- The Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) recently issued Circular No. 24/SEOJK.03/2021 on the Calculation of Risk-Weighted Assets for Credit Risk Through a Standard Approach for Commercial Banks (“Circular 24/2021”). Previously, these matters were addressed under Circular No. 42/SEOJK.03/2016 and its amendment.
- When calculating any Risk-Weighted Assets (Aktiva Tertimbang Menurut Risiko - “ATMR”) for credit risk through the application of a standard approach, a bank is now required to complete a due diligence process in order to ensure that said bank has gained a sufficient understanding of the risk profiles and characteristics of the opposing parties. Such due diligence must be conducted when any such transactions are initiated and also on a periodic, annual basis in relation to any subsequent transactions.
- The reporting of ATMR calculations for credit risk through a standard approach to the OJK now encompasses the following aspects: 1) Data exposure relating to ATMR calculations for credit risk through a standard approach; 2) Calculation details; and 3) Recapitulation of the results of calculations. It should be noted that the abovementioned reports must be submitted on a monthly basis (for individual bank submissions) and on a quarterly basis (for bank submissions that have been consolidated with those of subsidiaries).
- The Circular has been in force since 7 October 2021 while the new reporting system is set to come online on 1 January 2023.
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