To:
Conventional Commercial Bank Directors,
At your office.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 16/SEOJK.03/2023 CONCERNING CAPITAL CALCULATION FOR BANK EXPOSURES TO CENTRAL COUNTERPARTY INSTITUTIONS

In light of the implementation of Financial Services Authority Regulation Number 27 of 2022 concerning the Second Amendment to Financial Services Authority Regulation Number 11/POJK.03/2016 concerning Minimum Capital Requirements for Conventional Banks (State Gazette of the Republic of Indonesia Year 2022 Number 35/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 26/OJK), hereinafter referred to as POJK KPMM, as referred to in Article 42A of POJK KPMM that Banks are required to calculate exposures to central counterparty institutions in capital calculations, it is necessary to regulate implementation provisions regarding capital calculation for bank exposures to central counterparty institutions in a Circular Letter of the Financial Services Authority as follows:

I. GENERAL PROVISIONS

1. Central Counterparty Institution (CCP) is an institution established to clear transactions conducted by its members. CCP members are parties that meet the requirements to use clearing services based on criteria established by the CCP. Generally, a CCP positions itself between the parties conducting transactions, so the CCP acts as a seller to the buyer and as a buyer to the seller.

2. The operation of a CCP within the country is in accordance with legislation concerning the operation of central counterparty institutions. The objectives of establishing a CCP include:
   a. supporting the development of financial markets; b. reducing credit risk; and
   c. increasing transaction efficiency, such as derivative transactions.

3. These provisions regulate capital calculation for bank exposures to CCPs. Such exposures include:
   a. over-the-counter (OTC) derivatives; b. exchange-traded derivatives;
   c. long settlement transactions; and
   d. securities financing transactions (SFT), which carry credit risk and therefore need to be calculated in the Bank's minimum capital provision obligations.

4. Exposures arising from the failure to deliver cash and/or financial instruments on the settlement date of financial instrument sales or purchase transactions, including default fund contributions for such exposures, are excluded from the scope of exposure calculations for transactions conducted with a CCP. Financial instruments include, among others, stocks, spot exchange rates, or spot commodities.

5. The calculation of exposures for financial instrument sales or purchase transactions followed by the delivery of cash and/or financial instruments as referred to in item 4 is in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks.

6. Banks must maintain adequate capital for exposures arising from transactions with qualifying CCPs (QCCP) as well as non-QCCPs.

7. A QCCP is an entity that has a license to operate as a CCP, including a license to obtain exemptions, and has obtained approval from the relevant regulator or supervisor to operate as a CCP in accordance with the products offered.

8. In the event that:
   a. transactions with a CCP increase risk exposure; b. there is no clarity regarding the fulfillment of CCP requirements as a QCCP; and/or
   c. the competent authority finds significant weaknesses in the CCP that have not been resolved by the said CCP,
   Banks must consider adding capital.

9. In the event that a Bank acts as a member of a CCP, the Bank must conduct assessments using adequate scenarios and stress testing regarding capital adequacy for exposures to CCPs to mitigate the inherent risks of such transactions. This assessment includes potential future exposures or contingent exposures arising from future withdrawals of default fund commitments and/or secondary commitments to take over or replace offsetting transactions from customers who are members of other CCPs in the event that such CCP members experience default or insolvency.

10. Banks must ensure the adequacy of risk management implementation quality regarding activities related to CCPs and report regularly all exposures to CCPs, including exposures arising from transactions with CCPs and exposures arising from CCP membership obligations such as default fund contributions, to the Board of Directors and the Risk Management Committee.

II. CALCULATION OF EXPOSURES RELATED TO TRANSACTIONS WITH CCPs

1. Banks must calculate exposures related to transactions with CCPs. Such exposure calculations are distinguished into transactions cleared with QCCPs and non-QCCPs.

2. Exposure calculations related to transactions with CCPs calculated by Banks include:
   a. exposures in the event that the Bank acts as:

1. a CCP member; and/or
2. a customer;
   b. exposures related to collateral for transactions with CCPs; and
   c. default fund contribution exposures in the event that the Bank acts as a CCP member.

3. For exposure calculations as referred to in item 2 letter a, the result is the product of the net amount and the risk weight.

4. Generally, the calculation of the net amount is in accordance with the calculation of exposures generating credit risk due to counterparty failure (counterparty credit risk) as regulated in the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks. However, there are adjustments to certain indicators in the calculation of the net amount as listed in Appendix A, which is an integral part of this Financial Services Authority Circular Letter, including the minimum Margin Period of Risk (MPOR) amount and calculations for SFT exposures.

5. The determination of risk weights is as listed in Appendix A, which is an integral part of this Financial Services Authority Circular Letter.

6. In the event that there is a CCP member leg to customers from exchange-traded derivative transactions based on bilateral agreements, the CCP member or customer calculates capital requirements for such transactions as OTC derivative transactions. This treatment also applies to transactions between higher-level clients and lower-level clients in a multi-level client structure.

7. The method for calculating exposures related to transactions with CCPs is listed in Appendix A, which is an integral part of this Financial Services Authority Circular Letter.

8. If a CCP no longer meets the requirements as a QCCP for 3 (three) months, the exposure calculation for transactions with a CCP previously recognized as a QCCP may continue to be treated as transactions with a QCCP. After this period, exposure calculations for the CCP must be conducted in accordance with exposure calculations for non-QCCPs.

9. Banks begin calculating exposures transacted with CCPs in accordance with this Financial Services Authority Circular Letter for the end-of-month position in the month following the first QCCP beginning operations in Indonesia.

III. REPORTING

1. Banks submit Reports on Exposures Related to Transactions with CCPs online through the Financial Services Authority reporting system.

2. Banks submit Reports on Exposures Related to Transactions with CCPs:
   a. monthly, for Banks individually, submitted for the end-of-month position; and b. quarterly, for Banks on a consolidated basis, submitted for the end-of-month positions in March, June, September, and December, for Banks that have subsidiaries.

3. Banks submit Reports on Exposures Related to Transactions with CCPs as part of the Risk-Weighted Asset Calculation Reports for Credit Risk in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks.

4. Reports on Exposures Related to Transactions with CCPs are submitted for the first time:

This copy is consistent with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja a. for Banks individually for the end-of-month position in the month following the first QCCP beginning operations in Indonesia; and b. for Banks on a consolidated basis for the end-of-month positions in the nearest March, June, September, or December after the first QCCP begins operations in Indonesia.

5. The format and guidelines for filling out Reports on Exposures Related to Transactions with CCPs are as listed in Appendix B, which is an integral part of this Financial Services Authority Circular Letter.

IV. PUBLICATION

1. Banks announce Reports on Exposures Related to Transactions with CCPs individually and on a consolidated basis for the end-of-month positions in June and December.

2. Banks announce Reports on Exposures Related to Transactions with CCPs as part of the Credit Risk Exposure and Capital Publication Reports for Risk-Weighted Assets - Standardized Approach in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks.

3. Announcements regarding Reports on Exposures Related to Transactions with CCPs are conducted for the first time for the end-of-month positions in the nearest June or December after the first QCCP begins operations in Indonesia.

4. The format and guidelines for filling out Reports on Exposures Related to Transactions with CCPs are as listed in Appendix C, which is an integral part of this Financial Services Authority Circular Letter.

V. CLOSING

The provisions in this Financial Services Authority Circular Letter take effect from the date of establishment.

Established in Jakarta on October 19, 2023

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
DIAN EDIANA RAE signed

APPENDIX
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 16/SEOJK.03/2023 CONCERNING CAPITAL CALCULATION FOR BANK EXPOSURES TO CENTRAL COUNTERPARTY INSTITUTIONS

TABLE OF CONTENTS
APPENDIX A .......................................................................................... - 3 -
I. Calculation of Exposures in the Event that the Bank Acts as a CCP Member and/or Customer.......................................... - 3 -

1. Transactions with QCCP.......................................................... - 3 -
2. Transactions with non-QCCP .................................................... - 7 -
   II. Treatment of Collateral for Transactions with CCPs ...................................... - 8 -
   III. Calculation of Default Fund Exposures................................................ - 9 -
   IV. Upper Limit of Capital Provision for Exposures to QCCPs............................................................................................ - 13 -
   V. Calculation Adjustments for SFT Exposures............................ - 13 -
   APPENDIX B ........................................................................................ - 16 -
   I. General .......................................................................................... - 16 -
   II. Report Format............................................................................ - 16 -
   III. Filling Guidelines....................................................................... - 17 -
   APPENDIX C ........................................................................................ - 19 -
   I. General .......................................................................................... - 19 -
   II. Report Format............................................................................ - 19 -
   III. Filling Guidelines....................................................................... - 20 -

APPENDIX A
METHODS FOR CALCULATING EXPOSURES RELATED TO TRANSACTIONS WITH CCPs

I. CALCULATION OF EXPOSURES IN THE EVENT THAT THE BANK ACTS AS A CCP MEMBER AND/OR CUSTOMER

1. Transactions with QCCP
   a. Bank as a CCP Member

1. Exposures to QCCP
   a) Calculation of the net amount in the Bank's exposure as a CCP member to a QCCP refers to item II.4 of this Financial Services Authority Circular Letter. b) The minimum MPOR value in the calculation of the net amount is established as:
   (1) for derivative transactions conducted by a CCP member, the settlement of which is conducted with a QCCP and accompanied by a daily margin agreement between the CCP member and the customer, the minimum MPOR value is 5 (five) working days; (2) for each OTC derivative transaction transacted with a QCCP, the minimum MPOR value is 10 (ten) working days; (3) in the event that a QCCP accounts for variation margin for specific transactions (for example, when a QCCP collects and accounts for variation margin for positions in exchange-traded or OTC forward transactions), and the CCP member's variation margin is not protected from QCCP insolvency, the minimum time period applied to such transaction exposures is the lower of:
   (a) 1 (one) year; or
   (b) the remaining time to maturity of the transaction, with a minimum MPOR of 10 (ten) working days; and (4) for netting sets of 5,000 (five thousand) or more transactions, in the event that they contain illiquid collateral, the transactions are exotic, and/or there are disputed transactions, the minimum MPOR is 20 (twenty) working days. c) The method for calculating counterparty credit risk exposures used in the event that the Bank transacts bilaterally with a counterparty other than a CCP requires the Bank to calculate exposures for each individual netting set. However, netting arrangements for QCCPs are not standardized like OTC offsetting agreements in the context of bilateral transactions. Therefore, there are adjustments to the counterparty credit risk exposure calculation method that allow for netting under certain conditions for exposures with QCCPs. d) In the event that transaction settlement can be applied on a net basis in accordance with provisions applicable in the event of default and regardless of whether the counterparty is insolvent or bankrupt, the entire replacement cost for all transactions related to the QCCP can be calculated as the net replacement cost if the close-out netting set meets the requirements in the offsetting agreement as follows:
   (1) for derivative transactions, in accordance with the Financial Services Authority Circular Letter regarding guidelines for calculating the net amount of derivative transactions in the calculation of risk-weighted assets for credit risk using the standardized approach; (2) for SFTs, there are requirements that must be met, namely:
   (a) the offsetting agreement meets the requirements:
   i. legally applicable in each relevant jurisdiction in the event of default and regardless of whether the counterparty is declared insolvent or bankrupt;
   ii. grants the non-defaulting party the right to settle transactions upon default in accordance with the agreed agreement, including in the event that the counterparty is declared insolvent or bankrupt;
   iii. regulates the calculation of profits and losses from transactions (including considering collateral values) on a net basis, resulting in 1 (one) net obligation value from 1 (one) party to the other party;
   iv. allows for the liquidation or set-off of collateral immediately after default; and
   v. rights arising from the provisions required in items ii through iv can be legally enforced based on provisions in each relevant jurisdiction at the time of default, regardless of whether the counterparty is declared insolvent or bankrupt; and
   (b) cross-position netting (between the banking book and trading book) can only be recognized if the netting transactions meet the following criteria:
   i. the Bank marks to market all transactions daily; and
   ii. instruments used as collateral are included in the types of eligible financial collateral in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks.
   e) The emphasis of the provisions in letter d) is the existence of the right to netting that can be applied based on provisions. In the event that the Bank cannot demonstrate that the offsetting agreement meets the requirements as referred to in letter d), each transaction will be considered as 1 (one) netting set in the calculation of exposures for transactions with QCCPs. f) The risk weight is established at 2% (two percent) in the event that:
   (1) the Bank as a CCP member conducts transactions for its own benefit; or (2) the Bank as a CCP member provides clearing services to customers and must pay losses resulting from value changes in transactions in the event of QCCP failure.
2. Exposures to Customers
   a) The Bank as a CCP member treats exposures to customers as bilateral derivative transactions (including calculating counterparty credit risk exposure (CVA)), regardless of whether the CCP member guarantees derivative transactions or acts as an intermediary between the customer and the QCCP. The calculation of the net amount refers to item II.4 of this Financial Services Authority Circular Letter. b) The Bank as a CCP member may recognize a shorter close-out period for customer transactions that have been cleared. The CCP member may calculate exposures to customers by applying an MPOR value of at least 5 (five) working days. This net amount value is also used in the CVA calculation. The CVA calculation method is in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for market risk for conventional banks. c) In the event that the Bank as a CCP member receives collateral from customers for customer derivative transactions and this collateral is passed on to the QCCP, the CCP member may recognize such collateral for calculations on both the QCCP leg and the customer leg. Thus, initial margin provided by customers to the CCP member can be used to mitigate the CCP member's exposure to such customers. The same condition applies to multi-level client structures. d) The determination of risk weights is in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks. b. Bank as a Customer
3. The calculation of the net amount in customer exposures refers to item II.4 of this Financial Services Authority Circular Letter.
4. The Bank's exposure as a customer is distinguished into:
   a) the Bank's exposure as a customer to a CCP member in the event that:
   (1) the Bank is a customer of a CCP member; and (2) the CCP member acts as a financial intermediary where the CCP member settles offsetting transactions with a QCCP; b) the Bank's exposure as a customer to a QCCP in the event that:
   (1) the Bank is a customer of a CCP member; and (2) the CCP member guarantees the Bank's exposure to the QCCP; and c) the Bank's exposure as a customer to other customers at a higher level (higher level client) in a multi-level client structure.
5. The Bank applies a risk weight of 2% (two percent) for transactions as referred to in item 2) if the following requirements are met:
   a) offsetting transactions are identified by the QCCP as customer transactions and the collateral for such transactions is accounted for by the QCCP and/or the CCP member in accordance with agreements to prevent customer losses caused by default or insolvency from:
   (1) the CCP member;
   (2) other customers of the CCP member; and/or
   (3) the CCP member and other customers of the CCP member jointly.
   Matters that must be met in these requirements are:
   (1) there are no legal obstacles to transferring customer collateral accounted for by a failed CCP member to:
   (a) the QCCP;
   (b) 1 (one) or more CCP members that have not failed; (c) the said customer; or (d) a party designated by the customer, when the CCP member becomes insolvent; and (2) the customer conducts adequate studies regarding legal issues as referred to in item (1) and conducts reviews as necessary to ensure that the agreement can be executed and has sufficient basis to conclude that in the event of legal claims, courts and competent authorities can execute collateral in accordance with legislation; and b) there are provisions or agreements establishing that offsetting transactions with a failed or insolvent CCP member will continue to be transacted indirectly with the CCP or by the CCP member. In such circumstances, the customer's exposure position and collateral will be transferred to market value unless the customer requests to close out their position at market value. In the event that there is precedent for transferring transactions to the CCP or the CCP member, this needs to be considered when assessing the likelihood that such transactions can be transferred. In the event that the CCP agreement does not prohibit the transfer of customer transactions, this is not sufficient basis to conclude that such transactions can be transferred.
6. The Bank applies a risk weight of 4% (four percent) if the Bank as a customer is not protected from losses in the event that the CCP member and other customers of the CCP member jointly experience default or insolvency as referred to in item 3).a), but other requirements in item 3) are met. This risk weight will be applied to the Bank's exposure as a customer to the CCP member or the Bank's exposure as a customer to other customers at a higher level (higher level client).
7. In the event that the requirements as referred to in item 3) are not met, it is calculated as bilateral transactions (including calculating CVA exposure). The application of risk weights for credit risk calculations is in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks.

2. Transactions with non-QCCPs
   Banks calculate exposures for transactions conducted with non-QCCPs in accordance with the Financial Services Authority Circular Letter regarding the calculation of risk-weighted assets for credit risk using the standardized approach for conventional banks, with risk weights determined according to the portfolio category type relevant to the non-QCCP.

II. TREATMENT OF COLLATERAL FOR TRANSACTIONS WITH CCP

1. Banks calculate and apply risk weights for every asset or collateral placed in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks, regardless of whether the assets in question have been placed as collateral. Thus, placed collateral must be treated as instruments in the banking book or trading book at the time the collateral is not placed with the CCP.

2. Assets or collateral placed as referred to in item 1 will be calculated in exposures giving rise to credit risk due to counterparty failure (counterparty credit risk), regardless of whether the collateral is recorded in the banking book or trading book. In this case, this includes the increase in exposures giving rise to credit risk due to counterparty failure (counterparty credit risk) as a result of the application of haircuts. Counterparty credit risk arises when assets or collateral of a CCP member or client are placed with the CCP or a CCP member, but do not include bankruptcy remote assets or are assumed that the assets or collateral will be returned to the Bank when the counterparty experiences bankruptcy. In such conditions, the Bank placing the assets or collateral must calculate the credit risk on the relevant assets or collateral based on the credit rating of the entity holding the assets or collateral.

3. In the event that assets are trade exposures with the CCP and collateral is managed by the CCP, and the placed assets or collateral do not include bankruptcy remote assets, the application of risk weights:
   a. for Banks as CCP members, a risk weight of 2% (two percent); or b. for Banks as clients of a CCP member, a risk weight of:
   1) 2% (two percent) if meeting the conditions as referred to in item I.1.b.1) through item I.1.b.3); or
   2) 4% (four percent) if meeting the conditions as referred to in item I.1.b.1) and item I.1.b.4).

4. In the event that assets or collateral are trade exposures, managed by a custodian, and include bankruptcy remote from the CCP, Banks do not need to calculate capital requirements for exposures giving rise to credit risk due to counterparty failure (counterparty credit risk) or net claims equal to 0 (zero). Several matters to note in this treatment are:
   a. all forms of collateral included in this scope include cash, securities, other pledged assets, and excess initial margin or variation margin also known as overcollateralization; and b. custodian is a party providing custody services including, among others, custodian banks or trustees. Types of custodians include trustees or other forms that manage assets but do not benefit from the assets managed and do not result in the assets being legally delayed in return (at the request of creditors or by court order) if the custodian becomes insolvent or bankrupt.

5. Assets or collateral that do not include trade exposures are subject to risk weights according to the relevant portfolio category types with the CCP in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks.

6. Regarding the calculation of net claims for derivative transactions, collateral placed but not included in bankruptcy remote must be calculated in the net independent collateral amount (NICA) in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of net claims for derivative transactions in the calculation of risk-weighted assets for credit risk using the standard approach.

III. CALCULATION OF DEFAULT FUND EXPOSURE

1. Default Fund Contribution Exposure to QCCP
   a. Banks as CCP members calculate default fund contribution exposure to QCCP based on the approach to be explained in this section. b. Default fund contributions will be subject to risk weights determined according to the formula and methodology in this section, without distinguishing classes, business types, or products. This applies to default funds used for either products or business types with settlement risk or for products or business types with counterparty credit risk. However, in the event that a CCP member's default fund contribution is separated by product type and can only be accessed for specific product types, capital requirements for the default fund exposure are determined according to the formula and methodology established in this section, while still calculating for each product type giving rise to counterparty credit risk. If prefunded own resources of the CCP apply to various types of products, the CCP must allocate the funds to each calculation proportionally according to the proportion of each net claim for each specific product type.
   c. CCP members set capital provision for default fund contributions determined based on risk sensitivity calculations considering:
   1) the size and quality of QCCP funding sources;
   2) counterparty credit risk exposures to the QCCP; and
   3) the order of use of funding sources through the QCCP loss bearing waterfall in the event that a CCP member defaults.
   d. Capital provision corresponding to risk sensitivity for default fund contributions (KCMi) for CCP members is carried out in 2 (two) calculation steps as follows:

    1) Calculate hypothetical QCCP capital requirements (KCCP) for counterparty credit risk exposures to all QCCP members and their clients.  
        a) KCCP is calculated consistently with the purpose of calculating KCMi so that it does not reflect the actual capital requirements of the QCCP which can be determined by the QCCP and the QCCP supervisor. b) KCCP is calculated using the following formula:  
            Kccp = ∑EADi . Risk Weight . Capital Ratio / CMi where:  
            (1) exposure at default (EADi) is the net claim related to QCCP exposures to CCP member 'i', valued at the end of the reporting date before margin called on the final margin call on that day. Exposures include:  
                (a) CCP member transactions and client transactions guaranteed by the CCP member; and (b) all value of collateral managed by the QCCP, including default fund contributions from CCP members regarding transactions in letter (a) above.  
            (2) risk weight is set at 20% (twenty percent).  
            (3) capital ratio is set at 8% (eight percent).  
            (4) CM is the CCP member. c) In the event that a CCP member provides client clearing services, and client transactions and client collateral are managed in separate sub-accounts, either individual or joint accounts, the EAD calculation is done separately based on the client sub-accounts. This is to ensure that client collateral cannot be used to offset (offset) QCCP exposures against CCP members who conduct transactions for their own purposes in the KCCP calculation. In the event that sub-accounts consist of derivatives and SFT, the EAD of those sub-accounts is the sum of derivative EAD and SFT EAD. d) In the event that collateral is managed in accounts containing SFT and derivatives, prefunded initial margin provided by the CCP member or client must be allocated to SFT exposures and derivative exposures proportionally according to the EAD or net claims of those products calculated with reference to item II.4 of this OJK Circular. Specifically for derivative transactions, the impact of collateral is not calculated. e) In the event that CCP member default fund contributions (DFi) are not separated between client sub-accounts and other sub-accounts (house sub-account), DFi must be allocated per sub-account, based on the proportion of each initial margin of the sub-accounts placed by or for the CCP member. f) For derivative transactions, EAD is calculated as bilateral transaction exposures between the QCCP and the CCP member in accordance with the Financial Services Authority (OJK) Circular regarding guidelines for calculating net claims for derivative transactions in the calculation of risk-weighted assets for credit risk using the standard approach with special treatments as follows:  
            (1) MPOR of 10 (ten) working days is used for calculating potential future exposure (PFE) of QCCP derivative transactions against CCP members on derivative transaction exposures. An MPOR of 20 (twenty) working days for netting sets with more than 5,000 (five thousand) transactions is not applied in this PFE calculation. (2) All collateral managed by the QCCP gives the QCCP legal rights to use the relevant collateral, including default fund contributions from the relevant CCP member (DFi), to be used to offset QCCP exposures against the CCP member or against the relevant client in the event of default by the CCP member or client. This calculation will be reflected in the multiplier in accordance with the Financial Services Authority (OJK) Circular regarding guidelines for calculating net claims for derivative transactions in the calculation of risk-weighted assets for credit risk using the standard approach. g) For SFT, the EADi calculation is:  
            EADi = Max (EBRMi – IMi – DFi; 0) Where:  
            (1) EBRMi is the net claim to CCP member 'i' before the use of credit risk mitigation techniques in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks. For this calculation, in the event that variation margin has been exchanged before margin called on the final margin call on that day, it will affect the mark-to-market calculation; (2) IMi is the initial margin placed by the CCP member with the QCCP; (3) DFi is the prefunded default fund contribution of the CCP member which will be used in the event that the CCP member defaults, either together with or after the initial margin of the CCP member, to reduce QCCP losses. h) In calculations as referred to in letters a) through g), Banks need to note:  
            (1) haircuts applied to SFT refer to the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks; (2) holding period for SFT calculations refer to the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks; and (3) netting sets applicable to CCP members as regulated in item I.1.a.1).d) through item I.1.a.1).e).
   
    2) Calculate CCP member capital requirements (KCMi).  
        KCMi is calculated using the following formula:  
        KCMi = max (KCCP . (DFi pref / (DFCCP + DFCM pref)) ; 8% . 2% . DFi pref) Where:  
        a) KCMi is the capital provision for CCP member 'i' default fund contribution. b) DFCM pref is the total prefunded default fund contribution from all CCP members. c) DFCCP is the prefunded own resources of the QCCP (including contributed capital, retained earnings, and others), which enters the order of use of funding sources (default waterfall), which is junior or pari passu over the prefunded default fund contribution from CCP members. d) DFi pref is the prefunded default fund contribution provided by CCP member 'i'. e) In the calculation of risk-weighted assets for credit risk, Banks as CCP members divide the KCMi value by a divisor of 8% (eight percent). In this calculation, the lower limit on the risk weight of default fund exposures is 2% (two percent).
   
    3) Banks must obtain information regarding KCCP, DFCM pref, and DFCCP at the end of each reporting position from the QCCP to calculate capital adequacy as a CCP member. Therefore, Banks can only conduct transactions with QCCP that can calculate and provide such data every month or at any time upon request by the Financial Services Authority.
   
    4) CCP members calculate KCMi at least every month.
   

2. Banks as CCP members must apply a risk weight of 1,250% (one thousand two hundred fifty percent) for default fund contributions to non-QCCP. The aforementioned default fund contributions include funded and unfunded contributions that must be paid in the event that the CCP requires such and it has been stated in the agreement.

IV. UPPER LIMIT ON CAPITAL PROVISION FOR EXPOSURES TO QCCP

In the event that the calculation of capital requirements for exposures traded with QCCP and default fund contributions to QCCP results in a higher amount compared to the calculation of capital requirements applied to the same exposures if traded with non-QCCP as calculated in item I.2 and item III.2, capital requirements are determined based on the calculation of item I.2 and item III.2.

V. ADJUSTMENT OF CALCULATIONS FOR SFT EXPOSURES

1. Generally, the calculation of net claims for SFT exposures in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks with some adjustments to be discussed in this section.

2. Setting minimum holding period values as follows:
   a. for netting sets containing 1 (one) or more derivative transactions with illiquid collateral, the minimum holding period value is 20 (twenty) working days. Banks determine illiquid collateral in the context of stress market conditions. Stress market conditions are indicated, among others, by the absence of an active market so that price quotations from the market obtained from counterparties for 2 (two) working days or less do not cause movement in the market or do not represent the discount value of the collateral. b. for netting sets with conditions:
   1) the Bank has experienced 2 (two) problematic (disputed) margin calls in the previous 2 (two) quarters; and
   2) the relevant (disputed) problems last longer than the lower limit (floor) MPOR applicable to the relevant netting set,
   the magnitude of the minimum MPOR value is 2 (two) times the lower limit (floor) MPOR applicable to the netting set and must be used for 2 (two) quarters since the occurrence of conditions as referred to in item 1) and item 2).

3. For the calculation of SFT exposures in a netting, Banks use the following formula:
   E = max {0; ∑Ei − ∑Cj + 0,4 x net exposure + 0,6 x gross exposure / √Nj + ∑(Efx x Hfx fx)} Where:
   E : net claims in a netting set after considering credit risk mitigation techniques in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks. Ei : value of all cash and securities delivered or sold with a promise to be bought back or given to the counterparty based on netting agreements. Cj : value of all cash and securities received or bought with a promise to be sold back or owned by the Bank based on netting agreements. Net Exposure : calculated using the following formula Net Exposure = |∑EsHs s| Gross Exposure : calculated using the following formula Gross Exposure = ∑Es s |Hs| Es : : net value of securities delivered or received in a netting set (always positive value). Hs : : haircut magnitude in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks. Hs is positive if it is an instrument delivered or sold with a promise to be bought back, or transacted in a manner similar to securities lending or repo transactions. Hs is negative if it is an instrument delivered or bought with a promise to be sold back or transacted in a manner similar to securities borrowing or reverse repo transactions. N : number of instruments issued in a netting set (instruments with Es value less than 1/10 (one-tenth) of the largest Es value in the netting set are excluded from the calculation). Efx : : absolute value of net instrument positions for each exchange rate for instruments with different settlement exchange rates. Hfx : : exchange rate haircut in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks.

APPENDIX B
EXPOSURE REPORT RELATED TO TRANSACTIONS WITH CCP

I. GENERAL

1. Banks compile Exposure Reports related to Transactions with CCP as in Table 1 or Table 2.

2. Reports are submitted by Banks individually. Specifically for Banks that have subsidiaries, they also add reports on a consolidated basis.

3. Reports are submitted as part of the Summary Table of Risk-Weighted Asset (ATMR) Calculation Results for Credit Risk-Standard Approach in the ATMR Credit Risk-Standard Approach Calculation Report in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks.

4. Exposure Reports related to Transactions with CCP are presented in millions of rupiah.

II. REPORT FORMAT

1. Table 1: Exposure Report related to Transactions with CCP

   a b
   Net Claims (after Credit Risk Mitigation Techniques) ATMR Total Exposures to QCCP Exposures traded with QCCP (excluding initial margin and default fund contribution) (i) OTC derivatives (ii) derivative transactions through exchanges (iii) securities financing transactions (iv) netting sets (in the event that cross-product netting is permitted) Segregated initial margin Nonsegregated initial margin Prefunded default fund contribution Unfunded default fund contribution

   a b
   Net Claims (after Credit Risk Mitigation Techniques) ATMR Total Exposures to NonQCCP Exposures traded through nonQCCP (excluding initial margin and default fund contribution) (i) OTC derivatives (ii) derivative transactions through exchanges (iii) securities financing transactions (iv) netting sets (in the event that cross-product netting is permitted) Segregated initial margin 10 Nonsegregated initial margin 11 Prefunded default fund contribution 12 Unfunded default fund contribution 13 Total Exposures to QCCP and NonQCCP

2. Table 2: Exposure Report related to Transactions with CCP (Simplified Version)
   No. Portfolio Category Net Claims ATMR

   1. …
   2. Exposures related to Central Counterparty (CCP)
      Total

III. FILLING GUIDELINES

1. Table 1
   a. The report is intended to provide a comprehensive picture of the Bank's exposures to CCP. The report format covers all types of exposures (traded exposures, collateral, and default fund contributions) and other capital requirements. b. Total exposures are all exposures traded with CCP as explained in Part I Appendix A.
   c. Net Claims (after Credit Risk Mitigation Techniques (MRK)) are net claims in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks and these regulations after considering Credit Risk Mitigation Techniques.
   d. Initial Margin is the initial margin provided by the Bank as a CCP member or the Bank as a client placed with the CCP to mitigate PFE. Initial Margin does not include default fund contributions. e. Prefunded default fund contribution is the contribution of CCP members that has been provided by the Bank as a CCP member which is a fund that can be used in the event that the CCP incurs losses. f. Unfunded default fund contribution is the contribution of CCP members that has been agreed to be provided by the Bank as a clearing member which is a fund that can be used in the event that the CCP incurs losses. g. Row 1 is the sum of rows 2 through 6. h. Row 7 is the sum of rows 8 through 12.
   i. Row 13 is the sum of row 1 and row 7.

2. Table 2
   a. In the event that the report as in Table 1 is not yet available in the Financial Services Authority reporting system, Banks submit reports as in Table 2. b. Reports as in Table 2 are submitted as part of the Summary Table of Risk-Weighted Asset (ATMR) Calculation Results for Credit Risk-Standard Approach in the ATMR Credit Risk-Standard Approach Calculation Report, namely in the Derivative Exposures subsection.
   c. Net Claims and ATMR in row 8 are Net Claims (after MRK) and ATMR in row 13 of Table 1.

APPENDIX C
PUBLICATION OF EXPOSURE REPORT RELATED TO TRANSACTIONS WITH CCP

I. GENERAL

1. Banks publish Exposure Reports related to Transactions with CCP.

2. Reports are published by Banks individually. Specifically for Banks that have subsidiaries, they also add reports on a consolidated basis.

3. Reports are published as part of the Risk and Capital Exposure Publication Report for ATMR Credit Risk-Standard Approach in accordance with the Financial Services Authority (OJK) Circular regarding the calculation of risk-weighted assets for credit risk using the standard approach for commercial banks.

4. Exposure Reports related to Transactions with CCP are presented in millions of rupiah.

II. REPORT FORMAT

a b  
Net Claims (after Credit Risk Mitigation Techniques) ATMR 1 Total Exposures to QCCP Exposures traded with QCCP (excluding initial margin and default fund contribution) (i) OTC derivatives (ii) derivative transactions through exchanges (iii) securities financing transactions (iv) netting sets (in the event that cross-product netting is permitted) Segregated initial margin Nonsegregated initial margin Prefunded default fund contribution Unfunded default fund contribution Total Exposures to NonQCCP Exposures traded through nonQCCP (excluding initial margin and default fund contribution) (i) OTC derivatives (ii) derivative transactions through exchanges

a b  
Net Claims (after Credit Risk Mitigation Techniques) ATMR (iii) securities financing transactions (iv) netting sets (in the event that cross-product netting is permitted) Segregated initial margin 10 Nonsegregated initial margin 11 Prefunded default fund contribution 12 Unfunded default fund contribution 13 Total Exposures to QCCP and NonQCCP

III. FILLING GUIDELINES

Filling out this report refers to the filling guidelines for Table 1 as referred to in item III.1 Appendix B of this OJK Circular.

Determined in Jakarta on 19 October 2023

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

HEAD OF EXECUTIVE SUPERVISOR OF BANKING

FINANCIAL SERVICES AUTHORITY

REPUBLIC OF INDONESIA,

DIAN EDIANA RAE

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