BANK INDONESIA REGULATION NUMBER 4/7/PBI/2002 CONCERNING

Unofficial Translation BANK INDONESIA REGULATION NUMBER 4/7/PBI/2002 CONCERNING PRUDENTIAL PRINCIPLES FOR PURCHASE OF CREDIT BY BANKS FROM THE INDONESIAN BANK RESTRUCTURING AGENCY THE GOVERNOR OF BANK INDONESIA Considering: a. that the principal activity of the banking system is mobilization of funds and disbursement of funds, of which one form is conducted by extension of credit; b. whereas extension of credit by the banking system may take place through direct disbursement to debtors or by purchase of credit owned by another party, including but not limited to the Indonesian Bank Restructuring Agency; c. whereas the extension of bank credit must take place in compliance with prudential principles as referred to in the prevailing law concerning banking; d. now therefore it is necessary to enact provisions concerning prudential principles for purchase of credit by banks from the Indonesian Bank Restructuring Agency in a Bank Indonesia Regulation; In view

In view of: - 2-1. Act Number 7 of 1992 concerning Banking (State Gazette Number 31 of 1992, Supplement to the State Gazette Number 3472) as amended by Act Number 10 of 1998 (State Gazette of the Republic of Indonesia Number 182 of 1998, Supplement to the State Gazette of the Republic of Indonesia Number 3790); 2. Act Number 23 of 1999 concerning Bank Indonesia (State Gazette of the Republic of Indonesia Number 66 of 1999, Supplement to the State Gazette of the Republic of Indonesia Number 3843); HAS DECREED: To enact: THE BANK INDONESIA REGULATION CONCERNING PRUDENTIAL PRINCIPLES FOR PURCHASE OF CREDIT BY BANKS FROM THE INDONESIAN BANK RESTRUCTURING AGENCY. CHAPTER I GENERAL PROVISIONS Article 1 The terminology used in this Bank Indonesia Regulation has the following meanings: 1. Bank

- 3-1. Bank is a Commercial Bank as defined in Act Number 7 of 1992 concerning Banking as amended by Act Number 10 of 1998, including a Branch Office of a Foreign Bank; 2. Indonesian Bank Restructuring Agency, hereinafter referred to as IBRA, is a special agency established pursuant to Government Regulation Number 17 of 1999 concerning the Indonesian Bank Restructuring Agency as last amended by Government Regulation Number 47 of 2001; 3. Credit is provision of funds or equivalent claims based on a loan agreement between the Bank and another party, requiring the borrowing party to repay the debt after a specified term together with interest, including: a. purchase of customer securities accompanied by a Note Purchase Agreement (NPA); b. takeover of claims in the course of factoring; 4. Securities are promissory notes, notes, bonds, Credit securities, or any derivative thereof, or other interest, or a liability of an issuer, in the form customarily traded on the capital market and money market, including but not limited to Bank Indonesia Certificates (SBIs), Money Market Securities, Commercial Paper, Mutual Fund Certificates, and Medium Term Notes. Article 2 Banks are required to apply prudential principles and risk management when purchasing Credit from IBRA. Article 3

- 4 - Article 3 Purchase of Credit by Banks from IBRTA must be conducted at fair value. Article 4 Purchase of Credit by Banks from IBRA as referred to in Article 3 may be conducted by: a. Direct purchase; b. Purchase through a brokerage company. CHAPTER II ACCOUNTING TREATMENT Article 5 (1) Banks are required to recognize Credit purchased from IBRA as Credit on the Bank balance sheet in the amount of the Credit principal or facility. (2) Increment of the Credit principal or facility as referred to in paragraph (1) over the purchase value of the Credit shall be booked as follows: a. If the Bank enters into a new Credit agreement with the debtor, the increment shall be booked as deferred income. b. If the Bank

- 5 - b. If the Bank does not enter into a new Credit agreement with the debtor, the increment shall be booked as Allowance for Earning Assets Losses. c. Deferred income as referred to in letter a and Allowance for Earning Assets Losses as referred to in letter b shall be presented as an offsetting account against the Credit concerned. Article 6 (1) Income from Credit purchased from IBRA shall be recognized on a cash basis. (2) Recognition of income on cash basis shall be applied to Credit classified as current, special mention, sub-standard, doubtful, and loss. Article 7 Payment from debtors shall be recognized as follows: a. If the Bank enters into a new Credit agreement with the debtor, payment from the debtor shall be recognized as amortization of Credit principal and/or interest income in accordance with the new Credit agreement. b. If the Bank does not enter into a new Credit agreement with the debtor: 1) all payments from the debtor shall be recognized as amortization of Credit principal; and 2) receipts in excess of Credit principal shall be recognized as interest income. CHAPTER III

- 6 - CHAPTER III PRUDENTIAL PRINCIPLES Article 8 (1) Banks are prohibited from making correction to Allowance for Earning Assets Losses and/or deferred income as referred to in Article 5 paragraph (2) for the purpose of recognition of revenue. (2) Correction to Allowance for Earning Assets Losses and/or deferred income as referred to in paragraph (1) may only be made by the Bank if the debtor has repaid the entire purchase value of the Credit. (3) Allowance for Earning Assets Losses and/or deferred income as referred to in Article 5 paragraph (2) may be used to cover losses incurred from debt restructuring. Article 9 (1) Banks are required to recover the full purchase value of Credit as referred to in Article 5 paragraph (2) within a period of 5 (five) years. (2) If after a period of 5 (five) years, there is an uncollected residual balance of Credit, the residual balance of Credit shall be written off the books. Article 10 (1) Credit purchased from IBRA shall be classified as current for a period of 1 (one) year from date of purchase. (2) Assessment

- 7 - (2) Assessment of Credit quality after the period referred to in paragraph (1) shall be based on analysis of debtor cash flow and repayment ability. (3) Banks shall be required to maintain separate administration of Credit purchased from IBRA. Article 11 (1) Banks shall be required to form Allowance for Earning Assets Losses in respect of Credit purchased from IBRA in accordance with prevailing Bank Indonesia regulations. (2) Allowance for Earning Assets Losses as referred to in paragraph (1) shall be formed at net book value of the Credit. Article 12 (1) Each Credit purchased from IBRA shall remain subject to the prevailing Bank Indonesia regulation concerning the Legal Lending Limit. (2) Calculation of the Legal Lending Limit in respect of each Credit as referred to in paragraph (1) shall be based on the net book value of the Credit. Article 13

- 8 - Article 13 (1) Banks may only purchase Credit from IBRA to a maximum of 50% (fifty percent) of Tier I capital. (2) Calculation of 50% (fifty percent) of Tier I capital shall be based on the purchase value of the Credit. Article 14 Transactions for purchase of Credit by Banks from IBRA shall remain subject to other provisions in force concerning prudential principles, unless stipulated otherwise in this Bank Indonesia Regulation. CHAPTER IV PURCHASE OF CREDIT THROUGH BROKERAGE COMPANIES Article 15 In the event that a Bank purchases Credit through a brokerage company as referred to in Article 4 letter b, the Bank shall be required to: a. comply with accounting treatment and prudential principles as stipulated in Chapter I, Chapter II, and Chapter III; b. consolidate the financial statement in respect of the brokerage company, including but not limited to Bank internal reports, the Commercial Bank monthly report, the Quarterly Published Report, and the Annual Report; c. manage

- 9 - c. manage risk on a consolidated basis, including but not limited to compliance with the Capital Adequacy Ratio, Non-Performing Loans ratio, and ratio of net open position, on a consolidated basis. Article 16 (1) Bank Indonesia may waive the implementation of consolidation provisions as referred to in Article 15 letter b and Article 15 letter c in the event that the Bank is able to prove to Bank Indonesia that the Bank does not exercise control over the brokerage company or that the relationship between the Bank and brokerage company is temporary. (2) In the event that Bank Indonesia waives the implementation of consolidation provisions as referred to in paragraph (1), Securities obtained by the Bank from the brokerage company under transactions for purchase of Credit from IBRA must have investment grade rating issued by a leading rating agency. Article 17 In the event that a Bank purchases Credit from IBRA through a brokerage company as referred to in Article 15, the Bank shall be required to: a. obtain prior approval from Bank Indonesia; b. deliver a statement of no objection from the brokerage company in regard to supervision conducted by Bank Indonesia. c. confirm that all commitments pertaining to the transaction process comply with prevailing laws and regulations. Article 18

- 10 - Article 18 In the approval process referred to in Article 17 letter a, the Bank shall be required to provide Bank Indonesia with documents and transparent explanations of these documents concerning: a. financial condition of the brokerage company; b. transaction mechanism; c. ownership and financial links between the Bank and the brokerage company; d. analysis of fair value of the Credit purchase; e. estimated repayment value expected from the Credit purchase; and f. other documents required by Bank Indonesia based on discussions between the Bank and Bank Indonesia. Article 19 Application for approval and delivery of documents as referred to in Article 17 and Article 18 shall be addressed by the Bank to Bank Indonesia as follows: a. the relevant Directorate of Bank Supervision, Jl. M.H. Thamrin No. 2, Jakarta 10110, for a Bank having its head office in the working area of the Bank Indonesia head office; or b. local Bank Indonesia Office, for a Bank having its head office outside the working area of the Bank Indonesia head office. Article 20

- 11 - Article 20 (1) Application for approval and delivery of statements as referred to in Article 17 and Article 18 shall be treated as commitments of the Bank and brokerage company to Bank Indonesia. (2) Bank Indonesia may revoke any issued approval if information is subsequently found to be false or misleading. (3) In the event that Bank Indonesia revokes approval as referred to in paragraph (2), the Bank shall be required to establish Allowance for Earning Assets Losses for the entire value of Credit purchased through the brokerage company. Article 21 Financial links between the Bank and the brokerage company shall remain subject to the prevailing regulations concerning the Legal Lending Limit. CHAPTER V EXTENSION OF NEW PROVISION OF FUNDS Article 22 (1) Banks may extend additional provision of funds to debtors holding Credit purchased from IBRA. (2) Quality of additional provision of funds as referred to in paragraph (1) shall be assessed in accordance with the prevailing Bank Indonesia regulation concerning Earning Assets Quality. Article 23

- 12 - Article 23 Banks and/or Bank subsidiaries are prohibited from extending provision of funds to debtors and/or corporate group debtors for the purpose of repayment of Credit purchased by Banks from IBRA. CHAPTER VI TRANSPARENCY Article 24 (1) Banks are required to disclose the following: a. Total Credit principal or facility in respect of Credit purchased from IBRA, purchase value of Credit, amount of Allowance for Earning Assets Losses or deferred income arising from the Credit purchase transaction, and amount of Allowance for Earning Assets Losses established in accordance with Credit quality; b. Summary changes in balance of Credit purchased from IBRA, covering at least the following: 1) Initial balance; 2) Changes in value due to foreign currency translation; 3) Additional purchase of Credit from IBRA during the current period; 4) Credit receipts during the current period; 5) Total Credit written off during the current period; 6)_Ending

- 13-6) Ending balance. c. Summary of changes to Allowance for Earning Assets Losses arising from increment of Credit principal or facility over purchase value of Credit, covering at least the following: 1) Initial balance; 2) Changes in value due to foreign currency translation; 3) Additional Allowance for Earning Assets Losses arising from transactions for purchase of Credit during the current period; 4) Allowance for Earning Assets Losses applied for write off; 5) Correction to Allowance for Earning Assets Losses due to receipts in excess of purchase value; 6) Ending balance. d. Summary of changes to deferred income arising from increment of Credit principal or facility over purchase value of Credit, covering the following: 1) Initial balance; 2) Changes in value due to foreign currency translation; 3) Additional deferred income arising from transactions for purchase of Credit during the current period; 4) Deferred income applied for write off; 5) Correction to deferred income due to receipts in excess of purchase value; 6) Ending

- 14-6) Ending balance. e. Interest income and other income; f. Portion of Credit subject to new Credit agreements; g. Additional provision of funds to debtors holding Credit purchased from IBRA. h. In the case of Credit purchased through a brokerage company, in addition to disclosure as referred to in letter a through letter g, disclosure shall be made of the name of the brokerage company, transaction mechanism, ownership links, financial links, and explanations of control/consolidation. (2) Disclosure as referred to in paragraph (1) letter a and letter e shall be presented as separate notes in the Quarterly Published Financial Statement released in newspapers in accordance with prevailing regulations. (3) Disclosure as referred to in paragraph (1) shall be presented as separate notes in the Quarterly Published Financial Statement released on the Bank homepage in accordance with prevailing regulations. (4) Disclosure as referred to in paragraph (1) shall be presented in the Notes to the Financial Statement in the Annual Report. CHAPTER VII

- 15 - CHAPTER VII SANCTIONS Article 25 Any Bank violating the provisions of Article 3, Article 5, Article 6, Article 7, Article 8, Article 9, Article 10, Article 11, Article 13, Article 14, Article 15 letter a, Article 16 paragraph (2), Article 17, Article 23, and Article 27 shall be liable to administrative sanctions in respect of Allowance for Earning Assets Losses to the amount of the possible loss to the Bank from the transaction value and/or administrative sanctions as referred to in Article 52 paragraph (2) of Act Number 7 of 1992 concerning Banking as amended by Act Number 10 of 1998, including but not limited to: a. inclusion of members of management, Bank employees, and shareholders in the list of persons prohibited from becoming owners and managers of Banks; b. suspension of certain business activities, including but not limited to freeze on expansion of provision of funds. c. dismissal of Bank management and thereafter appointment of caretaker management until a General Meeting of Shareholders or Meeting of Cooperative Members appoints permanent successors with approval of Bank Indonesia. Article 26

- 16 - Article 26 (1) Any Bank in violation of the provisions of Article 12 and Article 21 shall be liable to sanctions as referred to in the prevailing Bank Indonesia regulation concerning the Legal Lending Limit. (2) Any Bank in violation of the provisions of Article 15 letter b shall be liable to sanctions as referred to in the prevailing Bank Indonesia regulations concerning Commercial Bank Monthly Reports and Transparency of Financial Condition of Banks. (3) Any Bank in violation of the provisions of Article 15 letter b shall be liable to sanctions as referred to in prevailing relevant Bank Indonesia regulations. (4) Any Bank in violation of the provisions of Article 24 shall be liable to sanctions as referred to in the prevailing Bank Indonesia regulation concerning Transparency of Financial Condition of Banks. CHAPTER VIII TRANSITIONAL PROVISIONS Article 27 Any Bank having purchased Credit from IBRA during 2002 prior to the issuance of this Bank Indonesia Regulation shall be required to bring itself into conformity with the provisions stipulated in this Bank Indonesia Regulation. CHAPTER IX

- 17 - CHAPTER IX CONCLUDING PROVISIONS Article 28 Any further provisions necessary for the implementation of this Bank Indonesia Regulation shall be stipulated in a Circular Letter of Bank Indonesia. Article 29 This Bank Indonesia Regulation shall come into force on the date of its enactment. Enacted in: Jakarta Dated: September 27, 2002 On behalf of THE GOVERNOR OF BANK INDONESIA (signed) ANWAR NASUTION SENIOR DEPUTY GOVERNOR STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 97 OF 2002 DPNP

ELUCIDATION TO BANK INDONESIA REGULATION NUMBER 4/7/PBI/2002 CONCERNING PRUDENTIAL PRINCIPLES FOR PURCHASE OF CREDIT BY BANKS FROM THE INDONESIAN BANK RESTRUCTURING AGENCY GENERAL REVIEW The Indonesian Bank Restructuring Agency is engaged in a program for sale of loan assets as part of the restructuring of the national banking system and recovery of the economy, with particular focus on easing the burden of the State Budget. As is widely known, the loan assets held by the Indonesian Bank Restructuring Agency consist of non-restructured credit and restructured credit. One of the parties intending to purchase credit from the Indonesian Bank Restructuring Agency is the banking system. In this regard, it is necessary to stipulate the prudential principles that must be applied by the national banking system in conducting these transactions in order to prevent risks that could endanger the national banking system. ARTICLE

- 2 - ARTICLE BY ARTICLE Article 1 Number 1 through number 4 Article 2 Article 3 Fair value is defined as the sum that may be obtained from the exchange of financial instruments in arm s length transactions, not undertaken by reason of compulsion or liquidation, and conducted in compliance with prevailing Financial Accounting Standards. Article 4 Letter a Direct purchase is defined as the direct purchase by a Bank of Credit offered by IBRA. This definition of direct purchase includes purchase through a consortium in which the consortium consists of a Bank and consortium partners jointly purchasing Credit offered by IBRA. Letter b A brokerage company may comprise among others a clearing house, asset management company, special purpose vehicle, and similar entity. A Bank shall be deemed to exercise control of a brokerage company on the basis of the nature of the Credit purchase

- 3 - purchase transaction conducted through the brokerage company. In the case of such element of control, appraisal and consolidated supervision must be conducted as required by prevailing Financial Accounting Standards and prudential principles. Control is defined as control as stipulated in the prevailing Bank Indonesia regulation concerning Transparency of Financial Condition of Banks. Article 5 Paragraph (1) Credit principal or facility is defined as the value stated in the Credit agreement or right of collection against the debtor concerned. Paragraph (2) Purchase value of credit is defined as the value at which Credit is purchased from IBRA. Letter a If the Bank enters into a new Credit agreement with the debtor, the value of the Credit stated in the agreement is the estimated collectible value, and therefore the increment between the value of the Credit in the agreement over the purchase value shall be recognized as deferred income. Letter b

- 4 - Letter b If the Bank does not enter into a new Credit agreement, the increment of Credit principal or facility over purchase value is a sum estimated to accrue as loss, and thus the increment shall be recognized as Allowance for Earning Asset Losses. Letter c The offsetting account shall be presented on the assets side as a deduction against the Credit concerned. Article 6 Paragraph (1) Income includes but is not limited to interest receipts and other receipts set out in the agreement between the Bank and the debtor. Income shall be recognized on a cash basis throughout the term of the Credit. Paragraph (2) Recognition on cash basis shall apply both to non-restructured Credit and restructured Credit. Article 7 Article 8 Paragraph (1) Paragraph (2)

- 5 - Paragraph (2) Correction to Allowance for Earning Assets Losses and/or deferred income shall be in the amount of the increment of payments from the debtor over purchase value of the Credit. Paragraph (3) Credit restructuring shall take place in accordance with the prevailing Bank Indonesia regulation on Credit Restructuring. Article 9 Paragraph (1) The 5 (five) year period in this paragraph shall be calculated from the date on which the Credit is recorded in the Bank balance sheet. Paragraph (2) Residual balance of Credit is defined as the entire Credit principal or facility not repaid by the debtor. Article 10 Paragraph (1) Classification of Credit as current shall apply to non-restructured Credit and to restructured Credit. The one year period shall be calculated from the date on which the Credit is recorded in the Bank balance sheet. Paragraph (2)

- 6 - Paragraph (2) Assessment based on analysis of debtor cash flow and repayment ability shall apply to non-restructured Credit and to restructured Credit. Analysis of debtor cash flow and repayment ability shall be based on the prevailing Bank Indonesia regulation concerning Earning Assets Quality. In the case of Credit for which a new agreement is not made with the debtor, analysis of debtor cash flow and repayment ability shall be based on the book value of the Credit. Book value of Credit is defined as Credit principal or facility after deduction for Allowance for Earning Assets Losses or deferred income arising from the Credit purchase transaction. Paragraph (3) Separate administration encompasses all recording pertaining to Credit purchased from IBRA, whether directly or through brokerage companies. Scope of recording includes but is not limited to Credit principal, purchase value of Credit, balance of and changes to Allowance for Earning Assets Losses and deferred income arising from purchase of Credit, analysis of debtor cash flow and repayment ability, expected repayment schedule, and regular evaluation of Credit quality. Article 11

- 7 - Article 11 Paragraph (1) Paragraph (2) Book value of Credit is defined as Credit principal or facility after deduction for Allowance for Earning Assets Losses or deferred income arising from the Credit purchase transaction. Article 12 Paragraph (1) Paragraph (2) Article 13 Paragraph (1) Tier I capital shall be calculated in accordance with the prevailing Bank Indonesia regulation concerning Capital Adequacy Ratio. Paragraph (2) Article 14 Other provisions in force concerning prudential principles is defined as including but not limited to provisions concerning the Capital Adequacy Ratio and Net Open Position. Article 15

- 8 - Article 15 Letter a In the event that a Bank receives Securities from a brokerage company in substitution of purchased Credit, the Securities shall be subject to the same accounting treatment and prudential principles as stipulated in Chapter I, Chapter II, and Chapter III. Letter b In the reporting made in the commercial bank monthly report, brokerage companies may be treated as branch offices of the Bank or consolidated into the Bank head office report. Letter c Consolidated Capital Adequacy Ratio is defined as the capital adequacy ratio of the Bank calculated for the consolidated financial statement covering the Bank and brokerage companies. Ratio of non-performing loans is defined as ratio of nonperforming Credit as stipulated in prevailing Bank Indonesia regulations. Article 16 Paragraph (1) Control is defined as control as stipulated in the prevailing Bank Indonesia regulation concerning Transparency of Financial Condition of Banks. Paragraph (2)

- 9 - Paragraph (2) Article 17 Article 18 Article 19 Article 20 Paragraph (1) Paragraph (2) Paragraph (3) Article 21 Liabilities in the consolidated financial statement as referred to in Article 15 are without prejudice to the imposition of provisions concerning the Legal Lending Limit of the Bank in respect of a brokerage company. Article 22

- 10 - Article 22 Paragraph (1) Paragraph (2) Article 23 Article 24 Paragraph (1) Paragraph (2) Disclosure in a newspaper shall be accompanied by an explanation that other detailed information can be seen at the Bank homepage. Paragraph (3) Paragraph (4) Article 25 Article 26

- 11 - Article 26 Paragraph (1) Paragraph (2) Paragraph (3) Related Bank Indonesia regulations in this paragraph are defined as including but not limited to the Bank Indonesia regulations concerning the Capital Adequacy Ratio and Net Open Position. Paragraph (4) Article 27 Article 28 Article 29 SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 4228 DPNP