At the Seminar on the Establishment of External Loss Data Consortium (KDKE) held by Bank Indonesia (BI) in Jakarta on 29 March 2012 and attended by representatives of all of Indonesia’s banking community, Dr Wimboh Santoso, Director of Banking Research and Regulation at Bank Indonesia, announced that Bank Indonesia wished all Indonesian banks to participate in a loss data consortium to be facilitated by Lembaga Pengembangan Perbankan Indonesia (LPPI), the independent, not-for-profit banking development institute. Following from this, LPPI today announced the establishment of Konsorsium Data Kerugian Eksternal (KDKE) Indonesia, supported by classification, analysis, quality management and technology support from RiskBusiness, the leading service provider to operational risk data consortia.
Bapak Santoso stated “The management of operational loss data is indispensable in order to strengthen the risk management practices of banks, as well as for the implementation of Basel II. Management and operational loss data availability will allow each bank to minimize the occurrence of fraud and other operational risks, determine the risk mitigation process, and strengthen risk-based audit processes. In addition, in the context of Basel II, management and operational loss data availability will allow the banks to meet the application requirements of the Advanced Measurement Approaches (AMA) in the calculation of capital. Furthermore, the data collection process and a supporting reward system reduce the potential for losses being covered up and increases the awareness of cultural and business unit operational risk”.
Muljana Soekarni, Director at LPPI said: “The formation of KDKE will be aimed at providing a forum for members of the consortium to discuss various operational issues that occur in the banking industry, providing information and data relating to operational losses amongst its members, while simultaneously enhancing the image of Indonesia in international banking circles”. Bapak Soekarni continued “LPPI, given its independence and proven track record in developing the Indonesian banking profession is the ideal facilitator for KDKE. With the assistance of our strategic partner RiskBusiness International, KDKE will set new standards for data quality, data completeness and classification granularity amongst loss data consortia. BI and LPPI set two crucial milestones in the establishment of KDKE, the first of which was establishing the structure and formalising all aspects by the end of August 2012, which we have achieved. The next is full implementation, including data submission by the participants – we plan to complete this and to deliver the first round of analysis back to all participants before the end of 2012”.
Mike Finlay, Chief Executive at RiskBusiness International welcomed the establishment of the new consortium. “In order to fully appreciate the exposure run in the local and regional market, it is imperative that market participants have access to comparable data that is relevant to their operations and business activity. With KDKE being fully inclusive of all players in the Indonesian market, the participants will be in a position to benchmark themselves against their peers, learn lessons from the experiences of others and have access to a complete set of high-quality external data for inclusion in their risk management and measurement activities”. RiskBusiness has assisted KDKE Indonesia define its classification taxonomy, covering risk categories/loss event types, process types, business lines and product types, causal factor types, control types and impact types and is working with both LPPI and individual participants in the areas of training, initial data take-on and techniques for data classification. Finlay adds “In addition to simply collecting and analysing loss data, KDKE will provide participants with access to industry risk profiles and will use the submitted data to create loss profiles which can be benchmarked against the forward-looking risk profiles. KDKE will also deliver real-time newsflashes about public events as and when they happen around the world, providing a third source of comparable data to the participants”.