.55 69.22

26 PT. BANK NUSANTARA PARAHYANGAN TBK. 12.9 0.61 2.45 342 1.63 86.11 49.45

27 PT BANK MASPION INDONESIA 12.4 0.79 0.92 101.88 1.78 83.62 67.46

28 PT BANK BUMI ARTA 34.42 2.72 1.17 200.14 2.29 79.16 29.51

C A R N P L R O A L D R

(Percent)

Operational Costto Operational

IncomeEAA/EA1) EEAA/RA2)

1 Earning Asset Allowance to Earning Asset2 Existing Earning Asset Allowance to Required Allowanced

No

70Appendices

29 PT BANK KESAWAN, Tbk 14.32 2.11 1.03 135.38 1.37 89.43 46.25

30 PT BANK PIKKO (MERG.CENTURY 6.12.2004) -19.93 7.91 2.4 255.6 -32.14 539.89 26.12

31 PT BANK ARTA NIAGA KENCANA 20.6 3.15 1.51 100 1.19 89.98 79.65

32 PT BANK IFI 32.3 3.97 0.92 101.09 0.27 102.27 61.13

33 PT BANK GANESHA 17.62 1.65 2.82 278.99 1.3 89.44 67.39

34 PT BANK HAGAKITA 11.3 1.94 2.33 100 1.74 86.02 87.72

35 PT BANK SWADESI, Tbk 25.61 1.45 3.56 216.3 2.55 74.59 62.97

36 PT BANK ANTAR DAERAH 16.05 2.82 1.95 123.34 1.77 85.33 75.34

37 PT. BANK HALIM INDONESIA 68.19 1.15 2.44 318.99 2.44 77.24 74.42

38 PT BANK SHINTA INDONESIA 69.78 10.42 6.23 256.27 0.92 91.41 32.77

39 PT BANK METRO EKSPRESS 74.31 1.93 2.31 207.51 4.26 61.06 55.3

40 PT BANK WINDU KENTJANA 12.68 1.51 1.82 157.29 1.03 129.97 54.1

PRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANKPRIVATE NATIONAL NON-FOREX BANK

41 PT BANK TABUNGAN PENSIUNAN NASIONAL 19.04 3.24 4.24 140.98 8.55 65.05 95.85

42 PT BANK AGRONIAGA Tbk. 16 4 2 134 2 83 98

43 PT BANK VICTORIA INTERNATIONAL 14.46 5.65 3.75 388.3 1.09 92.85 44.11

44 PT GLOBAL INTL BANK (closed 13.1.2005) 44.84 2.05 1.48 100 1.22 89.71 74.09

45 PT BANK JASA JAKARTA 16.93 0.56 4.08 519.16 3.66 69.21 78.71

46 PT BANK EKSEKUTIF INTERNASIONAL, Tbk. 15.83 7.88 3.28 94.79 2.57 85.03 84.59

47 PT BANK YUDHA BHAKTI 15.79 2.94 2.3 161.98 4.28 74.17 59.02

48 PT BANK HARDA INTERNASIONAL 11.67 2.18 1.08 105.22 1.57 87.16 67.31

49 PT BANK DANPAC (MERG.CENTURY 6.12.04) 27.15 0.87 1.07 121.05 2.79 84.4 60.16

50 PT BANK INDEX SELINDO 10.83 2.5 1.82 147.43 1.38 90.58 60.38

51 PT BANK PERSYARIKATAN INDONESIA 8.82 23.29 6.82 100.46 -13.18 205.92 103.37

52 PT BANK UIB 16.5 3.69 2.87 100 2.2 84.48 81.53

53 PT DIPO INTERNATIONAL BANK 13.86 2.6 1.9 112.79 5.35 63.84 91.51

54 PT BANK HIMPUNAN SAUDARA 1906 11.84 0.43 2.12 124.87 4.69 75.7 92.75

55 PT BANK AKITA 13.22 3.59 1.1 100.47 3.81 76.92 94.52

56 PT BANK SYARIAH MEGA INDONESIA 19.82 1.07 3.01 107 2.8 70.51 91.4

57 PT CENTRATAMA NASIONAL BANK 12.29 1.08 1 100.11 4.5 73.72 92.43

(Percent)

No B A N K C A R N P L R O A L D ROperational Costto Operational



71Appendices

58 PT PRIMA MASTER BANK 11.48 0.45 1.44 149.87 1.19 90.42 88.07

59 PT BANK MULTI ARTA SENTOSA (MAS) 22.01 1.43 1.41 169.41 2.65 74.67 77.07

60 PT BANK KESEJAHTERAAN EKONOMI 32.43 3.27 3.35 107.05 6.95 58.89 135.57

61 PT BANK DJASA ARTA 12.55 4.98 2.88 132.1 2.35 83.11 58.32

62 PT BANK SRI PARTHA 17.68 0.46 1.31 64.96 1.29 92.72 74.84

63 PT BANK INDOMONEX 11.67 1.23 1.91 130.45 1.78 83.26 84.21

64 PT BANK MITRANIAGA 16.42 1.98 1.03 104.25 3.32 77.85 72.85

65 PT BANK FAMA INTERNASIONAL 15.04 2.67 2.73 155.42 2.65 80.61 92.17

66 PT BANK MAYORA 19.32 0.9 2.05 311.18 0.82 94.25 34.85

67 PT BANK ARTOS INDONESIA 19.31 1.96 0.77 100 1.37 93.32 78.99

68 PT ANGLOMAS INTERNASIONAL BANK 15 2 1 112 3 77 89

69 PT BANK INA PERDANA 20.97 5.57 1.02 113.88 3.16 76.73 66.48

70 PT BANK BINTANG MANUNGGAL 22.05 0.65 2.22 129.25 3.37 78.2 88.17

71 PT BANK SINAR HARAPAN BALI 18.23 1.45 1.63 127.71 5.31 75.44 91.76

72 PT BANK HARMONI INTERNATIONAL 17.17 2.3 2.19 113.05 3.07 81.26 81.05

73 PT BANK BISNIS INTERNASIONAL 34.93 0.96 1.06 138.25 1.42 91.43 76.51

74 PT LIMAN INTERNATIONAL BANK 88.82 0 0.85 188.4 3.54 73.66 67.33

75 PT BANK HARFA 30.87 2.43 1.63 154.1 -1.24 105.27 81.11

76 PT BANK ROYAL INDONESIA 132.01 1.24 1.07 139.75 0.18 98.52 10.46

77 PT BANK PURBA DANARTA 178.85 4.77 3.11 479.36 1.09 82.04 24.82

78 PT ALFINDO SEJAHTERA BANK 84.13 0 4.71 1839.13 -0.21 103.43 24.97

79 PT BANK SWAGUNA 10.61 20.27 3.96 60 -2.77 118 70.74

REGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANKREGIONAL DEVELOPMENT BANK

80 PT BPD JAWA BARAT 15.1 0.41 1.21 115.07 4.09 72.88 81.66

81 PT. BPD JAWA TIMUR 16.53 1.46 1.8 139.49 4.47 66.71 50.28

82 PT. BPD DKI 18.85 4.43 1.58 138.36 4.64 66.91 45.36

83 PT BANK PEMBANGUNAN DAERAH JAWA TENGAH 19.75 1.28 1..53 110.39 5.83 62.7 79.92

84 PT BANK PEMBANGUNAN DAERAH RIAU 25.02 6.4 1.46 87.1 2 77.84 26.88

85 PT. BPD SUMATERA UTARA 30.98 4.14 0.88 112.15 5.99 61.43 49.31

86 BPD SUMATERA BARAT 14.46 4.37 3.08 118.14 4.57 67.49 87.85

(Percent)




72Appendices

87 BPD KALIMANTAN TIMUR 22.32 4.13 2 101.45 6.28 59.84 63.52

88 PT. BANK BPD ACEH 18.92 2.18 1.32 119.48 2.9 73.53 37.82

89 BANK PEMBANGUNAN DAERAH BALI 16.72 0.8 1.4 118.37 7.35 57.76 101.38

90 PT. BPD PAPUA 23.96 3.07 2.05 98.32 5.21 66.9 40.08

91 BPD SULAWESI SELATAN 27.67 2.66 2.02 112.14 7.01 51.63 60.6

92 PT BPD SUMATERA SELATAN 14.71 3.58 1.5 99.99 2.01 85.82 93.77

93 BPD YOGYAKARTA 16.39 1.18 1.17 112.77 4.19 73.26 56.93

94 PT. BPD KALIMANTAN BARAT 20.29 1.19 1.86 149.4 3.51 73.53 57.04

95 PD BPD KALIMANTAN SELATAN 24.07 2.46 1.17 99.86 5.27 65.73 52.95

96 PT. BPD BANK KALIMANTAN TENGAH 18.54 5.58 1.92 105.49 1.71 78.45 32.68

97 PT. BPD NUSA TENGGARA TIMUR 13.49 0.39 1.22 101.06 4.62 64.53 73.31

98 PT. BPD NUSA TENGGARA BARAT 20.11 2.89 2.02 99.27 6.72 71.25 102.25

99 PT. BANK LAMPUNG 14.53 2.4 2.66 122.46 5.25 66.48 90.23

100 PT. BPD SULAWESI UTARA 16.73 2.66 2.61 112.79 7.74 65 73.52

101 PT. BPD MALUKU 25.49 2.83 2.28 100 1.17 89.6 51.76

102 BPD JAMBI 33.63 1.63 1.55 100 5.84 55.35 64.14

103 BPD SULAWESI TENGGARA 24.01 6.65 3.31 141.32 8 54.68 60.96

104 PT. BANK PEMBANGUNAN DAERAH BENGKULU 9.51 3.23 2.4 108.44 4.09 72.25 74.9

105 PT. BPD SULAWESI TENGAH 14.39 4.86 2.43 104.31 1.75 82.58 47.42

JOINT VENTURE BANKJOINT VENTURE BANKJOINT VENTURE BANKJOINT VENTURE BANKJOINT VENTURE BANK

106 PT BANK UFJ INDONESIA 16.57 4.14 3.53 176.28 1.99 73.68 165.49

107 PT BANK SUMITOMO MITSUI INDONESIA 48.95 4.6 6.24 100 1.87 66.86 102.87

108 PT BANK MIZUHO INDONESIA 20.87 0.77 2.53 100 2.45 61.95 70.9

109 PT BANK DBS INDONESIA 14.32 0.42 1.48 131.36 2.84 57.25 0

110 PT BANK RESONA PERDANIA 23.44 10.24 6.74 128.08 1.13 84.43 132.73

111 PT BANK UOB INDONESIA 47.52 10.65 3.21 102.45 2.03 74.03 65.25

112 PT ANZ PANIN BANK 21.77 7 4.78 2.61 6.12 67.94 89.71

113 PT BANK CHINATRUST INDONESIA 20.81 4.82 2.12 100 3.13 64.68 115.52

114 PT RABOBANK INTERNATIONAL INDONESIA 22.47 11.87 11.92 100.46 2.32 71.9 152.1

115 PT BANK WOORI INDONESIA 57.47 6.57 2.83 110.08 5.62 59.13 90.11

(Percent)




73Appendices

116 PT BANK COMMONWEALTH 47.58 0 0.44 100.06 0.32 96.2 3.78

117 PT KOREA EXCHANGE BANK DANAMON 47.12 12.33 3.61 115.91 4.33 45.93 158.77

118 PT BANK OCBC-INDONESIA 116.01 11.71 3.37 109.77 2.44 68.56 70

119 PT BANK FINCONESIA 26.48 4.32 9.21 153.66 1.36 90.76 158.49

120 PT BANK BNP INDONESIA 39.07 42.86 16.79 116.58 2.67 117.64 160.52

121 PT BANK MULTICOR 62.13 0 1.15 133.94 8.5 55.75 50.85

122 PT BANK MAYBANK INDOCORP 247.01 35.33 15.09 158.29 2.34 60.56 57.3

123 PT INTER PACIFIC BANK 185.28 43.4 26.31 334.78 14.58 99.78 469.16

124 PT. BANK CAPITAL INDONESIA 2017.08 0 1.43 3477.41 -35.97 400.54 0

FOREIGN BRANCH BANKFOREIGN BRANCH BANKFOREIGN BRANCH BANKFOREIGN BRANCH BANKFOREIGN BRANCH BANK

125 CITIBANK N.A. 15.3 0 3.92 127.55 5.68 57.41 61.08

126 DEUTSCHE BANK AG. 21.21 1.75 3.16 103.44 8.26 39.87 21.15

127 ABN AMRO BANK 20.09 17.18 4.87 125.41 4.85 79.53 36.89

128 THE HONGKONG & SHANGHAI B.C. 12 2 4 169 4 59 59

129 STANDARD CHARTERED BANK 9.9 2.4 2.7 115.9 4.8 57.1 58.4

130 THE BANK OF TOKYO-MITSUBISHI LTD. 19.12 1.53 1.56 101.14 3.34 53.96 112.48

131 AMERICAN EXPRESS BANK 23.26 1.03 1.89 157.63 0.64 96.21 82.84

132 JP. MORGAN CHASE BANK 34.96 7.81 4.61 107.06 8.59 26.73 51.96

133 THE BANGKOK BANK COMP. LTD 53.35 18.66 9.75 108.35 4.94 43.96 124.56

134 BANK OF CHINA 217.84 0 1.07 100.22 -0.01 94.81 12.03

135 BANK OF AMERICA, N.A 110 0 1 115 0 96 1

(Percent)

No B A N K C A R N P L EAA/EA1) EEAA/RA2) R O A L D ROperational Costto Operational

Income


74Appendices

Board of GovernorBoard of GovernorBoard of GovernorBoard of GovernorBoard of Governor

GovernorGovernorGovernorGovernorGovernor

Senior Deputy GovernorSenior Deputy GovernorSenior Deputy GovernorSenior Deputy GovernorSenior Deputy GovernorDeputy GovernorDeputy GovernorDeputy GovernorDeputy GovernorDeputy Governor

Bank Supervision TeamsBank Supervision TeamsBank Supervision TeamsBank Supervision TeamsBank Supervision Teams

Rural Bank DepositsRural Bank DepositsRural Bank DepositsRural Bank DepositsRural Bank Deposits

Insurance and LiquidationInsurance and LiquidationInsurance and LiquidationInsurance and LiquidationInsurance and Liquidation

TeamTeamTeamTeamTeam

Rural Bank Licensing,Rural Bank Licensing,Rural Bank Licensing,Rural Bank Licensing,Rural Bank Licensing,

Research and RegulationResearch and RegulationResearch and RegulationResearch and RegulationResearch and Regulation

Division (P3BPR)Division (P3BPR)Division (P3BPR)Division (P3BPR)Division (P3BPR)

Information andInformation andInformation andInformation andInformation and

Documentation of RuralDocumentation of RuralDocumentation of RuralDocumentation of RuralDocumentation of Rural

Bank Supervision (IDBPR)Bank Supervision (IDBPR)Bank Supervision (IDBPR)Bank Supervision (IDBPR)Bank Supervision (IDBPR)

DIRECTORATE OF BANKINGDIRECTORATE OF BANKINGDIRECTORATE OF BANKINGDIRECTORATE OF BANKINGDIRECTORATE OF BANKINGRESEARCH AND REGULATIONRESEARCH AND REGULATIONRESEARCH AND REGULATIONRESEARCH AND REGULATIONRESEARCH AND REGULATION

(DPNP)(DPNP)(DPNP)(DPNP)(DPNP)Nelson TampubolonNelson TampubolonNelson TampubolonNelson TampubolonNelson Tampubolon

Tel. 381 7726 Fax. 231 0993Tel. 381 7726 Fax. 231 0993Tel. 381 7726 Fax. 231 0993Tel. 381 7726 Fax. 231 0993Tel. 381 7726 Fax. 231 0993

DIRECTORATE OF BANK LICENSINGDIRECTORATE OF BANK LICENSINGDIRECTORATE OF BANK LICENSINGDIRECTORATE OF BANK LICENSINGDIRECTORATE OF BANK LICENSING

AND BANKING INFORMATION (DPIP)AND BANKING INFORMATION (DPIP)AND BANKING INFORMATION (DPIP)AND BANKING INFORMATION (DPIP)AND BANKING INFORMATION (DPIP)

Ny. Siti Ch. FadjrijahNy. Siti Ch. FadjrijahNy. Siti Ch. FadjrijahNy. Siti Ch. FadjrijahNy. Siti Ch. Fadjrijah


DIRECTORATE OF BANKDIRECTORATE OF BANKDIRECTORATE OF BANKDIRECTORATE OF BANKDIRECTORATE OF BANK

SUPERVISION 1 ( DPwB1 )SUPERVISION 1 ( DPwB1 )SUPERVISION 1 ( DPwB1 )SUPERVISION 1 ( DPwB1 )SUPERVISION 1 ( DPwB1 )

S. Anton TarihoranS. Anton TarihoranS. Anton TarihoranS. Anton TarihoranS. Anton Tarihoran



SUPERVISION SUPERVISION SUPERVISION SUPERVISION SUPERVISION 2 ( DPwB2)2 ( DPwB2)2 ( DPwB2)2 ( DPwB2)2 ( DPwB2)

Ahdi Jumhari LAhdi Jumhari LAhdi Jumhari LAhdi Jumhari LAhdi Jumhari L



EXAMINATIONEXAMINATIONEXAMINATIONEXAMINATIONEXAMINATION 1 (DPmB1) 1 (DPmB1) 1 (DPmB1) 1 (DPmB1) 1 (DPmB1)

Yang Ahmad RizalYang Ahmad RizalYang Ahmad RizalYang Ahmad RizalYang Ahmad Rizal

Tel.381 7300 Fax.231 1436Tel.381 7300 Fax.231 1436Tel.381 7300 Fax.231 1436Tel.381 7300 Fax.231 1436Tel.381 7300 Fax.231 1436


EXAMINATIONEXAMINATIONEXAMINATIONEXAMINATIONEXAMINATION 2 (DPmB2) 2 (DPmB2) 2 (DPmB2) 2 (DPmB2) 2 (DPmB2)

Aris AnwariAris AnwariAris AnwariAris AnwariAris Anwari


DIRECTORATE OF RURAL BANKDIRECTORATE OF RURAL BANKDIRECTORATE OF RURAL BANKDIRECTORATE OF RURAL BANKDIRECTORATE OF RURAL BANKSUPERVISIONSUPERVISIONSUPERVISIONSUPERVISIONSUPERVISION

(DPBPR)(DPBPR)(DPBPR)(DPBPR)(DPBPR)Irman Djaja DalimiIrman Djaja DalimiIrman Djaja DalimiIrman Djaja DalimiIrman Djaja Dalimi


DIRECTORATE OF ISLAMICDIRECTORATE OF ISLAMICDIRECTORATE OF ISLAMICDIRECTORATE OF ISLAMICDIRECTORATE OF ISLAMIC

BANKING (DPbS)BANKING (DPbS)BANKING (DPbS)BANKING (DPbS)BANKING (DPbS)

HarismanHarismanHarismanHarismanHarisman


SPECIAL UNIT FOR BANKINGSPECIAL UNIT FOR BANKINGSPECIAL UNIT FOR BANKINGSPECIAL UNIT FOR BANKINGSPECIAL UNIT FOR BANKING

INVESTIGATION (UKIP)INVESTIGATION (UKIP)INVESTIGATION (UKIP)INVESTIGATION (UKIP)INVESTIGATION (UKIP)

Bachri AnsjoriBachri AnsjoriBachri AnsjoriBachri AnsjoriBachri Ansjori


Financial SystemFinancial SystemFinancial SystemFinancial SystemFinancial System

Stability Bureau (BSSK)Stability Bureau (BSSK)Stability Bureau (BSSK)Stability Bureau (BSSK)Stability Bureau (BSSK)

Banking ResearchBanking ResearchBanking ResearchBanking ResearchBanking Research

and Regulationand Regulationand Regulationand Regulationand Regulation

BureauBureauBureauBureauBureau (BPPB) (BPPB) (BPPB) (BPPB) (BPPB)


Documentation DivisionDocumentation DivisionDocumentation DivisionDocumentation DivisionDocumentation Division

(IDPnP)(IDPnP)(IDPnP)(IDPnP)(IDPnP)

Bank LiquidationBank LiquidationBank LiquidationBank LiquidationBank Liquidation

Team (BDL)Team (BDL)Team (BDL)Team (BDL)Team (BDL)

Banking DataBanking DataBanking DataBanking DataBanking Data

Division (DtB)Division (DtB)Division (DtB)Division (DtB)Division (DtB)

Bank LicensingBank LicensingBank LicensingBank LicensingBank Licensing

Division (Prz)Division (Prz)Division (Prz)Division (Prz)Division (Prz)


Administration DivisionAdministration DivisionAdministration DivisionAdministration DivisionAdministration Division

(IAdmP)(IAdmP)(IAdmP)(IAdmP)(IAdmP)

Bank SupervisionBank SupervisionBank SupervisionBank SupervisionBank Supervision

Division 12 (PwB12)Division 12 (PwB12)Division 12 (PwB12)Division 12 (PwB12)Division 12 (PwB12)




Documentation of BankDocumentation of BankDocumentation of BankDocumentation of BankDocumentation of Bank

Supervision 1 (IDWB1)Supervision 1 (IDWB1)Supervision 1 (IDWB1)Supervision 1 (IDWB1)Supervision 1 (IDWB1)























Supervision 2 (IDWB2)Supervision 2 (IDWB2)Supervision 2 (IDWB2)Supervision 2 (IDWB2)Supervision 2 (IDWB2)



ExaminationExaminationExaminationExaminationExamination 1 (IDMB1) 1 (IDMB1) 1 (IDMB1) 1 (IDMB1) 1 (IDMB1)

Bank ExaminationBank ExaminationBank ExaminationBank ExaminationBank Examination

TeamsTeamsTeamsTeamsTeams



ExaminationExaminationExaminationExaminationExamination 2 (IDMB2) 2 (IDMB2) 2 (IDMB2) 2 (IDMB2) 2 (IDMB2)

Bank ExaminationBank ExaminationBank ExaminationBank ExaminationBank Examination

TeamsTeamsTeamsTeamsTeams

Islamic Banking ResearchIslamic Banking ResearchIslamic Banking ResearchIslamic Banking ResearchIslamic Banking Research

and Development Teamand Development Teamand Development Teamand Development Teamand Development Team

Islamic BankIslamic BankIslamic BankIslamic BankIslamic Bank

Regulation TeamRegulation TeamRegulation TeamRegulation TeamRegulation Team

Islamic BankingIslamic BankingIslamic BankingIslamic BankingIslamic Banking

Supervision TeamsSupervision TeamsSupervision TeamsSupervision TeamsSupervision Teams

Banking InvestigationBanking InvestigationBanking InvestigationBanking InvestigationBanking Investigation

Teams 1Teams 1Teams 1Teams 1Teams 1


Documentation Division ofDocumentation Division ofDocumentation Division ofDocumentation Division ofDocumentation Division of


(IDIP)(IDIP)(IDIP)(IDIP)(IDIP)







STR TeamSTR TeamSTR TeamSTR TeamSTR Team

Appendix 4Organization Chart of Bank Indonesia’s Banking Sector

Licensing, Information andLicensing, Information andLicensing, Information andLicensing, Information andLicensing, Information and

Administration DivisionAdministration DivisionAdministration DivisionAdministration DivisionAdministration Division

(PIA)(PIA)(PIA)(PIA)(PIA)

Appendices 7575

Appendix 5List of Acronyms

Accounting and Auditing Organization for Islamic and

Financial Institutions (AAOIFI)

Association of Sharia Banks (ASB)

Bank Indonesia Branch Office (BIBO)

Bank Indonesia Regulation (BIR)

Bank Indonesia Sertificate (BIS)

Bank Performance Report (BPeR)

Banking Sector Management Information System (BSMIS)

Banks Under Intensive Supervision (BIS)

Banks Under Special Supervision (BSS)

Black-Listed Persons (BLP)

Capital, Asset, Management, Earning, Liquidity and

Sensitivity to Market Risk (CAMELS)

Capital Adequacy Ratio (CAR)

Capital Restoration Plan (CRP)

Cease and Desist Order (CDO)

Collective Decree (CD)

Commercial Sharia Banks (CSB)

Debtor Information System (DIS)

Emergency Liquidity Assistance (ELA)

Examination Management Information System (EMIS)

Examination Report (ER)

Financial Safety Nets (FSN)

Financial Stability Review (FSR)

Food and Agriculture Organization (FAO)

Frozen Business Activities Bank (FBAB)

Frozen Operation Banks (FOB)

Government Guarantee Program Unit (GGPU)

Individual Supervision Strategy (ISS)

Indonesian Accountants Association (IAA)

Indonesian Bank Restructuring Agency (IBRA)

Asosiasi Bank Syariah Indonesia (ASBISINDO)

Kantor Bank Indonesia (KBI)

Peraturan Bank Indonesia (PBI)

Sertifikat Bank Indonesia (SBI)

Sistem Informasi Manajemen Sektor Perbankan

Pengawasan Bank Indonesia (SIMSPBI)

Bank Dalam Pengawasan Intensif (BDPI)

Bank Dalam Pengawasan Khusus (BDPK)

Daftar Orang Tercela (DOT)

Surat Keputusan Bersama (SKB)

Bank Umum Syariah (BUS)

Sistem Informasi Debitur (SID)

Fasilitas Pembiayaan Darurat (FPD)

Sistem Informasi Manajemen Pemeriksaan (SIMERIK)

Laporan Hasil Pemeriksaan (LHP)

Jaring Pengaman Sistem Keuangan (JPSK)

Kajian Stabilitas Keuangan (KSK)

Bank Beku Kegiatan Usaha (BBKU)

Bank Beku Operasi (BBO)

Unit Pelaksana Program Penjaminan (UP3)

Ikatan Akuntan Indonesia (IAI)

Badan Penyehatan Perbankan Nasional (BPPN)

76 Appendices

Indonesian Banking Architecture (IBA)

Indonesian Debt Restructuring Agency (INDRA)

Indonesian Deposit Insurance Company (IDIC)

Indonesian Rural Bank Assosiations (IRBAs)

Information System for Banks Under Investigation (ISBI)

Institute for Development of Economics and Finance

(INDEF)

Interbank Money Market (IMM)

International Islamic Financial Market (IIFM)

Islamic Financial Services Board (IFSB)

Jakarta Initiative Task Force (JITF)

Legal Lending Limit (LLL)

Loan to Deposit Ratio (LDR)

Mandatory Supervisory Actions (MSA)

Minimum Capital Requirement (MCR)

Minimum Statutory Reserve (MSR)

Money Laundering Crime (MLC)

National Sharia Arbitrage Body (NSAB)

Negotiable Certificate Deposit (NCD)

Net Interest income (NII)

Net Open Position (NOP)

Non Performing Loans (NPL)

Non-Performing Financing (NPF)

On-site Supervisory Presence Team (OSP)

People’s Representatives Assembly (PRA)

Professional Certification Program for Rural Banks (CERTIF)

PT Perusahaan Nasional Madani (PNM Ltd)

Regional Development Bank (RDB))

Return on Assets (ROA)

Rural Bank in Liquidation (RBL)

Sharia Business Units (SBU)

Sharia Economic Communication Centre (SECC)

Sharia National Council (SNC)

Sharia Supervisory Council (SSC)

Small and Medium Enterprises (SMEs)

Special Investigation Unit (SIU)

Arsitektur Perbankan Indonesia (API)

Lembaga Penjamin Simpanan (LPS)

Asosiasi -asosiasi BPR (Perbarindo, Perbamida dan

Asbisindo)

Sistem Informasi Bank Dalam Investigasi (SIBADI)

Pasar Uang Antar Bank (PUAB)

Batas Maksimum Pemberian Kredit (BMPK)

Kewajiban Penyediaan Modal Minimum (KPMM)

Giro Wajib Minimum (GWM)

Tindak Pidana Pencucian Uang (TPPU)

Badan Arbitrasi Syariah Nasional (Basyarnas)

Sertifikat Deposito

Posisi Devisa Netto (PDN)

Dewan Perwakilan Rakyat (DPR)

PT PNM

Bank Pembangunan Daerah (BPD)

Bank Perkreditan Rakyat dalam Likuidasi (BPRDL)

Unit Usaha Syariah (UUS)

Pusat Komunikasi Ekonomi Syariah (PKES)

Dewan Syariah Nasional (DSN)

Dewan Pengawas Syariah

Usaha Mikro Kecil dan Menengah (UMKM)

Appendices 7777

Standard Financial Accountancy Statement (SFAS)

Supervision Management Information System (SMLS)

The Financing to Deposit Ratio (FDR)

Training of Trainers (ToT)

Wadiah Sertificate of Bank Indonesia (WSBI)

Pernyataan Standard Akuntansi Keuangan (PSAK)

Sistem Informasi Manajemen Pengawasan (SIMWAS)

Sertifikat Wadiah Bank Indonesia (SWBI)

Banking Supervision Report 2004

Documents

Transcript of Banking Supervision Report 2004