MR

To:
The Board of Directors of Commercial Banks,

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 6 /SEOJK.03/2020

CONCERNING
CALCULATION OF RISK-WEIGHTED ASSETS FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH FOR COMMERCIAL BANKS

In light of the implementation of the Financial Services Authority Regulation Number 11/POJK.03/2016 concerning Minimum Capital Requirements for Commercial Banks (State Gazette of the Republic of Indonesia Year 2016 Number 25, Supplement to the State Gazette of the Republic of Indonesia Number 5848) as amended by the Financial Services Authority Regulation Number 34/POJK.03/2016 concerning Amendments to the Financial Services Authority Regulation Number 11/POJK.03/2016 concerning Minimum Capital Requirements for Commercial Banks (State Gazette of the Republic of Indonesia Year 2016 Number 188, Supplement to the State Gazette of the Republic of Indonesia Number 5929), hereinafter referred to as the POJK on MCR, among other things as regulated in Article 28 paragraph (1) of the POJK on MCR that Banks are required to calculate Risk-Weighted Assets (RWA) for Operational Risk in the calculation of the Minimum Capital Requirement (MCR) ratio. In addition, with the emergence of new international standards in the document Basel III: Finalising Post-Crisis Reforms which changes the method of calculating RWA for Operational Risk, which was previously regulated in the Financial Services Authority Circular Letter Number 24/SEOJK.03/2016 concerning Calculation of Risk-Weighted Assets for Operational Risk Using the Basic Indicator Approach, it is necessary to regulate implementation provisions regarding the Calculation of RWA for Operational Risk Using the Standardized Approach in the Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

1. Operational Risk is the risk resulting from insufficient and/or malfunctioning internal processes, human error, system failures, and/or external events that affect Bank operations. Legal risk is included as operational risk arising, among others, from exposure to fines, penalties, and/or sanctions resulting from supervisory actions or civil settlements, but does not include strategic risk and reputational risk.

2. Operational Risk is one of the risks that must be considered in the calculation of capital adequacy in addition to Credit Risk, Market Risk, and other material risks. Therefore, as regulated in the POJK on MCR, Banks calculate RWA for Operational Risk in the MCR ratio calculation.

3. Based on international standards, the calculation of RWA for Operational Risk is conducted using the standardized approach.

4. The calculation of RWA for Operational Risk using the standardized approach replaces the calculation of RWA for Operational Risk using other approaches applicable to Commercial Banks.

II. CALCULATION OF RWA FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH

1. Business Indicator (BI) is a proxy for Operational Risk based on financial statements.

2. Business Indicator Component (BIC) is the component resulting from the multiplication of BI with the marginal coefficient (α).

3. Internal Loss Multiplier (ILM) is a multiplier calculated based on the average value of historical losses experienced by the Bank and the BIC value.

4. Minimum Operational Capital (MOC) using the standardized approach is the minimum capital calculated based on the multiplication of BIC and ILM with the following formula:
   MOC = BIC x ILM = (BI x α) x ILM

5. In calculating BIC, Banks are divided into 3 (three) categories (buckets) distinguished based on BI ranges.

6. In the event that a Bank intends to submit a request for approval to the Financial Services Authority to be able to:
   a. calculate internal loss data in the ILM calculation, for Banks classified in the BI 1 (bucket) category; b. exclude internal operational risk loss events that are not relevant to the Bank's risk profile from the internal loss data; and/or
   c. exclude divested activities from the BI calculation,
   Banks may submit a written request for approval to the Financial Services Authority through:
   a. the Relevant Bank Supervision Department or the Financial Services Authority Regional Office in Jakarta for Banks with headquarters or branches of banks domiciled abroad located in the Special Capital Region of Jakarta Province and Banten Province; or b. the Financial Services Authority Regional Office or the local Financial Services Authority Office according to the area where the Bank's headquarters is located, for Banks with headquarters outside the Special Capital Region of Jakarta Province and Banten Province.

7. To calculate RWA for Operational Risk in the MCR ratio calculation, Banks use the following formula:
   RWA for Operational Risk Using the Standardized Approach = 12.5 x MOC

8. The calculation of RWA for Operational Risk using the standardized approach is used in the calculation of the Bank's MCR ratio for that entire year.
   Example: RWA for Operational Risk for the year 2023 will be used in the calculation of the MCR ratio for the position from January 2023 through December 2023.

9. RWA for Operational Risk using the standardized approach in this Financial Services Authority Circular Letter is first considered in the MCR ratio for the January 2023 position. In the calculation of the MCR ratio up to the December 2022 position, Banks continue to use RWA for Operational Risk using the approach as regulated in the Financial Services Authority Circular Letter Number 24/SEOJK.03/2016 concerning Calculation of Risk-Weighted Assets for Operational Risk Using the Basic Indicator Approach.

10. The calculation of RWA for Operational Risk using the standardized approach in this Financial Services Authority Circular Letter is applied by Banks individually and on a consolidated basis.

11. The method of calculating RWA for Operational Risk using the standardized approach refers to the Appendix which is an integral part of this Financial Services Authority Circular Letter.

III. REPORTING

In the context of calculating RWA for Operational Risk using the standardized approach, Banks submit reports both individually and on a consolidated basis as follows:

1. Operational Risk Management Implementation Report
   a. Banks submit the Operational Risk Management Implementation Report to the Financial Services Authority as part of the self-assessment results of the Bank's health level. b. The Operational Risk Management Implementation Report as referred to in letter a is submitted to the Financial Services Authority online via the Financial Services Authority Reporting System.
   c. In the event that the Financial Services Authority Reporting System is not yet available, the Operational Risk Management Implementation Report as referred to in letter b is submitted offline.
   d. The format and content of the Operational Risk Management Implementation Report as referred to in letter a refer to the Appendix which is an integral part of this Financial Services Authority Circular Letter. e. The method and time limit for submitting the Operational Risk Management Implementation Report are in accordance with the method and time limit for submitting self-assessment results of the Bank's health level as regulated in Financial Services Authority regulations concerning the assessment of commercial bank health levels. f. The Operational Risk Management Implementation Report as referred to in letter a is first submitted for the end of December 2022 position.

2. Calculation Report for Operational Risk
   a. Banks compile the Calculation Report for Operational Risk consisting of:

1. historical loss data report;
2. BI detail report; and
3. RWA calculation report for Operational Risk.
   b. Banks submit the Calculation Report for Operational Risk as referred to in letter a annually.
   c. The Calculation Report for Operational Risk as referred to in letter a is submitted to the Financial Services Authority online via the Financial Services Authority Reporting System.
   d. The online reporting method as referred to in letter c is in accordance with the Financial Services Authority Regulation concerning commercial bank reporting via the Financial Services Authority Reporting System. e. In the event that the Financial Services Authority Reporting System is not yet available, the Calculation Report for Operational Risk as referred to in letter c is submitted offline. f. The deadline for submitting reports online or offline is set on January 31 of the same year. Example:
   The Calculation Report for Operational Risk submitted no later than January 31, 2023 is used for the calculation of the MCR ratio for the position from January 2023 through December 2023. g. In the event of corrections that affect the magnitude of BIC and ILM, among others based on the results of financial statements audited by a Public Accountant Firm (KAP), Banks must submit the Calculation Report for Operational Risk no later than the end of the following month. Banks use the new RWA for Operational Risk data in the MCR ratio calculation for the end of the following month position. Example:
   A Bank calculates RWA for Operational Risk for January and February 2023 based on the BIC calculation from unaudited 2022 financial statements, 2021, and 2020. At the beginning of March 2023, the audited 2022 financial statements by the KAP are submitted to the Bank. The Bank submits the Calculation Report for Operational Risk no later than the end of April 2023 based on the audited financial statements by the KAP. Subsequently, the Bank uses the results of the RWA calculation in the MCR ratio calculation starting from the April 2023 position. h. If the deadline for submitting reports offline as referred to in letter f falls on a Saturday, Sunday, and/or national holiday, the report is submitted on the next working day.
   i. The Calculation Report for Operational Risk as referred to in letter a is first submitted for the calculation of RWA for Operational Risk for the year 2023, which must be submitted no later than January 31, 2023.
   j. Banks submit a trial of the Calculation Report for Operational Risk as referred to in letter a:
4. first no later than January 31, 2021 for the calculation of Operational Risk for the year 2021; and
5. second no later than January 31, 2022 for the calculation of Operational Risk for the year 2022.
   The trial report is submitted online via the Financial Services Authority Reporting System. In the event that the Financial Services Authority Reporting System is not yet available, the report is submitted offline. k. The format and content of the Calculation Report for Operational Risk as referred to in letter a refer to the Appendix which is an integral part of this Financial Services Authority Circular Letter.
   l. Reports submitted offline as referred to in letter e are submitted to the Financial Services Authority through:
6. the Relevant Bank Supervision Department or the Financial Services Authority Regional Office in Jakarta for Banks with headquarters or branches of banks domiciled abroad located in the Special Capital Region of Jakarta Province and Banten Province; or
7. the Financial Services Authority Regional Office or the local Financial Services Authority Office according to the area where the Bank's headquarters is located, for Banks with headquarters outside the Special Capital Region of Jakarta Province and Banten Province.

IV. PUBLICATION

1. The announcement of the Operational Risk Management Implementation Report and the Calculation Report for Operational Risk is first conducted for the end of December 2022 position.

2. Banks must disclose loss data for each of the 10 (ten) years used in the ILM calculation.
   Loss data is reported net, i.e., after considering recovery, both before and after considering loss exclusions.

3. Banks must disclose each BI sub-item for each year, for 3 (three) years, in the BI calculation.

4. Banks announce the Operational Risk Management Implementation Report and the Calculation Report for Operational Risk using the method as referred to in the Financial Services Authority Regulation governing transparency and publication of Bank reports.

5. The format for announcing the Operational Risk Management Implementation Report and the Calculation Report for Operational Risk refers to the Appendix which is an integral part of this Financial Services Authority Circular Letter.

This copy is consistent with the original
Deputy Director of Legal Consultation and
Harmonization of Banking Regulations 1
Legal Directorate 1
Legal Department signed
Wiwit Puspasari

V. CLOSING

At the time this Financial Services Authority Circular Letter takes effect, the Financial Services Authority Circular Letter Number 24/SEOJK.03/2016 concerning Calculation of Risk-Weighted Assets for Operational Risk Using the Basic Indicator Approach is repealed and declared invalid effective January 1, 2023.

The provisions in this Financial Services Authority Circular Letter take effect on the date of determination.

Determined in Jakarta on April 29, 2020
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
HERU KRISTIYANA

APPENDIX
FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER
NUMBER 6 /SEOJK.03/2020
CONCERNING
CALCULATION OF RISK-WEIGHTED ASSETS FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH FOR COMMERCIAL BANKS

TABLE OF CONTENTS

Appendix A METHOD OF CALCULATING RWA FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH
Appendix B BUSINESS INDICATOR DETAILS
Appendix C FORMAT OF OPERATIONAL RISK MANAGEMENT IMPLEMENTATION REPORT
Appendix D FORMAT OF CALCULATION REPORT FOR OPERATIONAL RISK
Appendix D.1 FORMAT OF HISTORICAL LOSS DATA REPORT
Appendix D.2 FILLING OUT THE HISTORICAL LOSS DATA REPORT
Appendix D.3 FORMAT OF BUSINESS INDICATOR DETAIL REPORT
Appendix D.4 FILLING OUT THE BUSINESS INDICATOR DETAIL REPORT
Appendix D.5 FORMAT OF RWA CALCULATION REPORT FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH
Appendix D.6 FILLING OUT THE RWA CALCULATION REPORT FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH
Appendix E MAPPING OF INTERNAL LOSS CATEGORIES

Appendix A

METHOD OF CALCULATING RWA FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH

I. General
A. Operational Risk is the risk resulting from insufficient and/or malfunctioning internal processes, human error, system failures, and/or external events that affect Bank operations. Operational Risk includes legal risk arising, among others, from exposure to fines, penalties, and/or sanctions resulting from supervisory actions or civil settlements, but does not include strategic risk and reputational risk. B. Business Indicator (BI) is a proxy for Operational Risk based on financial statements.
C. Business Indicator Component (BIC) is the component resulting from the multiplication of BI with the marginal coefficient (α).
D. Internal Loss Multiplier (ILM) is a multiplier calculated based on the average value of historical losses experienced by the Bank and the BIC value.
E. Minimum Operational Capital (MOC) using the standardized approach is the minimum capital calculated based on the multiplication of BIC and ILM with the following formula:
MOC = BIC x ILM = (BI x α) x ILM
F. To calculate RWA for Operational Risk in the MCR ratio calculation, Banks use the standardized approach with the following formula:
RWA for Operational Risk Using the Standardized Approach = 12.5 x MOC

II. Business Indicator Calculation
A. BI is a financial statement-based indicator for Operational Risk.
B. BI consists of 3 (three) components, namely:

1. Interest, Rent, and Dividend Component (IRD), mathematically calculated with the formula:
2. Service Component (SC), mathematically calculated with the formula:
   ; and
3. Financial Component (FC), mathematically calculated with the formula:
   C. The bar symbol above each sub-component of IRD, SC, and FC indicates that the sub-component is calculated based on the 3 (three) year average value of each sub-component, i.e., the last December position (T), the previous December position (T-1), and the December position two years prior (T-2).
   Example:
   Calculation for Operational Risk for the year 2023 uses data from the December 2022 position, December 2021 position, and December 2020 position.
   D. The bar symbol on the right and left of sub-components:
4. interest income minus interest expense;
5. net profit/loss of the trading book position; and
6. net profit/loss of the banking book position;
   indicates that the sub-component is calculated using the absolute value.
   For the calculation of sub-components calculated net (example: interest income minus interest expense), the net calculation is done annually first, subsequently a 3 (three) year average is calculated. E. BI is calculated with the formula:
   BI = IRD + SC + FC
   F. Detailed data for each BI component refers to Appendix D.3. Business Indicator Detail Report Format.

III. Business Indicator Component Calculation
A. The calculation of BIC is the multiplication of BI with the marginal coefficient (α), mathematically calculated with the formula:
BIC = BI x (α)
B. BI Range and Marginal Coefficient (α)
The determination of the marginal coefficient (α) depends on the BI category (bucket). The value of the marginal coefficient (α) will increase as the BI value increases as stated in Table 1.

Table 1. Relationship between BI Range and Marginal Coefficient (α)
Category (bucket) | BI Range (Trillion Rp) | Marginal Coefficient (α) 1 | ≤ 15 | 12% 2 | 15 < BI ≤ 450 | 15% 3 | > 450 | 18%

Example:

1. BI = Rp10 trillion
   BIC = Rp10 trillion x 12% = Rp1.2 trillion
2. BI = Rp23 trillion
   BIC = (Rp15 trillion x 12%) + ((Rp23 trillion - Rp15 trillion) x 15%) = Rp3 trillion
3. BI = Rp510 trillion
   BIC = (Rp15 trillion x 12%) + ((Rp450 trillion – Rp15 trillion) x 15%) + ((Rp510 trillion - Rp450 trillion) x 18%) = Rp77.85 trillion

IV. Internal Loss Multiplier
A. Internal Loss Multiplier Calculation

1. Internal Operational Risk losses experienced by the Bank can affect the MOC calculation through the ILM.

2. ILM depends on the BIC value and the average value of Operational Risk Loss Component (ORLC) previously experienced by the Bank, mathematically calculated with the formula:
   ILM = Ln [ exp(1) − 1 + ( ORLC / BIC )^0.8 ]

3. ORLC is calculated with the formula:
   15 x average of high-quality annual Operational Risk Loss data over the previous 10 years.

4. The ILM value is set as follows:
   a. ILM equals 1 (one) in the event that the ORLC value equals the BIC value; b. ILM is greater than 1 (one) in the event that the ORLC value is greater than the BIC value, i.e., Banks that have relatively larger Operational Risk loss values than the BIC value so that it is necessary to provide more capital as a result of internal loss values for Operational Risk included in the MOC calculation; or
   c. ILM is less than 1 (one) in the event that ORLC is less than the BIC value, i.e., Banks that have relatively smaller Operational Risk loss values than the BIC value so that it is necessary to provide less capital as a result of internal loss values for Operational Risk included in the MOC calculation.

5. The calculation of the average value of Operational Risk losses in ORLC must be based on annual loss data for Operational Risk that meets the requirements:
   a. having high quality; and b. data collection period is 10 (ten) years prior.

6. The high quality requirements as referred to in item 5 letter a refer to Section VI. Qualitative Requirements for Loss Data Collection in the Appendix of this Financial Services Authority Circular Letter.

7. In the event that the Bank does not have high-quality loss data for the previous 10 (ten) year period as referred to in item 5 letter b, the Bank may use high-quality loss data with a period of at least 5 (five) years prior.

8. In the event that the Bank does not have high-quality loss data for the previous 5 (five) year period as referred to in item 7, the Bank must calculate the MOC value based on the BIC value.

9. The Financial Services Authority may request the Bank to use loss data of less than 5 (five) years in the event that the ILM value is greater than 1 (one) and the Financial Services Authority believes that the losses reflect the Bank's Operational Risk exposure.

B. Use of Internal Operational Risk Loss Data Based on the Standardized Approach

1. Banks that have a BI value less than or equal to Rp15,000,000,000,000.00 (fifteen trillion rupiah) and fall into the BI 1 (bucket) category as in Table 1, internal operational risk loss data is considered not to affect the MOC calculation so the ILM value is set at 1 (one). Thus, the MOC value for such Banks is equal to BIC, which is 12% (twelve percent) times BI. However, Banks still disclose internal loss data in the historical loss data report.

2. Banks that fall into the BI 1 (bucket) category as in Table 1 may include internal operational risk loss data in the ILM calculation as long as they meet the qualitative requirements for collecting internal operational risk loss data and obtain approval from the Financial Services Authority.

3. Banks that have a BI value greater than Rp15,000,000,000,000.00 (fifteen trillion rupiah) must include internal operational risk loss data in the MOC calculation.

4. Good and quality data collection, and the integrity of the data are important matters to be able to produce capital values that correspond to the operational loss exposure experienced by the Bank. Banks must always meet

Qualitative requirements for internal loss data collection for Operational Risk.

5. Banks that cannot meet the qualitative requirements for internal loss data collection must meet the Minimum Capital Requirement for Operational Risk (MMRO) of at least 100% (one hundred percent) of the Indicator-Based Capital (KIB) value.

6. For Banks that cannot meet the qualitative requirements as referred to in number 5, the Financial Services Authority (OJK) may request the Bank to set a Factor of Proportionality (FPKI) greater than 1 (one).

7. Banks must disclose:
   a. exemptions from the use of internal operational risk loss data due to inability to meet qualitative requirements; and b. the application of the resulting FPKI, in the Calculation Report for Operational Risk.

V. Application of the Standard Approach on a Consolidated Basis

A. At the consolidated level, the calculation of Risk-Weighted Assets (RWA) for Operational Risk using the standard approach uses the Business Indicator (BI) figures fully on a consolidated basis by netting all intra-group revenues and costs. Calculations at the sub-consolidation level use the BI figures of the Bank at that sub-consolidation level. Calculations at the Subsidiary level use the BI figures of the Subsidiary.

B. When the BI figures for the Bank at the sub-consolidation level or the Bank as a Subsidiary reach the BI category (bucket) 2, the Bank must use its own historical loss data in the RWA calculation for Operational Risk using the standard approach. Banks at the sub-consolidation level or Banks that are Subsidiaries do not include loss data resulting from other entities within the same business group (holding company).

C. In the event that a Bank's Subsidiary falls into BI category (bucket) 2 or BI category (bucket) 3 and does not meet the qualitative requirements for data collection, that Subsidiary must calculate the MMRO by applying 100% (one hundred percent) of the KIB. In this case, the Financial Services Authority (OJK) may determine that the Bank use an FPKI greater than 1 (one).

VI. Qualitative Requirements for Loss Data Collection

Qualitative requirements for operational risk loss data collection consist of general criteria and specific criteria in the process of identifying, collecting, and treating loss data.

A. General Criteria for the Identification, Collection, and Treatment of Loss Data

Banks must have appropriate processes for the identification, collection, and treatment of operational risk loss data in order to calculate the Minimum Capital Requirement for Operational Risk (MMRO). The general criteria for using the Standardized Approach for Operational Risk (SAOR) are:

1. Internal loss data used in the SAOR calculation must be based on observations over a 10 (ten) year period. For initial implementation, Banks may use internal operational risk loss data with a 5 (five) year period if the Bank does not have high-quality data with a period longer than 5 (five) years. All high-quality data longer than 5 (five) years must be included in the SAOR calculation.

2. Internal loss data that can be used is the most relevant data, i.e., loss data directly related to the Bank's current activities, technology processes, and/or risk management procedures.

3. Banks must:
   a. document procedures and processes for identifying, collecting, and treating internal operational risk loss data; b. validate the aforementioned procedures and processes before they are used in the MMRO calculation; and
   c. review the aforementioned procedures and processes independently by internal and/or external audit functions.

4. In the context of risk management implementation, and the execution of validation and/or supervisory review, the Bank maps internal loss data into categories:

a. internal fraud; b. external crime;
c. employment practices and workplace safety;
d. clients, products, and business practices; e. damage to physical assets; f. business disruption and system failures; or g. execution, delivery, and process management.

5. Banks must document criteria for allocating internal loss data into one of the 7 (seven) categories as referred to in number 4, in accordance with the mapping in Appendix E. Internal Loss Category Mapping in this Financial Services Authority Circular.

6. Internal loss data must be comprehensive and cover all material activities and exposures from all relevant subsystems and regions.

7. For the purpose of calculating average annual losses, the minimum threshold for an operational loss event is set at:
   a. Rp300,000,000.00 (three hundred million rupiah) for Banks falling into BI category (bucket) 1; and b. Rp1,500,000,000.00 (one billion five hundred million rupiah) for Banks falling into BI category (bucket) 2 and BI category (bucket) 3, as referred to in Table 1. The aforementioned minimum threshold is calculated by the Bank on a gross basis for an operational loss event.

8. Banks must collect information related to operational loss events, in addition to information regarding gross loss amounts, as follows:
   a. the date the event first occurred or began (event date), if available; b. the date the Bank became aware of the event (discovery date);
   c. the date (or dates) when the operational loss event was recorded as a loss, provision, or reserve in the Bank's income statement (accounting date); and

d. recovery values for gross loss amounts, along with descriptive information regarding the cause of the operational loss event. Tax impacts, such as reductions in corporate income tax liabilities resulting from operational losses, cannot be categorized as recovery in the calculation of Operational Risk using the standard approach. Detailed explanations of this descriptive information are adjusted according to the magnitude of the gross loss amount.

9. Operational loss events related to Credit Risk that have been included in the RWA for Credit Risk are not included in the loss data collection. However, operational loss events related to Credit Risk that are not included in the RWA for Credit Risk must be included in the loss data collection.

10. Operational Risk losses related to Market Risk are treated as Operational Risk for the purpose of calculating the MMRO as referred to in the RWA calculation for Operational Risk using the standard approach.

11. Examples of operational loss events include:
    a. a flood disaster in a regency causing several Bank branches in that regency to be submerged, resulting in damage to ATM machines at several of those branches; and/or b. a system error in the Bank's core banking system causing the account balances of several customers to decrease. The above examples are still counted as 1 (one) operational loss event because they arise from the same cause.

12. Not included as 1 (one) operational loss event include:
    a. internal fraud committed by employee "A" several times, with each instance of internal fraud causing the Bank a loss of Rp20,000,000.00 (twenty million rupiah); and/or b. bank teller calculation errors at several bank branches that in total caused the Bank a loss of Rp350,000,000.00 (three hundred fifty million rupiah). The aforementioned multiple events are not categorized as 1 (one) operational loss event because they were not committed at the same time or by the same party simultaneously.

13. Banks must have an independent review process for the completeness and accuracy of loss data.

B. Specific Criteria for the Identification, Collection, and Treatment of Loss Data

1. Banks must formulate procedures and policies containing, among other things, definitions of gross loss, dates related to operational risk events (reference date), and losses that have been categorized. Data categorization can be done as per the division of operational loss event types as referred to in letter A number 4.

2. Banks must be able to identify:
   a. gross loss amounts; b. recoveries not from insurance; and
   c. recoveries from insurance,
   for all operational loss events.

3. Banks must use the accounting date as the basis for determining loss data. For losses resulting from legal events, the accounting date is the date when a provision is made for the legal event for estimated losses calculated in the income statement.

4. Losses resulting from common operational risk events or related operational risk events occurring over several years, but recorded over several years, must be allocated to the year in which the loss occurred. Such recording must comply with financial accounting standards.

5. Gross Loss Calculation

Gross loss is loss before considering any form of recovery.

a. In order to calculate the loss data collection, components that must be included in the gross loss calculation are:

1. direct expenses, including impairment and settlement, recorded in the income statement, and write-offs caused by operational risk events;

2. costs arising from an event, including:
   a) external expenses, which are directly related to the operational risk event (examples: legal service expenses directly related to the event and costs paid to consultants, legal advisors, or suppliers); and b) repair or replacement costs, incurred in order to restore the initial position before the operational risk event occurred;

3. provisions or reserves calculated in the income statement regarding potential operational loss impacts;

4. deferred losses, i.e., losses originating from operational risk events with definite financial impacts, but which are temporarily booked in transitional accounts and/or suspense accounts and have not yet been recognized in the income statement.
   Example:
   The impact of certain events, such as legal events or damage to physical assets, may be known and clearly identifiable before the event is recognized through the formation of reserves.
   Significant deferred losses must be included in the loss data collection in the time period appropriate to the size and duration of the deferred component; and

5. Timing losses (temporary losses), i.e., negative economic impacts recorded in the financial accounting period, resulting from operational risk events affecting cash flows or financial statements of previous financial accounting periods.
   Example:
   The impact of time is generally related to the occurrence of operational risk events due to temporary errors in recording a company's financial accounts, such as over-recording of revenue, accounting errors, and mark-to-market errors. Although these events do not represent the company's actual financial impact (the net impact over time is zero), if such errors persist beyond one financial accounting period, they represent a material misstatement of the Bank's financial statements. Significant timing losses must be included in the data collection if the past losses are related to operational risk events occurring over more than one accounting period and causing an increase in legal risk.

b. In order to calculate the loss data collection, components that must be excluded from the gross loss calculation are:

1. general maintenance contract costs for property, factories, or equipment;
2. internal or external expenditures to improve business conditions after the occurrence of operational risk losses (examples: improvements, enhancements, risk assessment initiatives, and repairs); and
3. insurance premiums.

6. Net Loss and Recovery Calculation

a. Net loss is loss after considering the impact of recoveries.

b. Recovery is an independent event, related to the loss event, occurring at a different time, and funds or cash inflows from economic benefits have been received from a third party.
Example:
Payments from insurance guarantors, repayments received from fraud perpetrators, or recoveries from transfer errors.

c. In order to calculate the loss data collection, Banks must use net loss values after considering recovery values, including recoveries from insurance. However, recovery values can be used to reduce loss values if the Bank has received payment. In the event that recovery is still in the form of receivables, it cannot be recognized as a recovery value.

d. When requested by the Financial Services Authority (OJK), Banks submit verification of payments used to reduce loss values to the Financial Services Authority (OJK).

7. In determining an operational loss event (loss event) to be included in the SAOR calculation, Banks refer to the minimum threshold for an operational event as regulated in letter A number 7, calculated on a gross basis. However, Banks still calculate the SAOR by considering recoveries obtained by the Bank. In the event that, after recovery, the operational loss experienced by the Bank becomes lower than the minimum threshold for an operational event as regulated in letter A number 7, the Bank still includes the operational loss in the SAOR calculation.

8. In the event that operational losses occur in foreign currency denominations, loss data calculations must be converted using Rupiah exchange rates consistent with those used in financial statements during the period in which the loss occurred.

9. In the event that there is an operational loss event causing the Bank to form a provision and followed by the settlement of productive assets (charge off), the Bank must calculate the provision and settlement of the aforementioned productive assets as operational losses resulting from the operational loss event.
   Example:
   The Bank experienced a legal event in 2023 causing the Bank to form a provision for an operational loss event of Rp350,000,000.00 (three hundred fifty million rupiah). Subsequently, in 2024, the Bank settled the legal event, resulting in a total loss of Rp400,000,000.00 (four hundred million rupiah). Based on this, the Bank calculates operational losses in 2023 at Rp350,000,000.00 (three hundred fifty million rupiah) and in 2024 at Rp50,000,000.00 (fifty million rupiah), which is the difference between the initial provision formed and the total settlement of productive assets occurring thereafter. Thus, there is no double counting of the actual operational losses incurred.

10. In the event that the Bank refunds overcharged debtors due to operational failures, the initial overcharge:
    a. is not calculated as an operational loss if the refund to the debtor is made in the same financial accounting period as the overcharge; or b. is calculated as an operational loss if the refund to the debtor is made after the financial accounting period of the overcharge (timing loss), and with a value exceeding the minimum threshold as referred to in letter A number 7. The initial overcharge is not calculated as a recovery.

11. Losses arising from outsourced activities are included in operational loss data. However, in the event that the operational loss impact of outsourced activities is paid by the outsourcing provider or outsourced personnel, the Bank does not need to calculate it as an operational loss.

VII. Specific Treatment in the Calculation of RWA for Operational Risk Using the Standard Approach

A. Exemption of Internal Operational Risk Loss Data from SAOR Calculation

1. Banks may request approval from the Financial Services Authority (OJK) for exemption from the SAOR calculation for certain internal operational risk loss events that are not relevant to the Bank's risk profile.

2. Requests for exemption from the SAOR calculation as referred to in number 1 must occur infrequently and be supported by strong justification by the Bank.

3. In evaluating the relevance between the event causing operational loss and the Bank's risk profile, Banks need to consider whether the cause of the event causing operational loss could also occur in other operational activities.

4. In the event that the Bank no longer has exposure because it has settled a legal event or divested business, the Bank conducts an organizational analysis to demonstrate that there are no similar exposures or residual legal exposures. The Bank must demonstrate that the loss event excluded from the SAOR calculation is not related to other ongoing products and activities.

5. Requests for exemption as referred to in number 1 may be made provided they meet the following requirements:
   a. having an amount exceeding the materiality threshold, i.e., greater than 5% (five percent) of the Bank's average losses; and b. the excluded losses have been included in the Bank's operational risk loss data collection for a minimum period of 3 (three) years.

6. Exclusions of losses related to divested activities do not need to meet the minimum period requirement as referred to in number 5 letter b.

7. The amount of excluded losses and the frequency of excluded losses must be disclosed and submitted in the report format as referred to in Appendix D.1. Historical Loss Data Report Format.

8. In the event that the Financial Services Authority (OJK) has granted approval for the request for exemption of internal operational risk losses as referred to in number 1, the Bank removes the internal operational risk losses from the SAOR calculation immediately after the Financial Services Authority (OJK) grants approval.

9. In the event that approval from the Financial Services Authority (OJK) as referred to in number 8 is granted before the reporting period as regulated in this Financial Services Authority Circular, the Bank must submit the Calculation Report for Operational Risk no later than the end of the following month offline. The Bank uses the new RWA data for Operational Risk in the Minimum Capital Requirement for Market Risk (KPMM) calculation for the position at the end of the following month.
   Example:
   The Bank calculates RWA for Operational Risk from January to July 2023 based on the SAOR calculation of internal loss data from 2022 and 9 (nine) previous periods. At the beginning of August 2023, the Financial Services Authority (OJK) grants approval for the Bank to exclude certain operational losses from the SAOR calculation. Based on this approval, the Bank calculates RWA for Operational Risk for September 2023 based on the SAOR calculation that has excluded certain operational losses. The Bank submits the Calculation Report for Operational Risk no later than the end of September 2023.

B. Treatment Related to Divested Activities, Mergers, Consolidations, Acquisitions, Integrations, and Conversions

1. Banks may request approval from the Financial Services Authority (OJK) to exclude divested activities from the Business Indicator (BI) calculation.

2. The exclusion of divested activities from the BI calculation as referred to in number 1 must be disclosed and reported in the Calculation Report for Operational Risk.

3. In the event that approval from the Financial Services Authority (OJK) as referred to in number 1 is granted before the reporting period as regulated in this Financial Services Authority Circular, the Bank must submit the Calculation Report for Operational Risk no later than the end of the following month offline. The Bank uses the new RWA data for Operational Risk in the Minimum Capital Requirement for Market Risk (KPMM) calculation for the position at the end of the following month.
   Example:
   The Bank calculates RWA for Operational Risk from January to July 2023. Based on the SAOR calculation of internal loss data from 2022 and 9 (nine) previous periods. At the beginning of August 2023, the Financial Services Authority (OJK) grants approval for the Bank to exclude operational losses from divested activities in the SAOR calculation. Based on this approval, the Bank calculates RWA for Operational Risk for September 2023 based on the SAOR calculation that has excluded operational losses from divested activities. The Bank submits the Calculation Report for Operational Risk no later than the end of September 2023.

4. For the purpose of calculating the SAOR and BI, Banks must include internal operational risk loss values and BI components caused by merger, consolidation, acquisition, integration, and conversion activities. Loss data and BI included in the SAOR must cover businesses of merged, consolidated, acquired, integrated, or converted entities from the period prior to the relevant merger, consolidation, acquisition, integration, and conversion activities using the standard approach, using 10 (ten) years of data for SAOR calculation and 3 (three) years of data for BI calculation.

5. In the event that merger, consolidation, and acquisition, integration, or conversion activities as referred to in number 4 occur before the reporting period as regulated in this Financial Services Authority Circular, the Bank must submit the Calculation Report for Operational Risk offline within the timeframe determined by the Financial Services Authority (OJK). The Bank uses the new RWA data for Operational Risk in the Minimum Capital Requirement for Market Risk (KPMM) calculation for the position at the end of the same month as the deadline for submitting the Calculation Report for Operational Risk.
   Example:
   Bank "A" and Bank "B" merge to become Bank "C" and are required to calculate Minimum Capital Requirement for Market Risk (KPMM) for the first time starting from July 2023 data. Bank "C" calculates RWA for Operational Risk in July 2023 by considering internal loss data from Bank "A" and Bank "B" for 2022 and 9 (nine) previous periods. Bank "C" submits the Calculation Report for Operational Risk no later than the end of July 2023.

Appendix B

DETAILS OF BUSINESS INDICATORS (BI)

Components
Interest,
Lease, and
Dividends (KBSD)
Interest Income
Interest income arising from all financial assets and other interest income (including interest income from financing leases and operating leases, as well as gains from leased assets).

1. Interest income from customer loans and advances, assets available for sale, assets held to maturity, trading assets, financing leases, and operating leases.

2. Interest income from hedging derivative transactions.

3. Other interest income.

4. Gains from leased assets.
   Interest Expense Interest expense from all financial liabilities and other interest expenses (including interest expense from financing leases and operating leases, as well as depreciation, impairment, and losses from leased assets).

5. Interest expense from deposits, issued securities, financing leases, and operating leases.

6. Interest expense from hedging derivative transactions.

7. Other interest expenses.

8. Losses from leased assets.

9. Depreciation and impairment of leased assets.
   Productive
   Assets
   The total gross amount of loans, customer advances (advances), interest-bearing securities (including government securities), and leased assets calculated at the end of each year. Productive assets included in the calculation are assets in the balance sheet. Non-performing productive assets are still included in the total Productive Assets calculation. Dividend Income Dividend income from securities investments and financing not consolidated in financial statements, including dividend income from unconsolidated Subsidiary Companies, associates, and joint ventures. Components Services (KJ) Service and Commission Income Income arising from the provision of consulting and services. Includes income received by the Bank as a financial service provider. Service and commission income arising from:

10. Securities (issuance, origination, reception, transmission, execution of orders on behalf of customers).

11. Clearing and settlement, asset management, custodian services, fiduciary transactions, payment services, structured finance, services in securitization, credit commitments and guarantees provided, and foreign transactions.
    Service and
    Commission
    Expense
    Expenses arising from requests for consulting and services. Includes outsourcing costs paid by the Bank for the provision of financial services, but excludes outsourcing costs paid for the provision of non-financial services (such as logistics, information technology, and human resources). Service and commission expenses arising from clearing and settlement, custodian services, services in securitization, credit commitments and guarantees received, underwriting, and foreign transactions. Other Operational Income Income arising from the Bank's ordinary operational activities and not included in other business indicators but having similar characteristics (income from operating leases is not included in this account).

12. Rental income from investment properties.

13. Gains from non-current assets and disposal groups classified as held for sale and not meeting the qualification as discontinued operations, in accordance with financial accounting standards.
    Other
    Operational
    Expense
    Expenses and losses arising from the Bank's ordinary operational activities and not included in other business indicators but having similar characteristics, and arising from events causing operational losses (expenses from operating leases are not included in this account).

14. Losses from non-current assets and disposal groups classified as held for sale and not meeting the qualification as discontinued operations, in accordance with financial accounting standards.

15. Losses occurring as a result of events causing operational losses such as fines, penalties, settlements, compensation values from damaged assets, which have not been provisioned in previous years.

16. Expenses related to provisions or reserves for operational loss events (loss event).

Components
Financials
(KK)
Net Profit and Loss
Trading Book

1. Net profit and loss of trading book assets and liabilities (including derivatives, debt securities, equity, loans and customer advances (advances), short positions, other assets and liabilities).
2. Net profit and loss from hedging accounting.
3. Net profit and loss from exchange rate differences.
   Net Profit and Loss
   Banking
   Book
4. Net profit and loss of financial assets and liabilities measured at fair value through profit or loss.
5. Realized gains or losses from financial assets and liabilities not measured at fair value through profit or loss (including loans and customer advances (advances), assets available for sale, assets held to maturity, financial liabilities measured at amortized cost).
6. Net profit and loss from hedging accounting.
7. Net profit and loss from exchange rate differences.
   Types of income and expenses not included in the BI component calculation, namely:
8. income and expenses from insurance and reinsurance business;
9. premiums paid and recoveries/payments received from the purchase of insurance or reinsurance policies;
10. administrative costs, including employee salaries, outsourcing costs paid for the provision of non-financial services (including logistics, human resources, and/or information technology), and other administrative costs (including information technology, telephone, travel, office supply needs, and/or delivery services);
11. recovery of administrative costs including recovery of payments on behalf of debtors (such as taxes debited from debtors);
12. costs for building rentals including courtyards and fixed assets, except when these costs arise from operational loss events (loss event);
13. depreciation or amortization of tangible and intangible assets, except depreciation related to leased assets (which should be included in the calculation of costs for financing leases and operating leases);
14. provisions or corrections of provisions (including pensions, commitments, and/or guarantees provided) except provisions related to operational loss events (loss event);
15. costs due to the repayment of share capital upon demand (share capital repayable on demand);
16. impairment loss reserves (CKPN) or CKPN corrections including financial assets, non-financial assets, equity investments in Subsidiary Companies, joint ventures, and associates (associates);
17. changes in goodwill recognized in profit or loss; and
18. corporate income tax, both current and deferred tax.

Appendix C

OPERATIONAL RISK MANAGEMENT APPLICATION REPORT FORMAT Bank Name : Bank … (individual/consolidated) Report Year : ______ /(unaudited/audited) QUALITATIVE ANALYSIS 1 Explanation of regulations, policies, and/or guidelines related to risk management for Operational Risk. 2 Explanation of the structure and organization of management and control functions related to Operational Risk. 3 Explanation of the measurement system for Operational Risk (including systems and data used to calculate Operational Risk to estimate capital burden for Operational Risk). 4 Explanation of the scope and main coverage of the reporting framework for Operational Risk for the Bank's executive officials and Board of Directors. 5 Explanation of risk mitigation and risk transfer used in management for Operational Risk. This includes mitigation through policy issuance (such as policies for risk culture, acceptable risk, and outsourcing), divestment of high-risk businesses, and establishing control functions. Remaining exposure can be absorbed by the Bank or transferred. For example, the impact of operational losses can be mitigated through insurance.

Appendix D.1

HISTORICAL LOSS DATA REPORT FORMAT
Bank Name : Bank … (individual/consolidated)
Report Year : ______ /(unaudited/audited)
A B C D E F G H I J K
T T-1 T-2 T-3 T-4 T-5 T-6 T-7 T-8 T-9 10-YEAR AVERAGE Minimum threshold for an operational loss event (loss event) of IDR 300,000,000.00 (three hundred million rupiah) or more 1 Net operational loss amount after considering recovery value (without exclusion) 2 Number of Operational Risk loss occurrences 3 Amount of Operational Risk losses excluded 4 Number of Operational Risk loss occurrences excluded.

A B C D E F G H I J K
T T-1 T-2 T-3 T-4 T-5 T-6 T-7 T-8 T-9 10-YEAR AVERAGE 5 Net operational loss amount after considering recovery value and excluded Operational Risk losses Minimum threshold for an operational loss event (loss event) of IDR 1,500,000,000.00 (one billion five hundred million rupiah) or more 6 Net operational loss amount after considering recovery value (without exclusion) 7 Number of Operational Risk loss occurrences 8 Amount of Operational Risk losses excluded 9 Number of Operational Risk loss occurrences excluded 10 Net operational loss amount after considering

A B C D E F G H I J K
T T-1 T-2 T-3 T-4 T-5 T-6 T-7 T-8 T-9 10-YEAR AVERAGE recovery value and excluded Operational Risk losses Details of capital calculation for operational risk 11 Are losses used in the ILM calculation? (Yes/No) 12 If line 11 is filled with "No", whether the non-use of internal loss data is due to non-compliance with minimum standards for loss data? (Yes/No) 13 Threshold used in capital calculation for Operational Risk 14 Additional Notes (if any)

Appendix D.2

FILLING IN THE HISTORICAL LOSS DATA REPORT
ROW
NO.
DESCRIPTION
1 This row is filled with the net loss amount after considering recovery value for operational loss events for each reporting period over the last 10 (ten) years, with values above the minimum threshold for an operational loss event (loss event) of IDR 300,000,000.00 (three hundred million rupiah). Excluded Operational Risk losses from the MORC calculation must still be included in this row. Amount is filled in millions of rupiah. 2 This row is filled with the number of Operational Risk loss occurrences based on the minimum threshold for an operational loss event (loss event) of IDR 300,000,000.00 (three hundred million rupiah). Filled according to the frequency of occurrences. 3 This row is filled with the amount of Operational Risk losses excluded for each reporting period over the last 10 (ten) years, with values above the minimum threshold for an operational loss event (loss event) of IDR 300,000,000.00 (three hundred million rupiah). Amount is filled in millions of rupiah. 4 This row is filled with the number of Operational Risk loss occurrences excluded based on the minimum threshold for an operational loss event (loss event) of IDR 300,000,000.00 (three hundred million rupiah). Filled according to the frequency of occurrences. 5 This row is filled with the net operational loss amount after considering recovery value and excluded Operational Risk loss values for each reporting period over the last 10 (ten) years, with values above

ROW
NO.
DESCRIPTION the minimum threshold for an operational loss event (loss event) of IDR 300,000,000.00 (three hundred million rupiah).
Amount is filled in millions of rupiah.
6 This row is filled with the net loss amount after considering recovery value for operational loss events for each reporting period over the last 10 (ten) years, with values above the minimum threshold for an operational loss event (loss event) of IDR 1,500,000,000.00 (one billion five hundred million rupiah). Excluded Operational Risk losses from the MORC calculation must still be included in this row. Amount is filled in millions of rupiah. 7 This row is filled with the number of Operational Risk loss occurrences based on the minimum threshold for an operational loss event (loss event) of IDR 1,500,000,000.00 (one billion five hundred million rupiah). Filled according to the frequency of occurrences. 8 This row is filled with the amount of Operational Risk losses excluded for each reporting period over the last 10 (ten) years, with values above the minimum threshold for an operational loss event (loss event) of IDR 1,500,000,000.00 (one billion five hundred million rupiah). Amount is filled in millions of rupiah. 9 This row is filled with the number of Operational Risk loss occurrences excluded based on the minimum threshold for an operational loss event (loss event) of IDR 1,500,000,000.00 (one billion five hundred million rupiah). Filled according to the frequency of occurrences. 10 This row is filled with the net operational loss amount after considering recovery value and excluded Operational Risk loss values for each reporting period over the last 10 (ten) years, with values above the minimum threshold for an operational loss event (loss event) of IDR 1,500,000,000.00 (one billion five hundred million rupiah). Amount is filled in millions of rupiah. 11 Indication for Banks on the use of Operational Risk losses in the ILM calculation. Banks using ILM = 1 based on regulations in this Otoritas Jasa Keuangan Circular fill "No". 12 Indication for Banks that the non-use of internal loss data in the ILM calculation is due to non-compliance with requirements as regulated in this Otoritas Jasa Keuangan Circular. The application of all ILM results must be reported in line 2 of Appendix D.5. Format Report Calculation of RWAs for Operational Risk Using the Standardized Approach. 13 Minimum threshold for an operational loss event (loss event) used in capital calculation for Operational Risk, filled with IDR 300,000,000.00 (three hundred million rupiah) or IDR 1,500,000,000.00 (one billion five hundred million rupiah), if applied. 14 Banks fill the additional notes column to explain the aggregate rational reasons for new exclusions since the previous publication period. Banks must disclose material information, in aggregate, which can help readers understand the Bank's historical losses and recoveries, with the exception of confidentiality and information ownership, including information regarding reserves that must be formed by law. For rows 1 to 10, the letter T indicates the last annual reporting period, T-1 indicates the annual reporting period in
the year before the last period, and so on. Column k indicates the average of net annual losses after considering recovery and loss exclusions over the last 10 (ten) years. The loss values and recovery values for such losses must be reported in the recording year in the financial statements.

ROW
NO.
DESCRIPTION
Banks with (bucket) IB 1 category do not need to fill rows 6 to 10. Banks with (bucket) IB 2 and (bucket) IB 3 categories do not need to fill rows 1 to 5.

Appendix D.3

BUSINESS INDICATOR DETAIL REPORT FORMAT
Bank Name : Bank … (individual/consolidated)
Report Year : ______ /(unaudited/audited)
NO.
BUSINESS INDICATOR (BI) AND
BI SUBCOMPONENTS a b c
T T-1 T-2
1 Interest, Lease, and Dividends Component (KBSD) 1a Interest Income 1b Interest Expense 1c Productive Assets 1d Dividend Income 2 Services Component (KJ) 2a Service and Commission Income 2b Service and Commission Expense 2c Other operational income 2d Other operational expenses 3 Financial Component (KK) 3a Net Profit and Loss Trading Book 3b Net Profit and Loss Banking Book 4 BI 5 Business Indicator Component (BIC) BI Disclosure 6a Total BI including divested activities 6b Reduction in BI due to exclusion of divested activities 7 Additional Notes

Appendix D.4

FILLING IN THE BUSINESS INDICATOR DETAIL REPORT ROW NO.
DESCRIPTION
1 Interest, Lease, and Dividends Component (KBSD) = Min [Abs (Interest Income - Interest Expense); 2.25% x Productive Assets] + Dividend Income.
In this formula, all parts are calculated based on the average over 3 (three) years (T, T-1, and T-2).
Productive assets are the sum of the total gross amount of loans, customer advances (advances), interest-bearing securities (including government securities), and leased assets calculated at the end of each year. Productive assets included are assets in the balance sheet. 1a Interest income arising from all financial assets and other interest income (including interest income from financing leases and operating leases, as well as gains from leased assets). 1b Interest expense from all financial liabilities and other interest expenses (including interest expense from financing leases and operating leases, as well as losses, depreciation, and impairment of leased assets). 1c Total gross amount of loans, customer advances (advances), interest-bearing securities (including government securities), and leased assets calculated at the end of each year. 1d Dividend income from securities investments and financing not consolidated in financial statements, including dividend income from unconsolidated Subsidiary Companies, associates, and joint ventures. 2 Services Component (KJ) = Max (Service and Commission Income; Service and Commission Expense) + Max (Other Operational Income; Other Operational Expense). In this formula, all parts are calculated based on the average over 3 (three) years (T, T-1, and T-2).

ROW
NO.
DESCRIPTION
2a Income arising from the provision of consulting and services.
Includes income received by the Bank as a financial service provider.
2b Expenses arising from requests for consulting and services. Includes outsourcing costs paid by the Bank for the provision of financial services, but excludes outsourcing costs paid for the provision of non-financial services (such as logistics, IT, and human resources). 2c Income arising from the Bank's ordinary operational activities and not included in other business indicators but having similar characteristics (income from operating leases is not included in this account). 2d Expenses and losses arising from the Bank's ordinary operational activities and not included in other business indicators but having similar characteristics, and arising from events causing operational losses (expenses from operating leases are not included in this account). 3 Financial Component (KK) = Absolute Value (Net Profit and Loss Trading Book) + Absolute Value (Net Profit and Loss Banking Book). In this formula, all parts are calculated based on the average over 3 (three) years (T, T-1, and T-2). 3a It is the sum of:
a. Net profit and loss of trading book assets and liabilities (including derivatives, debt securities, equity, loans and customer advances (advances), short positions, other assets and liabilities); b. Net profit and loss from hedging accounting; and
c. Net profit and loss from exchange rate differences.
3b It is the sum of:
a. Net profit and loss of financial assets and liabilities measured at fair value through profit or loss; b. Realized gains or losses from financial assets and liabilities not measured at fair value through profit or loss (including loans and customer advances (advances), assets available for sale, assets held to maturity, financial liabilities measured at amortized cost);
c. Net profit and loss from hedging accounting; and
d. Net profit and loss from exchange rate differences.
4 BI which is the sum of 3 (three) components, namely KBSD, KJ, and KK.
5 BIC is calculated by multiplying BI by the marginal coefficient (α).
The marginal coefficient (α) increases based on BI value as follows:
Category
(Bucket)
BI Range
(Trillion Rp)
αI
1 ≤ 15 12%
2 15 < BI ≤ 450 15%
3 > 450 18%
BI disclosure (rows 6a and 6b) is only reported if the Bank receives approval from Otoritas Jasa Keuangan to exclude divested activities from the BI calculation.
If the Bank does not have divested activities excluded from the BI calculation, the Bank fills row 6a with the same amount as row 4, and row 6b with 0.
6a BI in this row includes the value of divested activities 6b Difference between row 6a and row 4.
7 Banks fill the additional notes column to explain significant differences from each reporting period and the main causes of such differences. Additional narrative is required for Banks receiving Otoritas Jasa Keuangan approval to exclude divested business activities from the BI calculation. The letter T indicates the last annual reporting period, T-1 indicates the annual reporting period in the year before the last period, and so on. The value of row 5 of Appendix D.3 must be the same as row 1 of Appendix D.5 Format Report Calculation of RWAs for Operational Risk Using the Standardized Approach. Amount is filled in millions of rupiah.

Appendix D.5

FORMAT REPORT CALCULATION OF RWAS FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH Bank Name : Bank … (individual/consolidated) Report Year : ______ /(unaudited/audited) (in millions) NO. DETAILS TOTAL 1 Business Indicator Component (BIC) 2 Internal Loss Multiplier (ILM) 3 Minimum Operational Risk Capital (MORC) 4 RWAs for Operational Risk

Appendix D.6

FILLING IN THE REPORT CALCULATION OF RWAS FOR OPERATIONAL RISK USING THE STANDARDIZED APPROACH ROW NO.
DESCRIPTION
1 BIC used to calculate MORC obligations.
2 ILM used to calculate MORC obligations. If Otoritas Jasa Keuangan determines to exclude losses from Operational Risk calculation, then ILM is set to 1 (one).
3 MORC value according to Pillar 1. For Banks using Operational Risk losses in calculating ILM, this value must be based on the multiplication of BIC by ILM. For Banks not using Operational Risk losses in calculating ILM, the value is the BIC value. 4 Conversion of RWA value for Operational Risk according to Pillar 1

Appendix E

MAPPING OF INTERNAL LOSS CATEGORIES

DEFINITION

CATEGORY (LEVEL 2)

EXAMPLES OF ACTIVITIES (LEVEL 3)

Internal Fraud<br>Losses involving at least one internal party due to actions intended to deceive, misappropriate property, or violate applicable regulations or company policies, excluding discrimination/difference incidents involving more than 1 (one) internal party.

Illegal Activities<br>1. Unreported transactions (intentional)<br>2. Type of illegal transaction (with monetary loss)<br>3. Position mismatch (intentional)<br><br>Theft and Fraud<br>1. Fraud/credit fraud/worthless deposit<br>2. Theft/extortion/embezzlement/robbery<br>3. Misappropriation of assets<br>4. Asset destruction<br>5. Forgery<br>6. Check kiting<br>7. Smuggling<br>8. Account takeover/forgery<br>9. Tax violation/embezzlement (intentional)<br>10. Bribery<br>11. Insider trading (not on company accounts)

CATEGORY (LEVEL 2)	EXAMPLES OF ACTIVITIES (LEVEL 3)
External Fraud<br>Losses due to actions by third parties intended to deceive, misappropriate property, or violate the law.	Theft and Fraud<br>1. Theft/robbery<br>2. Forgery<br>3. Check kiting<br><br>System Security<br>1. Hacking<br>2. Information theft (with monetary loss)<br><br>Employment Practices and Workplace Safety<br>Losses arising from actions inconsistent with regulations or employment agreements, health or safety, from payments for personal injury claims, or from discrimination/difference incidents.

CATEGORY (LEVEL 2)	EXAMPLES OF ACTIVITIES (LEVEL 3)
Labor Unions	1. Compensation, benefits, termination issues<br>2. Organized labor activities<br><br>Workplace Safety	1. Employee health and safety regulations<br>2. Worker compensation<br><br>General Liability (slips, falls, and others)	1. Employee health and safety regulations<br>2. Worker compensation<br><br>Difference and Discrimination	All types of discrimination

CATEGORY (LEVEL 2)

EXAMPLES OF ACTIVITIES (LEVEL 3)

Clients, Products, and Business Practices<br>Losses arising from product design or from unintentional or negligent failure to fulfill obligations/regulations to specific clients (including fiduciary and suitability requirements).

Suitability, Disclosure, and Fiduciary<br>1. Fiduciary violation or guideline violation<br>2. Suitability/disclosure issues (know your customers, etc.)<br>3. Retail customer disclosure violation<br>4. Privacy violation<br>5. Aggressive sales<br>6. Account misuse (account churning)<br>7. Misuse of confidential information<br>8. Lender liability<br><br>Unfair Business or Market Practices<br>1. Antitrust<br>2. Unfair trade/market practices<br>3. Market manipulation<br>4. Insider trading (on company accounts)<br>5. Unauthorized activities<br>6. Money laundering<br><br>Product Weakness<br>1. Defective products (illegal, etc.)<br>2. Model errors.

CATEGORY (LEVEL 2)	EXAMPLES OF ACTIVITIES (LEVEL 3)
Selection, Sponsorship, and Exposure	1. Failure to investigate clients according to guidelines<br>2. Exceeding client exposure limits.<br><br>Advisory Activities	Disputes arising from advisory activities.
Damage to Physical Assets<br>Losses arising from loss or damage to physical assets caused by natural disasters or other events.	Natural Disasters or Other Events<br>1. Natural disaster losses.<br>2. Human losses originating from external sources (terrorism, vandalism).<br><br>Business Disruption and System Failures<br>Losses arising from business disruption or system failures.

CATEGORY (LEVEL 2)	EXAMPLES OF ACTIVITIES (LEVEL 3)
Systems	1. Hardware.<br>2. Software.<br>3. Telecommunications.<br>4. Power outages/disruptions.
Execution, Delivery, and Process Management<br>Losses from counterparties or vendors caused by failures in processing transactions or management.	Recording Execution and Transaction Maintenance<br>1. Miscommunication.<br>2. Errors in data entry, maintenance, and loading.<br>3. Timing or responsibility inaccuracies.<br>4. Operational errors in mode/system.<br>5. Accounting errors/entity attribution errors.<br>6. Other task misperformance.<br>7. Delivery failure.<br>8. Collateral management failure.<br>9. Reference data maintenance.<br><br>Monitoring and Reporting<br>1. Errors in mandatory reporting.<br>2. Inaccurate external reports (resulting in loss)<br><br>Customer Intake and Documentation<br>1. Loss of client consent/disclaimer.<br>2. Missing/incomplete legal documents.<br><br>Customer/Client Account Management<br>1. Accounts given unauthorized access.<br>2. Incorrect client records (resulting in loss)<br>3. Lost/damaged client assets due to negligence.<br><br>Trading Counterparties<br>1. Non-client counterparty misperformance<br>2. Other disputes with non-client counterparties.

This copy is consistent with the original

Deputy Director of Legal Consultation and Harmonization of Banking Regulations 1 Legal Directorate 1 Legal Department

signed

Wiwit Puspasari

CATEGORY (LEVEL 2)	EXAMPLES OF ACTIVITIES (LEVEL 3)
Vendors and Suppliers	1. Outsourcing.<br>2. Vendor disputes

Determined in Jakarta on April 29, 2020

CHIEF EXECUTIVE OF BANKING SUPERVISION
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,

signed

HERU KRISTIYANA