Banking Supervision Report

Bank IndonesiaDepartment of Banking Research and Regulation (DPNP)Jl. MH. Thamrin No. 2, Jakarta, Indonesia - 10350Telephon: (+62-21) 2310108, ext.4798, 4794, 8623 and 7725Fax : (+62-21) 3518946 dan 3518629Email: DPNP@bi.go.id

Banking Supervision Report2012

Banking Supervision Report 2012iv

Foreword

BI MissionTo achieve and maintain rupiah stability by maintaining monetary stability and by

BI VisionTo be recognized, domestically and internationally, as a credible central bank

Strategic Values of Bank Indonesia

Visi:“Menjadi lembaga bank sentral yang dapat dipercaya secara nasional

maupun internasional melalui penguatan nilai-nilai strategis yang dimiliki serta

pencapaian inflasi yang rendah dan stabil”

Misi:“Mencapai dan memelihara kestabilan nilai rupiah melalui pemeliharaan

kestabilan moneter dan pengembangan stabilitas sistem keuangan untuk

pembangunan jangka panjang yang berkesinambungan”

Nilai-nilai Strategis Organisasi Bank Indonesia:“Nilai-nilai yang menjadi dasar Bank Indonesia, manajemen dan pegawai untuk

bertindak dan atau berperilaku, yang terdiri atas Kompetensi, Integritas, Transparansi,

Akuntabilitas dan Kebersamaan”

Foreword

Banking Supervision Report 2012vi

Foreword

Halim Alamsyah

Banking Supervision Report 20122

Executive Summary

Foreword

Executive Summary

Foreword

Executive Summary

Foreword

Banking Policy Framework

Dynamics

RegulatoryApproach Approach

Management

Executive Summary

Foreword

Table of Contents

Foreword Executive Summary Prospects and BankingPolicy Direction

Bank Structure and Performance in 2011

Banking Policy and Regulationin 2011

Bank Supervision Implementation

Foreword ............................................................................................................ v

Table of Contents ................................................................................................ viiList of Tables .......................................................................................................................................... ixList of Graphs ........................................................................................................................................ xList of Figures ........................................................................................................................................ xi

............................................................................................ 1

....................................... 71.1 Banking Structure ......................................................................................................................... 9

1.1.1 Commercial Banks ............................................................................................................... 9

1.1.2 Islamic Banks ....................................................................................................................... 11

1.1.3 Rural Banks (BPR) ................................................................................................................ 12

1.2 Banking Performance ................................................................................................................... 14

......................................................................................... 15

1.2.2 Islamic Banking..................................................................................................................... 19

........................................ 24

1.2.4 Rural Banks .......................................................................................................................... 25

........................... 29

................................................. 33........................................................................................................... 35

.......................................................................................... 35

2.1.2 Islamic Banking..................................................................................................................... 35

2.1.3 Rural Banks (BPR) ................................................................................................................ 37

..................................................................................................................... 38

.......................................................................................... 38

2.2.2 Islamic Banks ....................................................................................................................... 45

2.2.3 Rural Banks (BPR) ................................................................................................................ 46

.......................................... 46

........................................................................................................................ 46

................................................................................................................. 47

.................................. 47

...................................................................................... 47

...................................... 50

............................................... 51

.................................... 52

................................................... 53

Table of Contents

Banking Supervision Report 2012viii

Table of Contents

............................................................................................................ 55

................................................................................................................ 56

................................................................................................................................ 60

.................. 61

.............................................................................................. 63

.......................................................................................................... 67

.............................................................. 69

.................................................................................................. 71

........... 733.1 Banking Supervision ..................................................................................................................... 75

.......................................................................................... 823.1.2 Islamic Banking .................................................................................................................... 883.1.3 Rural Banks (BPR) ................................................................................................................ 91

3.2 Fit and Proper Tests ...................................................................................................................... 94.......................................................................................... 95

3.2.2 Islamic Banks ....................................................................................................................... 953.2.3 Rural Banks (BPR) ................................................................................................................ 95

................................................................................................ 96................................................................................................................... 97

....................................................................................................................... 99

................................................. 101

..................................4.1 Challenges and Prospects ............................................................................................................. 107

.......................................................................................................... 108......................................................................................... 108

4.2.2 Islamic Banking .................................................................................................................... 108 4.2.3 Rural Banks (BPR) ................................................................................................................ 110

........................................................... 111.......................................... 119

Table of Contents

Table 1.1 Total Number of Banks and Bank Branches .............................................................................. 9Table 1.2 Number of Banks based on Core Capital ................................................................................... 10

........................................................................... 11................................................................................. 12

.................................................. 12................................................................................................... 13

Table 1.7 Licensing Data for 2012 ............................................................................................................. 13...................................................... 14

.............................................................. 14Table 1.10 Total Assets of Rural Banks ........................................................................................................ 14

.................................................................................................. 14......................................................................................... 15

..................................................... 20........................................................................................ 24

............................................................... 26.......................................................................... 28

................................................................................................... 29

................................................................................................... 31

.......................................... 61...................................................................... 65

......................................................... 94................................... 97

.......................................................... 99

List of Tables

Banking Supervision Report 2012x

Table of Contents

................................................................................. 10........................................................................ 11

..................................................................................................... 11.................................................................................. 16

............................................................................................................. 16.......................................................................................... 16

Graph 1.7 Non-Performing Loans (NPL) ................................................................................................... 17Graph 1.8 Share of Deposit Components in 2012 .................................................................................... 18Graph 1.9 Average Rupiah Lending and Deposit Rates at Commercial Banks .......................................... 18

........................................................ 20.................................................................................. 21

.............................................................. 21................................................................ 21

......................................................................................................... 22............................................................................................. 22

.................................................................................................... 22.......................................................................... 24

............................................................. 24.................................................................................... 24

........................................................................... 26........................................................................................... 26

.................................................................................... 26Graph 1.23 Performance of NPL and Loan Loss Provisions ........................................................................ 27Graph 1.24 Interest Rates at Rural Banks ................................................................................................... 28

....................................................................................................... 30............................................................................................................ 31

................................................................................. 31......................................................................................... 31

.................................................................... 92..................................................................................... 93

........................................................................................... 97Graph 3.4 Handling of Tipibank Cases (1999-2012) ................................................................................. 98

List of Graphs

Table of Contents

..................................................................................... 76............................................................................................ 77

....................................................................... 80

List of Figures

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Chapter 1Banking Structure and Performance in 2012

Bank Structure and Performance

Foreword Table of Contents Prospects and Banking

1.1 Banking Structure

74% concentrated on the islands of Java and Sumatera. In the past year, state-owned banks have implemented

an aggressive expansion strategy.

1.1.1. Commercial Banks1

Table 1.1 Total Number of Banks and Bank Branches

State-Owned BanksNumber of Banks 4 4 4

Foreign Exchange Banks

Non-Foreign Exchange BanksNumber of Banks 31 30 30Number of Branches 1131 1288 1447

Regional Banks

Number of Branches 1413 1472 1712

Joint Venture Banks

Foreign Banks Number of Banks 10 10 10

TotalNumber of Banks 122 120 120

Number of Islamic Banks 11 11 11

Bank Group 2010 2011 2012

1. A change in the business licence of a local enterprise (PD). South Kalimantan Regional Bank was licensed under the name PT Bank Pembangunan Daerah Kalimantan Selatan (South Kalimantan Regional Bank)

2. A change in the business license of PT Bank Dipo Internasional to PT Bank Sahabat Sampoerna through Bank Indonesia Gubernatorial Decree no. 14/7/KEP.GBI/2012, dated 22nd February 2012.

3. A change in the business license of PT Bank Agroniaga to PT Bank Rakyat Indonesia Agroniaga Ltd through Bank Indonesia Gubernatorial Decree no. 14/72/KEP.GBI/2012.

4. A change in the business license of PT Bank Liman Internasional to PT Bank Dinar Indonesia through Bank

to Rp10 trillion compared to the previous period and one more bank in the next category with a core capital of

State-owned Banks

Non-foreign Exchange Banks

Regional Banks

Joint Venture Banks

Foreign Banks

Table 1.2 Number of Banks based on Core Capital

8 9 10 8.34

Rp 1 T s.d Rp 10 T 40 32,79 44 49 40.83

Rp100 M s.d < Rp 1 T 74

< Rp100 M 0 0,00 0 0,00 0 0,00

Total 122 100,00 120 100,00 120 100,00

Core Capital Number of Banks

Number of Banks

Number of Banks%

2010 2011 2012

BOOK 1 BOOK 2 BOOK 3 BOOK 4

Core Capital

< Rp1 T

Core Capital Core Capital Core Capital

Number of Banks 40 14

assets in the banking industry (Graph 1.2). In general, all bank groups experienced an increase in their total

state-owned banks and foreign exchange banks, while non-foreign exchange banks enjoyed the most growth as

a percentage (yoy) (Graph 1.3).

State-owned Banks

Non-foreign Exchange Banks

Regional Banks

Joint Venture Banks

Foreign Banks

37,50%

38,44%-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

(Million Rp)

2010 2011 2012

State-owned Banks Foreign Exchange Banks Non-foreign Exchange BanksRegional Banks Joint Venture Banks Foreign Banks

in 2012Graph 1.3 Total Assets by Bank Group

1.1.2. Islamic Banks

Berkesan, Ternate; BPRS Magetan, Kediri; and BPRS Saka Dana Mulia, Semarang), one license conversion from

(BPRS Kafalatul Ummah, Medan).

costs while enhancing the service provided to the customer.

1.1.3. Rural Banks (BPR)2

Group of Bank 2010 2011 2012

Islamic Bank (BUS)

- Number of Banks 11 11 11- Number of branches 1401Unit Usaha Syariah (UUS) 23 24 24

23 24 24- Number of branches

Islamic Rural Banks

- Number of Banks

- Number of branches 401

2010 2011 2012

1.088 1.223 1329

1.280 1443Total 3.910 4.172

expanding rural banking services evenly into all areas of the archipelago, namely by applying less stringent

Java and Bali and one from outside Java and Bali.

Based on ownership, of the 13 rural banks engaged in mergers, four were owned by local government with

2010 2011 2012

Jumlah % Jumlah % Jumlah %

Java-Bali 74,1 1.208 72,4 1.184

442 28,4Total 100 100 100

From To

Jabodetabek*

West Java

Central Java and Yogyakarta

East Java

Bali and Nusa Tenggara

Sumatera

Kalimantan

Sulampua**

- - 15 1

- 1 4 1

- - 7 2

- 1 - -Total 4 12 30 6

*) Jakarta, Bogor, Depok, Tangerang/Banten, Bekasi dan Karawang

**) Sulawesi, Maluku dan Papua

In-Principle Approval

Business License

License

Table 1.7 Licensing Data for 2012

2010 2011 2012

From To From To From To

Limited Company 4 21 3 11 4

Local Enterprise 1 34 4 19 2

- - - - - -

Total 31 7 30 6

In line with Bank Indonesia policy to encourage the establishment of rural banks in the form of limited

rural bank. Local government owns rural banks with status as a local enterprise, whereas rural banks in the form

of limited companies are examples of rural banks where a private party holds at least a part or all of the shares.

2010 2011 2012

Total Percentage Total Percentage Total Percentage

Limited Company 1.384 81,1 1.388 83,2 1.391 84,2

Local Enterprise 288 247 14,8 229 13,9

34 2,0 34 2,0 33 2,0

Total 1.706 100 100 100

Jml % Jml % Jml %

S.d. Rp1 M 1,5 16 1,0 12 0,7

Rp1 M s.d. Rp5M 20,0 264 15,8 229 13,9

Rp5 M s.d. Rp10M 25,4 387 23,2 333 20,1

Rp 10 M 53,2 1.002 60,0 1.079 65,3Total 100 1.669 100 1.653 100

Total aset2010 2011 2012

25341433907

Table 1.10 Total Assets of Rural Banks

Jml % Jml % Jml %

S.d. Rp500jt 0,5 6 0,4 4 0,2

Rp500jt s.d.Rp1M 16

3261.706

0,9 95 5,7 77 4,7

Rp1M s.d. Rp10M 45,4 767 46,0 678 41,0

Rp10M s.d. Rp25M 30,5 560 33,6 617 37,3

Rp25M 22,6 241 14,4 277 16,8Total 100 1.669 100 1.653 100

Paid up capital2010 2011 2012

Table 1.11 Paid Up Capital of Rural Banks

In terms of total assets, rural banks can be grouped into four categories. However, based on paid up capital

1.2. Banking PerformanceAgainst the backdrop of a languid global economic recovery, the banking industry in Indonesia performed

In terms of capital, the banking industry maintained a level of capital well in excess of the minimum threshold

supported by enhanced credit risk management amid a business environment and macroeconomy marred by

the global economic crisis.

Dec-10 Dec-11 Dec-12

Total Assets (T Rp)

Deposits (T Rp) 2,338.82 2,784.91 Credit (T Rp)** 2,200.09 CAR (%) 17.17 17.32 NPL Gross (T Rp)** 2.17 1.87 NPL Net (T Rp)** 0.39 0.73

3.03 3.08

LDR (%) 79.00

Table 1.12 Key Indicators of Commercial Banks

** Excluding credit channelling

in the future. When compared to other countries in the region, like Malaysia, Singapore, Thailand, Korea and

tended to slow. Working capital credit grew by 23.21% (yoy) compared to 21.41% in the year previous. In

19.87% compared to 24.21% in the previous year.

02009 2010 2011 2012 2012

Graph 1.4 Credit in Growth, Deposits and LDR (%)

economic sectors, however, that experienced a slowdown like mining, social services, others and corporate

35,00%

0,00Working Capital

Credit

Dec - 10

22,4123,21

Consumer Loans

TotalInvestmentCredit

Dec - 11 Dec - 12

24,5923,08

-20 0 20 40 60 80 100 120 140 160 180

Others

Manufacturing

Agriculture

CorporateServices

Social Services

Mining

Electricity

Although credit growth for the year of 2012 reached 23.08% (yoy), exposure to credit risk tended to ease overall,

a decline in gross non-performing bank loans to just 1.87% (December 2012), which is the lowest level in the

deemed safe, however, threats of rising NPL require vigilance as the nominal NPL level of several sectors, including

the low levels.

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 122010 2011 2012

Net NPL (right-hand scale)Gross NPL (right-hand scale)

Graph 1.7 Non-Performing Loans (NPL)

Indonesia) in order to expand credit.

of deposits as the primary source of bank funds was 91.04%. Meanwhile, interbank-sourced funds and other

of 71.84%.

A capital structure with a stronger component of core capital is a good indicator of greater bank resilience

Working Capital Credit Investment CreditConsumer Loans 1-month Term Deposits

2012201120102009200820072006

Graph 1.9 Average Rupiah Lending and Deposit Rates at Commercial Banks

Checking Account

Savings Account

Term Deposit

42,83%23,78%

33,39%

Graph 1.8 Share of Deposit Components in 2012

environment. The high level of capital at banks is inextricably linked to Bank Indonesia policy to strengthen

lending rates, the rapid surge in credit volume allocated led to an increase in average Net Interest Income (NII)

appeals from Bank Indonesia to lower bank rates. In 2012, the average 1-month rupiah deposit rate declined by

1.2.2. Islamic Banking

Rp7.11 trillion to Rp14.02 trillion.

Table 1.13 Key Indicators for Islamic Banks and Islamic Business Units

2010 2011 2012

Total Assets (Rp T)

Deposits (T Rp)

iB Financing (T Rp)

CAR (%)* 14,14NPF Gross (%) 3,02 2,22NPF Net (%) 1,34 1,34

1,79 2,14

FDR (%) 88,94 99,99

Islamic Banks (BUS) and Islamic Business Units (UUS)

2009 2010 2011 2012

Graph 1.10 Growth in Financing, Deposits and FDR at BUS and UUS

placements at Bank Indonesia decreased.

39,27% 34,77%

62,97%

39 ,44 %

30 ,52 %33,45%

87 ,93 %

50,38%

34,93%

48,49% 50,56%43 ,86 %

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

100,00%

WorkingCapital Financing

Investment Financing

Consumer Financing

Total Financing

2010 2011 2012

27,64%

20,86%

22,85%

32,69%

21 ,92 %

29,10%

28 ,26 %

44 ,95 %

76,46%

51,33%

43,69%

-20,00% 0,00% 20,00% 40,00% 60,00% 80,00% 100,00%

Agriculture

Mining

Manufacturing

Electricity

Corporate Services

Others

Social Services

Graph 1.11 BUS and UUS Financing Growth by TypeGraph 1.12 BUS and UUS Financing Growth by

Economic Sector

decreased in 2012 to 14.17% from 14.84% in 2011.

500000

1000000

1500000

2000000

2500000

3000000

Million Rp %

2009 2010 2011 2012

Graph 1.13 Growth in BUS and UUS Non-Performing Financing

trillion (12.01%). Nevertheless, growth in term deposits was considerably lower than that in the previous year,

dependence on expensive funds.

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000Million Rp %

2009 2010 2011 2012

ROA (right -hand scale) ROE (right-hand scale)

derived from fee-based income.

46,02%

39 ,05 %

48,92%45,46%

32,59 %

42,32%

60,66%

51 ,79 %47,49%

38 ,25 %

19,67%

27,81%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

Checking Savings Term Deposits Total

2010 2011 2012

Checking

Savings

Term Deposits

12,00%

30,55%57,44%

Islamic Rural Banks

Indikator Utama 2010 2011 2012

Total Assets (Rp T) 2,73 4,70Deposits (T Rp) 2,09 2,93iB Financing (T Rp)

CAR (%)

NPFs Gross (%)

NPFs Net (%)

78,10FDR (%) 128,47 127,71

Table 1.14 Key Indicators of Islamic Rural Banks

contributed by the mining sector with 217.7% and social services with 147.19%.

Financing by Type

80,33%

0,58%0,38%

2,30%4,57% Mudharabah Contracts

Musyarakah Contracts

Murabahah Contracts

Salam Contracts

Ijarah Contracts

Qardh Contracts

Others

Working Capital FinancingInvestment FinancingConsumer Financing

on the core capital of the bank3

BUKU (Bank Umum Kelompok Usaha or Commercial Bank Business Groups). BUKU 1 is for banks with the lowest

56,79%217,19 %

-7,30%

45,01%

35,13 %

21,45%84,69%

3 ,63 %

147,14%34,66 %

21,45%

-100,00% -50,00% 0,00% 50,00% 100,00% 150,00% 200,00% 250,00% 300,00%

Agriculture

Mining

Manufacturing

Electricity

Corporate Services

Others

Social Services

Graph 1.19 Financing Growth by Economic Sector

of capital at around 17%, which is close to the CAR level for the banking industry (17.32%).

Indikator Utama BUKU 1 BUKU 2 BUKU 3 BUKU 4

Total Assets (T Rp) 221.84 844.89 1,270.81DPK (T Rp)

Credit (T Rp)

CAR (%) 17.71 17.02NPL Gross (%) 2.11 1.99

2.23 2.34 3.80

81.94 80.24LDR (%) 89.39

1.2.4. Rural Banks

increasing by 21.21% from Rp41.10 trillion to Rp49.82 trillion and deposits increasing by 17.43% from Rp38.21

an 18.10% increase in core capital from Rp8.87 trillion to Rp10.43 trillion in 2012. The growth in capital at rural

small sector.

Graph 1.22 Growth in Credit and Deposits in 2012

- 5.00 10.00 15.00 20.00 25.00

Deposits Credit

Graph 1.20 Performance of Assets, Credit and Deposits

Billion Rp

210211020102CreditTotal Assets Deposits

Billion Rp

0100020003000400050006000700080009000

May July

210211020102Paid Up CapitalCore Capital P/l In Current Year

credit at Rp49.82 trillion.

the lowest for the past decade. Low NPL eases the burden of reserves that must be maintained by rural banks,

thereby allowing rural banks to concentrate on credit expansion.

In general, the performance of rural banks tended to improve as evidenced by a number of key indicators.

declining gradually.

2.421 3.408

2010 2011 2012 2011 2012 2010 2011 2012 2010 2011 2012By business type* 33.844 41.100 49.819 21,44 21,22 100 100 100 6,10 5,22 4,75

a. Micro 12.668 14.292 15.551 12,82 8,81 37,43 34,77 31,21 8,61 8,03 7,61b. Small 3.795 4.838 3,45 27,48 10,84 9,23 9,71 6,08 5,86 5,70

c. Medium 1.313

84,45 40,74 3,88 5,89 6,84 7,20 3,86 4,03d. Non-MSM 16.195 20.591 26.022 27,14 26,38 47,85 50,10 52,23 4,09 3,32 2,96

By credit type 33.844 41.100 49.818 21,44 21,21 100 100 100 6,10 6,10 4,75a. Working capital 16.790b. Investment 1.929c. Consumption 15.126

19.557 23.030 16,48 17,76 49,61 47,59 46,23 8,40 7,54 6,69

2.364 2.964 22,56 25,40 5,70 5,75 5,95 5,06 4,17 4,65

19.178 23.824 26,79 24,22 44,69 46,66 47,82 3,71 2,99 2,63

*) For 2010 and 2011 data, the criteria for credit based on business type is in accordance with the MSME criteria stipulated in Act no. 20, 2008, concerning MSMEs.

Credit Type)%(LPN)%()%()pRrailim(Position Growth Share

Graph 1.23 Performance of NPL and Loan Loss Provisions

2010 2011 2012

ne July

ay Juni Juli

June July

Gross NPL Net NPL Loan Loss Provisions (right-hand scale)

8% Billion Rp

high lending rates at rural banks include a high cost of funds and large overheads.

Graph 1.24 Interest Rates at Rural Banks

Dec 09 Dec 10 Dec 11 Dec12

Savings Term Deposits Credit Allocated

Indikator Utama Des-10 Des-11 Des-12

Total Assets (T Rp)

DPK (T Rp) 31,31 38,21 44,87Credit (T Rp) 28,00 33,84 41,10 49,82CAR (%) 24,17 30,01NPLs Gross (%)

NPLs Net (%) 3,97

3,09 3,32LDR (%) 72,90 79,00

81,82 80,97 79,47 77,77

Table 1.17 Key Indicators of Rural Banks

collateral when the loan is disbursed, which is set at 70%. The scope of mortgage loans includes consumer

through a government housing scheme.

two-wheeled vehicles; (ii) a minimum downpayment of 30% for four-wheeled vehicles; and (iii) a minimum

business.

70m2 decelerated from 49% (June 2012 yoy) to 39% (November 2012 yoy). Notwithstanding, mortgage

growth quickly rebounded at the end of 2012 to 47.2% (yoy) compared to just 27% at yearend 2011. This

trend in mortgage growth is in line with the annual cycle of such loans, which tend to spike at the end of

Box 1.1 Loan-to-Value (LTV) Policy for Mortgages and Automotive Loans

January

March April M

Aygust

September

October

November

December

Houses <21m2

Flat/apartment <21m2Houses of 22m2 to 70m2

Flat/apartment of 22m2 to 70m2Houses >70m2

Flat/apartment >70m2

vehicles slowed from 10% (June 2012, yoy) to -28% (December 2012, yoy).

Table 1.18 Growth in Mortgages by Type

41% 23% 23% 25% 20% 19%

38% 27% 38% 49% 42% 47%

9% 57% 58% 86% -23% -32%

8% 83% 60% 52% 38% 31%

2% 60% 49% 25% 89% 80%

2% 35% 32% 87% 72% 68%

0,38% 56% 70% 122% 116% 295%

33% 35% 43% 25% 22%

Houses of 22m2 to 70m2

Houses >70m2

Houses <21m2

Average growth rate

2011Mortgage Type:

Annual Growth (yoy)

2011Apr

2011Jun

2011Aug

2011Oct

2011Dec

2010Feb

2011Apr

2011Jun

2011Aug

2011Oct

2011Dec

Houses <21m2

Flat/apartment <21m2Houses of 22m2 to 70m2

Flat/apartment of 22m2 to 70m2Houses >70m2

Flat/apartment >70m2

Jan2012

Feb2012

Mar2012

Apr2012

May2012

Jun2012

Jul2012

Aug2012

Sep2012

Oct2012

Nov2012

Dec2012

20% 20% 20% 21% 19%12% 10%

7% 7%5%

5%12%11%11%11%

-31% -44% -44%-37%

-23%-17% -16%

-36% -36%

-67% -68% -65% -62% -61%-56% -53% -52%

-60% -61% -62%-59%

-30%-29% -28%

-21%truk

3%2%-4%

1% -7%2%

5%-13%

-20%-25%

motorcycle

and other vehicles.

Jul -1

Car Motorcycle Truck/Lorry Others

Chapter IIBanking Policy and

Banking Policy and Regulation

Foreword Table of Contents Bank Structure and Performance in 2011

Prospects and Banking

Bank Indonesia is as follows:

1. In order to enhance bank

the public accountants employed by banks. Bank Indonesia will also review ownership policy at banks and

others:

1. In order to enhance the

2. In order to help customer segment

Dewan Syariah Nasional - DSN) and Indonesia Charter of Accountants (Ikatan Akuntan Indonesia – IAI) in order to expedite the development of new and non-standard products.

industry alike.

and human resources.

4. In order to foster Islamic

and the uniqueness of Islamic banking products in order to raise public understanding of Islamic banking

Board (IFSB).

6. Bank Indonesia developed an Islamic Banking

early assessment of supervision at Islamic rural banks. In congruity with the development of supervision

organises and hosts training for the supervisors of Islamic banks in order to enhance their competence.

important.

appropriate lending rates for rural banks. Form the results of the review it was found that Bank Indonesia

3. The

development of Apex rural banks in order to expand the role and capacity of rural banks in terms of

d. Enforcing Capital Adequacy Maintained Assets (CEMA) for foreign bank branches.

Commercial Banks.

4) Policy to develop an electronic credit transfer system for Apex rural banks is discussed in more detail in Box 4.1.

commissioners and directors; (ii) the suitability of capital adequacy assessments; (iii) the suitability of

manage their exposure to risk by maintaining asset quality and asset write-downs (PPA).

b. Assessment criteria for the quality of interbank placements categorised as loss.

c. Assessment of credit quality and other funds for MSME borrowers.

d. Term deposits recognised as cash collateral.

e. Criteria for a Prime Bank.

f. Credit restructuring and PPA.

as follows:

submission of reports as well as the enhancement of transparency at banks in general.

d. Structured products.

h. Bank employees.

general.

for collateral and the interest rates for the short-term funding facility.

c. That a bank shall only implement a transfer of power agreement with a Corporate Service Provider

bank of responsibility to protect the rights of its customers.

e. The submission of work excluded for the transfer of power.

commercial vehicles with four wheels or more.

The enforcement of a maximum limit on shareholdings at commercial banks aims to control the shareholder

soundness as well as good corporate governance.

standard approach.

maturity.

b. Adding a form to calculate risk-weighted assets pertaining to credit risk.

not applicable to banks in Indonesia when a single shareholder controls two banks that are operated based

modus operandi.

the form for the weekly balance sheet in order to align the format with the new Commercial Bank

strengthen the Islamic banking industry as follows:

to successfully apply for the short-term funding facility as well as the requirements pertaining to collateral.

This circular was issued to provide a reference for Islamic banks and Islamic business units for mortgage

risk management at Islamic banks and Islamic business units.

102 at Islamic banks.

agencies.

access to their services:

funds and repayments.

stemming from the real sector:

spilled over to countries in Asia like China and India. Despite a slight downturn in the performance

statements and other sources for public listed companies as well as corporate surveys for non-public

Fisheries) and the banking industry.

1. Create new entrepreneurs. This program aims to mould new entrepreneurs through ongoing training and

The disbursement of small business loans (kredit usaha rakyat – KUR

such workers in terms of entrepreneurship.

6) Year to date.

Bank Indonesia also collaborated with the Ministry of Agriculture through a credit extension program.

Bank Indonesia has undertaken a number of measures as follows:

and the death of livestock.

signed on 26th

as well as determining a normal level of interest in order to make claim payments.

banks and the handling of bank failure.

4. Follow-up measures for a bank that has had its business license revoked.

rd December 2012.

th December 2011

supervisory bodies worldwide. The required response was not only to raise the capital quality of banks as a solid

system supervision at the local (solo) level by host supervisors and at the consolidated level by home supervisors

was also realised.

issued

supervisors;

with supervision and to ameliorate the quality of banking supervision around the world. BCBS also develops supervision guidelines and

consolidated banking supervision by home supervisors and solo banking supervision by host supervisors.

between Bank Indonesia and the Monetary Authority of Singapore to discuss the performance of banks in each

Bank Indonesia as a member of the Forum concurred with the other members to compose memorandums of

follows:

stability.

6. Communicate with the general public in order to prevent and resolve crises.

well as if shadow banking is used by market players to circumvent regulatory requirements.

supervision.

process (Pillar 2). Strengthening the capital framework (Pillar 1) under Basel III is not intended to undermine

Basel III. This also stresses the importance of the supervisory review process. Supervisors are considered to play

and adequate capital to absorb risk as well as to intervene when imbalances emerge.

The capital and liquidity requirements under Basel III also evidence the growing importance of supervisors

and strategic decision-making by bank management will remain a challenge for supervisors. This will entail

and involvement in discussions with the bank board and management regarding the business strategy and

statement from the Board within the risk-management framework as well as persistent divergence between the

explore a mechanism to formally evaluate risk culture in 2013.

valuable lessons garnered by the supervisory authority in Indonesia in the face of several crises in recent years

Box 2.1 Policy to Extend Credit and Provide Technical Assistance in order to develop

target to MSMEs can be achieved by commercial banks directly through the provision of credit or

MSMEs. The technical assistance provided by Bank Indonesia aims to enhance the competence of

to meet the credit terms imposed by banks.

to create an equitable MSME development program.

Box 2.2

Sample

2011 2012

Mar Sept Des Mar Sep Des

Corporate

Mortgages

qtq Mar 11-

Des 12

Credit Segment

Des11-

Des 12

Based on the results of monitoring performed by Bank Indonesia as well as input from the general

Box 2.3 Multi-licensing Policy

BUKU 1

BUKU 2

BUKU 3

BUKU 4

which covers full and complex banking services.

as well as to promote economic development in unbanked and underbanked areas. There are two main

new concept.

Zona IKoe sien = 5

Zona IIKoe sien = 4

Zona IIIKoe sien = 3

Zona IVKoe sien = 2

Zona VKoe sien = 1

Zona VIKoe sien = 0.5

DKI JakartaLuar Negeri

Jawa BaratJawa TengahDI YogyakartaJawa TimurBali

Kalimantan TimurKepulauan RiauSumatera Utara

RiauSumatera SelatanKalimantan TengahKalimantan SelatanSulawesi UtaraSulawesi SelatanPapua

DI ehJambiSumatera BaratBangka BelitungBengkuluLampungKalimantan BaratSulawesi Tenggara

NTBNTTSulawesi TengahGorontaloSulawesi BaratMaluku UtaraMalukuPapua Barat

access to banking services.

Rp10 Bilion

Rp4 Bilion

Rp2 Bilion

Rp8 Bilion

Rp3 Bilion

Rp1 Bilion

community.

Such policy is expected to strengthen bank resilience because banks will operate according to their capacity.

by urging banks to supplement capital if business expansion is a desired goal. The necessary increase in

market segment is more niche.

development throughout the Indonesian archipelago.

economic growth in order to ameliorate the welfare of the general public.

In line with policy to manage the supply of foreign exchange and policy to expand the role and enhance

banks domiciled in Indonesia and foreign bank branches as follows:

Bank Indonesia.

based on the results of an assessment conducted by Bank Indonesia.

Box 2.4 Trustee Policy

2. The Banking Sector

resources.

3. The Corporate Sector

exchange proceeds from exports and foreign exchange from overseas loans.

Background

further undermined borrower performance and led to spiralling non-performing loans. Such circumstances

compounded bank losses and eroded capital at nearly all banks.

of total shares in a bank.

Box 2.5 Shareholding Policy at Commercial Banks

is the most restricted compared to other kinds of shareholder. The other category of shareholder is non-

is maintained.

maximum shareholding for investors in banks that have merged.

Box 2.6 Policy for iB Mortgages and iB Automotive Financing at Islamic Commercial

Banks and Islamic Business Units

Chapter 3

and Enforcement in 2012

Foreword Table of Contents Bank Structure and Performance in 2011 in 2011

3.1 Banking SupervisionConsolidated Supervision

dated 15th

Level 1

Level 2 is

Level 3

Risk-Based Banking Supervision

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5

Stage 6

Insurance Company I

Insurance Company A

Insurance Company B

FinanceCompany C

Company E

FactoringCompany G

FinanceCompany F

Company H

FinanceCompany D

1. Know your bank

6. Supervisory actions and

monitoring

5. Update bank risk profile and

soundness level

InspectionReport

4. Risk BasedInspections

3. SupervisionPlanning

InspectionWork Plan

2. Assessment of riskand bank

soundness

Collection of dataand information

RBS Phase 1Panel Forum

RBS Phase 2Panel Forum

Risk Profile andLevel of

Bank Soundness

AnnualSupervision

Strategy

assessment of bank soundness is used as the basis to determine future business strategy as well as to compile

Bank Soundness Assessment Framework

principle-based

minimum requirements that the

Bank Soundness Level Assessment

Framework

Bank Soundness Assessed Individually

KnowYourBank

CompositeRBBR

Inherent Risk

Level of Composite

Inherent RiskComposite KPMR

LevelComposite Risk

CGS Capital

Credit Risk Credit Risk

Market Risk

Liquidity Risk Framework3. Human Resources

System (MIS) Processes4. Risk Control System

ComplianceRisk

Market Risk Structure

Process

Results

PerformanceAdequacy

Source

Sustainability

Liquidity Risk

ComplianceRisk

Risk Level

QualityOf Risk

Applied

RISK PROFILE

Assessment of Consolidated Bank Soundness

st July for the

assessment of bank soundness conducted at the end of June and no later than 31st

assessment of bank soundness conducted at the end of June and 15th

Good Corporate Governance

Earnings

Capital

Supervision Status of Commercial Banks

Financial System Stability Dashboard

3.1.2. Islamic Banking

Level of Soundness

Dec'12 Dec'11 Dec'10

Cukup Sehat

Kurang Sehat

Tidak Sehat

20,0 40,0 60,0 80,0 100

2,12,23,4

4,94,65,8

8,98,610,18

84,184,580,8

Capital

Asset quality

Earnings

Liquidity

Dec'12 Dec'11 Dec'10

Cukup Sehat

Kurang Sehat

Tidak Sehat

10,0 20,0 30,0 40,0 60,050,0

9,79,08,2

25,522,822,5

59,260,059,0

5,68,210,3

pantsNot

2011 2012

110 21

Directors

21 15 24 15 332 130

Controlling Shareholders 0 0 0 0 155

Total 32 153 42

3.2.2 Islamic Banks

Commercial Banks Rural Banks

Cases Banks Cases Banks Cases Banks

22 14 44 21 35

13 43 20

Witnesses 50Witnesses 20Total

Number of Disputes

2010 2011 2012

Disbursement of Funds

Payment System

3 3 11

278 510 521

st December 2013 the

Authority

Box3.1 Preparations and the Transition Period for the Transfer of the Supervision

Function to the Financial Services Authority (OJK)

Chapter IVBanking Outlook and Policy

Prospects and Banking Policy Direction

Foreword Table of Contents Bank Structure and Performancein 2011 in 2011

public closely relates to the

TabunganKu

TabunganKuTabunganKu

TabunganKu

TabunganKu program

TabunganKuTabunganKu account holders use

TabunganKu

customers open a new TabunganKuTabunganKuother key features of the TabunganKu

TabunganKu

Box 4.1 Policy to develop an Electronic Credit Transfer System

Department of Banking Supervision 1

Department of Banking Research and Regula ons

Department of Sharia Banking

Department of Credit, Rural Bank Supervision and SMEs

Department of Bank Licensing and Banking Informa on

Department of Inves ga on and Banking Media on

Coordinator & Editor :

Banking Supervision Report

Director :

Contributor :

Writers & Contributor :

Banking Supervision Report

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