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[PRESS RELEASE] External Loss Data Consortium
Friday, September 21, 2012 | Admin

PRESS RELEASE

EXTERNAL LOSS DATA CONSORTIUM

Operational risk is a kind of risk that needs special attention because of its inherent characteristics in day to day operations, namely malfunctioning internal process, human error, system failure, and external occurrences. Various occurrences related to operational risk frequently become news in the mass media, from theft by employees, theft by customers, and robbery up to ‘small’ things frequently occurring, such as teller’s fault in calculating, ATM disorder, power outage, and offline computer network, all of which bring about bank losses.

Satisfactory risk management, particularly the operational risk, becomes a need simultaneously obligation for banks. This is in line with various regulations concerning importance of prudential bank management in order that banks in Indonesia have strong resistance to various shocks both internally and externally. In order to anticipate and mitigate the operational risk banks have to calculate accurately so that they may manage risks accurately and comprehensively. Therefore, banks need comprehensive loss data either from internal or external side. The external loss data may be collected from two sources, namely the public (printed or electronic media) that are unstructured and consortium (data from members) that are well structured and have been processed.

In managing the internal loss data, originating from operational loss data internally occurring in banks themselves, banks may manage on individual basis. As for the external loss data management, namely operational loss data occurring in other banks, banks frequently face obstacles to obtain. This causes real risks faced by national banks unable to be mapped, which will further make bank operational risk management and mitigation not optimal.

To collect eligible and standardized external loss data a data center is needed. The data center becomes a place to collect all external loss data that will be further reused by banks as resources to manage and mitigate operational risks. The data center is called as the External Loss Data Consortium (KDKE). So far, this KDKE has recruited members of 16 banks, namely BCA, Bank DKI, BPD Jateng, BTPN, BPD DIY, Bank Sahabat Sampoerna, Bank Nagari, BPD Jambi, BTN, Bank Sulselbar, BPD Kalteng, BNI, Bank Mandiri,  Bank Jabar Banten, Bank Permata, and Bank Bukopin; while other banks are under process of recruitment.

The Operational Risk Sub-group – Banking Working Group established by Bank Indonesia has conducted a thorough study on the importance and urgency of this KDKE. For the last time, Bank Indonesia discussed it in a seminar on March 29, 2012, followed by a meeting on May 14, 2012.

The KDKE is an entity that is established for national banking interest and belongs to banks. Through the KDKE, consortium members may discuss various operational problems occurring in the banking industry through operational risk information or data jointly they own. It is expected that through this KDKE the members may share their information and manage and mitigate operational risks from external loss data they experience. For this reason, national banks have to be prepared and aware to participate in KDKE operations.

With the establishment of the KDKE, availability of sufficient external loss data will maximize risk management process and enable banks to meet requirements to apply the Advance Measurement Approach (AMA) method in calculating Capital Adequacy Ratio (CAR).

In this relation, the Indonesian Banking Development Institute (LPPI) as an independent institution and highly committed in developing the national banking has prepared itself to organize the KDKE that will immediately begin today, September 21, 2012. The LPPI has more than enough competence to organize the KDKE, from its institutional organization and technological infrastructure to its human resource and support of the regulator. Moreover, the LPPI as a trustworthy and leading institution in developing the banking industry in the country has been undoubted anymore. Therefore, the LPPI will be able to make the KDKE a supporting instrument that strengthens better national banking development, certainly with support and cooperation of banks and the regulator.

Jakarta, September 21, 2012

External Loss Data Consortium

 
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