PT
BANK
SUMITOMO
MITSUI
INDONESIA
GOOD
CORPORATE
GOVERNANCE
IMPLEMENTATION
&
SELF
‐
ASSESSMENT
REPORT
For
the
position
of
year
2012
PT
BANK
SUMITOMO
MITSUI
INDONESIA
GOOD
CORPORATE
GOVERNANCE
IMPLEMENTATION
REPORT
For
the
position
of
year
2012
DISCLOSURE
OF
GCG
COVERAGE
A
Foreword
In compliance with Bank Indonesia Regulation No. 8/4/PBI/2006 dated 30 January 2006, its amendment No. 8/14/PBI/2006 dated 5 October 2006 and Bank Indonesia Circular Letter No. 9/12/DPNP dated 30 May 2007, we are very pleased to present to you Good Corporate Governance (GCG) Implementation Report of PT Bank Sumitomo Misui Indonesia (“Bank”) for the position of year 2012.
Transparency
of
GCG
Implementation
A. Disclosure of GCG Coverage
I.
Implementation
of
Tasks
and
Responsibilities
by
the
Board
of
Commissioners
(BOC)
and
the
Board
of
Directors
(BOD).
a.
Number,
composition,
criteria
and
independency
of
BOC
and
BOD
members
BOC
As of 31 December 2012, the number of BOC of the Bank is 3 (three), namely 2 (two) Japanese citizens and 1 (one) Indonesian citizens with the following composition:
Name Position
Masayuki Shimura President Commissioner Hiroshi Irie Vice President Commissioner RAG Bramono Dwiedjanto Independent Commissioner
Vacant *) Independent Commissioner
*)
Effective on 1 July 2012, Mr. Subianto Rustandi resigned as Independent Commissioner of the Bank, 1 (one) position of the Bank’s Independent Commissioner as of 31 December 2012 was vacant. On 21 February 2013, the Bank appointed Ms. Ninik Herlani Masli Ridhwan as new Independent Commissioner of the Bank.
All members of BOC have taken and passed the Fit and Proper Test. In addition, members of BOC:
1. Do not have another position as a member of BOC, BOD, or Executive Officers at both non‐financial institutions/companies or non‐bank subdiaries controlled by the Bank (in accordance with the regulations of Bank Indonesia No. 8/14/PBI/2006 Article 7(1)). 2. Do not have a family relationship up to the second degree with other members of BOC
FOREWORD
and/or BOD.
3. Do not use the Bank for personal, family, and/or other parties’ interests, which may cause a loss or decline in the Bank’s profit.
4. Do not take and/or receive a personal gain from the Bank other than remuneration and other facilities decided in the General Meeting of Shareholders.
BOD
As of 31 December 2012, the Bank has 6 (six) members of BOD namely 4 (four) Indonesian citizens and 2 (two) Japanese citizens whom are all domiciled in Indonesia. The composition of BOD is as follows:
Name Position
Masaya Hirayama President Director
Vacant*) Deputy President Director
Shoichi Yamashiro Director
Bruno Octer Purba Director Masa Paskalis Lingga Director
Trie Karjati Wibowo Compliance Director
Ajar Siswandono Director
*)
Effective on 30 October 2012, Mr. Nobuyasu Akagi resigned as Deputy President Director of the Bank, the position of The Bank’s Deputy President Director as of 31 December 2012 was vacant. On 1 April 2013, the Bank appointed Mr. Tsuyoshi Yamaguchi as new Deputy President Director of the Bank.
All members of BOD come from independent parties of Controlling Shareholder. In addition, members of BOD:
1. Do not hold another position as a member of the BOC, the BOD or Executive Officer of banks, companies, and /or other institutions.
2. Do not own shares either individually or jointly of more than 25% (twenty five percent) of paid‐up capital of the Bank and/or another company.
3. Do not have family relationship up to the second degree with fellow members of the BOD and/or members of the BOC.
4. Do not extend a general power of attorney to other parties which will result in transfer of the duties and functions of the BOD.
5. Do not use the Bank for personal, family, and other parties’ interests that may cause a loss or reduce the profit of the Bank.
6. Do not take and/or receive personal gain from the Bank other than remuneration and other facilities determined based on the decision of the General Meeting of Shareholders.
b.
Tasks
and
responsibilities
of
BOC
and
BOD
BOC
Each member of BOC has performed the following tasks and responsibilities independently and in timely manner:
1. Ensuring the implementation of GCG in any business of the Bank at all levels or hierarchy of the organization.
2. Conducting supervisory function on the implementation of the tasks and responsibilities of the BOD, and providing advice to the BOD by:
Directing, monitoring, and evaluating the implementation of Bank strategic policies Not being involved in decision making related to Bank’s operational activities
3. Ensuring that the BOD has followed up on audit findings and recommendations of the Internal Audit Unit of the Bank, external auditor, and the result of Bank Indonesia and/or other supervisory authorities.
4. Establishing an Audit Committee and Risk Monitoring Committee on June 27, 2007, and Remuneration and Nomination Committee on June 26, 2008. The appointments of all committee members are made by BOD based on a decision by the meeting of BOC.
5. Ensuring that the committees have been formed to carry out their tasks effectively.
6. To approve the Bank’s loan especially to related parties within certain limits. 7. Compiling work guideline and procedure (Code of Conduct) which are binding on each
member of the BOC that covers: Conflicts of Interest
Corporate Opportunities Confidentiality
Fair Dealing
Compliance with Laws, Rules and Regulations
Encouraging the Reporting of Any Illegal or Unethical Behavior Compliance Procedures
Working Time
Code of Meeting of BOC
BOD
Each member of BOD has performed its duties and responsibilities for the implementation of the management of the Bank as follows:
1. Managing the Bank in accordance with the authority and responsibilities as stipulated in the Articles of Association and applicable laws and regulations.
2. Applying the principles of GCG in any business activity of the Bank at all levels or hierarchy in the organization.
3. Following up on audit findings and recommendations of the Bank’s Internal Audit Work Unit, external auditor, the results of supervision of Bank Indonesia and /or other supervisory authorities.
auditor function and risk management implementation, including the internal control system.
5. Being responsible for the implementation of its tasks to Shareholders through the General Meeting of Shareholders.
6. Disclosing the Bank’s strategic policies on employee related matters to the employees either directly to the employees or indirectly through the each Head of Department and Human Resource Department (HRD) in weekly meetings which would then be placed in the file sharing (BSMI Library folder) which can be accessed by all employees.
7. Not employing an individual advisor and/or professional service as a consultant unless it satisfies the following requirements:
a. A project with special characteristics;
b. Based on clear contract covering at least scope of work, responsibilities, work period
Compliance with Laws, Rules, and Regulations
Encouraging the Reporting of Any Illegal or Unethical Behavior Compliance Procedures
No. Date Agenda Recommendations
1 15 Feb 12 Review and acceptance on the recognized and ultimately help the Management to make decision in the future.
No. Date Agenda Recommendations
2011.
▪ Compliance and KYC&AML Report.
▪ Compliance and KYC&AML Report. Directors’ attention to KPMG’s commitment in realizing their initial presentation/proposal for Financial Audit Year 2012 to have smooth transition process from previous External Auditor (Ernst & Young) as well as to understand Bank’s activities without disrupting Bank’s operations and taking much of employees’ time and efforts in soliciting information, and to expect Board of Directors to provide clear guideline to KPMG and closely observe its work especially during the transition period.
b)Due to the decrease of turnover ratio support employee informal group activities to improve or enhance the interaction and relationship among employees.
No. Date Agenda Recommendations
performance target for each employee and use the performance as the basis
▪ Compliance and KYC&AML Report. Directors shall continue to provide clear guideline to KPMG and closely
recommends to consider several factors in selecting Pension Fund Provider (DPLK) such as reputation of the Pension Fund Provider company; administration fee, performance of investment, clients of the company.
▪ Compliance and KYC&AML Report.
encourage employees to work better, keep the motivation and engagement, and to act continuous improvement. Some considerations regarding the program are:
‐ The achievement should be measured by specific measurable criteria, and leverage the
productivity of the company.
‐ The achievement should be worth it to perform by employees.
No. Date Agenda Recommendations committee to BOC.
Evaluation on the effectiveness and responsibility of
committees. Others.
the employees.
II.
Completeness
and
Implementation
of
the
Tasks
of
the
Committees
and
the
Work
Unit
Performing
Bank
Internal
Audit
Function
a.
Structure,
Organization,
Skills,
and
Independency
of
Committee
Members
Audit
Committee
Audit Committee was established on 27 June 2007. As per December 2012, Audit Committee consists of 3 (three) members with the following composition:
Name Position
RAG Bramono Dwiedjanto Chairman as well as Member
Jenly Hendrawan Member with expertise in Finance and Accounting Constance J. Rehatta Member with expertise in Banking
Audit Committee members have met the qualifications below:
1. Possess adequate knowledge regarding banking industry widely with good integrity, character, and morals;
2. A willingness to accept accountability; 3. Informed Judgment;
4. Mature confidence;
5. Objectivity and intellectual honesty.
Risk
Monitoring
Committee
Risk Monitoring Committee was established on 27 June 2007. The composition of Risk Monitoring Committee as of December 2012 consist of 2 (two) Independent Parties, as follows:
Name Position
Vacant *) Chairman as well as Member
Sofyan Rambey Member with expertise in Risk Management Maharani Reza Member with expertise in Banking
*) Effective on 1 July 2012 Mr. Subianto Rustandi resigned from his position as as Independent Commissioner of the Bank, the position of Risk Monitoring Committee Chairman of the Bank as of 31 December 2012 was vacant.
On 15 March 2013, the Bank appointed Mr. RAG Bramono Dwiedjanto as Chairman as well as Member of Risk Monitoring Committee and Ms. Triharini as member of Risk Monitoring Committee with expertise in Banking. Thus, the composition of Risk Monitoring Committee as of 15 March 2013 are as follows:
Name Position
RAG Bramono Dwiedjanto Chairman as well as Member
Sofyan Rambey Member with expertise in Risk Management Triharini Member with expertise in Banking
Risk Monitoring Committee members have met the qualifications below:
1. Possession of adequate knowledge regarding banking industry widely with good integrity, character, and morals;
2. Sufficient time to fulfill his duty; 3. Ability to communicate effectively;
4. Good mentality and ethics, and also professionally responsible
Remuneration
and
Nomination
Committee
Remuneration and Nomination Committee was established on 30 June 2008. As per December 2012, Remuneration and Nomination Committee consists of 3 (three) members with the following composition:
Name Position
RAG Bramono Dwiedjanto Chairman as well as Member, Independent Commissioner Hiroshi Irie Member, Commissioner
Akhmad Ludzain Member, Executive Officer in charge of Human Resources
Remuneration and Nomination Committee members have met the qualifications below: 1. Possession of adequate knowledge regarding banking industry widely with good
integrity, character, and morals;
3. Sufficient knowledge of Human Resources Management Concept; 4. Proactive and professional ways of thinking.
b.
Tasks
and
Responsibilities
of
the
Committees
Audit
Committee
In regard to article 43 regarding duties and responsibilities of Audit Committee as stipulated in Bank Indonesia regulation number 8/4/PBI/2006 dated 30 January 2006 as amended by Bank Indonesia regulation number 8/14/PBI/2006 dated 5 October 2006 concerning implementation of Good Corporate Governance for Commercial Bank, related duties and responsibilities have been provided in Audit Committee Charter, as follows:
To possess work guideline and procedure called Audit Committee Charter that shall be binding to all Committee members.
To perform the monitoring and evaluation of audit planning and implementation as well as monitoring the audit result follow up actions in order to assess the adequacy of internal control including the adequacy of financial reporting process.
To perform the monitoring and evaluation of the followings in order to give recommendations to Board Of Commissioners:
` Implementation of the tasks of the Internal Audit Work Unit.
` Consistency between audit implementation by the Public Accountant Office with prevailing auditing standards.
` Consistency between the financial reports with prevailing accounting standards. ` Implementation of follow up actions by the BOD on findings by the Internal Audit
Work Unit, public accountant, SMBC Internal Audit as the Bank’s majority shareholders, and BI supervision result.
To give a recommendation on the appointment of Public Accountant and Public Accountant Office to the Board Of Commissioners to be submitted to the General Meeting of Shareholders.
To review in timely manner all annual and interim financial statements; including the management's discussion and analysis, auditor's comments and suggestions, and any significant accounting or reporting issues.
Risk
Monitoring
Committee
To establish a working guideline and procedure called Risk Monitoring Committee Charter that shall be binding to all Committee members.
To assist Commissioners to accomplish their roles and responsibility in the Bank’s risk management by giving recommendation to BOC.
To perform evaluation of the consistency between risk management policies and its implementation.
To perform monitoring and evaluation on the implementation of Risk Management Committee and Risk Management Department tasks.
To perform monitoring on the continuing improvement process of policies, procedures, and Bank’s risk management practices, in order to ensure that Bank’s risk management is implemented well.
scheme including the management of credit risk, market risk, liquidity risk, operational risk, legal risk, reputation risk, strategic risk and compliance risk.
To review and ensure that Bank’s risk profile, both inherent risk and risk control system, is within the risk tolerance level decided by Management.
To give opinion broadly to Management regarding good bank risk management, including identification on high risk area, in line with the changes of Bank’s business environment.
Remuneration
and
Nomination
Committee
Related to remuneration policies:
To perform an evaluation of the remuneration policy.
To give a recommendation to the BOC concerning:
`BOC and BOD remuneration policies to be submitted to the General Meeting of Shareholders.
`Executive Officers and employee remuneration policies as a whole to be submitted to the BOD.
To ensure that the remuneration policy commensurate with at least the following: `Financial performance and reserves formation as stipulated in prevailing laws and
regulations;
`Individual work performance;
`Fairness compared to peer group; and
`Consideration on long‐term goals and strategies of the Bank. Related to nomination policies:
To prepare and give a recommendation on the system and procedure for selecting and /or replacing members of BOC and BOD to BOC to be submitted to the General Meeting of Shareholders.
To submit a recommendation on prospective members of BOC and/or BOD to the BOC to be submitted to the General Meeting of Shareholders.
To submit a recommendation on independent parties who will become committee members to BOC.
c.
Frequency
of
Committee
Meetings
Audit
Committee
Based on stipulation on Audit Committee Charter, Audit Committee conduct a meeting at least once a month. In case there are major issues, in any event, the committee will meet more frequently to fulfill its responsibilities. During the year 2012, Audit Committee has conducted a total of 16 (sixteen) meetings.
Risk
Monitoring
Committee
Risk Monitoring Committee conducted a meeting at least once a month. During the year 2012, Risk Monitoring Committee has conducted a total of 12 (twelve) meetings.
Remuneration
and
Nomination
Committee
months. From January to December 2012, Remuneration and Nomination Committee has conducted a total of 8 (eight) meetings.
d.
Committee’s
working
schedule
and
its
realization
in
2012
Audit
Committee
In term of monitoring and evaluation of audit planning and implementation as well as monitoring of follow up of audit result for assessing adequacy of internal control including adequacy of financial reporting, thus Audit Committee has conducted activities during year 2012, as follows:
Monitored and evaluated for the following activities:
` Internal Audit Department’s activities, among others are preparation of The Annual of Internal Audit Plan for year 2012 and 2013; realization of audit schedule refer to The Annual of Internal Audit Plan of year 2011 and year 2012; implementation of follow up action toward result of triennial years review by appointed Public Accountant (KPMG) upon IAD’s performance and compliance toward Bank Indonesia’s regulation (SPFAIB/The Standards for The Practice of The Internal Audit Function for Commercial Bank and Risk Management Implementation in The Utilization of Information Technology by Commercial Banks – IT Audit Function); and submission of mandatory reporting to Bank Indonesia.
` Implementation/realization of In‐Office Inspection Plan including its result done by Business Administration Planning Department (BAPD).
` Consistency of financial report of the Bank in accordance with prevailing accounting standards.
` Consistency between audit implementation by the External Auditor (Ernst and Young) for financial audit year 2011 and performance plan of new External Auditor for financial audit year 2012 with prevailing audit standard.
` Follow up action done by Board of Director upon result of Internal Audit Department; Bank Indonesia’s supervisory team; SMBC Parent Company Audit; External auditor (Ernst and Young).
To deliver recommendation of appointment of Public Accountant for financial audit year 2012 (KPMG) to the Board of Commissioners to be submitted to the General Meeting of Shareholders.
Other activities:
` Set up Audit Committee Planning for year 2012 and year 2013.
` Set up realization of Audit Committee’s activities for year 2011 and 2012.
` Conducted self‐assessment of Audit Committee’s performance for year 2011 as implementation of Good Corporate Governance.
` Set up agenda and having coordination meeting with related departments in BSMI for discussing oeprational activity staffing, development plan and others.
` Having discussion with related departments regarding the current issues and activities, among others are monitoring Bank’s preparation toward the implementation of IFRS (International Financial Reporting Standard.
` Having discussion with External Auditor (Ernst and Young) regarding Financial Audit for year 2011.
` Having discussion with new External Auditor (KPMG) for conducting Financial Audit for year 2012.
` Having discussion with new stipulations which issued by Bank Indonesia with Internal Audit Department, such as submission of filling Questionnaire of Member Certification of BI‐RTGS system and National Clearing System as audit report of BI‐RTGS and National Clearing System to Bank Indonesia.
The function and activities of Audit Committee has been performed in accordance with the planned activities as well as refer to the prevailing regulations. Bank will continuously enhance the performance of Audit Committee in accordance with the prevailing regulations.
Risk
Monitoring
Committee
In order to evaluate the consistency between risk management policies and its implementation, on year 2012 the committee conducted discussions with Risk Management Department Member and/or Risk Taking Units, as well as conducted the following activities:
Conducted meeting in a monthly basis.
Discussed on risk profile report which covering 8 (eight) types of risk, which submitted to Bank Indonesia in quarterly basis.
Discussed on minutes of Risk Management Coordination meeting and Risk Management Committee meeting as a way to monitor the implementation of risk management in the Bank.
Discussed on the result of compliance risk assessment prepared by Compliance Department based on SMBC rules, and its deifference from compliance risk asseesment prepared by Risk Management Department.
Discussed on Asset Purchase, Trade Finance, and Information Technology activity in the Bank.
Discussed on the realization of Bank’s Business Plan 2012. Discussed on Banker’s Code of Conduct.
The function and activities of Risk Monitoring Committee has been performed in accordance with the prevailing regulations. During the vacancy of the chairman of Risk Monitoring Committee, the members kept conducting regular meeting to discuss matters related to committee’s tasks and responsibilities. Bank will continuously enhance the performance of Risk Monitoring Committee in accordance with the prevailing regulations.
Remuneration
and
Nomination
Committee
In the year 2012 the Remuneration and Nomination Committee have made some activity plans related to the Remuneration and Nomination Committee’s tasks based on Bank Indonesia Regulation No. 8/4/PBI/2006 dated 30 January 2006 and its amendment. For implementation of the above plans, the Committee conducted the following activities in the year 2012:
Conducted meeting periodically at least once in 3 (three) months. Related to Remuneration Policies:
` In coordination with HRD, The Remuneration and Nomination Committee reviewed remuneration policies run by the Bank, including proposed the renumeration improvement in term of pension fund and enhance medical benefit program. In addition, also proposed the enhancement of non compensation reward, such as give reward to the employee in order to improve their motivation and employee engagement.
` Discussed and gave recommendation to BOC concerning remuneration policies for BOC and BOD to submit to General Meeting of Shareholders
` Discussed the progress of job evaluation and developing salary structure project that is conducted in cooperation with external experts (from Towers Watson) to learn the position of job and remuneration of the Bank in the labor market.
` Discussed renewal of medical benefit program for employees proposed by HRD. Related to Nomination Policies:
` Review yearly assessment conducted by each Chairman of Audit and Risk Monitoring Committee and provided recommendation for re‐appointment of Committee members from Independent parties.
` Conducted evaluation on candidate of new members of BOC and BOD and gave recommendation in accordance with Bank Indonesia regulations.
` Conducted evaluation on the existing BOD and give recommendation based on Bank Indonesia Regulation.
Others
` Evaluated and monitored employee turnover. Per semester II/2012, total employee turnover (11.52%) was decreased compared to semester I/2012 (13.37%).
The function and activities of Remuneration and Nomination Committee has been performed in accordance with the planned activities as well as refer to the prevailing regulations. However, Bank will continuously enhance the performance of Remuneration and Nomination Committee according to the prevailing regulations.
III.
Performance
of
Compliance,
Internal
Auditor,
and
External
Auditor
Functions
a.
Compliance
function
Performance
of
Compliance
Function
Bank made continuous attempts to ensure the Bank’s adherence to the regulations that prevail in the banking sector, and mitigated the compliance risk that might arise in the event that the Bank did not comply with or implement the applicable regulations.
In the context of ensuring this, the following were the activities made in the area of compliance throughout 2012:
Active Supervision of the Board of Directors and the Board of Commissioners
Board of Commissioner and Board of Directors monitored and maintained that the Bank’s business activities did not deviate from the prevailing regulations, mainly toward the fulfillment of the regulations related to the principles of prudence, such as Minimum Capital Requirement, Legal Lending Limit (LLL), Net Open Position (NOP), Minimum Reserve Requirement (MRR), and Asset Quality Rating.
Compliance indicators per December 2012 position as follows:
` Minimum Capital Requirement (KPMM/CAR) : 26.14%
` There was no excess or violation of Legal Lending Limit (LLL)
` There was no violation toward the regulations concerning Net Open Position (0.14%)
` Minimum Reserve Requirement (MRR) in Rupiah was 8.21% and in foreign currency was 8.19%
` NPL Ratio (gross) 0.70% and NPL Ratio (net) 0.55%
Director Overseeing Compliance Function submitted periodical reports regarding the implementation of the duties and responsibilities to the President Director with a copy to the Board of Commissioners.
Monthly Compliance Meetings attended by Board of Directors of the Banks and all Department Heads discussed any problems relevant to the Bank’s compliance with the regulations and monitored the follow‐up actions that should be taken by the Bank in respect to the issuance of Bank Indonesia regulations.
Bank formed Compliance Department that is responsible directly to Director Overseeing Compliance Function. Compliance Department prepared Compliance Action Plan compiled based on the result of Compliance Risk Assessment, Risk Profile Report, the Result of Bank Indonesia Inspection, External Audit, and Internal Audit and conducted control and monitoring toward the realization of the Compliance Action Plan.
Board of Commissioners performed evaluation towards the Implementation of Compliance Function and gave recommendations on issues that needs improvement to Board of Directors that ensured all of the recommendation of Board of Commissioners have been implemented.
Handling Customer Complaint Resolution
customer complaint resolution as well as the submission of quarterly report to Bank Indonesia. All customer complaints received by the Bank during year 2012 have been resolved properly between the Bank and the customer. The Bank has taken preventive action to avoid the recurrence in the future and made active efforts to resolve each customer complaint in order to prevent the arising of Reputational Risk and Legal Risk. The Bank organized the Report on the Implementation of the Duties and Responsibilities of the Director overseeing Compliance Function and conveyed it to Bank Indonesia every 6 (six) months.
Policies and Procedures
Conducted revision / review toward the policies and procedure manuals of the Bank in order to get assurance that the Bank’s internal rules were already in conformity with Bank Indonesia regulations and other existing laws and ruling.
Internal Control
On a continual basis carried out Compliance Self‐Reviewing toward several legal categories, such as: Confidentiality, Conflicts of Interest, Customer Protection, Financial Products, Foreign Currency Administration, Labor, Prohibition of Insider Trading, Net Open Position, Legal Lending Limit, Minimum Reserve Requirement, Entertainment & Gifts, and Reporting to Bank Indonesia.
Coordinating with the other related departments to perform review toward any plan of new product/ activity including any enhancement and/ or modification of the existing product/ activity.
Management Information System
The availability of accurate and timely information, among others, by conducting update to the new regulations relevant to the Bank’s activities issued by Bank Indonesia and other government institutions, circulated it to Board of Directors and all related departments and discussed it in the Compliance Meeting forum.
Conducted analysis on new regulations that have significant impact to the Bank and discussed it with the related departments.
Conducted enhancement on the information and technology system of the Bank in respect to the reporting to Bank Indonesia and reporting to other authorities so that it may generate data and reports effectively.
Conducted monthly Compliance Meeting as a means to discuss and share compliance issues related with banking activities.
Human Resources and Training
In order to support the compliance function, during year 2012, the Bank conducted internal/in‐house training programs related to compliance as follows:
No. Topic Training Provider Date 1. Customer Protection Risk Management
Guard
18 February 2012
2. Refreshment/ Maintenance Program for Risk Management Certification
GPS consulting 12 May 2012 for local employee & 1 June 2012 for foreign manpower
3. Financial Products Treasury Lentera Pro 12 May 2012
4. Bank Codes of Ethics e‐learning September – December 2012
5. Purchase of Foreign Currency against Rupiah through Banks
Risk Management Guard
13 October 2012
6. Compliance Awareness e‐learning September – December 2012
Bank conducted study meeting related with Bank’s compliance towards the prevailing regulations in regard to the issuance of new regulations as well as assigned the employee from the related departments to attend the dissemination held in Bank Indonesia.
Bank organized internal training related to compliance to all new employees to give understanding in respect of the implementation of the compliance function by the Bank as well as the stipulations and prevailing rules and regulations.
Bank actively participated in Compliance Director Communication Forum (FKDKP) and discussion forum with Bank Indonesia.
Sanction
from
Bank
Indonesia
The imposition administrative sanction
During January – December 2012, the Bank received 1 (one) administrative sanction in respect of the reporting obligation to Bank Indonesia. In connection with the delay in conveying the revision data toward Commercial Bank Daily Report (LHBU) Form 407 Short‐Term Offshore Borrowing Report on 9 March 2012, the Bank was imposed with the financial obligation in the amount of Rp 450.000,00 (four hundred and fifty thousand rupiah). The Bank has taken the necessary actions follow‐up this issue, among others, by revising the internal procedure, enhancing the monitoring toward internal report and conveying the report accurately and punctually.
Excess of the sanction imposition
On 8 October 2012, the Bank received the notification from Bank Indonesia informing that that there was excess of the sanction imposition in the form of financial penalty for the violation of Rupiah Minimum Reserve Requirement for the period of August 2005 until May 2009. For the excess sanction imposition, Bank Indonesia has credited the Bank’s account in Bank Indonesia in the amount of Rp 341.501,00 (three hundred and forty one thousand five hundred and one rupiah).
Implementation
of
Regulations
concerning
Anti
Money
Laundering
and
Combating
Terrorism
Financing
Supported by the regulations of Bank Indonesia issued in 2009, regarding the Implementation of Anti‐Money Laundering (AML) and Combating Terrorism Financing (CFT) Program for Commercial Banks as well as Law concerning Prevention and Combating Money Laundering Crime, the Bank strived for continual efforts to enhance the quality of risk management application that was relevant to the implementation of AML and CFT.
The above measures were taken by bearing in mind the awareness of the risks of the banking transactions being used as the means of money laundering and terrorism financing that would continue to increase along with the escalation of the complexity of banking products and activities as a whole.
Taking the above considerations, throughout 2012, the Bank conducted the following activities in its attempt to enhance the quality of AML and CFT implementation:
Active Supervision of the Board of Directors and the Board of Commissioners
The Bank formed AML & CFT Unit that handling the implementation of AML and CFT Program and is responsible directly to Director Overseeing Compliance Function.
The implementation of AML & CFT Program was always included into the agenda as one of the items discussed in the meetings conducted on a routine basis between the BOD and all department heads, including issues or constraints being faced by the Bank. Conducted regular monitoring toward the realization of the Implementation of AML and CFT Action Plan.
Director overseeing Compliance Function submitted the implementation of AML and CFT Program to Board of Directors and Board of Commissioners on quarter basis.
Policies and Procedures
Conducted revision toward the Standard Guidance on the Implementation of Anti‐ Money Laundering and Combating Financing of Terrorism Program by referring to the issuance of a number of regulations related to AML & CFT. Furthermore, the Bank also made revision toward Procedure Manual of AML & CFT Unit to accommodate revision of the Standard Guidance on the Implementation of AML & CFT Program.
Conducted revision toward Manual & Procedure of STB Detector, as AML support system, revised the scenario of parameter of STB detector as well as the development of STB Detector System related with transaction monitoring report.
Prepared an Action Plan pertinent to the implementation of AML & CFT Program and the realization were reported to Bank Indonesia in semi annual basis.
Updated customer’s data and documents.
Conducted revision toward Customer Risk Rating Methodology based on result review toward Customer Risk Rating Methodology that was conducted in yearly basis.
Internal Control
Internal Audit Department conducted examination with respect to the effective implementation of AML and CFT Program of the Bank, among others, by performing obedience test towards the policies and procedures related to AML and CFT Program. Conducted AML & CFT Independent reviews on a quarterly basis and semi‐annual basis to assess the implementation of AML & CFT especially on customer identification, customer due diligence, suspicious transaction report and the implementation of SMBC policy related with OFAC rules.
Management Information System
Bank conducted periodical review towards STB Detector System that is used to perform identification, analysis, monitoring, and reporting concerning transaction characteristics performed by the Bank’s Customers as well as performed enhancement on the system, particularly related to the transaction monitoring.
The Bank conveyed Suspicious Financial Transaction Report (LKTM) and Cash Financial Transaction Report (LTKT) to Indonesia Financial Transaction Report and Analysis Centre (INTRAC).
Human Resources and Training
The Bank conducted candidates’ selection based on their educational background and experiences by considering the Bank’s needs as well as implemented the screening procedures to detect any connection of the prospective employee with Politically Exposed Person (PEP) as well as to detect whether the prospective employee has any criminal record, as a part of the implementation of Know Your Employee (KYE). The Bank conducted study meeting related with the implementation of AML & CFT Program as well as assigned the employee from the related departments to attend the dissemination concerning the issuance of new regulations held in Bank Indonesia as well as the any other regulations.
In order to support the implementation of AML and CFT Program, Bank conducted internal/in‐house training programs related to compliance and KYC Principles and Anti‐ Money Laundering as follows:
No. Topic Types of Training Date
1. Implementation of AML & CFT e‐learning September – December 2012
b.
Internal
Audit
(
Satuan
Kerja
Audit
Internal
–
SKAI
)
Function
Internal Audit Department, independent from other operational working units, has the main role to assess the various functions and control systems in the Bank and to advise the Management concerning their condition, as follows:
Evaluating sufficiency of an adherence to the Bank’s plans, policies and procedures and compliance with governmental laws and regulations (including BI regulations).
Ascertaining the adequacy of controls for safeguarding the Bank’s asset and, as appropriate, verifying the existence of assets.
Reviewing operations and programs to ascertain whether results are consistent with established objectives and goals and whether the operations or programs are being carried out as planned.
Providing adequate monitoring of follow‐up actions by auditee to ensure that corrective action is taken and it is effective.
Internal Audit Department has prepared The Annual Internal Audit Plan which formed to define the expected conduct and scope of audit that related with implementation of Risk Based Audit. This Annual Internal Audit Plan was composed from result of assessment of audit scope either in qualitative model or in quantitative model as well as considering other aspects, among others are area that need to be paid attention due to problem in operational activity; risk profile from related departments; Bank’s Business Plan and others. The Annual Internal Audit Plan has been reviewed by Audit Committee and obtain approval from President Director and Board Of Commissioners.
Toward issues that found as result of audit SKAI, auditee/department in charge has conducted corrective action immediately or prepare action plan of follow up action in order to avoid repeated issues. Those findings or issues have been monitored until its completion in monthly and reported them to Board Of Director and Board Of Commissioners.
In addition, SKAI has reported related essential of audit result to Bank Indonesia in accordance with prevailing regulations.
Public Accountant has conducted review toward performance and compliance of SKAI toward Bank Indonesia’s regulations (The Standard For The Practice Of The Internal Audit Of Function For Commercial Banks or SPFAIB and Risk Management Implementation in The Utilization of Information Technology by Commercial Banks – IT Audit Function in every 3 years. Last reviewed has been conducted by the appointed Public Accountant (KPMG) on July 2011 which state that performance of Internal Audit Department is proper and fulfill stipulation of related Bank Indonesia’s regulation. The review result has been submitted to Bank Indonesia.
c.
External
Audit
function
Siddharta
&
Widjaja
(KPMG)
Has been selected as new Bank’s External Auditor to replace Purwantono, Suherman dan Surja (E&Y).
Review of the Bank’s Consolidation Reporting Package to SMBC as the Bank’s majority shareholder for the position of 30 June 2012.
Audit of the Bank’s Financial Statements for the year ended 31 December 2012
SMBC Audit
Business Promotions and Credit & Cash Management Services of PT Bank Sumitomo Mitsui Indonesia. The primary departments which were reviewed by SMBC are as follows:
- Marketing Departments I ‐ VI
- Credit Risk Management Department - Loan Department
- Loan Administration Department - Cash Management Services Department - Asset Purchase Department
- Risk and governance committees
- Other related departments, where appropriate
The conclusion of the abovementioned SMBC audit results are as follows:
¾ Business Promotion & Credit and Cash Management Services
The result is “Amber” which means “weaknesses in the internal control environment have been identified which if not corrected in a reasonable period of time could significantly impact the overall control environment. The identified weaknesses could result in financial loss and/or reputational damage and/or regulatory censure.”
Bank Indonesia Audit
From 26 November – 14 December 2012, Bank Indonesia conducted audit for position 30 September 2012 with the scope as follow:
- Loan
- Anti Money Laundering and Combating the Financing of Terrorism
- GCG Implementation
IV.
Risk
Management
Implementation
In reference to BI regulation No. 5/8/PBI/2003 dated 19 May 2003, and its amendment No. 11/25/PBI/2009 dated 1 July 2009, as well as BI Circular Letter No. 5/21/DPNP/2003 dated 29 September 2003 and its amendment no. 13/23/DPNP dated 25 October 2011 pertaining the Implementation of Risk Management by Commercial Bank, the Bank implemented the following:
Revised Standard Guidance on the Implementation of Risk Management to accommodate the alteration on parameters applied in risk monitoring.
Applied management of 8 (eight) types of risk, i.e. credit risk, market risk, liquidity risk, operational risk, legal risk, reputation risk, strategic risk and compliance risk.
Established a Risk Management Committee, Asset and Liability Committee (ALCO), and Risk Management Department as part of the enhancement of bank’s risk management structure.
Every month, Bank held Risk Management Coordination meeting, RMC meeting, and ALCO meeting to discuss, as follows:
a. Risk Management Coordination
Bank discussed on the management of 8 (eight) types of risk, among others as follows:
Type of Risk Content Market Risk
`Portfolio Volume and Composition
`Potential Loss of Interest Rate Risk in Banking Book
`Business Strategy and Policy
Compliance Risk
`Type and Significance of Violation
`Frequency of Violation or Track Record of Bank's Compliance
`Violation towards Provisions concerning Particular Financial Transaction
Liquidity Risk
`Composition of Asset, Liabilities and Administrative Account
`Concentration of Asset and Liabilities
`Vulnerability of Funding Needs
`Access to Funding Sources
Credit Risk
`Asset Portfolio Composition and Concentration Level
`Quality of Fund Provision and Adequacy of Loan Provision
`Fund Provision Strategy and Fund Resources
`External Factor
Operational Risk
`Business Characteristic and Complexity
`Human Resources
`Information Technology and Supporting Infrstructures
`Fraud
`External event
Legal Risk
`Litigation Factor
`Weakness of Binding Provisions Factor
`Absence of Law/Regulation Factor
Reputation Risk
`Impact from Reputation of Bank Owner and Related Company
`Violation of Business Ethics
`Complexity of Products and Business Cooperation
`Frequency, Material and Exposure of Bank's Negative Publication
`Frequency and Materiality of Customer Complaints
Strategic Risk
` Proper Alignment between Strategy and Business Environment Condition
` High Risk Strategy and Low Risk Strategy
` Bank's Business Position
` Realization of Bank's Business Plan
b. Risk Management Committee (RMC)
In the meeting, Risk Management Committee (RMC) provides recommendations on the enhancement of risk management implementation, as well as makes decision related to risk management issue.
c. Assets and Liabilities Management Committee (ALCO):
Bank discussed on market, funding and liquidity situation which impact to Bank’s asset and liability.
risk type in the year 2012. For the purpose of monitoring and evaluating the risk profile, active supervision by BOC and BOD will continually be conducted.
In line with Bank Indonesia audit finding for position as of September 2012 and also based on internal review by the Bank, Bank will enhance some current Policies and Procedures such as developing a Credit Policy Committee, enhancement of credit policy, impairment policy and policy related to derivative transaction in order to be inline with current regulation.
V.
Provision
of
Funds
to
Related
Parties
and
Provision
of
Funds
in
Large
Amount
(Large
Exposures)
No. Description Total
Debtor Nominal (mil Rp.)
1 For related parties 13 920,780
2 For main debtors:
c. Individual 13 11,580,277
d. Group 7 12,008,141
VI.
The
Bank’s
Strategic
Plan
In accordance with Bank Indonesia Regulation No. 12/21/PBI/2010 dated 19 October 2010 and Bank Indonesia Circular Letter No. 12/27/DPNP dated 25 October 2010 regarding Business Plan of Commercial Banks, the Bank has prepared its Business Plan for the year 2013–2015 and submitted to Bank Indonesia on 30 November 2012. Furthermore, BOD continuously monitored their realization and submitted the quarterly realization report of Business Plan to Bank Indonesia. BOD also reported the summary of the realization report during the coordination meeting of BOC and BOD which would then be discussed by BOC during BOC Meeting. In addition, Business Plan Supervision Report was reported by the Bank semi‐annually and was submitted to Bank Indonesia in August 2012 and February 2013. The Bank’s Corporate Plan FY 2008–2012 was submitted on January 31, 2008.
In general, the Bank succeeded to achieve audited net income of Rp. 506.2 billion or 16.06% increase compared to last year.
From the asset side, the loan realization reached Rp. 23.15 trillion at the end of year 2012 or 44.91% higher compared to end of year 2011. The Bank has also managed to keep Non Performing Loan (NPL) ratio below 5% namely 0.70% (gross base) and 0.55% (net base) at the end of year 2012. Total assets of the Bank also increased by 51.95%, from Rp. 21.15 trillion at the end of 2011 to Rp. 32.13 trillion at the end of 2012.
Share
Ownership
by
BOC
and
BOD
Members
Reaching
5%
or
More
of
Paid
‐
up
Capital
B
From the liability side, at the end of year 2012, the third party fund was amounting to Rp. 12.59 trillion or 49.29% higher compared to end of year 2011. From the capital side, the Bank’s Capital Adequacy Ratio (CAR) by considering credit risk, operational risk and market risk at the end of year 2012 was 26.14%, which was far above the minimum requirement set by Bank Indonesia. The Bank will exert its best effort to maintain continuous business growth continuously in a steady condition.
VII.
Transparency
in
the
Bank’s
Financial
and
Non
‐
Financial
Conditions
that
Were
Not
Included
in
Other
Reports
The Bank has carried out its obligation to prepare and submit reports, information of Bank’s products and use of Bank’s customer personal data and information of prime lending rate in accordance with the following Bank Indonesia Regulations:
Bank Indonesia Regulation No. 3/22/PBI/2001 dated 31 December 2001, its amendment No. 7/50/PBI/2005 dated 29 November 2005 and Bank Indonesia Regulation No.: 14/14/PBI/2012 dated 18 October 2012 on Transparency and Publication of the Bank’s Report and Bank Indonesia Circular Letter No.: 14/35/DPNP dated 10 December 2012 regarding Commercial Bank Annual Report and Certain Annual Reports submitted to Bank Indonesia by properly compiling and presenting annual report, quarterly published financial report and monthly report according to the above regulations.
Bank Indonesia Regulation No. 7/6/PBI/2005 dated 20 January 2005 and Circular Letter No. 7/25/DPNP dated 18 July 2005 on Transparency in Bank’s Product Information and Use of Customer Personal Data by creating its own written policies and procedures regarding this matter.
Bank Indonesia Circular Letter No.: 13/05/DPNP dated 8 February 2011, its amended by Bank Indonesia Circular Letter No. 15/01/DPNP dated 15 January 2013 concerning Transparency of Prime Lending Rate Information.
Thus, there are no other reports that have not been disclosed by the Bank.
e Ownership by BOC and BOD Members Reaching 5% or More of Paid‐up Capital
BOC and BOD members do not have share ownership reaching 5% (five percent) or more of paid‐up capital that consists of type and number of shares in the Bank, other banks, non‐bank financial institutions and other companies that are placed domestically or internationally.
Remuneration
Package/Policy
and
Other
Facilities
for
BOC
and
BOD
Members
D
Financial
and
Family
Relationship
among
BOC
and
BOD
with
Other
BOC,
BOD,
and/or
the
Bank’s
Shareholders
C
B. Financial and Family Relationship among BOC and BOD with Other BOC, BOD, and/or the Bank’s Share
There is no financial and family relationship among members of BOC and BOD with other members of the BOC, BOD, and/or the Bank’s Shareholders in the Bank.
Remuneration Package/Policy and Other Facilities for BOC and BOD Members
Remuneration for BOC and BOD was reviewed and decided by General Meetings of Shareholders. Remuneration and Nomination Committee will also evaluate the remuneration policies of BOD, BOC, Executive Officers, and employees.
The disclosure of remuneration package/policy referred to the above is described as follows:
No. Description
Remuneration received in 1 year
BOC BOD
No. of People
Rp. (mil) No. of People
Rp. (mil)
1. Remuneration (salary, bonus, fixed allowance, and
other benefits not in kind) 2
**) 339 7 ***)
13,423
2. Other facilities/benefits in kind (housing,
transportation, medical insurance, and so on) that*): a. can be owned
b. can not be owned
‐
‐ 7 ***) 2,925
Total 2 339 7 16,348
*) Assessed in Rupiah equivalent
**) 1 Commissioner resigned in mid of year 2012
***) 1 Director accomplished the assignment in 2012 and has not been replaced yet
Total BOC and BOD members that received remuneration package in 1 (one) year classified by their salary level are as follows:
Total Remuneration Received per person in 1 year (cash) No. of BOC No. of BOD
Above Rp. 2 billion ‐ 3
Between Rp. 1 billion and Rp. 2 billion ‐ 3 Between Rp. 500 million and Rp. 1 billion ‐ 1
Shares
Option
E
Ratio
of
the
Highest
Salary
to
the
Lowest
Salary
F
Frequency
of
BOC
Meetings
G
Number
of
Internal
Fraud
H
ares Option
There is no shares system owned by the Bank.
Ratio of the Highest Salary to the Lowest Salary
Ratio of the highest salary to the lowest salary can be classified as follows:
Ratio Description
Percentage
Ratio of the highest and lowest salary of staff 1,842.1% Ratio of the highest and lowest salary of director 183.1% Ratio of the highest and lowest salary of commissioner 100% Ratio of the highest director’ salary and highest staff’s salary 195.4%
requency of BOC Meetings
The Bank has held BOC meetings 4 (four) times in a year, namely on 15 February, 14 May, 7 August, and 24 October 2012 All meetings were attended by 100% of BOC members, meaning that it has therefore achieved the quorum to convene BOC Meeting in accordance with the Bank’s articles of association. Each meeting basically consists of the following 2 (two) sessions: Coordination Meeting of BOC & BOD and BOC Meeting. Meeting details are as follows:
No. Attendance Date
1 Attended by 100% of total members of BOC through video conference 15 Feb 2012 2 Attended by 100% of total members of BOC through video conference 14 May 2012 3 Attended by 100% of total members of BOC through video conference 7 August 2012 4 Attended by 100% of total members of BOC through video conference 24 October 2012
During the year 2012, there were no internal fraud that occurred in the Bank.
