In implementing a business strategy that includes the application of risk management and compliance with applicable regulations, BCA follows the prudential principle, while continually taking into account developments in the business environment.
In 2022, BCA focused its risk management strategy on several main activities:
• Proactively providing credit restructuring for debtors affected by COVID-19 in accordance with the prevailing regulations. The restructuring scheme was tailored based on an analysis of debtors’ conditions and needs. BCA also participated in the National Economic Recovery (PEN) program by chanelling credit guarantees for MSMEs or non-MSMEs from government-appointed guarantors.
• Implementing PSAK 71 as a substitute for PSAK 55, concerning “Financial Instruments”. This came into effect on January 1, 2020. Changes were mainly related to the classification and measurement of financial instruments, the use of expected losses in the calculation of any impairment of financial assets, and improvements to the accounting hedging model.
• Developing a digital version of the work guideline (PAKAR) for Corporate, Commercial, SME, Consumer loans and Credit Cards, as well as Interbank loans.
• Developing the Integrated Risk Management Information System (IRMIS) to support the preparation of BCA risk profile reports, integrated risk reports, and integrated capital adequacy reports.
• Conducting operational risk assessments for adjustments to work processes and development plans for products and services, as well as providing recommendations for mitigating risk and maintaining service, in accordance with regulatory provisions.
• Continuing to develop the necessary infrastructure for the calculation of Risk Weighted Assets (RWA) for Credit Risk and Operational Risk using a standardized approach that will be effectively implemented in January 2023, in accordance with regulatory provisions, with a trial report on the calculation of Credit RWA and Operational RWA submitted to OJK.
• Conducting market risk reviews on LIBOR discontinuity and the use of alternative reference rates (ARRs), and preparing a system that could accommodate derivative transactions using ARRs.
In general, the results of these stress tests show that BCA’s capital and liquidity position is appropriate to anticipate estimated losses from potential risks faced in various worsening scenarios.
BCA monitors the magnitude of risk and trends as evidenced in the Bank’s Risk Profile Report and supporting factors in capital adequacy analysis.
Credit Quality
In the face of the ongoing COVID-19 pandemic, BCA has issued several policies and regulations to maintain credit quality and support the PEN program, including the following:
1. Adjustments to the provisions on additional interest subsidies and relaxation of Micro Credit Program (Kredit Usaha Rakyat/KUR) impacted by COVID-19 as a follow-up to Regulation of the Coordinating Minister for Economic Affairs No.2 Year 2022 dated 19 January 2022 regarding Special Treatment for Micro Credit Program Debtors Affected by COVID-19 Pandemic 2. Provisions on credit guarantee on loans affected by
COVID-19 in the context of the National Economic Recovery (PEN) program as a follow-up to Regulation of the Minister of Finance No. 27/PMK.08/2022 dated 29 March 2022 regarding Government Guarantee Procedures for Corporate Business through a Designated Guarantee Business Entity in the Context of Implementing the National Economic Recovery Program.
3. Provisions on credit guarantee on SME loans affected by COVID-19 in the context of the National Economic Recovery (PEN) program as a follow-up to Regulation of the Minister of Finance No. 28/PMK.08/2022 dated 30 March 2022 regarding Government Guarantee Procedures for Corporate Business through a Designated Guarantee Business Entity in the Context of Implementing the National Economic Recovery Program.
BCA continued to disburse new and additional loans to existing debtors with prudence, taking into account, amongst others, payment capabilities and in-depth knowledge of potential debtors, business sectors, and business locations.
BCA implemented disciplined risk management to manage the non-performing loan ratio In December 2022, the NPL was at 1.7%, lower than the previous year’s 2.2%. This remained within the Bank’s risk appetite, supported by the implementation of a credit relaxation policy according to POJK No. 11/POJK.03/2020, which allowed restructured loans affected by the pandemic to be categorized as Current for debtors who met the criteria.
In December 2022, restructured loans amounted to Rp62.2 trillion, down 24.6% compared to the figure in December 2021 of Rp82.5 trillion. The decline was mainly due to the restructuring of Current category loans, which declined by Rp19.0 trillion or 29.2% to Rp46.0 trillion. Total restructured loans represented 9% of BCA’s total loan portfolio.
Restructured Loan Outstanding (non consolidated – in billion Rupiah)
2022 2021 2020
Increase / (decrease)
2022 Increase / (decrease) 2021
Nominal % Nominal %
Performing Loan 52,753 73,600 93,259 (20,847) -28.3% (19,659) -21.1%
Current 45,966 64,918 88,005 (18,952) -29.2% (23,087) -26.2%
Special Mention 6,787 8,682 5,254 (1,895) -21.8% 3,428 65.2%
NPL 9,459 8,896 4,228 562 6.3% 4,668 110.4%
Substandard 1,386 1,302 1,620 84 6.5% (318) -19.6%
Doubtful 4,313 658 592 3,655 555.5% 66 11.1%
Loss 3,759 6,936 2,016 (3,177) -45.8% 4,920 244.1%
Total Restructured Loan 62,212 82,496 97,487 (20,285) -24.6% (14,991) -15.4%
Total Loan Portfolio 691,141 620,640 575,649 70,501 11.4% 44,991 7.8%
% Restructured Loans to Total Loans
Portfolio 9.0% 13.3% 16.9% n.a -4.3% n.a -3.6%
BCA monitors the Loan at Risk (LAR) ratio that describes a broader scope of credit risk. The LAR comprises loans under
“Current Restructured Loans”, “Special Mention”, and “Non-Performing Loans (NPL)”.
Loan at Risk (LAR) by segment (non consolidated – in billion Rupiah)
LAR (Nominal) LAR (%)* LAR
2022 2021 2020 2022 2021 2020
Increase / (decrease)
2022 Increase / (decrease) 2021
Nominal % Nominal %
Corporate 27,328 32,906 40,860 8.6% 11.5% 15.9% (5,579) -17.0% (7,954) -19.5%
Commercial & SME 24,467 35,090 39,865 11.7% 18.4% 21.9% (10,623) -30.3% (4,775) -12.0%
Consumer 17,579 22,825 27,741 10.8% 15.8% 20.2% (5,246) -23.0% (4,916) -17.7%
Total LAR 69,374 90,821 108,466 10.0% 14.6% 18.8% (21,448) -70.2% (17,645) -49.2%
* LAR nominal/respective loan portfolio
In December 2022, the total of BCA’s LAR stood at Rp69.4 trillion or 10% of total loans, an improvement on the previous year’s Rp90.8 trillion, with reductions visible in all segments. The improvement in LAR ratio was supported by a decrease in restructured loans in line with the reduction in COVID-19 cases, leading to increased personal mobility and a positive impact on the recovery of the business activity of certain debtors.
In December 2022, the Corporate Segment’s LAR decreased by Rp5.6 trillion or 17.0% to Rp27.3 trillion, mainly from the tourism sector. The LAR in the Commercial
& SME Segment decreased by Rp10.6 trillion or 30.3% to Rp24.5 trillion, with the largest decline coming from the building material and other construction related sector.
Meanwhile, the LAR in the Consumer Segment decreased by Rp5.2 trillion or 23.0%.
Top 10 Sectors in Corporate, Commercial and SME Segments (based on BCA internal classification)*
2022 2021 2020
Financial Services 7.4% 7.5% 8.5%
Plantation and Agriculture 7.2% 6.7% 7.3%
Properties and Construction 5.3% 5.0% 5.3%
Building Material and Other Construction Related 5.3% 5.9% 6.1%
Edible Oil 5.1% 5.5% 4.2%
Infrastructure for Transportation 5.1% 4.8% 3.6%
Distributor, Retailer and Wholesaler 5.0% 5.5% 5.6%
Telecommunication 4.9% 5.2% 4.2%
Automotive and Transportation 4.6% 4.3% 4.1%
Transportation and Logistic 4.6% 4.8% 4.6%
Total 54.5% 55.3% 53.6%
* Excluding consumer and employee loan
Note: These categories are based on internal industry classification by BCA and are defined differently from those in the Financial Audit Report, which refers to the classifications in the Commercial Bank Reports as stipulated by the regulator.
As part of efforts to manage loan portfolios and concentration risk, loan diversification is at the forefront of BCA’s attention. The Bank continuously evaluates the implementation of credit disbursement and credit monitoring to ensure there are no limit breaches and the credit is of good quality. Credit evaluation considers the prospect and performance of sectors, and sets limits for certain financing, including types of financing, cooperation, groups, locations, and other aspects that are adjusted to risk levels.
The Bank provides a comprehensive solution to fulfil customer credit needs and performs continuous credit monitoring. BCA will continue to develop capabilities in credit processing for a better quality of credit disbursement, using technology such as machine learning and data analytics.
Anticipating a potential decline of asset quality, the Bank has implemented an Early Warning System (EWS) to monitor changes in debtor repayment capacity as a preventive action to minimize the risk of default.
Liquidity
BCA maintains an adequate liquidity position and monitors the balance between short-term liabilities that must be fulfilled, and the availability of short-term funds held by the Bank. BCA ensures sufficient funds for short-term, liquid, and low-risk placements, especially in the risk-free placement of securities issued by Bank Indonesia.
Most of BCA’s liquidity comes from current accounts and savings accounts (CASA) with low interest rates. Amidst the ongoing economic challenges, up to December 2022, CASA funds grew by 10.4%, or Rp79.7 trillion, accounting for 81.9% of total third-party funds. High CASA ratio is one of BCA’s strengths in facing future challenges, particularly related to the potential interest rate hikes that may occur in the future.
BCA’s Loan to Deposit Ratio (LDR) in December 2022 was 65.2%. This is supported by strong CASA performance in 2022. Meanwhile, Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) remained adequate, at 393.5% and 171.1%, respectively. To maintain overall balance of third party funds, BCA proactively reviews the appropriate interest rates for deposits in accordance with BCA’s liquidity condition.
Capital Position
To support sustainable business growth at the Bank and its subsidiaries, BCA maintains an adequate capital condition.
As of December 2022, BCA had a consolidated Capital Adequacy Ratio (CAR) of 25.8%. The Bank’s capital needs are fulfilled from organic capital growth supported by solid profitability.
In accordance with POJK No.14/POJK.03/2017 regarding the Recovery Plan for Systemic Banks, BCA took the following actions:
• Issued Rp500 billion worth of subordinated bonds in 2018 to fulfill obligations to issue debt securities with equity characteristic.
• Developed and submitted its first Recovery Plan document in 2017, and routinely thereafter submitted the annual (2018 up to 2022) Updated Recovery Plan to OJK.
Additionally, in accordance with Regulation of Indonesia Deposit Insurance Corporation (LPS) No. 1 Year 2021 on Resolution Plan for Commercial Banks, BCA in 2022 also submitted its first Resolution Plan to the LPS.
Exchange Rate Risk
Amid fluctuations in the rupiah exchange rate against foreign currencies due to global economic pressures, BCA manages risks related to foreign currency exposure by maintaining a conservative Net Open Position (NOP).
BCA’s NOP was 0.12%, far below the maximum limit of 20% imposed by the regulator.
BCA constantly monitors foreign exchange transactions, to comply with the provisions and internal policies of the Bank, as well as Bank Indonesia Regulations (PBI) and Financial Services Authority Regulations (POJK). Transactions processed through the branches are monitored, recorded, and reported to the Treasury Division as the coordinator who manages all foreign currency transactions. Each branch is required to cover its foreign exchange rate risk at the end of each working day in accordance with the NOP tolerance limit given to the branch network.
Operational Risk
In managing operational risk, BCA utilizes Operational Risk Management Information System (ORMIS), a web-based application containing three assessment tools which are Risk Control Self-Assessment, Loss Event Database, and Key Risk Indicator. BCA conducts operational risk assessment for each Bank product, new and existing under enhancement. To instill risk culture, BCA performs socialization of operational risk management and Risk Awareness program routinely to each work unit.
Related to the management of operational risk within information technology (including cyber risk), BCA has a number of internal policies, including:
• Basic Policy in the Management of Information Technology Utilization Risks.
• Policy on Protection of Information Assets.
• Policy on the Business Continuity Plan (BCP).
In addition, to ensure the reliability, security, availability, and timeliness in the utilization of information technology systems, BCA implements the following measures:
• Operates an integrated Disaster Recovery Center (DRC) with 2 (two) Data Centers in different locations operating by mirroring;
• Implements security systems with reference to standardized systems, both local and overseas;
• Utilizes a tool monitoring system to monitor or detect system disruptions, threat of fraud, and cyber attacks on BCA’s banking systems so as to minimize the risk of loss from events that could harm the reputation of BCA;
• Reviews and implements security policies for applications that can be accessed using a VPN and for work units that will access office applications using a VPN for work from home (WFH) needs and split operations during the COVID-19 pandemic, as well as recommending the implementation of security needed by the work units.
• Performs vendor due diligence regarding cyber security risks so as to mitigate cyber risks that may arise from third parties.