SEOJK on Guidelines for the Use of the Standard Method in Calculating Minimum Capital Requirements for Commercial Banks Considering Market Risk

To:
The Board of Directors of Conventional Commercial Banks at their location.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 38 /SEOJK.03/2016

CONCERNING
GUIDELINES FOR THE USE OF THE STANDARD METHOD IN CALCULATING MINIMUM CAPITAL REQUIREMENTS FOR COMMERCIAL BANKS CONSIDERING MARKET RISK

In connection with Financial Services Authority Regulation Number 11/POJK.03/2016 concerning Minimum Capital Requirements for Commercial Banks (State Gazette of the Republic of Indonesia Year 2016 Number 25, Supplement to the State Gazette of the Republic of Indonesia Number 5848), hereinafter referred to as the POJK on Minimum Capital Requirements for Commercial Banks, it is necessary to regulate implementation provisions regarding the Guidelines for the Use of the Standard Method in Calculating Minimum Capital Requirements for Commercial Banks Considering Market Risk in a Circular Letter of the Financial Services Authority as follows:

I. GENERAL PROVISIONS

1. Market Risk is one of the risks considered by Banks in calculating Risk-Weighted Assets (RWA) for the calculation of Minimum Capital Requirements (KPMM). Therefore, as regulated in the POJK on Minimum Capital Requirements for Commercial Banks, Banks are required to consider RWA for Market Risk in the KPMM calculation using:
   a. Standard Method; and/or; b. Internal Model.

2. For initial implementation, for Banks that meet certain criteria as referred to in the POJK on Minimum Capital Requirements for Commercial Banks, the calculation of RWA for Market Risk is carried out using the Standard Method.

II. USE OF THE STANDARD METHOD IN CALCULATING KPMM CONSIDERING MARKET RISK

Market Risk calculation includes the calculation of interest rate risk and exchange rate risk, including option price change risk. Banks that meet certain criteria as regulated in the POJK on Minimum Capital Requirements for Commercial Banks are required to consider Market Risk. For Banks that meet certain criteria and have Subsidiary Companies exposed to equity and/or commodity risks, in addition to considering interest rate risk and exchange rate risk, the Market Risk calculation also considers equity and/or commodity risks.

A. Interest Rate Risk Calculation

1. Interest rate risk calculation is carried out against financial instrument positions in the Trading Book exposed to interest rate risk.

2. Interest rate risk calculation includes specific risk and general risk calculation.

B. Exchange Rate Risk Calculation

1. Exchange rate risk calculation is carried out against foreign currency positions in the Trading Book and Banking Book exposed to exchange rate risk.

2. In the exchange rate risk calculation, Banks may exclude structural positions as long as they meet all requirements as regulated in provisions concerning net foreign exchange positions.

C. Equity Risk Calculation

1. Equity risk calculation for Banks on a consolidated basis with Subsidiary Companies is carried out against financial instrument positions in the Trading Book exposed to equity risk.

2. Equity risk calculation includes specific risk and general risk calculation.

D. Commodity Risk Calculation

Commodity risk calculation for Banks on a consolidated basis with Subsidiary Companies is carried out against financial instrument positions in the Trading Book and Banking Book exposed to commodity risk.

III. PROCEDURES FOR CAPITAL CHARGE CALCULATION

The procedures for calculating capital charges for interest rate risk, exchange rate risk, equity risk, and/or commodity risk refer to Appendix I of this Financial Services Authority Circular Letter.

IV. REPORTING PROCEDURES

1. Reports related to the use of the Standard Method in calculating KPMM for Commercial Banks considering Market Risk are submitted monthly through the Financial Services Authority reporting system. In the event that the Financial Services Authority reporting system is not yet available, report submission refers to provisions regulating periodic reports of commercial banks.

2. Reports as referred to in item 1 are prepared in accordance with the format and procedures contained in Appendix II and Appendix III of this Financial Services Authority Circular Letter.

V. OTHER PROVISIONS

Appendix I, Appendix II, and Appendix III in this Financial Services Authority Circular Letter are an integral part of this Financial Services Authority Circular Letter.

VI. CLOSING PROVISIONS

1. With the implementation of this Financial Services Authority Circular Letter, regulations concerning the calculation of KPMM on a consolidated basis considering Market Risk in Bank Indonesia Circular Letter Number... Number 8/27/DPNP dated 27 November 2006 concerning Prudential Principles and Reports in the Framework of Consolidated Risk Management Implementation for Banks Controlling Subsidiary Companies are adjusted to the regulations in this Financial Services Authority Circular Letter.

2. With the implementation of this Financial Services Authority Circular Letter:
   a. Bank Indonesia Circular Letter Number 9/33/DPNP dated 18 December 2007 concerning Guidelines for the Use of the Standard Method in Calculating Minimum Capital Requirements for Commercial Banks Considering Market Risk; and b. Bank Indonesia Circular Letter Number 14/21/DPNP dated 25 October 2011 concerning Amendments to Bank Indonesia Circular Letter Number 9/33/DPNP dated 18 December 2007 concerning Guidelines for the Use of the Standard Method in Calculating Minimum Capital Requirements for Commercial Banks Considering Market Risk; are revoked and declared invalid.

Provisions in this Financial Services Authority Circular Letter shall take effect from the date of determination.

Determined in Jakarta on 8 September 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy matches the original
Legal Director 1
Legal Department signed
Yuliana

APPENDIX I
FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER
NUMBER 38 /SEOJK.03/2016
CONCERNING
GUIDELINES FOR THE USE OF THE STANDARD METHOD IN CALCULATING MINIMUM CAPITAL REQUIREMENTS FOR COMMERCIAL BANKS CONSIDERING MARKET RISK

I. INTRODUCTION

1. In the document International Convergence of Capital Measurement and Capital Standards 2006, the Basel Committee on Banking Supervision (Committee) recommended 2 (two) approaches to measure Market Risk in capital adequacy calculations, namely the Standard Method and the Internal Model.

2. The Standard Method offers a standardized approach to measuring Market Risk and calculating capital adequacy for all Banks. Besides being relatively simple, this standardization can reduce reporting burdens on Banks and provide a reference for bank supervisors in conducting verification.

3. Banks that meet certain criteria have been required to calculate Market Risk using the Standard Method since 2003. However, along with the development of financial instruments and the increasing complexity of Bank businesses, and with the issuance of the POJK on Minimum Capital Requirements for Commercial Banks, it is necessary to issue implementation provisions regarding the use of the Standard Method in calculating KPMM considering Market Risk.

II. USE OF THE STANDARD METHOD IN CALCULATING KPMM CONSIDERING MARKET RISK

A. General Provisions

1. Banks that individually and/or on a consolidated basis meet certain criteria as regulated in the POJK on Minimum Capital Requirements for Commercial Banks are required to consider Market Risk using the Standard Method. In calculating Market Risk using the Standard Method, Banks must meet the minimum standards regulated in these Guidelines.

2. Market Risk in KPMM calculation includes interest rate risk, exchange rate risk, equity risk, and/or commodity risk.

3. Banks individually and/or on a consolidated basis with Subsidiary Companies consider interest rate risk and/or exchange rate risk.

4. Banks on a consolidated basis as referred to in item 1, in addition to considering risks as referred to in item 3, also consider:
   a. equity risk, if the Bank has Subsidiary Companies exposed to equity risk; and/or b. commodity risk, if the Bank has Subsidiary Companies exposed to commodity risk.

B. Interest Rate Risk Calculation

1. General Provisions for Interest Rate Risk
   a. Interest rate risk calculation is carried out against financial instruments in the Trading Book exposed to interest rate risk, which include:

   1. all fixed or floating rate debt securities and all financial instruments with similar characteristics, including Negotiable Certificates of Deposit and securities sold by Banks with a condition to be repurchased (repo or securities lending);
   2. derivative instruments related to securities or interest rates, including Bond Forward, Bond Option, Interest Rate Swap, Cross Currency Swaps, Foreign Exchange Forward, Interest Rate Options, and Forward Rate Agreements (FRAs).
      b. Capital charge calculation for interest rate risk includes:
   3. specific risk of each security or financial instrument, regardless of long or short positions. Thus, offsetting is not possible unless the positions are identical; and
   4. general risk of the entire portfolio, where long or short positions in different securities or financial instruments can be offset.
      c. The market value of securities used in specific and general risk calculations is the dirty price, which is the market value of securities (clean price) plus the present value of interest income to be received (accrued interest). Present value calculation for accrued interest may be omitted if, based on the coupon payment schedule, the present value does not result in a material difference from the accrued interest value.

2. Specific Risk Calculation
   a. Capital charge calculation for specific risk is designed to protect Banks from loss risks due to price changes of each financial instrument held due to factors related to the issuer of the financial instrument. b. In specific risk calculation, Banks may only perform offsetting between long and short positions if the positions are identical. Identical positions in securities transactions and derivative transactions mean there is equality in issuer, coupon rate, maturity, currency type, call features, and others.
   c. In the event of identical long and short positions such that offsetting is performed, such positions do not need to be reported to the Financial Services Authority, but Banks must document the entire offsetting process adequately.
   d. Specific risk charges are divided into weighting categories as in Table 1 below.

Table 1
Weighting Categories for Specific Risk

Issuer	Weight

1. Indonesian Government | 0.00%
2. Other Governments
   a. Rating AAA to AA- | 0.00% b. Rating A+ to BBB-
   i. Remaining time to maturity less than or equal to 6 (six) months | 0.25%
   ii. Remaining time to maturity more than 6 (six) months up to 24 (twenty-four) months | 1.00%
   iii. Remaining time to maturity more than 24 (twenty-four) months | 1.60%
   c. Rating BB+ to B- | 8.00%
   d. Rating less than B- | 12.00% e. Unrated | 8.00%
3. Qualifying
   a. Remaining time to maturity less than or equal to 6 (six) months | 0.25% b. Remaining time to maturity more than 6 (six) months up to 24 (twenty-four) months | 1.00%
   c. Remaining time to maturity more than 24 (twenty-four) months | 1.60%
4. Others
   a. Corporations with:
   i. Short-term rating A-1 | 1.60%
   ii. Short-term rating A-2 | 4.00%
   iii. Short-term rating A-3 | 8.00%
   iv. Short-term rating less than A-3 | 12.00%
   v. Rating AAA to AA- | 1.60%
   vi. Rating A+ to A- | 4.00%
   vii. Rating BBB+ to BB- | 8.00%
   viii. Rating less than BB- | 12.00%
   ix. Unrated | 12.00%
   b. Banks categorized as:
   i. Short-term Receivables
   1) Short-term rating less than A-3 | 12.00%
   2) Rating BB+ to B- | 4.00%
   3) Rating less than B- | 12.00%
   4) Unrated | 4.00%
   ii. Long-term Receivables
   1) Short-term rating less than A-3 | 12.00%
   2) Rating BB+ to B- | 8.00%
   3) Rating less than B- | 12.00%
   4) Unrated | 8.00%
   c. Public sector entities and multilateral development banks and international institutions
   i. Rating BB+ to B- | 8.00%
   ii. Rating less than B- | 12.00%
   iii. Unrated | 8.00%

Explanation of Table 1 regarding weighting categories for specific risk is as follows:

1. Indonesian Government
   The Indonesian Government category includes all instruments issued, guaranteed, or secured by effects issued by:
   a) The Central Government of the Republic of Indonesia; b) Bank Indonesia; c) Other government bodies and institutions whose entire operational funding comes from the State Budget (APBN) of the Republic of Indonesia.

2. Other Governments
   The Other Governments category includes all instruments issued, guaranteed, or secured by effects issued by the central government or central bank of other countries.

3. Qualifying
   a) The Qualifying category includes:
   (1) Securities issued, guaranteed, or secured by effects issued by:
   (a) Regional Governments as regulated in legislation concerning regional government; (b) Banks, including banks operating in Indonesia and banks operating outside Indonesia; (c) Indonesia Exports Financing Agency, as referred to in Law Number 2 of 2009 concerning the Indonesia Exports Financing Agency; (d) State-Owned Enterprises (BUMN) as regulated in legislation concerning BUMN, which are not categorized as Banks; (e) Multilateral development banks, namely the World Bank Group consisting of International Bank for Reconstruction and Development (IBRD), Multilateral Investment Guarantee Agency (MIGA), and International Finance Corporation (IFC), Asian Development Bank (ADB), African Development Bank (AfDB), European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IADB), European Investment Bank (EIB), European Investment Fund (EIF), Nordic Investment Bank (NIB), Caribbean Development Bank (CDB), Islamic Development Bank (IDB), Council of Europe Development Bank (CEDB) and International Finance Facility for Immunization (IFFIm); (f) International institutions, namely the Bank for International Settlements, International Monetary Fund (IMF), and European Central Bank, which have investment grade ratings from 1 (one) rating agency as regulated in Financial Services Authority provisions concerning rating agencies and ratings recognized by the Financial Services Authority. (2) Securities issued by parties other than those referred to in item (1), which have investment grade ratings from at least 2 (two) rating agencies as regulated in Financial Services Authority Circular Letters regulating rating agencies and ratings recognized by the Financial Services Authority. b) Domestic ratings are used for securities in Rupiah currency. International ratings are used for securities in foreign currency.

4. Others
   The Others category includes all securities issued, guaranteed, or secured by effects issued by corporations, banks, public sector entities, multilateral development banks, and international institutions that are not included in the Indonesian Government, Other Governments, and Qualifying categories.

The terms corporation, bank, public sector entity, multilateral development bank, and international institution refer to parties included in Receivables to Corporations, Receivables to Banks, Receivables to Public Sector Entities, and Receivables to Multilateral Development Banks and International Institutions as referred to in provisions regulating guidelines for calculating risk-weighted assets for credit risk using the standard approach.

e. Derivative account receivables arising from interest rate instruments (debt securities) in the Bank's financial position report (balance sheet) remain subject to RWA calculation for Credit Risk according to applicable provisions even though the underlying derivative instruments have been considered in specific risk. This is because specific risk considers issuer credibility while derivative account receivables represent counterparty credit risk.

3. General Risk Calculation
   a. Capital charge calculation for general risk is intended to protect Banks from loss risks due to changes in market interest rates. b. General risk is applied to security positions and derivative instruments related to securities or interest rates recorded in the Trading Book.
   c. Calculation methods that can be used for general risk calculation are the Maturity Method or the Duration Method. Banks may choose between these 2 (two) methods as long as they are done consistently and accurately. For Banks using the Duration Method, Bank management must ensure that the Bank has the capacity to apply this method based on prudential principles.
   d. Banks must notify in writing to the relevant Bank Supervision Department, Regional Office of the Financial Services Authority, or local Financial Services Authority Office if the Bank intends to use the Duration Method in general risk calculation. e. Banks intending to use the Duration Method, in the written notification as referred to in letter d, must be accompanied by documents and information covering:
   1. policies and procedures for implementing the Duration Method;
   2. instruments calculated with the Duration Method;
   3. systems supporting the implementation of calculation procedures;
   4. processes and procedures for controlling the calculation method; and
   5. internal validation by independent parties regarding the Market Risk calculation method used.
      f. The Financial Services Authority may conduct examinations of the Duration Method used by Banks to ensure the correctness of documents and information as referred to in letter e. g. Capital charge calculation in general risk is done by summing 4 (four) components as follows:
   6. The smallest proportion between matched long and short positions in each time band (vertical disallowance);
   7. The largest proportion between matched long and short positions from the entire time band (horizontal disallowance);
   8. Net short position or net long position of the entire weighted Trading Book; and
   9. Charges on matched option positions (net).
      h. Maturity Method
   10. Long and short positions of all security positions and derivative instruments are mapped into a maturity ladder consisting of 13 (thirteen) or 15 (fifteen) time bands as listed in Table 2 according to the interest rate or coupon of the financial instrument.

Table 2
Time Bands and Risk Weights (Maturity Method)

Time Band	Risk Weight (%)
Coupon > 3%	Coupon < 3%
< 1 month	0

1 – 3 months | 0.20 | 0.20
3 – 6 months | 0.40 | 0.40
6 – 12 months | 0.70 | 0.70
1 – 2 years | 1.25 | 1.25
2 – 3 years | 1.75 | 1.75
3 – 4 years | 2.25 | 2.25
4 – 5 years | 2.75 | 2.75
5 – 7 years | 3.25 | 3.25
7 – 10 years | 3.75 | 3.75
10 – 15 years | 4.50 | 4.50
15 – 20 years | 5.25 | 5.25
20 years | 6.00 | 6.00
12 – 20 years | 8.00 | 8.00
20 years | 12.50 | 12.50

2. Fixed-rate instruments are allocated according to remaining maturity, while floating-rate instruments are allocated according to the time until the next repricing date.

3. The capital charge calculation process with the Maturity Method is performed as follows:
   a) Vertical Disallowance, namely:
   Calculation of matched positions in each time band multiplied by the capital charge weight, which is 10% (ten percent). The calculation of matched positions is done by matching short and long positions in each time band, where the smallest position is the matched position. The difference from this matching is the residual position (unmatched position), both long and short. b) Horizontal Disallowance, namely:
   (1) In each zone (zone 1, zone 2, and zone 3) Calculation of matched positions in each zone multiplied by the capital charge weight, which is 40% (forty percent) for zone 1, 30% (thirty percent) for zone 2, and 30% (thirty percent) for zone 3 according to Table 3. The calculation of matched positions is done by matching residual (unmatched) long positions and residual (unmatched) short positions from all time bands, where the smallest position is the matched position of that zone. The difference from this matching process is the residual position (unmatched position), both long and short positions of that zone. (2) Between Zones (zone 1 and zone 2, zone 2 and zone 3, and zone 1 and zone 3) Calculation of matched positions between zones multiplied by the capital charge weight, which is 40% (forty percent) for zone 1 and zone 2, 40% (forty percent) for zone 2 and zone 3, and 100% (one hundred percent)...

percent) for Zone 1 and Zone 3 according to Table 3.
The calculation of matched positions between zones can be explained as follows:

Between Zone 1 and Zone 2
The calculation of matched positions is performed by matching (matching) the residual positions (unmatched position) long and the residual positions (unmatched position) short from Zone 1 and Zone 2, where the smallest position constitutes the matched position between Zone 1 and Zone 2. The difference from this matching process constitutes the remaining residual positions (remaining unmatched position) in Zone 1 and Zone 2, both long and short positions.

Between Zone 2 and Zone 3
The calculation of matched positions is performed by matching (matching) the long positions and short positions of the remaining residual positions (remaining unmatched position) from Zone 2 with the residual positions (unmatched position) from Zone 3, where the smallest position constitutes the matched position between Zone 2 and Zone 3. The difference from this matching process constitutes the remaining residual positions (remaining unmatched position) in Zone 3, both long and short positions.

Between Zone 1 and Zone 3
The calculation of matched positions is performed by matching (matching) the remaining residual positions (remaining unmatched position) long and the remaining residual positions (remaining unmatched position) short from Zone 1 and Zone 3, where the smallest position constitutes the matched position between Zone 1 and Zone 3. The difference from this matching process constitutes the remaining residual positions (remaining unmatched position) from the entire inter-zone matching process.

Table 3
Horizontal Disallowance
Zone Time Band
Within Zone
Between Consecutive Zones
Between Zone 1 and Zone 3
Zone 1 < 1 month

1 – 3 months 40%
3 – 6 months
6 – 12 months 40%
Zone 2 > 1 – 2 years
2 – 3 years 30% 100%
3 – 4 years
Zone 3 > 4 – 5 years 40%
5 – 7 years
7 – 10 years
10 – 15 years 30%
15 – 20 years
20 years

c) Overall Net Open Position, namely:
The calculation of remaining residual positions (remaining unmatched position), both long or short, from all inter-zone matching processes according to the description in item (2) multiplied by a capital charge weight of 100% (one hundred percent).

Thus, the calculation of minimum capital requirements for general risk is the sum of:

1. Vertical Disallowance
   Matched position between long and short positions in each time band X 10%
2. Horizontal Disallowance
   Matched position between long and short positions in Zone 1 X 40% Matched position between long and short positions in Zone 2 X 30% Matched position between long and short positions in Zone 3 X 30% Matched position between long and short positions of residual positions from Zone 1 and long and short positions of residual positions from Zone 2 X 40% Matched position between long and short positions of remaining residual positions from Zone 2 and long and short positions of residual positions from Zone 3 X 40% Matched position between long and short positions of remaining residual positions from Zone 1 and long and short positions of remaining residual positions from Zone 3 X 100%
3. Overall Net Open Position
   Net amount of long position weights or short position weights X 100%

i. Duration Method (Duration Method)

1. Long and short positions of all securities and derivative instruments are mapped into a duration ladder consisting of 15 (fifteen) time bands (time band) as stated in Table 4. The duration ladder is defined as a table compiled based on the grouping of durations of a security or derivative instrument.
2. In performing the capital charge calculation process using the Duration Method (Duration Method), attention must be paid to the modified duration and the estimated price movement of each position, and mapping each position to the appropriate maturity zone (maturity zones) according to Table 4.

Table 4
Time Bands and Assumed Yield Change Assumptions Time Band Assumed Yield Change (%) Zone 1 < 1 month 1.00

1 – 3 months 1.00
3 – 6 months 1.00
6 – 12 months 1.00
Zone 2
1 – 1.9 years 0.90
1.9 – 2.8 years 0.80
2.8 – 3.6 years 0.75
Zone 3
3.6 – 4.3 years 0.75
4.3 – 5.7 years 0.70
5.7 – 7.3 years 0.65
7.3 – 9.3 years 0.60
9.3 – 10.6 years 0.60
10.6 – 12 years 0.60
12 – 20 years 0.60
20 years 0.60

3. The capital charge calculation process using the Duration Method (Duration Method) is in principle the same as the Maturity Method (Maturity Method), except for the application of capital charge weights for Vertical Disallowance, which is 5% (five percent) of the matched positions in each time band.

j. Derivative instruments, whether for trading or hedging purposes of securities instruments in the Trading Book, are reported using a two-legged approach.
Examples:

1. A purchase (long position) of a Forward Rate Agreement (FRA) conducted at the end of April and maturing at the end of June with a Bank Indonesia Certificate (SBI) interest rate of 3 (three) months must be reported as a long position with a time band of 5 (five) months and a short position with a time band of 2 (two) months.
2. An interest-rate swap transaction conducted by the Bank, receiving floating interest rates (floating) and paying fixed interest rates (fixed), must be reported as a long position for floating interest rate instruments (floating) according to the time band until the next interest rate adjustment, and as a short position for fixed interest rate instruments (fixed) according to the remaining maturity of the swap transaction.

4. Offset process for derivative transactions in the calculation of specific risk and general risk.
   a. In general, long and short positions can be offset (offset) as long as the financial instruments are identical, namely having the same issuer, coupon interest rate, currency type, maturity, and others. b. In the event that the Bank conducts an offset process (offset), such positions do not need to be reported, but the Bank must conduct adequate documentation of all such offset processes (offset).
   c. Forward transactions can be offset (offset) with their underlying instruments (underlying instrument), but positions with remaining time bands until the forward contract maturity must still be reported because the Bank still has interest rate exposure until the time the securities are delivered to the buyer.
   In the event that forward contracts use various types of securities at the time of transaction settlement, offset (offset) can only be conducted if the Bank has long positions in securities and short forward positions based on the underlying securities. d. The term "others" as referred to in letter a, used in determining identical positions of a financial instrument in the offset process (offset), namely:

1. for swap and FRA transactions, they are identical in terms of interest rate references (for floating rate positions, e.g., JIBOR and LIBOR) and interest rate or coupon differences of no more than 0.15% (fifteen basis points);
2. for swap, FRA, and forward transactions, they are identical in terms of the next interest rate setting date or, for instruments with fixed interest rates or forward transactions, the remaining time band to maturity, subject to the following limits:
   a) if the remaining time band to maturity of one of the derivative transaction positions is up to 1 (one) month, then the offset process can only be conducted if the remaining time band to maturity of the second position is the same; b) if the remaining time band to maturity of one of the derivative transaction positions is more than 1 (one) month up to 1 (one) year, then the offset process can only be conducted if the remaining time band to maturity of each position is no more than 7 (seven) days; or c) if the remaining time band to maturity of one of the derivative transaction positions is more than 1 (one) year, then the offset process can only be conducted if the remaining time band to maturity of the second position is no more than 30 (thirty) days.
3. For option positions, the offset process (offset) is as regulated in letter F (General Guidelines and Calculation of Market Risk for Option Transactions).

5. Treatment of Repo Transactions
   a. Securities delivered to the counterparty as collateral in repo transactions recorded in the Trading Book according to financial accounting standards, are recorded as long positions in the calculation of specific risk and general risk. b. Specific Risk Calculation The calculation of specific risk for securities is determined by:

1. issuer category; and
2. rating and/or remaining maturity.
   c. General Risk Calculation
   General risk calculation is based on the remaining maturity for securities with fixed interest rates (fixed) or the remaining time band until the next interest rate adjustment for securities with floating interest rates (floating).

6. Treatment of Reverse Repo Transactions in Trading Activities
   In the event that securities serving as collateral for reverse repo transactions are traded, the Bank must book such transactions as short positions in the Trading Book, thereby exposing them to Market Risk. a. Specific Risk Calculation The calculation of specific risk for securities is determined by:

1. issuer category; and
2. rating and/or remaining maturity.
   b. General Risk Calculation
   General risk calculation is based on the remaining maturity for securities with fixed interest rates (fixed) or the remaining time band until the next interest rate adjustment for securities with floating interest rates (floating).

7. Treatment of Mutual Fund Transactions
   a. The calculation of Market Risk for mutual funds recorded in the Trading Book, including specific risk and general risk, must reflect the risk weights of all assets contained in the mutual fund units. b. Specific risk calculation can be conducted using 2 (two) approaches, namely based on:

1. Mutual Fund Rating
   In the event that the mutual fund has a rating as required by the Financial Services Authority (OJK) as regulated in item 2.d.3)a)(2), a risk weight of 1.6% (one point six percent) is applied.
2. Issuer Category and/or Rating of Each Asset in the Mutual Fund
   In calculating specific risk based on this approach, the Bank must have information from the investment manager regarding the details of the mutual fund assets based on issuer and/or rating. Based on this information, the Bank can perform the following calculation steps to obtain the value subject to capital charges:
   a) calculate the percentage component of each asset contained in the mutual fund; b) the value as referred to in letter a) multiplied by the market value of mutual fund units owned by the Bank; and c) the value as referred to in letter b) is recorded according to the issuer category of the securities.
   c. In the event that both approaches as referred to in letter b cannot be conducted, mutual fund securities will be classified into the "Others" category and subject to a capital charge of 8% (eight percent).
   d. General risk calculation can be conducted using 2 (two) approaches, namely based on:
3. Remaining Maturity of Each Mutual Fund Asset
   In calculating general risk based on this approach, the Bank must have information from the investment manager regarding the details of all assets of the mutual fund based on remaining maturity. The calculation process to obtain the value subject to capital charges is as follows:
   a) calculate the percentage component of each asset contained in the mutual fund; b) the value as referred to in letter a) multiplied by the market value of mutual fund units owned by the Bank; and c) the value as referred to in letter b) is recorded according to the time band.
4. Average Duration (Average Duration) of All Mutual Fund Assets
   In calculating general risk based on this approach, the Bank must have information from the investment manager regarding the average duration of the mutual fund. The determination of the average duration of mutual fund assets is done by calculating the duration of each mutual fund asset and multiplying it by the share or composition of each mutual fund asset against the total assets of the mutual fund. e. In the event that the Bank uses the Maturity Method to calculate general risk, while for mutual funds the Bank only has information from the investment manager regarding the average duration of the mutual fund assets, the Bank can use the average duration approach to calculate the general risk of mutual funds. f. In the event that both approaches as referred to in letter d cannot be conducted, the mutual fund securities are considered to have a remaining maturity of 10 (ten) to 15 (fifteen) years and are subject to a risk weight of 4.5% (four point five percent). g. Information on the Net Asset Value (Liquidation Value) of mutual funds obtained from the investment manager must be the Net Asset Value adjusted daily. h. All information regarding mutual funds obtained from the investment manager, such as details of mutual fund assets based on issuer and/or rating, remaining maturity, and average duration, can be used for a period of 1 (one) month. Example:
   On January 15, 20XX, the investment manager can provide information regarding the remaining maturity or average duration of all mutual fund assets. This information can be used by the Bank for a period of 1 (one) month, specifically for the Market Risk calculation report at the position of January 31, 20XX. Subsequently, the Market Risk calculation report for the position of February 28, 20XX must use information available no more than 1 (one) month prior.
   i. All information obtained from the investment manager must be documented by the Bank for audit trail (audit trail) purposes.

8. Treatment of Credit Derivatives (Credit Derivative)
   a. Credit Derivatives are contracts between 2 (two) parties using derivative instruments to hedge by transferring risk from the protection buyer (protection buyer) to the protection seller (protection seller) over reference financial assets (underlying reference asset) in the form of securities, loans, or other receivables. Credit Derivative Contracts stipulate that the transfer of risk is based on the occurrence of a credit event over the reference obligation (reference obligation) owned by the reference entity (reference entity). b. In general, Credit Derivatives include Credit Default Swaps (CDS), Total Rate of Return Swaps (TRS), and Credit Linked Notes (CLN) or similar other instruments.
   c. Credit Derivative Transactions can be classified as Trading Book in the event that:

1. they are conducted for hedging (hedge) purposes of financial asset positions or a group of financial assets in the Trading Book; and/or
2. Credit Derivative transactions (e.g., CLN) are conducted by the protection seller for trading (trading) purposes.
   d. In the event that the Bank hedges (hedge) Credit Risk exposure in the Banking Book using Credit Derivatives in the Trading Book through internal hedging (hedge), the credit risk exposure in the Banking Book is considered unhedged for capital calculation purposes, unless the Bank purchases Credit Derivatives from a protection seller that is an external party. In the event that credit protection from an external party is purchased and recognized as a hedge (hedge) over Credit Risk exposure in the Banking Book for capital calculation purposes, Credit Derivatives for hedging (hedge) from both internal and external parties are not booked as Trading Book. e. Reporting of Credit Derivatives is conducted using a two-legged approach, namely:
3. as long or short positions to the reference entity for specific risk and long or short positions over the reference obligation for general risk; and
4. as long or short positions for general risk with time bands up to maturity for fixed interest rates or remaining time bands until the next interest rate adjustment according to the time bands in Table 2, in the event that Credit Derivative contracts require periodic premium or interest payments.
   f. Capital charge calculation for Market Risk is based on the notional amount of the Credit Derivative contracts, except for CLN which uses the fair value of the securities. g. Capital charge calculation is conducted as follows:
5. The calculation methods for specific risk and general risk are similar to the calculation methods used for other financial instruments.
6. Credit Default Swap
   a) In specific risk calculations, the protection buyer reports as short positions and the protection seller reports as long positions to the reference entity. b) In general risk calculations for Credit Default Swaps without periodic premium or interest payments according to the swap contract, neither the protection seller nor the protection buyer needs to calculate and allocate Market Risk capital charges. In the event that Credit Default Swaps require periodic premium or interest payments, the protection seller reports as long positions and the protection buyer reports as short positions with time bands up to maturity for fixed interest rates (fixed) or remaining time bands until the next interest rate adjustment for floating interest rates (floating).
7. Total Rate of Return Swap
   a) In specific risk calculations, the protection buyer reports as short positions and the protection seller reports as long positions to the reference entity. b) In general risk calculations for Total Rate of Return Swaps without periodic premium or interest payments according to the swap contract, neither the protection seller nor the protection buyer needs to calculate and allocate Market Risk capital charges. In the event that Total Rate of Return Swaps require periodic cash flow exchanges (premiums and/or interest), the protection buyer reports as long positions with time bands up to maturity for fixed interest rates (fixed) and remaining time bands until the next interest rate adjustment for floating interest rates (floating), and short positions over the reference financial assets. Meanwhile, the protection seller reports as short positions with time bands up to maturity for fixed interest rates and remaining time bands until the next interest rate adjustment for floating interest rates (floating), and long positions over the reference financial assets.
8. Credit Linked Note (CLN)
   a) In specific risk calculations, the protection buyer reports as short positions and the protection seller reports as long positions to the reference entity. Additionally, the protection seller also reports long positions over the securities issued by the protection buyer with a fair value equal to the CLN. b) In general risk calculations, the protection seller reports as long positions and the protection buyer reports as short positions over the securities with a fair value equal to the CLN.
9. Credit Derivatives with First-to-Default Features
   a) In specific risk calculations, the protection buyer reports as short positions over one of the financial asset references from a group of financial asset references (basket of underlying reference assets) that results in the highest capital charge calculation for specific risk. b) Subsequently, the protection seller reports as long positions over each financial asset reference from the group of financial asset references with the maximum capital charge for specific risk equal to the notional amount of the Credit Derivative contract. For Credit Derivatives with first-to-default features, capital charges are formed against all financial asset references contained in the group of financial assets. This means that risk weights are applied to the maximum amount payable in the contract for each financial asset reference. In the event that the capital charge calculation for each financial asset reference is lower than the capital charge calculation for the notional amount of the Credit Derivative contract, the reported positions are the positions of each financial asset reference or the positions of the Credit Derivative contract that result in the highest capital charge calculation. Example:
   (1) The Bank issues a CLN worth Rp10 billion with 3 reference financial assets in the form of securities issued by the Indonesian Government. The issued CLN meets the Qualification Category criteria, so a risk weight of 1.6% can be applied. The capital charge calculation for the 3 reference financial assets is Rp0, namely Rp10 billion x (3 x 0%), and the capital charge calculation for the CLN is Rp0.16 billion, namely Rp10 billion x 1.6%. Thus, the capital charge calculation used is Rp0.16 billion. (2) The Bank issues a CLN worth Rp10 billion with 3 reference financial assets in the form of unrated securities issued by 3 commercial companies. The capital charge calculation for the 3 reference financial assets is Rp2.4 billion, namely [(Rp10 billion x (3 x 100%)) x 8%]. (3) The Bank issues a CLN worth Rp10 billion with 13 reference financial assets in the form of unrated securities issued by 13 commercial companies. The capital charge calculation for the 13 reference financial assets is at most the capital charge for the notional amount of the CLN, namely Rp10 billion, and not Rp10.4 billion [(Rp10 billion x (13 x 100%)) x 8%]. c) General risk calculations are no different from other Credit Derivatives.
10. Credit Derivatives with Multiple Financial Asset References
    a) In specific risk calculations, the protection buyer reports as short positions and the protection seller reports as long positions to all reference entities proportionally. b) In the event that CLN instruments meet the Qualification Category as referred to in Table 1, the protection buyer reports as short positions and the protection seller reports as long positions over the CLN.
11. Protection buyers can use Credit Derivative instruments to offset (offset) with...

with financial reference assets in the calculation of capital charges for specific risks as long as the following requirements are met:
a) In the event that the value of the financial reference asset and the Credit Derivative instrument always move in opposite directions in relatively equal amounts, which may occur if:
(1) the financial reference asset is identical to the reference liability; or (2) a long position in the financial reference asset is hedged by a short position in a Credit Derivative contract (or vice versa), and there is a match between the financial reference asset and the reference liability (except in cases where the maturity of the Credit Derivative contract may be shorter than the financial reference asset), then the Bank may perform an offset between the position of the financial reference asset and the position of the Credit Derivative instrument, so there is no need to calculate capital charges for specific risks. b) In the event that the value of the financial reference asset and the Credit Derivative instrument always move in opposite directions in relatively unequal amounts with the following conditions:
(1) a long position in the financial reference asset is hedged by a short position in a Credit Derivative contract (or vice versa), and there is a match between the financial reference asset and the reference liability in terms of terms and conditions, maturity, and currency type; (2) the definition of credit event and transaction settlement mechanism, as well as other important aspects in the Credit Derivative contract, do not cause significant differences in the price movement of the Credit Derivative instrument ... from the price movement of the financial reference asset; and (3) the Credit Derivative contract can effectively transfer risk where there are no contractual requirements that can limit the realization of protection payments, then the Bank may perform an offset between the position of the financial reference asset and the position of the Credit Derivative instrument by 80% (eighty percent) in the calculation of capital charges for specific risks. The offset is applied by considering the capital charges for specific risks at only 20% (twenty percent) for one position, namely the position of the financial reference asset or the position of the Credit Derivative instrument that results in the largest calculation of capital charges for specific risks, while capital charges for other positions will not be considered. c) In the event that the value of the financial reference asset and the Credit Derivative instrument generally move in opposite directions, which may occur if:
(1) a long position in the financial reference asset is hedged by a short position in a Credit Derivative contract (or vice versa), where there is a mismatch between the financial reference asset and the reference liability but meets the following requirements:
(a) the reference liability is pari passu with the financial reference asset or is junior to the financial reference asset; and (b) the reference entity is the same as the obligor of the financial reference asset and there is a clause in the Credit Derivative contract regarding cross reference, namely cross default or cross acceleration according to the International Swaps and Derivatives Association Credit Derivatives Definitions in force; (2) the financial reference asset is identical to the reference liability, or a long position in the financial reference asset is hedged by a short position in a Credit Derivative contract (or vice versa) but there is a mismatch between the financial reference asset and the credit protection in the Credit Derivative instrument in terms of currency type; or (3) a long position in the financial reference asset is hedged by a short position in a Credit Derivative contract (or vice versa) where there is a mismatch, namely the financial reference asset is similar but not identical to the reference liability, but the financial reference asset is included in one of the reference liabilities in the Credit Derivative contract to be delivered to the protection seller in the event of physical settlement, then the Bank may perform an offset between the position of the financial reference asset and the position of the Credit Derivative instrument by 50% (fifty percent) in the calculation of capital charges for specific risks. The offset is applied by considering the capital charges for specific risks at only 50% (fifty percent) for 1 (one) position, namely:
(1) the position of the financial reference asset; or (2) the Credit Derivative instrument, which results in the largest calculation of capital charges for specific risks, while capital charges for other positions will not be considered. d) In the event that the conditions as stated in letters a), b), and c) are not met, then the Bank must calculate and allocate capital charges for specific risks for the position of the financial reference asset and the position of the Credit Derivative instrument.
8) The protection buyer may use Credit Derivative instruments with a first-to-default feature to perform an offset with one of the financial reference assets from a group of financial reference assets, namely with the financial reference asset that results in the lowest calculation of capital charges for specific risks.
9) In the event that the Bank performs an offset process, the Bank must conduct adequate documentation of the entire offset process.
C. Exchange Rate Risk Calculation

1. Exchange rate risk calculation is performed against foreign currency positions in the Trading Book and Banking Book exposed to exchange rate risk, including gold, with reference to the calculation of net foreign exchange positions as regulated in provisions governing net foreign exchange positions. Positions against gold are treated the same as foreign currencies with the consideration that gold price movements are almost the same as foreign exchange rate movements, and the Bank treats gold transactions the same as foreign currency transactions.
2. A position of an instrument denominated in foreign currency, besides being exposed to exchange rate risk, also allows the Bank to be exposed to interest rate risk (for example, for cross-currency swaps). In such conditions, the interest rate risk exposure must also be considered as explained in letter B (Interest Rate Risk Calculation).
3. The calculation of capital charges for exchange rate risk from foreign currency positions is charged at 8% (eight percent) against the net foreign exchange position as a whole at the end of the day.
4. In the calculation of exchange rate risk, the Bank may exclude structural positions from the calculation of net foreign exchange positions as long as all requirements as regulated in provisions governing net foreign exchange positions are met.
   If the Bank chooses to exclude such structural positions, such exclusion must be conducted consistently and obtain approval from the Financial Services Authority.
   In order to obtain approval from the Financial Services Authority, the Bank submits supporting documents related to the status of the structural position and proof of transaction accounting. Example:
   Structural positions in the form of fixed assets abroad need to be supported by documents such as proof of ownership, proof of payment, and accounting documents.
   The Financial Services Authority may request additional documents from the Bank to ensure the feasibility of a structural position to be excluded from the calculation of net foreign exchange positions. D. Equity Risk Calculation
5. Equity risk calculation for the Bank consolidated with Subsidiary Companies is performed against financial instrument positions in the Trading Book exposed to equity risk, which include:
   a) common stocks with or without voting rights, securities that can be converted into stocks (convertible securities), or other financial instruments that have characteristics similar to stocks but do not include equity investments in Subsidiary Companies treated as a deduction factor in the Bank's capital calculation, as well as non-convertible preference shares; and b) equity-based derivative contracts which are future, forward, swap, option, or other derivative contracts that are similar where the value of the contract is influenced by stocks or stock indices underlying (underlying).
6. In the calculation of equity risk, positions of equity-based derivative contracts must be converted into notional equity positions underlying the derivative, namely:
   a) futures and forward contracts related to individual stocks are reported based on the fair value of the respective stocks; b) futures contracts related to stock indices are reported based on the fair value of the portfolio of stocks underlying the respective futures contracts; and c) stock swap contracts are treated based on a two-legged approach, namely as 2 (two) notional positions. For example, stock swaps are reported as long positions for the amount received by the Bank based on changes in the value of a certain stock or index, and short positions for the amount paid by the Bank based on changes in the value of another stock or index.
7. In the calculation of equity risk, the Bank may perform an offset process between long and short positions in the event that the positions are identical, thereby resulting in a net long equity position or a net short equity position. The term identical positions means that there is similarity in the issuer and the financial market.
   Example:
   A Subsidiary Company buys shares of PT X on the Indonesia Stock Exchange (BEI) and sells forward contracts for shares of PT X on the BEI. The positions arising from these two transactions can be offset because they meet the identical condition. In the event that there are identical long and short positions so that an offset process is performed, such positions do not need to be reported to the Financial Services Authority, but the Bank must conduct adequate documentation of the entire offset process.
8. The calculation of capital charges for equity risk in the Trading Book includes:
   a) specific risk from gross equity positions, which is the sum of the absolute values of long and short positions for each financial instrument exposed to equity risk issued by each issuer on each financial market (market by market basis). In the event that financial instruments exposed to equity risk are traded on more than one financial market, such financial instruments are treated as positions in the financial market where the respective financial instruments are primarily traded (primary listing); and b) general risk from net equity positions as a whole, which is the absolute value of the difference between the total long positions and the total short positions for each financial instrument exposed to equity risk on each financial market.
9. Specific Risk Calculation
   a) The calculation of capital charges for specific risk is designed to protect the Bank from the risk of losses due to price changes of each financial instrument exposed to equity risk due to factors related to the issuer. Risks related to the counterparty in such transactions are calculated separately in the counterparty credit risk calculation. b) The calculation of capital charges for specific risk is 8% (eight percent) of gross equity positions.
10. General Risk Calculation
    a) The calculation of charges for general risk is intended to protect the Bank from the risk of losses due to changes in market factors. b) The calculation of capital charges for general risk is 8% (eight percent) of net equity positions as a whole. Example:
    Company
    Number of Shares
    Position
    Market Price/Stock Price
    Market Price
    A 10,000
    2,000
    Long
    Short
    Rp100
    Rp100
    Rp1,000,000
    Rp200,000
    B 15,000 Short Rp200 Rp3,000,000
    C 5,000 Short Rp400 Rp2,000,000
    D 10,000 Short Rp100 Rp1,000,000
    E 20,000 Long Rp200 Rp4,000,000
    Offset between long and short positions in Company A, namely (10,000 x Rp100) – (2,000 x Rp100) = Rp800,000 (Long) Total long positions = Rp800,000 + Rp4,000,000 = Rp4,800,000 Total short positions = Rp3,000,000 + Rp2,000,000 + Rp1,000,000 = Rp6,000,000 Specific Risk = (Rp4,800,000 + Rp6,000,000) x 8% = Rp864,000 General Risk = (Rp4,800,000 – Rp6,000,000) x 8% = Rp96,000 Equity Risk = Rp864,000 + Rp96,000 = Rp960,000 From the calculation, the capital charge for Equity Risk is Rp960,000.00 (nine hundred sixty thousand rupiah).
11. In the event that forward, future, or option contracts are not only based on stocks but also on interest rates or exchange rates, the Bank must also calculate capital charges for interest rate risk or exchange rate risk.
    E. Commodity Risk Calculation
12. Commodity risk calculation for the Bank consolidated with Subsidiary Companies is performed against financial instrument positions in the Trading Book and Banking Book exposed to commodity risk, which among others include commodity-based derivative contracts which are future, option, or other derivative contracts that are similar where the value of the contract is influenced by commodities or commodity indices underlying (underlying). Commodities included are among others physical products that can be traded such as agricultural products, minerals (including oil), and precious metals, but excluding gold.
13. Commodity risks to be considered include:
    a. Directional risk, namely risk arising from changes in spot prices for net open commodity positions, particularly for commodity positions from spot trade transactions or physical trade. b. Basis risk, namely risk arising from price movements that are not perfectly correlated between similar but not identical commodities, which among others can be caused by commodity quality.
    c. Forward gap risk and interest rate risk, namely risk arising from changes in forward prices caused by differences in maturity (maturity mismatches).
14. In the calculation of commodity risk, both for commodity positions and commodity-based derivative contracts, the Bank converts:
    a. gross positions, namely the sum of long and short positions for each commodity (measured in barrels, kilograms, or other units of measurement used for commodities) into currency units based on the current market price of each respective commodity; and b. commodity-based derivative contract positions into notional commodity positions underlying the respective derivatives based on the current market price of each respective commodity and according to the maturity of the derivative contract, particularly if the Bank uses the Maturity Ladder Approach, namely:

1. futures and forward contracts related to individual commodities are reported as the notional amount in units of measurement (e.g., barrels or kilograms) multiplied by the spot price of the commodity, and based on the maturity of the derivative contract; and
2. commodity swap contracts are treated based on a two-legged approach, namely as 2 (two) notional positions ... where one leg is a fixed price and the other leg is the current market price. Each position is reported as the notional amount and mapped to the corresponding maturity ladder. The Bank reports long positions if it makes fixed payments and receives floating payments, and short positions if it receives fixed payments and makes floating payments.

4. In the calculation of commodity risk, the Bank may perform an offset process between long and short positions in the event that they are identical, namely:
   a. the underlying commodities are the same; or b. the underlying commodities are different but fall into the same group.
5. Calculation methods that can be used for commodity risk calculation are the Simplified Approach or the Maturity Ladder Approach. The Bank may choose between these 2 (two) methods as long as it is conducted accurately and consistently.
6. Simplified Approach
   Capital charges for commodity risk are the sum of the following calculations:
   a. 15% (fifteen percent) of net positions, either long or short, for each commodity position to anticipate directional risk; and b. 3% (three percent) of gross positions (sum of the absolute values of long and short positions) for each commodity position to anticipate basis risk, forward gap risk, and interest rate risk.
7. Maturity Ladder Approach
   a. Positions in each type of commodity must be reported based on a time scale in separate maturity ladders (maturity ladder) according to Table 5 below.
   Table 5
   Time Scale and Spread Rate
   Time Scale Spread Rate
   < 1 month 1.5%

1 – 3 months 1.5%
3 – 6 months 1.5%
6 – 12 months 1.5%
1 – 2 years 1.5%
2 – 3 years 1.5%
3 years 1.5%
Spot commodity positions must be mapped in a time scale of less than or equal to 1 (one) month. Commodity-based derivative contract positions are mapped based on the maturity of the derivative contract. b. Capital charges for commodity risk are the sum of the following calculations:

1. 1.5% (spread rate) of the total long and short positions that are matched in each time scale;
2. 0.6% of residual positions (unmatched position) originating from each time scale multiplied by the number of scales between the previous time scale and the next time scale; and
3. 15% of the remaining residual position.
   Example:
   A Subsidiary Company agrees to futures contracts to buy and sell sugar commodities with the following maturities and prices:
   Futures Contract Maturity
   Price
   (in Rp. 000)
   Buy 4 months 800
   Sell 5 months 1,000
   Buy 2.5 years 600
   Sell 7 years 600
   Time Scale Position
   (Rp 000) Capital Charge Calculation
   < 1 month

1 – 3 months
3 – 6 months Long 800
Short
1,000
[800 (Long) + 800 (Short)
(matched position)] x 1.5%
200 (Short) (remaining residual position) that is considered in the 3 subsequent time scales, namely time scale > 2-3 years 200 x 3 x 0.6% 3.6
6 – 12 months
1 – 2 years
2 – 3 years Long 600 [200 (Long) + 200 (Short)
(matched position)] x 1.5%
400 (Long) (remaining residual position) that is considered in the 1 subsequent time scale, namely time scale > 3 years 400 x 1 x 0.6% 2.4
3 years Short 600 [400 (Long) + 400 (Short)
(matched position) x 1.5%
200 (remaining residual position) x 15%
Total Capital Charge 78
c. In the event that forward, future, or option contracts are not only based on commodities but also on interest rates or exchange rates, the Bank must also calculate capital charges for interest rate risk or exchange rate risk.
F. General Guidelines and Market Risk Calculation for Option Transactions

1. General Provisions for Market Risk Calculation for Option Transactions
   a. Banks that conduct option transactions for trading or hedging purposes for a specific instrument in the Trading Book (for example, securities included in the Trading Book) must report option positions along with the underlying financial instruments and calculate capital charges for Market Risk for such option positions. b. The calculation of capital charges for Market Risk for option transactions is conducted using the following approaches:

1. Simplified Approach; or
2. Intermediate Approach.

2. Simplified Approach
   a. The Simplified Approach is basically used only by Banks that conduct option purchase transactions. b. In the Simplified Approach, the calculation results of capital charges for option risk will be added to the calculation of capital charges for the same risk category as the underlying instrument, for example, interest rate risk, equity risk, exchange rate risk, or commodity risk.
   c. The calculation of capital charges based on the Simplified Approach is:
   Position Treatment
   Long spot and Long put or
   Short spot and
   Long call
   Capital charges are the fair value of the underlying instrument of the option multiplied by the sum of specific risk weights and general risk weights of the underlying instrument, minus the value of the option in the money condition (if any) with a minimum capital charge of zero. For options with remaining maturity of more than 6 (six) months, the strike price must be compared with the forward price. Banks that cannot make such comparison use the value of the in-the-money option as zero. Long call or Long put Capital charges are the smallest of:
   (i) the fair value of the underlying instrument of the option multiplied by the sum of specific risk weights and general risk weights of the underlying instrument; and (ii) the fair value of the option. d. Capital charge weights for option risk are:
   Type of Option Capital Charge Weight
   Interest Rate
   Option
   Underlying instrument is securities:

• specific risk according to Table 1
• general risk according to Table 2
  Underlying instrument is interest rates:
• no specific risk
• general risk according to Table 4
  Foreign Currency
  Option
  8%
  Equity Option - specific risk = 8%
• general risk = 8%
  Commodity Option 15%
  Example:
  PT A (Subsidiary Company of the Bank) owns 100 shares of PT X for trading activities. The market value of 1 share is Rp1,000,000.00. In addition, PT A also has a put option on such shares with ... with a strike price of Rp1,100,000.00. The calculation of capital charges for such positions is as follows:
  Rp16,000,000.00 1) – Rp10,000,000.00 2)
  = Rp6,000,000.00
  Explanation:

1. Rp16,000,000.00 is the multiplication between the value of shares (100 shares x Rp1,000,000.00 = Rp100,000,000.00) with the capital charge weight for equity risk (8% for specific risk + 8% for general risk = 16%)
2. Rp10,000,000.00 is the difference in option value in the in-the-money position [(Rp1,100,000.00 – Rp1,000,000.00) x 100 shares]
   The same calculation methodology also applies to options with financial instruments exposed to exchange rate risk, interest rate risk, or commodity risk. e. For foreign currency option transactions, the underlying instrument is the asset to be received if the option is exercised. In the event that the fair value of an underlying instrument is zero (for example, caps and floors, swaptions), the Bank must use the notional value in the Market Risk calculation.

3. Intermediate Approach
   a. General

1. Banks that conduct option sales transactions must apply the Intermediate Approach (Intermediate Approach) in the form of the Delta-Plus Approach (Delta-Plus Approach).
2. The calculation of capital charges for option risk with the Intermediate Approach includes the calculation of capital charges for specific risk and general risk.
3. Capital charges for specific risk are calculated by multiplying the equivalent delta value of each option position with the risk weights established according to the risk category of the underlying instrument of the option. The calculation of capital charges for general risk refers to letter b (Delta-Plus Approach/Delta-Plus Approach).
   b. Delta-Plus Approach ...

b. Delta-Plus Approach

1. Banks conducting option sale transactions must use the Delta-Plus approach to assess option positions. This approach uses the delta equivalent value and sensitivity parameters or "Greek letters" related to the option to measure Market Risk. The delta equivalent value must be reported as the fair value of the underlying instrument multiplied by the delta value.
2. In the event that the delta value is not available in the market, Banks may calculate the delta value using an option pricing model such as the standard Cox, Ross, Rubinstein or a Black and Scholes type algorithm or another model that is comparable and equivalent to the algorithm.
3. Option positions calculated using the option delta value are all of the Bank's option positions, namely the option positions issued by the Bank (Bank as writer) and the option positions purchased by the Bank (Bank as holder).
4. All or part of the option positions as referred to in item 3) may be offset with other option positions provided they meet the following requirements:
   a) have the same underlying, namely the same currency; and b) are symmetrical with the hedged option position.
   An example of a symmetrical position is in the event that the Bank issues a call option (Bank as writer), the symmetrical position is:
   (1) purchase of a call option (Bank as holder); or (2) sale of a put option (Bank as writer).
   Example:
   The Bank conducts a call option sale transaction of USD 50,000 with a strike price of Rp8,800 which will ...

expire on July 31, 20XX (Bank as writer). Meanwhile, the Bank also conducts a put option sale transaction of USD 40,000 with a strike price of Rp8,750 which will expire on July 31, 20XX (Bank as writer) and a call option purchase transaction of USD 20,000 with a strike price of Rp8,850 which will expire on July 31, 20XX (Bank as holder). Based on the delta value calculation, it is assumed that the three option transactions each have a delta value of 0.5; 0.6; and 0.8. Thus, the option risk calculation is as follows:
0.5 x USD50,000 = USD25,000 (short)
0.6 x USD40,000 = USD24,000 (long)
0.8 x USD20,000 = USD16,000 (long)
USD15,000 (long)
5) Long or short positions arising from several option transactions (call and put option sales as well as call and put option purchases) may be offset provided they are identical, namely having similarities in the underlying instrument, exercise date, agreed price (strike price), option type, and currency type.
Example:
The Bank conducts a put option sale transaction on a 3 (three) month JIBOR interest rate which will expire on July 31, 20XX. Meanwhile, the Bank also conducts a put option purchase transaction on a 3 (three) month JIBOR interest rate which will expire on July 31, 20XX. Given that both transactions resulting in long and short positions are identical, it can be ensured that they have the same delta value so that an offset can be performed.
6) Capital charge for general risk is calculated based on the delta equivalent value of each option. However, because the delta value is not sufficient to cover all risks related to the option position, the Bank must also measure gamma sensitivity (measuring the rate of change of delta) and vega (measuring the sensitivity of the option price to changes in volatility of the underlying instrument of the option).
7) Banks using the Delta-Plus Approach are required to calculate delta risk, gamma risk, and vega risk for each option position (including hedging positions). The measurement of the capital charge is as follows:
a) Delta risk calculation
(1) Capital charge for delta risk is calculated based on the delta equivalent value with securities or interest rates as the underlying instrument according to the interest rate time scale, namely using a two-legged approach in the same manner as the reporting of other derivative transactions, namely the position at the time the contract is valid and the position at the time the underlying instrument expires. Example:
(a) In April, the Bank purchased a 2-month call option with a 3-month interest rate underlying. At the end of April, the Bank reported long and short positions each with a term of 5 months and 2 months according to the delta equivalent value. (b) In April, the Bank purchased a call option on securities that will be delivered within a period of 5 months. At the end of April, the Bank reported a long position with a term ...

term according to the securities and a short position with a term of 5 months according to the delta equivalent value.
(c) In April, the Bank sold a 2-month call option with a 3-month interest rate underlying. At the end of April, the Bank reported long and short positions each with a term of 2 and 5 months according to the delta equivalent value. (2) Capital charge for options on exchange rate and gold positions is valued based on the delta equivalent value referring to exchange rate risk calculations. (3) Capital charge for stock options is valued based on the delta equivalent value referring to equity risk calculations. For the purpose of this calculation, financial markets in each country will be treated as different underlyings. (4) Capital charge for commodity options is valued based on the delta equivalent value referring to commodity risk calculations. b) Gamma risk calculation (1) Gamma risk calculation for each option position is:
Gamma impact = ½ x Gamma x VU²
VU = change or variation of the underlying instrument of the option (2) VU is calculated for:
i. interest rate options, if the underlying instrument is securities, then the fair value of the instrument is multiplied by the risk weight according to Table 2;
ii. foreign currency options, then the fair value of the underlying instrument is multiplied by 8%;
iii. stock ...

iii. stock and stock index options, then the fair value of the underlying instrument is multiplied by 8%;
iv. commodity options, then the fair value of the underlying instrument is multiplied by 15%.
(3) For the purpose of this calculation, the following positions must be treated as options having the same underlying:
i. interest rates are any time scale;
ii. foreign currencies are any type of foreign currency;
iii. stocks and stock indices are any financial market;
iv. commodities are any type of commodity.
(4) Each option with an underlying in the same risk category will result in a gamma risk calculation that is positive or negative. The gamma risk calculation results in each risk category are summed so as to produce a net gamma risk number for each category, whether positive or negative. Furthermore, only the net gamma risk number that is negative from each risk category is subject to capital charge calculation. (5) The total capital charge for gamma risk is the sum of the absolute values of the net gamma risk numbers that are negative. c) Vega risk calculation (1) Vega risk is the risk of proportional shift in volatility of the underlying by ±25% (twenty-five percent). In the vega risk calculation, the Bank must calculate ...

calculate the capital charge by multiplying the total vega of all options with the same underlying by the proportional shift from the assumption of ±25% (twenty-five percent). Each option with the same underlying will result in a vega calculation that is positive or negative. The vega numbers are summed so as to produce a net vega number for each underlying, whether positive or negative. (2) The total capital charge for vega risk is the sum of the absolute values of the net vega numbers obtained from the calculation for each option. Example:
Volatility of the underlying is 20% while the vega calculation result is 1.68. With a proportional shift of 25%, the capital charge calculation for vega risk is:
5 1) x 1.68 = 8.4
Note:

1. There is an increase in volatility of 5%, namely from 20% to 25%
   Determined in Jakarta on September 8, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, sd
NELSON TAMPUBOLON
Copy in accordance with the original
Director of Law 1
Law Department sld
Yuliana

BANK NAME
REPORTING MONTH
CONTACT PERSON
DIVISION/DEPARTMENT
TEL./E-MAIL
REPORT FORM FOR KPMM RATIO CALCULATION
BY CALCULATING CREDIT RISK AND MARKET RISK

Form I.A
Specific Risk - Securities Exposure (Trading Book) Long Short (1) (3) (4) (5) (6) (7) 1 0 0% 0 a. 0 0% 0 b.
i. remaining term to maturity less than or equal to 6 months 0 0.25% 0
ii. remaining term to maturity more than 6 months up to 24 months 0 1% 0
iii. remaining term to maturity more than 24 months 0 1.60% 0
c. 0 8% 0
d. 0 12% 0 e. 0 8% 0 a. 0 0.25% 0 b. 0 1% 0
c. 0 1.60% 0
4. a.
i. short-term rating A-1 0 1.60% 0
ii. short-term rating A-2 0 4.00% 0
iii. short-term rating A-3 0 8.00% 0
iv. short-term rating less than A-3 0 12.00% 0
v. AAA to AA- rating 0 1.60% 0
vi. A+ to A- rating 0 4.00% 0
vii. BBB+ to BB- rating 0 8.00% 0
viii. rating less than BB- 0 12.00% 0
ix. unrated 0 12.00% 0
b.
i. Short-term Receivables

1. short-term rating less than A-3 0 12.00% 0
2. BB+ to B- rating 0 4.00% 0
3. rating less than B- 0 12.00% 0
4. unrated 0 4.00% 0
   ii. Long-term Receivables
5. short-term rating less than A-3 0 12.00% 0
6. BB+ to B- rating 0 8.00% 0
7. rating less than B- 0 12.00% 0
8. unrated 0 8.00% 0
   c.
   i. BB+ to B- rating 0 8.00% 0
   ii. rating less than B- 0 12.00% 0
   iii. unrated 0 8.00% 0
   TOTAL 0
   No. Securities and Derivative Instruments with securities as the underlying instrument:
   Position
   TOTAL Risk Weight
   Total Capital Charge for Specific Risk
   (based on gross position, namely long position plus short position) (2) Instruments meeting the criteria as Indonesian Government Instruments meeting the criteria as Other Governments AAA to AA- ratingA+ to BBB- rating with:
   BB+ to B-Instruments meeting the criteria as Others issued by Corporations, with:
   issued by Banks:
   issued by public sector entities and multilateral development banks and international institutions with:
   rating less than B-unrated
   Instruments meeting the criteria as Qualification with:
   remaining term to maturity less than or equal to 6 months remaining term to maturity more than 6 months up to 24 months remaining term to maturity more than 24 months

Form I.B
General Risk - Interest Rate Exposure (Trading Book) - Maturity Method Currency : Rate :
Maturity Ladder
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (15) (17) (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) < 1 month < 1 month 0.00% 0

1 - 3 months > 1 - 3 months 0.20% 0
3 - 6 months > 3 - 6 months 0.40% 0
6 - 12 months > 6 - 12 months 0.70% 0
1 - 2 years > 1 - 1.9 years 0 0 1.25% 0
2 - 3 years > 1.9 - 2.8 years 0 0 1.75% 0
3 - 4 years > 2.8 - 3.6 years 0 0 2.25% 0
4 - 5 years > 3.6 - 4.3 years 0 0 2.75% 0
5 - 7 years > 4.3 - 5.7 years 0 0 3.25% 0
7 - 10 years > 5.7 - 7.3 years 0 0 3.75% 0
10 - 15 years > 7.3 - 9.3 years 0 0 4.50% 0
15 - 20 years > 9.3 - 10.6 years 0 0 5.25% 0
20 years > 10.6 - 12 years 0 0 6.00% 0
12 - 20 years 0 0 8.00% 0
20 years 0 0 12.50% 0
CAPITAL CHARGE FOR GENERAL RISK :
For Vertical Disallowance 0 10% 0.00
For Horizontal Disallowance within zones

• Within Zone 1 0 40% 0.00
• Within Zone 2 0 30% 0.00
• Within Zone 3 0 30% 0.00
  For Horizontal Disallowance between Zones
• Zone 1 and Zone 2 0 40% 0.00
• Zone 2 and Zone 3 0 40% 0.00
• Zone 1 and Zone 3 0 100% 0.00
  For Overall Net Open Position 0 100% 0.00
  TOTAL CAPITAL CHARGE 0.00
  Time Scale
  Long Short
  Matched
  Position
  Disallowance
  Factor
  Capital Charge for Vega Risk
  TOTAL CAPITAL CHARGE
  Zone
  Capital Charge (Simplified Approach )
  Overall Net
  Open Position
  2 0
  1 0
  Matched
  Short Position
  Horizontal Disallowance between zone 1 and zone 3 Matched Position Residual Value Long Short 0 0 Horizontal Disallowance between zone 1 and zone 2 Matched Position Residual Value Horizontal Disallowance between zone 2 and zone 3 Residual Value Matched Position Residual Value Long Long Short Interest Rate Derivatives Position Risk Weight Coupon 3% or more Coupon less than 3% Long Short Total Net Option Position (delta equivalent) Long Short Securities, Debt Related Derivatives, and Credit Derivatives Position Long Total Capital Charge (Capital Charge) Short Position After Weighting Matched Position Residual Value Long Short Long Short Horizontal Disallowance within zone 1, zone 2, and zone 3 Vertical Disallowance

Form I.B.1
(1) (2) (3) (4) (5) (6) (7) (8)
< 1 month < 1 month 0 0

1 - 3 months > 1 - 3 months 0 0
3 - 6 months > 3 - 6 months 0 0
6 - 12 months > 6 - 12 months 0 0
1 - 2 years > 1 - 1.9 years 0 0
2 - 3 years > 1.9 - 2.8 years 0 0
3 - 4 years > 2.8 - 3.6 years 0 0
4 - 5 years > 3.6 - 4.3 years 0 0
5 - 7 years > 4.3 - 5.7 years 0 0
7 - 10 years > 5.7 - 7.3 years 0 0
10 - 15 years > 7.3 - 9.3 years 0 0
15 - 20 years > 9.3 - 10.6 years 0 0
20 years > 10.6 - 12 years 0 0
12 - 20 years 0 0
20 years 0 0
Total Net Option Position
(delta equivalent)
Total Option Position
(delta equivalent)
Long Short Long Short Long Short
Time Scale
Coupon 3% or more
Coupon less than
3%

Form I.B
General Risk - Interest Rate Exposure (Trading Book) - Duration Method Currency : Rate :
Maturity Ladder
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (16) (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) (32) < 1 month 0 0 1.00% 0

1 - 3 months 0 0 1.00% 0
3 - 6 months 0 0 1.00% 0
6 - 12 months 0 0 1.00% 0
1 - 1.9 years 0.90% 0
1.9 - 2.8 years 0.80% 0
2.8 - 3.6 years 0.75% 0
3.6 - 4.3 years 0.75% 0
4.3 - 5.7 years 0.70% 0
5.7 - 7.3 years 0.65% 0
7.3 - 9.3 years 0.60% 0
9.3 - 10.6 years 0.60% 0
10.6 - 12 years 0.60% 0
12 - 20 years 0.60% 0
20 years 0.60% 0
CAPITAL CHARGE FOR GENERAL RISK :
For Vertical Disallowance 0 5% 0.00
For Horizontal Disallowance within zones

• Within Zone 1 0 40% 0.00
• Within Zone 2 0 30% 0.00
• Within Zone 3 0 30% 0.00
  For Horizontal Disallowance between Zones
• Zone 1 and Zone 2 0 40% 0.00
• Zone 2 and Zone 3 0 40% 0.00
• Zone 1 and Zone 3 0 100% 0.00
  For Overall Net Open Position 0 100% 0.00
  TOTAL CAPITAL CHARGE 0.00
  Capital Charge for Vega Risk
  Capital Charge (Simplified Approach )
  TOTAL CAPITAL CHARGE
  2 0
  3 0
  Total Capital
  Charge
  (Capital
  Charge)
  Short
  Short
  Residual Value
  Matched
  Position
  Residual Value
  Matched
  Position
  Residual Value
  Vertical Disallowance
  Short
  Matched
  Position
  Disallowance
  Factor
  Matched
  Position Long
  Long Short Long
  Modified
  Duration
  Assumed
  Changes in
  Yield
  Position After
  Weighting
  Horizontal Disallowance between zone 1 and zone 2 Short Estimated Price Movement Horizontal Disallowance between zone 2 and zone 3 Long Short Matched Long Long Position Residual Value Short Horizontal Disallowance within zone 1, zone 2, and zone 3 Matched Position Residual Value Long Short Overall Net Open Position Horizontal Disallowance between zone 1 and zone 3 Long Interest Rate Derivatives Position Total Net Option Position (delta equivalent) Zone Securities, Debt Related Derivatives, and Credit Derivatives Position Time Scale Short Long

Form I.B.1
(2) (3) (4) (5) (6) (7) (8)
< 1 month 0 0

1 - 3 months 0 0
3 - 6 months 0 0
6 - 12 months 0 0
1 - 1.9 years 0 0
1.9 - 2.8 years 0 0
2.8 - 3.6 years 0 0
3.6 - 4.3 years 0 0
4.3 - 5.7 years 0 0
5.7 - 7.3 years 0 0
7.3 - 9.3 years 0 0
9.3 - 10.6 years 0 0
10.6 - 12 years 0 0
12 - 20 years 0 0
20 years 0 0
Short Long Short Long Short
Total Option Position
(delta equivalent)
Total Net Option Position
(delta equivalent) Option Position
Long
Time Scale

Form II
Exchange Rate Exposure (Banking Book and Trading Book) Long Short Long Short Long Short Long Short (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) United States Dollar USD 0 Euro EUR 0 Australian Dollar AUD 0 Canadian Dollar CAD 0 Danish Krone DKK 0 Hong Kong Dollar HKD 0 Malaysian Ringgit MYR 0 New Zealand Dollar NZD 0 Norwegian Krone NOK 0 British Pound GBP 0 Singapore Dollar SGD 0 Swedish Krona SEK 0 Swiss Franc CHF 0 Japanese Yen JPY 0 Burmese Kyat BUK 0 Indian Rupee INR 0 Kuwaiti Dinar KWD 0 Pakistani Rupee PKR 0 Philippine Peso PHP 0 Saudi Riyal SAR 0 Sri Lankan Rupee LKR 0 Thai Baht THB 0 Brunei Dollar BND 0 Gold 0 Other currencies ………… 0 Capital Charge 8% 0 TOTAL CAPITAL CHARGE 0 Capital Charge for Vega Risk Structural Position TOTAL CAPITAL CHARGE Capital Charge (Simplified Approach ) Total Net Foreign Exchange Position Net Option Position (delta equivalent) (1) Foreign Exchange Position (excluding Option ) after considering Structural Position Rate Foreign Exchange Position [Assets, Liabilities, and Administrative Accounts (not including option )] Foreign Currency

Form II.A
Long Short Long Short Long Short
(1) (2) (3) (4) (5) (6) (7)
United States Dollar 0 0
Euro 0 0
Australian Dollar 0 0
Canadian Dollar 0 0
Danish Krone 0 0
Hong Kong Dollar 0 0
Malaysian Ringgit 0 0
New Zealand Dollar 0 0
Norwegian Krone 0 0
British Pound 0 0
Singapore Dollar 0 0
Swedish Krona 0 0
Swiss Franc 0 0
Japanese Yen 0 0
Burmese Kyat 0 0
Indian Rupee 0 0
Kuwaiti Dinar 0 0
Pakistani Rupee 0 0
Philippine Peso 0 0
Saudi Riyal 0 0
Sri Lankan Rupee 0 0
Thai Baht 0 0
Brunei Dollar 0 0
Gold 0 0
Other currencies ………… 0
Net Option Position
(net delta equivalent)
(delta equivalent) Option Position
Foreign Currency

Form III
Equity Exposure (Trading Book) on a Consolidated Basis New York Stock Exchange London Stock Exchange Hong Kong Stock Exchange Tokyo Stock Exchange Singapore Stock Exchange (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) 1 Common Stock Long Short 2 Convertible securities Long Short 3 Commitment to buy and sell stocks Long Short 4 Equity swaps Long Short 5 Stock index futures Long Short 6 Stock futures Long Short 7 Stock index options Long Short 8 Stock options Long Short 9 Others Long Short Long 0 Short 0 Risk Weight 8% 8% 8% 8% 8% 8% 8% Total Capital Charge (capital charge ) for Equity Risk 0 No. Equity Type TOTAL Position Total Capital Charge (capital charge ) for General Risk (based on net position, namely long position offset with short position) Total Capital Charge (capital charge) for Specific Risk (based on gross position, namely long position plus short position) Capital Charge for Vega Risk TOTAL CAPITAL CHARGE 0 0 Capital Market Total Capital Charge (capital charge ) for Equity Risk Stock Exchange Jakarta Other countries Capital Charge (Simplified Approach )

Form IV
Commodity Exposure (Banking Book and Trading Book) on a Consolidated Basis - Simplified Method (Simplified Approach ) Long Short (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 1 15% 3% 0 2 15% 3% 0 3 15% 3% 0 4 15% 3% 0 5 15% 3% 0 6 15% 3% 0 7 15% 3% 0 8 15% 3% 0 9 15% 3% 0 Total Capital Charge (capital charge ) for Commodity Risk 0 Capital Charge for Vega Risk TOTAL CAPITAL CHARGE Capital Charge (Simplified Approach ) No. Total Capital Charge Risk Weight for Net Position Risk Weight for Gross Position Capital Charge for Gross Position Commodity Type Position Spot Price Capital Charge for Net Position

Form V
Commodity Exposure (Banking Book and Trading Book) on a Consolidated Basis - Maturity Ladder Approach Commodity :
Long Short Long Short
(2) (3) (4) (5) (6) (7) (8)
CAPITAL CHARGE (CAPITAL CHARGE)
Capital Charge for Spread Risk 1.50% 0
Capital Charge for residual positions considered in the next time scale 0.60% 0 Capital Charge for Overall Net Position 15% Residual Position Time Scale CAPITAL CHARGE (CAPITAL CHARGE ) FOR OPTION RISK Capital Charge (Simplified Approach) TOTAL CAPITAL CHARGE (1) < 1 month

3 years
Matched Position
TOTAL CAPITAL CHARGE
Capital Charge for Vega Risk
6 - 12 months
1 - 2 years
2 - 3 years
1 - 3 months
3 - 6 months
Position
Capital Charge for Spread Risk
Capital Charge for residual positions considered in the next time scale

CORE CAPITAL (2a + 2b) a. Core Capital (after considering deduction factors, in accordance with regulations regarding KPMM) b. Additional Core Capital (after considering deduction factors, in accordance with regulations regarding KPMM) 2 COMPLEMENTARY CAPITAL (after considering deduction factors, in accordance with regulations regarding KPMM) TOTAL MARKET RISK ATMR Specific Risk General Risk Interest Rate Risk 4 TOTAL CAPITAL (Core Capital + Complementary Capital) 5 ATMR for CREDIT RISK 6 ATMR for OPERATIONAL RISK 7 ATMR for MARKET RISK 8 TOTAL ATMR (CREDIT RISK + OPERATIONAL RISK + MARKET RISK) KPMM RATIO (ACTUAL) a. Core Capital Ratio
i. Core Capital Ratio
ii. Additional Core Capital Ratio
b. Complementary Capital Ratio
10 SHORTFALL OF CORE CAPITAL TO MEET 4.5% MINIMUM 11 SHORTFALL OF CORE CAPITAL TO MEET 6% MINIMUM 12 KPMM RATIO ACCORDING TO RISK PROFILE ALLOCATION OF ACTUAL KPMM RATIO TO MEET KPMM ACCORDING TO RISK PROFILE a. Core Capital Ratio (minimum 4.5%) b. Allocated Additional Core Capital Ratio
c. Additional Core Capital Ratio allocated to meet minimum 6% Core Capital
d. Allocated Complementary Capital Ratio e. Additional Core Capital Ratio allocated to meet KPMM Risk Profile 14 CAPITAL SHORTFALL TO MEET KPMM RISK PROFILE 15 CORE CAPITAL AVAILABLE TO MEET BUFFER TOTAL BUFFER THAT MUST BE FORMED a. Capital Conservation Buffer b. Countercyclical Buffer
c. Capital Surcharge for D-SIB
17 EXCESS OR SHORTFALL OF CORE CAPITAL TO MEET BUFFER Exchange Rate Risk Option Price Change Risk Total
12.5 x Total
(Equivalent
ATMR)
Exchange Rate Risk

• Bank reports are based on the Bank's own calculations, while the Financial Services Authority will use supervisory data
  available at the Financial Services Authority
  Form VI
  Calculation of Minimum Capital Requirement Ratio Capital Charge Calculation Using Standard Method Interest Rate Risk

MODAL INTI (2a + 2b) a. Core Capital (after deducting deduction factors, in accordance with prevailing regulations regarding Minimum Capital Requirements) b. Additional Core Capital (after deducting deduction factors, in accordance with prevailing regulations regarding Minimum Capital Requirements) 2 ADDITIONAL CAPITAL (after deducting deduction factors, in accordance with prevailing regulations regarding Minimum Capital Requirements) TOTAL MARKET RISK ATMR Risk Specific General Risk Specific General Risk Interest Rate Risk Exchange Rate Risk Equity Risk Commodities 4 TOTAL CAPITAL (Core Capital + Additional Capital) 5 ATMR for CREDIT RISK 6 ATMR for OPERATIONAL RISK 7 ATMR for MARKET RISK 8 TOTAL ATMR (CREDIT RISK + OPERATIONAL RISK + MARKET RISK) MINIMUM CAPITAL REQUIREMENT RATIO (ACTUAL) a. Core Capital Ratio
i. Core Capital Main Ratio
ii. Additional Core Capital Ratio
b. Additional Capital Ratio
10 SHORTFALL OF MAIN CORE CAPITAL TO MEET 4.5% MINIMUM 11 SHORTFALL OF CORE CAPITAL TO MEET 6% MINIMUM 12 MINIMUM CAPITAL REQUIREMENT RATIO ACCORDING TO RISK PROFILE ALLOCATION OF ACTUAL MINIMUM CAPITAL REQUIREMENT RATIO FOR COMPLIANCE WITH RISK PROFILE a. Main Core Capital Ratio (minimum 4.5%) b. Allocated Additional Core Capital Ratio
c. Additional Main Core Capital Ratio allocated to meet minimum 6% Core Capital
d. Allocated Additional Capital Ratio e. Additional Main Core Capital Ratio allocated to meet Minimum Capital Requirements Risk Profile 14 CAPITAL SHORTFALL FOR COMPLIANCE WITH RISK PROFILE MINIMUM CAPITAL REQUIREMENTS 15 AVAILABLE MAIN CORE CAPITAL FOR BUFFER COMPLIANCE TOTAL REQUIRED BUFFER a. Capital Conservation Buffer b. Countercyclical Buffer
c. Capital Surcharge for D-SIBs
17 SURPLUS OR SHORTFALL OF MAIN CORE CAPITAL FOR BUFFER COMPLIANCE

Form VII
Calculation of Minimum Capital Requirements Ratio on a Consolidated Basis Calculation of Capital Charges Using the Standard Method Interest Rate Risk Exchange Rate Risk Equity Risk Commodities Risk Option Price Change Risk Total
12.5 x
Total
(Equivalent
ATMR)

• Bank reports are based on the Bank's own calculations, while the Financial Services Authority will use supervisory data available at the Financial Services Authority

Form VIII
Disclosure & Additional Explanations
Determined in Jakarta on 1 September 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON
Copy matches the original
Director of Law 1
Law Department signed
Yuliana

APPENDIX III
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 38 /SEOJK.03/2016 REGARDING GUIDELINES FOR THE USE OF THE STANDARD METHOD IN THE CALCULATION OF MINIMUM CAPITAL REQUIREMENTS FOR COMMERCIAL BANKS BY INCLUDING MARKET RISK

I. GENERAL INSTRUCTIONS

1. Banks only fill in data in the provided cells, and are not permitted to change the format (adding and/or reducing rows and/or columns in the Form) unless otherwise determined by the Financial Services Authority.
2. Banks individually fill in Form I.A., Form I.B., Form I.B.1., Form II, Form II.A., and Form VI jointly. For Banks with Indonesian legal entity status, this covers the head office and all branches located domestically and abroad.
3. Banks on a consolidated basis with Subsidiary Companies, in addition to filling in the Forms as in number 2, also fill in Form VII.
4. Banks on a consolidated basis with Subsidiary Companies and having Subsidiary Companies exposed to equity risk and/or commodity risk, in addition to filling in the forms as in number 3, also fill in Form III, Form IV, and/or Form V.
5. Form VIII is only filled in when there are additional disclosures and explanations deemed necessary to complete the filling of the forms as in number 2, number 3, and number 4.
6. The filling of all forms is expressed in millions of Rupiah. In the event that a Bank does not have positions or exposures that must be reported, data in the provided cells is filled with the number 0 (zero).
7. The filling of forms covers all positions in the balance sheet (on balance sheet) as well as derivative transaction positions (off balance sheet).
8. Information used as a reference in filling out the forms must be the same as the information used to compile the Monthly Report of Commercial Banks (LBU) at the position of the same month.
9. The filling of forms uses fair value on the reporting date (current market value). In the event that the notional value used as a reference for a derivative transaction differs from the effective notional value, the Bank uses the effective notional value in calculating fair value.

II. SPECIFIC INSTRUCTIONS
A. Form I - Interest Rate Exposure

1. Specific Risk – Securities and Derivative Instruments Related to Securities (Debt Related Derivatives)
   a. Form I.A is filled with long and short positions of securities and derivative instruments related to securities, such as bond forwards and bond options, that fall into the Trading Book category based on the issuer's securities category. In the event that a derivative transaction does not contain credit risk, such as interest rate swap, currency swap, forward rate agreement (FRA), forward foreign exchange, and interest rate future transactions, the Bank does not need to report such transactions in Form I.A. Included in long and short positions are commitments to buy and sell securities, such as securities sale transactions with a buy-back condition (repo) and securities purchase transactions with a sell-back condition (reverse repo) for trading purposes. b. Specifically for number 2.b and number 3 in Form I.A, long and short positions are filled based on the time scale remaining until maturity (residual maturity) of the securities and/or securities that serve as the reference (underlying securities) in derivative transactions.
2. General Risk - Securities, Derivative Instruments Related to Securities (Debt Related Derivatives),
   and Derivative Instruments Related to Interest Rates (Interest Rate Derivatives) a. Form I.B is filled with long and short positions that fall into the Trading Book category as previously reported in Form I.A, as well as long and short positions arising from derivative transactions related to interest rates, such as interest rate swaps, cross currency swaps, foreign exchange forwards, and forward rate agreements (FRA). b. Specifically for option transactions, all long and short positions are reported in Form I.B.1, using delta equivalent values. In the event that the Bank uses the Simple Method, option risk calculations are performed separately.
   c. In the event that the Bank uses the Delta-Plus Method, option risk calculations for gamma risk and vega risk are performed separately.
   d. In the event that the Bank uses the Duration Method, the Bank fills in and uses Form I.B (Duration Method). If there are several instruments in one (one) time scale, the Bank fills in the Weighted Position column based on calculations performed separately without filling in the modified duration and estimated price movement columns. e. The Bank documents calculations related to the use of the Duration Method, including among others calculations of modified duration and estimated price movements.

B. Form II - Foreign Currency Exposure

1. Form II is filled with long and short positions for each foreign currency (including gold), whether recorded on the asset side, liability side, and administrative accounts as regulated in prevailing regulations regarding Net Foreign Exchange Position (PDN).
   The asset value taken into account is the book value, i.e., the instrument value after being adjusted for impairment loss reserves formed in the same currency.
2. Specifically for option transactions, all long and short positions are reported in Form II.A, using net delta equivalent values. The Bank may perform offsetting between the long and short positions of all or part of those option positions with option positions arising from other option contracts as long as they are identical, namely having similarities in the exercise date, agreed price (strike price), currency type, underlying instrument, and option type. In the event that the Bank has long and short positions that can be offset, those positions do not need to be reported in Form II.A but the Bank documents the entire offsetting process and submits it as an attachment to Form II.A.
   Offsetting is not permitted to be performed against long positions arising from put option sale transactions and short positions arising from call option sale transactions, even though both positions are identical. Thus, the Bank reports both positions in Form II.A in column (2) and column (3).
3. In the event that the Bank uses the Simple Method, option risk calculations are performed separately.
4. In the event that the Bank uses the Delta-Plus Method, option risk calculations for gamma risk and vega risk are performed separately.

C. Form III – Consolidated Equity Exposure

1. Form III is filled with long and short positions of financial instruments and derivative instruments related to shares, such as equity futures and equity options, that fall into the Trading Book category. Positions are reported based on each financial market (market by market basis).
2. In the event that financial instruments exposed to equity risk are traded on more than 1 (one) financial market, the Bank reports the financial instrument in the financial market where the financial instrument is primarily traded (primary listing).
3. In the event that a derivative contract is not only share-based but also interest rate-based, the Bank reports in Form I.B.
4. Specifically for option transactions, all long and short positions are reported using delta equivalent values. In the event that the Bank uses the Simple Method, option risk calculations are performed separately.
5. In the event that the Bank uses the Delta-Plus Method, option risk calculations for gamma risk and vega risk are performed separately.

D. Form IV – Consolidated Commodity Exposure (Simple Method)

1. Form IV is filled with long and short positions of financial instruments and derivative instruments related to commodities, such as commodity futures and commodity options, that fall into the Trading Book and/or Banking Book categories.
2. In the event that a derivative contract is not only commodity-based but also interest rate-based, the Bank reports in Form I.B.
3. Specifically for option transactions, all long and short positions are reported using delta equivalent values. In the event that the Bank uses the Simple Method, option risk calculations are performed separately.
4. In the event that the Bank uses the Delta-Plus Method, option risk calculations for gamma risk and vega risk are performed separately.

E. Form V – Consolidated Commodity Exposure (Maturity Method)

1. Form V is filled with long and short positions of financial instruments and derivative instruments related to commodities, such as commodity futures and commodity options, that fall into the Trading Book and/or Banking Book categories based on the time scale in the maturity ladder.
2. In addition, the Bank fills in the Capital Charge column for Residual Positions Calculated into the Next Time Scale and Capital Charge for Overall Net Position.
3. In the event that a derivative contract is not only commodity-based but also interest rate-based, the Bank reports in Form I.B.
4. Specifically for option transactions, all long and short positions are reported using delta equivalent values. In the event that the Bank uses the Simple Method, option risk calculations are performed separately.
5. In the event that the Bank uses the Delta-Plus Method, option risk calculations for gamma risk and vega risk are performed separately.

F. Form VI - Calculation of Minimum Capital Requirements Ratio (KPMM) The calculation of the Minimum Capital Requirements Ratio covering Credit Risk, Market Risk, and Operational Risk is done by calculating the Bank's capital ratio against Risk-Weighted Assets (ATMR) for Credit Risk, risk-weighted market exposures, and ATMR for Operational Risk. The components of the Minimum Capital Requirements Ratio calculation include:

1. Bank Capital, namely Core Capital (Tier 1) and Additional Capital (Tier 2) as in POJK on Minimum Capital Requirements for Commercial Banks.
2. Risk-weighted market exposures, namely capital charges for all types of Market Risk converted into equivalents with ATMR by multiplying by the number 12.5 (twelve point five).
3. ATMR for Credit Risk, namely total ATMR whose calculation refers to regulations governing the calculation of risk-weighted assets for credit risk using the standard approach.
4. ATMR for Operational Risk, namely total ATMR whose calculation refers to Circular Letters of the Financial Services Authority regarding the calculation of risk-weighted assets for operational risk using the basic indicator approach.

G. Form VII - Calculation of Minimum Capital Requirements Ratio (KPMM) on a Consolidated Basis Form VII is filled in when the Bank has Subsidiary Companies that must be consolidated. Positions that must be filled in this form are consolidated positions.

Determined in Jakarta on 1 September 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON
Copy matches the original
Director of Law 1
Law Department signed
Yuliana