Minimum Capital Provision Requirements for Export Financing Institutions

To the Executive Director of the Export Financing Institution,

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 5 /SEOJK.05/2023

CONCERNING

MINIMUM CAPITAL PROVISION OBLIGATIONS
OF THE EXPORT FINANCING INSTITUTION

In relation to the mandate of Article 112 paragraph (6) of the Financial Services Authority Regulation Number 9/POJK.05/2022 concerning the Supervision of the Export Financing Institution (State Gazette of the Republic of Indonesia Year 2022 Number 1/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 1/OJK), it is necessary to further regulate the minimum capital provision ratio (KPMM) of the Export Financing Institution in this Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

In this Financial Services Authority Circular, the following terms are meant:

1. Export Financing Institution, hereinafter abbreviated as LPEI, is the Export Financing Institution as referred to in the Law concerning the Export Financing Institution.

2. Board of Directors is the Board of Directors of LPEI as referred to in the Law concerning the Export Financing Institution.

3. Executive Director is a member of the Board of Directors appointed by the Minister of Finance to carry out the operational activities of LPEI.

4. Sharia Principles are the core rules based on Islamic law that serve as the foundation in the making of agreements between LPEI and other parties in carrying out national export financing activities.

5. Sharia Business Unit, hereinafter abbreviated as UUS, is a special business unit work unit from the LPEI head office that carries out business activities based on Sharia Principles and/or functions as the head office of offices other than the head office that carry out business activities based on Sharia Principles.

6. Subsidiary Company is a company owned and/or controlled by LPEI directly or indirectly, both domestically and abroad.

7. Internal Capital Adequacy Assessment Process, hereinafter abbreviated as ICAAP, is the process carried out by LPEI to determine capital adequacy in accordance with LPEI's risk profile and to determine strategies to maintain capital levels.

8. Supervisory Review and Evaluation Process, hereinafter abbreviated as SREP, is the review process carried out by the Financial Services Authority over the results of the ICAAP.

9. Risk-Weighted Assets, hereinafter referred to as RWA, is the total assets of LPEI based on the risk profile of each asset.

10. Credit Risk is the risk arising from the failure of other parties to fulfill obligations to LPEI, including guarantee risks.

11. Market Risk is the risk on asset, liability, equity, and/or administrative account positions, including derivative transactions, due to overall changes in market conditions.

12. Operational Risk is the risk arising from insufficient and/or non-functioning internal processes, human error, system failure, and/or external events affecting LPEI operations.

13. Trading Book is all financial instrument positions in the financial position report and administrative accounts, including derivative transactions, owned by LPEI with the purpose of:
    a. being traded and freely transferable or can be hedged in their entirety, including:
    1) positions held for resale in the short term;
    2) positions held for the purpose of obtaining actual and/or potential short-term profits from price movements; or
    3) positions held for the purpose of locking in arbitrage profits; and/or
    b. hedging other positions in the Trading Book.

14. Banking Book is all other positions not included in the Trading Book.

II. MINIMUM CAPITAL PROVISION OBLIGATIONS ACCORDING TO LPEI'S RISK PROFILE

1. Internal Capital Adequacy Assessment Process (ICAAP)

   a. In fulfilling the minimum capital provision obligation according to LPEI's risk profile, both individually and consolidated with Subsidiary Companies, LPEI must have an ICAAP adjusted to the size, characteristics, and complexity of LPEI's business.

   b. The ICAAP as referred to in letter a must at least include:
   1) active supervision by the Executive Director and Board of Directors;
   2) capital adequacy assessment;
   3) monitoring and reporting; and
   4) internal control.

   c. In carrying out active supervision, as referred to in letter b number 1), the Executive Director and Board of Directors have responsibilities at least as follows:
   1) the responsibilities of the Executive Director and Board of Directors must at least include:
   a) understanding the nature and level of risks faced by LPEI, assessing the adequacy of risk management quality, and linking the risk level with the capital adequacy owned by LPEI to anticipate risks faced, and to support LPEI's business plans and strategic plans for the future; and b) ensuring the consistent and integrated implementation of ICAAP in LPEI's operational activities;
   2) the responsibilities of the Executive Director must at least include:
   a) formulating capital management policies, strategies, and procedures in accordance with the size, characteristics, business complexity, and risk level of LPEI, and ensuring LPEI always maintains adequate capital levels to anticipate LPEI's risks; b) developing a framework to assess the level of risks faced by LPEI and the process of identifying the alignment between risk levels and capital needs; c) ensuring that LPEI's strategic plans include capital management strategies that describe capital needs, anticipated capital expenditures, target capital levels to be achieved, and expected capital sources; and d) ensuring that capital management policies, strategies, and procedures are communicated and implemented comprehensively; and
   3) the responsibilities of the Board of Directors must at least include:
   a) approving capital management policies, strategies, and procedures in accordance with the size, characteristics, business complexity, and risk level of LPEI; b) reviewing the quality and effectiveness of LPEI's capital management; and c) conducting periodic evaluations of the quality and effectiveness of capital management policies, strategies, and procedures, and making adjustments if necessary.

   d. In carrying out capital adequacy assessment, LPEI must at least:
   1) have adequate policies and procedures to ensure all risks are identified, measured, and reported periodically to the Executive Director and Board of Directors. The types of risks and factors considered in the assessment of each risk refer to the provisions of the Financial Services Authority regulating the supervision of LPEI;
   2) have methods and processes for conducting capital adequacy assessments by linking risk levels with the capital levels needed to absorb potential losses from the said risks;
   3) adjust methods and assumptions used in the event of changes in business plans, risk profiles, and external factors; and
   4) document the results of risk measurements and calculations of required capital levels, including the methods and assumptions used.

   e. In carrying out monitoring and reporting, LPEI must at least:
   1) have adequate information systems to monitor and report risk exposures and measure the impact of changes in risk profiles on LPEI's capital needs; and
   2) submit risk profile and capital level reports periodically to the Executive Director and Board of Directors, which are used by the Executive Director to:
   a) evaluate risk levels, risk movement trends, and the impact on capital levels; b) evaluate the fairness of methods, sensitivity, and fairness of assumptions used in measuring risk levels and assessing LPEI's capital adequacy; c) determine the availability of adequate LPEI capital in accordance with the risk profile; and d) estimate future capital needs based on the results of the latest risk profile assessment and adjust LPEI's strategic plans if necessary in accordance with applicable regulations.

   f. In carrying out internal control, LPEI must at least:
   1) have adequate internal control systems to ensure the reliability of the applied ICAAP; and
   2) conduct periodic reviews of ICAAP at least once every 1 (one) year and/or as needed by LPEI, to ensure the reliability, accuracy, and fairness of the ICAAP process. The review process is carried out by internal parties of LPEI who have adequate competence and are independent of the capital adequacy determination process. The scope of ICAAP review must at least include:
   a) the alignment of the capital adequacy assessment process with the size, characteristics, and complexity of LPEI's business; b) the accuracy and completeness of data used in the capital adequacy assessment process; c) the fairness of methods and assumptions used in the capital adequacy assessment process; and d) the fairness of stress testing scenarios used in the capital adequacy assessment process.

2. Supervisory Review and Evaluation Process (SREP)

SREP must at least be conducted for assessments of:
a. active supervision by the Executive Director and Board of Directors; b. capital adequacy assessment;
c. monitoring and reporting; and
d. internal control.

3. Calculation of Minimum Capital Provision Obligation According to Risk Profile

   a. LPEI is required to maintain a minimum capital provision ratio of at least 8% (eight percent) and/or in accordance with LPEI's risk profile as required to be fulfilled by LPEI.

   b. The maintenance of the minimum capital provision ratio is carried out both individually and consolidated with subsidiary companies.

   c. Capital as referred to in letter a is the sum of components:
   1) core capital;
   2) supplementary capital; and
   3) additional supplementary capital,
   using the guidelines as stated in the Appendix which is an integral part of this Financial Services Authority Circular.

   d. The minimum capital provision ratio as referred to in letter a is the comparison between capital as referred to in letter c and RWA.

   e. The minimum capital provision ratio according to LPEI's risk profile as referred to in letter a is set at a minimum:
   1) 8% (eight percent) of RWA if the risk profile is Rank 1;
   2) 9% (nine percent) to less than 10% (ten percent) of RWA if the risk profile is Rank 2;
   3) 10% (ten percent) to less than 11% (eleven percent) of RWA if the risk profile is Rank 3; or
   4) 11% (eleven percent) to 14% (fourteen percent) of RWA if the risk profile is Rank 4 or Rank 5.

   f. RWA as referred to in letter d consists of:
   1) RWA for Credit Risk;
   2) RWA for Market Risk; and
   3) RWA for Operational Risk.

   g. The method of calculating RWA as referred to in letter f is carried out using the guidelines stated in the Appendix which is an integral part of this Financial Services Authority Circular.

   h. The obligation to fulfill the minimum capital provision ratio according to LPEI's risk profile as referred to in letter a is set as follows:
   1) fulfillment of the minimum capital provision ratio for positions from March to May is based on the risk profile rank of the position from December of the previous year;
   2) fulfillment of the minimum capital provision ratio for positions from June to August is based on the risk profile rank of the position from March;
   3) fulfillment of the minimum capital provision ratio for positions from September to November is based on the risk profile rank of the position from June;
   4) fulfillment of the minimum capital provision ratio for positions from December to February of the following year is based on the risk profile rank of the position from September; and
   5) in the event of a change in risk profile rank among the risk profile assessment periods, fulfillment of the minimum capital provision ratio is based on the latest risk profile rank.

   i. Several illustrations of minimum capital calculation according to risk profile are as follows:

   Illustration:
   LPEI has total capital of Rp31,000,000,000,000.00 (thirty-one trillion rupiah) and total RWA of Rp300,000,000,000,000.00 (three hundred trillion rupiah), so LPEI's KPMM ratio is 10.33% (ten point three three percent). LPEI has a risk profile of Rank 2. Based on the results of the ICAAP and calculations by the Financial Services Authority, LPEI needs to provide minimum capital according to the risk profile of 9% (nine percent) of RWA. Thus, LPEI is required to provide minimum capital according to the risk profile of 9% (nine percent) of Rp300,000,000,000,000.00 (three hundred trillion rupiah) or an amount of Rp27,000,000,000,000.00 (twenty-seven trillion rupiah). With LPEI's KPMM ratio of 10.33% (ten point three three percent), in this case, LPEI has fulfilled the minimum KPMM ratio requirement according to the risk profile of 9% (nine percent).

III. CALCULATION OF RWA FOR CREDIT RISK

1. The calculation of RWA for Credit Risk calculated by LPEI includes asset exposures in the financial position report as well as commitment and contingent liabilities in administrative account transactions.

2. The calculation of RWA for Credit Risk is carried out for LPEI individually including UUS and/or consolidated in the event that LPEI has Subsidiary Companies. Consolidated RWA for Credit Risk calculation is carried out for conventional LPEI Subsidiary Companies and/or those with business activities based on Sharia Principles.

   a. The calculation of RWA for Credit Risk for LPEI individually having a UUS is done by combining UUS exposures in LPEI's overall exposure. The scope of exposures considered and risk weight determinations are in accordance with this Financial Services Authority Circular.

   b. The calculation of RWA for Credit Risk on a consolidated basis for LPEI having Subsidiary Companies is carried out as follows:
   1) In the event that all LPEI Subsidiary Companies operate conventionally, the calculation of RWA for Credit Risk on a consolidated basis is based on consolidated financial reports, namely the sum of RWA for Credit Risk:
   a) for LPEI individually; and b) for Subsidiary Companies conducting business activities conventionally, with the scope of exposures considered and risk weight determinations in accordance with this Financial Services Authority Circular, after eliminating (set-off) transactions between entities within the consolidated business group; or
   2) In the event that some LPEI Subsidiary Companies conduct business activities based on Sharia Principles, the calculation of RWA for Credit Risk on a consolidated basis is the sum of RWA for Credit Risk:
   a) for LPEI individually, with the scope of exposures considered and risk weight determinations in accordance with this Financial Services Authority Circular; b) for Subsidiary Companies conducting business activities conventionally, with the scope of exposures considered and risk weight determinations, in accordance with this Financial Services Authority Circular; and c) for Subsidiary Companies conducting business activities based on Sharia Principles, with the scope of exposures considered and risk weight determinations, in accordance with this Financial Services Authority Circular, after eliminating (set-off) transactions between entities within the consolidated business group.

IV. CALCULATION OF RWA FOR MARKET RISK

1. Calculation of KPMM by Considering Market Risk

The calculation of Market Risk includes the calculation of interest rate risk, exchange rate risk, and option price change risk.

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 calculations.

b. Exchange Rate Risk Calculation  
    1) Exchange rate risk calculation is carried out against foreign currency positions, including gold price changes, in the Trading Book and Banking Book exposed to exchange rate risk.  
    2) In the calculation of exchange rate risk as referred to in number 1), LPEI may exclude structural positions as long as all requirements as regulated in provisions governing net foreign exchange positions are met.

c. RWA calculation for Market Risk is carried out for LPEI individually including UUS and/or consolidated in the event that LPEI has Subsidiary Companies. Consolidated RWA for Market Risk calculation is carried out for conventional LPEI Subsidiary Companies and/or those with business activities based on Sharia Principles. RWA calculation for Market Risk is carried out by considering interest rate risk and/or exchange rate risk.

d. Option Price Change Risk Calculation  
LPEI conducting option transactions for hedging purposes against a specific instrument must report the option position along with the underlying financial instrument and calculate the capital charge for Market Risk for the option position.

2. Method of Calculating Capital Charge

The method of calculating capital charges for interest rate risk, exchange rate risk, and option risk is carried out in accordance with the guidelines stated in the Appendix which is an integral part of this Financial Services Authority Circular.

V. CALCULATION OF RWA FOR OPERATIONAL RISK

1. RWA calculation for Operational Risk is carried out for LPEI individually including UUS and/or consolidated in the event that LPEI has Subsidiary Companies. Consolidated RWA for Operational Risk calculation is carried out for conventional LPEI Subsidiary Companies and/or those with business activities based on Sharia Principles. RWA calculation for Operational Risk in the KPMM calculation is done with the following formula:

   a. RWA for Operational Risk = 12.5 x Operational Risk Capital Charge.

   b. The Operational Risk Capital Charge referred to is the average of the sum of positive annual gross income (January to December) for the last 3 (three) years multiplied by 15% (fifteen percent).

   c. The calculation of Operational Risk Capital Charge is done with the following formula:

   KPID = [ Σ(GI 1…n x α)] / n

   With the following explanations:
   KPID = Operational Risk Capital Charge using the basic indicator approach GI = positive annual gross income in the last 3 (three) years n = number of years where gross income is positive α = 15%

   Example:
   (in billion Rp)
   LPEI 2020 2019 2018 2017 2016
   Gross Income 750 3,000 2,250 1,750 2,500

   Based on the data above, the capital charge for calculating RWA for Operational Risk for the 2021 position is as follows:

   RWA for Operational Risk
   = 12.5 x Operational Risk Capital Charge
   = 12.5 x [15% x {(750+3,000+2,250)/3}]
   = 3,750

   Thus, RWA for Operational Risk for the 2021 position is Rp3,750,000,000,000.00 (three trillion seven hundred fifty billion rupiah).

2. Gross income calculation is carried out by considering:

   a. Gross income is income from net operating activities, plus insurance and guarantee income, plus other net operational income, calculated cumulatively from the beginning of January to the end of December each year.

   b. The method of calculating gross income is as stated in the Appendix which is an integral part of this Financial Services Authority Circular, using data submitted through LPEI's monthly reports.

   c. The method of calculating gross income for UUS, the gross income calculation also considers gross income from UUS after conversion in accordance with LPEI's business characteristics and Sharia Principles.

   d. In the event that based on audited financial reports by a Public Accountant Office (KAP) there are corrections affecting the amount of gross income, LPEI must correct the calculation of RWA for Operational Risk in the month following the submission of the audited financial report by the KAP to LPEI.

   Example:
   LPEI calculates RWA for Operational Risk during January and February 2020 based on gross income from 2017, 2018, and 2019 (unaudited). At the beginning of March 2020, the 2019 financial report audited by the KAP has been submitted to LPEI. Based on the report, LPEI calculates RWA for Operational Risk for March 2020 based on gross income from 2017, 2018, and 2019 (audited).

   e. In the event that in the calculation of the average gross income over the last 3 (three) years, there is 1 (one) year or 2 (two) years where LPEI experienced negative or zero gross income, then for the calculation of the average annual gross income as referred to in letter a, LPEI must exclude the negative gross income value from the numerator and denominator when calculating the average gross income.

   Example:
   (in billion Rp)
   LPEI 2020 2019 2018 2017 2016
   Gross Income 800 1,200 (750) (1,750) 3,000

   Based on the data above, the capital charge for calculating RWA for Operational Risk is as follows:

   1. For the 2021 position:
      RWA for Operational Risk
      = 12.5 x Operational Risk Capital Charge
      = 12.5 x [15% x {(800+1,200)/2}]
      = 1,875

   Thus, RWA for Operational Risk for the 2021 position is Rp1,875,000,000,000.00 (one trillion eight hundred seventy-five billion rupiah).

   2. For the 2020 position:
      RWA for Operational Risk
      = 12.5 x Operational Risk Capital Charge
      = 12.5 x [15% x {(1,200)/1}]
      = 2,250

   Thus, RWA for Operational Risk for the 2020 position is Rp2,250,000,000,000.00 (two trillion two hundred fifty billion rupiah).

   f. If during the last 3 (three) years LPEI experienced negative or zero gross income, then for the calculation of the average annual gross income as referred to in number 1, LPEI must calculate the Operational Risk Capital Charge using the last positive annual gross income.

Example:
(in billion Rp)
LPEI 2020 2019 2018 2017 2016
Revenue
Gross
(1,250) (1,500) (750) 1,800 2,750
Based on the data above, the capital charge for calculating RWA for Operational Risk as of 2021 is as follows:
RWA for Operational Risk
= 12.5 x Operational Risk Capital Charge
= 12.5 x [15% x {(1,800)/1}]
= 3,375
Thus, the RWA for Operational Risk as of 2021 is Rp3,375,000,000,000.00 (three trillion three hundred seventy-five billion rupiah).

VI. PROCEDURES FOR SUBMITTING REPORTS ON THE CALCULATION OF THE MINIMUM CAPITAL PROVISION RATIO ACCORDING TO THE RISK PROFILE OF LPEI

1. LPEI is required to submit reports on the calculation of the minimum capital provision ratio according to the risk profile to the Financial Services Authority (OJK) electronically through the OJK's data communication network system.

2. LPEI must ensure that the report on the calculation of the minimum capital provision ratio according to the risk profile submitted electronically as referred to in item 1 is correct and identical to the printed document.

3. In the event that the OJK data communication network system as referred to in item 1 is not yet available or experiences technical disturbances, the submission of the report on the calculation of the minimum capital provision ratio according to the risk profile is submitted to the OJK offline by:
   a. hand delivery; or b. sent through a courier service company.

4. In the event of technical disturbances as referred to in item 3, the OJK announces via its website.

5. Offline submission of reports as referred to in item 3 must be submitted in electronic data format using media in the form of a compact disc or other electronic data storage media.

6. Submission of reports as referred to in item 5 must be accompanied by a cover letter in printed form signed by the Executive Director.

7. LPEI submits reports on the calculation of the minimum capital provision ratio according to the risk profile to the OJK:
   a. no later than February 15 for reports on the calculation of the minimum capital provision ratio according to the risk profile as of the end of December of the previous year; or b. if the deadline for submission of the report on the calculation of the minimum capital provision ratio according to the risk profile as referred to in letter a falls on a holiday, the deadline for submission of the report on the calculation of the minimum capital provision ratio according to the risk profile is on the next working day, with reference to the format as referred to in the Appendix which is an inseparable part of this OJK Circular.

8. Reports as referred to in item 7 letter a are submitted to:
   Head of Executive Supervisor of Insurance, Pension Funds, Financing Institutions, and Other Financial Service Institutions Financial Services Authority attn: Director of Supervision of Special Financial Institutions Wisma Mulia Building 2, 15th Floor Jalan Jenderal Gatot Subroto Kav. 40 Jakarta 12710, with a copy to the Director General of State Assets Ministry of Finance attn: Director of Separated State Assets Syafrudin Prawiranegara II Building, Jl. Lap. Banteng Timur No.2-4, Central Jakarta City, Jakarta 10710

9. In the event of a change in the address of the OJK Office for submission of reports as referred to in item 8, the OJK provides notification regarding the address change via letter or announcement.

This copy is consistent with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

10. LPEI is deemed to have submitted the report on the calculation of the minimum capital provision ratio according to the risk profile with the following provisions:
    a. for electronic submission through the OJK data communication network system, evidenced by a receipt from the OJK data communication network system; or b. for offline submission, evidenced by a receipt from the OJK.

VII. CLOSING PROVISIONS

This OJK Circular takes effect on the date of determination.

Determined in Jakarta on February 21, 2023
HEAD OF EXECUTIVE SUPERVISOR OF
INSURANCE, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
OGI PRASTOMIYONO

Vls;ak,
APPENDIX
FINANCIAL SERVICES AUTHORITY CIRCULAR
REPUBLIC OF INDONESIA
NUMBER 5 /SEOJK.05/2023
CONCERNING
MINIMUM CAPITAL PROVISION OBLIGATION
INDONESIAN EXPORT FINANCING INSTITUTIONS

PROCEDURES FOR CALCULATION, PREPARATION, AND SUBMISSION OF REPORTS ON THE CALCULATION OF THE MINIMUM CAPITAL PROVISION RATIO FOR INDONESIAN EXPORT FINANCING INSTITUTIONS

The procedures for calculation, preparation, and submission of reports on the calculation of the minimum capital provision ratio are drafted with reference to the following provisions:

I. CAPITAL

Capital used for the calculation of the minimum capital provision ratio consists of core capital (tier 1), supplementary capital (tier 2), and additional supplementary capital (tier 3) for LPEI.

A. Core Capital

1. Core capital consists of:
   1.1. Initial capital;
   1.2. Additional capital reserves (disclosed reserves), including:
   1.2.1. Additive factors, namely:
   1.2.1.1. Additional capital;
   1.2.1.2. Grants;
   1.2.1.3. General reserves;
   1.2.1.4. Purpose reserves;
   1.2.1.5. Undetermined prior year profits;
   1.2.1.6. Current year profits after tax, amounting to 50% (fifty percent);
   1.2.1.7. Translation differences of financial statements;
   1.2.1.8. Potential gains from fair value increases of financial assets measured at fair value through other comprehensive income.
   1.2.2. Deductive factors, namely:
   1.2.2.1. Prior year losses;
   1.2.2.2. Current year losses;
   1.2.2.3. Translation deficits of financial statements;
   1.2.2.4. Potential losses from fair value decreases of financial assets measured at fair value through other comprehensive income;
   1.2.2.5. The difference between Asset Quality Provisioning (PPKA) and Impairment Loss Reserves (CKPN) on productive assets.

2. Core capital is calculated with a deductive factor in the form of goodwill.

B. Supplementary Capital

1. Supplementary capital includes:
   1.1. Fixed asset revaluation reserves;
   1.2. General PPKA reserves that must be formed with an amount of at most 1.25% (one point two five percent) of RWA for Credit Risk.

2. Supplementary capital can only be calculated at most 100% (one hundred percent) of core capital.

C. Additional Supplementary Capital

1. Additional supplementary capital is subordinated debt that meets the following criteria:
   1.1. Not guaranteed by LPEI or Subsidiary Companies and fully paid;
   1.2. Has a contract term of at least 2 (two) years;
   1.3. Cannot be paid before the schedule determined in the loan agreement except with the approval of the Financial Services Authority;
   1.4. Contains a binding (lock-in) clause stating that principal, interest, and/or profit sharing payments, including payments at maturity, cannot be made if such payments cause the minimum capital provision ratio individually or in consolidation with Subsidiary Companies to not meet applicable regulations;
   1.5. Has a clear loan agreement including the repayment schedule; and
   1.6. Obtains prior approval from the Financial Services Authority.

2. Additional supplementary capital can be used as long as it meets the following criteria:
   2.1. Only used to calculate Market Risk;
   2.2. Does not exceed 250% (two hundred fifty percent) of the portion of core capital allocated to calculate Market Risk; and
   2.3. The total amount of supplementary capital and additional supplementary capital is at most 100% (one hundred percent) of core capital.

II. RISK-WEIGHTED ASSETS (RWA)

LPEI must calculate RWA for Credit Risk, Market Risk, and Operational Risk in the calculation of the minimum capital provision ratio.

A. RWA for Credit Risk

In calculating RWA for Credit Risk, LPEI uses the RWA calculation guidelines for Credit Risk as contained in Appendix III of this SEOJK.

B. RWA for Market Risk

1. Market Risk that must be calculated by LPEI is risk as follows:
   1.1. Interest rate risk, namely the risk of loss due to changes in the price of financial instruments from the Trading Book position caused by interest rate changes, including:
   1.1.1. Specific risk, namely the risk of changes in the price of financial instruments due to factors related to the issuer of the financial instrument; and
   1.1.2. General risk, namely the risk of changes in financial instruments due to changes in market factors.
   1.2. Exchange rate risk, namely the risk of loss due to changes in the value of Trading Book and Banking Book positions caused by changes in foreign exchange rates including changes in gold prices; and
   1.3. Option price change risk, which is influenced by:
   1.3.1. Interest rate risk;
   1.3.2. Exchange rate risk.

2. Trading Book is all positions of financial instruments in the financial position report and administrative accounts including derivative transactions held for:
   2.1. trading purposes and can be freely transferred or can be hedged as a whole, including:
   2.1.1. positions held for resale in the short term;
   2.1.2. positions held for the purpose of obtaining actual and/or potential short-term profits from price movements; or
   2.1.3. positions held for the purpose of maintaining arbitrage profits (locking in arbitrage profits); and/or
   2.2. hedging purposes for other positions in the Trading Book.

3. Banking Book is all other positions that are not included in the Trading Book.

4. RWA for Market Risk is calculated by converting the capital charge amount for all types of Market Risk into an equivalent to RWA for Market Risk multiplied by 12.5 (twelve point five).

5. The calculation of RWA for Market Risk is contained in Appendix IV of this SEOJK.

C. RWA for Operational Risk

In calculating RWA for Operational Risk, LPEI uses the RWA calculation guidelines for Operational Risk as contained in Appendix V of this SEOJK.

III. CALCULATION OF RWA FOR CREDIT RISK

COMPONENT NOMINAL RISK WEIGHTING (%) RWA
(1) (2) (3) (4)=(2)x(3)
A. ASSETS IN FINANCIAL POSITION REPORT
(Rupiah & Foreign Currency)

1. Cash 0%
2. Gold and commemorative coins 0%
3. Deposits at Bank Indonesia 0%
4. Deposits at banks:
   4.1 Guaranteed by the central government and Bank Indonesia 0%
   4.2 Not guaranteed 20%
5. Securities held:
   5.1 Issued by the central government and Bank Indonesia 0%
   5.2 Issued and guaranteed with cash, foreign banknotes, gold, gold currency, as well as current accounts, deposits, and savings equal to the value of the guarantee 0%
   5.3 Issued by donor country governments and multilateral financial institutions 20%
   5.4 Others 100%
6. Financing
   6.1 Financing provided to or guaranteed by:
   6.1.1 Bank Indonesia 0%
   6.1.2 Central government 0%
   6.1.3 Cash, foreign banknotes, gold, gold currency, as well as current accounts, deposits, and savings equal to the value of the guarantee 0%
   6.1.4 Banks, local governments, non-ministerial institutions in Indonesia, and multilateral financial institutions 20%
   6.1.5 State-owned enterprises (BUMN) and companies owned by the central government of other countries *) 50%
   6.1.6 Other parties 100%
   6.2 Loans to employees 50%
7. Other receivables to or guaranteed by:
   7.1 Bank Indonesia 0%
   7.2 Central government 0%
   7.3 Cash, foreign banknotes, gold, gold currency, as well as current accounts, deposits, and savings equal to the value of the guarantee 0%
   7.4 Banks, local governments, non-ministerial institutions in Indonesia, and multilateral financial institutions 20%
   7.5 BUMN and companies owned by the central government of other countries *) 50%
   7.6 Other parties 100%
8. Investments 100%
9. Fixed assets - net 100%
10. Inter-office assets - net 100%
11. Other assets 100%

COMPONENT NOMINAL RISK WEIGHTING (%) RWA
(1) (2) (3) (4)=(2)x(3)
Total RWA of assets in financial position report

COMPONENT NOMINAL RISK WEIGHTING (%) RWA
(1) (2) (3) (4)=(2)x(3)
B. ADMINISTRATIVE ACCOUNTS (Rupiah & Foreign Currency)

1. Unused financing facilities provided until the end of the current calendar year:
   1.1 Financing facilities provided to or guaranteed by:
   1.1.1 Bank Indonesia 0%
   1.1.2 Central government 0%
   1.1.3 Cash, foreign banknotes, gold, gold currency, as well as current accounts, deposits, and savings, equal to the value of the guarantee 0%
   1.1.4 Banks, local governments, non-ministerial institutions in Indonesia, multilateral financial institutions 10%
   1.1.5 BUMN and companies owned by the central government of other countries *) 25%
   1.1.6 Other parties 50%
   1.2 Loans to employees 25%
2. Guarantees
   2.1 In the context of providing financing including standby L/C & risk-sharing and endorsements or avals on securities provided upon request:
   2.1.1 Bank Indonesia and central government 0%
   2.1.2 Banks, local governments, non-ministerial institutions, and multilateral financial institutions 20%
   2.1.3 BUMN and companies owned by the central government of other countries *) 50%
   2.1.4 Other parties 100%
   2.2 Valid L/Cs (excluding standby L/C) provided upon request:
   2.2.1 Bank Indonesia and central government 0%
   2.2.2 Banks, local governments, non-ministerial institutions, and multilateral financial institutions 4%
   2.2.3 BUMN and companies owned by the central government of other countries *) 10%
   2.2.4 Other parties 20%
3. Guarantees *)
   Guarantees provided to or guaranteed by:
   3.1 Bank Indonesia 0%
   3.2 Central government 0%
   3.3 Cash, foreign banknotes, gold, gold currency, current accounts, deposits, and savings equal to the value of the guarantee 0%
   3.4 Banks, local governments, non-ministerial institutions, and multilateral financial institutions 20%
   3.5 BUMN and companies owned by the central government of other countries *) 50%
   3.6 Other parties 100%
4. Insurance *)
   Insurance provided to or guaranteed by:
   4.1 Bank Indonesia 0%
   4.2 Central government 0%
   4.3 Cash, foreign banknotes, gold, gold currency, current accounts, deposits, and savings equal to the value of the guarantee 0%
   4.4 Banks, local governments, non-ministerial institutions, and multilateral financial institutions 20%
   4.5 BUMN and companies owned by the central government of other countries *) 50%
   4.6 Other parties 100%
   Total RWA of administrative accounts

C. TOTAL RWA

*) The nominal value of guarantees and insurance is filled with the self-retention value minus the estimated self-retention claims. *) Financing, guarantee, and insurance positions provided to or guaranteed by the central government include central government assignments as long as the funding for the central government assignment has been allocated as special assignment funds. *) In determining risk weightings, LPEI can also use reference risk weightings for exposure based on rating as contained in Table I while still paying attention to the principle of prudence and risk management.

Illustrative example:

1. LPEI provides financing to a national private company (categorized as other parties with a risk weight of 100%) amounting to Rp 10 Billion, subsequently the national private company has a corporate rating of AA- with a risk weight according to Table I.c of 20%. Thus, the credit risk RWA for the financing provision to the national private company is Rp 10 Billion x 20% = Rp 2 Billion.
2. LPEI provides financing to a national private company (categorized as other parties with a risk weight of 100%) amounting to Rp 10 Billion, subsequently the national private company has a corporate rating of B- with a risk weight according to Table I.c of 150%. Thus, the credit risk RWA for the financing provision to the national private company is Rp 10 Billion x 150% = Rp 15 Billion.

Table I. Determination of Risk Weightings for Exposure Based on Rating
in the Calculation of RWA for Credit Risk

a. Determination of Risk Weightings for Receivables to State-Owned Enterprises (BUMN) Equivalent Rating AAA to AAA+ BBB+ to BBB BBB- to BB+ BB to B Less than B Risk Weighting 20% 50% 50% 100% 150%

b. Determination of Risk Weightings for Receivables to Companies Owned by the Central Government of Other Countries Equivalent Rating AAA to AAA+ BBB+ to BBB BBB- to BB+ BB to B Less than B Risk Weighting 20% 50% 50% 100% 150%

c. Determination of Risk Weightings for Receivables to Other Parties
Equivalent Rating AAA to AAA+ BBB+ to BBB BBB- to BB+ BB to B Less than B Risk Weighting 20% 50% 100% 100% 150%

IV. CALCULATION OF RWA FOR MARKET RISK

1. Form 1.a.: Specific Risk - Securities Exposure (Trading Book)
   Form 1.a.
   Specific Risk - Securities Exposure (Trading Book) No Securities and Derivative Instruments with securities as the underlying instrument (debt related derivatives) Government Position Qualifying Others Total Capital Charge (Capital Charge) for Specific Risk Maturity 6 months or less More than 6 months to 24 months More than 24 months (1) (2) (3) (4) (5) (6) (7) (8) (9) Securities Long issued, guaranteed, or guaranteed with effects issued by the Indonesian Government and Bank Indonesia Short Securities Long issued, guaranteed, or guaranteed with effects issued by the Government and Central Bank of other countries that meet established criteria Short Securities Long issued, guaranteed, or guaranteed with effects issued by multilateral financial institutions Short Securities Long issued by banks with an initial (original) maturity of less than 2 (two) years Short Securities Long issued by other parties that meet established criteria Short Other securities in the Trading Book outside items 1 - 5 above Long Short TOTAL Long Short Risk Weighting 0.00% 0.25% 1.00% 1.60% 8.00% Total Capital Charge (capital charge) for Specific Risk (based on gross position, i.e., long position plus short position)

2. Form 1.b.: General Risk - Interest Rate Exposure (Trading Book)
   Form 1.b: General Risk - Interest Rate Exposure (Trading Book) - Maturity Method Currency: ... Exchange Rate: ...
   Maturity Ladder
   Zone Time Scale Bond Positions, Debt Related Derivatives, and Credit Derivatives Interest Rate Derivative Positions Total Position Net Option Position (delta equivalent) Risk Weighting Weighted Position Net Option Position After Weighting Coupon 3% or more Coupon less than 3% Long Short Long Short Long Short Long Short Long Short (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) < 1 mo < 1 mo 0.00%

1 - 3 mo > 1 - 3 mo 0.20%
3 - 6 mo > 3 - 6 mo 0.40%
6 - 12 mo > 6 - 12 mo 0.70%
1 - 2 yr > 1 - 1.9 yr 1.25%
2 - 3 yr > 1.9 - 2.8 yr 1.75%
3 - 4 yr > 2.8 - 3.6 yr 2.25%
4 - 5 yr > 3.6 - 4.3 yr 2.75%
5 - 7 yr > 4.3 - 5.7 yr 3.25%
7 - 10 yr > 5.7 - 7.3 yr 3.75%
10 - 15 yr > 7.3 - 9.3 yr 4.50%
15 - 20 yr > 9.3 - 10.6 yr 5.25%

20 yr > 10.6 - 12 yr 6.00%
12 - 20 yr 8.00%
20 yr 12.50%

Form 1.b.: General Risk - Interest Rate Exposure (Trading Book) - Continued Form 1.b: General Risk - Interest Rate Exposure (Trading Book) - Maturity Method Currency: ... Exchange Rate: ... Maturity Ladder Zone Vertical Disallowance Horizontal Disallowance within zone 1, zone 2, and zone 3 Horizontal Disallowance between zone 1 and zone 2 Horizontal Disallowance between zone 2 and zone 3 Horizontal Disallowance between zone 1 and zone 3 Overall Net Open Position Matched Position Matched Position Matched Position Matched Position Matched Position Matched Position Residual Value Residual Value Residual Value Residual Value Residual Value Residual Value Long Short Long Short Long Short Long Short Long Short (1) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31)

Form 1.b.: General Risk - Interest Rate Exposure (Trading Book) - Continued Form 1.b: General Risk - Interest Rate Exposure (Trading Book) - Maturity Method Currency: ... Exchange Rate: ... CAPITAL CHARGE FOR GENERAL RISK:
Matched Position Disallowance Factor Total Capital Charge (Capital Charge) For Vertical Disallowance 10% For Horizontal Disallowance within zone

• Within Zone 1 40%
• Within Zone 2 30%
• Within Zone 3 30%
  For Horizontal Disallowance between Zones
• Zone 1 and Zone 2 40%
• Zone 2 and Zone 3 40%
• Zone 1 and Zone 3 100%
  For Overall Net Open Position 100%
  TOTAL CAPITAL CHARGE

3. Form 2.: Exchange Rate Risk
   Form 2
   Exchange Rate Exposure (Banking Book and Trading Book) Foreign Currency Exchange Rate Foreign Exchange Position [Assets, Liabilities, and Administrative Accounts (not including option)] Structural Position Foreign Exchange Position (not including Option) after considering Structural Position Net Option Position (Delta Equivalent) Total Foreign Exchange Position Net Matched Option Position Long Short Long Short Long Short Long Short (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) United States Dollar USD Euro EUR Australian Dollar AUD Canadian Dollar CAD Danish Krone DKK Hong Kong Dollar HKD Malaysian Ringgit MYR New Zealand Dollar NZD Norwegian Krone NOK British Pound Sterling GBP Singapore Dollar SGD Swedish Krona SEK Swiss Franc CHF Japanese Yen JPY Burmese Kyat BUK Indian Rupee INR Kuwaiti Dinar KWD Pakistani Rupee PKR Philippine Peso PHP Saudi Arabian Riyal SAR Sri Lankan Rupee LKR Thai Baht THB Brunei Dollar BND Gold Other currencies TOTAL CAPITAL CHARGE Capital Charge 8% Capital Charge 30%

4. Form 3.: Option Position
   Form 3.a.: Option Position
   Time Scale Option Position Total Option Position (Delta Equivalent) Total Net Option Position (Delta Equivalent) Coupon 3% or more Coupon less than 3% Long Short Long Short Long Short (1) (2) (3) (4) (5) (6) (7) (8) < 1 month < 1 month

1 - 3 months > 1 - 3 months
3 - 6 months
6 - 12 months
1 - 2 years
3 - 6 months
6 - 12 months
1 - 1.9 years
2 - 3 years > 1.9 - 2.8 years
3 - 4 years > 2.8 - 3.6 years
4 - 5 years
5 - 7 years
7 - 10 years
3.6 - 4.3 years
4.3 - 5.7 years
5.7 - 7.3 years
10 - 15 years > 7.3 - 9.3 years
15 - 20 years > 9.3 - 10.6 years
20 years > 10.6 - 12 years
12 - 20 years
20 years
Capital Charge (Capital Charge) for Option Risk Capital Charge 0 30% 0

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

V. CALCULATION OF ATMR FOR OPERATIONAL RISK
Form 4: Method of Calculating Gross Income for ATMR Calculation for Operational Risk Position:
Account Period
2020* 2019* 2018*
(Jan – Dec) (Jan – Dec) (Jan – Dec)

Gross Income
A. Income from operational activities

1. Interest, Provision, and Commission Income
   a. Interest b. Provisions and Commissions
2. Profit Sharing, Margin, and Ujrah Income
   a. Profit Sharing b. Margin
   c. Ujrah
   Total Interest, Provision and Commission, Profit Sharing, Margin, and Ujrah Income B. Interest, Provision and Commission, Profit Sharing, Margin, and Ujrah Expenses
3. Interest Expenses
4. Provision and Commission Expenses
5. Profit Sharing Expenses
6. Margin Expenses
7. Ujrah Expenses
   Total Interest, Provision and Commission, Profit Sharing, Margin, and Ujrah Expenses
   C. Income from operational activities (A - B)
   D. Insurance and Guarantee Income
8. Premium Income
   a. Gross Premium b. Reinsurance Premium (-/-)
   c. Decrease (Increase) in Premiums Not Yet Earned

Total Premium Income
2. Guarantee Fee Income
3. Reinsurance Commission Income
4. Other Income
Total Insurance and Guarantee Income
E. Other Operational Income

1. Net Securities Transaction Profit
2. Net Foreign Currency Transaction Profit
3. Others
   Total Other Operational Income
   F. Total Income from Insurance and Guarantee Activities and Other Operational Income (D + E) G. Insurance and Guarantee Expenses
4. Insurance Claim Expenses
   a. Premiums Not Yet Earned b. Gross Claims
   c. Reinsurance Claims
   d. Decrease (Increase) in Retained Self-Estimated Claims Total Insurance Claim Expenses
5. Guarantee Claim Expenses
6. Decrease (Increase) in Reinsurance Assets
7. Other Expenses
   Total Insurance and Guarantee Expenses
   H. Provision/Depreciation Expenses
8. Asset Quality Assessment Provision Expenses
9. Asset Quality Assessment Provision Expenses Based on Sharia Principles
10. Fixed Assets and Inventory Depreciation Expenses
11. Intangible Assets Amortization Expenses
12. Ijarah Asset Depreciation Expenses
    Total Provision/Depreciation Expenses

Notes:

• : the gross income calculation period is adjusted to the ATMR calculation period for operational risk
  : n is the number of years where gross income is positive

I. Provision Expenses on Contingent Liabilities
J. Other Operational Expenses

1. Rental Expenses
2. Maintenance and Repair Expenses
3. Administrative and General Expenses
4. Labor Expenses
   a. Salary, Wage, and Allowance Expenses b. Labor Development and Training Expenses
   c. Other Labor Expenses
   Total Other Operational Expenses
   K. Marketing Expenses
   L. Other Expenses
   M. Total Insurance and Guarantee Expenses, Provision/Depreciation Expenses, Provision Expenses on Contingent Liabilities, Other Operational Expenses, Marketing Expenses, and Other Expenses (G + H + I + J + K + L)
   I. Gross Income (C + F - M)
   II. Average Gross Income (∑ I1...I3 / n)
   III. Capital Charge for Operational Risk (15% × II)
   IV. ATMR for Operational Risk (12.5 × III)

VI. CALCULATION OF MINIMUM CAPITAL PROVISION RATIO
Form 5.a.: Calculation of Minimum Capital Provision Ratio

1. Total ATMR for Credit Risk (according to applicable regulations)
2. Core Capital (after considering deduction factors according to applicable regulations)
3. Supplementary Capital (after considering deduction factors, according to applicable regulations)
4. Investments made by Export Financing Institutions (LPEI)
5. Minimum capital provision ratio for Credit Risk
6. TOTAL ATMR FOR MARKET RISK
   Interest Rate Risk Foreign Exchange Risk Price Change Risk Option Total
   12.5 × Total
   (Equivalent ATMR)
   Specific Risk General Risk Interest Rate Risk Exchange Rate Risk
7. Core Capital allocated to anticipate Market Risk (minimum 28.5% × total capital charge)
8. Supplementary Capital allocated to anticipate Market Risk (i.e., that which can be added to Additional Supplementary Capital)
9. Additional Supplementary Capital meeting requirements
   a. Excess Subordinated Loans that cannot be counted in Supplementary Capital b. Subordinated Loans with an initial maturity of minimum 2 (two) years and meeting the criteria for Subordinated Loans that can be counted as a capital component
10. Additional Supplementary Capital allocated to anticipate Market Risk
11. TOTAL CAPITAL (Core Capital + Supplementary Capital + Additional Supplementary Capital)
12. Less: ATMR for credit risk on all securities in the Trading Book that have considered Specific Risk (Form 1.a)
13. Total ATMR for Operational Risk (according to applicable regulations)
14. TOTAL ATMR (CREDIT RISK + MARKET RISK + OPERATIONAL RISK)
15. Minimum capital provision ratio after considering Credit Risk, Market Risk, and Operational Risk
16. Additional Supplementary Capital Excess Ratio

Form 5.b.: Calculation of Minimum Capital Provision Ratio DESCRIPTION TOTAL
I. CAPITAL COMPONENTS
A. CORE CAPITAL

1. Initial Capital
2. Additional Capital Reserves (Disclosed Reserves)
   a. Additional Capital b. Grants
   c. General Reserves and Purposes
   d. Undistributed previous year profit after tax e. Previous year loss (-/-) f. Current year profit after tax (50%) g. Current year loss (-/-) h. Foreign branch financial statement translation differences

1. Excess difference
2. Deficit difference (-/-)
   i. Potential increase/decrease in fair value of financial assets measured at fair value through other comprehensive income (-/-)
   j. Difference between Asset Quality Assessment Provisions (PPKA) and Impairment Loss Reserves (CKPN) on productive assets

3. Goodwill (-/-)
   B. SUPPLEMENTARY CAPITAL
   (Maximum 100% of core capital)
4. Fixed asset revaluation reserves
5. General PPKA Reserves (maximum 1.25% of ATMR) Credit Risk
   C. ADDITIONAL SUPPLEMENTARY CAPITAL MEETING REQUIREMENTS
   D. ADDITIONAL SUPPLEMENTARY CAPITAL ALLOCATED TO ANTICIPATE MARKET RISK
   II. TOTAL CORE CAPITAL AND SUPPLEMENTARY CAPITAL (A+B)
   III. TOTAL CORE CAPITAL, SUPPLEMENTARY CAPITAL, AND ADDITIONAL SUPPLEMENTARY CAPITAL ALLOCATED TO ANTICIPATE MARKET RISK (A+B+D)
   IV. INVESTMENTS (-/-)
   V. TOTAL CAPITAL FOR CREDIT RISK (II - IV)
   VI. TOTAL CAPITAL FOR CREDIT RISK, MARKET RISK, AND OPERATIONAL RISK (III - IV)
   VII. ATMR FOR CREDIT RISK
   VIII. ATMR FOR MARKET RISK
   IX. ATMR FOR OPERATIONAL RISK
   X. MINIMUM CAPITAL PROVISION OBLIGATION AVAILABLE FOR

This copy is consistent with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja
CREDIT RISK (V : VII)
XI. MINIMUM CAPITAL PROVISION RATIO AVAILABLE FOR
CREDIT RISK, MARKET RISK, AND OPERATIONAL RISK (VI :
(VII + VIII + IX))
XII. ADDITIONAL SUPPLEMENTARY CAPITAL EXCESS RATIO ((C-D) : (VII + VIII +
IX))
XIII. REQUIRED MINIMUM CAPITAL PROVISION RATIO
Established in Jakarta on February 21, 2023

EXECUTIVE HEAD OF SUPERVISOR
OF INSURANCE, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
OGI PRASTOMIYONO