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 2021, the Bank focused its risk management 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 interest subsidies for MSME debtors who met the criteria and credit guarantees for MSMEs or non-MSMEs from government-appointed guarantors.
BUSINESS SUPPORT
Risk Management
• Implementing PSAK 71 as a substitute for PSAK 55 concerning “Financial Instruments”. This became effective 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. Due to the COVID-19 pandemic and its impact on economic uncertainty, BCA continuously identified and monitored the latest developments and established an adequate Allowance for Impairment Losses (CKPN).
• Developing a digital version of the work guideline (PAKAR) for Corporate, Commercial, SME, Consumer loans and Credit Cards, as well as Credit Terms Manual (MKK) for Interbank.
• 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 customer service during the pandemic, as well as providing recommendations for mitigating risk and maintaining service.
• 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.
BCA regularly performs stress tests to measure the potential impact of possible changes in macroeconomic factors on capital, liquidity, asset quality, and profitability. 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.
Disciplined risk management
practices form the foundations
for the Bank’s ability to navigate
a dynamic business environment.
BCA monitors the magnitude of risk and trends as evidenced in the Bank’s Risk Profile Report and supporting factors in capital adequacy analysis.
In 2022, BCA will implement various initiatives as follows:
1. Continuing necessary infrastructure development for the Risk-Weighted Asset (RWA) calculation of Credit, Operational, and Market Risks using the new standardized approach that will be implemented in January 2023, according to regulatory provisions.
2. Continuing the adjustment of internal work processes and customer services in response to the COVID-19 pandemic. Consideration is given to the balance between convenience and security of customer service, customer and employee safety, and the implementation of proper risk management.
Credit Quality
The COVID-19 pandemic has caused a slowdown in economic activities, which could have a significant impact on the performance and ability to pay in some of our debtors across all segments. BCA has issued several policies and regulations to maintain credit quality and support the PEN program, that include:
1. Credit restructuring policy for debtors affected by the COVID-19 pandemic as a follow-up to POJK No. 11/
POJK.03/2020 dated 13 March 2020 concerning National Economic Stimulus as a Countercyclical Policy on the Impact of the Spread of Coronavirus Disease (COVID-19).
POJK No. 17/POJK.03/2021 dated 10 September 2021 and POJK No. 48/POJK.03/2020 dated 3 December 2020 concerning the Second Amendment to POJK No. 11/
POJK.03/2020.
2. Credit guarantee terms for MSMEs affected by the COVID-19 pandemic, a follow-up to Finance Minister Regulation (PMK) No. 71/PMK.08/2020 dated 23 June 2020 regarding The Procedures for the Government Guarantee through a Designated Guarantee Business Entity in order to Implement the National Economic Recovery Program.
3. Provisions regarding the interest subsidies for micro, small and medium business loans, as a follow-up to PMK No. 150/PMK.05/2021 dated 26 October 2021 regarding the Procedure for Granting Interest Subsidies or Margin Subsidies to Support the Implementation of the National Economic Recovery Program, PMK No. 50/
PMK.05/2021 dated 27 May 2021 on the Amendment to Finance Minister Regulation No. 138/PMK.05/2020 concerning the Procedure for Granting Interest Subsidies or Margin Subsidies to Support the Implementation of the National Economic Recovery Program, and PMK No.
138/PMK.05/2020 dated 25 September 2020.
4. Credit guarantee provisions for corporate business (Non-MSMEs) affected by the COVID-19 pandemic.
This is a follow-up to Finance Minister Regulation No. 98/PMK.08/2020 dated 28 July 2020 and PMK No.
32/PMK.08/2021 dated 1 April 2021 regarding the Amendment to Finance Minister Regulation No. 98/
PMK.08/2020 concerning Government Guarantee Procedures for Corporate Business through a Designated Guarantee Business Entity in the context of Implementing the National Economic Recovery Program.
5. Relaxation of micro credit program (Kredit Usaha Mikro or KUR) affected by COVID-19 and a follow up to the Regulation of Coordinating Minister for Economic Affairs (Permenko) No. 3 of 2021 dated 17 May 2021
regarding the Fourth Amendment to Permenko No. 6 of 2020 concerning Special Treatment for Micro Credit Program Debtors Affected by the COVID-19 Pandemic, Permenko No. 19 of 2020 dated 30 December 2020 regarding the Third Amendment to Permenko No. 6 of 2020, Permenko No. 16 of 2020 dated 19 August 2020 concerning the Second Amendment to Permenko No.
6 of 2020, Permenko No. 8 of 2020 dated 6 May 2020 concerning the Amendment to Permenko No. 6 of 2020 and Permenko No. 6 of 2020 dated 14 April 2020 as to Special Treatment for the Micro Credit Program Debtors Affected by the COVID-19 Pandemic.
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. At the end of December 2021, the NPL ratio was at 2.2%, compared to the previous year’s 1.8%. This ratio remained within the Bank’s risk appetite limit 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.
Restructured Loans (non consolidated – in billion Rupiah)
2021 2020 2019 Increase / (decrease) 2021 Increase / (decrease) 2020
Nominal % Nominal %
Performing Loan 73,600 93,259 6,506 (19,659) -21.1% 86,753 1,333.4%
Current 64,918 88,005 3,145 (23,087) -26.2% 84,860 2,698.1%
Special Mention 8,682 5,254 3,361 3,428 65.2% 1,893 56.3%
NPL 8,896 4,228 2,642 4,668 110.4% 1,586 60.0%
Substandard 1,302 1,620 895 (318) -19.6% 725 81.0%
Doubtful 658 592 208 66 11.1% 384 184.1%
Loss 6,936 2,016 1,539 4,920 244.1% 477 31.0%
Total Restructured Loan 82,496 97,487 9,149 (14,991) -15.4% 88,338 965.6%
Total Loan Portfolio 620,640 575,649 588,251 44,991 7.8% (12,602) -2.1%
% Restructured Loans to Total Loans Portfolio 13.3% 16.9% 1.6% n.a -3.6% n.a 15.3%
In December 2021, restructured loans amounted to Rp82.5 trillion, a 15.4% decreased from Rp97.5 trillion in December 2020. This was derived from the current category of restructured loans that was reduced of Rp23.1 trillion or 26.2% to Rp64.9 trillion, of which Rp61.9 trillion (10.0% of total loans) were restructured under COVID-19.
Total restructured loans stood at 13.3% of BCA’s total loan portfolio.
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)”.
2021 2020 2019 2021 2020 2019
Nominal % Nominal %
Corporate 32,913 40,866 7,023 11.5% 15.9% 2.9% (7,953) -19.5% 33,844 481.9%
Commercial & SME* 37,474 42,658 8,567 18.0% 21.6% 4.0% (5,185) -12.2% 34,092 398.0%
Consumer 20,435 24,942 7,019 16.6% 21.1% 5.3% (4,508) -18.1% 17,924 255.4%
Total LAR 90,822 108,466 22,609 14.6% 18.8% 3.8% (17,646) -16.3% 85,858 379.8%
* including productive mortgage
** LAR nominal/respective loan portfolio
In December 2021, the total of BCA’s LAR stood at Rp90.8 trillion or 14.6% of total loans, a decrease from the level in the previous year at Rp108.5 trillion for all segments. The improvement in LAR ratio was supported by a decrease in restructuring loans in line with the reduction in COVID-19 cases followed by people’s mobility having a positive impact on the recovery of the business activity of several debtors.
In December 2021, the Corporate Segment’s LAR decreased by Rp7.9 trillion or 19.5% to Rp32.9 trillion, mainly from the plantation and agriculture sector. The LAR in the Commercial
& SME Segment decreased Rp5.2 trillion or 12.2% to Rp37.5
trillion, with the largest decline coming from the textile sector. Meanwhile, the LAR in the Consumer Segment decreased Rp4.5 trillion or 18.1%, mostly from Mortgage and Vehicle Loan products.
BCA continues to monitor the condition of debtors who have restructured their loans and booked the provisions for impairment losses on assets of Rp9.3 trillion in 2021, with cost of credit at 1.6%. In December 2021, the credit provision was recorded at Rp32.2 trillion, which was considered adequate in anticipating the risk of bad credit.
Top 10 Industry Sectors in Credit Portfolio of Corporate, Commercial and SME Segment (based on BCA’s internal classification)*
2021 2020 2019
Financial Services 7.2% 8.3% 7.8%
Plantation and Agriculture 6.5% 7.1% 7.4%
Distributor, Retailer and Wholesaler 6.2% 6.2% 6.2%
Building Material and Other Construction Related 5.9% 6.1% 6.7%
Edible Oil 5.3% 4.1% 2.5%
Telecommunication 5.0% 4.1% 3.5%
Properties and Construction 5.0% 5.3% 5.4%
Transportation and Logistic 4.8% 4.6% 4.1%
Infrastructure for Transportation 4.6% 3.5% 2.7%
Automotive and Transportation 4.5% 4.3% 5.1%
Total 55.1% 53.5% 51.4%
* Not including consumer and employee loans
Note: These categories are based on internal classifications by BCA and are defined differently from those in the Financial Audit Report, which refers to classifications in the General Bank Report 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.
Most of the lending is provided in Rupiah, in line with the source of funding. Lending in USD is intended for business customers whose main income is in USD.
With credit infrastructure, BCA applies prudent risk management and focuses on projects with good credit worthiness. BCA provides syndicated loans together with other banks in financing large-scale infrastructure projects, as well as closely monitoring other potential sectors for lending opportunities and also sectors under economic pressure.
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 preventive actions to minimize the risk of default. BCA periodically reviews business performance and financial performance of its debtors and immediately takes the necessary actions if the debtors experience business or financial difficulties.