Good Corporate Governance and Self Assesment Review 2011

 PT BANK SUMITOMO MITSUI INDONESIA GOOD CORPORATE GOVERNANCE IMPLEMENTATION & SELF‐ASSESSMENT REPORT For the position of year
2011
PT BANK SUMITOMO MITSUI INDONESIA GOOD CORPORATE GOVERNANCE IMPLEMENTATION REPORT For the position of year 2011 Foreword FOREWORD
In compliance with Bank Indonesia Regulation No. 8/4/PBI/2006 dated January 30, 2006, its amendment No. 8/14/PBI/2006 dated October 5, 2006 and Bank Indonesia Circular Letter No. 9/12/DPNP dated May 30, 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 2011. TRANSPARENCY OF GCG IMPLEMENTATION Transparency of GCG Implementation A DISCLOSURE OF GCG COVERAGE 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 December 31, 2011, the number of BOC of the Bank is 4 (four), namely 2 (two) Japanese citizens and 2 (two) Indonesian citizens with the following composition: Name *)
Position Masayuki Shimura President Commissioner Hiroshi Irie *) Vice President Commissioner RAG Bramono Dwiedjanto Independent Commissioner Subianto Rustandi **) Independent Commissioner Mr. Hiroshi Irie filled the vacant position effectively on October 3, 2011. Mr. Subianto Rustandi replaced Mr. Tjarsim Adisasmita effectively on October 3, 2011 **)
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 and/or BOD. 3. Do not use the Bank for personal, family, and/or other parties’ interests, which may 1
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 December 31, 2011, the Bank has 7 (seven) members of BOD namely 4 (four) Indonesian citizens and 3 (three) Japanese citizens whom are all domiciled in Indonesia. The composition of BOD is as follows: Name *)
Position Shuji Fujikawa *) President Director Nobuyasu Akagi Deputy President Director Shoichi Yamashiro Director Bruno Octer Purba Director Tri Harini Director Trie Karjati Wibowo Compliance Director Ajar Siswandono Director Mr. Masaya Hirayama replaced Mr. Shuji Fujikawa effectively on January 25, 2012. 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: 2
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. 4. Establishing Internal Audit Department, Risk Management Department/Risk Management Committee, and Compliance Department to implement the principles of GCG. BOD regularly attended every meeting conducted and provided directions for the enhancement of GCG principles related to compliance, internal auditor and external 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 3
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 and costs involved; c. The consultant shall be an independent party having a qualification to work on a project with special characteristics as referred to in letter a. 8. Providing data and information that is accurate, relevant, and timely to the BOC. 9. Possessing work guideline and procedure (Code of Conduct) that are binding on each member of the BOD, which 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 BOD All decisions by the BOD made in accordance to the work guideline and procedure shall be binding on and become the responsibilities of all members of the BOD. Any dissenting opinions and their reasons will be clearly disclosed in Minutes of Meeting of BOD which will then be signed and distributed to all BOD members. c. BOC Recommendations The followings are the summary of recommendations from BOC to BOD that were raised at the meetings of BOC held in 2011 together with the detailed agenda of the meetings: No. Date 1 25‐Jan‐11 Agenda Recommendations a) Review and acceptance on a) BOC appreciated the effort made by BOD and all staffs for the achievement of good the report of BOD regarding performance in year 2010 and advised as follows: • Evaluation on Realization of BOD to maintain the momentum throughout the year 2011 as the Bank is Business Plan as of expecting a huge expansion in year 2011. December 31, 2010. • Evaluation on Risk Profile b) BOC requested BOD to maintain well Report as of December 31, credit control of asset purchase business. 2010. c) BOC was very pleased to hear that the • Compliance and AML & CFT Company’s liquidity risk rating has been Report. improved from “moderate” to “low‐to‐
moderate” level. 4
No. Date 25‐Jan‐11 2 3 Agenda •
Follow‐up Actions on Recommendations from Commissioners. • Others. ƒ Report of Activities and Self Assessment Result of Audit Committee, Risk Monitoring Committee, Remuneration and Nomination Committee and Recommendations from Each Committee to BOC. ƒ Others. 29‐Apr‐11 ƒ Review and acceptance on the report of Board of Directors regarding as follows: • Evaluation on Realization of Business Plan as of March 31, 2011. • Evaluation on Risk Profile Report as of March 31, 2011. • Compliance and AML & CFT Report. • Follow‐Up Action on BOC Recommendation. • Others. ƒ Report of Activities and Self Assessment Result of Audit Committee, Risk Monitoring Committee, Remuneration and Nomination Committee. ƒ Approval for BOD to renew the Committed Revolving Term Loan Facility from PT Bank Central Asia Tbk. in the maximum principal. ƒ Others 27‐Jul‐11 ƒ Review and acceptance on the report of BOD regarding as follows: • Realization of Business Plan Recommendations d) BOC suggested BOD to diversify deposit e)
f)
a)
b)
customers even more to decrease dependency ratio on prime depositors. BOC highlighted the importance of the reinforcement of limit on short‐term offshore borrowing and requested BOD to monitor this matter carefully. BOC appreciated that the Bank has completed the project with Kiran Resources to improve their risk profile framework and set up the risk management unit accordingly. BOC requested BOD to monitor how this new framework works and report about this improvement in the next 6 months. BOC commented that the Bank may need to further increase the personnel and non‐personnel expenses in order to be in line with the business expansion. BOC underlined that compliance issues should be enforced from the top management to all employees. a) BOC would like to ask the Bank to analyze why profit achievement from deposit in the second quarter was only 38.2% and to demonstrate deposit 5
No. 4 Date Agenda Recommendations as of 30 June 2011. volume in terms of both current account and term deposit through chart. Evaluation on Risk Profile Report as of June 30, 2011 b) BOC expressed his appreciation to the Bank’s effort regarding the litigation • Compliance and AML & CFT cases and hoped that the Bank could win Report. • Follow‐Up Action on BOC the case and increase profit. Recommendation. c) BOC would like to see dependency ratios on top 50 prime depositors and deposit • Others. ƒ Report of Activities of Audit coverage ratio of top 15 biggest Committee, Risk Monitoring depositors in the previous quarter and Committee, Remuneration last year. and Nomination Committee and Recommendations from Each Committee to BOC. ƒ Others. 15‐Nov‐11 ƒ Review and acceptance on No recommendation. the report of BOD regarding as follows: ▪ Evaluation on Realization of Business Plan as of September 30, 2011. ▪ Evaluation on Risk Profile Report as of September 30, 2011. ▪ Compliance and AML & CFT Report. ▪ Follow‐Up Action on Recommendation from Commissioners. ▪ Others. ƒ Report of Activities of Audit Committee, Risk Monitoring Committee, Remuneration and Nomination Committee and Recommendations from Each Committee to BOC. ƒ Evaluation on the Effectiveness of each Committee’s Tasks and Responsibilities. ƒ Standard Evaluation on the Compliance Function. ƒ Approval on the Revised Code of Conduct of BOC. ƒ Others. 27‐Jul‐11 •
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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 June 27, 2007. As per December 2011, 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 *) Mr. RAG Bramono Dwiedjanto replaced Mr. Tjarsim Adisasmita effectively on October 11, 2011 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. As of December 2011, Risk Monitoring Committee consists of 3 (three) members with the following composition: Name Position Subianto Rustandi *) Chairman as well as Member Sofyan Rambey Member with expertise in Risk Management Maharani Reza Member with expertise in Banking *) Mr. Subianto Rustandi replaced Mr. RAG Bramono Dwiedjanto effectively on October 11, 2011 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 7
Remuneration and Nomination Committee Remuneration and Nomination Committee was established on 30 June 2008. As per December 2011, 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 *) Mr. RAG Bramono Dwiedjanto replaced Mr. Tjarsim Adisasmita effectively on October 11, 2011. **) Mr. Hiroshi Irie replaced Mr. Masayuki Shimura effectively on October 11, 2011. **)Mr. Akhmad Ludzain replaced Ms. Lulita Putrinda effectively on October 11, 2011. 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; 2. Strong commitment to task and objectivity judgment; 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 8
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 possess work 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 Unit’s 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. To review and ensure the adequacy and the completeness of Bank’s risk management 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: 9
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 2011, Audit Committee has conducted a total of 18 (eighteen) meetings. Risk Monitoring Committee Risk Monitoring Committee conducted a meeting at least once a month. During the year 2011, Risk Monitoring Committee has conducted a total of 12 (twelve) meetings. Remuneration and Nomination Committee Remuneration and Nomination Committee conducted a meeting at least once in 3 (three) months. From January to December 2011, Remuneration and Nomination Committee has conducted a total of 3 (three) meetings. d. Committee’s working schedule and its realization in 2011 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 2011, as follows: Monitored and evaluated for the following activities: ` Internal Audit Department’s activities, among others are realization of audit schedule refer to The Annual of Internal Audit Plan of year 2010 and year 2011; result of review by appointed Public Accountant/KPMG upon IAD’s 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); follow up action toward Bank Indonesia’s supervisory team’s recommendation for audit result per position as of 31 December 2010; submission of mandatory reporting to Bank Indonesia and progress on recruitment of Auditor’s staffs. ` Implementation/realization of In‐Office Inspection Plan including its result done by Business Administration Planning Department (BAPD). 10
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Consistency of financial report of the Bank in accordance with prevailing accounting standards. Consistency between audit implementation by the External Auditor (Ernst and Young) with prevailing audit standard for financial audit year 2010. Follow up action done by Board of Director upon result: 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 2011 (Ernst and Young) to the Board of Commissioners to be submitted to the General Meeting of Shareholders. Other activities: ` Reviewed and revised Audit Committee’s Charter ` Set up Audit Committee Planning for year 2012. ` Prepared realization of Audit Committee’s activities for year 2010 and 2011. ` Conducted self‐assessment of Audit Committee’s performance for year 2010 as implementation of Good Corporate Governance. ` Delivered the opinion to Board of Commissioners regarding selection of the Public Accountant to conduct review upon Internal Audit Department’s 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). ` Having discussion with related departments regarding the current issues and activities, among others are handling of particular loan’s facility, preparation of Bank toward the implementation of IFRS (International Financial Reporting Standard) ` Having discussion with Bank Indonesia’s supervisory team regarding their inquiries toward activities of Audit Committee during their on‐site audit in Bank. `
Having discussion with External Auditor (Ernst and Young) on Kick Off meeting of Financial Audit for year 2011. 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 2011 the committee conducted discussions with Risk Management Unit 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. 11
Discussed on minutes of Risk Management Unit meeting and Risk Management Committee meeting as a way to monitor the implementation of risk management in the Bank. Discussed on Risk Management Advisory deliverable services performed by KIRAN Resources. Revised “Risk Monitoring Committee Charter” in order to enhance tasks and responsibilities of the Chairman of Risk Monitoring Committee as well as yearly self assessment of committee. Discussed on Bank Indonesia audit result for position December 2010, particularly related to risk management. Discussed on SMBC audit result particularly related to risk management. Discussed on Asset Purchase activity in the Bank. The function and activities of Risk Monitoring Committee has been performed in accordance with the prevailing regulations. However, Bank will continuously enhance the performance of Risk Monitoring Committee in accordance with the prevailing regulations. Remuneration and Nomination Committee In the year 2011 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 2011: Conducted meeting periodically at least once in three months. Related to Remuneration Policies: ` In coordination with HRD, The Remuneration and Nomination Committee reviewed remuneration policies run by the Bank. ` 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. Others ` Evaluated and monitored employee turnover. Per semester II/2011, total employee turnover (13.3%) was decreased compared to semester I/2011 (20.7%). 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 12
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 2011: Active Supervision of the Board of Directors and the Board of Commissioners 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), and Minimum Reserve Requirement, and per December 2011, the position were recorded as follows: ` CAR: 40.13% ` NPL ratios: 0.69% (gross), 0.46% (net) ` There was no excess of LLL ` There was no violation toward the regulations concerning Net Open Position (0.20%) ` Minimum Reserve Requirement in Rupiah was 8.47% and in foreign currency was 8.36% 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. Handling Customer Complaint Resolution Bank ensured that the Customer Complaint Team, that was established by the Bank and reported directly to Director Overseeing Compliance Function, performed its tasks and responsibilities including its function as the coordinator of customer complaint resolution and submission of quarterly reports to Bank Indonesia. Bank made active efforts to resolve each customer complaint in order to prevent the arising of Reputation Risk and Legal Risk. Bank formed Compliance Department that is responsible directly to Director Overseeing Compliance Function. Compliance Department prepared Compliance Action Plan 13
compiled on the result of Compliance Risk Assessment, Risk Profile Report, the Result of Inspection of Bank Indonesia, 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. Policies and Procedures Conducted revision toward Compliance Manual to adjust it with Bank Indonesia Regulation No. 13/2/PBI/2011 regarding the Implementation of Compliance Function of Commercial Banks. 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 prevailing laws and regulations. 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 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, Bank conducted internal/in‐house training programs related to compliance as follows: 14
No. Topic Training Provider Date 1. Risk Based Bank Rating Risk Management Guard 9‐Jul ‐11
2. Refreshment/ Maintenance Program for Risk Management Certification Risk Forum 3. Legal Lending Limit for Commercial Banks & Asset Quality Rating Indonesian Banking Development Institute (LPPI) 15‐Oct‐11
4. Net Open Position, Foreign Currency Transaction against Rupiah, and Derivative Transaction LPPI 26‐Nov‐11
24‐Sept‐11
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. Sanction from Bank Indonesia During January ‐ December 2011, the Bank was imposed with 1 (one) administrative sanction toward the reporting obligation to Bank Indonesia. The details of the administrative sanction are as follows: •
Based on the result of Bank Indonesia Inspection for position as of 31 December 2010, the Bank was imposed with administrative penalty amounting IDR 650,000, which breakdown is as follows: a. Discrepancy in collectability rating of 2 (two) debtors @ IDR 100,000 = IDR 200,000 b. Reporting errors in Form 201 of LHBU of 9 (nine) items @ IDR 50,000 = IDR 450,000 To avoid the reoccurrence of this problem, the Bank will continue to improve its internal report control and subsequently submit reports in accurate and timely manner. Implementation of the Regulations Regarding Know Your Customer (KYC) Principles and Law concerning Money Laundering Criminal Actions (AMLA) 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 Money Laundering Criminal Actions, 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. 15
Taking the above considerations, throughout 2011, 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 in order to adjust it with the provisions in Law No. 3 of 2011 pertaining to Transfer of Funds and INTRAC Circular Letters No. S‐124A/1.02/PPATK/03/2011, No. S‐124B/1.02/PPATK/03/2011, No. S‐124C/1.02/PPATK/03/2011 pertinent to Postponement and Suspension of Transactions by Financial Service Provider. Further, 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, in order to enhance the parameter in 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. 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 16
performed by the Bank’s Customers as well as performed enhancement on the system, particularly related to the transaction monitoring. Human Resources and Training Bank conducted candidates’ selection based on their educational background and experiences by considering the Bank’s needs as well as implemented the screening procedures in the hiring of new employees. 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. 1. Topic KYC Principles & AML Training Types of Training e‐learning PPATK Date 31‐Dec‐11
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: Appraising the effectiveness and application of administrative and financial controls and reliability of data that is developed within the Bank. 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 of year 2011, which formed to define the expected conduct and scope of audit that related with implementation of Risk Based Audit. This Annual Internal Audit Plan of year 2011 was composed from result of assessment of audit scope either in qualitative model or in quantitative model. Policy and The Annual Internal Audit Plan of year 2011 has been approved by 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. 17
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 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 June 30, 2011 and December 31, 2011. Audit of the Bank’s Financial Statements for the year ended December 31, 2011. Siddharta Consulting (KPMG) Referring to Bank Indonesia regulation number 1/6/PBI/1999 dated September 20, 1999 regarding Designation of Compliance Director and Application of the Standards for the Practice of the Internal Audit Function for Commercial Banks and Bank Indonesia regulation number 9/15/PBI/2007 dated November 30, 2007 regarding Risk Management Implementation in the Utilization of Information Technology for Commercial Banks, during 20 – 26 July 2011 Siddharta Consulting (KPMG) has conducted 3 (three) years review on the performance and compliance of Internal Audit Department /Satuan Kerja Audit Intern (SKAI) of the Bank toward Bank Indonesia's regulations as mentioned above with coverage of review period from April 2008 up to March 2011. The result of this review has been sent to Bank Indonesia through letter number BSMI/BI/IAD/2011/615 dated August 23, 2011. Summary of result of the review are as follows: I. Related to fulfilling Bank Indonesia's regulation regarding SPFAIB covers 61 (sixtyone) items, as follows: `
`
`
`
61 items are Satisfactory Zero item is Partially Unsatisfactory Zero item is Unsatisfactory Zero item is Not Applicable (N/A) II. Related to fulfilling Bank Indonesia's regulation regarding IT Risk Management covers 14 (fourteen) items, as follows: `
`
`
`
13 (thirteen) items are Satisfactory One (1) item is Partially Unsatisfactory Zero item is Unsatisfactory Zero item is Not Applicable (N/A) Bank Indonesia (BI) Inspection From 7 March ‐ 1 April 2011, Bank Indonesia conducted audit for position 31 December 2010 with audit scope as follows: 18
`
`
`
`
`
`
Credit Risk (Loan functional activity) Liquidity Risk and Market Risk (Treasury activitiy) Compliance Risk Operational Risk (Information system Technology activity) GCG Implementation KYC and AML Implementation SMBC Audit During 7 ‐ 18 March 2011, SMBC (the Bank’s majority shareholder) conducted audit to review overall controls on operational risk and treasury risk as well as good governance in various activities of the Bank with audit scope as follows: ` Cash and Deposit ` Remittance and Clearing ` Trade Finance ` Treasury ` Treasury Risk Management ` Treasury Operation ` Other related activities The SMBC audit results are as follows: ¾ Operational Activities The result is “GREEN” which means “the internal control environment within the area reviewed is considered to be operating effectively. Weaknesses identified do not significantly impact the control environment and can be corrected in the normal course of business”. ¾ Treasury Activities 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.” In relation with the Bank’s capital increment which will affect the Bank’s business expansion, thus KPMG AZSA LLC Japan consider that the Bank’s operational has significant impact on the Group, as one of SMBC’ subsidiaries. Therefore, KPMG AZSA LLC Japan as external auditor of SMBC involved the Bank in their audit in respect of consolidation audit through SMBC Group. During 25 – 26 May 2011, KPMG AZSA LLC, Jepang conducted review with audit scope as follows: ` Understanding the overview of PT Bank Sumitomo Mitsui Indonesia ` Interview with appropriate personnel from certain departments (Non‐Japanese Banking Dept, Credit Dept, Audit Dept, Controllers Dept. etc.) ` Review of the minutes of major management meetings ` Inquiry regarding the result of local regulator’s inspection and the status of any follow‐up ` Credit review of Loans and Securities etc. (including assessment of specific borrowers) ` IFRS financial statements audit 19
The result of the above audit as follows: Based on the procedures performed, no significant matters came to the attention. Period 13 – 15 July 2011, SMBC (foreign majority shareholder) conducted credit review to examine the appropriateness and management of credit risk evaluation by the Bank. Overall rating of this review is “A”, which means, “Internal control functions effectively”. Period 12 – 23 September 2011, SMBC conducted audit to evaluate effective control over implementation of Bank Administration and other related matters which was done by the following departments/units: ` Accounting Department ` Human Resources Department ` General Affair Department ` Legal Department ` Business Administration Planning Department ` Internal Audit Department ` Information Technology Department ` Risk and governance committees and other related departments, where appropriate. The overall of audit rating for Administration 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.” IV. Risk Management Implementation In reference to BI regulation No. 5/8/PBI/2003 dated May 19, 2003, and its amendment No. 11/25/PBI/2009 dated July 1, 2009, as well as BI Circular Letter No. 5/21/DPNP/2003 dated September 29, 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 RMU meeting, RMC meeting, and ALCO meeting to discuss, as follows: a. Risk Management Unit Bank discussed on the management of 8 (eight) types of risk, among others as follows: Type of Risk Market Risk Content ` Portfolio Volume and Composition ` Potential Loss of Interest Rate Risk in Banking Book ` Business Strategy and Policy 20
Type of Risk Compliance Risk Liquidity Risk Credit Risk Operational Risk Legal Risk Reputation Risk Strategic Risk Content ` Type and Significance of Violation ` Frequency of Violation or Track Record of Bank's Compliance ` Violation towards Provisions concerning Particular Financial Transaction ` Composition of Asset, Liabilities and Administrative Account ` Concentration of Asset and Liabilities ` Vulnerability of Funding Needs ` Access to Funding Sources ` Asset Portfolio Composition and Concentration Level ` Quality of Fund Provision and Adequacy of Loan Provision ` Fund Provision Strategy and Fund Resources ` External Factor ` Business Characteristic and Complexity ` Human Resources ` Information Technology and Supporting Infrstructures ` Fraud ` External event ` Litigation Factor ` Weakness of Binding Provisions Factor ` Absence of Law/Regulation Factor ` 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 ` 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. The Bank will continuously enhance the role and function of the Risk Management Department to ascertain adequate policy, procedure, limit measurement, and internal control system. RMD also performs identification, measurement and monitoring of risk exposure on an exclusivity basis per risk type in the year 2011. For the purpose of monitoring and evaluating the risk profile, active supervision by BOC and BOD will continually be conducted.
21
V. Provision of Funds to Related Parties and Provision of Funds in Large Amount (Large Exposures) No. Total Description Debtor Nominal (mil Rp.) 1 For related parties 8 2 For main debtors: c. Individual 9 3,108,470
d. Group 13 10,756,276
796,279
VI. The Bank’s Strategic Plan In accordance with Bank Indonesia Regulation No. 12/21/PBI/2010 dated October 19, 2010 and Bank Indonesia Circular Letter No. 12/27/DPNP dated October 25, 2010 regarding Business Plan of Commercial Banks, the Bank has prepared its Business Plan for the year 2012–2014 and submitted to Bank Indonesia on November 30, 2011. 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 2011 and February 2012. 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. 436.2 billion or 20.71% increase compared to last year. From the asset side, the loan realization reached Rp. 15.97 trillion at the end of year 2011 or 27.63% higher compared to end of year 2010. The Bank has also managed to keep Non Performing Loan (NPL) ratio below 5% namely 0.69% (gross base) and 0.46% (net base) at the end of year 2011. Total assets of the Bank also increased by 28.00%, from Rp. 16.52 trillion at the end of 2010 to Rp. 21.15 trillion at the end of 2011. From the liability side, at the end of year 2011, the third party fund was amounting to Rp. 8.43 trillion or 21.44% lower compared to end of year 2010. 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 2011 was 40.13%, 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. 22
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 in accordance with the following Bank Indonesia Regulations: Bank Indonesia Regulation No. 3/22/PBI/2001 dated December 13, 2001, its amendment No. 7/50/PBI/2005 dated November 29, 2005 on Transparency in Bank Financial Condition 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 January 20, 2005 and Circular Letter No. 7/25/DPNP dated July 18, 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. Thus, there are no other reports that have not been disclosed by the Bank. B Share Ownership by BOC and BOD Members Reaching 5% or More of Paid‐up Capital 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. C B.
Financial and Family Relationship among BOC and BOD with Other BOC, BOD, and/or the Bank’s Shareholders 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. D Remuneration Package/Policy and Other Facilities for BOC and BOD Members 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: 23
Remuneration received in 1 year No. 1. BOC Description No. of People Rp. (mil) No. of People Rp. (mil)
2
312 7
12,045
‐
‐ 7
2,548
2
312 7
14,593
Remuneration (salary, bonus, fixed allowance, and other benefits not in kind) Other facilities/benefits in kind (housing, transportation, medical insurance, and so on) that*): a. can be owned b. can not be owned 2. BOD Total *) Assessed in Rupiah equivalent 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 ‐ 2 Between Rp. 500 million and Rp. 1 billion ‐ 2 Below Rp. 500 million 2 ‐ ares Option E Shares Option There is no shares system owned by the Bank. F Ratio of the Highest Salary to the Lowest Salary 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 Ratio of the highest and lowest salary of staff Percentage 2,852% Ratio of the highest and lowest salary of director 231% Ratio of the highest and lowest salary of commissioner 250% Ratio of the highest director’ salary and highest staff’s salary 114% requency of BOC Meetings 24
G Frequency of BOC Meetings The Bank has held BOC meetings 4 (four) times in a year, namely on January 25, April 29, July 27, and November 15, 2011. 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 Jan 25, 2011
2 Physically attended by 100% of total BOC members April 29, 2011
3 Physically attended by 100% of total BOC members July 27, 2011
4 Attended by 100% of total members of BOC through video conference Nov 15, 2011
H Number of Internal Fraud During the year 2011, there were no internal fraud that occurred in the Bank. I Number of Litigation Cases Number of Litigation Cases The number of litigation cases faced by the Bank for the position of year 2011 was as follows: I.
Description Total Private Settled 0 In the settlement process in the Bank 3 Total 3 The summary of litigation cases that in the settlement process could be outlined below: Year Type of Tax Dispute Claim of Refund
(million Rp.) Criminal ‐
‐
‐
Status as of 31 Dec 2011 SUPREME COURT 2002 Corporate Income Tax Dispute 81,424 On April 1, 2011, the Bank received Judicial Review from the Director General of Tax (DGT) filed a lawsuit to Supreme Court to revoke the year 2002 Corporate Income Tax Decision toward Interest on Non Performing Loan, Foreign Exchange Loss and Bad Debt expenses. 25
Type of Tax Dispute Year Claim of Refund
(million Rp.) Status as of 31 Dec2011 SUPREME COURT Corporate Income Tax Dispute 81,424 2003 Interest compensation 15,392 2002 Interest Compensation Corporate Income Tax 42,431 Subsequently on April 15, 2011, the Bank filed the Contra Memorandum of Reconsideration to the Supreme Court. The outcome of the appeal filed by the Directorate General of Taxation to the Supreme Court is not presently determinable. The Director General of Taxes applied for appeal to the Supreme Court for canceling the decision from Tax Court related to interest compensation. The outcome of the appeal filed by the Directorate General of Taxation to the Supreme Court is not presently determinable. In January 2012, the Director General of Taxation filed an appeal to the Supreme Court to revoke the decision of the Tax Court and refused to pay such additional interest compensation amounting to Rp. 42,431 million. The outcome of the appeal filed by the Directorate General of Taxation to the Supreme Court is not presently determinable. J J.
Transactions Containing Conflict of Interest Transactions Containing Conflict of Interest During the year 2011, there were no transactions containing conflict of interest arising in the Bank. The Bank has possessed and enforced its own internal policy written in Compliance Manual regarding the handling, administration of record keeping, documentation and disclosure of conflict of interest within the minutes of meeting in case it happened. In addition, the majority shareholder of the Bank, SMBC, also issued the “Rules for Managing Conflict of Interest" which has been applied in the Bank as long as it is not contrary to the prevailing laws and regulations in Indonesia. K Buy Back of Bank’s Shares and/or Bonds Buy Back of Bank’s Shares anor Bonds There was no Buy back of Bank shares during the year 2011. L Provision of Funds for Social Activities and Political Activities during the Reporting
Provision of Funds for Social Activities and Political Activities during the Reporting There was no provision of funds for social and political activities generated from the Bank during 2011. 26
II
NO Aspects being assessed
1
2
3
4
5
6
GENERAL RESULT OF GCG SELF-ASSESSMENT
PT BANK SUMITOMO MITSUI INDONESIA
Rating
Implementation of the Duties
and Responsibilities of Board
of Commissioners (BOC)
2
Implementation of the Duties
and Responsibilities of Board
of Directors (BOD)
2
Completion and
Implementation of the Duties
of Committees
2
Handling of Conflicts of
Interest
1
The Implementation of Bank's
Compliance Function
The Implementation of Internal
Audit Function
2
2
Strengths and Weaknesses
Action Plan
BOC has taken actions and made decisions independently;
transparency aspect is sufficiently good and has never violated the
prohibitions as stipulated in the regulations. Working guidelines and
procedure for BOC has also been established in accordance with the
prevailing regulations.
BOC will continously enhance the implementation of duties
and responsibilities comply with the GCG principles and
prevailing regulations.
The function of Directors has been conducted effectively and the BOD’s
meetings have been held periodically. The implementation of the duties
and responsibilities of BOD has complied with the GCG principles.
However, based on Bak Indonesia audit per position 31 December
2010, there are weaknesses that if not remedied immediately, may
cause a downgrading of the Rating Factor.
The Bank has committed to conduct follow up actions on
those weaknesses as documented in findings of Bank
Indonesia Inspection result for position as of December 31,
2010. The Bank will closely monitor the progress of each
follow up action to be reported to Bank Indonesia.
The function and activities of Audit Committee, Risk Monitoring
Committee and Remuneration and Nomination Committee have been
performed in accordance with the prevailing regulations.
Completion and implementation of the Duties of Committees
will be continously enhance.
The Bank has continuously enforcred its internal rule regarding the
handling of conflict of interests, disclosing, discussing, and
documenting any conflict of interest, as well as monitoring its customer
transactions to ensure that there will be no transaction that may put the
Bank into a conflict of interest situation. In 2011, there were no
transactions that put the Bank into a situation with conflict of interest
with its customers, which caused the Bank to suffer from losses or
reduced its profit.
The Bank would constantly observe its internal rule
regarding the handling of conflicts of interest, disclose,
discuss, and document any conflicts of interest, and monitor
its customer transactions to ensure that there will be no
transactions that may put the Bank into a conflict of interest
situation.
The implementation of tasks and independency of Compliance Director
and Compliance Unit has run very effectively. Compliance Director and
Compliance Unit has performed regular review regarding the
implementation of compliance principle through Compliance Self
Reviewing and observed the Bank's internal rules to ensure that the
procedures have already complied with the regulations.
The Bank would continuously improve ‘Compliance
Awareness’ at all levels of the organization of the Bank, so
that the compliance principle will always be implemented in
each business activities of the Bank.
The implementation of internal audit function has run effectively. The
the Bank will continously enhance the implementation of
result of 3 (three) years Internal Audit Quality Assurance Review
Risk Based Audit and revise the Annual Internal Audit Plan
conducted by KPMG in July 2011 was the performance and compliance of year 2011 by May 2011.
of Internal Audit Department has coincided with requirements of
SPFAIB (The Standard of The Practice of Internal Audit) and IT Audit
Risk Management refers to Bank Indonesia regulations. However,
based on Bank Indonesia audit per position 31 December 2010, there
are some weakness in the Annual Internal Audit Plan of year 2011.
Target Date
Status
-
Ongoing Process
Dec 2011
Done
-
Ongoing Process
-
Ongoing Process
-
Ongoing Process
May 2011
Done
II
NO Aspects being assessed
7
8
9
10
The Implementation of
External Audit Function
The Implementation of Risk
Management and Internal
Control System
Facilities to Related Parties
and
dL
Large E
Exposures
Transparency of Financial and
Non-Financial Conditions,
GCG Implementation Report
and Internal Reporting
11 The Bank's Strategic Plan
Composite Value
GENERAL RESULT OF GCG SELF-ASSESSMENT
PT BANK SUMITOMO MITSUI INDONESIA
Rating
1
2
3
2
2
2
Strengths and Weaknesses
The Bank appointed Purwantono, Suherman & Surja as its external
auditor in carrying out the Bank's financial audit reports year 2011.
Audit implementation has fulfilled the criteria stipulated. The
appointment of this external auditor has also complied with the
procedure in place.
Action Plan
Target Date
Status
The Bank would continue to maintain its compliance to
ensure that the appointment of external auditor as well as its
audit implementation has been complied with the prevailing
regulations.
-
Ongoing Process
Dec 2011
Done
-
Ongoing Process
-
Ongoing Process
Dec 2012
In Progress
The Bank will continuously enhance the function of each
Procedure and implementation of Bank's internal control will
section in Risk Management Department in measuring risk
continuously be enhanced. Management gives support for the
improvement of staff quality by conducting required trainings including e- profile of each risk types.
learning program. Related to risk management, Management has
actively encouraged staff to particapate in the Risk Management
Certification Program. Based on the Bank Indonesia audit per position
31 December 2010, there was some weaknesses on the
implementation of risk management.
There was no violation or excess of LLL in year 2011. As of December
31 2011
31,
2011, final
fi l risk
i k to fifinance iindustry
d
iis 2
2.92%
92% off totall portfolio.
f li Th
The
Bank has mitigated this credit concentration risk either by SBLC of
prime banks or Corporate Guarantee of multinational companies.
The Bank would closely monitor the increasing trend of loan
concentration
i
l
level
l and
d implement
i l
prudential
d i l principles
i i l
i
in
providing funds so that the risk would be mitigated and
managed well.
Information on financial and non-financial condition is highly proper and The Bank would continuously ensure that the information on
in compliance with the prevailing regulations. GCG Implementation
financial and non-financial aspects is highly proper and in
Report and other internal reports have also been prepared in
compliance with the prevailing regulations.
accordance with the prevailing regulations. However, the Bank has
received few findings and recommendations from Public Accountant
with regard to the financial audit for the year ended December 31,
2011.
Corporate Plan and Business Plan of the Bank have been prepared
according to the prevailing regulations and realized well in accordance
with determined target, the Bank’s vision and mission, as well as taking
into account all external and internal factors, prudence principles and
sound Banking principles. As of December 31, 2011, the level of
inherent risk for Strategic Risk is low and the level of internal control
adequacy is satisfactory, as such, the risk composite is low. Overall
business plan realization for year 2011 was good (higher than the
target), as reflected in capitalization, asset quality and profitability.
The Bank would do its utmost to achieve its business
performance targets which have been established in the
Bank’s Business Plan 2012 – 2014 and regularly monitor the
progress to ensure that the level of strategic risk stays at low
level.
Rating: Good
PT BANK SUMITOMO MITSUI INDONESIA GOOD CORPORATE GOVERNANCE SELF‐ASSESSMENT REPORT For the position of year 2011 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOC I. The Implementation of the Duties and Responsibilities of BOC Objective To evaluate: ƒ The adequacy of the total, composition, integrity and competence of the Commissioners compared to the size and complexity of the Bank’s business, the minimum criteria and the independence level of the members of the BOC. ƒ The effectiveness of the implementation of the duties and responsibilities of the BOC. ƒ The effectiveness of the meetings of BOC. ƒ The adequacy of the disclosure aspect regarding the shareholding and the various relationships of a member of the BOC and another member of the BOC, members of the Directors and/or the Controlling Shareholders of the Bank; ƒ The compliance of the BOC to the prohibition stipulated in the prevailing regulations and legislation. Sub Factor A. The Composition, Criteria and Independency of the BOC Criteria/Indicators Self Assessment Analysis 1. The total number of the BOC is minimum 3 (three) members and does not BOC of PT BSMI consists of 4 (four) persons, not exceeding total BOD exceed the total number of the Directors. members (7 persons). 2. Minimum 1 (one) member of BOC is domiciled in Indonesia. 2 (two) members of BOC are domiciled in Indonesia (Mr. RAG Bramono Dwiedjanto and Mr. Subianto Rustandi). 3. Minimum 50% of the total members of BOC are Independent The Bank has 2 (two) Independent Commissioners, 50% from the total Commissioners. commissioners, therefore this requirement has been fulfilled. 4. Replacement and or appointment of BOC has taken into account the The appointment of Mr. Hiroshi Irie as Vice President Commissioner and Mr. recommendation from the Nomination Committee or the Remuneration Subianto Rustandi as Independent Commissioner has taken into account the and Nomination Committee and approved by the General Meeting of recommendation from Remuneration and Nomination Committee no.: Shareholders. BSMI/RemCom/2011/012 dated April 29, 2011 and no.:BSMI/RemCom/2011/014 dated May 6, 2011 respectively and approved by the Shareholders Circular Resolution in lieu of an Extraordinary General Meeting of Shareholders. 5. The Independent Commissioners do not hold another position except as The Independent Commissioners do not hold multiple/concurrent positions stipulated in the PBI regarding the Implementation of GCG for Commercial as stipulated in statement letter in connection with application for approval Banks, i.e. only hold a position as members of the BOC, Directors or of BOC members. 1 Executive Officers: Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOC I. The Implementation of the Duties and Responsibilities of BOC • In 1 (one) non Bank financial institution; or • Who carries out supervision function in 1 (one) non Bank subsidiary controlled by the Bank; and a double position as Independent Commissioner as the Chairman of Committee maximum as 2 (two) Chairman of Committee at the same Bank. 6. The majority of commissioners are not related up to the second level with other members of the Commissioners and/or Directors. B. Duties and Responsibilities of BOC Criteria/Indicators 1. BOC has ensured the implementation of GCG principles in each business activity of the Bank at all levels of the organization. 2. BOC has supervised the implementation of the duties and responsibilities of the Directors periodically or at any time, and to give advice to the Directors. 3. In the framework of implementing the supervisory duties, BOC has directed, monitored and evaluated the implementation of the Bank’s strategic policies. 4. BOC is not involved in the decision making of the Bank’s operational activities except in the facilities to related parties and other matters determined in the Bank’s Articles of Association and or the prevailing regulations in the framework of carrying out the supervision function. All Commissioners are not related up to the second level with members of Commissioners and/or Directors as stipulated in statement letter in connection with application for approval of BOC members. Self Assessment Analysis GCG Principles have been implemented well in each business activity of the Bank at all levels of the organization. Has been conducted accordingly by submitting supervision report semiannually to BI, Independent Commissioner fortnightly visit to BSMI and quarterly conducting Coordination Meetings of BOC and BOD (Jan. 25, April 29, July 27 and Nov. 15, 2011) to supervise BOD’s activities and give advices and recommendations to BOD. BOC has approved the Banks’ Business Plan and Corporate Plan at BOC meeting and also monitored and evaluated the realization of Business Plan and other strategic matters (if any) and discuss it during BOC meetings. BOC is not involved in the decision making of the Bank’s operational activities except in the facilities to related parties and other matters determined in the Bank’s Articles of Association and or the prevailing regulations in the framework of carrying out the supervision function 2 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOC I. The Implementation of the Duties and Responsibilities of BOC 5. BOC has ensured that the Directors have followed up audit findings and recommendations from the Bank’s internal audit unit, external auditors, the result of Bank Indonesia audit and or the supervision of other authorities. 6. BOC shall notify Bank Indonesia at the latest 7 (seven) business days from the date they find a breach of the regulations in the financial and banking sector, and the condition or the estimation of a condition which may endanger the Bank’s business continuity. 7. BOC has carried out the duties and responsibilities independently. 8. BOC has established an Audit Committee, a Risk Monitoring Committee and the Remuneration and Nomination Committee. 9. The appointments of the Committee members have been done by the Directors based on the resolutions of BOC meeting. 10. BOC has ensured that the Committees established performed their duties effectively. 11. BOC has business guidelines and procedure mentioning the work ethics, business hours and meetings. Has been conducted through monthly report and semi‐annual internal audit report. BOC provided their comments/opinions in the monthly report. There were no violations of regulations in the financial and banking sector and the condition or the estimation of a condition that may endanger the Bank’s business continuity during the year 2011. If there were any violations, BOC would report in accordance with prevailing regulations. Has been conducted accordingly. Decision‐makings in BOC meetings could not be influenced by others. Audit Committee and Risk Monitoring Committee were established on June 27, 2007 and Remuneration and Nomination Committee was established on June 26, 2008. The appointment of Mr. Akhmad Ludzain and Mr. Hiroshi Irie as members of Remuneration and Nomination Committee, Mr. Subianto Rustandi as Chairman of Risk Monitoring Committee and Mr. RAG. Bramono Dwiedjanto as Chairman of Audit Committee and Remuneration and Nomination Committee have been done by the Directors based on circular resolution letter in lieu of BOC meeting no.: 021/BOC/Circular/X/2011. Has been conducted through the appointment of BOC members as committee members and participate actively in committee meetings. Guidance and Code of Conduct for members of BOC has been established on June 28, 2007. On July 27, 2010, the Bank has conducted revision I and on 3 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOC November 15, 2011 conducted revision II. 12. BOC has provided sufficient time to carry out their duties and BOC has provided sufficient time to carry out their duties and responsibilities. responsibilities in an optimal manner. Indonesian commissioners conducted weekly visit to BSMI while Japanese commissioners visited BSMI if there are important matters to be discussed and attended BOC meetings physically and through teleconference. C. The Effectiveness of the BOC Meetings Criteria/Indicators Self Assessment Analysis 1. BOC meetings have been convened periodically, minimum 4 (four) times a BOC meetings, which have been held 4 (four) times (January 25, April 29, July year, and physically attended or via teleconference technology by all 27 dan November 15, 2011) were attended by all BOC members physically members of the Commissioners minimum 2 times (twice) a year. and through teleconference. 2. Decision making of BOC meetings has been done based on discussion and Has been conducted accordingly as stated in Guidance and Code of Conduct deliberation or the majority votes in the event there is no consensus. for BOC. 3. The results of BOC meetings have been put in minutes of meetings and Has been conducted accordingly as stated in minutes of BOC meeting and well documented, including the dissenting opinions clearly. well documented. During year 2011, there is no dissenting opinion. 4. The results of BOC meetings have been distributed to all members of the Has been conducted accordingly, the delivery on the results of BOC meetings BOC and related parties. has been well documented. 5. The results of the BOC meetings could be used as recommendations and/or Has been conducted accordingly. The recommendations from BOC have been advices, which can be implemented by the Annual General Meeting of followed up by the Bank and evidences related to the follow‐up actions have Shareholders and/or the Directors. been well documented. D. Transparency, Relationship in Finance, Management and Family and Prohibitions for BOC Criteria/Indicators Self Assessment Analysis 1. In the GCG Reports, BOC has disclosed: Has been disclosed in the statement letter submitted on the process of ƒ Shareholding which has reached 5% (five percent or more in the selection/fit & proper test and will be reported in 2011 GCG Implementation respective Bank or in other Banks and companies (inside and outside Report. the country) 4 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOC ƒ Financial and family relationships with other members of the BOC, members of Directors and or Controlling Shareholders of the Bank. ƒ Remuneration and other facilities. 2. BOC does not take advantage of the Bank for personal interest, the interest Members of BOC do not take advantage of the Bank for personal interest, the of their families and or other parties, which cause loss or reduce the Bank’s interest of their families and or other parties, which cause loss or reduce the profit. Bank’s profit. 3. BOC does not take and or receive personal profit from the Bank other than Members of BOC do not take and or receive personal profit from the Bank the Remuneration and the other facilities as determined in the General other than the remuneration and the other facilities as determined in the Meeting of Shareholders. General Meeting of Shareholders. E. Information on Fit and Proper Test (F&P Test) Criteria/Indicators Self Assessment Analysis 1. All members BOC have integrity, competence and adequate financial Has been conducted accordingly in the selection until appointment process of reputation. BOC members. 2. All members of BOC, which are former members of Directors or Executive Not Applicable. Officers of the Bank or parties, related to the Bank which may influence their capabilities to act independently, and who do not carry out supervision function and from the Bank itself, have passed the cooling off period minimum 1 (one) year. 3. All Independent Commissioners do not have relationship in financial, All Independent Commissioners do not have relationship in financial, management, shareholding and family with other members of the BOC, management, shareholding and family with other members of the BOC, Directors and/or Controlling Shareholders or a relationship with the Bank, Directors and/or Controlling Shareholders or a relationship with the Bank as which may influence their capabilities to act independently. stipulated in statement letter in connection with application for approval of BOC members. 4. All members of BOC have passed the F&P Test and have been approved by Has been conducted accordingly and obtained Approvals by Bank Indonesia Bank Indonesia. for BOC members are as follows; 5 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOC ƒ Mr. Masayuki Shimura through BI letter No. 12/101/GBI/DPIP/Rahasia dated July 22, 2010. ƒ Mr. Hiroshi Irie through BI letter No. 13/91/GBI/DPIP/Rahasia dated August 11, 2011. ƒ Mr. RAG Bramono Dwiedjanto through BI letter No. 11/32/GBI/DPIP/Rahasia dated March 19, 2009. ƒ Mr. Subianto Rustandi through BI letter No. 13/91/GBI/DPIP/Rahasia dated August 11, 2011. Rating Criteria 1 – The ASPECTS of the Implementation of the Duties and Responsibilities of BOC Rating 1 ƒ The total composition, integrity and competence of the members BOC are appropriate compared to the size and complexity of the Bank’s business and have fulfilled the prevailing regulations. ƒ All members of BOC are able to act and make decisions independently. ƒ The implementation of the duties and responsibilities of BOC has fully complied with the GCG principles, are effective and without any minor weakness. ƒ BOC meetings are effective and efficient. ƒ The transparency aspect of BOC is excellent and they have never violated the prohibitions in the regulations. Rating 2 ƒ The total composition, integrity and competence of the members of BOC are in accordance with the size and complexity of the Bank’s business and have fulfilled the prevailing regulations. ƒ All members of BOC are able to act and make decisions independently. ƒ The implementation of the duties and responsibilities of BOC has complied with the GCG principles, but with minor weakness. ƒ BOC meetings are effective and efficient. ƒ The transparency aspect of the members of BOC is good and they have never violated the prohibitions in the regulations. Rating 3 ƒ The total, composition, integrity and competence of the members of BOC are quite in accordance with the size and complexity of the Bank’s business and have fulfilled the prevailing regulations. ƒ All members of BOC are able to act and make decisions independently. ƒ The implementation of the duties and responsibilities of BOC has complied with the GCG principles, but there are weaknesses that, if not remedied immediately, may cause a downgrading. ƒ BOC meetings are quite effective and efficient. ƒ The transparency aspect of the members of BOC is quite good and they have never violated the prohibitions in the regulations. 6 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOC Rating 4 ƒ The total, composition, integrity and competence of BOC are not in accordance with the size and complexity of the Bank’s business and the compliance to the prevailing regulations. ƒ BOC has acted and made decisions not quite independently. ƒ The implementation of the duties and responsibilities of BOC has not fully complied with the GCG principles, not fully efficient and there are significant weaknesses in the implementation, which may cause a downgrading and rating of the GCG composite. ƒ BOC meetings are not so effective and efficient. ƒ The transparency aspect of the members of BOC is not good and they have violated the prohibitions in the regulations. ƒ The total, composition, integrity and competence of the members of BOC are not in accordance with the size and complexity of the Bank’s business and the compliance to the prevailing regulations. ƒ BOC has not acted and taken decisions independently. ƒ The implementation of the duties and responsibilities of BOC has not complied with the GCG principles and there are significant weaknesses in the implementation, which may cause a downgrading and rating of the GCG composite of the Bank. ƒ BOC meetings are neither effective nor efficient. ƒ The transparency aspect of the members of BOC is bad and they have often violated the prohibitions in the regulations. CONCLUSION: IDENTIFICATION OF ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 2 (Last year’s rating = 2) BOC has taken actions and made decisions independently; transparency aspect is sufficiently good and has never violated the prohibitions as stipulated in the regulations. Working guidelines and procedure for BOC has also been established and reviewed in accordance with the prevailing regulations. Follow up plan: BOC will continuously improve their duties and responsibilities based on GCG principles and the prevailing regulation. Rating 5 7 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOD II. The Implementation of the Duties and Responsibilities of BOD Objective To evaluate: ƒ The adequacy of the total, composition, integrity and competence of the members of BOD compared to the size and complexity of the Bank’s business, the minimum criteria, and the independency level of the members of BOD. ƒ The effectiveness of the implementation of the duties and responsibilities of BOD. ƒ The effectiveness of the meetings of BOD. ƒ The adequacy of the disclosure aspect regarding the shareholding and the various relationships of BOD with the members of BOC, another member of BOD and/or the Controlling Shareholder of the Bank. ƒ The compliance of the Directors to the prohibition stipulated in the prevailing regulations and legislation. SUB FACTOR A. The Composition, Criteria and Independence of the Directors Criteria/Indicators Self Assessment Analysis 1. The total members of the BOD are minimum 3 (three) members. Currently, BOD consists of 7 (seven) members. 2. All members of the BOD are domiciled in Indonesia. All members of BOD are domiciled in Indonesia. 3. Replacement and or appointment of BOD have taken into account the The appointment of Mr. Masaya Hirayama as President Director to recommendation from the Nomination Committee or the Remuneration and the replace Mr. Shuji Fujikawa effectively on January 25, 2012 has taken Nomination Committee. into account the recommendation from Remuneration and Nomination Committee no.: BSMI/RemCom/2011/018. 4. The majority of the members of the BOD have experience minimum 5 (five) years Majority members of BOD have experience minimum 5 (five) years in in operational fields as Bank Executive Officers of the Bank, except for Shariah banking industries. Bank (minimum 2 years). 5. BOD does not hold another position as Commissioners, Directors or Executive Members of BOD do not hold any multiple / concurrent positions as Officers at another Bank, company and or another institution except the items as stated in their Statement Letter in connection with the application for stated in PBI regarding the GCG Implementation for Banks i.e. to become the BOC approval on candidate of BOD member. in the framework of carrying out the supervisory duties of the investment in a non Bank subsidiary controlled by the Bank. 8 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOD II. The Implementation of the Duties and Responsibilities of BOD 6. The members of BOD severally or jointly do not have shareholding more than 25% (twenty five percent) of the paid up capital at another company. 7. BOD has appointed Committee members based on the resolutions of the BOC meeting. 8. The majority members of BOD do not have family relationship up to the second level with other members of the Directors and/or the members of BOC. 9. Members of BOD do not issue a general power of attorney to another party resulting in a transfer of the duties and function of BOD. B. Duties and Responsibilities of the Directors Criteria/Indicators 1. BOD is fully responsible for the management of the Bank. 2. BOD manages the Bank in accordance with the authorities and responsibilities as regulated in the Articles of Association and the prevailing legislation. 3. BOD has carried out the GCG principles in each business activity of the Bank at all levels or steps of the organization. Members of BOD do not have shareholding more than 25% of the paid‐up capital at another company as stated in their statement letter in connection with the application for approval on candidate of BOD member. The appointment of Mr. Akmad Ludzain and Mr. Hiroshi Irie as Remuneration and Nomination Committee member, Mr. Subianto Rustandi as the Chairman Risk Monitoring Committee and Mr. RAG. Bramono Dwiedjanto as the Chairman of Audit Committee and Remuneration and Nomination Committee has done by the Directors based on the circular resolutions in lieu of BOC meeting no.: 021/BOC/Circular/X/2011. Members of BOD do not have family relationship up to the second level with other members of the Directors and/or the members of BOC as stated in their Statement Letter in connection with the application for approval on candidate of BOD member. Members of BOD do not issue a general power of attorney to another party resulting in a transfer of the duties and function of BOD as stated in their Statement Letter in connection with the application for approval on candidate of BOD member. Self Assessment Analysis BOD is fully responsible for the management of the Bank. Has been conducted accordingly. Has been conducted accordingly, however there are weaknesses as documented in findings of Bank Indonesia Inspection result for 9 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOD II. The Implementation of the Duties and Responsibilities of BOD 4. BOD has established the SKAI, SKMR and Risk Management Committee and the Compliance Unit. 5. BOD has followed up audit findings and recommendation from SKAI, the external auditor and Bank Indonesia findings and or the supervision result of other authorities. 6. BOD has given accountability for the execution of their duties to the shareholders in the General Meeting of Shareholders. position as of 31 December 2010 such as: • There are some weaknesess on the appointment and employment of foreign manpowers (TKA) as well as the transfer knowledge program by TKA to local counterparts. • The Bank has not yet finalized the translation of the rules & regulation to Bahasa Indonesia. Bank’s commitment and follow‐up actions: As of December 31, 2011. the Bank has settled the above findings with the following actions: ‐ Bank has revised the mechanism on the appointment and employment of TKA and implementing the new comprehensive format. ‐ Bank has revised policy of HRD related to the transfer knowledge program by TKA to local counterparts. ‐ The Bank has finalized the translation of the rules & regulation to Bahasa Indonesia. BOD has established the Internal Audit Department (IAD) as SKAI, SKMR and Risk Management Committee and Compliance Department (COD) as Compliance Unit, as reflected in the Bank’s organization chart. Has been conducted accordingly by preparing follow up action and targeted deadline for each audit findings and recommendations. Has been conducted accordingly. BOD has conveyed the Annual Report of for the financial year 2008, 2009 and 2010 at the Annual General Meeting of Shareholders on March 30, 2009, March 31, 2010, April 8, 2011 and March 26, 2012 respectively. 10 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOD II. The Implementation of the Duties and Responsibilities of BOD 7. BOD has disclosed the Bank’s strategic policies in the employment sector to the employees via a media easily accessible by the employees. 8. BOD does not use individual advisor and/or professional service as a consultant except for specific project, based on an explicit contract covering the scope of work, responsibilities, tenor of the work, and the fees and the consultant is an Independent Party with the qualification to carry out the special project. 9. BOD has provided data and information that are comprehensive, accurate, updated and on timely basis to BOC. 10. BOD has business guidelines and procedure, which have stated the business ethics, business hours and meeting. Has been conducted accordingly via BSMI Library on Lotus Notes that are easily accessible by all employees. BOD does not use individual advisor and/or professional service as a consultant except for specific project and the consultant is an Independent Party with the qualification to carry out the special project. BOD has reported their activities through Coordination meeting of BOD & BOC. Also BOD has provided data and information to BOC by letter, e‐mail and/or phone on timely basis. Guidance and Code of Conduct for members of BOD have been established on June 28, 2007. On May 2, 2011, the Bank has conducted revision I. C. The Effectiveness of BOD Meetings Criteria/Indicators Self Assessment Analysis 1. BOD has adopted strategic policies and resolutions via the mechanism of the BOD Meetings were conducted to make strategic policies and Directors’ meeting. decisions such as organization structure change. 2. The Decision making of BOD meetings have been done based on discussion and Has been conducted accordingly as stated Guidance and Code of deliberation or the majority votes in the event there is no consensus. Conduct for members of BOD. 3. The result of BOD meetings is put in minutes of meetings and well documented, Has been conducted accordingly as stated in minutes of BOD meeting including the dissenting opinions in BOD meetings. and well documented. During year 2011, there is 1(one) dissenting opinion related to risk management certification policy. 4. Every decision taken by BOD in the meetings can be implemented and in Has been conducted accordingly. accordance with the prevailing business policy, guidelines and procedure. D. Transparency, Relationship in financial, management and family as well as Prohibitions for BOD Criteria/Indicator Self Assessment Analysis 11 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOD II. The Implementation of the Duties and Responsibilities of BOD 1. In the GCG Reports, all members of BOD have disclosed: ƒ Shareholding which reaches 5% (five percent) or more in the respective Bank or in other Banks and companies (inside and outside the country) ƒ Financial and family relationships with other members of BOC, members of BOD and or the Controlling Shareholders of the Bank. ƒ Remuneration and other facilities. 2. BOD does not take advantage of the Bank for personal interest, the interest of their families and or other parties, which cause loss or reduce the Bank’s profit. 3. BOD does not take and or receive personal profit from the Bank other than the Remuneration and the other facilities as determined in the General Meeting of Shareholders. 4. BOD severally or jointly does not hold shares exceeding 25% (twenty five percent) of the paid up capital in another company. E. Information on Fit and Proper Test (F&P Test) Criteria/Indicator 1. All members of BOD have integrity, competence and adequate financial reputation. 2. The President Director is independent from the Controlling Shareholder, i.e. does not have relationship in financial, management, shareholding and family. 3. All members of BOD have passed the F&P Test and have been approved by Bank Indonesia. Has been disclosed in the statement letter submitted on the process of selection / fit & proper test and will be disclosed in 2011 GCG Implementation Report. BOD does not take advantage of the Bank for personal interest, the interest of their families and or other parties, which cause loss or reduction in the Bank’s profit. BOD does not take and/or receive personal profit from the Bank other than the Remuneration and the other facilities as determined in the General Meeting of Shareholders. BOD severally or jointly does not hold shares exceeding 25% (twenty five percent) of the paid up capital in another company as stated in their statement letter in connection with the application for approval on candidate of BOD member. Self Assessment Analysis Has been conducted in the process of selection until appointment of BOD members. Has been conducted accordingly as stated in his statement letter for independency (surat pernyataan independensi). All members of BOD have passed the F&P Test and have been approved by Bank Indonesia with the following details: ƒ Mr. Shuji Fujikawa through BI letter No. 12/86/GBI/DPIP/Rahasia dated July 1, 2010. 12 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOD II. The Implementation of the Duties and Responsibilities of BOD ƒ Mr. Masaya Hirayama through BI letter No. 13/134/GBI/DPIP/Rahasia dated December 13, 2011 (replaced Mr. Shuji Fujikawa effective on January 25, 2012). ƒ Mr. Nobuyasu Akagi through BI letter No. 11/130/GBI/DPIP/Rahasia dated September 24, 2009. ƒ Mr. Shoichi Yamashiro through BI letter No. 8/42/GBI/DPIP/Rahasia dated April 28, 2006. ƒ Mr. Bruno Octer Purba through BI letter No. 7/26/GBI/DPIP/Rahasia dated June 21, 2005. ƒ Ms. Tri Harini and Ms. Trie Karjati Wibowo through BI letter No. 10/23/GBI/DPIP/Rahasia dated February 20, 2008. ƒ The Appointment of Ms. Trie Karjati Wibowo as Compliance Director through BI letter No. 10/111/GBI/DPIP/Rahasia dated July 28, 2008. ƒ Mr. Ajar Siswandono through BI letter No. 11/92/GBI/DPIP/Rahasia dated July 15, 2009. Rating Criteria 1 – The Aspects of the Implementation of the Duties and Responsibilities of the Directors Rating 1 ƒ The total, composition, integrity and competence of the members of BOD are appropriate compared to the size and complexity of the Bank’s business. ƒ The all members of BOD are able to act and make decisions independently. ƒ The implementation of the duties and responsibilities of BOD has fully complied with the GCG principles, are effective and without any minor weakness. ƒ BOD meetings are effective and efficient. ƒ The transparency aspect of BOD is excellent and they have never violated the prohibitions in the regulations. Rating 2 ƒ The total, composition, integrity and competence of BOD are in accordance with the size and complexity of the Bank’s business. ƒ The all members of BOD are able to act and make decisions independently. ƒ The implementation of the duties and responsibilities of BOD has complied with the GCG principles, but with minor weakness. ƒ BOD meetings are effective and efficient. ƒ The transparency aspect of BOD is good and they have never violated the prohibitions in the regulations. 13 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE DUTIES AND RESPONSIBILITIES OF BOD II. The Implementation of the Duties and Responsibilities of BOD Rating 3 ƒ The total, composition, integrity and competence of BOD are quite in accordance with the size and complexity of the Bank’s business. ƒ The all members of BOD are able to act and make decisions independently. ƒ The implementation of the duties and responsibilities of BOD has complied with the GCG principles, but there are weaknesses that if not remedied immediately, may cause a downgrading of the Rating Factor. ƒ BOD meetings are quite effective and efficient. ƒ The transparency aspect of BOD is quite good and they have never violated the prohibitions in the regulations. Rating 4 ƒ The total, composition, integrity and competence of BOD are not appropriate compared with the size and complexity of the Bank’s business and do not fully comply with the prevailing regulations. ƒ BOD has acted and taken decisions less independently. ƒ The implementation of the duties and responsibilities of BOD has not complied with the GCG principles and there are significant weaknesses in the implementation which may cause a downgrading of the Rating Factor and GCG Composite. ƒ BOD meetings are less effective and efficient. ƒ The transparency aspect of BOD is not good and they have violated the prohibitions in the regulations. Rating 5 ƒ The total, composition, integrity and competence of BOD are not in accordance with the size and complexity of the Bank’s business and do not comply with the prevailing regulations. ƒ BOD has not acted and taken decisions independently. ƒ The implementation of the duties and responsibilities of BOD has not complied with the GCG principles which may cause a downgrading of the GCG quality or the downgrading of the GCG composite of the Bank, the management aspects in CAMELS and the composite ratings in CAMELS. ƒ BOD meetings are neither effective nor efficient. ƒ The transparency aspect of BOD is bad and they have often violated the prohibitions in the regulations. CONCLUSION: IDENTIFICATION OF ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 3 (Last year’s rating = 2) The function of Directors has been conducted effectively and the BOD’ meetings have been held periodically. The implementation of the duties and responsibilities of BOD has complied with the GCG principles, but based on Bank Indonesia audit as of December 31, 2010, there are weaknesses that if not remedied immediately, may cause a downgrading of the Rating Factor. The Bank has followed up and settled all findings of Bank Indonesia audit as of December 31, 2010. Follow up plan: BOD will continously put its best effort to improve the implementation of duties and responsiblities based on GCG principles and the prevailing regulation. 14 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES Objective To evaluate: ƒ
the adequacy of the structure, qualifications and competence of the Committees ƒ
the effectiveness of the execution of the duties and responsibilities of the Committees ƒ
the effectiveness and efficiency of the execution of the committees’ meetings SUB FACTOR A. The Structure, Composition, Double Position and Independency of the Committees Members Criteria/Indicators Self Assessment Analysis 1. Audit Committee ƒ Members of the Audit Committee minimum consist of one independent Members of the Audit Committee consist of 3 (three) people, namely Mr. commissioner, one member from the independent party having the Tjarsim Adi Sasmita (Independent Commissioner) up to September 2011 and expertise in financial or accounting field and one member from the replaced by Mr. RAG Bramono Dwiedjanto from October 2011, Mr. Jenly independent party having expertise in legal or banking field. Hendrawan (Independent Party with expertise in finance and accounting) and Ms. Constance J. Rehatta (an Independent Party with expertise in Banking). ƒ The Audit Committee is chaired by the Independent Commissioner. The chairman of the Audit Committee is Mr. Tjarsim Adi Sasmita up to September 2011 and from October 2011 replaced by Mr. RAG Bramono Dwiedjanto (both Independent Commissioner). ƒ Minimum 51% (fifty one percent) of the members of the Audit All members of Audit Committee consist of Independent Commissioners (Mr. Committee are Independent Commissioners and Independent Parties. Tjarsim Adi Sasmita up to September 2011 and Mr. RAG Bramono Dwiedjanto from October 2011) and two Independent Parties (Mr. Jenly Hendrawan dan Ms. Constance J. Rehatta). ƒ Members of the Audit Committee have good integrity, character and Good integrity, character and morality of Audit Committee have supported morality. the performance of Audit Committee which has been evaluated through the process of selection until appointment of Audit Committee. 15 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES 2. Risk Monitoring Committee ƒ Members of the Risk Monitoring Committee minimum consist of one Independent Commissioner, one member from an Independent Party having expertise in financial field and one member from an Independent Party having expertise in risk management field. ƒ The risk monitoring committee is chaired by an independent Commissioner. ƒ Minimum 51% (fifty one percent) of the members of the Risk Monitoring Committee are Independent Commissioners and Independent Parties. ƒ Members of the Risk Monitoring Committee have good integrity, character and morality. 3. Remuneration and Nomination Committee ƒ Members of the Remuneration and Nomination Committee minimum consist of one Independent Commissioner, one Commissioner and one Executive Officer supervising human resources or one employee representative. ƒ The Executive Officer or the employees representative member of Committee shall have knowledge and the regulations of remuneration In October 2011, there was a change in the member of Risk Monitoring Committee, so now the member of Risk Monitoring Committee consist of 3 (three) persons, namely Mr. Subianto Rustandi (Independent Commissioner), Mr. Sofyan Rambey independent Party with expertise in risk management) and Ms. Maharany Reza (independent party with expertise in banking). Related to the change mentioned above, the chairman of the Risk Monitoring Committee also has been handed over from Mr. RAG Bramono Dwiedjanto (Independent Commissioner) to Mr. Subianto Rustandi (Independent Commissioner). All members of Risk Monitoring Committee consist of Independent Commissioners (Mr. Subianto Rustandi) and two independent parties (Mr. Sofyan Rambey and Ms. Maharany Reza). Has been conducted in the process of selection until appointment of Risk Monitoring Committee. The members of Risk Monitoring Committee in conducting their function have also shown a good integrity, character and morality.
In October 2011, there was a change in the member of Remuneration and Nomination Committee, hence the members of Remuneration and Nomination Committee consist of 3 (three) persons, namely Mr. RAG. Bramono Dwiedjanto (Independent Commissioner), Mr. Hiroshi Irie (Vice President Commissioner) and Mr. Akhmad Ludzain (Executive Officer, Head of Human Resources Department). Ms. Akhmad Ludzain, Executive Officer in charge of Human Resources matter of the Bank, has been working in Human Resources area for more than 10 16 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES system and/or nomination and the succession plan of the Bank. ƒ The Remuneration and Nomination Committee is chaired by an Independent Commissioner. ƒ In the event members of the Remuneration and Nomination Committee are determined to be more than 3 (three) members, the Independent Commissioners shall be minimum 2 (two) persons.. ƒ If the Bank forms the Committee separately, then: o The Executive Officer or the employees representative member of the Remuneration Committee shall have knowledge regarding the remuneration system of the Bank; and o The Executive Officer member of the Nomination Committee shall have knowledge regarding the nomination system and the succession plan of the Bank. 4. Double Position of Committee Members • Members of Audit Committee and Risk Monitoring Committee are not from the Directors of the same Bank or another Bank. • Double position of Independent Party at the same Bank, another Bank and/or another company has considered the competence, independency criteria, confidentiality, codes of ethics and the implementation of the duties and responsibilities. 5. Independency of Committee Members • All independent members of Committees do not have relationship in financial, management, shareholding and/or family with the BOC, Directors and/or Controlling Shareholders or relationship with the Bank, years and has adequate knowledge on the regulations of remuneration system and the succession plan of the Bank. The chairman of the Remuneration and Nomination Committee is Mr. RAG. Bramono Dwiedjanto (Independent Commissioner). Members of the Remuneration and Nomination Committee only consist of 3 (three) persons. The Bank does not form the Committee separately. Members of Audit Committee and Risk Monitoring Committee are not from the Directors of the same Bank or another Bank. Committee Members do not have double position at the same Bank, another Bank and/or another company. All independent members of Committees do not have relationship in financial, management, shareholding and/or family with the BOC, Directors and/or Controlling Shareholders or relationship with the Bank. 17 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES which may influence their capability to act independently. • All independent parties who are former members of the Directors or Executive Officers from the same Bank and do not carry out supervisory function or other parties which have relationship with the Bank which may influence the capability to act independently has passed the cooling off period for 6 (six) months. B. The Implementation of Duties and responsibilities of the Committees Criteria/Indicator 1. Audit Committee In order to give recommendations to the BOC: • The Audit Committee has monitored and evaluated the planning and implementation of the audit and monitored the follow up of the audit findings in the framework of assessing the adequacy of the internal control including the adequacy of the financial reporting process. • The Audit Committee has reviewed: o The implementation of the SKAI duties; o The appropriateness of the audit implementation by the KAP with the prevailing audit standard; Not Applicable. Self Assessment Analysis Audit Committee has monitored and evaluated the planning and implementation of the audit and monitored the follow up of the audit findings as stipulated in Audit Committee Charter (it shown in the Minutes of Meeting (MoM) dated January 07, 2011, January 14, 2011, January 28, 2011, February 18, 2011 Februay 25, 2011, March 17, 2011, March 25, 2011, April 15, 2011, April 21, 2011, May 27, 2011, June 17, 2011, June 24, 2011, July 15, 2011, September 29, 2011, October 27, 2011, November 29, 2011, December 06, 2011 and December 22, 2011. Review on implementation of SKAI duties is well performed. Guidance and comments/recommendations were immediately provided to Head of SKAI during meetings as mentioned in the MoM dated February 18, 2011 March 25, 2011, April 21, 2011, May 27, 2011, June 17, 2011 September 29, 2011, October 27, 2011, November 29, 2011 and December 22, 2011. In order to ensure that the audit implementation by the KAP is conducted with the prevailing audit standard, Audit Committee did the followings, 1. Selected KAP with certain condition, such as having a lot of audit experiences, particularly in banking industry, having solid audit team, etc 18 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES o The appropriateness of the financial statements and the prevailing accounting standard; and o The follow up by the Directors of the findings of the SKAI, the Public Accountant and the supervision result of Bank Indonesia. • The Audit Committee has issued recommendation for the appointment of a Public Accountant and Public Accountant Office according to the prevailing regulations to the General Meeting of Shareholders via the BOC. 2. Risk Monitoring Committee In order to give recommendation to the BOC, the Risk Monitoring Committee: • Evaluates the policy and implementation of the risk management; (MoM February 18, 2011; Memorandum AC‐21/II‐11 dated February 22, 2011) 2. Review on audit implementation (MoM January 7, 2011; MoM April 21, 2011) This duty is conducted through the followings, Discussed bank’s financial statement, especially if there are any extraordinary figures, Audit Committee immediately made inquiries to related Head of Department/Accounting to obtain information for necessary follow‐up action. (MoM May 27, 2011, June 24, 2011, September 29, 2011, and December 22, 2011). Audit Committee strictly monitored follow‐up actions on all findings of the SKAI (MoM dated February 18, 2011 March 25, 2011, April 21, 2011, May 27, 2011, June 17, 2011 September 29, 2011, October 27, 2011, November 29, 2011 and December 22, 2011. PUBLIC ACCOUNTANT (MoM April 21, 2011, May 27, 2011, July 15, 2011 and September 29, 2011), and the SUPERVISION RESULT OF BANK INDONESIA (MoM dated January 28, 2011, February 25, 2011, July 15, 2011, September 29, 2011, October 27, 2011, November 29, 2011 and December 22, 2011) promptly until all findings were rectified. Audit Committee has provided recommendation for appointment of a Public Accountant Office in a timely manner to the Board of Commissioners to be submitted to the General Meeting of Shareholders. (Memorandum number AC‐21/II‐11 dated February 22, 2011). The recommendation provided by Risk Monitoring Committee to the BOC, has been made based on: • Evaluation on the policy and implementation of Bank’s risk 19 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES • Monitors and evaluates the implementation of the duties of the Risk Management Committee and the Risk Management Unit. 3. Remuneration and Nomination Committee In order to give recommendation to the BOC: • The Remuneration Committee has evaluated the remuneration policy for: o The BOC and Directors and have submitted it to the General Meeting of Shareholders; and o The Executive Officers and employees and have submitted it to the Directors. • Related to the remuneration policy, the Committee has considered the financial performance, the individual achievement, the fairness with the peer group, and the long‐term target and strategy of the Bank. • Related to the nomination policy, the Committee has issued the system and procedure for the election of and/or replacement of the members of the BOC and Directors to be submitted to the General Meeting of management; • Monitoring and evaluation on the implementation of the duties of Risk Management Committee and Risk Management Unit by: - Reviewing policies related to risk management; - Reviewing on monthly basis Minutes of RMU meeting and RMC meeting, as well as reviewing the following up actions on matters affected Bank’s risk management; - Reviewing and give inputs to enhance Bank’s quarterly Risk Profile Report to Bank Indonesia; - Inviting operational working unit to discuss their tasks and responsibilities as well as matters related to risk management to ensure effectiveness of implementation of Bank’s risk management. Remuneration and Nomination Committee has conducted evaluation and provide recommendation on the remuneration policy for BOC and BOD and submitted it to the General Meeting of Shareholders. Has been conducted accordingly as stipulated in Remuneration and Nomination Committee Charter. The Remuneration and Nomination Committee has issued system and procedure on the recommendation for the appointment, re‐appointment and/or discharge of BOC, BOD and Committee members from Independent 20 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES Shareholders. • The Nomination Committee has recommended candidates for members of the BOC and/or directors to be submitted to the General Meeting of Shareholders. • The Nomination Committee has recommended candidates of independent Parties who can become members of the Committee to the BOC. C. The Effectiveness of the Committee Meetings Criteria/Indicators 1. Committee meetings are executed according to the requirement of the Bank. Parties and has made an improvement of the procedure in June 2010 pursuant to the recommendations resulted from the inspection of Bank Indonesia and SMBC Audit. Has been conducted accordingly, During year 2011, Remuneration and Nomination Committee issued 3 (three) recommendation letters for the candidacy of BOC and BOD member as follows: 1. In April 2011, Remuneration and Nomination Committee issued recommendation on nomination of Ms. Nur Arini as Director. 2. In April 2011, Remuneration and Nomination Committee also issued its recommendation related to the appointment of Mr. Subianto Rustandi as Independent Commissioner to replace Mr. Tjarim Adisasmita. 3. In May 2011, Remuneration and Nomination Committee also issued its recommendation related to the appointment of Mr. Hiroshi Irie to fill in the vacant position of Deputy President Commissioner which had been vacant since June 2011 by the resignation of Mr. Yuichi Hirano. In March 2011, Remuneration and Nomination Committee reviewed the result of yearly assessment of Committee members from Independent Parties as conducted by each Chairman of the Committee and submitted a recommendation on re‐appointment of the members of the Committee from Independent Parties to BOC. Self Assessment Analysis During year 2011, Audit Committee has conducted a total of 18 (eightteen) meetings. Risk Monitoring Committee has conducted a total of 12 (twelve) meetings. Remuneration and Nomination Committee has conducted a total of 3 (three) meetings. In each committee charter, committee meetings should be conducted at least once a month except for Remuneration and Nomination Committee Meeting that is conducted at least once in 3 (three) 21 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES months. 2. The Audit Committee meetings and Risk Monitoring Committee meetings All meetings of Audit Committee and Risk Monitoring Committee were at are attended minimum by 51% of the total members including the least attended by 51% of the total members including the Independent independent commissioner and the independent party. Commissioners and the Independent Parties. 3. The Remuneration and Nomination Committee meetings are attended All meetings of Remuneration and Nomination Committee were attended by minimum by 51% of the total members including the independent at least 66% of total members including the Independent Commissioners and commissioner and the Executive Officer or the employees’ representative. Executive Officer. 4. Meeting resolutions are adopted based on discussion and deliberation or Meeting resolutions are adopted based on result of discussion and the majority votes in the event there is no consensus. deliberation among members of each Committee. 5. Minutes of meetings are well documented, including dissenting opinions Minutes of Meeting are complete and well documented. clearly and well documented. 6. The result of the Committee meeting is a recommendation, which can be The result of the Committee meetings have all been reported to BOC in BOC used optimally by the BOC. meetings and used optimally as recommendation. 1
Rating Criteria – The Aspect of the Completion and Implementation of the Duties of the Committees Rating 1 ƒ The composition and competence of the Committees are very appropriate compared to the size and complexity of the Bank’ business. ƒ The implementation of the committees’ duties has been done effectively and there is no minor weakness. ƒ The recommendations of the Committees are very useful and can be used as reference for the decision of the BOC. ƒ The implementation of the Committees’ meetings has been done according to the internal guidelines and is effective and efficient. Rating 2 Rating 3 ƒ
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The composition and competence of the Committees are appropriate compared to the size and complexity of the Bank’ business. The implementation of the committees’ duties has been done effectively but there are minor weaknesses. The recommendations of the Committees are useful and can be used as reference for the decision of the BOC. The implementation of the Committees’ meetings has been done according to the internal guidelines and is effective and efficient. The composition and competence of the Committees are quite appropriate compared to the size and complexity of the Bank’ business. The implementation of the committees’ duties has been done quite effectively but there are weaknesses which if not remedied immediately may cause a downgrading of the rating factor. 22 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST III. COMPLETION AND IMPLEMENTATION OF THE DUTIES OF COMMITTEES ƒ The recommendations of the Committees are quite useful and can be used as reference for the decision of the BOC. ƒ The implementation of the Committees’ meetings has been done according to the internal guidelines and is effective and efficient. Rating 4 ƒ The composition and competence of the Committees are not quite appropriate compared to the size and complexity of the Bank’ business. ƒ The implementation of the committees’ duties has not been done quite effectively and there are quite significant weaknesses, which may cause a downgrading of the rating factor and the GCG Composite. ƒ The recommendations of the Committees are less useful and cannot always be used as reference for the decision of the BOC. ƒ The implementation of the Committees’ meetings has not been done according to the internal guidelines and is less effective and efficient. Rating 5 ƒ The composition and competence of the Committees are not appropriate compared to the size and complexity of the Bank’ business. ƒ The implementation of the committees’ duties has not been done effectively and there are significant weaknesses, which may cause a downgrading of the rating factor and the GCG Composite. ƒ The recommendations of the Committees are not useful and cannot be used as reference for the decision of the BOC. ƒ The implementation of the Committees’ meetings has not been done according to the internal guidelines and is not effective and efficient. CONCLUSION: IDENTIFY THE ISSUES, FOLLOW UP AND SETTLEMENT TARGET 2 Rating 2 (Last year’s rating = 2) - Audit Committee The function and activities of Audit Committee have been performed effectively in accordance with the prevailing regulations. Also, regular meetings of Audit Committee have been conducted to discuss matters related with Audit Committee’s tasks and responsibilities. - Risk Monitoring Committee The composition and competence of the Risk Monitoring Committee members are appropriate compared to the size and complexity of the Bank’ business. The function and activities of Risk Monitoring Committee also have been performed in accordance with the prevailing regulations. - Remuneration and Nomination Committee The function and activities of Remuneration and Nomination Committee have been performed in accordance with the prevailing regulations. However, during year 2011, regular meetings have been conducted only 3(three) times. Meanwhile, based on Committee Charter, regular meeting should be conducted at least once in 3 (three) months (4 times in one year). Follow up plan: The Bank will continuously improve the performance of Audit Committee, Risk Monitoring Committee and Remuneration and Nomination Committee in conducting their duties and responsibilities according to the prevailing regulations. 23 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST IV. HANDLING OF CONFLICTS OF INTEREST OBJECTIVE To evaluate the effectiveness of managing the conflicts of interest and the adequacy of the disclosure aspect and the impact of the conflict of interest to the Bank’s profitability. The handling of the Conflicts of Interest Criteria/Indicator Self Assessment 1. The Bank has the policy, system and procedure for the settlement of: 1. As a reference in dealing with conflicts of interest, the Bank has stipulated it in the guidelines and Code of Conduct of Board of •
Conflict of interest involving each management and employees of the Bank. Commissioners, Code of Conduct of Board of Directors and the •
Administration, documentation and disclosure of conflict of interest in the Compliance Manual which applies to all employees of the Bank. Minutes of Meeting. Furthermore, in dealing with conflicts of interest, the Bank also refers to the "Rules for Managing Conflict of Interest" made by the majority shareholder of the Bank, SMBC, as long as the rules are not inconsistent with the provisions in force in Indonesia. 2. There was no conflict of interest that was reported during 2011. 2. Conflict of interest has been disclosed in each decision and well documented. 3. During 2011, there were no conflicts of interest that caused the 3. Conflict of interest does not cause loss or reduce the profit of the Bank. Board of Commissioners, Board of Directors and Officers Executive take actions that harm or reduce the profits of the Bank. RATING CRITERIA 1 – HANDLING OF CONFLICTS OF INTEREST Rating 1 ƒ
The Bank has the policy, system and procedure for settlement of conflict of interest, which are very comprehensive and effective. ƒ
All conflicts of interest have been disclosed in each decision, and accompanied by the minutes of meeting, has been well administered and documented. ƒ
The conflicts of interest do not cause loss or reduce the profit of the Bank. Rating 2 ƒ
The Bank has the policy, system and procedure for settlement of conflict of interest, which are comprehensive and effective. ƒ
All conflicts of interest have been disclosed in each decision, and accompanied by the minutes of meeting, has been well administered and documented. ƒ
The conflicts of interest do not cause loss or reduce the profit of the Bank. 24 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: HANDLING OF CONFLICTS OF INTEREST IV. HANDLING OF CONFLICTS OF INTEREST Rating 3 ƒ
The Bank has the policy, system and procedure for settlement of conflict of interest, which are quite comprehensive and effective. ƒ
All conflicts of interest have been adequately disclosed in each decision, and accompanied by the minutes of meeting, has been well administered and documented. ƒ
The conflicts of interest do not cause loss or reduce the profit of the Bank. Rating 4 ƒ
The Bank has the policy, system and procedure for settlement of conflict of interest, which are not quite comprehensive and effective. ƒ
All conflicts of interest have not been adequately disclosed in each decision, and some are accompanied by the minutes of meeting, has not been well administered and documented ƒ
The conflicts of interest have caused loss or reduce the profit of the Bank. Rating 5 ƒ
The Bank has the policy, system and procedure for settlement of conflict of interest, which are not comprehensive and effective. ƒ
All conflicts of interest have not been disclosed in each decision, and are not accompanied by the minutes of meeting, has not been well administered and documented ƒ
The conflicts of interest have caused loss or reduce the profit of the Bank. CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 1 (Last year’s rating = 1) The Bank has the provision regarding handling of conflict of interests which is stipulated in the guidelines and Code of Conduct of Board of Commissioners, Code of Conduct of Board of Directors, and Compliance Manual which applies to all employees of the Bank. Conflict of interests has been disclosed and documented in the Minutes of Board of Commissioners’ Meeting and Minutes of Board of Directors’ Meeting. In 2011, there were no transactions that put the Bank into a situation with conflict of interest with its customers, which caused the Bank to suffer from losses or reduced its profit. Follow‐up plan: The Bank will continually implement prudential principles in conducting transactions with related party including handling conflict of interests. The Bank will continuously observe its internal rule regarding the handling of conflicts of interest, disclose, discuss, and document any conflict of interest, and monitor its customer transactions to ensure that there will be no transaction that may put the Bank into a conflict of interest situation. 25 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION Objective To evaluate: ƒ
The compliance level of the Bank to Bank Indonesia regulations and the prevailing legislation as well as the compliance of the commitments to the authorities. ƒ
The effectiveness of the implementation of the duties and independency of the Compliance Director and the Compliance Unit. ƒ
The availability of the business guidelines, updated business system and procedure in all fields/levels of organization. ƒ
Adequate MIS is available so that the Compliance Unit can carry out the duties effectively. The Implementation of the Duties of the Compliance Function Criteria/Indicators Self Assessment Analysis 1. The duties of the Compliance Directors are: 1. Compliance Director a. To ensure the Bank’s compliance to Bank Indonesia a. To ensure the Bank’s compliance to Bank Indonesia regulations and the prevailing regulations and the prevailing legislation by: legislation, Compliance Director has conducted the following actions: ƒ
Deciding the necessary steps by considering prudence 1) Define ‘Compliance Plan’ annually as reference to the objective that shall be principles; accomplished in relation to the compliance to the prevailing regulations; as well as the function of Compliance Unit to accomplish the objective. ƒ
Monitoring and maintaining the business activities of the 2) Together with Compliance Unit, inform each issuance of Bank Indonesia Bank not to deviate from the regulations; stipulations to all employees and Board of Directors. If necessary, study meetings with the related Departments were conducted. In order to monitor and maintain that the Bank’s business activities did not deviate from the prevailing regulations, every issuance of the stipulations was then discussed in Compliance Meeting to discuss the steps that shall be taken by the Bank to comply with the stipulation as well as to discuss the issues that may occur in the implementation of the stipulations. Compliance Meeting was held regularly every month and was attended by Board of Directors and all Department Heads. In the Compliance Meeting, it was also discussed in the event of there were any violations toward the prevailing regulations, to clearly define the causes of the violation and decided the actions that should be taken to avoid reoccurrence of this violation. 26 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION ƒ
Monitoring and maintaining the Bank’s compliance to all the agreements and commitments made by the Bank to Bank Indonesia and the authorities. b. To prevent the Directors of the Bank or the head of the Foreign Bank Branch from deciding the policy and/or making decisions which deviate from the prevailing regulations and legislation. 3) The progress of Bank’s compliance to the commitments that was made by the Bank to Bank Indonesia and any other authorities were discussed on the monthly compliance meeting. The discussion, among others, included the progress of follow‐up actions that has been taken by the Bank in connection with the result of Bank Indonesia Inspection or any inspection by other authorities, such as Directorate of Taxation. The discussion was aimed to monitor and maintain the Bank’s compliance to all agreements and commitments made by the Bank to Bank Indonesia and the authorities. Compliance Director has ensured the Bank’s compliance to Bank Indonesia regulations and the prevailing legislation, among other by: • Together with Compliance Department, conducted update actions toward new regulations relevant to the Bank’s business activities, which were issued by Bank Indonesia or other government institutions by informing such issuance to all employees and the Management of the Bank through Lotus Notes as well as discussing them in Compliance meetings. Study meetings with the respective department heads were conducted, if necessary. The discussions were intended to provide understanding towards the regulations and to assess the impact of such regulations/ legislations on the implementation of activities of the Bank. b. In any meeting that was attended by Board of Directors, or in any guidance that was given to the employees, Compliance Director always provide opinion from the compliance perspective by referring to the prevailing regulations. Furthermore, in the occurrence of any compliance issue, Compliance Director will conduct compliance assessment to ensure whether the decision that was made has been in line with the prevailing regulations and legislations and make further consultation to Bank Indonesia or other authorities, if necessary. This was conducted to ensure that the business activities of the Bank and decisions of Board of Directors have been in line with the prevailing regulations. 27 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION c. To submit periodical reports regarding the implementation of the duties and responsibilities to the President Director with a copy to the BOC or the authorities according to the Bank’s organization structure d. The appointment of the Compliance Director has been done according to the prevailing regulations. c. Compliance Director, in cooperation with Compliance Unit, conducted Compliance Meeting that served as a monitoring tool towards any significant compliance issues, such as inform the occurrence of such issue to the participants of the meeting and monitor the progress in regular basis. Compliance Meeting was held regularly every month and was attended by Board of Directors and all Department Heads. Furthermore, Compliance Director also regularly submitted the implementation of his/ her duties and responsibilities to President Director on Meeting of Board of Directors that was held on monthly basis; as well as to Board of Commissioners in the Meeting of Board of Commissioners that was held on quarterly basis. The report consist of, among others, any issuance of new regulations and legislations, analysis of compliance problem, etc. Through the submission of the report, all members of Board of Directors and Board of Commissioner will be aware of the implementation of compliance principle on the business activities of the Bank. d. The appointment of the Compliance Director has obtained Bank Indonesia’s approval through Letter No. 10/111/GBI/DPIP/Rahasia dated July 28, 2008 and has been legalized by General Meeting of Shareholders. e. Besides the above matters, the role of Compliance Director to ensure the Bank’s compliance to Bank Indonesia regulations and the prevailing legislations, was also performed through a number of activities as follow: • monitored the implementation of prudential principles among others but not limited to fulfilling the requirements over Minimum Capital Requirement, Legal Lending Limit, Net Open Position, Asset Quality Rating, Provision for Earning Asset Losses, Minimum Reserve Requirement and CAMELS rating. • supervised the Bank’s Customer Complaint Team and ensuring that all customer complaints has been resolved satisfactorily. 28 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION 2. The Directors have: 2.
a. Approved the compliance policy of the Bank in the form of a formal document regarding an effective compliance function. b. Been responsible to communicate all policies, guidelines, systems and procedures to all related levels of organization. c. Been responsible to create an effective and permanent compliance function as part of the policy of the Bank’s compliance as a whole. 3. The Compliance Unit has: 3.
a. Been independent from the operational units; • conducted monitoring over regular reports’ submission to Bank Indonesia and other authorities. • conducted review over the policies/ internal procedures of the Bank to ensure that those policies/ procedures has been in line with the prevailing laws and regulations. • together with Compliance Department, performed regular review regarding the implementation of compliance principle through Compliance Self‐Reviewing. BOD a. Directors has provided its approval over Compliance Manual and amendments of policies and procedures manual of each department; as well as Compliance Plan annually. The implementation of policies and the compliance plan was also controlled and monitored by Directors. b. All policies, guidelines, systems and procedures have been informed to all related levels of organization through Lotus Notes that can be easily accessed by all employees. c. Directors create effective compliance function by developing steps to create the implementation of the Compliance Culture; manage the Compliance Risk being faced by the Bank; ensure the policies, internal rules, systems, and procedures and the business activities conducted by the Bank have already complied with Bank Indonesia regulations and the prevailing legislations, and ensure the Bank’s compliance with the commitments made by the Bank to Bank Indonesia and/or other authorized supervisory institutions. Compliance Unit: a. The Bank has Compliance Department which acted as the Compliance Unit as required by Bank Indonesia. The independence of Compliance Unit is 29 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION b. Been responsible to the availability and appropriateness of the guidelines, systems and procedures of all business units to the updated prevailing legislation at all levels of organization. 4. The Bank has: 4.
a. Provided quality resources to handle the duties effectively; indicated, among others, as follows: • Compliance Department has performed its duties independently from the operational units. • The Head of Compliance Department did not perform other duties outside the Compliance Function. y Compliance Department has direct access to the Compliance Director and reports any compliance issues directly to the Compliance Director. b. Compliance Department reviewed the Bank’s internal systems and procedures by verifying the appropriateness of guidelines, systems and procedures according to the provision in the prevailing legislations by using sampling method. In particular, in the event of any amendment or issuance of the Bank’s internal systems and procedures, Compliance Department has to ensure that such systems and procedures are in line with Bank Indonesia regulations and the prevailing laws and regulations and provides opinion from the compliance perspective, if necessary. c. Besides the above matters, the role of Compliance Unit in relation to the management of compliance risk faced by the Bank, was also performed through a number of activities as follow: • conducting identification of Compliance Risk in each functional activity • performing measurement of Compliance Risk • monitoring Compliance Risk • controlling Compliance Risk In order to support the compliance function, the Bank has: a. Conducted candidates selection based on their educational background and experiences by considering the Bank’s needs; Conducted internal training related to compliance to the newly‐hired staff to 30 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION b. Submitted the reports regarding the implementation of the duties of the Compliance Director and the special reports to Bank Indonesia and related parties provide knowledge on the implementation of compliance function in the Bank and the prevailing laws and regulations. In addition, the Bank also conducted in‐house training by inviting training instructors from authorities that issue regulations. During 2011, the Bank has conducted 4 (four) in‐house compliance trainings with the following topics: • Risk Based Bank Rating • Refreshment/ Maintenance Program for Risk Management Certification • Legal Lending Limit & Asset Quality Rating • Net Open Position The Bank also held internal training related to specific compliance issue, such as AML & CFT Training. It is highlighted that the training is mandatory for all staff and conducted through electronic media, with cooperation from Human Resources Department; and Assigned its staff to participate in external training, according to their competency and needs according to their tasks and responsibilities. Compliance Department in cooperation with Human Resources Department provided proposal to the Bank’s Management for assigning employees in training related to compliance organized by external training providers (public training). b. Bank has submitted the reports regarding the implementation of the duties of the Compliance Director to Bank Indonesia semester II/2010 and semester I/2011 on 28 January 2011 and 29 July 2011 respectively. During 2011, there was no special report to Bank Indonesia and related parties regarding the policies and/or decision of Board of Directors which have deviated from Bank Indonesia stipulations and/ or the prevailing legislations. 31 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION RATING CRITERIA 1 – ASPECTS OF THE IMPLEMENTATION OF COMPLIANCE FUNCTION Rating 1 ƒ The Bank’s compliance is classified as excellent and the Bank has never breached any prevailing regulations and commitments. ƒ The execution of the duties and independency of the Compliance Director and the Compliance Unit is very effective. ƒ The Compliance Director and the Compliance Unit review periodically the compliance at all operational units. ƒ Updated and very comprehensive business and procedure are available at all levels of organization and fully in line with the prevailing legislation. Rating 2 ƒ The Bank’s compliance is classified as good but the Bank has made immaterial violation to the prevailing regulations and commitments, which are already settled during the semester of the CAMELS Rating. ƒ The execution of the duties and independency of the Compliance Director and the Compliance Unit is effective. ƒ The Compliance Director and the Compliance Unit review periodically the compliance at the majority of operational units. ƒ Updated and comprehensive business guidelines and procedure are available at all levels of organization and in accordance with the prevailing legislation Rating 3 ƒ The Bank’s compliance is classified as quite good but the Bank has made immaterial violation to the prevailing regulations and commitments, which are to be settled during the following semester. ƒ The execution of the duties and independency of the Compliance Director and the Compliance Unit is quite effective. ƒ The Compliance Director and the Compliance Unit review periodically the compliance at some of the operational unit. ƒ Updated business guidelines and procedure are available at all levels of organization in a quite complete and comprehensive manner and in line with the prevailing legislation Rating 4 ƒ The Bank’s compliance is not very good and the Bank has made quite material violation to the prevailing regulations and commitments, which are to be settled during the following 2 (two) semesters. ƒ The execution of the duties and independency of the Compliance Director and the Compliance Unit is less effective. ƒ The Compliance Director and the Compliance Unit review but infrequently the compliance at some of the operational unit. ƒ Business guidelines and procedure available at all levels of organization are updated but incomplete and incomprehensive and not fully in line with the prevailing legislation. Rating 5 ƒ The Bank’s compliance is not good and the Bank has made material violation to the prevailing regulations and commitments, with the possibility to be settled longer than the following 2 semesters. ƒ The execution of the duties and independency of the Compliance Director and the Compliance Unit is ineffective. ƒ The Compliance Director and the Compliance Unit never review the compliance at the operational unit. ƒ Business guidelines and procedure available at all levels of organization are not updated and incomplete and incomprehensive and not line with the prevailing legislation. 32 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION V. THE IMPLEMENTATION OF THE BANK’S COMPLIANCE FUNCTION CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 2 (Last year’s rating = 2) • The implementation of tasks and independency of Compliance Director and Compliance Department has run very effectively. • Compliance Director and Compliance Unit perform regular review regarding the implementation of compliance principle through Compliance Self Reviewing • Compliance Director and Compliance Unit perform review towards the provisions/ internal rules of the Bank to ensure that the provisions/ procedures have already complied with the regulations. • During January – December 2011, the Bank was imposed with 1 (one) administrative sanction toward the reporting obligation to Bank Indonesia. The detail of the administrative sanction is as follow: •
Based on the result of Bank Indonesia Inspection for position as of 31 December 2010, the Bank was imposed with administrative penalty amounting IDR 650,000, which breakdown is as follows: a. Discrepancy in collectability rating of 2 (two) debtors @ IDR 100,000 = IDR 200,000 b. Reporting errors in Form 201 of LHBU of 9 (nine) items @ IDR 50,000 = IDR 450,000 Follow up plan: The Bank would continuously improve ‘Compliance Awareness’ and facilitate ‘Compliance Culture’ at all levels of the organization of the Bank through development of systems, compliance policy, etc, to enhance the implementation of compliance principle in each business activities of the Bank. 33 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION VI. THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION Objective To evaluate: ƒ
The adequacy of the Bank’s Internal Audit function, to evaluate all the business aspects according to Bank Indonesia regulations and the prevailing legislation; ƒ
The effectiveness of the Implementation of the Bank’s internal audit to create a Bank, which is sound and able to develop naturally. The Implementation of the Internal Audit Function Criteria/Indicators Self Assessment Analysis 1. The Directors are responsible for: ƒ The creation of an internal control structure and the guarantee of the The internal control structure encompasses the coordination of implementation of the Bank’s internal audit function at each level of policies, organization, procedures, methods, and rules that have been management. established including SKAI/Satuan Kerja Audit Intern (Internal Audit ƒ Follow up of the Bank’s internal audit findings according to the policy and Department) as part of the internal control structure, which directive from the BOC. encompasses all activities related to audit and the reporting of audit ƒ The availability of the reports regarding the activities of the Bank’s internal result on the coordination of internal control structure at each level of audit functions for the General Meeting of Shareholders. Bank’s management. 2. The Bank: ƒ Decides an effective internal audit function at all aspects and elements of Bank has established SKAI for conducting internal audit function activities, which are expected to be directly affecting the interest of the Bank effectively on banking activities which performed based on Risk Based and public. Audit as stipulated in The Annual Internal Audit Plan. ƒ Shall have the Standard Implementation of the Bank’s Internal Audit Function Bank has conducted requirements of SPFAIB by establishing SKAI, (SPFAIB), by: preparing Internal Audit Charter as well as preparing the internal audit o Preparing the Internal Audit Charter; guidelines. o Establishing the Internal Audit Unit (SKAI); o Preparing the internal audit guidelines ƒ The SKAI shall be independent to the operational units. SKAI is independent for operational/other working unit. 34 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION VI. THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION ƒ Periodical review on the effectiveness of the SKAI implementation and its compliance to the SPFAIB by external party every three years. ƒ Provides quality resources to settle the duties effectively. ƒ Plan and realize the improvement of the human resources quality periodically and continuously. 3. The SKAI has: ƒ Carried out the supervision function independently with adequate scope of duties and in accordance with the plan, implementation and the monitoring of the audit result; An Independendent external party has conducted Quality Assurance Review toward the performance and compliance of Internal Audit Department based on Bank Indonesia regulations in every three years. The last Internal Audit Quality Assurance Review has covered profiling IAD against requirements of SPFAIB (The Standard for The practice of Internal Audit function) and IT Audit Risk Management based on Bank Indonesia Regulation. Those review was conducted by the appointed Independendent external party (KPMG) on July 2011. The result of related Internal Audit Quality Assurance Review mentioned that Internal Audit Department has complied with requirements of SPFAIB and IT Audit Risk Management based on Bank Indonesia regulations. Criteria or qualification for auditor has been determined in order to support recruitment program for auditor. Education and training plan for auditor has been determined as well as proper implemented periodically and continuously in order to enhance quality, knowledge, and skill of auditor. SKAI has performed supervision function independently thus they can carry out their duties/conduct audit objectively and free from interference in the term of audit scope. Audit has been carried out coincides with The Annual Internal Audit Plan of SKAI as well as monitoring of audit results have been continuously implemented until it is rectified. However, based on the review by Bank Indonesia toward the Annual Internal Audit Plan of Year 2011, there are several matters need to be added, among others: 35 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION VI. THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION ƒ Carried out the duties minimum covering the rating of: o The adequacy of the Bank’s Internal Control System; o The effectiveness of the Bank’s Internal Control System; o The performance quality. ‐ Explanations on why there were 5 departments that are not included in the list of departments that will be audited. - The scope of audit should be more into the appropriateness of operational activities in line with the prevailing regulation. Bank’s commitment and follow‐up actions: The Bank has revised the Annual Internal Audit Plan based on review by Bank Indonesia SKAI has carried out duties of assessment of internal control system/structure which encompass of policies, organization, procedures, methods, and rules within each of working unit including adequacy, effectiveness and performance quality. However, based on the result of Bank Indonesia’s Supervisor’s team on audit position as of December 2010, there are matters need to be conducted by Internal Audit Department related to on‐site audit schedule: ƒ In scope of Treasury Auditing: To evaluate Bank’s compliance with the prevailing regulations (in this case is issuance of Delegation Of Authority to an advisor/non‐employee of the Bank to conduct dealing) ƒ In scope of Loan –Asset Purchase Auditing: to conduct on‐site visit to branch of multi finance offices and to perform review towards the reliability of the information system that is used by the multifinance companies (Oto and SOF). Bank’s commitment and follow‐up actions: Internal Audit Department has included those above matters on on‐
site audit schedule (Treasury and Loan Asset Purchase) and documented the audit result. 36 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION VI. THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION ƒ Reported all the audit findings according to the prevailing regulations. ƒ Monitored, analyzed and reported the developments of the corrective follow up done by the auditee. ƒ Prepared and updated the guidelines and business system and procedure according to the prevailing regulations and legislation. SKAI has reported audit result and requested the related working unit to set up preventive action so that there will be no repeated findings occurred. SKAI has also reported related audit result and follow up actions from auditee to BOD and BOC. SKAI has analysed and monitored progress of corrective follow‐up actions by the auditee as well as report them continuously. SKAI has reviewed periodically and updated the guidelines and working procedures as necessary in line with prevailing regulations and legislation. RATING CRITERIA 1 – THE ASPECTS OF INTERNAL AUDIT FUNCTION Rating 1 ƒ
The implementation of the internal Audit Function of the Bank has been done very effectively; the internal guidelines have complied with the minimum standard as determined in the SPFAIB without any minor weakness. ƒ
The SKAI has carried out its functions very independently and objectively. Rating 2 ƒ
The implementation of the internal Audit Function of the Bank has been done effectively; the internal guidelines have complied with the minimum standard as determined in the SPFAIB, however with minor weakness which can immediately be overcome by routine actions. ƒ
The SKAI has carried out its functions independently and objectively. Rating 3 ƒ
The implementation of the internal Audit Function of the Bank has been done quite effectively, the internal guidelines have quite complied with the standard as determined in the SPFAIB however with minor weakness, which if not immediately overcome, may cause the downgrading of the quality of the internal audit function. ƒ
The SKAI has carried out its functions quite independently and objectively. Rating 4 ƒ
The implementation of the internal Audit Function of the Bank has not been done quite effectively; the internal guidelines have not quite complied with the minimum standard as determined in the SPFAIB with quite significant weaknesses. ƒ
The SKAI has not carried out its functions quite independently and objectively. Rating 5 ƒ
The implementation of the internal Audit Function of the Bank is not effectively; the internal guidelines have not complied with the minimum standard as determined in the SPFAIB with significant weaknesses. ƒ
The SKAI has not carried out its functions independently and objectively. 37 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION VI. THE IMPLEMENTATION OF THE INTERNAL AUDIT FUNCTION CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 2 (Last year’s rating = 3) In July 2011, Independent external party (KPMG) conducted 3 (three) years Internal Audit Quality Assurance Review. The result of that review was the performance and compliance of Internal Audit Department has coincided with requirements of SPFAIB (The Standard of The Practice of Internal Audit) and IT Audit Risk Management refers to Bank Indonesia regulations. All of Bank Indonesia’s recommendations as result of Bank Indonesia’s Supervisory review for position of December 2010 in order to include relevant matters into The Annual of Internal Audit Plan and on‐site audit schedule has been fully conducted. Follow up plan: The Bank will consistently maintain performance and compliance of Internal Audit Department toward related Bank Indonesia regulations and to include relevant matters as result of Bank Indonesia’s Supervisory review into The Annual of Internal Audit Plan and related on‐site audit schedule 38 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: EXTERNAL AUDIT FUNCTION VII. THE IMPLEMENTATION OF THE EXTERNAL AUDIT FUNCTION Objective ƒ
The effectiveness of the audit execution by the Public Accountant, ƒ
The quality of the audit findings of the Public Accountant, ƒ
The appropriateness of the appointment of the Public Accountant and the Public Accountant Office compared to the prevailing regulations. The Implementation of the External Audit Function Criteria/Indicators Self Assessment Analysis 1. In carrying out the Bank’s financial audit reports, the Bank appoints a Public Has been conducted accordingly. The Bank appoints Public Accountant Accountant and a Public Accountant Office listed at Bank Indonesia. Firm Purwantono, Suherman & Surja (Ernst & Young). 2. The appointment of the same Public Accountant and a Public Accountant Office by The appointment of the same Public Accountant and a Public the Bank may not exceed 5 (five) years consecutively. Accountant Office by the Bank may not exceed 5 (five) years consecutively. 3. The appointment of the Public Accountant and the Public Accountant Office shall Audit Committee has provided recommendations for the appointment be with prior approval by the General Meeting of Shareholders based on the of Public Accountant and Public Accountant Office and approval by recommendation from the Audit Committee via the BOC. General Meeting of Shareholders has been obtained. 4. The assignment of the audit to the Public Accountant and the Public Accountant Has been conducted accordingly. The assignment of the audit to the Office minimum covers the following aspects: Public Accountant and the Public Accountant Office reflected in ƒ The capacity of the appointed Public Accountant; engagement letter and documented. ƒ The legality of the business agreement; ƒ The audit scope; ƒ The professional standard of the public accountant; and ƒ The communication between Bank Indonesia and the respective Public Accountant Office. 39 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: EXTERNAL AUDIT FUNCTION VII. THE IMPLEMENTATION OF THE EXTERNAL AUDIT FUNCTION 5. The appointed Public Accountant and the Public Accountant have: ƒ Submitted the audit findings and management letter to the Bank on timely Has been conducted accordingly. basis; ƒ Is able to work independently, fulfills the professional standard of a public Has been conducted accordingly. accountant and the agreement as well as the audit scope determined RATING CRITERIA 1 – THE ASPECTS OF THE IMPLEMENTATIN OF THE EXTERNAL AUDIT FUNCTION Rating 1 ƒ The audit done by the Public Accountant is very effective and according to the minimum requirements determined in the regulations. ƒ The quality and scope of the audit result of the Public Accountant are excellent. ƒ The audit is by an independent Public Accountant/Public Accountant Office and has fulfilled the determined criteria. Rating 2 ƒ The audit done by the Public Accountant is effective and according to the minimum requirements determined in the regulations (3) however, with minor weakness. ƒ The quality and scope of the audit result of the Public Accountant are good. ƒ The audit is done by an independent Public Accountant/Public Accountant Office and has fulfilled the determined criteria. ƒ The audit done by the Public Accountant is quite effective and according to the minimum requirements determined in the Rating 3 regulations 13) however, with weaknesses. ƒ The quality and scope of the audit result of the Public Accountant are quite good. ƒ The audit is done by a Public Accountant/Public Accountant Office, which is quite independent and quite fulfilled the determined criteria. Rating 4 ƒ The audit done by the Public Accountant is not quite effective and according to the minimum requirements determined in the regulations 3) with quite material weaknesses ƒ The quality and scope of the audit result of the Public Accountant are not quite good. ƒ The audit is done by a Public Accountant/Public Accountant Office, which is not quite independent. Rating 5 ƒ The audit done by the Public Accountant is not effective and not according to the minimum requirements determined in the regulations 3) with material weaknesses ƒ The quality and scope of the audit result of the Public Accountant are not good. ƒ The audit is not done by an independent Public Accountant/Public Accountant Office. 40 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: EXTERNAL AUDIT FUNCTION VII. THE IMPLEMENTATION OF THE EXTERNAL AUDIT FUNCTION CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 1 (Last year’s rating = 1) The Bank appointed Purwantono, Suherman & Surja as its external auditor in carrying out the Bank's financial audit reports year 2011. Audit implementation has fulfilled the criteria stipulated. The appointment of this external auditor has also complied with the procedure in place. Follow up plan: The Bank would continue to maintain its compliance to ensure that the appointment of external auditor as well as its audit implementation has been complied with the prevailing regulations. 41 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM VIII. THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM Objective To evaluate: ƒ
The effectiveness and the adequacy of the risk management implementation according to the objective, size and complexity of the Bank’s business and the Bank’s risks. ƒ
To ensure that the BOC and Directors (the management) have actively supervised the implementation of the risk management policy and strategy. Criteria/Indicators Self Assessment Analysis 1. The BOC has clear duties and responsibilities such as: BOC has clear duties and responsibilities in risk management areas as stipulated in the Standard Guidance on the Implementation of Risk Management. ƒ To approve and evaluate the risk management policy. ƒ BOC approved and evaluated the policies and procedures related to risk management including Standard Guidance on the Implementation of Risk Management. ƒ To evaluate the responsibilities of the Directors for the implementation of the ƒ BOC evaluated BOD report on the implementation of risk risk management policy. management policy through BOC meeting and also Coordination Meeting of BOC&BOD. ƒ To evaluate and decide the application of the Directors related to the ƒ BOC evaluated and approved loan application to related party. transactions requiring the approval from the BOC. 2. The Directors have clear duties and responsibilities such as: ƒ To review the risk rating methodology, the adequacy of the implementation of ƒ BOD reviewed risk profile report and implementation of internal the Internal Control System and the appropriateness of the policy, procedure control which include policy, procedure, and limit. and limit decision. ƒ To provide quality resources to handle risk management effectively. ƒ BOD continued to enhance quality of resources and systems for managing risk management. 42 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM VIII. THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM ƒ To plan and realize the quality improvement of the human resources managing ƒ BOD implement staff quality improvement by assigning staff to the risk periodically and continuously. related training, seminar, invite external resources (training providers) to enhance staff knowledge. 3. The Bank has: ƒ Have the risk policy, procedure and limit decision. ƒ Bank has established Standard Guidance on the Implementation of Risk Management, and policies and procedure for credit risk, operational risk, legal risk, reputation risk, strategic risk and compliance risk. Bank also established rules and regulation, as well as limits, related to market risk and liquidity risk. ƒ Effectively identified, measured, monitored and controlled the Bank’s risks and ƒ Bank has identified its risk (Credit, Market, Liquidity, Operational, have adequate risk management information system. Legal, Reputation, Strategic and Compliance) in the risk profile. Bank also has adequate risk management reporting. ƒ Implemented good and comprehensive internal control system. ƒ Provided the current process, Bank continuously enhanced internal control by improving procedures, clear duties and responsibilities such dual control, segregation of function, etc. 1
RATING CRITERIA – THE ASPECTS OF THE IMPLEMENTATION OF THE RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM Rating 1 ƒ The management very effectively identifies and controls all the Bank’s risks. ƒ The management very actively monitors the policy, procedure and limit decision, a comprehensive and very effective management information system to maintain a sound internal condition of the Bank. ƒ The procedure and the implementation of the Bank’s internal control is very comprehensive and very much in accordance with the objective, size and business complexity and risk of the Bank. ƒ The management effectively monitors the appropriateness of the Bank’s condition to sound management principles of the Bank, the prevailing regulations and very much in accordance with the Bank’s internal policy and procedure. ƒ The implementation of the internal control does not show any weaknesses. Rating 2 ƒ The management effectively identifies and controls all the Bank’s risks. 43 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM VIII. THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM ƒ The management actively monitors the policy, procedure and limit decision, and a comprehensive and effective management information system to maintain a sound internal condition of the Bank. ƒ The procedure and the implementation of the Bank’s internal control is comprehensive and in accordance with the objective, size and business complexity and risk of the Bank. ƒ The management effectively monitors the appropriateness of the Bank’s condition to sound management principles of the Bank, the prevailing regulations and in accordance with the Bank’s internal policy and procedure. ƒ The implementation of the internal control has weaknesses but has been corrected that they do not have significant impact to the Bank’s condition. Rating 3 ƒ The management quite effectively identifies and controls all the Bank’s risks. ƒ The management quite actively monitors the policy, procedure and limit decision, a comprehensive and quite effective management information system to maintain a sound internal condition of the Bank. ƒ The procedure and the implementation of the Bank’s internal control is quite comprehensive and quite in accordance with the objective, size and business complexity and risk of the Bank. ƒ The management quite effectively monitors the appropriateness of the Bank’s condition to sound management principles of the Bank, the prevailing regulations and quite in accordance with the Bank’s internal policy and procedure. ƒ The implementation of the internal control has immaterial weaknesses, which if not immediately corrected may cause significant impact to the Bank’s condition. Rating 4 ƒ The management does not effectively identify and control all the Bank’s risks. ƒ The management less actively monitors the policy, procedure and limit decision, a comprehensive and less effective management information system to maintain a sound internal condition of the Bank. ƒ The procedure and the implementation of the Bank’s internal control is not comprehensive and not in accordance with the objective, size and business complexity and risk of the Bank. ƒ The management does not effectively monitor the appropriateness of the Bank’s condition to sound management principles of the Bank, the prevailing regulations and is not in accordance with the Bank’s internal policy and procedure. ƒ The implementation of the internal control has material weaknesses, which if not immediately corrected may cause significant impact to the Bank’s condition. Rating 5 ƒ The management does not effectively identify and control all the Bank’s risks. 44 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM VIII. THE IMPLEMENTATION OF RISK MANAGEMENT INCLUDING THE INTERNAL CONTROL SYSTEM ƒ The management does not actively monitors the policy, procedure and limit decision, a comprehensive and does not effectively management information system to maintain a sound internal condition of the Bank. ƒ The procedure and the implementation of the Bank’s internal control is not comprehensive and not in accordance with the objective, size and business complexity and risk of the Bank. ƒ The management does not effectively monitor the appropriateness of the Bank’s condition to sound management principles of the Bank, the prevailing regulations and is not in accordance with the Bank’s internal policy and procedure. ƒ The implementation of the internal control has several weaknesses and material violations, which if not immediately integrally corrected will cause material loss. CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 2 (Last year’s rating = 2) Management has identified critical risks and provides mitigation/controls. Procedure and implementation of Bank internal control have been continuously enhanced, by establishing several policies and procedures, as well as limits related to risk management. Management support staff quality improvement by proving necessary trainings including e‐learning program. In regard to risk management, Management also has actively promoted staffs to participate in risk management certification program. Based on Bank Indonesia Audit position 31 December 2010, there were some weaknesses in the application of risk management. However, Bank has followed up the said findings, and continuously enhances the risk management application. Follow up plan: Bank would continuously strengthen the implementation of risk management in BSMI. 45 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: FACILITIES TO RELATED PARTIES AND LARGE EXPOSURE IX. FACILITIES TO RELATED PARTIES AND LARGE EXPOSURES 1. Bank has: • Owned policies, system and procedures in writing clearly for the facilities to related parties and large exposures, monitoring and ways to solve the problems. • Periodically evaluated and updated policies, system and procedures in accordance with the prevailing regulations. 2. Application of facilities by Bank to related parties and or large exposures has: • Fulfilled Bank Indonesia regulation with regard to Legal Lending Limit and considered the prudential principles and other prevailing regulations. • Considered the capability of capital and portfolio distribution/ diversification of facilities. 3. It is decided by the management independently, without intervention from the related parties or other parties. 4. The Bank has provided periodical reports to Bank Indonesia regarding the subject on timely basis. Bank has owned policies, system and procedures in writing clearly for the facilities to related parties and large exposures as well as monitoring and ways to solve the problems. Bank has periodically evaluated and updated policies, system and procedures in accordance with the prevailing regulations. There was no violation or excess of LLL in year 2011. Has been conducted accordingly. As of 31 December 2011, the Bank’s 25 biggest debtors reached 86.91% from the total portfolio and the biggest credit portfolio according to industry sector was finance companies (47.07%). Although the Bank’s credit concentration risk was high, Bank has mitigated the risk of main debtors using deposit guarantee, Standby L/C, Letter of Guarantee, hence the ratio become 46% and continuously monitor it in a regular basis. Has been conducted accordingly. Management’s decision could not be influenced by other parties. The Bank has provided periodical reports to Bank Indonesia regarding the subject on timely basis. 46 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: FACILITIES TO RELATED PARTIES AND LARGE EXPOSURE IX. FACILITIES TO RELATED PARTIES AND LARGE EXPOSURES RATING CRITERIA 1 – FACTOR OF FACILITIES TO RELATED PARTIES AND LARGE EXPOSURES Rating 1 ƒ The Bank already has written, updated and very comprehensive policy, system and procedure for facilities to related parties and large exposures. ƒ There has been no violation and breach of Legal Lending Limit or prudence principles. ƒ Diversification of exposures is even or the total exposure of core debtors compared to the total exposure is insignificant ƒ Decision making for facilities to related parties and large exposure is done very independently. Rating 2 ƒ The Bank already has written, updated and comprehensive policy, system and procedure for facilities to related parties and large exposures. ƒ There has been no violation of Legal Lending Limit or prudence principles but there has been breach of Legal Lending Limit, which was already settled. ƒ Diversification of exposures is even or the total exposure of core debtors compared to the total exposure is insignificant ƒ Decision making for facilities to related parties and large exposure is done independently. Rating 3 ƒ The Bank already has written, quite updated and quite comprehensive policy, system and procedure for facilities to related parties and large exposures. ƒ There has been no violation of Legal Lending Limit or prudence principles but there has been breach of Legal Lending Limit, which has not been settled as it is still within the settlement period according to the action plan. ƒ Diversification of exposures is quite even. ƒ Decision making for facilities to related parties and large exposure is done quite independently. Rating 4 ƒ The Bank already has written, but not quite updated and incomplete policy, system and procedure, which have not been according to the prevailing regulations for facilities to related parties and large exposures. ƒ There has been no violation of Legal Lending Limit or prudence principles but there has been breach of Legal Lending Limit, which has not been settled, which has exceeded the settlement period according to the action plan. ƒ Diversification of exposures is uneven or the total large exposures/core debtors significantly higher than the total facilities. ƒ Decision making for facilities to related parties and large exposure is not done independently. Rating 5 ƒ The Bank already has written policy, system and procedure but they are not up to date, incomplete and have not been according to the prevailing regulations for facilities to related parties and large exposures. ƒ There has been violation of Legal Lending Limit and prudence principles and breach of Legal Lending Limit, which has exceeded 2 (two) settlement periods according to the action plan. 47 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: FACILITIES TO RELATED PARTIES AND LARGE EXPOSURE IX. FACILITIES TO RELATED PARTIES AND LARGE EXPOSURES ƒ Diversification of exposures is uneven or the total large exposures/core debtors very significantly higher than the total facilities. ƒ Decision making for facilities to related parties and large exposure is not done independently. CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 3 (Last year’s rating = 3) There was no violation or excess of LLL in year 2011. As of December 31, 2011, final risk to finance industry is 2.92% of total portfolio. The Bank has mitigated this credit concentration risk either by SBLC of prime banks or Corporate Guarantee of multinational companies. Follow up plan: The Bank would closely monitor the increasing trend of loan concentration level and implement prudential principles in providing funds so that the risk would be mitigated and managed well. 48 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING X. THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING OBJECTIVE To evaluate: ƒ
The time, accuracy and scope of the transparency of the financial and non financial condition submitted to the stakeholders (public); ƒ
The effectiveness of the information management of the Bank’s products and services, the handling of customers complaints and the handling of customers’ private data; ƒ
The scope of the reporting of GCG implementation submitted in a comprehensive, accurate, updated, complete and timely basis. ƒ
The scope of the parties receiving the GCG implementation report. ƒ
The reliability of the Bank’s Management Information System, particularly the Internal Reporting System which is able to present data and information on timely basis, accurate and useful for decision making (business). SUB FACTOR A. The Implementation of the Transparency of Financial and Non‐Financial Condition Criteria/Indicator Self Assessment Analysis 1. The Bank has been transparent in its financial and non‐financial conditions to the During the year 2011, Bank has disclosed its financial statements to stakeholders including the quarterly Financial Statements and has reported them public in Media Indonesia newspaper quarterly and has reported to to Bank Indonesia or stakeholders according to the prevailing regulations. Bank Indonesia. 2. The Bank shall and have: ƒ
Prepare and present the reports in the manner, type and scope as regulated The Bank has prepared and presented the reports in the manner, type in Bank Indonesia Regulation regarding the Transparency of the Financial and scope as regulated in Bank Indonesia Regulation regarding the Condition of the Bank. Transparency of the Financial Condition of the Bank. ƒ
Made transparent the Bank’s product information according to Bank The Bank has made transparent the Bank’s product information and Indonesia Regulation regarding the transparency of the Bank’s Product prime lending rate according to Bank Indonesia Regulation regarding Information and the use of the Customers’ Personal Data. the transparency of the Bank’s Product Information and the use of the Customers’ Personal Data. 49 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING X. THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING ƒ
Made transparent the procedure of customers’ complaints and the The Bank has made transparent the procedure of customers’ settlement of dispute with customers according to Bank Indonesia Regulation complaints and the settlement of dispute with customers according to regarding Customers’ Complaints and Banking Mediation. Bank Indonesia Regulation regarding Customers’ Complaints and Banking Mediation through BSMI News in July 2008 and February 2010. ƒ
Submitted the Annual Report minimum to: The Bank has submitted Annual Report to Bank Indonesia and other o Bank Indonesia; parties according to the prevailing regulations. o YLKI; o Rating agencies in Indonesia; o Banks Association in Indonesia; o LPPI; o 2 (two) Research Institutions in Economic and Finance; o 2 (two) Economic and Finance Magazines. 3. The Bank has made transparent the reports on timely basis with the scope The Bank does not have its own homepage. Financial statements have according to the regulation on the Bank’s homepage, covering: been published quarterly in Media Indonesia newspaper. ƒ
The Annual Statements (financial and non financial); ƒ
The quarterly Published Financial Statements minimum in 1 (one) newspaper in the Indonesian language with wide circulation at the domicile of the Bank’s head office. 50 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING X. THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING B. The Report on the Implementation of the Good Corporate Governance 1. The Bank has prepared the report on the GCG Implementation with the contents The Bank has prepared the report on the GCG Implementation with and scope minimum according to the prevailing regulations. the contents and scope minimum according to the prevailing regulations. 2. The report of the GCG implementation has: ƒ
Reflected the actual condition of the Bank or according to the self‐ The report of the GCG implementation has reflected the actual assessment result of the Bank. condition of the Bank or according to the self‐assessment result of the Bank. ƒ
Accompanied by the self‐assessment result of the Bank. The report of the GCG implementation has been accompanied by the self‐assessment result of the Bank. 3. In the event of a different Predicate in the self assessment result with Bank If Bank received audit result from BI and there is different Predicate in Indonesia supervision, the Bank has to the self assessment, the Bank will revise and submit the revised GCG ƒ
Revise the Composite Value and Predicate of the self‐assessment result to self‐assessment based on the prevailing regulations. the public in the nearest Published Financial Statement. ƒ
Submit the revised GCG self‐assessment result of the Bank to Bank Indonesia. 4. The Bank has submitted the report on the GCG Implementation minimum to: Bank The Bank has submitted GCG Implementation Report to Bank Indonesia; YLKI; Rating agencies in Indonesia; Banks Association in Indonesia; LPPI; Indonesia and other parties according to the prevailing regulations. 2 (two) Research Institutions in Economic and Finance; 2 (two) Economic and Finance Magazines in complete and timely manner. 5. The Bank has presented the report on the GCG implementation in its homepage The Bank does not have its own homepage. on timely basis. 51 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING X. THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING C. Adequacy of Internal Reporting Criteria/Indicator Self Assessment Analysis 1. Comprehensive internal report supported by reliable Management Information The Bank has comprehensive internal report and always tries its best System is available. effort to upgrade and improve information technology in both sides’ hardware and software. The Bank continuously enhances its core banking system (T24) to support internal/external reporting, add new report or improve the existing report of STB system to support AML, CTR and STR reporting. 2. Adequate, accurate and timely information is available. o T24, MIS system is to help the users get the required information. o MIS system reporting is made following the requirement from PD through Marketing Department. o Upgrade of STB system to follow requirement from SMBC Tokyo and/or Bank Indonesia. o GCM system is available to support the Bank related to credit information. o Loss‐DB system is available to get information of Bank's loss/near‐
miss event. o LLL system is available to support the monitoring of daily LLL. 3. There is adequate information system supported by competent human resources The Bank has adequate information system supported by competent IT staff. 4. There is adequate IT security system. o Establish a security policy. o Establish IT Security organization which help Bank to control IT security related matter. 52 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING o Secure access to IT Data Center. o Establishment of DRC; the Bank has improved its DRC (working space). The Bank also has plan to improve working space, communication network and system of DRC same with the Bank’s data center, hence the Bank can performance its operation from DRC office as well as from the Bank’s data center. RATING CRITERIA 1 – ASPECTS OF THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING Rating 1 ƒ The Bank is very transparent in presenting the financial and non‐financial information to public via the Bank’s homepage and in media easily accessible. ƒ The scope of the financial and non‐financial information is available on timely basis, comprehensive, accurate, updated and complete. ƒ The Bank is very transparent in presenting the information on products and services, implements a very effective management of customers’ complaints and maintains very appropriately the customers’ personal data and information. ƒ The scope of the report on GCG implementation is very comprehensive, accurate, updated and complete and submitted on timely basis to the shareholders according to the prevailing regulations. ƒ The Bank’s Management Information System particularly related to the Bank’s Internal Reporting System I s able to provide data and information on timely basis, accurate, comprehensive and very reliable and effective for management decision making. Rating 2 ƒ The Bank is transparent in presenting the financial and non‐financial information to public via the Bank’s homepage and in media easily accessible. ƒ The scope of the financial and non‐financial information is available on timely basis, comprehensive, accurate, updated and complete. ƒ The Bank is transparent in presenting the information on products and services, implements an effective management of customers’ complaints and maintains appropriately the customers’ personal data and information. ƒ The scope of the report on GCG implementation is quite comprehensive, accurate, updated and complete and submitted quite on timely basis to the shareholders according to the prevailing regulations. ƒ The Bank’s Management Information System particularly related to the Bank’s Internal Reporting System is able to provide data and information on timely basis, accurate, comprehensive and reliable and effective for management decision‐making. 53 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING Rating 3 ƒ The Bank is quite transparent in presenting the financial and non‐financial information to public via the Bank’s homepage and in media quite easily accessible. ƒ The scope of the financial and non‐financial information is available quite on timely basis, comprehensive, accurate, updated and complete. ƒ The Bank is quite transparent in presenting the information on products and services, implements quite an effective management of customers’ complaints and maintains adequately the customers’ personal data and information. ƒ The scope of the report on GCG implementation is quite comprehensive, accurate, updated and complete and submitted quite on timely basis to the shareholders according to the prevailing regulations. ƒ The Bank’s Management Information System particularly related to the Bank’s Internal Reporting System is quite able to provide data and information on timely basis, accurate, comprehensive and reliable and effective for management decision‐making. Rating 4 ƒ The Bank is less transparent in presenting the financial and non‐financial information to public. ƒ The scope of the financial and non‐financial information is not complete and not very accurate. ƒ The Bank is less transparent in presenting the information on products and services, implements not so effective management of customers’ complaints and maintains inadequately the customers’ personal data and information. ƒ The scope of the report on GCG implementation is not comprehensive, accurate, updated and complete and submitted not on timely basis to the shareholders according to the prevailing regulations. ƒ The Bank’s Management Information System particularly related to the Bank’s Internal Reporting System is unable to provide data and information on timely basis, accurate, comprehensive and less reliable and effective for management decision‐making. Rating 5 ƒ The Bank is not transparent in presenting the financial and non‐financial information to public. ƒ The scope of the financial and non‐financial information is incomplete and inaccurate. ƒ The Bank is not transparent in presenting the information on products and services, implements an ineffective management of customers’ complaints and does not maintain the customers’ personal data and information. ƒ The scope of the report on GCG implementation is incomprehensive, inaccurate, updated and complete and submitted to the shareholders not according to the prevailing regulations. ƒ The Bank’s Management Information System particularly related to the Bank’s Internal Reporting System is unable to provide data and information on timely basis, accurate, comprehensive and unreliable and ineffective for management decision‐making. 54 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE TRANSPARENCY OF THE FINANCIAL AND NON‐FINANCIAL CONDITION OF THE BANK, THE REPORT OF THE IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE AND THE INTERNAL REPORTING CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 2 (Last year’s rating = 2) Information on financial and non‐financial condition is highly proper and in compliance with the prevailing regulations. GCG Implementation Report and other internal reports have also been prepared in accordance with the prevailing regulations. However, the Bank has received few findings and recommendations from Public Accountant with regard to the financial audit for the year ended December 31, 2011. Follow up plan: The Bank will continuously improve the implementation of the transparency of financial and non financial condition, the report of the implantation of GCG and the internal reporting based on the prevailing regulation. 55 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE BANK’S STRATEGIC PLAN XI. THE BANK’S STRATEGIC PLAN OBJECTIVE To evaluate: ƒ The adequacy of the Bank’s corporate plan and business plan related to the vision and mission of the Bank, the strategic target and its corporate values; ƒ The seriousness of the business plan preparation The Preparation and Communication of the Bank’s corporate plan and business plan Criteria/Indicator Self Assessment Analysis 1. The Bank’s strategic plans have been prepared in the forms of corporate plan and The Bank has prepared corporate plan and business plan according to business plan according to the vision and mission of the Bank. the vision and mission of the Bank. 2. The business plan has been prepared in a realistic, comprehensive, achievable The business plan has been prepared in a realistic, comprehensive, manner, by considering prudence principles and responsive to internal and achievable manner, by considering prudence principles and responsive external changes. to internal and external changes. 3. The corporate plan and business plan are prepared by the Directors and approved The corporate plan and business plan are prepared by the Directors by the Commissioners. and approved by the Commissioners. 4. The Directors have: ƒ Communicated the corporate plan and the business plan to the Controlling Has been conducted accordingly. Shareholders and to all levels of organization in the Bank; ƒ Carried out the corporate plan effectively. Has carried out the corporate plan effectively. 5. The preparation and the submission of the corporate plan of the Bank: ƒ Followed Bank Indonesia regulation regarding corporate plan; Has followed Bank Indonesia regulation regarding corporate plan. ƒ Considered the composite risk level of the Risk Control System (RCS) – strategic Bank has assessed the composite risk level of the Risk Control System Risk; (RCS) – strategic risk since the year 2009 in the Bank’s quarterly risk profile report. As of December 31, 2011, the level of inherent risk for strategic risk is low and the level of internal control adequacy is 56 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE BANK’S STRATEGIC PLAN XI. THE BANK’S STRATEGIC PLAN ƒ Considered external and internal factors influencing the business continuity of the Bank; ƒ Considered prudence principles and sound Banking principles. 6. The Commissioners have supervised the implementation of the corporate plan. satisfactory, as such, the risk composite is low. Has considered external and internal factors influencing the business continuity of the Bank. Has considered prudence principles and sound Banking principles. The Commissioners have supervised the implementation of the corporate plan. RATING CRITERIA 1 – ASPECTS OF BUSINESS PLAN OF COMMERCIAL BANKS Rating 1 ƒ The business plan is very much appropriate to the vision and mission of the Bank and the corporate plan of the Bank. ƒ The corporate plan and the business plan are realistically prepared and have considered all external and internal factors, prudence principles and sound Banking principles. ƒ The realization of the business plan is very much in accordance with the business plan of the Bank. ƒ Low Strategic Risk Rating Rating 2 ƒ The business plan is appropriate to the vision and mission of the Bank and the corporate plan of the Bank. ƒ The corporate plan and the business plan are realistically prepared and have considered all external and internal factors, prudence principles and sound Banking principles. ƒ The realization of the business plan is in accordance with the business plan of the Bank. ƒ Low Strategic Risk Rating or Moderate to Low Strategic Risk Rating. Rating 3 ƒ The business plan is quite appropriate to the vision and mission of the Bank and the corporate plan of the Bank. ƒ The corporate plan and the business plan are quite realistically prepared and have considered all external and internal factors, prudence principles and sound Banking principles. ƒ The realization of the business plan is quite in accordance with the business plan of the Bank. ƒ Moderate Strategic Risk Rating. Rating 4 ƒ The business plan is less appropriate to the vision and mission of the Bank and the corporate plan of the Bank. ƒ The corporate plan and the business plan are less realistically prepared and have not considered all external and internal factors, prudence principles and sound Banking principles. 57 Appendix 2, Bank Indonesia Circular No. 9/12/DPNP dated 30 May 2007 RATING ASPECTS: THE BANK’S STRATEGIC PLAN XI. THE BANK’S STRATEGIC PLAN ƒ The realization of the business plan is not quite in accordance with the business plan of the Bank. ƒ High Strategic Risk Rating or Moderate to high Strategic Risk Rating. Rating 5 ƒ The business plan is not appropriate to the vision and mission of the Bank and the corporate plan of the Bank. ƒ The corporate plan and the business plan are unrealistically prepared and have not considered all external and internal factors, prudence principles and sound Banking principles. ƒ The realization of the business plan is not in accordance with the business plan of the Bank. ƒ High Strategic Risk Rating CONCLUSION: IDENTIFY ISSUES, ACTION PLAN AND SETTLEMENT TARGET 2 Rating 2 (Last year’s rating = 2) Corporate Plan and Business Plan of the Bank have been prepared according to the prevailing regulations and realized according to the determined target, the Bank’s vision and missions, as well as taking into account all external and internal factors, prudence and sound Banking principles. As of December 31, 2011, the level of inherent risk for strategic risk is low and the level of internal control adequacy is satisfactory, as such, the risk composite is low. Follow up plan: The Bank would do its utmost to achieve its business performance targets which have been established in the Bank’s Business Plan 2012 – 2014 and regularly monitor the progress to ensure that the level of strategic risk stays at low level. 58