OJK Regulation No. 31/POJK.03/2019 on Leverage Ratio Compliance Obligations for Commercial Banks

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 31 /POJK.03/2019
ON
LEVERAGE RATIO COMPLIANCE OBLIGATIONS FOR COMMERCIAL BANKS BY THE GRACE OF GOD ALMIGHTY THE COMMISSIONERS' COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that to create a healthy and developing banking system capable of competing nationally and internationally, a strong bank capital structure is required; b. that to measure bank capital structure, a capital ratio indicator is needed to complement the Minimum Capital Requirement ratio;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on Leverage Ratio Compliance Obligations for Commercial Banks;
Recalling:

Law Number 7 of 1992 on Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);
Law Number 21 of 2011 on the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION ON LEVERAGE RATIO COMPLIANCE OBLIGATIONS FOR COMMERCIAL BANKS.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation:

Commercial Bank, hereinafter referred to as Bank, is a bank that conducts conventional business activities providing payment circulation services, including branch offices of banks located abroad.
Leverage Ratio, hereinafter referred to as Leverage Ratio, is the ratio of Core Capital to Total Exposure.
Core Capital is Core Capital as regulated in the Financial Services Authority Regulation regarding Minimum Capital Requirement obligations for commercial banks.
Total Exposure is the sum of asset exposure in the financial position statement, derivative transaction exposure, securities financing transaction exposure, and administrative account transaction exposure in the commitment and contingency statement.
Subsidiary Company is a company owned and/or controlled by the Bank directly or indirectly, both domestically and abroad, meeting the criteria regulated in the Financial Services Authority Regulation regarding the application of consolidated risk management for banks controlling subsidiary companies.

Article 2
(1) Banks are required to provide adequate Core Capital based on Total Exposure recorded in the financial position statement and the commitment and contingency statement.
(2) Adequate Core Capital provision as referred to in paragraph (1) is calculated using the Leverage Ratio.
(3) Banks are required to meet the Leverage Ratio as referred to in paragraph (2) at a minimum of 3% (three percent) at all times.
(4) The Leverage Ratio as referred to in paragraph (2) is calculated in Indonesian Rupiah.

Article 3
(1) In the event that a Bank owns and/or controls a Subsidiary Company, the Leverage Ratio compliance obligation as referred to in Article 2 paragraph (3) applies to the Bank both individually and on a consolidated basis. (2) Consolidated Leverage Ratio compliance as referred to in paragraph (1) does not include Subsidiary Companies conducting insurance business activities.

CHAPTER II
LEVERAGE RATIO CALCULATION
Article 4
(1) To comply with the Leverage Ratio as referred to in Article 2 paragraph (3), Banks are required to calculate Core Capital and Total Exposure.
(2) Core Capital as referred to in paragraph (1) includes:
a. core capital and additional capital for Banks headquartered in Indonesia; or b. business funds, retained earnings, prior year profits, current year profits, general reserves, fixed asset revaluation surplus balances, and other comprehensive income for branch offices of banks located abroad, with consideration of capital deduction factors, as referred to in the Financial Services Authority Regulation regarding Minimum Capital Requirement obligations for commercial banks. (3) Total Exposure as referred to in paragraph (1) includes trading book and banking book positions. (4) In calculating Total Exposure as referred to in paragraph (1), Banks are prohibited from:
a. performing netting processes between asset positions and liabilities recorded in the financial position statement; b. recognizing collateral, guarantees, sureties, or other credit risk mitigation techniques as deduction factors for Total Exposure; and/or
c. recognizing assets that have been calculated as deduction factors for Core Capital as referred to in the Financial Services Authority Regulation regarding Minimum Capital Requirement obligations for commercial banks.
(5) The method for calculating Total Exposure as referred to in paragraph (1) is contained in Appendix A, which is an integral part of this Financial Services Authority Regulation.

CHAPTER III
REPORTING AND PUBLICATION
Article 5
(1) Banks are required to submit reports on Leverage Ratio compliance obligations based on the end-of-quarter reporting position to the Financial Services Authority.
(2) The Leverage Ratio compliance obligation report as referred to in paragraph (1) consists of:
a. Leverage Ratio Total Exposure report; and b. Leverage Ratio calculation report.
(3) The end-of-quarter reporting position as referred to in paragraph (1) refers to reports for the end of March, June, September, and December months.
(4) The format of the Leverage Ratio compliance obligation report as referred to in paragraph (1) is contained in Appendix B, which is an integral part of this Financial Services Authority Regulation.

Article 6
(1) Banks are required to submit the Leverage Ratio compliance obligation report as referred to in Article 5 to the Financial Services Authority online through the Financial Services Authority reporting system. (2) The online reporting method as referred to in paragraph (1) complies with the Financial Services Authority Regulation regarding commercial bank reporting through the Financial Services Authority reporting system. (3) In the event that online reporting to the Financial Services Authority as referred to in paragraph (2) cannot yet be performed, reports are submitted offline. (4) The deadline for submitting online and offline reports is established as follows:
a. the 7th day after the end of the reporting month, for individual Bank reports; and b. the 21st day after the end of the reporting month, for consolidated Bank reports.
(5) In the event that the report submission deadline as referred to in paragraph (4) falls on a Saturday, Sunday, and/or national holiday, the report is submitted on the next working day.
(6) The Leverage Ratio compliance obligation report as referred to in paragraph (1) is submitted for the first time for the end-of-March 2020 position.

Article 7
Offline submission of Leverage Ratio compliance obligation reports as referred to in Article 6 paragraph (3) is submitted to:
a. the relevant Bank Supervision Department or Financial Services Authority Regional Office in Jakarta for Banks headquartered or branch offices of banks located abroad within the Jakarta Special Capital Region Province and Banten Province; or b. the Financial Services Authority Regional Office or local Financial Services Authority Office according to the region of the Bank's headquarters location, for Banks headquartered outside the Jakarta Special Capital Region Province.

Article 8
(1) Banks are required to publish Leverage Ratio compliance obligation reports based on the end-of-quarter reporting position as referred to in Article 5 paragraph (1) for the end of March, June, September, and December months. (2) Publication of the end-of-quarter Leverage Ratio compliance obligation report as referred to in paragraph (1) must be conducted through:
a. the Bank's website for the Leverage Ratio compliance obligation report as referred to in Article 5 paragraph (1) end-of-quarter reporting position; and b. at least 1 (one) national Indonesian-language newspaper with wide circulation, the Bank's website, and online through the Financial Services Authority reporting system, for the percentage value of the Leverage Ratio end-of-quarter reporting position included in the quarterly publication report. (3) The obligation to publish the end-of-quarter Leverage Ratio compliance obligation report as referred to in paragraph (2) letter a must be done no later than:
a. the 15th day of the second month after the end of the reporting month, for reports for the end of March, June, and September months; and b. the end of March of the following year after the end of the reporting month, for the December month end report. (4) The method, format, and time limit for submitting quarterly publication reports for the quarterly Leverage Ratio percentage value as referred to in paragraph (2) letter b are conducted in accordance with the method, format, and time limit for publication as regulated in Financial Services Authority regulations regarding transparency and publication of Bank reports. (5) Publication of the quarterly Leverage Ratio compliance obligation report as referred to in paragraph (2) is submitted for the first time for the end-of-March 2020 report position.

Article 9
(1) Banks are required to maintain the announcement of the end-of-quarter Leverage Ratio compliance obligation report on the Bank's website as referred to in Article 8 paragraph (2) letter a for a minimum of 5 (five) last fiscal years. (2) For new Banks resulting from mergers, consolidations, or conversions of less than 5 (five) years, the obligation to maintain the announcement of the Leverage Ratio compliance obligation report as referred to in paragraph (1) remains.

Article 10
Banks are deemed not to have published the Leverage Ratio value for the end-of-quarter position as referred to in Article 8 paragraph (2) letter b if the published quarterly report does not include information regarding the percentage value of the Leverage Ratio for the end-of-quarter reporting position.

CHAPTER IV
ADMINISTRATIVE SANCTIONS
Article 11
(1) Banks that do not comply with the provisions as referred to in Article 2 paragraph (1), Article 2 paragraph (3), Article 4 paragraph (1), and/or Article 4 paragraph (4) are subject to administrative sanctions in the form of written warnings. (2) Banks that do not comply with the provisions as referred to in Article 5 paragraph (1) and/or Article 6 paragraph (1) are subject to administrative sanctions in the form of fines of Rp1,000,000.00 (one million rupiah) per day of delay or a maximum of Rp30,000,000.00 (thirty million rupiah). (3) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2), the Bank may be subject to administrative sanctions in the form of:
a. reduction of the Bank's health level; b. suspension of certain business activities; and/or
c. prohibition from acting as a main party in accordance with the Financial Services Authority Regulation regarding re-evaluation of main parties of financial service institutions.

Article 12
Banks that do not comply with the provisions as referred to in Article 8 paragraph (1), Article 8 paragraph (2), and/or Article 9 are subject to administrative sanctions in accordance with the Financial Services Authority Regulation regarding transparency and publication of Bank reports.

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

CHAPTER V
CLOSING PROVISIONS
Article 13
This Financial Services Authority Regulation takes effect on the date of enactment.
For everyone to know, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on 2 December 2019

CHAIRMAN OF THE COMMISSIONERS' COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO
Enacted in Jakarta on 3 December 2019
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2019 NUMBER 232

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 31 /POJK.03/2019
ON
LEVERAGE RATIO COMPLIANCE OBLIGATIONS FOR COMMERCIAL BANKS

I. GENERAL
The experience of financial and economic crises that occurred in various countries in 2008 showed that there was excessive leverage in the banking system, both for exposures recorded in the financial position statement and for administrative account transaction exposures in the commitment and contingency statement of Banks. Although Banks have strong Minimum Capital Requirement ratios, excessive leverage conditions have proven to cause losses to Banks and the overall economy when large-scale asset sales occur, resulting in declining asset prices in the financial system. Furthermore, the quantity and quality of capital simultaneously declined due to the losses borne by Banks when liquidity conditions in the financial system decreased significantly. This condition caused large-scale credit contraction, affecting the Bank's ability to support economic growth and increasing overall credit risk.

As one of the efforts to mitigate these impacts, an additional ratio in the form of Leverage Ratio was introduced to complement the risk-based capital framework ratio, namely the Minimum Capital Requirement. The Leverage Ratio aims to limit excessive leverage conditions in the banking sector so that asset sales processes that worsen and endanger the overall financial system and economy can be avoided. The Leverage Ratio is a simpler, non-risk-based measurement, expected to strengthen risk-based capital calculation requirements. In this regard, regulations regarding Leverage Ratio compliance obligations for Commercial Banks are necessary.

II. ARTICLE BY ARTICLE
Article 1
Sufficiently clear.
Article 2
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Conversion of foreign currency to Rupiah is conducted using the Bank Indonesia closing middle rate on the reporting date.
Article 3
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Insurance business activities have very different risk characteristics from banking business activities, so Leverage Ratio calculations are not applied.
Article 4
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Letter a
Sufficiently clear.
Letter b
Credit risk mitigation techniques are methods of recognizing collateral, guarantees, sureties, or credit insurance in calculating risk-weighted assets using the standardized approach.
Letter c
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Article 5
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
The Leverage Ratio Total Exposure report is a report containing detailed Total Exposure calculations comparing Total Exposure values based on financial accounting standards with Total Exposure values based on calculation methods as regulated in this Financial Services Authority Regulation. Letter b The Leverage Ratio calculation report is a report presenting quantitative information in the form of calculations and Leverage Ratio values. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.
Article 6
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Letter a
Example:
For the Leverage Ratio report for individual Banks for the end of March 2020, it must be submitted no later than April 7, 2020.
Letter b
Example:
For the Leverage Ratio report for consolidated Banks for the end of March 2020, it must be submitted no later than April 21, 2020.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
Sufficiently clear.
Article 7
Sufficiently clear.
Article 8
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Letter a
Example:
Publication for the Leverage Ratio compliance obligation report for the end of March 2020 must be done no later than May 15, 2020.
Letter b
Example:
Publication for the Leverage Ratio compliance obligation report for the end of December 2020 must be done no later than the end of March 2021.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Article 9
Paragraph (1)
The Leverage Ratio compliance obligation report for the end of March 2020 must be maintained on the Bank's website until the end of March 2025.
Paragraph (2)
Sufficiently clear.
Article 10
Sufficiently clear.
Article 11
Sufficiently clear.
Article 12
Sufficiently clear.
Article 13
Sufficiently clear.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6428

APPENDIX
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 31 /POJK.03/2019
ON
LEVERAGE RATIO COMPLIANCE OBLIGATIONS
FOR COMMERCIAL BANKS
GUIDELINES FOR LEVERAGE RATIO COMPLIANCE OBLIGATIONS FOR COMMERCIAL BANKS

TABLE OF CONTENTS
Appendix A METHOD OF CALCULATING LEVERAGE RATIO FOR COMMERCIAL BANKS
Appendix B METHOD OF PREPARING LEVERAGE RATIO COMPLIABILITY REPORTS FOR COMMERCIAL BANKS
Appendix B.1 FORMAT OF TOTAL EXPOSURE REPORT IN LEVERAGE RATIO
Appendix B.2 FILLING OUT THE TOTAL EXPOSURE REPORT IN LEVERAGE RATIO
Appendix B.3 FORMAT OF LEVERAGE RATIO CALCULATION REPORT
Appendix B.4 METHOD OF FILLING OUT THE LEVERAGE RATIO CALCULATION REPORT
Appendix C EXAMPLE OF FILLING OUT TOTAL EXPOSURE REPORT IN LEVERAGE RATIO AND LEVERAGE RATIO CALCULATION REPORT

Appendix A
METHOD OF CALCULATING LEVERAGE RATIO
FOR COMMERCIAL BANKS
I. GENERAL

Leverage Ratio is the ratio of Core Capital to the sum of Total Exposure in the financial position statement and Administrative Account Transaction (TRA) value in the commitment and contingency statement.
Leverage Ratio can be calculated using the following formula: Core Capital / Total Exposure.
Core Capital is:
a. core capital and additional capital for Banks headquartered in Indonesia; or b. business funds, retained earnings, prior year profits, current year profits, general reserves, fixed asset revaluation surplus balances, and other comprehensive income for branch offices of banks located abroad, with consideration of capital deduction factors, as referred to in the Financial Services Authority Regulation regarding Minimum Capital Requirement obligations for commercial banks.
Total Exposure in Leverage Ratio calculation is the sum of asset exposure in the financial position statement, derivative transaction exposure, securities financing transaction exposure (Securities Financing Transactions/SFT), and TRA exposure in the commitment and contingency statement.
Total Exposure = asset exposure in balance sheet + derivative transaction exposure + SFT exposure + TRA exposure in the commitment and contingency statement.
Coverage of trading book and banking book positions refers to Financial Services Authority regulations regarding Minimum Capital Requirement obligations for commercial banks.
Reference entity is the party owing or having payment obligations from underlying assets, including:
a. issuers of securities designated as underlying assets; and b. parties obligated to settle receivables from transferred credits or claims designated as underlying assets.

II. CALCULATION OF TOTAL EXPOSURE IN LEVERAGE RATIO
A. General

Exposure value calculations in Leverage Ratio generally use the recorded value of exposures.
The recorded value used for Leverage Ratio calculation is the recorded asset value plus accrued interest receivable before deducting impairment losses on assets, in accordance with financial accounting standards.
In calculating Total Exposure, Banks are prohibited from:
a. performing netting processes between asset positions and liabilities recorded in the financial position statement; b. recognizing collateral, guarantees, sureties, or other credit risk mitigation techniques as deduction factors for Total Exposure; and/or
c. recognizing assets that have been calculated as deduction factors for Core Capital as referred to in the Financial Services Authority Regulation regarding Minimum Capital Requirement obligations for commercial banks,
as referred to in Article 4 paragraph (4) of this Financial Services Authority Regulation.
Banks conducting securitization activities must pay attention to the following:
a. Banks conducting traditional securitization and acting as initial creditors may exclude financial asset pools underlying transferred assets from Total Exposure Leverage Ratio calculations, provided they meet the financial asset transfer requirements as referred to in the Financial Services Authority Regulation regarding prudential principles in asset securitization activities for commercial banks. In this case, securitization exposures still recorded in the Bank's financial position statement will be included in the Leverage Ratio. b. Banks conducting synthetic securitization and/or traditional securitization but not meeting the financial asset transfer requirements as referred to in the Financial Services Authority Regulation regarding prudential principles in asset securitization activities for commercial banks must still include underlying financial assets in Total Exposure Leverage Ratio calculations.
Banks must be wary of transactions or structures that may prevent Banks from adequately knowing the source of leverage. Such transactions or structures include:
a. Banks conducting SFT transactions where exposure to the counterparty increases when the counterparty's credit quality deteriorates, or SFT transactions where the counterparty's credit quality positively correlates with the value of securities received (counterparty credit quality deteriorates when security values fall); b. Banks that generally act as principal actors in derivative and SFT transactions then choosing to become agents to obtain special treatment benefits for agents in Leverage Ratio calculations;
c. Banks conducting collateral swap trades to avoid calculating collateral values in Leverage Ratio exposure calculations; and
d. Banks creating structures or mechanisms to transfer assets off the balance sheet.
In the event that the leverage source from such transactions cannot be adequately known in the Leverage Ratio or has the potential to cause asset sales (deleveraging) processes to become unstable, Banks re-examine such transactions and take corrective actions, including

Increasing the quality of Leverage Ratio management or submitting additional reports to the Financial Services Authority.

B. Asset Exposure in the Balance Sheet

Asset exposure in the balance sheet is all assets, collateral in derivative transactions, and collateral in SFTs recorded in the balance sheet, including current accounts at Bank Indonesia, but does not include:
a. assets that have been calculated as a factor reducing Core Capital as referred to in the Financial Services Authority Regulation regarding the minimum capital provision obligation for commercial banks; and/or b. exposures calculated in the exposure arising from Counterparty Credit Risk due to failure, i.e., derivative transactions and SFTs in the balance sheet.
The calculation of asset exposure in the balance sheet is the recorded value of assets plus accrued interest receivable not yet received, minus the Provision for Impairment Losses (CKPN) on those assets according to accounting standards, with the formula:
Asset exposure in the balance sheet = {recorded value of assets + accrued interest receivable not yet received (if any) – CKPN}.
Regular Purchase or Sale of Financial Assets
Accounting treatment for the regular purchase or sale of financial assets that have not yet been settled may use trade date accounting or settlement date accounting.
Regular purchase or sale is the purchase or sale of financial assets based on a contract requiring the delivery of assets within a timeframe generally established by regulations or prevailing market practices.

a. Trade Date Accounting
In calculating the Leverage Ratio, Banks using trade date accounting for the purchase and sale of financial assets must deduct the difference (if any) between the cash receivable from unsettled sales and the cash payable for unsettled purchases, which has been recognized based on financial accounting standards. Banks may offset cash receivables against cash payables, regardless of the financial accounting standard treatment of such offset, provided they meet the following requirements:
1. financial assets are measured at fair value through profit or loss and are included in the Bank's trading book definition; and
2. the purchase or sale of financial instruments is settled on a Delivery versus Payment (DvP) basis.
b. Settlement Date Accounting
For the Leverage Ratio calculation, the exposure calculation for the purchase or sale of financial assets using settlement date accounting is based on the calculation method for TRA exposure.
Treatment of Cash Pooling
Cash pooling is a Bank mechanism to combine credit and/or debit balances from several accounts belonging to a single customer using cash pooling services into a single account balance in the customer's name to facilitate cash and/or liquidity management. Such cash pooling requires a transfer process at most daily. After the transfer process, for the Leverage Ratio calculation, the Bank must:
a. if the transfer process occurs daily, the Bank deletes and merges several accounts belonging to a single customer using cash pooling services into a single account in the customer's name, provided the Bank has no obligation towards each individual account. Thus, the basis for calculating the Leverage Ratio for cash pooling is the balance in the single account, not several accounts belonging to a participating single customer; or b. if the transfer process does not occur daily, the Bank is still deemed to have deleted and merged several accounts belonging to a single customer using cash pooling services into a single account. The balance in this single account can be used as the basis for calculating exposure for the Leverage Ratio provided it meets the following requirements:
1. besides providing several accounts belonging to a single customer using cash pooling services, the Bank provides a single account with balances from all accounts belonging to a single customer that can be transferred and then offset;
2. the Bank must have a legally enforceable right at any time to transfer balances from each customer account using cash pooling services into the single account so that the Bank has no responsibility for the balances in the accounts individually;
3. the Bank must ensure that the frequency of the transfer process is adequate after consulting with the Financial Services Authority;
4. there is no mismatch in the maturity of balances in several accounts belonging to individual customers using cash pooling services in the cash pooling mechanism, or all balances are overnight or on demand; and
5. the Bank pays interest, charges interest, and/or levies fees based on the combined balance of each individual customer's account within the cash pooling mechanism.
c. if the transfer process does not occur daily and the Bank cannot meet the requirements as referred to in item 2), the Bank must display the balances in several accounts belonging to a participating single customer individually.

C. Derivative Transaction Exposure

Banks calculate exposure for all derivative transactions, including protection sale transactions using credit derivatives.
The calculation of derivative transaction exposure is the sum of Replacement Cost (RC) and Potential Future Exposure (PFE) multiplied by 1.4 (one point four), mathematically calculated with the formula:
Derivative Transaction Exposure = 1.4 x (RC + PFE)
The calculation of derivative transaction exposure as referred to in item 2) is performed on each netting set. Each netting set consists of:
a. 1 (one) derivative transaction, in the absence of an offsetting agreement meeting specific requirements; or b. 2 (two) or more derivative transactions with the same counterparty, provided that 2 (two) or more of the aforementioned derivative transactions can be offset through an offsetting agreement meeting specific requirements. Specific requirements for offsetting agreements are as regulated in the Financial Services Authority Circular regarding guidelines for calculating net exposure of derivative transactions in risk-weighted asset calculations for credit risk using the standard approach. In calculating the Leverage Ratio, Banks cannot offset different product categories. For example: offsetting between derivative transactions and SFTs.
Replacement Cost (RC) Calculation
Replacement Cost (RC) calculation is performed on each netting set. In calculating the Leverage Ratio, the RC calculation for derivative transactions is the largest value between:
a. the mark-to-market value of the derivative transaction minus cash variation margin received by the Bank plus cash variation margin given by the Bank; or b. 0 (zero), if the calculation in letter a) results in a negative number, mathematically calculated with the formula:
RC = max {V – CVMr + CVMp ; 0}
Explanation:
V : mark-to-market value of the derivative transaction.
CVMr : cash variation margin received by the bank and not yet deducted from the mark-to-market value of the derivative transaction (V).
CVMp : cash variation margin given by the bank.
Cash variation margin must meet requirements regarding Cash Variation Margin (CVM) Treatment.
The RC calculation for derivative transactions that do not have measurement based on financial accounting standards because the transactions are fully recorded in TRA is by using the sum of the positive fair value of the derivative transaction.
Potential Future Exposures (PFE) Calculation
a. PFE calculation refers to the Financial Services Authority Circular regarding guidelines for calculating net exposure of derivative transactions in risk-weighted asset calculations for credit risk using the standard approach. b. For the Leverage Ratio calculation, the multiplier in the PFE calculation is set constant at 1 (one).
c. If the Bank sells options (written option) such that the Bank has exposure to the underlying asset, the option sale is included in the exposure calculation for the Leverage Ratio.
Collateral Treatment
a. Collateral Received
1. Collateral received in derivative transactions has contradictory impacts on leverage conditions. Such collateral can reduce counterparty exposure but can also be used by the Bank as leverage in the Bank's balance sheet.
2. Collateral received by the Bank in derivative transactions does not automatically reduce the leverage inherent in the Bank's balance sheet due to derivative positions. This can occur when the Bank's exposure related to derivative transaction settlement does not automatically decrease due to the collateral.
3. Based on considerations in items 1) and 2), for the Leverage Ratio calculation, received collateral cannot be used to reduce the derivative transaction exposure calculation even if the collateral can be offset against derivative transaction exposure. Thus, RC cannot be reduced by received collateral, and the multiplier on PFE is set at 1 (one).
b. Collateral Given
If the Bank provides collateral to the counterparty resulting in a decrease in Total Asset Exposure in the Bank's balance sheet according to financial accounting standards, then in calculating exposure for the Leverage Ratio, the Bank must add back (gross up) by the amount of the decrease in asset exposure in the aforementioned balance sheet.
Cash Variation Margin (CVM) Treatment
a. Specific requirements for CVM as referred to in item 4) must meet the following conditions:
1. CVM is calculated daily and exchanged daily based on the mark-to-market value of the derivative transaction. CVM can be exchanged on the following day based on the previous day's closing mark-to-market value;
2. CVM is exchanged in the currency agreed upon in the derivative transaction agreement, master netting agreement (MNA), or credit support annex (CSA) to the MNA;
3. CVM exchanged is equal to the value used to mitigate changes in mark-to-market value, while still considering the mark-to-market threshold where the counterparty is not required to provide collateral to the Bank and the minimum collateral amount to be provided by the counterparty to the Bank; and
4. the MNA meets the following requirements:
  a) complies with laws and regulations in the jurisdiction where the Bank and counterparty are located, and is enforceable in the event of default, bankruptcy, and/or insolvency; b) meets all requirements as referred to in the Financial Services Authority Circular regarding guidelines for calculating net exposure of derivative transactions in risk-weighted asset calculations for credit risk using the standard approach; and c) there is an offsetting process resulting in a single legal obligation for one party (Bank or counterparty) in the event of default, bankruptcy, and/or insolvency, considering CVM.
b. CVM meeting specific requirements can be included in the derivative transaction exposure calculation for the Leverage Ratio as referred to in item C.4 with the following treatment:
1. for CVM received by the Bank from the counterparty, it is treated as a factor reducing RC as long as the derivative claim amount (positive mark-to-market) recorded in the balance sheet has not been reduced by CVM.
2. for CVM given by the Bank to the counterparty, if the Bank records the CVM as a cash receivable, such cash receivable can become a reduction in asset exposure in the balance sheet for the Leverage Ratio; however, such CVM is still treated as a factor increasing RC.
Calculation of Derivative Transaction Exposure in the form of Credit Derivative Sales
The definition of credit derivatives is not limited to Credit Default Swaps (CDS) and Total Return Swaps (TRS) sold by the Bank, but also all forms of put options that cause the Bank to have an obligation to provide credit protection. The calculation of exposure for credit derivative sales for the Leverage Ratio is:
a. The exposure value for credit derivative sales is the sum of:
1. the exposure value of risk due to counterparty failure based on the fair value of the credit derivative sale agreement using the formula as referred to in item 2); and
2. the notional credit exposure of the underlying reference entity in the form of the effective notional credit value referenced in the credit derivative sale.
  b. The calculation of exposure for credit derivative sales as referred to in letter a) may result in an excessive value. Thus, when calculating the exposure value of risk due to counterparty failure as referred to in item a.1), the Bank may exclude from the PFE component the portion of the effective notional credit value in the credit derivative sale that cannot be offset against the effective notional credit value in the credit derivative purchase because it does not meet the requirements for offsetting effective notional credit values in credit derivative transactions. The effective notional credit value is still included in the Leverage Ratio calculation as referred to in item a.2).
  c. The calculation in item a.2) arises because credit derivative sale transactions create exposure to credit notional value caused by the creditworthiness factor of the reference entity. For Leverage Ratio exposure calculation, credit derivative sales are treated as cash instruments like loans and securities.
  d. The calculation of effective notional credit value in credit derivative sales as referred to in item a.2) is:
3. the Bank adjusts the effective notional credit value to reflect the real exposure value protected by the credit derivative or causing leverage conditions;
4. the effective notional credit value can be reduced by the negative fair value already included in the Core Capital calculation.
  Example:
  a) if the fair value of the credit derivative sale is Rp20,000,000.00 (twenty million rupiah) on March 28, 2019, and has a negative fair value of Rp10,000,000.00 (ten million rupiah) on the next reporting date, the effective notional value can decrease to Rp10,000,000.00 (ten million rupiah). However, the effective notional value cannot be reduced by Rp30,000,000.00 (thirty million rupiah);
b) if the fair value of the credit derivative sale has a positive fair value of Rp5,000,000 (five million rupiah) on the next reporting date, the effective notional value cannot be reduced. Such treatment is consistent with the rationale that the effective notional value included in the exposure calculation can be limited to the maximum potential loss level at the reporting date, i.e., the effective notional credit value minus the negative fair value already included in the Core Capital calculation.
3) the effective notional credit value in credit derivative sales can be offset against the effective notional credit value in credit derivative purchases from the same reference entity, provided it meets the following requirements:
a) the reference financial asset of the credit derivative purchased by the Bank is identical to the reference financial asset of the credit derivative issued. Identical means there is a similarity in issuer (legal entity); b) the credit protection purchased through the credit derivative has the same or more conservative requirements than the credit derivative sold. These requirements include subordination level, optionality, credit events, reference, or other relevant requirements in valuing derivative transactions; c) the remaining term of the credit protection purchased through the credit derivative is at least equal to the credit derivative sold; d) the Bank does not buy credit protection from a counterparty whose credit quality is highly correlated with the value of the underlying bond; and

e) if the effective notional value of the sold credit derivative is reduced by the fair value decrease calculated in core capital, the effective notional value of the purchased derivative is reduced by the fair value increase already calculated in Core Capital.
4) in order to meet the requirements for offsetting as referred to in item 3), two reference entities are considered identical if they refer to the same legal subject. Credit protection using credit derivatives purchased for a group of reference entities can be offset against credit protection sold for individual reference entities or offset against credit protection sold for a group of reference entities, under certain conditions.
Conditions allowing offsetting treatment are:
a) credit protection purchased for a group of reference entities can be offset against credit protection sold for individual reference entities if the purchased credit protection has an economic value equivalent to the value to buy credit protection separately for each individual in the group of reference entities; b) credit protection purchased for a group of reference entities cannot be offset against credit protection sold for individual reference entities if the purchased credit protection does not cover the entire group of reference entities (protection only covers a subset of the group of reference entities). For example, credit derivatives with nth-to-default type or tranche division in securitization; and

c) credit protection purchased for a group of reference entities can be offset against credit protection sold for a group of reference entities as long as the purchased credit protection covers the entire portion of the group of reference entities that is the basis for the sale of credit protection. e. If the credit derivative sale transaction is an option sold by the Bank with the condition that the Bank has an obligation to provide credit protection based on certain conditions, the effective notional credit value of such option can be offset against the effective notional credit value of the call option, i.e., the Bank has the right to buy credit protection. Such offset can be performed provided it meets the requirements as referred to in item d.3). An example of conditions where the purchased credit derivative has the same or more conservative requirements than the sold credit derivative as referred to in item d.3).b) is when the strike price for the purchased credit protection is the same or lower than the strike price for the sold credit protection. f. Banks that buy credit protection through TRS and record the net payment received as net profit but do not record offsetting deterioration on the value of credit derivative sales in Core Capital either through fair value decrease or addition of capital reserves, the purchased credit protection cannot be offset against the effective notional value underlying the credit derivative sale.

D. Securities Financing Transaction (SFT) Exposure SFTs include repo transactions, reverse repo transactions, security lending, security borrowing, and margin lending transactions. The value of SFT transactions generally depends on market prices and has margin charging agreements. Exposure calculation will differ if the Bank conducts SFT for its own benefit versus the Bank as an intermediary or agent.

Bank conducts SFT for its own benefit
a. SFT Exposure Calculation
In calculating the Leverage Ratio, the SFT exposure calculation is the sum of:

the calculation of the gross recorded value of SFT assets without recognizing offsetting based on financial accounting standards.
Example: offsetting between cash receivables and cash liabilities; and
measurement of counterparty credit risk, considered as current exposure, subsequently called current exposure, without calculating the add-on factor in the form of PFE.
In SFT transactions, there is treatment for sale accounting transactions. If SFT transactions are treated as sales transactions causing the transfer of ownership of the underlying securities, then for Leverage Ratio calculation, the Bank must reverse the journal entry for the aforementioned sales transaction and calculate the SFT transaction exposure as referred to in this regulation.

b. Gross Recorded Value of SFT Assets Calculation Example of gross recorded value of SFT assets calculation:
Assets in the form of securities for repo transactions and assets in the form of reverse repo receivables for reverse repo transactions as referred to in item a.1) are adjusted as follows:

exclude the value of securities received in SFT transactions only if such securities have been recorded as assets in the Bank's balance sheet.
Example:
The Bank receives assets recorded in the Bank's balance sheet and has the right to re-pledge but has not yet done so;
treatment of cash liabilities in SFT, e.g., repo liabilities, and cash receivables in SFT, e.g., reverse repo receivables, with the same counterparty can be calculated net if they meet the following requirements:
a) SFT has the same explicit final settlement date. The Bank cannot calculate SFTs net if they do not have an explicit final settlement date (transactions can be cancelled at any time); b) the right to offset can be legally enforced under normal business conditions and in the event of default, insolvency, and/or bankruptcy; and c) the counterparty has the intention to settle net and simultaneously, or the SFT has a settlement mechanism similar to net settlement, i.e., cash flows from SFT are equivalent to one net value on the settlement date. To achieve this equivalence, the settlement of both transactions is conducted through the same settlement system and supported by cash and/or intra-day credit facilities that guarantee settlement will occur by the end of the day and any arising from the position (leg) of securities in SFT does not affect the net settlement of receivables and payables.

Specifically, that condition means that a failure in any single securities transaction in the settlement mechanism may delay the settlement of the corresponding cash leg or generate a liability in the settlement mechanism supported by the related credit facility.

In the event of a failure in the securities leg in the mechanism at the end of the settlement time, the SFT transaction and the related cash leg must be separated from the netting set and treated on a gross basis.

The criteria in letter c) are not intended to hinder settlement mechanisms with DvP or other types of settlement mechanisms, provided that the settlement mechanism meets the functional requirements set forth in letter c). For example, in the event of a failed transaction such as securities failing to transfer and the related receivables or payables for those securities, the settlement mechanism for that transaction may be considered to meet the functional requirements as referred to in letter c) if the transaction can be re-entered into the settlement mechanism until the transaction is settled.

c. Calculation of Current Exposure
The calculation of current exposure as referred to in item 2.a) is calculated based on the positive difference between the value of financial instruments delivered by the Bank and the value of financial instruments received by the Bank (E*).

Calculation of Current Exposure when the Bank Does Not Have an MNA.
The positive difference between the value of financial instruments delivered by the Bank and the value of financial instruments received by the Bank (E*) is calculated with the formula:
Ei* = max {0, [Ei - Ci]}

Explanation:
Ei* : The positive difference between the fair value of financial instruments delivered by the Bank and the fair value of financial instruments received by the Bank from counterparty i.
Ei : The fair value of financial instruments delivered by the Bank to counterparty i. a. for repo transactions, it is the net book value of the underlying securities of the repo transaction. b. for reverse repo transactions, it is the net book value of the reverse repo receivable. Ci : The fair value of financial instruments received by the Bank from counterparty i. a. for repo transactions, it is equal to the cash value giving rise to the repo obligation; or b. for reverse repo transactions, it is the fair value of the collateral in the form of securities underlying the reverse repo transaction.

Calculation of Current Exposure when the Bank Has an MNA.
The positive difference between the value of financial instruments delivered by the Bank and the value of financial instruments received by the Bank (E*) is calculated with the formula:
E* = max {0, [∑Ei - ∑Ci ]}

Explanation:
E* : The positive difference between the fair value of financial instruments delivered by the Bank and the fair value of financial instruments received by the Bank from counterparty i.
∑Ei : Total fair value of financial instruments delivered by the Bank to counterparty i.
∑Ci : Total fair value of financial instruments received by the Bank from counterparty i.

MNA must meet the following requirements:
a) in accordance with laws and regulations in force in the jurisdiction of the Bank's location and the counterparty, and can be applied at the time of default, bankruptcy, and/or inability to meet obligations (insolvency); b) the party not experiencing default has the right to terminate or close out all transactions at the time of the counterparty's default, bankruptcy, and/or inability to meet obligations (insolvency); c) netting is not only performed based on the initial transaction value but also performed against transaction profits and losses, including the value of collateral at the time of transaction cancellation or termination. Netting results in only one legal obligation for one party between the Bank or the counterparty; and d) in the event of default, bankruptcy, and/or inability to meet obligations (insolvency), the liquidation and netting process of the collateral must be carried out immediately.

Bank Conducts SFT as an Intermediary or Agent
a. The Bank calculates SFT exposure depending on the collateral provided by the Bank to customers. b. In the event the Bank acts as an intermediary for SFT transactions and does not provide collateral to customers, the Bank does not need to calculate SFT transaction exposure in the Leverage Ratio calculation.

c. In the event the Bank acts as an intermediary for SFT transactions but the Bank provides collateral to customers amounting to the difference between:

the value of financial instruments provided by the customer; and
the value of financial instruments received by the customer,
then the Bank calculates SFT exposure as the positive difference between the value of 1) and the value of 2).

d. In the event the coverage of collateral provided by the Bank exceeds letter c), then the Bank must take into account that collateral in the Leverage Ratio calculation at the value of the collateral provided by the Bank.

e. In the event the Bank provides collateral to both parties involved in the SFT, the calculation in the Leverage Ratio for each party is carried out separately.

E. Administrative Account Transaction (TRA) Exposure

TRA Exposure Calculated in the Leverage Ratio
TRA exposure calculated in the Leverage Ratio includes all facilities provided, whether from committed facilities (including liquidity facilities) or uncommitted facilities. Uncommitted facilities include facilities that can be contractually cancelled by the Bank at any time without notice to the debtor. Examples of TRA include direct credit substitutes, acceptances, letters of credit (L/C), and standby letters of credit (SBLC) in trade transactions.

In the event TRA exposure must be treated as derivative transaction exposure, based on financial accounting standards, that exposure is calculated as derivative exposure.

Calculation of TRA Exposure is the result of the multiplication between the notional value of the commitment obligation or contingent liability and the Credit Conversion Factor (CCF) minus the CVA Deduction (CKPN), with the formula:

TRA Exposure = (notional value of commitment obligation or contingent liability x CCF) – CKPN

The total value of TRA exposure as referred to in the formula above cannot be less than 0 (zero).

CCF for TRA Exposure
The determination of CCF for TRA exposure as referred to in item 1 is as follows:
a. 100% (one hundred percent) CCF is given for TRA exposure in the form of:

guarantees issued in the context of granting credit or taking over default risk, including bank guarantees and SBLC;
acceptances, including endorsements or avals on securities;
forward buy transactions, forward transactions for deposits and purchase of shares and securities with partial payment, which are commitments for the disbursement of funds in a specific amount;
exposure on the purchase of financial assets using settlement date accounting; or
TRA that are credit substitutes not explicitly falling into other categories.

b. 50% (fifty percent) CCF is given for TRA exposure in the form of:

contingent liabilities in the form of guarantees issued not in the context of granting credit, such as bid bonds, performance bonds, or advance payment bonds; or
facilities in the form of note issuance facilities (NIFs) and revolving underwriting facilities (RUFs), regardless of the maturity of the underlying facility;

c. 40% (forty percent) CCF is given for TRA exposure in the form of commitment obligations regardless of the maturity of the underlying facility, except where the commitment obligation meets the requirements for a lower CCF;

d. 20% (twenty percent) CCF is given for TRA exposure in the form of commitment obligations in the form of L/C, with an agreement period of up to 1 (one) year, but not including SBLC, both for the issuing bank and the confirming bank;

e. 10% (ten percent) CCF is given for TRA exposure in the form of commitment obligations that meet the criteria as uncommitted facilities. The Financial Services Authority evaluates various factors that may limit the Bank's ability to cancel commitments and considers providing a higher CCF for uncommitted facilities.

In the event the Bank provides a commitment for TRA exposure, the Bank applies the lower of the two applicable CCFs, for example:
a. The Bank has a commitment to provide short-term self-liquidating trade letters of credit arising from the movement of goods; that transaction is given a CCF of 20% (twenty percent) rather than 40% (forty percent); b. The Bank has a cancellable commitment without conditions to issue direct credit substitutes such as bank guarantees and SBLC, as referred to in item 2.f; that transaction is given a CCF of 10% (ten percent), rather than 100% (one hundred percent).

Appendix B.1
FORMAT OF TOTAL EXPOSURE REPORT IN THE LEVERAGE RATIO Bank Name : PT Bank…. (individual/consolidated) Report Position : Month (mm)/Year (yyyy) (in million rupiah) No Description Amount 1 Total assets in the balance sheet in public financial reports. (gross value before deducting CKPN). 2 Adjustments for the value of participations in Banks, financial institutions, insurance companies, and/or other entities that based on financial accounting standards must be consolidated but are outside the scope of consolidation based on Financial Services Authority regulations. 3 Adjustments for the value of underlying financial asset pools that have been transferred in asset securitization transactions meeting the derecognition requirements as regulated in Financial Services Authority Regulations regarding prudential principles in asset securitization activities for commercial banks. In the event the underlying financial assets referred to have been deducted from total assets in the balance sheet, the figure in this row is 0 (zero). 4 Adjustments for temporary exclusions of deposits at Bank Indonesia in order to meet reserve requirement regulations (if any). N/A 5 Adjustments for fiduciary assets recognized as components of the balance sheet based on financial accounting standards but excluded from the total exposure calculation in the Leverage Ratio. N/A 6 Adjustments for the value of regular purchases or sales of financial assets using trade date accounting. 7 Adjustments for the value of cash pooling transactions meeting the requirements as regulated in this Financial Services Authority Regulation. 8 Adjustments for the value of derivative transaction exposure. 9 Adjustments for the value of SFT exposure, for example reverse repo transactions. 10 Adjustments for the value of TRA exposure that has been multiplied by the CCF. 11 Prudential valuation adjustments in the form of capital deductions and CKPN. 12 Other adjustments. 13 Total Exposure in the Leverage Ratio calculation. Qualitative Analysis

Appendix B.2
FILLING OUT THE TOTAL EXPOSURE REPORT IN THE LEVERAGE RATIO The total exposure report in the Leverage Ratio is a summary comparison between the book value of assets based on financial accounting standards and the total exposure in the Leverage Ratio based on the Leverage Ratio calculation method as regulated in this Financial Services Authority Regulation. The purpose of the total exposure report in the Leverage Ratio is to present quantitative information and reconcile the total assets in the balance sheet in public financial reports with the total Leverage Ratio exposure. The Bank publishes and details the sources of significant differences between the book value of assets in the financial statements and the total Leverage Ratio exposure. Row No Description 1 This row shows the total assets in the balance sheet in public financial reports. (This value must be the same as the value reported by the Bank in public financial reports as regulated in Financial Services Authority Regulations regarding transparency and publication of bank reports). 2 This row shows participations in Banks, financial institutions, insurance companies, and/or other entities not included in the consolidation scope as regulated in Financial Services Authority Regulations regarding the application of consolidated risk management for Banks that exercise control over Subsidiary Companies. These must be calculated in the total Leverage Ratio exposure at the book value of the participation (not at the value of underlying assets and other exposures to the investee). In the event the participation is a core capital deduction factor, then that participation may reduce the total Leverage Ratio exposure. The reduction value is presented in negative value because it is a deduction factor from the total Leverage Ratio exposure. 3 This row shows the reduction value in the Leverage Ratio exposure calculation, for underlying financial assets that have been transferred in asset securitization transactions meeting the derecognition requirements as regulated in Financial Services Authority Regulations regarding prudential principles in asset securitization activities for commercial banks. The reduction value is presented in negative value because it is a deduction factor from the total Leverage Ratio exposure. In the event the underlying financial assets referred to have been deducted from total assets in the balance sheet, the figure in this row is 0 (zero). 4 This row shows adjustments for temporary exclusions of deposits at Bank Indonesia in order to meet reserve requirement regulations (if any). This adjustment will reduce the total exposure value in the Leverage Ratio calculation, so it is presented in negative value. 5 This row shows the reduction in asset value for fiduciary assets recognized as assets based on financial accounting standards and meeting derecognition requirements. The reduction value is presented in negative value because it is a deduction factor from the total
Leverage Ratio exposure. 6 This row shows adjustments for the value of regular purchases or sales of financial assets using trade date accounting. The adjustments are as follows:

Row No Description a. The Bank issues the difference (if any) between cash receivables from unsettled sales and cash payables from unsettled purchases, which have been recognized based on financial accounting standards; and b. The Bank performs netting between cash receivables and cash payables, regardless of the financial accounting standard treatment of such netting, provided that the netting meets the requirements as regulated in this Financial Services Authority Regulation Appendix. Adjustments that result in an increase in total exposure are reported as positive values. Adjustments that result in a decrease in total exposure are reported as negative values. 7 This row shows adjustments for cash pooling transactions that meet the requirements. This adjustment is a comparison between the book value of cash pooling transactions in the balance sheet and the treatment of cash pooling transactions as regulated in this Financial Services Authority Regulation Appendix. Adjustments that result in an increase in total exposure are reported as positive values. Adjustments that result in a decrease in total exposure are reported as negative values. 8 This row shows adjustments for derivative transaction exposure in the form of a comparison between the book value of derivative transactions and the calculation of derivative transaction exposure as regulated in this Financial Services Authority Regulation Appendix. Adjustments that result in an increase in total exposure are reported as positive values. Adjustments that result in a decrease in total exposure are reported as negative values. 9 This row shows adjustments for SFT exposure value in the form of a comparison between the book value of SFT as assets and the result of SFT exposure calculation based on the calculation method in this Financial Services Authority Regulation Appendix. In the event the adjustment results in an increase in total exposure

Row No Description it is reported as a positive value. Adjustments that result in a decrease in total exposure are reported as negative values.
10 This row shows the result of the multiplication between TRA value and CCF as regulated in this Financial Services Authority Regulation Appendix. The result of that multiplication is an increase in Leverage Ratio exposure, so it is reported as a positive value. 11 This row shows prudential valuation adjustments in the form of capital deductions and CKPN. CKPN in this row does not include CKPN calculated in SFT transaction exposure. This adjustment is reported as a negative value. 12 This row shows other adjustments (if any). Adjustments that result in an increase in total exposure are reported as positive values. Adjustments that result in a decrease in total exposure are reported as negative values. 13 This row shows the total Leverage Ratio exposure, which is the sum of rows 1 to 12. (The value in this row must be the same as the value in row 24 of the Leverage Ratio Calculation Report).

Appendix B.3
FORMAT OF LEVERAGE RATIO CALCULATION REPORT
Bank Name : PT Bank…. (individual/consolidated) Report Position : Month (mm) / Year (yyyy) (in million rupiah) Description Period T T-1 Asset Exposure in Balance Sheet 1 Asset exposure in the balance sheet including collateral assets, but not including derivative transaction exposure and SFT exposure (Gross value before deducting CKPN) 2 Value of additions back for derivative collateral delivered to counterparties resulting in a decrease in total asset exposure in the balance sheet due to the application of financial accounting standards 3 (Deduction for receivables related to CVM provided in derivative transactions) 4 (Adjustment for book value of securities received in SFT exposure recognized as assets) 5 (CKPN for those assets according to financial accounting standards) 6 (Assets that have been calculated as a Core Capital deduction factor as referred to in Financial Services Authority Regulations regarding minimum capital provision obligations for commercial banks) 7 Total Asset Exposure in the balance sheet Sum of row 1 to row 6 Derivative Transaction Exposure 8 RC Value for all derivative transactions, whether there is qualifying variation margin or there are qualifying netting agreements 9 Value of additions that are PFE for all derivative transactions 10 (Exclusion for derivative transaction exposure settled through a central counterparty (CCP)) N/A N/A 11 Adjustment for the effective notional value of credit derivatives 12 (Adjustment for effective notional value that has been netted and reduction of addon for credit derivative sales transactions) 13 Total Derivative Transaction Exposure Sum of row 8 to row 12 Securities Financing Transaction (SFT) Exposure 14 Gross book value of SFT assets 15 (Net value between cash liabilities and cash receivables) 16 Credit risk due to counterparty failure related to SFT assets referring to the current exposure calculation as

Description Period
T T-1 regulated in this Financial Services Authority Regulation Appendix 17 SFT agent exposure 18 Total SFT Exposure Sum of row 14 to row 17 Administrative Account Transaction (TRA) Exposure 19 Value of all commitment obligations or contingent liabilities Gross value before deducting CKPN 20 (Adjustment for the result of multiplication between the value of commitment obligations or contingent liabilities and CCF then minus CKPN) 21 (CKPN for TRA according to financial accounting standards) 22 Total TRA Exposure Sum of row 19 to row 21 Capital and Total Exposure 23 Core Capital 24 Total Exposure Sum of row 7, row 13, row 18, and row 22 Leverage Ratio 25 Leverage Ratio Value, including the impact of adjustments for temporary exclusions of deposits at Bank Indonesia in order to meet reserve requirement regulations (if any)

Description Period
T T-1
25a Leverage Ratio Value, excluding the impact of adjustments for temporary exclusions of deposits at Bank Indonesia in order to meet reserve requirement regulations (if any) 26 Minimum Leverage Ratio Value 3% 3% 27 Buffer against Leverage Ratio Value N/A N/A Average Value Disclosure 28 Average value of the gross book value of SFT assets, after adjustments for sale accounting transactions calculated net with cash liabilities in SFT and cash receivables in SFT 29 Quarter-end report final value of the gross book value of SFT assets, after adjustments for sale accounting transactions calculated net with cash liabilities in SFT and cash receivables in SFT 30 Total Exposure, including the impact of adjustments for temporary exclusions of deposits at Bank Indonesia in order to meet reserve requirement regulations (if any), which has included the average value of the gross book value of SFT assets as referred to in row 28 30a Total Exposure, excluding the impact of adjustments for temporary exclusions of deposits at Bank Indonesia

Description Period
T T-1 in order to meet reserve requirement regulations (if any), which has included the average value of the gross book value of SFT assets as referred to in row 28 31 Leverage Ratio Value, including the impact of adjustments for temporary exclusions of deposits at Bank Indonesia in order to meet reserve requirement regulations (if any), which has included the average value of the gross book value of SFT assets as referred to in row 28 31a Leverage Ratio Value, excluding the impact of adjustments for temporary exclusions of deposits at Bank Indonesia in order to meet reserve requirement regulations (if any), which has included the average value of the gross book value of SFT assets as referred to in row 28 Qualitative Analysis

Appendix B.4
PROCEDURES FOR FILLING OUT THE LEVERAGE RATIO CALCULATION REPORT

The Leverage Ratio Calculation Report provides detailed information regarding the components of the Leverage Ratio and offers a comparison of the Leverage Ratio as of the reporting date with the minimum required Leverage Ratio percentage. The Bank explains the main factors that have a material impact on the Leverage Ratio at the end of the current reporting quarter compared to the end of the previous reporting quarter. The Bank explains the main factors causing significant differences between the SFT value calculated in the Total Exposure Report in the Leverage Ratio and the average SFT value reported in row 28 of this Leverage Ratio Calculation Report.

No	Row	Description
1	This row shows the total value of assets in the financial position statement in the total exposure calculation, including collateral for derivative transactions recorded in the financial position statement and SFT collateral, excluding assets covered in rows 8 through 18. Derivative collateral and SFT collateral refer to collateral received or pledged, which is recorded as assets in the financial position statement. The value reported in this row refers to this OJK Regulation Appendix.
2	This row shows the gross-up addition equal to the impairment of asset exposure in the financial position statement in cases where pledged collateral to the counterparty results in a decrease in total asset exposure in the financial position statement due to the application of financial accounting standards.
3	This row shows the deduction for receivables related to CVM provided in derivative transactions.
4	This row shows adjustments for securities received in SFT and recognized by the Bank as assets in the financial position statement. This adjustment will reduce total exposure and is therefore reported as a negative value.
5	This row shows impairment losses (CKPN) on assets according to financial accounting standards. Adjustments in this row will reduce exposure and are therefore reported as a negative value.
6	This row shows the total value of assets that have been calculated as a deduction factor for Core Capital as referred to in the OJK Regulation governing minimum capital adequacy requirements for commercial banks. Adjustments in this row will reduce exposure and are therefore reported as a negative value.
7	This row is the sum of rows 1 through 6.
8	This row shows the Replacement Cost (RC) value for all derivative transactions, whether there is qualifying CVM or there are qualifying netting agreements. The value reported in this row is after being multiplied by 1.4 (one point four).
9	This row shows the addition value which is Potential Future Exposure (PFE) for all derivative transactions. The value reported in this row is after being multiplied by 1.4 (one point four).
10	This row is an exclusion for derivative transaction exposures settled through a central counterparty (CCP).
11	This row shows the effective notional value of credit derivatives minus the fair value impairment calculated in the Core Capital calculation.
12	This row shows:

a. the amount of the effective notional value of credit derivative sales minus the effective notional value of credit derivative purchases for 1 (one) same reference entity; and b. the add-on reduction value in the PFE calculation related to credit derivative sales. |

13	This row is the sum of rows 8 through 12.
14	This row shows the gross recorded value of SFT assets without recognizing any netting process.
15	This row shows the treatment of cash liabilities in SFT (e.g., repo liabilities) and cash claims in SFT with the same counterparty can be calculated on a net basis. This adjustment will reduce total exposure and is therefore reported as a negative value.
16	This row shows the credit risk value due to counterparty failure related to SFT assets referring to the current exposure calculation as regulated in this OJK Regulation Appendix.
17	This row shows the exposure value when the Bank acts as an SFT agent providing guarantees as regulated in this OJK Regulation Appendix.
18	This row is the sum of rows 14 through 17.
19	This row shows the total value of commitment obligations or contingent liabilities before adjustment with FKK (Credit Conversion Factor).
20	This row shows the deduction value for the total value of commitment obligations or contingent liabilities caused by adjustment with FKK. This adjustment will reduce total exposure and is therefore reported as a negative value.
21	This row shows impairment losses (CKPN) on Off-Balance Sheet Items (TRA) according to financial accounting standards. Adjustments in this row will reduce exposure and are therefore reported as a negative value.
22	This row is the sum of rows 19 through 21.
23	This row shows the Core Capital value as referred to in this OJK Regulation.
24	This row is the sum of row 7, row 13, row 18, and row 22. This value must be equal to the value in row 13 of the Total Exposure Report in the Leverage Ratio.
25	This row shows the Leverage Ratio value, which is the comparison between Core Capital and the sum of total exposure considering the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any). This row is reported in percentage form.
25a	This row shows the Leverage Ratio value calculation, which is the comparison between Core Capital and the sum of Total Exposure without considering the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any). This row is reported in percentage form. In the event that there are no adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements, the value in this row will be the same as the value in row 25.
26	This row shows the minimum Leverage Ratio value which has been set at 3% (three percent).
27	This row shows the total buffer amount against the Leverage Ratio value, to include the Leverage Ratio buffer for G-SIBs and other buffers.
28	This row shows the average value of the sum of the values in row 14 and row 15. Based on the daily sum from the reporting quarter period.
29	This row shows that if the values in row 14 and row 15 are based on the end-of-quarter position values, the value in row 29 is filled with the sum of the values in row 14 and row 15. If the values in row 14 and row 15 are based on average values, the value in row 29 is filled with the sum of the end-of-quarter position values from row 14 and row 15.
30	This row shows Total Exposure, including the impact of adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any), using the daily average value of the gross recorded value of SFT assets during the reporting quarter period, after adjustments for sale accounting transactions calculated on a net basis with cash liabilities in SFT and cash claims in SFT which have included the average value of the gross recorded value of SFT assets as referred to in row 28.
30a	This row shows Total Exposure, excluding the impact of adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any), using the daily average value of the gross recorded value of SFT assets during the reporting quarter period, after adjustments for sale accounting transactions calculated on a net basis with cash liabilities in SFT and cash claims in SFT. In the event that there are no adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements, the value in this row will be the same as the value in row 30.
31	This row shows the comparison between Core Capital and the sum of Total Exposure, including the impact of adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any), using the daily average value of the gross recorded value of SFT assets during the reporting quarter period, after adjustments for sale accounting transactions calculated on a net basis with cash liabilities in SFT and cash claims in SFT.
31a	This row shows the comparison between Core Capital and the sum of total exposure, excluding the impact of adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any), using the daily average value of the gross recorded value of SFT assets during the reporting quarter period, after adjustments for sale accounting transactions calculated on a net basis with cash liabilities in SFT and cash claims in SFT. In the event that there are no adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements, the value in this row will be the same as the value in row 31.

Appendix C
EXAMPLE OF FILLING OUT THE TOTAL EXPOSURE REPORT IN THE LEVERAGE RATIO AND THE LEVERAGE RATIO CALCULATION REPORT

Bank A has the following published financial statements:

Bank Name: Bank A
Statement Position: 03/2020
(In million Rupiah)

Assets	Liabilities and Equity
Cash 1,000	Demand Deposits 1,945
Spot and Derivative Receivables 500	Savings 6,100
Securities 1,200	Time Deposits 2,750
Securities Repo 200	Repo Liabilities 150
Reverse Repo Receivables 700	Capital 2,000
Loans 5,000
Impairment Losses (155)
a. Securities (50)
b. Securities Repo (5)
c. Loans (65)
d. Reverse Repo Receivables (35)
Investments 1,000
Fixed Assets 3,500
Total 12,945	Total 12,945

Notes:

Investments are investments in subsidiary companies which are a deduction from Core Capital.
Qualifying Core Capital is 1,800.
The Bank has commitment obligations that meet the criteria as uncommitted facilities of 1,500.
Collateral in reverse repo transactions consists of securities worth 1,000.

A. Total Exposure Calculation

Asset Exposure in the Financial Position Statement............................(1)
= Cash + Securities + Loans + Fixed Assets
= 1,000 + (1,200 - 50) + (5,000 - 65) + 3,500 = 10,585
Derivative Transaction Exposure........................................................(2)
= 1.4 (RC + PFE)
= 1.4 (500 + 20)
= 728
RC and PFE values are assumed calculation results as regulated in this OJK Regulation Appendix.
SFT Exposure for Repo Transactions…...........................................(3)
= Gross SFT + Current Exposure
= (200 - 5) + max {0, [200 - 5 - 150]}
= 195 + 45
= 240
SFT Exposure for Reverse Repo Transactions…...............................(4)
= Gross SFT + Current Exposure
= (700-35) + max {0, [700 - 5 - 1000]}
= 665 + 0
= 665
Off-Balance Sheet Item (TRA) Exposure…............................................................................(5)
= (Notional Value of Commitment Obligations x FKK) - Impairment Losses = (1,500 x 10%) - 0 = 150
Total Exposure
= (1) + (2) + (3) + (4) + (5)
= 10,585 + 728 + 240 + 665 + 150
= 12,368

B. Filling Out the Total Exposure Report in the Leverage Ratio

No	Description	Amount	Explanation
1	Total assets in the financial position statement in the published financial statements. (Gross value before deducting Impairment Losses).	13,100
2	Adjustments for investment values in Banks, financial institutions, insurance companies, and/or other entities that based on financial accounting standards must be consolidated but are outside the consolidation scope based on OJK regulations.	-
3	Adjustments for the value of underlying financial asset pools that have been transferred in asset securitization transactions meeting the derecognition requirements as regulated in the OJK Regulation regarding prudential principles in asset securitization activities for commercial banks. In the event that the underlying financial assets referred to have been deducted from total assets on the balance sheet, the figure in this row is 0 (zero).	-
4	Adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any).	N/A
5	Adjustments for fiduciary assets recognized as components of the financial position statement based on financial accounting standards but excluded from the total exposure calculation in the Leverage Ratio.	N/A
6	Adjustments for the value of regular purchases or sales of financial assets using the trade date accounting method.	-
7	Adjustments for the value of cash pooling transactions meeting the requirements as regulated in this OJK Regulation.	-
8	Adjustments for the value of derivative transaction exposure.	228	= (3) – spot and derivative receivables
= 728 - 500
9	Adjustments for the value of SFT exposure as an example of reverse repo transactions.	5	= ((3) + (4)) – (securities repo + reverse repo receivables)
= (240 + 665) – (200 + 700)
10	Adjustments for the value of TRA exposure multiplied by FKK. Prudential valuation adjustments consisting of capital deduction factors and Impairment Losses.	(1,115)	Investments and Impairment Losses of asset exposure in the financial position statement (balance sheet)
---	---	---	---
12	Other adjustments.	-
13	Total Exposure in the Leverage Ratio calculation.	12,368

C. Filling Out the Leverage Ratio Calculation Report

Description	Period T	Period T-1
Asset Exposure in the Financial Position Statement
1 Asset exposure in the financial position statement including collateral assets, but excluding derivative transaction exposure and SFT exposure (Gross value before deducting Impairment Losses)	11,700	-
2 Value addition for derivative collateral pledged to the counterparty which results in a decrease in total asset exposure in the financial position statement due to the application of financial accounting standards	-	-
3 (Deduction for receivables related to CVM provided in derivative transactions)	-	-
4 (Adjustment for recorded value of securities received in SFT exposure recognized as assets)	-	-
5 (Impairment Losses on assets according to financial accounting standards)	(115)	-
6 (Assets that have been calculated as a deduction factor for Core Capital as referred to in the OJK Regulation regarding minimum capital adequacy requirements for commercial banks)	(1,000)	-
7 Total Asset Exposure in the Financial Position Statement
Sum of row 1 through row 6	10,585	-
Derivative Transaction Exposure
---	---	---
8 Replacement Cost (RC) value for all derivative transactions, whether there is qualifying variation margin or there are qualifying netting agreements
9 Addition value which is Potential Future Exposure (PFE) for all derivative transactions
10 (Exclusion for derivative transaction exposures settled through a central counterparty (CCP))	N/A	N/A
11 Adjustments for the effective notional value of credit derivatives	-	-
12 (Adjustments for effective notional values that are netted and add-on reductions for credit derivative sales transactions)	-	-
13 Total Derivative Transaction Exposure
Sum of row 8 through row 12
Securities Financing Transaction (SFT) Exposure
---	---	---
14 Gross recorded value of SFT assets	860	-
15 (Net value between cash liabilities and cash claims)	-	-
16 Credit risk due to counterparty failure related to SFT assets referring to the current exposure calculation as regulated in this OJK Regulation Appendix
17 Exposure as an SFT agent	-	-
18 Total SFT Exposure
Sum of row 14 through row 17
Off-Balance Sheet Item (TRA) Exposure
---
19 Total value of commitment obligations or contingent liabilities
Gross value before deducting Impairment Losses	1,500	-
20 (Adjustment resulting from the multiplication of the value of commitment obligations or contingent liabilities and FKK then minus Impairment Losses)	(1,350)	-
---	---	---
21 (Impairment Losses on TRA according to financial accounting standards)	-	-
22 Total TRA Exposure
Sum of row 19 through row 21
Capital and Total Exposure
---	---	---
23 Core Capital	1,800	-
24 Total Exposure
Sum of row 7, row 13, row 18, and row 22	12,368	-
Leverage Ratio
---	---	---
25 Leverage Ratio Value, including the impact of adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any)	15%	0%
25a Leverage Ratio Value, excluding the impact of adjustments to the temporary exclusion of deposit placements at Bank Indonesia in order to meet minimum reserve requirements (if any)	15%	0%
26 Minimum Leverage Ratio Value	3%	3%
27 Buffer against the Leverage Ratio Value	N/A	N/A

OJK Regulation No. 31/POJK.03/2019 on Leverage Ratio Compliance Obligations for Commercial Banks

Lineage: In force

Similar documents from other regulators