BANKING DEVELOPMENT AND
F. Rural Banks Development (BPR)
a. Enhancing Sharia Banking Working Group (WGPS) in the development of sharia banking products; and b. Refining the regulation on new products and
activities.
5. Activities of service excellence enhancement and product customization in accordance with the regulation and supervision
a. Refining policy related to Financing to Value (FTV);
b. Developing and refining the standard of sharia bank products (including documentation) in accordance with the business characteristics;
c. Development of application of EWS BUS and UUS;
and
d. Refining regulation related to BUS and UUS institutions including the guidelines of supervision and licensing.
scale of BPR business is, it shall remain different from BU and is not directed to become a Commercial Bank;
2. Aspect of BPR Market
BPR is encouraged to improve its business capacity and to focus on providing products and services to MSE, especially in financing productive MSE and local communities, and to participate in regional Financial Inclusion program; and
3. Aspect of Supervision towards BPR
BPR supervision policy is directed to the refinement of supervision method based on risk, which implementation shall be adjusted to the capital scale and business complexity of the concerned BPR. Therefore, the implementation good governance principles, GCG and risk management for BPR becomes a necessity and is to be implemented immediately.
The change in supervision policy would be followed by changes in the paradigm of regulations for BPR, among others regulations related to business coverage, opening of office network and credit distribution area.
BPR that owned a larger capital capacity can do their business in a much larger area and at the same time shall be subjected to a more complete regulation.
In 2015, the policy on BPR development will be focused on the efforts to consolidate industrial security and good governance improvement in order to increase competitiveness through capital strengthening policy, implementation of GCG principle and Risk Management.
1. BPR Capital Strengthening Policy
Policy of capital strengthening for the existing BPR is stipulated in OJK Regulation Number 5/POJK.03/2015 concerning Minimum Capital Requirement (CAR) and Minimum Core Capital Requirement of Rural Banks (BPR) dated 1 April 2015 that governs minimum core capital that must be fulfilled by the existing BPR in the amount of Rp6 Billion with the stages of fulfillment as follows:
a. BPR which at the time of the policy enactment
meet minimum core capital of Rp3 billion no later than 31 December 2019, and forward, the said BPR must meet a minimum core capital of Rp6 billion no later than 31 December 2024; and b. BPR which at the time of the policy enactment
had a core capital of Rp3 billion.
As it is known, POJK Number 20/POJK.03/2014 concerning Rural Banks had been issued on November 19, 2014 and would be effective on January 1, 2015. The above POJK is intended to regulate BPR institutions, among others to regulate the aspects of permit, capital requirements, management, and business activities. Specifically in relation to the terms of paid-up capital requirement for BPR establishment, POJK referred to has required BPR to increase the capital amount to a minimum of:
a. Rp. 14 billions for BPR establishment in zone 1;
b. Rp. 8 billions for BPR establishment in zone 2;
c. Rp. 6 billions for BPR establishment in zone 3;
d. Rp. 4 billions for BPR establishment in zone 4.
(The division of BPR zones is specified in Circular Letter of OJK Number 16/SEOJK.03/2015 concerning BPR dated 25 May 2015).
The above paid-up capital requirement shall not be obligatory for BPR that has been in operation at the time the POJK has been enacted, normally known as existing BPR. Regarding the aforementioned matter, an assessment had been carried out to draft a capital security policy for existing BPR in order to improve resiliency and competitiveness of BPR in the future.
Policy of capital strengthening for the existing BPR is
meet minimum core capital of Rp3 billion no later than 31 December 2019, and forward, the said BPR must meet a minimum core capital of Rp6 billion no later than 31 December 2024; and b. BPR which at the time of the policy enactment
had a core capital of Rp3 billion.
2. Policy on the Implementation of GCG Principle for BPR
Although there are no specific regulations regarding BPR GCG, the spirit of GCG principle has been included in various regulations applicable for BPR. Among others are regulations prohibiting concurrent positions/functions for Directors and Commissioners, provision on LLL, requirement to pass the Fit and Proper Test (FPT) for prospective candidates of Director and Commissioner and other BPR regulations containing the principles of GCG.
In order to improve the effectiveness of the existing regulations, currently a related POJK is being drafted to cover the followings:
a. BPR GCG implementation included the following principles: transparency, accountability, responsibility, independency, and fairness.
b. Generally, the implementation of GCG for BPR would be adjusted to BPR core capital, which is divided into 3 categories: Large BPR, Medium BPR and Small BPR:
1) Large BPR should fully implement GCG principle covering the required minimum number of Director and Commissioner;
forming audit and risk supervisory committee; forming internal audit work unit, compliance work unit and risk management work unit;
2) Medium BPR should implement GCG principle as Large BPR, however not required to form an audit and risk supervisory committee; and
3) Small BPR should implement GCG limitedly
related to GCG principle implementation.
3. BPR Risk Management Implementation Policy With the growing BPR business scale, the bigger
potential of loss risk shall have to be faced by BPR management. Therefore, in order to anticipate future potential loss, Risk Management needs to be implemented, namely a series of methodologies and procedures used to identify, measure, monitor and control any risks arising from BPR business activities.
In order to draft Risk Management policy for BPR, a preliminary assessment had been carried out with a recommendation in the form of general framework of Risk Management implementation for BPR, including Risk Management for Information Technology in BPR, as follows:
a. BPR Risk Management Concept covered among others the types of relevant risk, implementation of risk types and risk management process (identification, evaluation, supervision and risk control) in accordance to the characteristics of BPR businesses.
b. Technically, BPR Risk Management implementation would be adjusted in accordance with BPR business scale reflected in magnitude of the core capital, categorized into 3: Large, Medium and Small BPR:
1) Large BPR should fully implement Risk Management by applying the entire relevant risks, forming Risk Management work unit and Risk Management committee;
2) Medium BPR should implement Risk Management as Large BPR, however
become more important and could affect BPR risk profile. IT aspect becomes very important as it is related to the continuity of bank operations.