Paper
Bank Indonesia Regulation Concerning Implementation of Consolidated Risk Management for Banks Performing Control on Subsidiary Companies
How does a bank manage the risk from the activities of its subsidiary companies?
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22 pages
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.
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