1. LECTURE (3-4) - ASSET LIABILITY MGT - DEBT & CAPITAL STRUCURE AND RESTRUCTURE March 2, 2010

2. Questions 3 What is Asset and Liability Management and why does a financial institution require conducting ALCO? What is the Risk and Reward relationship? How doe we reduce financial risk? What is the most important financial risk? Who is in charge of the Asset Liability policy and decisions?

3. ASSET LIABILITY MANAGEMENT Is the Management of the Net Interest Margin To ensure that its level are compatible With the Risk/Return objective of the institution. It is an integrated approach to financial management, requiring simultaneous decisions about the types and amounts of financial assets and liabilities it holds (mix & Volume).

4. WHO SETS THE OBJECTIVES ? The Normative Approach-The Classical Theory The Positive Approach-The Agency Theory Managerial Objectives in FIs: Customer Needs Ownership Structure Regulation

5. ASSET LIABILITY MANAGEMENT 1.Cash1.Deposit GiroTabungan 2.Earning Assets2. Purchase Funds LoansBanks Non Banks 3. Non Earning Assets3. Capital

6. OBJECTIVES & POTENTIAL CONFLICTS LiquidityProfitabilitySolvability Hedging vs. Open Position Long vs. Short FX Position NIM (Net Interest Margin) LDR (Loan to Deposit Ratio) CAR (Capital Adequacy Ratio) Matching Assets with Liabilities

7. DEBT & CAPITAL STRUCTURE AND RESTRUCTURE 1.Arti Debt to Equity Ratio 2.Biaya Dana: Hutang vs Modal 3.Mengapa perlu ada Restrukturisasi 4.Tehnik-Tehnik Restrukturisasi 5.Kecukupan Modal Bagi Bank

8. Debt to Equity Ratio Cost of Capital: Biaya Hutang vs Modal A.Does Debt Policy Matter? B.How Much Should a Firm Borrow? A. Interest Expense B. Corporate Taxes C. Cost of Financial Distress D. Explaining Financial Choices E. Choosing the Firm’s Debt to Equity Ratio

9. RESTRUKTURISASI Mengapa perlu ada Restrukturisasi? Karena perusahaan tidak akan bisa Survive apabila tidak dilakukan. LIKUIDASI (Jk. Pendek) vs RESTRUKTURISASI (Jk Panjang)

10. TEHNIK RESTRUKTURISASI A. Securing Continued Supplies of Medium and Long Term Funds 1. Re-Evaluating the Use of Financial Leverage 2. Placing Greater Emphasis on Financial Planning 3. Managing Relationship with Market Analyst and Shareholders 4. Tapping New Sources of Funds B. Managing Cash Flows to Ensure Adequate Liquidity for the Firm C. Managing The Cash Flow Cycle: 1. Managing Relationship with Banks 2. Determining Financial Health 3. Identifying Financial Distress signals 4. Giving the Firm a Second Chance 5. Debt Restructuring 6. Debt and Debt Equity Swaps

11. KECUKUPAN MODAL Capital Adequacy Ratio = 8%* Bank for International Settlement

12. END OF LECTURE (3 & 4)

13. THE INVESTMENT GAME 4

14. JSX 2.570

15. USD/RP 9.265

16. BOND PRICE 114.27

17. Oil $ 78.70

18. SBI 6.41%

19. END OF LECTURE (4)