SFAS 24 Press Release “Employee Benefits”
43. FINANCIAL RISK MANAGEMENT (continued) e. Market risk management (continued)
43. FINANCIAL RISK MANAGEMENT (continued)
e. Market risk management (continued)
ii. Interest rate risk (continued)
Interest Rate Risk in the Trading Book (continued)
The table below summarises the Group f inancial assets and liabilities (not measured at f air value through prof it or loss) at carrying amounts, categorised by the earlier of contractual re-pricing or maturity dates: (continued)
2021 Floating interest rate Fixed interest rate
Non-interest
bearing Total Up to 3
months
> 3 months - 1 year
Up to 3 months
> 3 months - 1 year
More than 1 year
Financial assets
Current accounts with
Bank Indonesia 27,781,998 - - - - 38,003,163 65,785,161
Current accounts with
other banks - net 11,604,834 - - - - - 11,604,834
Placements with Bank
Indonesia
and other banks - net - - - 81,535,191 5,613,814 - 87,149,005
Acceptance receivables - net 1,479,387 1,391,143 - - - 8,070,500 10,941,030
Bills receivable - net - - 6,311,972 - - - 6,311,972
Securities purchased under
agreements to resell - net - - 135,884,779 11,180,082 - - 147,064,861
Loans receivable - net 422,323,118 31,119,594 2,228,270 12,962,937 121,179,659 - 589,813,578 Consumer financing
receivables - net - - 632,830 3,025,081 4,198,065 - 7,855,976
Finance lease
receivables - net - - 25,687 33,657 24,801 - 84,145
Assets related to sharia transactions - murabahah
receivables - net - - - - - 1,234,433 1,234,433
Investment securities - net 10,155,265 - 29,064,724 21,568,455 162,718,940 725,032 224,232,416
Other assets - - 150,141 44,107 - 10,475,786 10,670,034
Total 473,344,602 32,510,737 174,298,403 130,349,510 293,735,279 58,508,914 1,162,747,445
Financial liabilities
Deposits from customers (764,594,031) - (189,549,234) (14,463,479) - - (968,606,744)
Sharia deposits - - - - - (1,620,039) (1,620,039)
Deposits from other banks (9,962,934) - (54,260) - - - (10,017,194)
Acceptance payables - - - - - (6,644,294) (6,644,294)
Securities sold under
agreements to resell - net - - (77,021) - - - (77,021)
Debt securities issued - - - (482,149) - - (482,149)
Borrowings - - (198,700) (715,265) (62,260) - (976,225)
Estimated losses from commitments
and contingencies - - - - - (3,239,171) (3,239,171)
Other liabilities - - - - - (5,089,294) (5,089,294)
Subordinated bonds - - - - (500,000) - (500,000)
Total (774,556,965) (189,879,215) (15,660,893) (562,260) (16,592,798) (997,252,131)
Interest rate re-pricing gap (301,212,363) 32,510,737 (15,580,812) 114,688,617 293,173,019 41,916,116 165,495,314
Fundamental ref orms to benchmark interest rates are being carried out globally, including the replacement of some Interbank Offered Rates (“IBORs”) with alternative interest rates (ref erred to as the 'IBOR ref orm'). The Group does not have significant exposure to IBOR on its f inancial instruments that will be ref ormed as part of this broad market initiative.
43. FINANCIAL RISK MANAGEMENT (continued) e. Market risk management (continued)
ii. Interest rate risk (continued)
As of 31 December 2021, the Bank has a total notional principal exposure to the benchmark interest rate which is expected to be subject of the interest benchmark rate ref orm, amounting to Rp 8,099,841 f or non-derivative assets, all of which are denominated in USD LIBOR. The Bank has excluded financial instruments that have the latest f ixing date before 30 June 2023 on the assumption that these instruments do not require ref orm.
In 2022, the Bank has started the interest benchmark rate ref orm f or the impacted contracts. The alternative interest rate benchmark selected by the Bank is Secured Overnight Financing Rate (“SOFR”). The Bank use spot approach to calculate adjustment f rom USD LIBOR to SOFR. Interest rate benchmark ref orm is assessed as direct consequence and economically equivalent.
The main risk f acing the Group as a result of the IBOR ref orm is operational, e.g.
renegotiation of loan contracts through bilateral negotiations with customers, renewal of contract terms, renewal of the system using the IBOR curve and revision of operational controls related to the ref orms. The rate convention that will be used will take into account the characteristics of the product, both derivative and non-derivative assets, as well as see input and recommendations f rom representatives of f inancial associations and working groups in force, in order to be able to provide accurate prices and mitigate risks arising f rom interest rate risk.
f. Operational risk management
The Bank has an Operational Risk Management Policy (“KMRO”), which is a basic guideline f or implementing and implementing operational risk management in all bank work units in general. The bank's operational risk manag ement policy ref ers to POJK regulation no. 18/POJK.03/2016 dated 22 March 2016 concerning Implementation of Risk Management f or Commercial Banks. To minimise the possibility of operational risk arising f rom the use of inf ormation technology, the Bank has a Basic Risk Management Policy on the Use of Inf ormation Technology and Inf ormation Security Policy. These policies are reviewed regularly and aligned with the provisions issued by the regulators.
Along with the current rapid development of inf ormation technology, Banks are required to carry out digital transf ormation, utilise IT to increase ef f iciency in Bank operations, and provide better services to customers. The Bank always innovates and develops saf e and comf ortable digital banking products as well as changes to more ef f icient internal processes. On the other hand, the use of this technology also increases risks including system disruption, cyber attacks, data leaks, and social engineering. To maintain the security and convenience of customers in making transactions using digital products, the bank also implements security and mitigation of risks that arise in every implementation and development of bank digital products. Each new product/activity development plan will f irst go through a risk management process in order to minimise the risks that may arise f rom these products/activities so that they do not significantly affect the Bank's risk profile.
This is regulated through the Product/Activity Publishing Policy and Provision of Inf ormation Technology Systems and Supporters.
In implementing IT risk management, the Bank also has other provisions/procedures such as Consumer Protection, Business Continuity Plan, Data Loss Prevention, and Management of user IDs and passwords. The Bank also conducts outreach and education to customers to increase customer awareness in conducting digital banking transactions, including through the website, BCA social media accounts, and videos f rom the Solusi BCA account on www.youtube.com.
f. Operational risk management (continued)
Furthermore, the Bank has qualif ied inf rastructure to support implementation of operational risk management, named Operational Risk Management Inf ormation System (“ORMIS”), which consists of three modules. The modules are Risk and Control Self Assessment (“RCSA”), Loss Event Database (“LED”), and Key Risk Indicator (“KRI”). This web-based application can be used by all working units to help them in managing operational risk. In order to make implementation of operational risk management more ef f ective and ef ficient, the bank continuously enhance the ORMIS in accordance with the latest bank operational activities.
Risk and Control Self Assessment (“RCSA”)
RCSA aims to improve the awareness culture in managing operational risk to improve risk control of each employee in conducting their daily activities so it can minimise operational risk loss.
RCSA is conducted regularly in all working units (branches and head of f ice) that are signif icantly exposed to operational risk.
The Bank regularly reviews and revalidates operational risk that may occur in working unit and also assess impact and likelihood grading that is used f or RCSA so that the assessment of operational risk can provide more precise overview of activities and risk prof iles of each working unit and bankwide.
Loss Event Database (“LED”)
LED is used to gather operational risk loss data f rom all working units. The data is then used by the Bank as a database to calculate operational risk capital reserves using a standard approach. On the other hand, LED data is used to analyse and monitor operational risk events to take action immediately and minimise loss.
The Bank always conducts an independent review of operational risk loss data comprehensively to maintain the validity of data which are provided by working units.
With the implementation of SE OJK No.6/SEOJK.03/2020 concerning Calculation of Weighted Assets by Operational Risk Using a Standard Approach f or Commercial Banks on January 1, 2023, banks will conduct a gap analysis and prepare the necessary inf rastructure to comply with regulatory requirements.
Key Risk Indicator (“KRI”)
KRI can provide an early warning sign of increasing operational risk in a working unit.
Whenever there is an increase in risk, the system will send a notif ication to Risk Manager, so they can immediately take necessary actions to minimise operational risk that may occur.
The Bank regularly reviews and revalidates KRI parameters and thresholds to ensure KRI ef f ectiveness in providing early warning signs of increased operational risk in working units.
43. FINANCIAL RISK MANAGEMENT (continued)