Report of the Board of Directors

BCA recorded positive business performance achieved by proactively managing the loan portfolio, maintaining loan quality, supporting the financing needs of quality customers, enhancing transaction banking capabilities, and continuing to develop the Bank’s subsidiaries’

businesses

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PT Bank Central Asia Tbk 2015 Annual Report

the movement of global capital flows to emerging markets began to fluctuate and reverse in line with the market’s anticipation of The Fed’s plans to normalize interest rates. In December 2015, The Fed began to raise short-term interest rates with an increase of 25 bps after a prolonged period of record-low interest rates. Pressure further increased when the Chinese monetary authority unexpectedly devalued the Yuan, resulting in increasing volatility in the Indonesian and global financial markets.

During 2015, the instability of global capital flows to Indonesia put pressure on the Rupiah exchange rate and led to stagnation in direct investment in Indonesia. These flows were exacerbated by structural issues first evident in 2012 that led to a shifting of a current account surplus into a substantial deficit as a result of the weakening exports of leading commodities and the high dependence of the national economy on imports and use of foreign services.

The current account deficit added to the pressure on the Rupiah, which depreciated by 10.2% in 2015 and a total of 29.0% since the end of 2012.

In the Government sector, the realization of state expenditure in 2015 was lower than expected. After the national election in the second half of 2014, Joko Widodo’s working cabinet needed some time to complete budget planning, implement a consolidation with the House of Representatives and spur realization of the state budget. Overall, political issues combined with overall macro-economic factors generated a less than conducive economic environment leading to weakening purchasing power and domestic spending and ultimately restricted the growth of Indonesia’s GDP.

In response to the economic situation, the Indonesian Government took strategic steps to support the Indonesian economy and develop a solid foundation for long-term economic growth. Various work programs and a series of economic policy packages and new regulations were implemented in an attempt to stimulate the Indonesian economy. These economic packages focused on revising the fuel subsidy program, strategic infrastructure

development programs, the one-stop investment service, the one map policy to govern land and forest areas, special economic zones, and various stimulus programs for the Small & Medium Enterprise (SME) segment. In alignment with Government changes in policy, the Indonesian Financial Services Authority reviewed banks’ work and budget plan and conducted proactive discussions with the banking sector with a view towards maintaining the balance between business growth and risk. Bank Indonesia carefully monitored the macro economic situation throughout the year and maintained the benchmark interest rate to better withstand uncertainty in global capital flows and to guide the current account deficit to a lower level while supporting liquidity by lowering the bank minimum reserve requirement.

These prudent steps were taken by the Government and the financial regulators to help prevent economic and financial crisis while building a steady economic structure.

Overall, BCA sees that the Indonesian economy underwent challenging structural adjustments in 2014-2015. The Government policies are set to address the challenges.

We remain optimistic for Indonesian long-term economic prospects. Human resources, with a large working-age population, abundant natural resources, a growing middle class, a stable political system and the various work programs and other efforts of the Government make Indonesia an attractive investment destination.

BCa PERFORMaNCE iN 2015: FOCuS ON QualiTy

Slowing growth in loans and third party funds along with

tightening competition and increasing non-performing loans

had a notable influence on the Indonesian banking industry

in 2015. In the midst of various challenges to the industry,

BCA maintained its position as one of the leading banks in

Indonesia, recording a positive performance and continuing

to provide added value for shareholders. These results

were achieved through the implementation of various work

programs with the aim of maintaining loan quality, supporting

the financing needs of quality customers, enhancing BCA’s

capabilities in transaction banking, and continuing to develop

the subsidiaries’ businesses.

43

PT Bank Central Asia Tbk 2015 Annual Report Prudence in lending

Although still within a manageable range, the overall loan quality within the banking sector deteriorated in 2015, especially in the sectors of mining commodities and their related sectors. In anticipation of deteriorating loan quality, and based on revised restructuring guidelines issued by the Indonesian Financial Services Authority, the Indonesian banking sector proactively restructured loans and boosted loan provisions for NPLs.

BCA applied a prudent approach to lending with the implementation of a sound credit risk management policy intended to maintain loan quality and minimize an increase in non-performing loans. Lending activities were particularly focused to meet real loan demand from quality customers with good track records across all of the Bank’s loan segments.

The corporate segment continued to play an important role in driving the growth of the Bank’s loan portfolio in 2015. The first semester saw sizeable loan repayments from several corporate customers in line with declining business activities.

However, in the second half of the year, loan demand in the corporate sector grew substantially as business activities began to pick up with signs of higher domestic consumption towards the end of year. Additionally, in consideration of the higher foreign exchange risk, customers attempted to minimize exposure to foreign currency liabilities by converting foreign currency loans from other banks to BCA Rupiah loans. A Government regulation mandating that transactions within Indonesia be made in Rupiah contributed to the increase in Rupiah working capital needs.

In the consumer loan segment, in 2015, the Bank offered mortgage and vehicle financing with attractive interest rates to stimulate consumer loan growth while maintaining a tight risk management policy. These measured steps were taken based upon confidence in consumer loan quality due to the low and stable NPL ratio in this segment. Commercial

& SME loans grew moderately in 2015, negatively impacted by conditions in the Indonesian economy. Prevention of deterioration in loan quality was a major focus of both the

business and risk sides of the Bank in the commercial loan segment.

BCA conducts intensive monitoring of the overall loan portfolio and takes proactive measures against any indications of declining loan quality. The early warning system is periodically strengthened to identify signs of weakening loan quality, enabling the Bank to take immediate preventive action if necessary. Early loan restructuring is applied as a preventive measure against those loans determined to have potential problems but which have prospect of quality improvement.

BCA’s loan portfolio stood at Rp 387.6 trillion in 2015, a 11.9% growth mainly supported by lending in the corporate segment in the second half of 2015. Overall, at year end 2015, BCA maintained loan quality with the Bank’s NPL ratio standing at 0.7%, below the industry average of 2.5%.

In general, we recognize that non-performing loans are a lagging indicator and will likely increase in the near term, with the potential to put pressure on the Bank’s performance, though the magnitude of any increase is expected to remain within a manageable range and within the Bank’s risk appetite.

Developments in the Transaction Banking Franchise

Transaction banking is at the center of BCA’s business activities. We continue to enhance the network and guard the Bank’s reputation as one of the leading transaction banks in Indonesia. Convenience, safety and reliability of the Bank’s transaction banking systems are essential in ensuring customer confidence.

BCA continues to enhance its multi-channel network

capabilities through the rapid development of electronic

banking platforms. In recent years, the Bank has encouraged

increased use of internet banking and mobile banking

solutions as a more convenient and easy-to-use channel

compared to the branch or ATM networks. These efforts

have seen positive results, with higher rates of increase in

transaction volumes of internet banking and mobile banking

than for branch offices and ATMs. The rapid technological

44

PT Bank Central Asia Tbk 2015 Annual Report

standing : seated :

Rudy Susanto

Director Subur Tan

Director Armand Wahyudi Hartono

Director Dhalia Mansor Ariotedjo

Director Eugene Keith Galbraith

Deputy President Director left to right

Board of Directors

45

PT Bank Central Asia Tbk 2015 Annual Report

standing : seated :

Jahja Setiaatmadja

President Director Anthony Brent Elam Director

Suwignyo Budiman Director

Henry Koenaifi

Director Erwan Yuris Ang Independent Director

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PT Bank Central Asia Tbk 2015 Annual Report

development of the internet and telecommunications, coupled with society’s seamless adaptation to these advances, has been a catalyst to the Bank’s success in this area. Mobile banking has delivered increasingly solid performance in recent years following the integration of

‘KlikBCA’, the Bank’s internet banking platform, and ‘m-BCA’, the mobile banking service, through the smartphone app branding, ‘BCA Mobile’. These developments are in line with the Bank’s efforts to improve operational efficiency as the cost structure of internet and mobile banking are considerably lower than those of the branch offices or ATMs.

Nonetheless, the branch and ATM networks continue to play an important role within the Bank with transaction value through these channels remaining significant. BCA continues to improve service quality and expand its range in these two

‘traditional’ delivery channels. Currently, BCA operates 1,182 branches and 17,081 ATMs nation-wide, an increase of 25.5% and 99.1% respectively over the last 5 years.

Looking ahead, we expect that the multi-channel service approach supported by a traditional branch network and enhanced by digital banking channels will represent a major trend in banking. BCA understands that capability and capacity in the Bank’s information technology infrastructure remains an essential foundation to the transition to the next phase of electronic banking at BCA. The Bank took active steps to capitalize on developing trends in digital banking and of dynamic technological developments during the year. In 2015, the Bank launched several new initiatives in electronic banking services, including ‘Sakuku’, a server- based electronic money product, as well as ‘Laku’ and ‘Duitt’, branchless banking services to attract customers outside of the existing customer base. Various measured investments were made in the banking network designed to achieve balance between the long-term benefits and the costs incurred.

BCA’s sustained excellence in transaction banking has provided the Bank with a sustainable source of core funding through transaction-based Current Accounts and Savings

Accounts (CASA). Despite slowing economic growth, the Bank increased the overall CASA balance by 7.1% to Rp 360.3 trillion. CASA remains a major contributor to the Bank’s funding base at 76.1% of total third party funds. We are pleased to report that BCA’s transaction banking services remained robust, as reflected in the stable and sustainable CASA funds growth throughout 2015.

Development of Subsidiary Businesses

BCA’s excellence in transaction banking services has procured a broad customer base for the Bank, which ultimately provides a solid foundation for the development of the Bank’s core business as well as opportunities for the Bank to develop new financial products and services through its subsidiaries. Aside from BCA Finance, a 4-wheeler financing subsidiary, and BCA Finance Ltd., a remittance subsidiary, which have operated for over 15 years, the Bank has invested in several relatively new subsidiaries in order to offer a wider variety of financial services. These subsidiaries include general insurance, life insurance, securities, Sharia banking and 2-wheeler financing.

Overall, the development of BCA’s subsidiaries made a positive contribution to the Bank’s business performance.

BCA Finance has grown into one of the largest 4-wheeler financing companies in Indonesia, and has contributed substantially to the Bank’s profitability. The subsidiary BCA Syariah has also performed well and in 2015 entered into the BUKU II category of Sharia banking, having a capital of more than Rp 1 trillion. CS Finance, engaged in 2-wheeler financing, also showed positive business performance and continued to develop support systems and risk management capacity.

BCA Sekuritas continuously strengthened its securities

business foundation through the underwriting and brokerage

businesses. The Bank’s general insurance subsidiary, BCA

Insurance, progressed nicely by increasing premium income

and developing synergy with BCA’s mortgage and vehicle

financing products. BCA Life, which began operations in the

fourth quarter of 2014, focused on setting up a solid base for

operations and strengthening the business support systems

for developing life insurance products.

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PT Bank Central Asia Tbk 2015 Annual Report

BCA believes that there is considerable business potential

for the subsidiaries to grow in their respective lines of business. In the coming years, the Bank will continue to support business growth and improve synergy between each of the subsidiaries and the main businesses of the Bank while taking into account the risks that may arise across the various markets where BCA is active.

CHallENGES iN 2015 aND TaRGETS VS REalizaTiON

As mentioned above, the Indonesian economy and the banking industry faced a number of challenges in 2015.

The profitability of the Indonesian banking industry came under pressure as a result of slowing growth in earning assets and third party funds as well as the declining loan quality. Nevertheless, we are pleased to report that the Bank recorded growth in Net Income of 9.3% to Rp 18.0 trillion in 2015 and generated a higher Return on Assets and Return on Equity than expected.

BCA’s financial achievements are in line with the Bank’s success in maintaining loan quality and its core business performance in 2015. BCA transaction banking provided sustainable funding from transaction accounts and secured a solid liquidity position thereby allowing the Bank to lower the maximum time deposit interest rates gradually throughout 2015 resulting in a decline in cost of funds.

Supported by loan growth and lower cost of funds, BCA’s Net Interest Income increased 12.0% to Rp 35.9 trillion in 2015.

The Bank also grew Operating Income other than Interest, both from transaction banking fee-based income and treasury activities in second half of 2015. To sustain profitability, further efforts were taken to maximize operational efficiency

and reduce the rate of growth in operating costs. However, BCA remain committed to investing in banking networks and information technology which represents a significant part of overall operating expenses. The weakening Rupiah exchange rate also contributed to the increased costs of the procurement of electronic networks and software, which are associated with the movements of US Dollar. Overall, the Bank posted a cost efficiency ratio at 46.5% in 2015, compared with 44.2% in 2014.

Closing the year, the Bank’s loan portfolio was recorded at

Rp 387.6 trillion, an increase of 11.9% for the year and within

the growth target range of 10%–12%. Third party funds grew

to Rp 473.7 trillion, an increase of 5.8% in 2015, below the

growth target range of 8%–11%. In line with easing liquidity

in the Indonesian banking sector and BCA’s efforts to balance

profitability, the Bank did not compete aggressively in time

deposits taking, resulting in a lower level of total third party

funds compared to the initial budget. Overall, the financial

position of the Bank was well preserved. BCA recorded a

low level of NPLs at 0.7%. The Loan to Funding Ratio (LFR)

was maintained at a healthy 81.1%, slightly above the lower

range recommended by the regulator. The Capital Adequacy

Ratio (CAR) reached 18.7%, above the minimum regulation

set by Bank Indonesia, and in position to comply with the

potential revision of the regulatory benchmark based on the

development of BASEL calculation methods.

48

PT Bank Central Asia Tbk 2015 Annual Report BCA Financial Highlights (in billion Rupiah)

2015 2014 Δ %

Total Assets 594,373 553,156 7.5%

Loans 387,643 346,563 11.9%

Third Party Funds 473,666 447,906 5.8%

Net Interest Income 35,869 32,027 12.0%

Operating Income other than Interest 12,007 9,346 28.5%

Operating Expenses (21,714) (18,393) 18.1%

Income Before Tax 22,657 20,741 9.2%

Net Income attributable to equity holders of parent entity 18,019 16,486 9.3%

EPS (in Rupiah) 731 669 9.3%

Key Financial Ratios (non consolidated)

2015 2014 Δ bps

ROA 3.8% 3.9% (10)

ROE 21.9% 25.5% (360)

NIM 6.7% 6.5% 20

LFR 81.1% 76.8% 430

NPL 0.7% 0.6% 10

Cost Efficiency Ratio 46.5% 44.2% 230

CAR (credit, market and operational risk) 18.7% 16.9% 180

iMPROViNG THE iMPlEMENTaTiON OF CORPORaTE GOVERNaNCE

BCA recognizes the importance of Good Corporate Governance in supporting business performance and providing added value for all stakeholders. The Board of Directors, the Board of Commissioners and BCA’s workforce are committed to building an organization that is transparent, accountable, responsible, fair and independent.

BCA implements Good Corporate Governance with reference to prevailing laws and regulations. The practice of Good Corporate Governance continues to be refined in accordance with best practices, including the Indonesian Corporate Governance Road Map issued by the Indonesian Financial Services Authority and the ASEAN Corporate Governance Scorecard.

As an effort to continuously improve the Bank’s corporate governance structure, and with reference to the Indonesian Financial Services Authority regulations, BCA as a financial conglomerate implemented an integrated corporate governance structure in 2015. The implementation includes

the formation of the Integrated Corporate Governance Committee, formulation of the Integrated Corporate Governance Manual, and adjustments to the duties and responsibilities of the Compliance Unit, the Risk Management Unit and the Internal Audit Division to account for integrated risks.

We are proud to report that the efforts of the Bank in implementing corporate governance have created a solid foundation for the continued growth of the organization. In addition, the public and professionals in the field have also shown appreciation and recognition of these efforts. This is reflected in the various awards received by BCA, amongst which are ‘Top 10 Public Listed Companies’ and ‘The Best Responsibility of The Board’ in the 7

^th

IICD Corporate Governance Awards.

CHaNGES TO THE BOaRD OF DiRECTORS

The Board of Directors consists of 10 members who have individual job descriptions, duties and responsibilities.

Effective communication and coordination is maintained

between members of the Board of Directors in the

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PT Bank Central Asia Tbk 2015 Annual Report

discussions of individual responsibilities and the overall

business strategy. In carrying out its duties, in 2015 the Board of Directors held 40 meetings as decision-making mechanism and for the exchange of opinions among the members of the Board.

The Board of Directors performed their duties in implementing work programs in line with the vision and mission of the Bank and by adhering to the core values of the company. With reference to prudent corporate governance, the executive committees under the Board of Directors contributed pro-actively to the Bank management in accordance with their respective duties and responsibilities.

The composition of BCA’s Board of Directors reflects the diversity of its members, be it in terms of education, work experience or expertise, with each member having the necessary competence to support the improvement of the company’s performance.

We report that in 2015 there were no changes in the composition of the Board of Directors. Profiles of the Board members can be found in the Corporate Data section on pages 560-563 of this Annual Report.

PERFORMaNCE aSSESSMENT OF COMMiTTEES uNDER THE BOaRD OF DiRECTORS

As of December 31, 2015, there were 7 Executive Committees assisting the Board of Directors including the Asset &

Liability Committee (ALCO); Credit Policy Committee; Credit Committee; Risk Management Committee; Integrated Risk Management Committee; Information Technology Steering Committee; and the Personnel Case Advisory Committee.

We report that in 2015 these committees have performed well, giving valuable and objective guidance to the Board of Directors, which ultimately assists in the effective and systematic implementation of the duties of the Board of Directors.

The Asset & Liability Committee (ALCO) implemented the assets and liabilities strategy with a view to maintaining

the Bank’s liquidity position while providing optimal levels of profitability for the Bank at a manageable level of risk.

The Risk Management Committee has ensured that the risk management framework is capable of providing adequate protection against the risks faced by BCA.

The Credit Policy Committee has recommended several lending policies, including determining loan approval authority for corporate and commercial loans. The Credit Committee assisted the Board of Directors in evaluating credit applications in line with prevailing credit policies. The Information Technology Steering Committee has reviewed and made recommendations regarding the strategic plan for information technology in keeping with the Bank’s business plan. The Personnel Case Advisory Committee has provided recommendations to the Board of Directors regarding settlement of employee breaches of policy cases while adhering to the principles of established fact, equality and fairness. The newly formed Integrated Risk Management Committee has been established to formulate the foundations of integrated risk management, including the completion of an integrated risk profile.

These committees carried out their duties and responsibilities in accordance with the authorities listed in the guidelines of each committee.

CORPORaTE SOCial RESPONSiBiliTy

As a responsible corporation, BCA ensures that the products and services offered by the Bank are beneficial to the wider community. We are proud of the Bank’s efforts in facilitating the various banking service needs for the people of Indonesia.