Application of Country Risk and Transfer Risk Management for Commercial Banks

COPY
REGULATION OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
NUMBER 10 OF 2026
CONCERNING
APPLICATION OF COUNTRY RISK AND TRANSFER RISK MANAGEMENT FOR COMMERCIAL BANKS BY THE GRACE OF ALMIGHTY GOD THE MEMBER OF THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that to implement the mandate of Article 33 of Financial Services Authority Regulation Number 18/POJK.03/2016 concerning the Application of Risk Management for Commercial Banks and to implement the provisions of Article 87 and Article 88 of Financial Services Authority Regulation Number 17 of 2023 concerning the Application of Governance for Commercial Banks, it is necessary to regulate implementing provisions regarding the application of country risk and transfer risk management for commercial banks; b. that based on the considerations referred to in letter a, it is necessary to stipulate a Regulation of the Board of Commissioners of the Financial Services Authority concerning the Application of Country Risk and Transfer Risk Management for Commercial Banks; Recalling:

1. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253) as has been amended several times, most recently by Law Number 4 of 2026 concerning Amendments to Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2026 Number 62, Supplement to the State Gazette of the Republic of Indonesia Number 7180);
2. Financial Services Authority Regulation Number 18/POJK.03/2016 concerning the Application of Risk Management for Commercial Banks (State Gazette of the Republic of Indonesia Year 2016 Number 53, Supplement to the State Gazette of the Republic of Indonesia Number 5861);
3. Financial Services Authority Regulation Number 17 of 2023 concerning the Application of Governance for Commercial Banks (State Gazette of the Republic of Indonesia Year 2023 Number 30/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 53/OJK);
   DECIDES:
   Stipulates: REGULATION OF THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY CONCERNING THE APPLICATION OF COUNTRY RISK AND TRANSFER RISK MANAGEMENT FOR COMMERCIAL BANKS
   Article 1
   In this Regulation of the Board of Commissioners of the Financial Services Authority, what is meant by:
4. Commercial Bank, hereinafter referred to as Bank, is a bank that conducts business activities conventionally and provides services in payment traffic, including branch offices of banks domiciled abroad.
5. Subsidiary is a subsidiary as regulated in the Financial Services Authority Regulation concerning the application of consolidated risk management for banks that control subsidiaries.
6. Credit Risk is the risk arising from the failure of another party to fulfill obligations to the Bank, including credit risk due to debtor default, credit concentration risk, counterparty credit risk, and settlement risk.
7. Country Risk is the risk arising from uncertainty due to the deteriorating economic conditions of a country, a country's failure to pay its debts, socio-political turmoil within a country, and a country's policies.
8. Transfer Risk is the risk arising because a counterparty, including a foreign party, located abroad cannot provide or obtain foreign currency to fulfill its obligations due to certain restrictions.
   Article 2
   (1) Banks shall effectively apply risk management related to Country Risk and Transfer Risk, both for the Bank individually and for the Bank on a consolidated basis with its Subsidiaries.
   (2) The application of risk management related to Country Risk and Transfer Risk as referred to in paragraph (1) shall be carried out for exposures to all parties, including but not limited to individuals, corporations, banks, and governments. (3) The application of risk management related to Country Risk and Transfer Risk shall be carried out as part of risk management for Credit Risk as regulated in the Financial Services Authority Regulation concerning the application of risk management for commercial banks.
   Article 3
   Banks shall calculate Country Risk and Transfer Risk ratios individually and on a consolidated basis.
   Article 4
   (1) The calculation of Country Risk and Transfer Risk ratios as referred to in Article 3 shall be carried out every semester for positions at the end of June and the end of December for the purpose of group categorization.
   (2) The results of the calculation of Country Risk and Transfer Risk ratios as referred to in paragraph (1) shall determine the risk management treatment and reporting for:
   a. the period from September to February of the following year, based on the Country Risk and Transfer Risk ratios at the end of June; and b. the period from March to August, based on the Country Risk and Transfer Risk ratios at the end of December of the previous year.
   Article 5
   (1) Based on the results of the calculation of Country Risk and Transfer Risk ratios as referred to in Article 4 paragraph (1), Banks shall be categorized into 3 (three) groups, namely:
   a. group 1 consists of Banks with a Country Risk and Transfer Risk ratio of 0% (zero percent); b. group 2 consists of Banks with a Country Risk and Transfer Risk ratio greater than 0% (zero percent) up to less than 5% (five percent); and
   c. group 3 consists of Banks with a Country Risk and Transfer Risk ratio equal to or greater than 5% (five percent).
   (2) For Banks with Subsidiaries, the categorization as referred to in paragraph (1) shall be based on the higher Country Risk and Transfer Risk ratio between the individual assessment or the consolidated assessment.
   (3) The application of risk management and reporting, both individually and on a consolidated basis, shall refer to the group categories as referred to in paragraph (1), namely:
   a. Banks in group 1 are not required to apply risk management but must still inform the Financial Services Authority about the results of the Country Risk and Transfer Risk ratio calculation as part of the Bank's self-assessment report on its health level in the same month; b. Banks in group 2 must at least apply general risk management and submit qualitative reports on Country Risk and Transfer Risk to the Financial Services Authority; and
   c. Banks in group 3 must apply stricter risk management compared to group 2 and submit qualitative and quantitative reports on Country Risk and Transfer Risk to the Financial Services Authority.
   (4) In the event that the Country Risk and Transfer Risk ratio increases and causes the Bank to meet the criteria for a higher group before the next ratio calculation period as referred to in Article 4 paragraph (1), the Bank shall continue to apply risk management and reporting according to its initial group until the next ratio calculation period. (5) In the event that the Country Risk and Transfer Risk ratio decreases and causes the Bank to meet the criteria for a lower group, the Bank shall continue to apply risk management and reporting according to its initial group for 2 (two) ratio calculation periods as referred to in Article 4 paragraph (1).
   Article 6
   (1) Qualitative reports on Country Risk and Transfer Risk shall be submitted semi-annually as part of the Bank's self-assessment report on its health level as regulated in the Financial Services Authority provisions concerning the assessment of commercial bank health levels. (2) Quantitative reports on Country Risk and Transfer Risk shall be submitted quarterly as part of the risk profile report as regulated in the Financial Services Authority provisions concerning the application of risk management for commercial banks. (3) Banks shall submit qualitative reports as referred to in paragraph (1) and quantitative reports as referred to in paragraph (2) in accordance with the procedures and deadlines regulated in the Financial Services Authority provisions concerning commercial bank reporting through the Financial Services Authority reporting system.
   Article 7
   Banks shall carry out the calculation of Country Risk and Transfer Risk ratios as referred to in Article 4 paragraph (1) for the first time for the data position of June 2027.
   Article 8
   (1) Banks in group 3 shall submit trial quantitative reports to the Financial Services Authority quarterly for the positions of September 2027, December 2027, March 2028, and June 2028.
   (2) The submission of trial quantitative reports as referred to in paragraph (1) shall be carried out through the Financial Services Authority's mailing room service to the respective Bank's supervisory work unit at the Financial Services Authority. (3) Trial quantitative reports as referred to in paragraph (1) shall be submitted at the end of the following month.
   Article 9
   (1) The submission of quantitative reports for Banks in group 3 shall be carried out for the first time for the data position of September 2028.
   (2) The submission of qualitative reports for Banks in group 2 and group 3 shall be carried out for the first time for the data position of December 2028.
   Article 10
   The provisions regarding the application of Country Risk and Transfer Risk management as listed in the Appendix are an inseparable part of this Regulation of the Board of Commissioners of the Financial Services Authority.
   Article 11
   Banks in group 2 and group 3 shall apply risk management in accordance with this Regulation of the Board of Commissioners of the Financial Services Authority no later than September 2028.
   Article 12
   When this Regulation of the Board of Commissioners of the Financial Services Authority comes into effect, the provisions regarding the application of Country Risk and Transfer Risk management as listed in:
   a. Financial Services Authority Circular Letter Number 34/SEOJK.03/2016 concerning the Application of Risk Management for Commercial Banks; and b. Financial Services Authority Circular Letter Number 14/SEOJK.03/2025 concerning the Application of Governance for Commercial Banks, are declared to remain valid as long as they do not conflict with the provisions in this Regulation of the Board of Commissioners of the Financial Services Authority. This copy is in accordance with the original Head of Legal Department Legal Department sgd. Mufli Asmawidjaja
   Article 13
   This Regulation of the Board of Commissioners of the Financial Services Authority shall come into effect on the date of its stipulation.
   Stipulated in Jakarta on September 21, 2026
   CHIEF EXECUTIVE OF BANKING SUPERVISION
   FINANCIAL SERVICES AUTHORITY
   REPUBLIC OF INDONESIA, sgd.
   DIAN EDIANA RAE

APPENDIX
REGULATION OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
NUMBER 10 OF 2026
CONCERNING
APPLICATION OF COUNTRY RISK AND TRANSFER RISK MANAGEMENT FOR COMMERCIAL BANKS

APPLICATION OF COUNTRY RISK AND TRANSFER RISK MANAGEMENT FOR COMMERCIAL BANKS

TABLE OF CONTENTS
A. SCOPE OF COUNTRY RISK AND TRANSFER RISK ................................. 4
I. General.......................................................................................... 4
II. Calculation of Exposure and Determination of Country Risk and Transfer Risk Countries ................................................................................ 4
B. GUIDELINES FOR THE APPLICATION OF COUNTRY RISK AND TRANSFER RISK MANAGEMENT................................................................................. 10
I. General........................................................................................ 10
II. Risk Management Pillars .............................................................. 10
III. Application of Risk Management for Inter-Office Exposures .......... 17
C. PROVISIONING................................................................................. 17
D. REPORTING ...................................................................................... 18
I. General........................................................................................ 18
II. Report Format and Filling Guidelines .................................... 18

A. SCOPE OF COUNTRY RISK AND TRANSFER RISK
I. General

1. Banks shall apply this Regulation of the Board of Commissioners, which is an implementing provision of the Financial Services Authority Regulation concerning the application of risk management for commercial banks and the Financial Services Authority Regulation concerning the application of governance for commercial banks.
2. Country Risk and Transfer Risk management shall be carried out to ensure that Banks have adequate policies and processes for identifying, measuring, monitoring, controlling well, and reporting exposures to Country Risk and Transfer Risk, thereby reducing potential losses arising from these risks in a timely manner.
3. Country Risk is the risk arising from uncertainty due to the deteriorating economic conditions of a country, a country's failure to pay its debts, socio-political turmoil within a country, and a country's policies, including nationalization or asset expropriation, exchange rate controls, and/or exchange rate devaluation. Country Risk includes, among others, the following risks:
   a. sovereign risk is the potential loss arising from a country's government being unable or unwilling to meet its obligations; b. macroeconomic risk is the potential loss arising from foreign parties abroad being unable to meet obligations due to changes in economic policies in their country, such as interest rate increases aimed at maintaining currency stability; and
   c. contagion risk is the risk arising when adverse developments in one country cause a downgrade or credit crisis not only for that country but also for other countries in the same region.
4. Transfer Risk is the risk arising because a counterparty, including a foreign party, located abroad cannot provide or obtain foreign currency to fulfill its obligations due to certain restrictions, such as restrictions on cash and/or capital flows by a country's government.
   II. Calculation of Exposure and Determination of Country Risk and Transfer Risk Countries
5. Exposures to Country Risk and Transfer Risk include the provision of funds in the form of asset exposures in the statement of financial position as well as commitment and contingency obligations in Administrative Account Transactions (TRA) to all parties, including but not limited to individuals, corporations, banks, and governments, namely:
   a. placements; b. derivative transactions;
   c. securities;
   d. securities sold with a promise to repurchase (repo); e. claims on securities purchased with a promise to resell (reverse repo); f. acceptance claims; g. loans; h. equity participations;
   i. temporary equity participations;
   j. TRA in the form of commitment and contingency obligations; and k. other forms of fund provision that can be equated with letters a to j.
6. Country Risk and Transfer Risk exposures include exposures based on counterparty, including intragroup exposures.
7. Intragroup exposures calculated in Country Risk and Transfer Risk are exposures arising from transactions between the Bank and controlling shareholders, ultimate controlling shareholders, Subsidiaries, and companies affiliated with the Bank. Companies affiliated with the Bank are companies affiliated with the bank as referred to in the Financial Services Authority provisions concerning the application of governance for commercial banks.
8. Country Risk and Transfer Risk exposures include:
   a. direct risk exposure, which is the Bank's exposure directly affected by the conditions of another country, among others, based on the conditions of the counterparty's country determined from:

1. location of collateral or guarantor;
2. project location;
3. nationality status or legal entity status; or
4. individual domicile or company operations; and
   b. indirect risk exposure, which is the Bank's exposure to a domestic counterparty (not meeting the definition as referred to in letter a) that is indirectly exposed to Country Risk and Transfer Risk because the counterparty's source of income is affected by the conditions of another country.

5. The amount of exposure is determined based on the proportion of facilities exposed to Country Risk and Transfer Risk, for example:
   a. If there is a facility exposed to direct risk exposure with 30% (thirty percent) of the facility to the debtor intended to finance a project abroad, then the amount of Country Risk and Transfer Risk exposure calculated is only 30% (thirty percent) of the total facility. b. If there is a facility exposed to indirect risk exposure with 20% (twenty percent) of the facility to the debtor paid based on export proceeds, then the amount of Country Risk and Transfer Risk exposure calculated is only 20% (twenty percent) of the total facility. If the Bank cannot separate the portion of facilities exposed to Country Risk and Transfer Risk, then the amount of exposure is calculated based on the total facility.
6. In identifying Country Risk and Transfer Risk exposures, Banks use the following approaches:
   a. immediate risk perspective, which is an approach to measuring Country Risk and Transfer Risk exposures that allocates exposure to the country of nationality status or business entity status, or individual domicile or company operations of the counterparty, thereby reflecting the direct contractual relationship between the Bank and the counterparty; and b. ultimate risk perspective, which is an approach to measuring Country Risk and Transfer Risk exposures that allocates exposure to the country of the party that legally and economically bears the ultimate risk in the event of default and/or impacts the counterparty's source of income. Based on the ultimate risk perspective, the exposure basis can be shifted, among others, to the country of collateral or guarantor location, project location, or location that impacts the counterparty's source of income.
7. In the ultimate risk perspective approach, to determine the source country of Country Risk and Transfer Risk, Banks must refer to the existence of collateral, guarantees, suretyship, or credit insurance that have been recognized as Credit Risk Mitigation Techniques (CRM Techniques) as referred to in the Financial Services Authority provisions concerning the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks.
8. If the Bank's identification results show both an immediate risk perspective and an ultimate risk perspective for an exposure, then the exposure is measured based on the ultimate risk perspective. If the ultimate risk perspective is only relevant for a portion of the total exposure, then the ultimate risk perspective is used for that portion.
9. Examples of applying immediate risk perspective and ultimate risk perspective:
   a. If the issuer of securities is a foreign entity with a legal location outside Indonesia, then based on the immediate risk perspective, the exposure is categorized as direct risk exposure with Country Risk and Transfer Risk originating from the country of the entity's legal location. b. If the debtor is an Indonesian legal entity company with project financing in Singapore and the source of payment for the financing facility comes from the project, then based on the ultimate risk perspective, the exposure is categorized as direct risk exposure with Country Risk and Transfer Risk originating from Singapore.
   c. If the debtor is an Indonesian citizen working and domiciled in Japan, then based on the immediate risk perspective, the exposure is categorized as direct risk exposure with Country Risk and Transfer Risk originating from Japan.
   d. If the debtor is an Indonesian citizen, and does not meet the direct risk exposure criteria, who exports to Japan, so that the debtor's source of income comes from the export proceeds, then based on the ultimate risk perspective, the exposure is categorized as indirect risk exposure with Country Risk and Transfer Risk originating from Japan. e. If the debtor is a Singaporean legal entity, so the immediate risk perspective is in Singapore, but the financing is partially guaranteed by 70% (seventy percent) by a Japanese legal entity company, so the ultimate risk perspective is in Japan. In this case, based on the immediate risk perspective, 30% (thirty percent) of Country Risk and Transfer Risk is in Singapore, based on the ultimate risk perspective, 70% (seventy percent) of Country Risk and Transfer Risk is in Japan, and both are categorized as direct risk exposure.
10. If an exposure is exposed to Country Risk and Transfer Risk from several countries, then the amount of exposure and the Country Risk and Transfer Risk countries are determined based on the proportional amount of the exposure according to the quantitative report data position.
    If the Bank cannot determine the proportion of each country, then the Country Risk and Transfer Risk exposure is identified from the country of the main source of income.
11. Banks shall calculate Country Risk and Transfer Risk ratios every semester for data positions at the end of June and the end of December using the Country Risk and Transfer Risk ratio (CTR ratio) formula as follows:
    CTR Ratio = [Total direct risk exposure] + [0.5 x Total indirect risk exposure] / Total Assets + Total TRA
12. Direct risk exposure and indirect risk exposure consist of:
    a. Asset exposures in the statement of financial position (except repo transaction exposures and reverse repo transaction exposures) that are calculated are the carrying value of assets plus accrued interest receivable (if any) after being reduced by Allowance for Impairment Losses (CKPN) on those assets in accordance with financial accounting standards. b. Repo transaction exposures that are calculated are the positive difference between the net carrying value of securities underlying the repo transaction and the carrying value of the repo obligation. The net carrying value of securities is the carrying value of securities after being reduced

with CKPN on such securities in accordance with financial accounting standards.The calculation of repo transaction exposure is carried out by following a comprehensive approach in the Collateralized Credit Risk Management Technique as referred to in the Financial Services Authority regulations concerning the calculation of risk-weighted assets for credit risk using a standard approach for commercial banks.In addition, exposure to securities underlying repo transactions is also calculated for asset exposure in the statement of financial position, as referred to in letter a.c. Reverse repo transaction exposure is the recorded value of reverse repo receivables after being reduced by CKPN on such receivables in accordance with financial accounting standards.The calculation of reverse repo transaction exposure is carried out by following a comprehensive approach in the Collateralized Credit Risk Management Technique as referred to in the Financial Services Authority regulations concerning the calculation of risk-weighted assets for credit risk using a standard approach for commercial banks.d. The calculated TRA exposure is the result of multiplying the value of commitment liabilities and contingent liabilities after being reduced by CKPN on such assets in accordance with financial accounting standards by the Credit Conversion Factor (CCF) as referred to in the Financial Services Authority regulations concerning the calculation of risk-weighted assets for credit risk using a standard approach for commercial banks.13. Total Assets is the sum of the recorded value of assets after being reduced by CKPN, provisions, or allowances in accordance with financial accounting standards.14. Total TRA is the sum of the value of commitment liabilities and contingent liabilities after being reduced by CKPN and then multiplied by the CCF as referred to in the Financial Services Authority regulations concerning the calculation of risk-weighted assets for credit risk using a standard approach for commercial banks.15. Banks are categorized into 3 (three) groups based on the Country Risk and Transfer Risk ratio, namely:

Category	CTR Ratio	Risk Management Treatment and Reporting
Group 1	0%	Not required to implement risk management but must inform the Financial Services Authority about the results of the Country Risk and Transfer Risk ratio calculation.
Group 2	>0% up to <5%	Must at least implement general risk management and conduct qualitative reporting on Country Risk and Transfer Risk.
Group 3	≥ 5%	Must implement stricter risk management and conduct qualitative and quantitative reporting on Country Risk and Transfer Risk.

16. The results of the Country Risk and Transfer Risk ratio calculation determine the group categorization, risk management treatment, and reporting for:
    a. the period from September to February of the following year, based on the Country Risk and Transfer Risk ratio at the end of June; and b. the period from March to August, based on the Country Risk and Transfer Risk ratio at the end of December of the previous year.17. In the event that the Country Risk and Transfer Risk ratio increases and causes the Bank to meet the criteria for a higher group before the next ratio calculation period, the Bank shall continue to implement risk management and reporting according to the initial group until the next ratio calculation period.For example, a Bank is categorized into group 2 based on the Country Risk and Transfer Risk ratio calculation in June 2028. As of September 2028, the Country Risk and Transfer Risk ratio increases to 6% (six percent). In this case, the Bank shall continue to implement risk management and reporting according to group 2 criteria until February 2029. If the results of the Country Risk and Transfer Risk ratio calculation in December 2028 categorize the Bank as group 3, then the Bank shall implement risk management and reporting according to group 3 starting from March 2029.18. In the event that the Country Risk and Transfer Risk ratio decreases and causes the Bank to meet the criteria for a lower group, the Bank shall continue to implement risk management and reporting according to the initial group for 2 (two) ratio calculation periods.For example:
    a. A Bank is categorized into group 3 based on the Country Risk and Transfer Risk ratio calculation in June 2028. As of December 2028, the Country Risk and Transfer Risk ratio decreases, meeting group 2 criteria. In this case, the Bank shall continue to implement risk management and reporting according to group 3 for 2 (two) Country Risk and Transfer Risk ratio calculation periods (December 2028 and June 2029), provided that the results of the Country Risk and Transfer Risk ratio calculation show that the Country Risk and Transfer Risk ratio remains in group 2. Subsequently, starting from September 2029, the Bank may begin to implement risk management and reporting according to group 2. b. A Bank is categorized into group 3 based on the Country Risk and Transfer Risk ratio calculation in June 2028. As of September 2028, the Country Risk and Transfer Risk ratio decreases to 2% (two percent). In this case, the Bank shall continue to implement risk management and reporting according to group 3 for 2 (two) Country Risk and Transfer Risk ratio calculation periods (December 2028 and June 2029), provided that the results of the Country Risk and Transfer Risk ratio calculation show that the Country Risk and Transfer Risk ratio remains in group 2. Subsequently, starting from September 2029, the Bank may begin to implement risk management and reporting according to group 2.19. Banks must adequately maintain and manage all forms of information, including data related to the calculation of Country Risk and Transfer Risk ratios. If needed, the Financial Services Authority may request all such information from the Bank.B. GUIDELINES FOR THE IMPLEMENTATION OF COUNTRY RISK AND TRANSFER RISK MANAGEMENTI. General1. The implementation of Country Risk and Transfer Risk management shall be adjusted to the size and business complexity of the Bank.2. The implementation of Country Risk and Transfer Risk management shall cover at least 4 (four) pillars, namely:
    a. active oversight by the board of directors and board of commissioners; b. adequacy of risk management policies and procedures and risk limit setting;
    c. adequacy of risk identification, measurement, monitoring, and control processes and risk management information systems; and
    d. comprehensive internal control system.II. Risk Management Pillars1. Active Oversight by the Board of Directors and Board of Commissionersa. The authority and responsibilities of the board of directors shall at least include:1) formulating and establishing strategies for managing Country Risk and Transfer Risk in accordance with the Bank's characteristics and complexity;2) setting risk limits and monitoring compliance with Country Risk and Transfer Risk exposure limits;3) formulating, establishing, and ensuring the implementation of policies and procedures to identify, measure, monitor, and control risks related to Country Risk and Transfer Risk in the Bank's business activities;4) monitoring the implementation and suitability of limits and policies as referred to in points 2) and 3), considering the development of Country Risk and Transfer Risk at least 1 (one) time a year, and implementing adequate follow-up actions. For Banks in group 3, such monitoring shall be carried out at least 2 (two) times a year;5) identifying, monitoring, and controlling Credit Risk against Country Risk and Transfer Risk exposures for each country, covering exposures based on counterparty including intragroup exposures;6) possessing and developing a management information system for Country Risk and Transfer Risk capable of providing accurate, complete, informative, timely, and reliable data, thereby enabling the provision of adequate reports;7) conducting periodic evaluation and testing (stress testing) at least 1 (one) time a year or based on certain conditions that will significantly affect the Bank;8) ensuring adequate internal control and review of Country Risk and Transfer Risk; and9) compiling and submitting the results of Country Risk and Transfer Risk identification, measurement, monitoring, and control in the risk profile report.b. The authority and responsibilities of the board of commissioners shall at least include:1) approving and evaluating strategies and policies related to Country Risk and Transfer Risk established by the board of directors and ensuring that such strategies and policies are integrated into the Bank's overall risk management process;2) evaluating the accountability of the board of directors and providing directions for improvements to the implementation of policies related to Country Risk and Transfer Risk periodically; and3) overseeing the implementation of risk management related to Country Risk and Transfer Risk carried out by the Bank, including the execution of evaluation and testing (stress testing) through the risk monitoring committee.c. Human Resources (HR)The adequacy of HR for Country Risk and Transfer Risk refers to the scope of general risk management implementation as referred to in the Financial Services Authority regulations concerning the implementation of risk management for commercial banks.d. Risk Management OrganizationThe unit for the implementation of Country Risk and Transfer Risk management is a related unit
    in Credit Risk management as referred to in the Financial Services Authority regulations concerning the implementation of risk management for commercial banks. If the Bank has a unit that manages the Bank's international activities, then that unit may be included in the related unit for Country Risk and Transfer Risk management.2. Adequacy of Risk Management Policies and Procedures and Risk Limit Settinga. Risk Management Strategy1) The risk management strategy for Country Risk and Transfer Risk includes a funding strategy in accordance with the scope of this Financial Services Authority Board of Commissioners Member Regulation, which is formulated by considering the Country Risk and Transfer Risk that will arise.2) The risk management strategy for Country Risk and Transfer Risk must be in line with the objectives, vision and mission, business plan, corporate plan, and other matters to maintain asset quality, profit, and business growth.b. Risk Appetite and Risk ToleranceThe setting of risk appetite and risk tolerance for Country Risk and Transfer Risk refers to the scope of general implementation as referred to in the Financial Services Authority regulations concerning the implementation of risk management for commercial banks.c. Policies and Procedures1) Country Risk and Transfer Risk policies and procedures must be adjusted to the Bank's risk profile, systemic status and impact, and risk appetite, and must consider market conditions and macroeconomic conditions, and be able to provide a bank-wide view of Country Risk and Transfer Risk exposures comprehensively.2) Policies and procedures shall include the Bank's assessment of the adequacy of risk mitigation for Country Risk and Transfer Risk exposures when necessary, for example, the existence of guarantees from other parties.3) In the event that the profitability level of the counterparty is affected by conditions in another country, the Bank's policy in processing funding approvals shall also include an assessment related to the counterparty's source of income from a particular country that has the potential to cause indirect risk exposure.4) Banks must have adequate policies and procedures for calculating provisions for Country Risk and Transfer Risk exposures. Policies and procedures shall, among other things, include the method or percentage of provisions formed for each exposure. The said policy must also explain the accounting policy underlying the Bank in calculating such provisions in the financial statements.d. Limits1) Banks must set limits for all Bank business activities that are potentially exposed to Country Risk and Transfer Risk.2) Limits for Country Risk and Transfer Risk are used to restrict risk. Banks must set limits based on country and may set more complex sublimits. Sublimits can be categorized, among others, based on: a) product type; b) maturity period such as short-term or long-term; c) counterparty category such as individuals, corporations, banks, and governments;
    d) risk type such as sovereign risk, macroeconomic risk, and contagion risk; and/or e) economic sector.3) Banks in group 3 must set Country Risk and Transfer Risk exposure limits up to at least 1 (one) sublimit categorized as referred to in point 2).4) The setting of Country Risk and Transfer Risk limits must be documented in writing and completely.5) Country Risk and Transfer Risk exposure limits must be understood by all risk management work units and related business units.3. Risk Identification, Measurement, Monitoring, and Control Processes, and Management Information Systemsa. Identification1) Banks identify Country Risk and Transfer Risk exposures (including inter-office and intragroup exposures) based on region (regional) and individual country, in addition to identifying exposures on an end-counterparty basis.2) Banks identify Country Risk and Transfer Risk exposures as referred to in point A.II.b. Measurement1) Banks must have written systems and procedures for measuring Country Risk and Transfer Risk in accordance with their scale and complexity.2) Banks measure Country Risk and Transfer Risk exposures, including inter-office and intragroup exposures, based on exposures in each country. The measurement tools used must be able to measure inherent risks, including exposure composition and concentration levels based on each country and region (regional).3) The system used for Country Risk and Transfer Risk measurement must at least allow for the measurement of all significant exposures with adequate details to analyze Country Risk and Transfer Risk. This is done, among other things, by: a) centralizing financial position statement exposures and administrative accounts exposed to Country Risk and Transfer Risk; b) analyzing exposure details at least based on counterparty category, exposure type, and remaining maturity; c) measuring exposures for the Bank both individually and on a consolidated basis; and d) distributing complete risk measurement results information for monitoring purposes by relevant work units.4) Banks conduct Country Risk and Transfer Risk analysis using a rating system, as follows: a) Banks consider country ratings issued by at least 1 (one) rating agency recognized by the Financial Services Authority in accordance with the Financial Services Authority regulations concerning recognized rating agencies and ratings; b) if the Bank uses more than 1 (one) rating result from a rating agency recognized by the Financial Services Authority, the use of ratings shall be in accordance with the Financial Services Authority regulations concerning the calculation of risk-weighted assets for credit risk using a standard approach for commercial banks; c) Banks may conduct their own (internal) country rating assessment; and d) if the results of the internal rating assessment differ from the rating from a rating agency recognized by the Financial Services Authority, then the lower rating shall be used to reflect higher risk.5) The main
    principles in using internal ratings are: a) If the Bank uses internal ratings, such ratings must at least have considered economic, social, and political stability, as well as monetary policy. b) The procedure for using the internal rating system must have a standardized and documented method. c) The internal rating system must be able to identify early changes in the Bank's risk profile caused by Country Risk and Transfer Risk. d) The internal rating system must be evaluated and updated periodically by a work unit independent of the work unit that applies the internal rating. e) Reports generated by internal ratings shall be submitted periodically to the board of directors.6) Banks use the results of risk ratings as a basis for setting exposure limits and for classifying and forming provisions for transactions with each country.7) To support the Country Risk and Transfer Risk analysis performed, Banks must conduct regular evaluation and testing (stress testing). Stress testing must be able to illustrate the potential Country Risk and Transfer Risk in various scenarios or conditions that may occur based on scale, complexity, and risk profile.8) The results of stress testing must be reviewed periodically by the board of directors and must be reflected in Country Risk and Transfer Risk policies and risk limits.9) The results of stress testing serve as a basis for the board of directors to adjust the risk management strategy for Country Risk and Transfer Risk.c. Monitoring1) Banks monitor Country Risk and Transfer Risk exposures, including compliance with risk limits, based on each country in addition to monitoring exposures on an end-counterparty basis.2) As referred to in point B.II.1.a.4), Banks conduct monitoring at least 1 (one) time a year. For Banks in group 3, monitoring is carried out at least 2 (two) times a year.3) Banks may conduct monitoring more frequently in the event of material economic, political, and social turmoil, including geopolitical tensions, war, and economic crises.4) Monitoring includes changes in government policies and strategies in related countries to assess the potential impact of such policy changes, including the possibility of a decrease in the ability to pay by counterparties in certain business sectors.5) Based on the results of monitoring and evaluation, Banks periodically update country risk limits and/or ratings. If there is a significant deterioration in conditions, the Bank must take appropriate control actions.6) An effective Country Risk and Transfer Risk monitoring system will enable Banks to: a) understand Credit Risk exposure both in total and based on specific aspects to anticipate the occurrence of concentration risk in certain countries; b) identify economic, political, social developments, as well as changes in government policies and strategies in partner countries to assess the potential impact of such policy changes; c) monitor compliance with risk limits and provisions related to funding
    associated with Country Risk and Transfer Risk; and d) monitor exceptions taken to funding exposed to specific country risks.7) In carrying out the monitoring of Country Risk and Transfer Risk exposures, the Risk Management Work Unit (RMWU) must periodically prepare reports on the development of Country Risk and Transfer Risk, including influencing factors, and submit them to the risk management committee and the board of directors.d. Control1) Banks must ensure that relevant work units conducting transactions exposed to Country Risk and Transfer Risk function adequately and that Country Risk and Transfer Risk exposures are maintained in compliance with internal policies on established limits and prudential principles.2) Banks implement Country Risk and Transfer Risk control for each country and region (regional), covering inter-office exposures, intragroup exposures, and exposures based on counterparty.3) In the event of significant deterioration in conditions, Country Risk and Transfer Risk control can be carried out through several ways, including: a) increasing the frequency of monitoring and assessment; b) expanding the scope of analysis, including assessing the counterparty's ability to pay; c) adjusting the formation of provisions; and d) preparing contingency plans if the risk continues to worsen.e. Information System1) The risk management information system for Country Risk and Transfer Risk must be able to provide accurate, complete, informative, timely, and reliable data, thereby enabling the provision of adequate reports. The data provided must include at least all Country Risk and Transfer Risk exposures, limits, country ratings, provisions, and reports on risk limit exceptions related to Country Risk and Transfer Risk.2) The risk management information system must be able to aggregate, monitor, and report Country Risk and Transfer Risk exposures in a timely manner.3) Banks must ensure the availability of efficient and effective reporting to provide adequate information on Country Risk and Transfer Risk exposures to the board of directors, board of commissioners, and audit committee.4. Internal Control SystemIn implementing Country Risk and Transfer Risk management, Banks shall implement at least: a. An independent and continuous review system for the effectiveness of implementing Country Risk and Transfer Risk management processes, including assessing the implementation of internal ratings or the use of monitoring tools, and the effectiveness of relevant work unit performance. b. Internal audits of Country Risk and Transfer Risk management implementation shall be conducted periodically, which shall include, among other things, identification of: 1) the suitability of funding activities with established policies and procedures; 2) weaknesses in Country Risk and Transfer Risk management processes, policies and procedures (including any exceptions to risk management policies and procedures), and the setting of Country Risk and Transfer
    Risk limits; and 3) compliance with Country Risk and Transfer Risk limits.III. Implementation of Risk Management for Inter-Office Exposures1. Banks must have policies, procedures, and risk limit settings for exposures arising from inter-office transactions for Banks with overseas branch networks exposed to Country Risk and Transfer Risk (inter-office exposures).2. Banks identify, monitor, and control inter-office exposures.3. Inter-office exposures are not included in the Country Risk and Transfer Risk ratio and are not reported in quantitative and qualitative reports on Country Risk and Transfer Risk.C. PROVISIONS1. Banks consider Country Risk and Transfer Risk in the calculation of CKPN for each exposure in accordance with financial accounting standards.

17. Provisions related to Country Risk and Transfer Risk as referred to in point 1 must be established with adequate and well-documented grounds.

18. Banks must be able to explain how country ratings relate to the provisioning methodology.

19. Banks must ensure that the scope of the audit by external auditors includes a review of the methodology and the amount of provisions related to Country Risk and Transfer Risk.
    D. REPORTING
    I. General

20. Banks must submit Country Risk and Transfer Risk reports as part of their risk profile reports and self-assessment reports on bank soundness.

21. Country Risk and Transfer Risk reports consist of:
    a. qualitative reports submitted semi-annually, covering at least:

1. total Country Risk and Transfer Risk exposure. The reported amount is converted from foreign currency to Rupiah using Bank Indonesia's mid-rate on the reporting date;
2. results of Country Risk and Transfer Risk ratio calculations, including bank group categorization;
3. risk limit policies;
4. risk limit and/or sublimit amounts;
5. stress testing, including methods, scenarios, and updates if any;
6. measurement and monitoring methods, including the rating approach used and rating agencies recognized by the Financial Services Authority;
7. monitoring results of increased Country Risk and Transfer Risk in specific countries and/or regions (if any);
8. provisioning methods that consider Country Risk and Transfer Risk; and
9. explanation of risk management information systems and internal control systems, and
   b. quantitative reports submitted quarterly, containing details of Country Risk and Transfer Risk exposure amounts.

3. Banks must submit reports more frequently or provide additional information related to Country Risk and Transfer Risk to the Financial Services Authority if necessary, for example, during a crisis or a threatened crisis situation.
   II. Report Format and Filling Guidelines
4. Qualitative Report
   There is no specific format, as long as it covers the information explained in point D.I.2.a.
5. Quantitative Report – Country Risk and Transfer Risk Ratio Report
   a. Report Format
   Bank Name :
   Reporting Period : Month/Year
   (in millions of Rupiah)

Item	T5)	T-16)
a Total direct risk exposure
b Total indirect risk exposure
c Total Country Risk and Transfer Risk exposure (a+b)1)
d Total indirect risk exposure after being multiplied by a weight of 50% (b x 0.5)2)
e Total Assets + Total TRA3)
f Country Risk and Transfer Risk Ratio [(a+d)/e]4)

b. Filling Guidelines

1. Total Country Risk and Transfer Risk exposure is calculated from all direct risk exposure and indirect risk exposure. The value used refers to point A.II.12.
2. Total indirect risk exposure after being multiplied by a weight of 50% (fifty percent) according to the Country Risk and Transfer Risk ratio formula.
3. Total Assets + Total TRA reported according to the Country Risk and Transfer Risk reporting period. Total Assets as referred to in point A.II.13. Total TRA as referred to in point A.II.14.
4. Country Risk and Transfer Risk Ratio refers to point A.II.11.
5. T is the data position for the reporting period.
6. T-1 is the data position for the previous report.
   The amount reported in the quantitative report is converted from foreign currency to Rupiah using Bank Indonesia's mid-rate on the reporting date.

3. Quantitative Report – Direct Exposure Report
   a. Format of Direct Exposure Report (direct risk exposure) (in millions of Rupiah)

No.	Country1)	Country Code1)	Rating Used2)	Government3)	Public Sector Entities3)	Multilateral Development Banks and International Institutions3)	Banks3)	Securities Companies and Other Financial Services Institutions3)	Micro, Small, and Retail Portfolio Businesses3)	Corporations3)	Total Exposure4)	% of total exposure5)	Claimed in the domestic currency of that country6)
...	...	...	...	...	...	...	...	...	...	...	...	...	...

b. Format of Indirect Exposure Report (indirect risk exposure) (in millions of Rupiah)

No.	Country1)	Country Code1)	Rating Used2)	Government3)	Public Sector Entities3)	Multilateral Development Banks and International Institutions3)	Banks3)	Securities Companies and Other Financial Services Institutions3)	Micro, Small, and Retail Portfolio Businesses3)	Corporations3)	Total Exposure4)	% of total exposure5)	Claimed in the domestic currency of that country6)
...	...	...	...	...	...	...	...	...	...	...	...	...	...

c. Filling Guidelines:

1. Name and country code of the bank's counterparty exposed to Country Risk and Transfer Risk during the reporting period, referring to regulations on integrated commercial bank reports.
2. Country rating as referred to in point B.II.3.b.4). In filling the “Rating Used” column, banks must fill in the name of the rating agency recognized by the Financial Services Authority or their own assessment.
3. Follow portfolio categories according to Financial Services Authority regulations regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks.
4. Total amount of Country Risk and Transfer Risk exposure held by the bank in a country from all counterparty categories.
5. Ratio of total Country Risk and Transfer Risk exposure to the overall total Country Risk and Transfer Risk exposure held by the bank with the following formula:
   % Total exposure = (exposure Government + exposure Public Sector Entities + exposure Multilateral Development Banks and International Institutions + exposure Banks + exposure Securities Companies and Other Financial Services Institutions + exposure Micro, Small, and Retail Portfolio Businesses + Corporate Exposure) / Total Country Risk and Transfer Risk exposure in all countries x 100%

Example: if Bank A has the following exposure details:

Country	Government	Banks	Securities Companies and Other Financial Services Institutions	Micro, Small, and Retail Portfolio Businesses	Corporations	Total Exposure
Australia	100.000		10.000		120.000	230.000
Japan	10.000	20.000	50.000	10.000	200.000	290.000
South Korea	50.000	50.000	15.000	0	100.000	215.000
Total Exposure	160.000	80.000	65.000	10.000	420.000	735.000

Then the exposure ratio of Bank A in Japan is as follows:
% total exposure [Japan] = (290,000/735,000) x 100% = 39.46%

6. Value of exposure claimed in the domestic currency of that country. Currency refers to the currency referenced in the contract for Country Risk and Transfer Risk exposure.
   Example: if Bank A has the following exposure details:

Country	Government	Banks	Securities Companies and Other Financial Services Institutions	Micro, Small, and Retail Portfolio Businesses	Corporations	Claimed in the domestic currency of that country
Australia	100.000		10.000		120.000	50.000
Japan	10.000	20.000	50.000	10.000	200.000	20.000
Total Exposure	110.000	30.000	50.000	10.000	320.000	70.000

This copy conforms to the original
Head of Legal Department
Legal Department signed.
Mufli Asmawidjaja
Based on the table above, it can be concluded that the exposure value of Bank A in Australia in Australian Dollars (AUD) is Rp50,000 and the exposure value of Bank A in Japan claimed in Yen (JPY) is Rp20,000. These amounts are the conversion values of AUD and JPY based on Bank Indonesia's mid-rate on the reporting date presented in millions of rupiah. Stipulated in Jakarta on September 21, 2026 CHIEF EXECUTIVE OF BANKING SUPERVISION FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed. DIAN EDIANA RAE