This Group Field Project will discuss how Bank BNI can benefit from Optimization of its Assets and Liabilities Portfolio.

Such optimization is necessary as Bank BNI is seeking to move away from 'recap bonds', which were injected as capital addition during the monetary crisis. Thus, it is important that not only that Bank BNI activate its intermediary functions but also able to invest better by managing maximum return from Assets and minimizing cost from Liabilities within tolerable risks.



We have identified that the problems derived from the business are:

1. What is the appropriate model to be used as a tool to determine the optimum portfolio?

2. What is the AIL Optimum Portfolio level and the greatest benefits?

3. What is the potential risk embedded in each component of A/L portfolio?

In setting up the model, the tools used are: Value at Risk (as Risk Measure) and Linear Programming Model (Optimization). Bank BNI's Asset and Liability classes are divided into Rupiah Asset, Rupiah Liability, Foreign Currency Asset and Foreign Currency Liability.



The results of the Optimization Model are:

. Lower opt. composition for Assets with Lower Yield to Risk Ratio

.Higher opt. composition for Assets with Higher Yield to Risk Ratio

.Lower opt. composition for Liabilities with Higher Cost to Risk Ratio

.Higher opt. composition for Liabilities with Lower Yield to Risk Ratio



As a conclusion, Bank BNI Asset and Liability performance have improved by this recomposition.



Total benefit after re-composition :

Components Before After Benefit

IDR Asset (bio) IDR 11,994.23 IDR 12,260.85 IDR 267.00

IDR Liability (bio) IDR 7,048.90 IDR 6,735.14 IDR 313.76

Fcy Asset (mio) USD 108.52 USD 112.34 USD 4.12

Fcy Liability (mio) USD 61.32 USD 59.83 USD 1.50



This model can be used as alternative tool to construct Optimum Asset and Liability composition. Such composition can be used as guidance in implementing Bank BNI portfolio strategy.

We also recommend that the tool be used to evaluate portfolio performance, determine risk limit allowed for each Asset/Liability component, and measure risk of each instrument -determining Capital at Risk.

This model is also applicable to other banks and financial institutions, with adjustments as required.



Research Location: PT.BNI 46, Tbk.