Bank Indonesia Regulation Concerning Implementation of Consolidated Risk Management for Banks Performing Control on Subsidiary Companies

This regulation aims to manage risk arising from the activities of a bank and its subsidiary companies.

The regulation states that:

• The continuity of a bank’s business activity is affected by risks arising from its business activity or from its subsidiary companies’ business activities,
• Banks must implement consolidated risk management to manage risk exposure, for which the bank must be able to identify, measure, monitor and control its risks,
• Banks must also ensure that their subsidiary companies follow prudential principles,
• It is necessary for Bank Indonesia (BI) to regulate the implementation of consolidated risk management for banks implementing control on subsidiary companies.

The regulation sets out terms for:

• Information systems and reporting,
• The calculation of Capital Adequacy Ratio (CAR),
• Asset quality evaluation,
• The calculation of the Legal Lending Limit (LLL),
• The management of subsidiary companies,
• Bank soundness rating and risk profile evaluation,
• Subsequent action for supervision and designation of bank status,
• Reporting, sanctions and miscallaneious provisions,
• Closing provisions.