Indonesian banks' risk evaluation efforts to benefit from KDKE launch
Safeguard of information confidentiality key to securing Indonesian banks’ participation in Indonesia’s new data loss consortium. October 02, 2012 | Levina LimIn early 2012, the Indonesian government announced the establishment of the External Loss Data Consortium, Konsorsium Kerugian Data Eksternal (KDKE), to be developed by the Indonesian Development Banking Institution, Lembaga Pengembangan Perbankan Indonesia (LPPI). Banks in Indonesia were encouraged to share their operational loss data in the consortium, which will enable them to compare their operational loss experiences with that of their peers, and apply the findings to model their own risk exposures. Recently launched in Jakarta, by Mulya Siregar, executive director of Banking Research and Regulation at Bank Indonesia (BI), the consortium has secured a total of 18 members, including Bank Mandiri and Bank Permata. The establishment of KDKE is an important move, being the first of its kind in Indonesia. This endeavour models after the Pan-European Credit Data Consortium (PECDC), a data-pooling initiative among member banks (presently 34 member banks) for credit risk. It is aimed at improving risk assessment and enhancing their internal credit risk models in pursuit of the International Ratings Based Advanced Status for Basel II, which was lauded to be the “largest commercial loan loss and recovery dataset in existence”. According to Siregar, external loss data availability requirements will allow banks to apply the Advanced Measurement Approach (AMA) in calculation of their capital adequacy ratios in accordance with the Basel II framework. Under the AMA approach, banks are allowed to form their own empirical model for use in quantifying required capital for operational risk. In Indonesia, banks are at various stages of preparation in utilising this approach while awaiting further guidelines from BI. Better quality data will contribute towards better measurement and evaluation of risks, leading to more robust controls and mitigation processes. Furthermore, operational losses are an important source of risk in financial institutions as th... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Data & Analytics, Data Management, Indonesia, Operational Risk, Risk and RegulationData & Analytics,Data Management,Indonesia,Oprisk,Risk and Regulation, Data & Analytics,Data Management,Indonesia,Operational Risk,Risk and Regulation, Keywords:KDKE, LPPI, Bank Indonesia, Bank Mandiri, Bank Permata, Mulya Siregar, PECDC, AMA, Subardiah, Muljana Soekarni, OJK KDKE, LPPI, Bank Indonesia, Bank Mandiri, Bank Permata, Mulya Siregar, PECDC, AMA, Subardiah, Muljana Soekarni, OJK
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