KEY BANKING REGULATIONS
A. New Regulations of OJK Products
1. Implementation of Governance for Rural Banks (BPR)
Pursuant to OJK Regulation Number 4/POJK.03/2015 dated 1 April 2015 concerning Implementation of Governance for Rural Banks (BPR).
With the ever-expanding services followed by the increase of BPR business volumes, the risk of BPR also increases, thus urges the need for implementing Governance by BPR.
Key Regulations
a. BPR are obliged to implement factors of governance application in every business activities and must be realized in the forms as follows:
1) implementation of duties and responsibilities of Directors
2) implementation of duties and responsibilities of Board of Commissioners
3) completeness and implementation of duties or functions of committees
4) the handling of conflicts of interest
5) application of compliance, internal audit, and external audit functions
6) application of risk management, including internal control system
7) legal lending limit 8) business plans of BPR
9) transparency of financial condition and non- financial conditions
b. OJK shall conduct assessment to the governance application of BPR
2) a Risk Management Work Unit and a Risk Management Committee; and
3) a Compliance Work Unit
e. Board of Directors in a BPR with core capital less than Rp50 billion are obliged to appoint executive officers who shall perform the:
1) Internal audit function;
2) Risk management function; and 3) Compliance function.
f. Number of Board of Commissioners:
1) BPR with core capital more than Rp50 billion are obliged to have a minimum of 3 (three) members of board of commissioners and a maximum of equal to the number of BOD members
2) BPR with core capital less than Rp50 billion are obliged to have a minimum of 2 (two) members of board of commissioners and a maximum of equal to the number of BOD members
g. Number of independent commissioners:
1) BPR with core capital more than Rp80 billion are obliged to have independent commissioners a minimum of 50% from the number of the BOC members
2) BPR with core capital less than Rp80 billion are obliged to have a minimum of 1 (one) independent commissioners
h. Former members of BOD or executive officers of BPR or parties that have affiliations with BPR, that can affect their ability to act independently, may not become independent commissioners in the concerned BPR prior to undergoing a cooling-off period of 1 (one) year.
i. Board of Commissioners in a BPR with core capital no less than Rp80 billion are obliged to establish at least:
1) an Audit committe; and 2) a Risk monitoring committee
j. Implementation of the compliance function for BPR organizational structure shall be divided into:
unit independent from the operational work unit.
2) BPR with core capital less than Rp50 billion are obliged to appoint an executive officer independent from the operational work unit in order to carry out the compliance function.
k. Implementation of the internatiol audit function for organizational structure of:
1) BPR with core capital more than Rp50 billion are obliged to establish SKAI
2) BPR with core capital less than Rp50 billion are obliged to appoint 1 (one) executive officer who shall be responsible for the implementation of the internal audit function l. Reports related to the implementation of BPR
governance are:
1) Reports on the implementation of main duties of BOD members supervising the compliance function.
2) Specific reports on policies/decisions of board of directors that deviate from the regulations.
3) Reports on the appointment and dismissal of head of SKAI or executive officer responsible for the implementation of internal audit function.
4) Reports on the implementation and main results of the internal audit including information on confidential audit results.
5) Specific reports on every internal audit findings which could disturb business continuity of BPR.
6) Reports on review results by external parties for BPR with core capital more than Rp50
BPR, it requires adjustment to the capital structure so as in line with the best practice of banking. The regulation of Minimum Capital Requirement (CAR) of BPR is as follows:
a. BPR are obliged to provide a minimum capital calculated using the lowest Capital Adequacy Ratio (CAR) of 12% from Risk Weighted Average (RWA).
b. BPR capital consists of:
1) Core capital (tier 1) covering:
a) Main core capital;
b) Additional core capital; and 2) Supplementary capital (tier 2).
c. Supplementary capital can only be taken into account at a maximum of 100% of the core capital.
d. BPR are obliged to provide core capital no less than 8% of the RWA.
e. Additional and/or changes in regulation concerning:
1) Fund Capital Injection 2) Capital Contribution
3) Capital Contribution in the form of Other Assets
4) Capital Loan to become a Component of Additional Core Capital
5) Reduction factor of Core Capital
6) Additional Capital Injection in the form of Fixed Assets
7) Supplementary Capital 8) RWA
f. Prohibition of profit distribution for BPR which capital ratio and minimum core capital is not in accordance with letter a and d
g. Minimum core capital of BPR is determined at Rp6 billion
h. Fulfillment phase
1) BPR with core capital less than Rp3 billion are obliged to meet a minimum core capital of Rp3 billion no later than 31 December 2019, and forward, the said BPR must meet
2) BPR with a minimum core capital of Rp3 billion but less than Rp6 billion are obliged to meet a minimum core capital of Rp6 billion no later than 31 December 2019 i. BPR is prohibited to execute profit distribution
in the event:
1) The referred distribution causing the decrease of core capital to less than Rp6 billion; or
2) BPR has not met a minimum core capital of Rp6 billion.
j. BPR obtaining business licenses with paid-up capital less than Rp6 billion are obliged to meet the minimum core capital amount no later than 5 (five) years after receiving the business license from OJK.
3. Transparency and Publication of Bank Reports