Financial Services Authority Regulation Number 9 of 2022 Concerning the Supervision of the Indonesian Export Financing Institution

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 9 /POJK.05/2022
CONCERNING
SUPERVISION OF THE INDONESIAN EXPORT FINANCING INSTITUTION BY THE GRACE OF GOD THE MOST HIGH, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in carrying out the regulatory and supervisory duties for the Indonesian Export Financing Institution as referred to in Article 8 and Article 9 of Law Number 21 of 2011 concerning the Financial Services Authority, the Financial Services Authority has the authority to establish legislation regarding the Indonesian Export Financing Institution; b. that the health level of the Indonesian Export Financing Institution serves as a tool for the Financial Services Authority in setting supervisory strategies and focus;
c. that the Financial Services Authority Regulation Number 40/POJK.05/2015 concerning the Guidance and Supervision of the Indonesian Export Financing Institution is no longer suitable to meet legal needs to regulate the health level of the Indonesian Export Financing Institution, thus it needs to be replaced;
d. that based on the considerations as referred to in letters a, b, and c, and to implement the provisions of Article 40 paragraph (2) of Law Number 2 of 2009 concerning the Indonesian Export Financing Institution, it is necessary to establish a Financial Services Authority Regulation concerning the Supervision of the Indonesian Export Financing Institution; Recalling: 1. Law Number 2 of 2009 concerning the Indonesian Export Financing Institution (State Gazette of the Republic of Indonesia Year 2009 Number 2, Supplement to the State Gazette of the Republic of Indonesia Number 4957);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING SUPERVISION OF THE INDONESIAN EXPORT FINANCING INSTITUTION.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

Indonesian Export Financing Institution, hereinafter abbreviated as LPEI, is the Indonesian Export Financing Institution as referred to in the Law concerning the Indonesian Export Financing Institution.
Government is the Government of the Republic of Indonesia.
Financing is credit and/or financing based on Sharia principles provided by LPEI.
Guarantee is the provision of guarantee facilities to cover the financial obligations of the guaranteed party in the event the guaranteed party cannot fulfill contractual obligations to its creditors, including those implemented based on Sharia principles.
Insurance is the provision of facilities in the form of compensation for losses arising from uncertain events, including those implemented based on Sharia principles.
Sharia Principles are the core rules based on Islamic law that serve as the foundation in the making of agreements between LPEI and other parties in carrying out national export financing activities.
Sharia Business Unit, hereinafter abbreviated as UUS, is a special business unit work unit from LPEI's headquarters that carries out business activities based on Sharia Principles and/or functions as the head office of offices other than the headquarters that carry out business activities based on Sharia Principles.
Good Corporate Governance is a process and structure used by LPEI to achieve the goals of business operations by considering the interests of all parties involved in the business operations, based on legislation and prevailing general practices.
Minister is the Minister of Finance of the Republic of Indonesia.
Board of Directors is the Board of Directors of LPEI as referred to in the Law concerning the Indonesian Export Financing Institution.
Executive Director is a member of the Board of Directors appointed by the Minister to carry out LPEI's operational activities.
Managing Director is a director appointed by the Board of Directors to assist the Executive Director in carrying out LPEI's operational activities.
Sharia Supervisory Board is a board appointed by LPEI that has the duty and function of supervision and provides advice to the Executive Director regarding the implementation of LPEI's activities to ensure compliance with Sharia Principles.
LPEI Health Level is the result of the assessment of LPEI's condition conducted against Good Corporate Governance, risk profile, profitability, and capital.
Composite Rating is the final rating of the LPEI Health Level assessment results.
Derivative Transaction is a payment contract or agreement whose value is derived from the value of the underlying instrument, whether followed by fund/instrument movement or without fund/instrument movement, conducted for hedging purposes.
Maximum Limit of Derivative Transactions, hereinafter abbreviated as BMTD, is the maximum percentage of Derivative Transactions permitted against LPEI's capital.
Derivative Receivable is a receivable resulting from potential profits from a Derivative Transaction agreement/contract, including potential profits due to being valued according to the market price of ongoing spot transactions.
Assets are productive and non-productive assets obtained conventionally or based on Sharia Principles.
Productive Assets are LPEI's fund investments to generate income.
Non-Productive Assets are LPEI Assets other than Productive Assets that have potential losses, including in the form of foreclosed collateral.
Foreclosed Collateral, hereinafter abbreviated as AYDA, is assets obtained by LPEI, either through auction or outside of auction based on voluntary surrender by the collateral owner in the event the borrower fails to fulfill its obligations to LPEI.
Acceptance Receivable is a receivable arising as a result of acceptance conducted against time drafts.
Administrative Account Transaction is a commitment and contingency liability.
Maximum Limit of Financing Provision, hereinafter abbreviated as BMPP, is the maximum percentage of fund investment in the form of Financing, fund placement, Acceptance Receivables, Insurance, and Guarantees permitted against LPEI's capital.
BMPP Excess is the excess difference between the permitted BMPP percentage and the percentage of fund investment against LPEI's capital at the reporting date, and does not include BMPP Violation.
BMPP Violation is the excess difference between the permitted BMPP percentage and the percentage of fund investment against LPEI's capital at the time of fund investment.
Own Retention is a portion of the compensation amount for losses or guarantee facilities for each risk that is borne by itself without reinsurance or Re-guarantee.
Borrower is a business entity or individual who receives fund investment from LPEI.
Asset Quality Assessment Provision, hereinafter abbreviated as PPKA, is a provision calculated as a certain percentage based on Asset quality.
Risk is the potential for losses that cannot be controlled and/or can be controlled due to the occurrence of a specific event.
Risk Management is a series of procedures and methodologies used to identify, measure, control, and monitor Risks arising from all of LPEI's business activities.
Subsidiary Company is a company owned and/or controlled by LPEI directly or indirectly, both domestically and internationally.
Capital is the sum of core capital components, supplementary capital, and additional supplementary capital for LPEI.

CHAPTER II
SCOPE AND MECHANISM OF SUPERVISION BY THE FINANCIAL SERVICES AUTHORITY AGAINST LPEI
Article 2
(1) The Financial Services Authority conducts supervision over LPEI.
(2) The scope of supervision by the Financial Services Authority against LPEI as referred to in paragraph (1) includes:
a. LPEI Health Level; and b. compliance with legislation.
Article 3
(1) The Financial Services Authority conducts supervision over LPEI as referred to in Article 2 through direct supervision and indirect supervision. (2) Direct supervision as referred to in paragraph (1) is conducted through direct examinations. (3) Direct examination as referred to in paragraph (2) is implemented in accordance with the Financial Services Authority Regulation regarding direct examination of non-bank financial service institutions. (4) Indirect supervision as referred to in paragraph (1) can be conducted through the implementation of monitoring, research, analysis, and evaluation of periodic and/or incidental reports, supervisory data, and other relevant information obtained by the Financial Services Authority. (5) Supervision over LPEI as referred to in paragraph (1) is implemented in accordance with the provisions of legislation.

CHAPTER III
ASSESSMENT OF LPEI HEALTH LEVEL
Article 4
(1) LPEI is required to maintain and/or improve the LPEI Health Level by applying prudence principles and Risk Management in carrying out business activities. (2) The Executive Director is responsible for maintaining and monitoring the LPEI Health Level and taking necessary steps to maintain and/or improve the LPEI Health Level as referred to in paragraph (1). (3) LPEI is required to assess the LPEI Health Level using an individual Risk approach. (4) In the event LPEI controls a Subsidiary Company, in addition to conducting Health Level assessment using an individual approach as referred to in paragraph (3), LPEI is required to conduct Health Level assessment using a consolidated Risk approach. (5) LPEI is required to assess the UUS health level using an individual Risk approach.
Article 5
(1) LPEI may conduct business activities based on Sharia Principles.
(2) In conducting business activities based on Sharia Principles, LPEI is required to:
a. open a special work unit through the formation of a UUS; b. allocate separate capital;
c. conduct separate bookkeeping;
d. appoint a Sharia Supervisory Board; e. appoint a UUS leader; and f. refer to fatwas issued by the National Sharia Council of the Indonesian Ulema Council. (3) The Financial Services Authority records the formation of the UUS.
Article 6
(1) The assessment of the LPEI Health Level using the Risk approach as referred to in Article 4 paragraph (3) and paragraph (4) is conducted with an assessment scope covering the factors:
a. Good Corporate Governance; b. Risk profile;
c. profitability; and
d. capital.
(2) The individual assessment of UUS health level as referred to in Article 4 paragraph (5) covers assessment of the Risk profile factor. (3) Further provisions regarding:
a. the assessment of the LPEI Health Level as referred to in paragraph (1); and b. the UUS health level as referred to in paragraph (2), are established by the Financial Services Authority.
Article 7
(1) Members of the Board of Directors, Executive Director, and Managing Director who cause LPEI to fail to meet the provisions of Article 4 paragraph (1), paragraph (3), paragraph (4), and paragraph (5), and/or Article 5 paragraph (2) are subject to administrative sanctions in the form of written reprimands. (2) Administrative sanctions in the form of written reprimands as referred to in paragraph (1) can be given in the form of warning letters. (3) Administrative sanctions as referred to in paragraph (1) are imposed on members of the Board of Directors, Executive Director, and Managing Director who commit violations.
Article 8
(1) LPEI employees who cause LPEI to fail to meet the provisions of Article 4 paragraph (1), paragraph (3), paragraph (4), and paragraph (5), and/or Article 5 paragraph (2) are subject to administrative sanctions in the form of oral or written reprimands. (2) Administrative sanctions in the form of oral reprimands as referred to in paragraph (1) are given in the form of advisory oral warnings. (3) Administrative sanctions in the form of written reprimands as referred to in paragraph (1) are given in the form of warning letters.

CHAPTER IV
ASSESSMENT OF GOOD CORPORATE GOVERNANCE FACTORS
Section One
Principles of Good Corporate Governance
Article 9
(1) LPEI is required to implement Good Corporate Governance principles in every business activity at all levels or tiers of the organization. (2) The Good Corporate Governance principles as referred to in paragraph (1) include:
a. openness; b. accountability;
c. responsibility;
d. independence; and e. fairness.
(3) The implementation of Good Corporate Governance principles as referred to in paragraph (1) must at least be manifested in:
a. the implementation of duties and responsibilities of the Board of Directors, Executive Director, Managing Director, and Sharia Supervisory Board; b. the completeness and implementation of duties of committees and work units carrying out internal control functions;
c. the application of compliance, internal audit, and external audit functions;
d. the application of Risk Management, including internal control systems; e. LPEI's business plan; f. transparency of financial and non-financial conditions; and g. internal reporting and conflict of interest.
Article 10
(1) The implementation of Good Corporate Governance principles as referred to in Article 9 paragraph (1) must be codified in a Good Corporate Governance guideline. (2) The Financial Services Authority assesses the Good Corporate Governance guideline as referred to in paragraph (1). (3) The Financial Services Authority may request LPEI to improve the Good Corporate Governance guideline as referred to in paragraph (1). (4) LPEI is required to follow up on the request from the Financial Services Authority as referred to in paragraph (3).
Section Two
Board of Directors
Paragraph 1
Duties and Responsibilities of the Board of Directors
Article 11
The Board of Directors is required to carry out duties and responsibilities independently.
Article 12
(1) The Board of Directors is required to ensure the implementation of Good Corporate Governance principles as referred to in Article 9 in every business activity of LPEI at all levels or tiers of the organization. (2) The Board of Directors is required to supervise the implementation of duties and responsibilities of the Executive Director, and provide advice to the Executive Director. (3) In conducting supervision as referred to in paragraph (2), the Board of Directors is required to direct, monitor, and evaluate the implementation of basic and strategic policies.
Article 13
The Board of Directors is required to ensure that the Executive Director has followed up on:
a. recommendations from LPEI's internal audit work unit; b. recommendations from external auditors;
c. results of supervision by the Financial Services Authority; and/or
d. results of specific supervision by other authorities.
Article 14
The Board of Directors is required to notify the Financial Services Authority in writing within a maximum of 5 (five) working days since the discovery of:
a. violations of the Law concerning LPEI and its implementing regulations as well as other relevant legislation related to LPEI's business activities; and b. conditions or estimated conditions that may endanger the continuity of LPEI's business.
Article 15
(1) To support the effectiveness of the implementation of duties and responsibilities, the Board of Directors is required to form at least:
a. an audit committee; b. a Risk monitoring committee; and
c. a remuneration and nomination committee.
(2) The appointment of committee members as referred to in paragraph (1) is conducted by the Executive Director based on a decision of the Board of Directors meeting. (3) The Board of Directors is required to ensure that the committees formed as referred to in paragraph (1) carry out their duties effectively. (4) The committees as referred to in paragraph (1) compile guidelines and work rules for the committees.
Article 16
The Board of Directors is required to have guidelines and work rules for each member of the Board of Directors.
Paragraph 2
Transparency Aspects of the Board of Directors
Article 17
The Board of Directors is required to disclose:
a. share ownership in other companies, both located domestically and internationally; b. financial relationships and family relationships with other members of the Board of Directors; and
c. total salary, income, and other allowances,
in the report on the implementation of Good Corporate Governance principles as regulated in this Financial Services Authority Regulation.
Section Three
Executive Director and Managing Director
Paragraph 1
Duties and Responsibilities
Article 18
(1) The Executive Director is fully responsible for the implementation of LPEI's management.
(2) The Executive Director is required to manage LPEI in accordance with its duties and authorities as regulated in the Law concerning LPEI and its implementing regulations.
Article 19
To carry out duties in fulfilling Good Corporate Governance principles as referred to in Article 9 paragraph (2), the Executive Director is at least required to form:
a. an internal audit work unit; b. a Risk Management committee;
c. a Risk Management work unit; and
d. a compliance work unit.
Article 20
The Executive Director is required to follow up on:
a. recommendations from LPEI's internal audit work unit; b. recommendations from external auditors;
c. results of supervision by the Financial Services Authority; and/or
d. results of specific supervision by other authorities.
Article 21
The Executive Director is required to prioritize LPEI's interests while still considering the interests of employees as a whole in establishing personnel policies. Paragraph 2 Transparency Aspects
Article 22
The Executive Director and Managing Director are required to disclose:
a. share ownership in other companies, located domestically and internationally; and b. financial relationships and family relationships with members of the Board of Directors and other Managing Directors, in the report on the implementation of Good Corporate Governance principles as regulated in this Financial Services Authority Regulation.
Section Four
Provision of Opinions by the Financial Services Authority regarding the Board of Directors and Managing Director Paragraph 1 Assessment of Competence and Integrity for Candidate Board of Directors Members and Candidate Managing Directors
Article 23
(1) The Financial Services Authority submits a written opinion to the Minister regarding the fulfillment of expertise and experience requirements for candidate Board of Directors members, except for the appointment of Board of Directors members from institutions/agencies. (2) The Financial Services Authority submits an opinion to the Board of Directors regarding the assessment of competence and integrity of candidate Managing Directors of LPEI. (3) To submit:
a. a written opinion to the Minister as referred to in paragraph (1); and b. an opinion to the Board of Directors as referred to in paragraph (2), the Financial Services Authority conducts a competence and integrity assessment. (4) Provisions regarding factors and procedures for competence and integrity assessment as referred to in paragraph (3) refer to regulations regarding key managers, as regulated in the Financial Services Authority Regulation concerning competence and integrity assessment for key managers of financial service institutions. (5) The results of the competence and integrity assessment as referred to in paragraph (3) are in the form of a predicate:
a. recommended; or b. not recommended.
Paragraph 2
Reassessment of the Board of Directors and Managing Director
Article 24
The Financial Services Authority conducts a reassessment of:
a. Board of Directors members other than those from institutions/agencies; and/or b. Managing Directors, in the event there are indications of involvement and/or responsibility for integrity, financial reputation, and/or competence issues occurring at LPEI.
Article 25
Indications of involvement and/or responsibility for integrity, financial reputation, and/or competence issues as referred to in Article 24 consist of:
a. actions, either directly or indirectly, in the form of:

concealing and/or obscuring:
a) violations of legislation as well as policies or internal regulations of LPEI; or b) actual financial conditions and/or transactions;
providing undue benefits to members of the Board of Directors, Executive Director, Managing Director, LPEI employees, and/or other parties that can harm or reduce LPEI's profits; and/or
committing acts that violate prudence principles in the financial services sector and/or good LPEI management principles;
b. proven to have committed criminal acts that have been decided by the court and have permanent legal force;
c. causing LPEI to experience difficulties that endanger the continuity of LPEI's business and/or may endanger the financial services industry;
d. failing to execute orders from the Financial Services Authority to do and/or not do specific actions; e. having non-performing loans and/or financing at financial service institutions and/or being a controller, member of the board of directors, member of the board of commissioners, or equivalent of a company that has non-performing loans and/or financing; f. proven to be declared bankrupt and/or being a shareholder, member of the board of directors, member of the board of commissioners, or equivalent, who is declared guilty causing a company to be declared bankrupt or have its business license revoked; g. failing to conduct strategic management for the healthy development of LPEI; h. refusing to provide commitments and/or failing to fulfill commitments agreed upon with the Financial Services Authority and/or the Government;
i. hindering or interfering with:
efforts and implementation of the Financial Services Authority's authority; and/or
efforts by the Board of Directors and Managing Director and/or other parties,
in handling LPEI's solvency and/or liquidity issues; and/or j. integrity, financial reputation, and/or competence issues other than letters a through i that contradict legislation.
Article 26
(1) The Financial Services Authority conducts a reassessment based on evidence, data, and/or information obtained from supervision results or other information. (2) The reassessment as referred to in paragraph (1) is conducted with steps:
a. analysis of evidence, data, and/or information regarding Board of Directors members and Managing Directors being reassessed; b. clarification of evidence, data, and/or information to Board of Directors members and Managing Directors being reassessed; and
c. determination and notification of the final reassessment results to Board of Directors members and Managing Directors being reassessed.
(3) In the event the Financial Services Authority obtains new evidence, data, and/or information before the determination and notification of the final reassessment results as referred to in paragraph (2) letter c, the Financial Services Authority determines the final reassessment results by considering the new evidence, data, and/or information obtained. (4) The determination of the final reassessment results as referred to in paragraph (3) is conducted while still referring to the process as referred to in paragraph (2) letters a through c.
Article 27
(1) The Financial Services Authority determines the final reassessment results for Board of Directors members and Managing Directors as referred to in Article 24 with the predicate:
a. recommended; or b. not recommended.
(2) The final reassessment results as referred to in paragraph (1) are conducted for evaluation of the results

assessment of competence and propriety as referred to in Article 23 paragraph (5).
(3) The Financial Services Authority shall notify the final results of the re-assessment of members of the Board of Directors and the Executive Director of LPEI as referred to in paragraph (1) in writing to the Minister, LPEI, members of the Board of Directors, and the Executive Director of LPEI who are subject to re-assessment. (4) The results of the re-assessment of members of the Board of Directors and the Executive Director of LPEI as referred to in paragraph (1) shall be included in the Financial Services Authority's history information.

Fifth Section
Compliance, Internal Audit, and External Audit Functions

Article 28
The Executive Director is required to ensure the implementation of LPEI's compliance function in accordance with the Law concerning LPEI and other applicable legislation.

Article 29
(1) LPEI's external audit function shall be carried out by a public accountant and/or a public accounting firm registered with the Financial Services Authority and the Audit Board of Indonesia. (2) The public accounting firm as referred to in paragraph (1) shall be appointed by the Executive Director with the approval of the Board of Directors. (3) In carrying out the external audit function, the public accounting firm shall audit the financial statements.

Sixth Section
Transparency

Article 30
(1) LPEI is required to implement transparency regarding financial and non-financial conditions to stakeholders.
(2) LPEI is required to have a reliable financial reporting system for supervision purposes and other stakeholders.
(3) LPEI is required to implement transparency of information regarding Financing, Guarantee, and Insurance products in accordance with regulations as stipulated in the Financial Services Authority Regulation concerning consumer protection in the financial services sector.

Seventh Section
Assessment of the Implementation of Good Corporate Governance Principles

Article 31
(1) The assessment of Good Corporate Governance factors as referred to in Article 6 paragraph (1) letter a is an assessment of the implementation of Good Corporate Governance principles by LPEI. (2) Further provisions regarding the assessment of Good Corporate Governance factors as referred to in paragraph (1) shall be determined by the Financial Services Authority.

Eighth Section
Administrative Sanctions

Article 32
(1) Members of the Board of Directors, the Executive Director, and the Executive Director who cause LPEI to be unable to fulfill the provisions of Article 9 paragraph (1), Article 10 paragraph (4), Article 11, Article 12, Article 13, Article 14, Article 15 paragraph (1) and paragraph (3), Article 16, Article 17, Article 18 paragraph (2), Article 19, Article 20, Article 21, Article 22, Article 28, and/or Article 30 shall be subject to administrative sanctions in the form of a written reprimand. (2) The administrative sanction of a written reprimand as referred to in paragraph (1) may be given in the form of a warning letter. (3) The administrative sanction as referred to in paragraph (1) shall be imposed on members of the Board of Directors, the Executive Director, and the Executive Director who commit violations. (4) The Executive Director who causes LPEI to be unable to fulfill the provisions of Article 10 paragraph (1) shall be subject to administrative sanctions in the form of a written reprimand.

Article 33
(1) LPEI employees who cause LPEI to be unable to fulfill the provisions of Article 9 paragraph (1), Article 10 paragraph (4), Article 11, Article 12, Article 13, Article 14, Article 15 paragraph (1) and paragraph (3), Article 16, Article 17, Article 18 paragraph (2), Article 19, Article 20, Article 21, Article 22, Article 28, and/or Article 30 shall be subject to administrative sanctions in the form of an oral reprimand or a written reprimand. (2) The administrative sanction of an oral reprimand as referred to in paragraph (1) shall be given in the form of an oral warning of an educational nature. (3) The administrative sanction of a written reprimand as referred to in paragraph (1) shall be given in the form of a warning letter.

CHAPTER V
ASSESSMENT OF RISK PROFILE FACTORS

First Section
Implementation of Risk Management

Paragraph 1
Scope of Risk Management Implementation

Article 34
(1) LPEI is required to implement Risk Management effectively.
(2) The implementation of Risk Management as referred to in paragraph (1) shall at least cover:
a. active supervision by the Executive Director, the Board of Directors, and the Sharia Supervisory Board; b. adequacy of Risk Management policies and procedures as well as the establishment of Risk limits;
c. adequacy of the Risk identification, measurement, control, and monitoring processes, as well as the Risk Management information system; and
d. a comprehensive internal control system.
(3) The implementation of Risk Management as referred to in paragraph (1) must be adjusted to the objectives, business policies, size, and complexity of LPEI's business. (4) Risk Management as referred to in paragraph (1) for LPEI must be implemented for:
a. Strategic Risk; b. Operational Risk;
c. Insurance Risk;
d. Credit Risk; e. Market Risk; f. Liquidity Risk; g. Legal Risk; h. Compliance Risk;
i. Reputational Risk;
j. Investment Risk, specifically for UUS; and k. Return Risk, specifically for UUS.
(5) Risks as referred to in paragraph (4) may be grouped into 3 (three):
a. the Business Risk group includes:

Insurance Risk; and
Strategic Risk;
b. the Financial Risk group includes:
Credit Risk;
Market Risk;
Operational Risk;
Liquidity Risk;
Investment Risk, specifically for UUS; and
Return Risk, specifically for UUS; and
c. the Governance Risk group includes:
Compliance Risk;
Legal Risk; and
Reputational Risk.

Paragraph 2
Active Supervision by the Executive Director, Board of Directors, and Sharia Supervisory Board

Article 35
LPEI is required to establish clear authorities and responsibilities at every level of position related to the implementation of Risk Management as referred to in Article 34.

Article 36
(1) The authorities and responsibilities as referred to in Article 35 for the Executive Director shall at least:
a. be responsible for the implementation of Risk Management policies and the Risk exposures taken by LPEI as a whole; b. evaluate and decide on transactions and Risk limits requiring the Executive Director's approval;
c. develop a Risk Management culture at all levels of the organization;
d. ensure the improvement of human resources competence related to Risk Management; e. ensure that the Risk Management function has operated independently; and f. carry out periodic reviews to ensure:

the accuracy of Risk assessment methodologies;
the adequacy of the implementation of the Risk Management information system; and
the appropriateness of Risk Management policies and procedures as well as the establishment of Risk limits.
(2) The Executive Director's responsibility for the implementation of Risk Management policies as referred to in paragraph (1) letter a includes:
a. evaluating and providing direction based on reports submitted by the Risk Management function; and b. submitting accountability reports to the Board of Directors and the Sharia Supervisory Board at least once every 6 (six) months. (3) To carry out the authorities and responsibilities as referred to in paragraph (1), the Executive Director must have an understanding of the Risks inherent in all functional activities of LPEI and be able to take necessary actions in accordance with LPEI's Risk profile.

Article 37
(1) The authorities and responsibilities as referred to in Article 35 for the Board of Directors shall at least:
a. formulate written and comprehensive Risk Management policies and strategies; b. evaluate the Executive Director's accountability regarding the implementation of Risk Management policies as referred to in letter a; and
c. evaluate and decide on the Executive Director's requests related to transactions and Risk limits requiring the Board of Directors' approval.
(2) The evaluation of Risk Management policies and strategies as referred to in paragraph (1) letter a shall be carried out at least once every 1 (one) year and at any time if there are factors significantly affecting LPEI's business activities. (3) The evaluation of the Executive Director's accountability regarding the implementation of Risk Management policies as referred to in paragraph (1) letter b shall be carried out at least once every 6 (six) months.

Article 38
(1) The authorities and responsibilities as referred to in Article 35 for the Sharia Supervisory Board shall at least:
a. evaluate Risk Management policies related to the fulfillment of Sharia Principles; and b. evaluate the Executive Director's accountability regarding the implementation of Risk Management policies related to the fulfillment of Sharia Principles as referred to in letter a. (2) The evaluation of Risk Management policies as referred to in paragraph (1) letter a shall be carried out at least once every 1 (one) year and at any time if there are factors significantly affecting LPEI's business activities. (3) The evaluation of the Executive Director's accountability regarding the implementation of Risk Management policies related to the fulfillment of Sharia Principles as referred to in paragraph (1) letter b shall be carried out at least once every 6 (six) months.

Paragraph 3
Adequacy of Risk Management Policies and Procedures and Establishment of Risk Limits

Article 39
The adequacy of Risk Management policies as referred to in Article 34 paragraph (2) letter b is fulfilled by containing at least:
a. the establishment of Risks related to LPEI's business activities; b. the establishment of the use of measurement methods and Risk Management information systems;
c. the establishment of the level of Risk to be taken, the establishment of Risk tolerance, and the determination of Risk limits;
d. the establishment of Risk rating assessments; e. the formulation of emergency plans in worst-case conditions; and f. the establishment of an internal control system in the implementation of Risk Management.

Article 40
(1) Risk Management procedures and the establishment of Risk limits as referred to in Article 34 paragraph (2) letter b must be adjusted to the level of Risk to be taken against LPEI's Risks. (2) Risk Management procedures and the establishment of Risk limits as referred to in paragraph (1) shall at least contain:
a. clear accountability and levels of delegation of authority; b. the periodic review of Risk Management procedures and the establishment of Risk limits; and
c. adequate documentation of Risk Management procedures and the establishment of Risk limits.
(3) The establishment of Risk limits as referred to in paragraph (2) must cover:
a. overall limits; b. limits per type of Risk; and
c. limits per functional activity and specific transactions with Risk exposure.

Paragraph 4
Adequacy of Risk Identification, Measurement, Control, and Monitoring Processes, and Risk Management Information Systems

Article 41
(1) LPEI is required to carry out the processes of Risk identification, measurement, control, and monitoring as referred to in Article 34 paragraph (2) letter c regarding material Risk factors. (2) The implementation of the processes of Risk identification, measurement, control, and monitoring as referred to in paragraph (1) must be supported by:
a. a timely management information system; b. accurate and informative reports regarding financial conditions, functional activity performance, and LPEI's Risk exposure; and
c. human resources with competence in the field of Risk Management.

Article 42
(1) The adequacy of the Risk identification process as referred to in Article 34 paragraph (2) letter c must be carried out by LPEI through an analysis of at least:
a. the characteristics of Risks inherent in LPEI; and b. Risks from LPEI's business activities.
(2) The adequacy of Risk measurement as referred to in Article 34 paragraph (2) letter c must be carried out by LPEI through at least:
a. periodic evaluation of the suitability of assumptions, data sources, and procedures used to measure Risk; and b. adjustment to the Risk measurement process in the event of changes in LPEI's business activities and material Risk factors. (3) The adequacy of the Risk control process as referred to in Article 34 paragraph (2) letter c must be carried out by LPEI to manage specific Risks that may endanger the continuity of LPEI's business. (4) The adequacy of Risk monitoring as referred to in Article 34 paragraph (2) letter c must be carried out by LPEI through at least:
a. evaluation of Risk exposure; and b. adjustment to the reporting process in the event of changes in:

business activities;
Risk factors;
information technology; and
LPEI's Risk Management information system,
that are material.

Article 43
(1) The Risk Management information system as referred to in Article 34 paragraph (2) letter c must be supported by human resources with competence in the field of Risk Management information systems. (2) The Risk Management information system as referred to in Article 34 paragraph (2) letter c must include reports or information at least regarding:
a. Risk exposure; b. compliance with Risk Management policies and procedures as well as the establishment of Risk limits as referred to in Article 39 and Article 40; and
c. the realization of Risk Management implementation compared to established targets.
(3) Reports or information generated from the Risk Management information system as referred to in paragraph (1) must be submitted regularly to the Executive Director.

Paragraph 5
Internal Control System

Article 44
LPEI is required to implement an effective internal control system against Risks inherent in the implementation of business activities at all levels of LPEI's organization.

Article 45
(1) The implementation of the internal control system as referred to in Article 44 must at least be able to timely detect weaknesses and deviations that cause or affect LPEI's Risk exposure. (2) The internal control system as referred to in paragraph (1) must ensure:
a. compliance of LPEI's management level with Risk Management policies and procedures as well as applicable legislation and LPEI's internal policies or regulations; b. the compliance and effectiveness of the Risk Management function in designing and implementing Risk Management strategies and policies;
c. the availability of complete, accurate, useful, and timely financial and management information;
d. effectiveness and efficiency in business and operational activities; and e. the effectiveness of the Risk culture throughout LPEI's organization.

Article 46
(1) The comprehensive internal control system as referred to in Article 34 paragraph (2) letter d in the implementation of Risk Management shall at least contain:
a. the suitability of the internal control system with the type and level of Risks inherent in LPEI's business activities; b. the establishment of authorities and responsibilities for monitoring compliance with the adequacy of Risk Management policies and procedures as well as the establishment of Risk limits as referred to in Article 34 paragraph (2) letter b;
c. the establishment of clear reporting lines and separation of functions from operational functions to Risk control functions;
d. an organizational structure that clearly depicts LPEI's business activities; e. accurate and timely financial and operational reporting; f. adequate procedures to ensure LPEI's compliance with applicable legislation and LPEI's internal policies or regulations; g. effective, independent, and objective reviews of LPEI's operational activity assessment procedures; h. adequate testing and review of the Risk Management information system;
i. complete and adequate documentation of operational procedures, scope, audit findings, and the responses of the Executive Director, Board of Directors, and Sharia Supervisory Board of LPEI based on audit results; and
j. periodic and continuous verification and review of the handling of LPEI's material weaknesses and the actions of the Executive Director, Board of Directors, and Sharia Supervisory Board of LPEI to correct deviations that occur. (2) The assessment of the internal control system in the implementation of Risk Management as referred to in paragraph (1) must be carried out by the internal audit function.

Paragraph 6
Risk Management Organization and Functions

Article 47
For the implementation of effective Risk Management processes and systems as referred to in Article 34, LPEI is required to form:
a. a Risk Management Committee; and b. a Risk Management Work Unit.

Article 48
(1) The Risk Management Committee as referred to in Article 47 letter a shall at least consist of:
a. half of the members of the Executive Directors; and b. officials one level below the Executive Directors.
(2) One of the members of the Executive Directors as referred to in paragraph (1) letter a is an Executive Director who oversees the Risk Management function. (3) The authorities and responsibilities of the Risk Management Committee as referred to in paragraph (1) provide recommendations to the Executive Director, at least containing:
a. the formulation of Risk Management policies, strategies, and guidelines for implementation; b. improvements or adjustments to the implementation of Risk Management based on the results of Risk Management implementation evaluations; and
c. the establishment of matters related to business decisions that deviate from normal procedures.

Article 49
(1) The Risk Management Work Unit as referred to in Article 47 letter b shall be adjusted to the size and complexity of LPEI's business as well as the Risks inherent in LPEI. (2) The Risk Management Work Unit as referred to in paragraph (1) must be independent from business and operational functions and from the internal control function. (3) The Risk Management Work Unit as referred to in paragraph (1) is directly responsible to the Executive Director who oversees the Risk Management Work Unit. (4) The authorities and responsibilities of the Risk Management Work Unit include:
a. identifying Risks including Risks inherent in LPEI's business activities; b. formulating Risk measurement methods;
c. monitoring the implementation of Risk Management strategies formulated by the Board of Directors;
d. monitoring overall Risk positions, per type of Risk, and per type of functional activity, and conducting testing using scenario/abnormal condition assumptions and testing using historical data; e. periodically reviewing the Risk Management process; f. reviewing proposals for the development or expansion of business activities; g. evaluating the accuracy of models and validity of data used to measure Risk, if LPEI uses models for internal purposes; h. providing recommendations to business and operational functions and/or to the Risk Management Committee, according to the authority possessed; and
i. formulating and submitting Risk profile reports to the Executive Director regularly.

Article 50
Business and operational functions as referred to in Article 49 paragraph (2) are required to inform the Risk Management Work Unit of inherent Risk exposures regularly.

Paragraph 7
Management of Risks Associated with Business Development or Expansion

Article 51
(1) LPEI is required to have written policies and procedures to manage Risks inherent in the development or expansion of LPEI's business activities. (2) Policies and procedures as referred to in paragraph (1) shall at least cover:
a. systems and procedures as well as authorities in the management of business development or expansion; b. the identification of all Risks inherent in the development or expansion of business activities, both those related to LPEI and consumers;
c. a trial period for Risk measurement and monitoring methods regarding the development or expansion of business activities;
d. an accounting information system for the development or expansion of business activities; e. legal aspect analysis for the development or expansion of business activities; and f. transparency of information to consumers. (3) The accounting information system as referred to in paragraph (2) letter d shall at least accurately depict the Risk profile and profit or loss levels for the development or expansion of business activities. (4) The legal aspect analysis as referred to in paragraph (2) letter e includes:
a. the potential Legal Risks arising from the development or expansion of business activities; and b. compliance with applicable legislation. (5) Aspects in implementing information transparency as referred to in paragraph (2) letter f shall pay attention to at least:
a. information provided is complete, correct, and not misleading to consumers; b. balanced information between potential benefits that may be obtained and Risks that may arise for consumers; and
c. information provided does not obscure, reduce, or cover up important matters related to Risks that may arise.
(6) LPEI's business activities constitute a form of business development or expansion if they meet the criteria:
a. have never been previously conducted by LPEI; or b. have been previously conducted by LPEI but involve development that changes or increases specific Risk exposures on LPEI.

Article 52
LPEI is prohibited from assigning or approving the Executive Director, Board of Directors, Executive Directors, Sharia Supervisory Board, and/or LPEI employees to carry out activities that are not LPEI's business activities using LPEI's facilities or assets.

Article 53
(1) In managing Risks inherent in new products and activities, LPEI is required to have written policies and procedures. (2) Policies and procedures as referred to in paragraph (1) shall at least:
a. standard operating procedures and authorities in the management of new products and activities; b. the identification of all Risks inherent in new products and activities;
c. a trial period for Risk measurement and monitoring methods regarding new products and activities;
d. an accounting information system for new products and activities; and e. legal aspect and consumer protection analysis for new products and activities. (3) LPEI is required to disclose Risks inherent in new products and activities as referred to in paragraph (2) letter b to customers, which shall be documented in a document signed by the customer. (4) The Executive Director must submit a report for every issuance of new products and activities to the Board of Directors. (5) The report as referred to in paragraph (4) must be submitted at the latest 7 (seven) working days since the new products and activities are effectively implemented.

Second Section
Implementation of Prudential Principles

Paragraph 1
Scope of Implementation of Prudential Principles

Article 54
LPEI is required to apply prudential principles in the implementation of activities which shall at least consist of:
a. Asset quality assessment; b. the formation of Provision for Credit Losses (PPKA) and impairment loss reserves;
c. the formation of technical reserves for Guarantees and Insurance;
d. the application of Capital Adequacy Ratio (BMPP); e. the management of net foreign exchange positions; f. Retention in Insurance and Guarantees; and g. the management of receivables and/or Derivative Transaction obligations.

Paragraph 2
Asset Quality Assessment

Article 55
(1) LPEI is required to assess, monitor, and take necessary steps to ensure that Asset quality remains good.
(2) Asset quality assessment is conducted against Productive Assets and Non-Productive Assets.
(3) The obligation as referred to in paragraph (1) is carried out at least by maintaining the value of Problematic Financing at a controlled level.

Article 56
(1) LPEI is required to establish the same quality for:
a. 1 (one) Borrower with several different accounts; and/or b. 1 (one) Borrower financed by several creditors to finance the same project. (2) The provisions as referred to in paragraph (1) are exempted for Financing for Government assignments and Financing that cannot be financed by banking or other financial service institutions in accordance with the applicable statutory regulations applicable to LPEI. (3) In the event of differences in Productive Asset quality, the lowest Productive Asset quality shall be used. (4) In the event that:
a. the determination of Productive Asset quality uses the Risk Factor of the Republic of Indonesia; b. the lowest Productive Asset quality has been written off;
c. Financing up to the amount of Rp10,000,000,000.00 (ten billion rupiah); and/or
d. the Borrower has several different projects with clear cash flow separation from each project, LPEI may establish different Productive Asset qualities. (5) LPEI is required to adjust Productive Asset quality at least every 3 (three) months, for the end-of-month positions in March, June, September, and December.

Article 57
(1) LPEI is required to establish criteria for Borrowers who are required to submit audited financial reports from a public accountant and rules regarding the deadline for submitting such financial reports. (2) LPEI is required to include the Borrower's obligation to submit financial reports as referred to in paragraph (1) in the agreement between LPEI and the Borrower. (3) The Productive Asset quality of a Borrower who does not submit financial reports as referred to in paragraph (1) is downgraded by one level and assessed at most as 'less performing' (kurang lancar).

Article 58
Productive Assets as referred to in Article 55 paragraph (2) shall at least include:
a. Financing; b. securities;
c. placements in the form of deposits;
d. Acceptance Receivables; e. Derivative Receivables; f. Equity Investments; and g. Administrative Account Transactions.

Article 59
(1) Financing quality is established based on assessment factors:
a. business prospects; b. Borrower performance; and/or
c. repayment ability.
(2) Assessment of business prospects as referred to in paragraph (1) letter a includes components:
a. business growth potential; b. market conditions and the Borrower's position in competition;
c. management quality and labor issues;
d. support from the group or affiliates; and e. efforts made by the Borrower to maintain the environment.
(3) Assessment of Borrower performance as referred to in paragraph (1) letter b includes components:
a. profit acquisition; b. capital structure;
c. cash flow; and
d. sensitivity to market risk.
(4) Assessment of repayment ability as referred to in paragraph (1) letter c includes components:
a. accuracy of principal and interest or margin, profit-sharing, or fee payments for activities based on Sharia Principles; b. availability and accuracy of the Borrower's financial information;
c. completeness of Financing documentation;
d. compliance with Financing agreements; e. suitability of fund usage; and f. fairness of the source of obligation payments. (5) Financing quality assessment is established as:
a. performing (lancar); b. special attention (dalam perhatian khusus);
c. less performing (kurang lancar);
d. doubtful (diragukan); or e. non-performing (macet).
(6) LPEI's Financing quality assessment is conducted in accordance with the guidelines contained in the Appendix which is an integral part of this Financial Services Authority Regulation. (7) Financing quality assessment for business activities based on Sharia Principles where the contract is conducted using contracts other than those regulated in this Financial Services Authority Regulation is carried out using guidelines with contract characteristics that most closely match. (8) The use of other contracts as referred to in paragraph (7) is conducted after obtaining approval from the Financial Services Authority, having first met the requirements:
a. there is a fatwa from the National Sharia Council of the Indonesian Ulema Council regulating the aforementioned contract; and b. approval from the Sharia Supervisory Board.

Article 60
The determination of Financing quality is based solely on the accuracy of principal and interest or margin, profit-sharing, or fee payments for:
a. micro, small, and medium enterprise Financing; and b. Financing and fund allocation to Borrowers whose business activity locations are in specific areas established by the Financial Services Authority.

Article 61
LPEI may restructure Financing receivables for debtors experiencing difficulty in paying principal and interest or margin, profit-sharing, or fees but who still have repayment ability and good business prospects.

Article 62
(1) The assessment of restructured Financing receivable quality as referred to in Article 61 is subject to the following provisions:
a. at most equal to the Financing receivable quality before Financing restructuring, provided the debtor has not met the obligation to pay principal and interest or margin, profit-sharing, or fee installments consecutively for 3 (three) periods according to the agreed time; b. may increase at most 1 (one) level from the Financing quality before restructuring, after the debtor has met the obligation to pay principal and interest or margin, profit-sharing, or fee installments consecutively for 3 (three) periods as referred to in letter a; and
c. based on assessment factors as referred to in Article 59 paragraph (1):

after the determination of Financing quality as referred to in letter b; or
in the event the debtor does not meet the requirements and/or payment obligations in the credit restructuring agreement, both during and after 3 (three) periods of payment obligations according to the agreed time.
(2) The determination of restructured Financing quality up to the amount of Rp10,000,000,000.00 (ten billion rupiah):
a. up to 3 (three) periods of payment obligations is established:
at most less performing for Financing classified as doubtful or non-performing; or
remains the same for Financing classified as less performing or special attention before Financing restructuring; and
b. after 3 (three) periods of payment obligations, the quality of restructured Financing is established based on assessment factors regarding the accuracy of principal and interest or margin, profit-sharing, or fee payments.

Article 63
The provisions regarding Financing receivable quality as referred to in Article 62 do not apply to Financing receivable restructuring for Government assignments.

Article 64
(1) The quality of fund placements in the form of securities, including Sharia-based securities, issued by:
a. the Government; b. Bank Indonesia;
c. donor country governments; or
d. multilateral financial institutions, is established as performing.
(2) Donor country governments as referred to in paragraph (1) letter c and multilateral financial institutions as referred to in paragraph (1) letter d must be in the investment-grade category in the last 1 (one) year. (3) The quality of fund placements in the form of securities other than those referred to in paragraph (1) which are measured through profit or loss or measured at fair value through other comprehensive income is established as having performing quality provided they meet the requirements:
a. actively traded on the stock exchange; b. transparent market value information exists;
c. coupons, returns, or other similar obligations are paid in the correct amount and time, in accordance with the agreement; and
d. have not matured.
(4) The quality of fund placements in the form of securities, including Sharia-based securities, that do not meet the requirements as referred to in paragraph (1) and paragraph (3) letters a and/or b, or securities measured at amortized cost, is established:
a. performing, if:

included in the investment-grade category;
coupons or other similar obligations are paid in the correct amount and time, in accordance with the agreement; and
have not matured,
b. less performing, if:
included in the investment-grade category;
there is a delay in coupon or other similar obligation payments; and
have not matured;
or
have a rating at least 1 (one) level below the investment-grade category;
there is no delay in coupon or other similar obligation payments; and
have not matured; or
c. non-performing, if the securities do not meet the criteria as referred to in letters a and b.

Article 65
(1) The quality of placements in the form of Rupiah or foreign currency deposits at Bank Indonesia is established as performing. (2) The quality of placements in the form of deposits in domestic and/or foreign banks is established:
a. performing, if:

the receiving bank has a minimum capital adequacy ratio at least equal to the minimum capital adequacy requirements;
for conventional placements, there are no arrears in principal and/or interest payments; and
for placements in accordance with Sharia principles, meet the requirements:
a) no arrears in principal payments for qardh contracts; b) withdrawable at any time for current accounts based on wadi'ah contracts; or c) no arrears in investment nominal and/or profit-sharing payments for deposits based on mudharabah or murabahah contracts; b. less performing, if:
the receiving bank has a minimum capital adequacy ratio at least equal to the minimum capital adequacy requirements;
for conventional placements, there are arrears in principal and/or interest payments up to 5 (five) working days; and
for placements in accordance with Sharia principles, meet the requirements:
a) there are arrears in principal payments up to 5 (five) working days for qardh contracts; b) not withdrawable up to 5 (five) working days for current accounts based on wadi'ah contracts; or c) there are arrears in investment nominal and/or profit-sharing payments up to 5 (five) working days for deposits with mudharabah or murabahah contracts;
c. non-performing, if:
the receiving bank has a minimum capital adequacy ratio less than the minimum capital adequacy requirements;
the receiving bank has been established and announced as a bank under special supervision or the bank has been subject to sanctions suspending all business activities;
the receiving bank is established as a bank in liquidation or has its business license revoked;
for conventional placements, there are arrears in principal and/or interest payments of more than 5 (five) working days; and/or
for placements in accordance with Sharia principles, meet the requirements:
a) there are arrears in principal payments for qardh contracts of more than 5 (five) working days; b) not withdrawable when the term is more than 5 (five) working days for current accounts based on wadi'ah contracts; or c) there are arrears in investment nominal and/or profit-sharing payments of more than 5 (five) working days for deposits based on mudharabah or murabahah contracts.

Article 66
The quality of Acceptance Receivables is established based on:
a. the quality provisions for fund placements in the form of bank deposits as referred to in Article 65 paragraph (2), if the party obligated to settle the receivable is a bank; or b. the Financing quality provisions as referred to in Article 59 paragraph (1), if the party obligated to settle the receivable is a Borrower.

Article 67
The quality of Derivative Receivables for hedging is established based on:
a. the provisions for determining the quality of fund placements in the form of bank deposits as referred to in Article 65 paragraph (2), if the counterparty is a bank; or b. the Financing quality provisions as referred to in Article 59 paragraph (1), if the counterparty is not a bank.

Article 68
(1) The quality of equity investments valued using the cost method is established:
a. performing, if the recipient of the equity investment obtains profit and does not experience cumulative losses; b. less performing, if the recipient of the equity investment experiences cumulative losses up to 25% (twenty-five percent) of the recipient's equity investment capital;
c. doubtful, if the recipient of the equity investment experiences cumulative losses of more than 25% (twenty-five percent) up to 50% (fifty percent) of the recipient's equity investment capital; or
d. non-performing, if the recipient of the equity investment experiences cumulative losses of more than 50% (fifty percent) of the recipient's equity investment capital. (2) Cumulative losses as referred to in paragraph (1) are based on the last fiscal year's audited financial reports. (3) The quality of equity investments measured at fair value or using the equity method is established as performing.

Article 69
The quality of temporary equity investments is established:
a. performing, if the term has not exceeded 1 (one) year; b. less performing, if the term has exceeded 1 (one) year but has not exceeded 3 (three) years;
c. doubtful, if the term has exceeded 3 (three) years but has not exceeded 5 (five) years; or
d. non-performing, if the term has exceeded 5 (five) years or has not been withdrawn even though the Borrower's company has cumulative profits.

Article 70
The quality of Administrative Account Transactions is established based on:
a. the provisions for determining the quality of fund placements in the form of bank deposits as referred to in Article 65 paragraph (2), if the counterparty is a bank; and b. the provisions for determining Financing quality as referred to in Article 59, if the counterparty is a Borrower.

Article 71
(1) Productive Assets guaranteed with cash collateral are established to have performing quality.
(2) Cash collateral as referred to in paragraph (1) consists of:
a. deposits, current accounts, savings at banks, guarantee deposits, and/or gold; b. Bank Indonesia certificates, Sharia Bank Indonesia certificates, government debt securities, sukuk, and/or other securities issued by the Government or Bank Indonesia;
c. Government and/or foreign government guarantees included in the investment-grade category; and/or
d. standby letters of credit from prime banks, issued in accordance with the Uniform Customs and Practice for Documentary Credits or International Standby Practices, which meet the requirements. (3) Prime banks as referred to in paragraph (2) letter d must meet the requirements of having:
a. an investment rating given by a rating agency, at least:

AA- based on Standard & Poor's assessment;
Aa3 based on Moody's assessment;
AA- based on Fitch assessment; or
an investment rating equivalent to numbers 1, 2, and/or 3 based on the assessment of a rating agency recognized by the Financial Services Authority,
based on long-term business prospect assessments; and b. total Assets included in the world's top 200 (two hundred).
(4) Cash collateral as referred to in paragraph (2) letters a and b must meet the requirements:
a. are blocked and accompanied by a disbursement power of attorney from the collateral owner, including partial disbursement to pay arrears of principal or interest installments; b. the blocking period is at least equal to the Productive Asset term;
c. have strong legal binding as collateral, free from all other obligations, free from disputes, not pledged to other parties, including having clear Guarantee objectives; and
d. are stored at LPEI and/or banks in the form of state-owned enterprises or regional-owned enterprises.
(5) Cash collateral as referred to in paragraph (2) letters c and d must meet the requirements:
a. are unconditional and irrevocable; b. must be withdrawable within a maximum of 7 (seven) working days from the claim submission, including partial disbursement to pay arrears of principal, interest, and/or returns; and
c. have a term of at least equal to the Productive Asset term.

Article 72
LPEI must submit a claim for the disbursement of cash collateral as referred to in Article 71 within a maximum of 7 (seven) working days after the Borrower defaults based on LPEI's determination.

Paragraph 3
Establishment of PPKA and Provision for Credit Loss Reduction Value

Article 73
(1) LPEI is required to establish PPKA for Productive Assets and Non-Productive Assets.
(2) PPKA consists of:
a. general and special reserves for Productive Assets; and b. special reserves for Non-Productive Assets.
(3) General reserves are established at least 1% (one percent) of Productive Assets with performing quality.
(4) The establishment of general reserves is exempted for Productive Assets in the form of:
a. Financing facilities that have not been drawn which are part of Administrative Account Transactions; b. securities issued by the Government;
c. Bank Indonesia certificates;
d. securities issued by donor country governments; e. securities issued by multilateral financial institutions; and f. portions of Productive Assets guaranteed with cash collateral as referred to in Article 71. (5) Special reserves are established at a minimum of:
a. 5% (five percent) of Assets with special attention quality after deducting collateral value; b. 15% (fifteen percent) of Assets with less performing quality after deducting collateral value;
c. 50% (fifty percent) of Assets with doubtful quality after deducting collateral value; and/or
d. 100% (one hundred percent) of Assets with non-performing quality after deducting collateral value.
(6) The obligation to establish general PPKA reserves does not apply to Productive Assets for lease transactions in the form of Financing with ijarah contracts or lease transactions with ownership transfer in the form of Financing with ijarah muntahiyah bit tamlik contracts. (7) The obligation to establish special PPKA reserves applies to Productive Assets for lease transactions in the form of Financing with ijarah contracts or lease transactions with ownership transfer in the form of Financing with ijarah muntahiyah bit tamlik contracts, with the calculation basis based on lease principal arrears. (8) LPEI must establish depreciation/amortization for lease transactions, with the following provisions:
a. Financing with ijarah contracts is depreciated/amortized in accordance with LPEI's depreciation policy for similar Assets; or b. Financing with ijarah muntahiyah bit tamlik contracts is depreciated according to the lease term. (9) The use of collateral value as a reduction factor in PPKA calculation as referred to in paragraph (5) can only be done for Productive Assets. (10) The establishment of PPKA for Productive Assets in the form of Financing based on murabahah, istishna', qardh, mudharabah, and musyarakah contracts is calculated based on the Financing principal balance.

Article 74
Collateral that can be counted as a reduction in the formation of PPKA is established as follows:
a. securities and shares actively traded on the stock exchange or included in the investment-grade category established by a rating agency and pledged; b. land or land with buildings secured with a mortgage right;
c. machines that are an integral part of the land and secured with a mortgage right;
d. apartment units secured with fiduciary security; e. motor vehicles, machines, or inventory secured with fiduciary security; f. warehouse receipts secured with a guarantee right over warehouse receipts; g. aircraft or sea vessels with a size above 20 (twenty) cubic meters secured with a mortgage; and/or h. Productive Assets (receivables) guaranteed by credit guarantors.

Article 75
(1) Collateral as referred to in Article 74 except letter a must:
a. be accompanied by valid legal documents; b. be secured in accordance with statutory regulations to provide preferential rights for LPEI; and
c. be protected by insurance with clauses that grant LPEI the right to receive insurance money in the event of claim payments.
(2) Insurance companies providing insurance protection as referred to in paragraph (1) letter c must meet the requirements:
a. obtain a business license from the Financial Services Authority; b. have a health level with a minimum healthy condition; and
c. are not related parties to LPEI or the Borrower group, unless reinsured to an insurance company and/or reinsurance company that is not a related party to LPEI or the Borrower group.

Article 76
(1) The value of collateral that can be counted as a reduction in the formation of PPKA is established:
a. securities and shares actively traded on the stock exchange or included in the investment-grade category, established at a maximum of 50% (fifty percent) of the value recorded on the stock exchange at the end of the month; and b. land, buildings, residential houses, machines considered as an integral part of the land, aircraft, sea vessels, motor vehicles, inventory, and warehouse receipts, established at a maximum:

70% (seventy percent) of the valuation, if the valuation was conducted in the last 18 (eighteen) months;
50% (fifty percent) of the valuation, if the valuation conducted has exceeded 18 (eighteen) months but has not exceeded 24 (twenty-four) months;
30% (thirty percent) of the valuation, if the valuation conducted has exceeded 24 (twenty-four) months but has not exceeded 30 (thirty) months; or
0% (zero percent) of the valuation, if the valuation conducted has exceeded 30 (thirty) months.
(2) Valuation as referred to in paragraph (1) is conducted by an independent appraiser registered with the Financial Services Authority.

Article 77
(1) LPEI is required to establish provisions for credit loss reduction value in accordance with applicable financial accounting standards. (2) The establishment of provisions for credit loss reduction value as referred to in paragraph (1) is conducted for the preparation of financial reports.

Paragraph 4
AYDA

Article 78
(1) LPEI must undertake resolution efforts for AYDA.
(2) LPEI must document resolution efforts for AYDA.
(3) Upon taking possession of collateral, LPEI must re-assess AYDA to establish the net realizable value.
(4) The establishment of net realizable value as referred to in paragraph (3) is conducted by an independent appraiser registered with the Financial Services Authority.

(5) Independent appraisers as referred to in paragraph (4) are appraisers who meet the following requirements:
a. are not related parties to the Borrower; b. conduct appraisal activities based on professional ethics and regulations established by the competent institution;
c. use appraisal methods based on appraisal professional standards issued by the competent institution;
d. hold a business license from the competent institution to operate as an appraisal company; and e. are registered as members of an association recognized by the competent institution.

Article 79
(1) The quality of Asset Quality Determination (AYDA) conducted through resolution efforts as referred to in Article 78 paragraph (1) is determined as follows:
a. performing, if the AYDA is held for up to 12 (twelve) months; b. sub-standard, if the AYDA is held for more than 12 (twelve) months up to 36 (thirty-six) months;
c. doubtful, if the AYDA is held for more than 36 (thirty-six) months up to 60 (sixty) months; or
d. loss, if the AYDA is held for more than 60 (sixty) months.

(2) AYDA for which no resolution efforts as referred to in Article 78 paragraph (1) are conducted is determined to have a quality one level lower than the provisions in paragraph (1).

Paragraph 5
Formation of Technical Reserves for Guarantee and Insurance

Article 80
(1) LPEI is required to form technical reserves for Guarantee and Insurance.
(2) The technical reserves for Guarantee and Insurance as referred to in paragraph (1) consist of:
a. reserves for insurance premiums or contributions and guarantee fees or kafalah service fees that are not yet revenue; and b. claim reserves.

(3) The amount of reserves for insurance premiums or contributions and guarantee fees or kafalah service fees that are not yet revenue as referred to in paragraph (2) letter a is calculated proportionally over the insurance or guarantee coverage period.

(4) The formation of claim reserves as referred to in paragraph (2) letter b is calculated at a minimum based on the sum of reserves for:
a. estimates of claims still in the resolution process; and b. estimates of claims that have occurred but are not yet reported.

Article 81
(1) In calculating the ratio of minimum capital provision obligations, LPEI must take into account the Provision for Potential Losses (PPKA) on Productive Assets as referred to in Article 73 paragraph (1) and the impairment loss reserves formed.

(2) If the calculation result of PPKA on Productive Assets is greater than the impairment loss reserves formed, LPEI must calculate the difference between the PPKA calculation and the impairment loss reserves as a deduction from Capital in the calculation of the minimum capital provision obligation ratio.

(3) If the calculation result of PPKA on Productive Assets is equal to or less than the impairment loss reserves formed, LPEI does not need to take PPKA into account in the calculation of the minimum capital provision obligation ratio.

Paragraph 6
Application of Best Practice Principles (BMPP)

Article 82
(1) In providing or conducting Financing, Insurance, Guarantee, fund placement, and Acceptance Bills, LPEI must comply with BMPP.

(2) LPEI is prohibited from making agreements or contracts or setting requirements that obligate LPEI to provide or conduct Financing, Insurance, Guarantee, fund placement, and Acceptance Bills, which would result in a violation of BMPP.

Article 83
LPEI must comply with BMPP to related parties at a maximum of 10% (ten percent) of Capital.

Article 84
(1) LPEI is prohibited from providing different treatment in fund investment to related parties.

(2) Fund investment to non-related parties that provides benefits to related parties is classified as fund investment to related parties.

Article 85
(1) Related parties as referred to in Article 83 include:
a. members of the Board of Directors and the Executive Director; b. companies/entities where LPEI acts as a controller;
c. parties having family relationships up to the second degree, both horizontal and vertical, from members of the Board of Directors and the Executive Director; and
d. companies/entities where the Board of Directors and/or Executive Director acts as a controller.

(2) LPEI acts as a Controller as referred to in paragraph (1) letter b, if directly or indirectly:
a. owns 10% (ten percent) or more of the shares of another company or entity, and that ownership share is the largest share; b. owns 25% (twenty-five percent) or more of the shares of another company/entity;
c. holds options or other rights to own shares, which, if exercised, would cause such party to own and/or control shares of another company/entity as referred to in letter a or letter b;
d. conducts cooperation or actions in line to achieve common goals in controlling a company/entity, with or without a written agreement with other parties, so that together they own and/or control shares of another company as referred to in letter a or letter b; e. conducts cooperation or actions in line to achieve common goals in controlling a company/entity, with or without a written agreement with other parties, so that together they hold options or other rights to own shares, the exercise of which rights causes such parties to own and/or control shares of another company/entity together as referred to in letter a or letter b; f. has the authority and/or ability to approve, appoint, and/or dismiss members of the Board of Commissioners and/or Board of Directors of another company/entity; and/or g. has the ability to determine operational or strategic policies of another company/entity.

Article 86
(1) LPEI must comply with BMPP to non-related parties:
a. 1 (one) Borrower at a maximum of 20% (twenty percent) of Capital; and/or b. a group of Borrowers at a maximum of 25% (twenty-five percent) of Capital.

(2) Several Borrowers are classified as a group of Borrowers as referred to in paragraph (1) letter b, if:
a. a Borrower is a controller of another Borrower; b. one same party is a controller of several Borrowers;
c. a Borrower has financial dependence on another Borrower;
d. a Borrower issues guarantees to take over and/or repay part or all of the obligations of another Borrower in case such other Borrower fails to meet its obligations (default) to LPEI; e. the Board of Directors, Board of Commissioners, and/or executive officers of a Borrower serve as directors and/or commissioners on the Board of Directors or Board of Commissioners of another Borrower.

Article 87
(1) BMPP for Financing is calculated based on the debit balance.

(2) Borrowers for the takeover of bills for factoring or the purchase of Financing without a repurchase agreement are parties obligated to repay the debt.

(3) Borrowers for the takeover of bills for factoring or the purchase of Financing with a repurchase agreement are parties selling the bills/Financing.

(4) The debit balance for the takeover for factoring or the purchase of Financing is calculated based on the purchase price.

Article 88
BMPP for fund placement in the form of securities is calculated based on the purchase price.

Article 89
BMPP for Acceptance Bills is calculated at the value of the accepted bill.

Article 90
(1) Administrative Account transactions are designated as Financing to the applicant.

(2) BMPP for Administrative Account transactions is calculated at the value that has been issued.

(3) Guarantees received by LPEI from banks and/or other parties for Borrowers and/or groups of Borrowers are not calculated as a deduction from Financing in the BMPP calculation.

Article 91
BMPP for Insurance is calculated at the amount of coverage borne solely by LPEI.

Article 92
(1) BMPP for Guarantee is calculated at the value of the Guarantee borne solely by LPEI.

(2) Government guarantees can be used as a deduction from the value of Guarantee borne solely by LPEI as referred to in paragraph (1).

Article 93
(1) Exceeding BMPP may be caused by:
a. Decrease in Capital; b. exchange rate changes;
c. fair value changes;
d. business mergers and/or changes in management structure causing changes in related parties and/or borrower groups; and/or e. changes in regulations.

(2) Exceeding BMPP is calculated based on the value recorded on the report date.

(3) LPEI is required to make adjustments if there is an Exceeding of BMPP.

Article 94
Provisions regarding Exceeding BMPP as referred to in Article 93 apply mutatis mutandis to BMTD.

Article 95
(1) BMPP provisions do not apply to:
a. the purchase of securities issued by the Government, Bank Indonesia certificates, securities issued by donor country governments, and/or securities issued by multilateral financial institutions; b. Financing guaranteed by the Government in accordance with applicable laws and regulations;
c. Financing guaranteed by:

collateral in the form of liquid collateral such as current accounts, deposits, savings, guarantee deposits, and/or gold; or
collateral in the form of securities issued by the Government, Bank Indonesia, donor country governments, or multilateral financial institutions;

d. Financing to Borrowers who have guarantees from:

prime banks; or
export credit agencies included in categories worthy of investment; and/or
e. Financing, Insurance, and Guarantee conducted after obtaining approval from the Financial Services Authority (OJK).

(2) Donor country governments and/or multilateral financial institutions as referred to in paragraph (1) letter a must be included in categories worthy of investment.

(3) Collateral as referred to in paragraph (1) letter c must meet the following requirements:
a. is blocked and accompanied by a disbursement power of attorney from the collateral owner; b. is unconditional and irrevocable;
c. the blocking period is at least equal to the Financing or fund placement period; and
d. has strong legal binding.

(4) Guarantees as referred to in paragraph (1) letter d must meet the following requirements:
a. are in the form of standby letters of credit in accordance with applicable Uniform Customs and Practice for Documentary Credits or International Standby Practices; b. are unconditional and irrevocable;
c. must be payable within a maximum of 7 (seven) working days from the claim submission, including partial payment;
d. have a minimum duration equal to the Financing period; and e. are not re-guaranteed by banks that are not prime banks.

Article 96
The takeover of time export bills is excluded from BMPP calculations as long as they meet the following requirements:
a. time export bills are issued based on time letters of credit in accordance with applicable Uniform Customs and Practice for Documentary Credits; and b. have been accepted by a prime bank.

Article 97
Exclusions from BMPP calculations as referred to in Article 95 paragraph (1) letter c number 2 and letter d are set at a maximum of:
a. 90% (ninety percent) of Capital for Financing to related parties; b. 80% (eighty percent) of Capital for Financing to Borrowers who are non-related parties; and
c. 75% (seventy-five percent) of Capital for Financing to groups of Borrowers who are non-related parties.

Article 98
(1) Temporary capital participation to overcome Financing failures is excluded from BMPP calculations.

(2) If new Financing is provided to a company where LPEI makes temporary capital participation, such new Financing is calculated in BMPP.

Article 99
The provision of Financing with a core-plasma partnership patterns, where the core company guarantees Financing provided to the plasma, is excluded from the definition of borrower groups as long as:
a. Financing is provided under a partnership pattern; b. the core company is not a related party to LPEI;
c. the plasma is not a subsidiary or branch owned, controlled, or affiliated with the core;
d. the plasma produces components required by the core company as part of the core company's production; and e. the Financing agreement with the plasma is conducted by LPEI directly with the plasma.

Article 100
(1) LPEI must comply with BMPP to 1 (one) state-owned enterprise or regional-owned enterprise at a maximum of 30% (thirty percent) of Capital.

(2) State-owned enterprises or regional-owned enterprises are not treated as borrower groups.

(3) BMPP for state-owned enterprises or regional-owned enterprises in the form of holding companies and including subsidiaries of state-owned enterprises or regional-owned enterprises are not treated as borrower groups.

Paragraph 7
Management and Maintenance of Net Foreign Exchange Position

Article 101
(1) LPEI is required to manage and maintain the overall net foreign exchange position at a maximum of 20% (twenty percent) of Capital.

(2) The overall net foreign exchange position as referred to in paragraph (1) is the sum of the absolute values of:
a. the net difference between Assets and liabilities in the financial position report for each foreign currency; and b. the net difference between receivables and obligations, whether commitments or contingencies, in administrative accounts for each foreign currency, all expressed in Rupiah.

Article 102
(1) The calculation of the net foreign exchange position is performed at the end of each day using the Reuters rate at 16:00 Western Indonesia Time on the relevant day.

(2) If the Reuters rate for a specific foreign currency is not available, LPEI may only use the closing rate at the same time as the Reuters rate.

(3) The net foreign exchange position is calculated jointly, covering all LPEI branch offices inside and outside the country.

Paragraph 8
Insurance and Guarantee Self-Retention

Article 103
(1) In conducting Insurance and Guarantee activities, LPEI must have Self-Retention for each Insurance and Guarantee closure.

(2) The total amount of Self-Retention for all LPEI Insurance and Guarantee closures is set at a maximum of 2 (two) times Capital.

Article 104
(1) The maximum limit of Self-Retention as referred to in Article 103 paragraph (2) for Insurance and Guarantee closures for each investor or counterparty from the insured/participant and/or each guarantor must follow the following provisions:
a. a maximum of 10% (ten percent) of Capital if each investor or counterparty from the insured/participant, and/or guarantor is a related party; b. a maximum of 20% (twenty percent) of Capital if each investor or counterparty from the insured/participant, and/or guarantor is an individual non-related party; or
c. a maximum of 25% (twenty-five percent) of Capital if each investor or counterparty from the insured/participant, and/or guarantor is 1 (one) group of non-related state-owned or regional-owned enterprises.

(2) Counterparties from the insured/participant, investors, or guarantors are classified as 1 (one) group of non-related parties as referred to in paragraph (1) letter c if:
a. they are controllers of other counterparties from the insured/participant, investors, or guarantors; b. one same party is a controller of several counterparties from the insured/participant, investors, or guarantors;
c. they have financial dependence with other counterparties from the insured/participant, investors, or guarantors; or
d. they have directors, commissioners, and/or executive officers who serve as directors and/or commissioners on the Board of Directors or Board of Commissioners of other counterparties from the insured/participant, investors, or guarantors.

(3) The maximum limit of Self-Retention for Insurance and Guarantee closures as referred to in paragraph (1) is calculated based on the value of Self-Retention still in effect.

(4) If the guarantor or counterparty from the insured also receives Financing facilities from LPEI, the maximum limit of Self-Retention for Insurance and Guarantee closures as referred to in paragraph (1) takes into account the debit balance of Financing provided to such guarantor or counterparty from the insured/participant.

Paragraph 9
Management of Receivables and Obligations of Derivative Transactions

Article 105
(1) LPEI is required to apply prudent principles in managing receivables and/or obligations arising from Derivative Transactions.

(2) Derivative Transactions as referred to in paragraph (1) are prohibited unless for hedging purposes.

Article 106
(1) BMTD for each counterparty is regulated as follows:
a. BMTD for debtors is set at 10% (ten percent) of Capital; and b. BMTD for bank counterparties is set not to exceed BMPP as referred to in Article 83 and Article 86.

(2) BMTD is calculated based on Derivative Transaction Risk, which is the sum of Derivative Receivables and potential future credit exposure.

(3) In calculating the value of Derivative Transaction Risk as referred to in paragraph (2), LPEI may perform netting with the following requirements:
a. are similar instruments; b. have similar underlying transactions;
c. have the same currency;
d. are conducted with the same counterparty; e. have the same duration; and f. are regulated in party agreements based on applicable laws and regulations.

Part Three
Mechanism for Assessing Risk Profile Factors

Article 107
(1) Assessment of risk profile factors as referred to in Article 6 paragraph (1) letter b is an assessment of:
a. Inherent Risk; and b. the quality of Risk Management implementation in LPEI operations.

(2) Assessment of Inherent Risk as referred to in paragraph (1) letter a is at least an assessment of the implementation of prudent principles as referred to in Article 54.

(3) Assessment of the quality of Risk Management implementation as referred to in paragraph (1) letter b is an assessment of the implementation of Risk Management as referred to in Article 34.

(4) Further provisions regarding assessment of risk profile factors as referred to in paragraph (1) are established by the Financial Services Authority (OJK).

Part Four
Compliance Plan

Article 108
(1) If LPEI fails to comply with provisions as referred to in Article 83, Article 86, Article 93 paragraph (3), Article 100 paragraph (1), and/or Article 104 paragraph (1), LPEI is required to submit an action plan within a maximum of 1 (one) month from the date of violation determination by the Financial Services Authority (OJK).

(2) LPEI that cannot comply with the provisions of this Financial Services Authority Regulation as a result of implementing Government assignments is required to submit an action plan within a maximum of 1 (one) month from notification by the Financial Services Authority (OJK).

(3) The action plan as referred to in paragraph (1) and paragraph (2) must at least contain plans to be carried out by LPEI to comply with the provisions, accompanied by a specific timeframe required to comply with the provisions as referred to in paragraph (1) and paragraph (2).

(4) The specific timeframe required to comply with the provisions as referred to in paragraph (3) in the action plan as referred to in paragraph (1) is determined as follows:
a. for BMPP Violations, within a maximum of 1 (one) month from the date the action plan is approved by the Financial Services Authority (OJK); b. for Exceeding BMPP, within a maximum of 12 (twelve) months from the date the action plan is approved by the Financial Services Authority (OJK).

(5) The action plan as referred to in paragraph (1) and paragraph (2) must obtain a statement of no objection from the Financial Services Authority (OJK).

(6) If the action plan as referred to in paragraph (1) and paragraph (2) is deemed by the Financial Services Authority (OJK) insufficient to address the problems, LPEI is required to improve the compliance plan.

(7) The Financial Services Authority (OJK) provides a statement of no objection for action plans submitted by LPEI, considering the problem conditions faced by LPEI, within a maximum of 14 (fourteen) days from the receipt of the complete compliance plan.

(8) LPEI is required to implement the action plan as referred to in paragraph (1) and paragraph (2).

Part Five
Administrative Sanctions

Article 109
(1) Members of the Board of Directors, Executive Directors, and Executive Directors who cause LPEI to fail to comply with the provisions of Article 34 paragraph (1), Article 40 paragraph (1) and (3), Article 41, Article 42, Article 43 paragraph (1), Article 44, Article 45 paragraph (2), Article 46 paragraph (2), Article 47, Article 50, Article 51 paragraph (1), Article 52, Article 54, Article 55 paragraph (1), Article 56 paragraph (1) and (5), Article 57 paragraph (1) and (2), Article 73 paragraph (1), Article 77 paragraph (1), Article 80 paragraph (1), Article 81 paragraph (1) and (2), Article 82, Article 84 paragraph (1), Article 101 paragraph (1), Article 104 paragraph (1), Article 105, and/or Article 108 paragraph (1), (2), (6), and (8) are subject to administrative sanctions in the form of written reprimands.

(2) Administrative sanctions in the form of written reprimands as referred to in paragraph (1) may be given in the form of warning letters.

(3) Administrative sanctions as referred to in paragraph (1) are imposed on members of the Board of Directors, Executive Directors, and Executive Directors who commit violations.

(4) Executive Directors who cause LPEI to fail to comply with the provisions of Article 34 paragraph (3) and (4), Article 35, and/or Article 53 paragraph (1) and (3) are subject to administrative sanctions in the form of written reprimands.

Article 110
(1) LPEI employees who cause LPEI to fail to comply with the provisions of Article 34 paragraph (1), Article 40 paragraph (1) and (3), Article 41, Article 42, Article 43 paragraph (1), Article 44, Article 45 paragraph (2), Article 46 paragraph (2), Article 47, Article 50, Article 51 paragraph (1), Article 52, Article 54, Article 55 paragraph (1), Article 56 paragraph (1) and (5), Article 57 paragraph (1) and (2), Article 73 paragraph (1), Article 77 paragraph (1), Article 80 paragraph (1), Article 81 paragraph (1) and (2), Article 82, Article 84 paragraph (1), Article 101 paragraph (1), Article 104 paragraph (1), Article 105, and/or Article 108 paragraph (1), (2), (6), and (8) are subject to administrative sanctions in the form of oral or written reprimands.

(2) Administrative sanctions in the form of oral reprimands as referred to in paragraph (1) are given in the form of advisory oral warnings.

(3) Administrative sanctions in the form of written reprimands as referred to in paragraph (1) are given in the form of warning letters.

CHAPTER VI
ASSESSMENT OF PROFITABILITY FACTORS

Article 111
(1) Assessment of profitability factors as referred to in Article 6 paragraph (1) letter c must at least include assessment of:

a. profitability performance; b. sources supporting profitability;
c. continuity of components supporting profitability;
d. profitability management; and e. implementation of social functions by Sharia Business Units (UUS).
(2) Further provisions regarding the assessment of profitability factors as referred to in paragraph (1) shall be determined by the Financial Services Authority.

CHAPTER VII
ASSESSMENT OF CAPITAL FACTORS
First Section
Minimum Capital
Article 112
(1) LPEI is required to maintain a minimum capital provision obligation ratio of at least 8% (eight percent) and/or in accordance with the LPEI's Risk Profile, which is mandated to be fulfilled by the LPEI. (2) The minimum capital provision obligation ratio as referred to in paragraph (1) is the ratio between Capital and Risk-Weighted Assets. (3) The minimum capital provision obligation ratio in accordance with the LPEI's Risk Profile as referred to in paragraph (1) is determined at a minimum:
a. 8% (eight percent) of Risk-Weighted Assets if the Risk Profile is rank 1; b. 9% (nine percent) up to less than 10% (ten percent) of Risk-Weighted Assets if the Risk Profile is rank 2;
c. 10% (ten percent) up to less than 11% (eleven percent) of Risk-Weighted Assets if the Risk Profile is rank 3; or
d. 11% (eleven percent) up to 14% (fourteen percent) of Risk-Weighted Assets if the Risk Profile is rank 4 or rank 5.
(4) The obligation to fulfill the minimum capital provision ratio in accordance with the LPEI's Risk Profile as referred to in paragraph (1) is determined:
a. fulfillment of the minimum capital provision ratio for the position from March to May is based on the Risk Profile rank from the position in December of the previous year; b. fulfillment of the minimum capital provision ratio for the position from June to August is based on the Risk Profile rank from the position in March;
c. fulfillment of the minimum capital provision ratio for the position from September to November is based on the Risk Profile rank from the position in June;
d. fulfillment of the minimum capital provision ratio for the position from December to February of the following year is based on the Risk Profile rank from the position in September; and e. in the event of a change in the Risk Profile rank among the Risk Profile assessment periods, fulfillment of the minimum capital provision obligation ratio is based on the last Risk Profile rank. (5) Risk-Weighted Assets as referred to in paragraph (2) consist of:
a. Risk-Weighted Assets for Credit Risk; b. Risk-Weighted Assets for Market Risk; and
c. Risk-Weighted Assets for Operational Risk.
(6) Further provisions regarding the minimum capital provision obligation ratio as referred to in paragraph (1) shall be determined by the Financial Services Authority.

Second Section
Mechanism for Assessing Capital Factors
Article 113
(1) The assessment of capital factors as referred to in Article 6 paragraph (1) letter d must at least include an assessment of:
a. capital adequacy level; and b. capital management.
(2) The assessment of the capital adequacy level as referred to in paragraph (1) letter a is at least an assessment of the fulfillment of the minimum capital provision obligation ratio as referred to in Article 112. (3) Further provisions regarding the assessment of capital factors as referred to in paragraph (1) shall be determined by the Financial Services Authority.

Third Section
Administrative Sanctions
Article 114
(1) Members of the Board of Directors, Executive Directors, and Managing Directors who cause the LPEI to be unable to fulfill the provisions of Article 112 paragraph (1) shall be subject to administrative sanctions in the form of a written reprimand. (2) Administrative sanctions in the form of a written reprimand as referred to in paragraph (1) may be given in the form of a warning letter. (3) Administrative sanctions as referred to in paragraph (1) are imposed on Members of the Board of Directors, Executive Directors, and Managing Directors who commit violations.

CHAPTER VIII
MECHANISM FOR ASSESSING THE HEALTH LEVEL OF LPEI First Section Mechanism for Assessing Health Level
Article 115
(1) Each health factor assessment of LPEI as referred to in Article 6 is assigned a rank based on a comprehensive and structured analysis framework. (2) The rank of each factor is categorized as follows:
a. rank 1; b. rank 2;
c. rank 3;
d. rank 4; and e. rank 5.
(3) The determination of the rank for the Good Corporate Governance factor is conducted based on a comprehensive and structured analysis of the assessment results of the implementation of Good Corporate Governance principles for LPEI and other information related to Good Corporate Governance for LPEI. (4) The determination of the rank for the Risk Profile factor is conducted through the following stages:
a. determination of the risk level of each risk as referred to in Article 34 paragraph (4); b. determination of the composite inherent risk level and the quality of composite Risk Management implementation; and
c. determination of the rank for the Risk Profile factor based on a comprehensive and structured analysis of the determination results as referred to in letters a and b, taking into account the significance of each risk to the overall Risk Profile.
(5) The determination of the rank for the profitability factor is conducted based on a comprehensive analysis of profitability parameters or indicators, taking into account the significance of each parameter or indicator and considering other issues affecting LPEI's profitability. (6) The determination of the rank for the LPEI capital factor assessment is conducted based on a comprehensive analysis of capital parameters or indicators, taking into account the significance of each parameter or indicator and considering other issues affecting LPEI's capital.
Article 116
(1) The determination of the consolidated rank for the Good Corporate Governance factor as referred to in Article 6 paragraph (1) letter a is conducted by taking into account:
a. the significance or materiality of the share of Subsidiary Companies to the LPEI on a consolidated basis; and b. issues related to the implementation of Good Corporate Governance principles at Subsidiary Companies that have a significant impact on the implementation of Good Corporate Governance principles on a consolidated basis. (2) The determination of the consolidated rank for the Risk Profile factor as referred to in Article 6 paragraph (1) letter b is conducted by taking into account:
a. the significance or materiality of the share of Subsidiary Companies to the LPEI on a consolidated basis; and b. Risk Profile issues at Subsidiary Companies that have a significant impact on the consolidated Risk Profile. (3) The determination of the consolidated rank for the profitability factor as referred to in Article 6 paragraph (1) letter c is conducted based on a comprehensive and structured analysis of specific profitability parameters or indicators resulting from the LPEI's consolidated financial reports and other financial information, taking into account:
a. the significance or materiality of the share of Subsidiary Companies to the LPEI on a consolidated basis; and b. profitability issues at Subsidiary Companies that have a significant impact on consolidated profitability. (4) The determination of the consolidated rank for the capital factor as referred to in Article 6 paragraph (1) letter d is conducted based on a comprehensive and structured analysis of specific capital parameters or indicators resulting from the consolidated financial reports of insurance companies and financing companies and other financial information, taking into account:
a. the significance or materiality of the share of Subsidiary Companies to the LPEI on a consolidated basis; and b. capital issues at Subsidiary Companies that have a significant impact on consolidated capital. (5) Further provisions regarding the determination of the consolidated ranks for the Good Corporate Governance factor, Risk Profile factor, profitability factor, and capital factor as referred to in paragraphs (1) through (4) shall be determined by the Financial Services Authority.
Article 117
(1) The Composite Rank of the LPEI Health Level is determined based on a comprehensive and structured analysis of the rank of each factor as referred to in Article 115 paragraphs (3) through (6), taking into account the materiality and significance of each factor. (2) The Composite Rank as referred to in paragraph (1) is categorized as follows:
a. Composite Rank 1; b. Composite Rank 2;
c. Composite Rank 3;
d. Composite Rank 4; and e. Composite Rank 5.
(3) Composite Rank 1 as referred to in paragraph (2) letter a reflects an LPEI condition that is generally very healthy, thus assessed as being very capable of facing significant negative influences from changes in business conditions and other external factors. (4) Composite Rank 2 as referred to in paragraph (2) letter b reflects an LPEI condition that is generally healthy, thus assessed as being capable of facing significant negative influences from changes in business conditions and other external factors. (5) Composite Rank 3 as referred to in paragraph (2) letter c reflects an LPEI condition that is generally fairly healthy, thus assessed as being fairly capable of facing significant negative influences from changes in business conditions and other external factors. (6) Composite Rank 4 as referred to in paragraph (2) letter d reflects an LPEI condition that is generally less healthy, thus assessed as being less capable of facing significant negative influences from changes in business conditions and other external factors. (7) Composite Rank 5 as referred to in paragraph (2) letter e reflects an LPEI condition that is generally unhealthy, thus assessed as being unable to face significant negative influences from changes in business conditions and other external factors. (8) Further provisions regarding the Composite Rank of the LPEI Health Level as referred to in paragraphs (3) through (7) shall be determined by the Financial Services Authority.

Second Section
Assessment of LPEI Health Level
Article 118
(1) LPEI is required to conduct a self-assessment of the LPEI Health Level as referred to in Article 4 paragraph (3), paragraph (4), and paragraph (5). (2) The self-assessment of the LPEI Health Level as referred to in paragraph (1) is conducted at least once a year for the position at the end of December. (3) In addition to conducting self-assessment as referred to in paragraph (2), LPEI is required to update the self-assessment of the LPEI Health Level if necessary. (4) The results of the self-assessment of the LPEI Health Level as referred to in paragraphs (2) and (3) must receive approval from the Executive Director. (5) The results of the self-assessment of the LPEI Health Level as referred to in paragraph (4) must be submitted to the Board of Directors. (6) LPEI is required to submit the results of the self-assessment of the LPEI Health Level as referred to in paragraphs (2) and (3) to the Financial Services Authority no later than:
a. February 15 for the LPEI Health Level assessment as referred to in paragraph (2); or b. 30 (thirty) working days from the date of updating the self-assessment of the LPEI Health Level as referred to in paragraph (3), via online through the Financial Services Authority's data communication network system. (7) If the submission deadline for the results of the self-assessment of the LPEI Health Level as referred to in paragraph (6) letter a falls on a holiday, the submission deadline for the results of the self-assessment of the LPEI Health Level is on the next working day.
Article 119
(1) The Financial Services Authority conducts an assessment of the LPEI Health Level every year for the position at the end of December. (2) The Financial Services Authority conducts an update of the assessment of the LPEI Health Level if necessary. (3) The assessment of the LPEI Health Level as referred to in paragraph (1) and the update of the assessment of the LPEI Health Level as referred to in paragraph (2) are conducted based on examination results, periodic reports submitted by LPEI, and/or other information.
Article 120
(1) In the event of a difference in the results of the LPEI Health Level assessment conducted by the Financial Services Authority as referred to in Article 119 and the results of the self-assessment of the LPEI Health Level conducted by LPEI as referred to in Article 118, the Financial Services Authority conducts a prudential meeting with the LPEI. (2) If after conducting the prudential meeting as referred to in paragraph (1) there is still a difference in the results of the LPEI Health Level assessment, the result of the LPEI Health Level assessment conducted by the Financial Services Authority shall prevail.

Third Section
Administrative Sanctions
Article 121
(1) Members of the Board of Directors, Executive Directors, and Managing Directors who cause the LPEI to be unable to fulfill the provisions of Article 118 paragraph (1), paragraph (3), paragraph (4), paragraph (5), and/or paragraph (6) shall be subject to administrative sanctions in the form of a written reprimand. (2) Administrative sanctions in the form of a written reprimand as referred to in paragraph (1) may be given in the form of a warning letter. (3) Administrative sanctions as referred to in paragraph (1) are imposed on Members of the Board of Directors, Executive Directors, and Managing Directors who commit violations.
Article 122
(1) LPEI employees who cause the LPEI to be unable to fulfill the provisions of Article 118 paragraph (1), paragraph (3), paragraph (4), and paragraph (5), and/or paragraph (6) shall be subject to administrative sanctions in the form of an oral reprimand or a written reprimand. (2) Administrative sanctions in the form of an oral reprimand as referred to in paragraph (1) are given in the form of an oral warning of an educational nature. (3) Administrative sanctions in the form of a written reprimand as referred to in paragraph (1) are given in the form of a warning letter.

CHAPTER IX
FOLLOW-UP ON LPEI HEALTH LEVEL ASSESSMENT
Article 123
(1) In the event that based on the results of the LPEI Health Level assessment there are:
a. LPEI Health Level factors assigned a rank of 4 or rank 5; b. LPEI Health Level Composite Rank assigned a rank of 4 or rank 5; and/or
c. LPEI Health Level Composite Rank assigned a rank of 3, but there are significant issues that need to be addressed so as not to disrupt the continuity of LPEI's business,
LPEI is required to submit an action plan to the Financial Services Authority.
(2) In the event that based on the health level assessment results, the UUS obtains a Risk Profile factor assessment with a rank of 4 or rank 5, LPEI is required to submit an action plan to the Financial Services Authority. (3) The action plan as referred to in paragraphs (1) and (2) is a commitment of the LPEI to the Financial Services Authority, which must at least include improvement steps to be implemented by the LPEI to address the issues faced, along with the target time for completion. (4) The Financial Services Authority has the authority to request the LPEI to adjust the action plan as referred to in paragraphs (1) and (2). (5) LPEI is required to submit the action plan:
a. for action plans that are follow-ups to the results of the LPEI Health Level assessment by the Financial Services Authority, submitted within the time limit determined by the Financial Services Authority; or b. for action plans that are follow-ups to the results of the LPEI's self-assessment, submitted no later than:

February 15 for the LPEI Health Level assessment for the position at the end of December; and
30 (thirty) working days from the date of updating the results of the self-assessment of the LPEI Health Level.
(6) If the submission deadline for the action plan for the LPEI's self-assessment as referred to in paragraph (5) letter b number 1 falls on a holiday, the submission deadline for the results of the self-assessment of the LPEI Health Level is on the next working day.
Article 124
(1) LPEI is required to submit a report on the implementation of the action plan as referred to in Article 123 paragraph (1) and paragraph (2) no later than:
a. 10 (ten) working days after the target time for completion of the action plan; and/or b. 10 (ten) working days after the end of the month and conducted monthly, if there are significant issues that will disrupt the timely completion of the action plan, via online through the Financial Services Authority's data communication network system. (2) The action plan implementation report submitted by LPEI must at least include an explanation regarding the realization of the action plan implementation, accompanied by proof of implementation and/or supporting documents.
Article 125
The Financial Services Authority has the authority to conduct examinations of the implementation of the action plan by LPEI.
Article 126
(1) Members of the Board of Directors, Executive Directors, and Managing Directors who cause the LPEI to be unable to fulfill the provisions of Article 123 paragraph (1), paragraph (2), and paragraph (5), and/or Article 124 paragraph (1) shall be subject to administrative sanctions in the form of a written reprimand. (2) Administrative sanctions in the form of a written reprimand as referred to in paragraph (1) may be given in the form of a warning letter. (3) Administrative sanctions as referred to in paragraph (1) are imposed on Members of the Board of Directors, Executive Directors, and Managing Directors who commit violations.
Article 127
(1) LPEI employees who cause the LPEI to be unable to fulfill the provisions of Article 123 paragraph (1), paragraph (2), and paragraph (5), and/or Article 124 paragraph (1) shall be subject to administrative sanctions in the form of an oral reprimand or a written reprimand. (2) Administrative sanctions in the form of an oral reprimand as referred to in paragraph (1) are given in the form of an oral warning of an educational nature. (3) Administrative sanctions in the form of a written reprimand as referred to in paragraph (1) are given in the form of a warning letter.

CHAPTER X
REPORTING
Article 128
In the event that LPEI conducts business activities based on Government assignment, LPEI is required to report to the Financial Services Authority no later than 5 (five) working days after LPEI receives the assignment, which must contain at least information regarding the impact of the implementation of the Government's task on:
a. the financial condition of LPEI; and b. fulfillment of the provisions in this Financial Services Authority Regulation.
Article 129
(1) LPEI is required to submit to the Financial Services Authority:
a. monthly reports; b. annual financial reports audited by a public accounting firm;
c. annual reports at least covering:

general information, including among others:
a) LPEI organs; b) LPEI business development; c) Board of Directors' strategy and policies; and d) Board of Directors' report;
annual financial reports audited by a public accounting firm consisting of:
a) financial position reports; b) profit and loss reports; c) equity change reports; d) cash flow reports; and e) notes to the financial statements, including information on commitments and contingencies;
opinion from the public accounting firm;
all disclosure aspects as mandated in the applicable financial accounting standards statement;
types of Risk and potential losses faced by LPEI and the Risk Management practices applied by LPEI; and
other information;
d. reports on the implementation of Good Corporate Governance principles at least covering:
scope of Good Corporate Governance principles;
share ownership of Members of the Board of Directors, Executive Directors, and Managing Directors;
financial relationships and family relationships of Members of the Board of Directors with other Members of the Board of Directors and Managing Directors;
remuneration policies and other facilities for Members of the Board of Directors, Executive Directors, and Managing Directors, disclosure of remuneration policies and other facilities for Members of the Board of Directors, Executive Directors, and Managing Directors at least covering the number of Members of the Board of Directors, Executive Directors, Managing Directors, and the total number of salaries, other remuneration benefits, and facilities set by the Minister;
ratio of highest to lowest salary;
frequency of Board of Directors meetings;
number of deviations that occurred and LPEI's resolution efforts;
number of legal issues and LPEI's resolution efforts;
transactions containing conflicts of interest;
bond buy-backs; and
provision of funds for social activities, both nominal amounts and recipients;
e. BMPP reports; f. net foreign exchange position reports; g. Risk Profile reports, including internal audit unit reports; and h. minimum capital provision obligation ratio calculation reports, via online through the Financial Services Authority's data communication network system. (2) Provisions regarding monthly reports as referred to in paragraph (1) letter a are regulated in a Financial Services Authority Regulation regarding monthly reports of non-bank financial service institutions. (3) Monthly reports, annual financial reports audited by a public accounting firm, and annual LPEI reports as referred to in paragraph (1) must contain information regarding UUS. (4) Reports as referred to in paragraph (3) are prepared based on applicable Sharia financial accounting standards. (5) In the event that the Financial Services Authority's data communication network system is not yet available or experiences technical difficulties, the submission of:
a. self-assessment results as referred to in Article 118 paragraph (6); b. action plans as referred to in Article 123 paragraph (1);
c. action plan implementation reports as referred to in Article 124 paragraph (1); and
d. reports as referred to in paragraph (1), shall be submitted to the Financial Services Authority offline.
(6) In the event of technical difficulties as referred to in paragraph (5), the Financial Services Authority announces via the Financial Services Authority website. (7) Submission of reports offline as referred to in paragraph (6) is accompanied by a cover letter in printed form signed by the Executive Director.

(8) Further provisions regarding the submission of the results of the LPEI's own Health Level assessment, action plans, and implementation reports of action plans as referred to in paragraph (5), as well as the form and structure of reports as referred to in paragraph (1) letters d through h, shall be determined by the Otoritas Jasa Keuangan.

Pasal 130
(1) Annual financial reports audited by a public accounting firm as referred to in Article 129 paragraph (1) letter b must be submitted no later than 4 (four) months after the end of the fiscal year. (2) LPEI must announce audited financial reports and other financial information as referred to in paragraph (1) through electronic mass media and at least 2 (two) print mass media with nationwide circulation, no later than April 30 of the following year. (3) Proof of announcement of financial reports as referred to in paragraph (2) must be submitted to the Otoritas Jasa Keuangan no later than 3 (three) working days from the date of publication.

Pasal 131
(1) Annual reports as referred to in Article 117 paragraph (1) letter c must be prepared for 1 (one) fiscal year and presented with a comparison of at least 1 (one) previous fiscal year. (2) Annual reports as referred to in paragraph (1) must be submitted to the Otoritas Jasa Keuangan no later than 5 (five) months after the end of the fiscal year. (3) LPEI must inform the annual report as referred to in paragraph (2) on the LPEI website within the time limit as referred to in paragraph (2).

Pasal 132
(1) LPEI is required to prepare reports on the implementation of Good Corporate Governance principles as referred to in Article 129 paragraph (1) letter d at the end of each fiscal year. (2) LPEI must submit reports on the implementation of Good Corporate Governance principles as referred to in paragraph (1) to the Otoritas Jasa Keuangan no later than 4 (four) months after the end of the fiscal year. (3) LPEI must inform reports on the implementation of Good Corporate Governance principles as referred to in paragraph (1) on the LPEI website no later than 4 (four) months after the end of the fiscal year.

Pasal 133
BMPP reports as referred to in Article 129 paragraph (1) letter e and net foreign exchange position reports as referred to in Article 129 paragraph (1) letter f must be submitted monthly in full to the Otoritas Jasa Keuangan no later than the 10th (ten) day of the following month.

Pasal 134
(1) Risk profile reports as referred to in Article 129 paragraph (1) letter g are submitted quarterly for the months of March, June, September, and December. (2) Risk profile reports as referred to in paragraph (1) must be submitted no later than 1 (one) month after the end of the reporting period.

Pasal 135
Reports on the calculation of the Minimum Capital Requirement ratio as referred to in Article 129 paragraph (1) letter h are submitted together with the submission of the results of the LPEI's own Health Level assessment.

Pasal 136
Executive Directors who cause LPEI to fail to meet the provisions:
a. Article 130 paragraph (1) after 4 (four) months until the end of the fifth month after the end of the fiscal year; b. Article 130 paragraph (2) after April 30 until the end of the fifth month after the end of the fiscal year;
c. Article 131 paragraph (2) after 5 (five) months until the end of the sixth month after the end of the fiscal year;
d. Article 132 paragraph (2) after 4 (four) months until the end of the fifth month after the end of the fiscal year; e. Article 133 after the 10th (ten) day until the end of the following month; and/or f. Article 134 paragraph (2) after 1 (one) month until the end of the second month after the end of the quarterly period, are subject to administrative sanctions in the form of oral reprimands.

Pasal 137
(1) Members of the Board of Directors, Executive Directors, and Managing Directors who cause LPEI to fail to meet the provisions of Article 130 paragraph (3), Article 131 paragraph (1), and/or Article 132 paragraph (1) are subject to administrative sanctions in the form of written reprimands. (2) Administrative sanctions in the form of written reprimands as referred to in paragraph (1) may be given in the form of warning letters. (3) Administrative sanctions as referred to in paragraph (1) are imposed on members of the Board of Directors, Executive Directors, and Managing Directors who commit violations.

Pasal 138
(4) LPEI employees who cause LPEI to fail to meet the provisions of Article 130 paragraph (3), Article 131 paragraph (1), and/or Article 132 paragraph (1) are subject to administrative sanctions in the form of oral or written reprimands. (5) Administrative sanctions in the form of oral reprimands as referred to in paragraph (1) are given in the form of advisory oral warnings. (6) Administrative sanctions in the form of written reprimands as referred to in paragraph (1) are given in the form of warning letters.

BAB XI
MECHANISM OF COORDINATION OF SUPERVISION WITH THE MINISTER

Pasal 139
(1) In conducting supervision of LPEI, the Otoritas Jasa Keuangan coordinates with the Minister.
(2) Reports submitted by LPEI to the Otoritas Jasa Keuangan are copied to the Minister.

BAB XII
CLOSING PROVISIONS

Pasal 140
At the time this Otoritas Jasa Keuangan Regulation comes into force, the provisions as referred to in Article 4 paragraph (1), paragraph (3), paragraph (4), and paragraph (5), Article 112 paragraph (1), Article 118 paragraph (1), paragraph (3), paragraph (4), paragraph (5), and paragraph (6), and Article 123 paragraph (1), paragraph (2), and paragraph (5), shall be in force for 1 (one) year from the date this Otoritas Jasa Keuangan Regulation is promulgated.

Pasal 141
At the time this Otoritas Jasa Keuangan Regulation comes into force, Otoritas Jasa Keuangan Regulation Number 40/POJK.05/2015 concerning the Guidance and Supervision of Export Financing Institutions (State Gazette of the Republic of Indonesia Year 2015 Number 321, Supplement to the State Gazette of the Republic of Indonesia Number 5791) is revoked and declared invalid.

Pasal 142
This Otoritas Jasa Keuangan Regulation comes into force on the date it is promulgated.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja

For the attention of everyone, ordering the promulgation of this Otoritas Jasa Keuangan Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta on June 14, 2022

CHAIRMAN OF THE COMMISSIONERS
OTORITAS JASA KEUANGAN
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on June 23, 2022

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2022 NUMBER 1/OJK

EXPLANATION
OF
OTORITAS JASA KEUANGAN REGULATION
REPUBLIC OF INDONESIA
NUMBER 9 /POJK.05/2022
CONCERNING
SUPERVISION OF EXPORT FINANCING INSTITUTIONS (LPEI)

I. GENERAL
Law Number 21 of 2011 concerning the Otoritas Jasa Keuangan mandates that the supervision and regulation functions regarding Export Financing Institutions (LPEI) are carried out by the Otoritas Jasa Keuangan. The purpose of establishing the Otoritas Jasa Keuangan is so that all financial service activities are conducted in an orderly, fair, transparent, and accountable manner, and are able to protect consumer and public interests.

In line with the purpose of establishing the Otoritas Jasa Keuangan, the Otoritas Jasa Keuangan conducts supervision of LPEI to optimally support the role of LPEI as a government policy instrument in increasing national exports while simultaneously encouraging LPEI to maintain its health level by considering all assessment coverage factors.

The Health Level of LPEI, which is a reflection of the condition and performance of LPEI, is a tool for the Otoritas Jasa Keuangan in determining supervision strategies and focus regarding LPEI.

The development of LPEI business is increasingly complex and dynamic, thereby affecting the risks faced by LPEI. Thus, a methodology for assessing the Health Level of LPEI is needed that can reflect the current condition of LPEI and future conditions.

The Health Level assessment methodology must be able to serve as a tool to evaluate LPEI performance with comprehensive and structured assessments of the integration of risk profiles and performance, including good corporate governance, profitability, and capital adequacy.

Provisions regarding LPEI supervision, among others, regulate:

supervision of LPEI with a scope including health level and compliance with laws and regulations;
the obligation to maintain and/or improve the Health Level of LPEI by applying prudential principles and risk management;
the obligation to assess the Health Level of LPEI using a risk-based individual approach;
components and procedures for assessing the Health Level of LPEI, including: good corporate governance, risk profiles, profitability, and capital adequacy;
submission of action plans if LPEI does not meet certain criteria based on the results of the Health Level assessment of LPEI;
the obligation to submit reports to the Otoritas Jasa Keuangan;
the mechanism for coordination of supervision with the Minister of Finance; and
the imposition of sanctions.

Based on the above, it is necessary to establish provisions regarding LPEI supervision in an Otoritas Jasa Keuangan Regulation.

II. ARTICLE BY ARTICLE

Pasal 1
Sufficiently clear.

Pasal 2
Paragraph (1)
Sufficiently clear.
Paragraph (2)
What is meant by “laws and regulations” are laws regulating LPEI along with its implementing regulations, including Laws concerning the Otoritas Jasa Keuangan.

Pasal 3
Sufficiently clear.

Pasal 4
Paragraph (1)
The Health Level of LPEI is maintained and/or improved so that public trust in LPEI can be maintained. Furthermore, the Health Level of LPEI is used as one of the means to evaluate the conditions and problems faced by LPEI and to determine follow-up actions to overcome LPEI weaknesses or problems, whether in the form of corrective actions by LPEI or supervisory actions by the Otoritas Jasa Keuangan. Paragraph (2) What is meant by “Executive Directors are responsible for maintaining and monitoring the Health Level of LPEI” refers to the authority of Executive Directors as regulated in laws and regulations concerning Good Corporate Governance. Paragraph (3) The assessment of the Health Level of LPEI using a Risk approach or risk-based nonbank rating is based on comprehensive analysis of performance, risk profiles, problems faced, and the development prospects of LPEI. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Pasal 5
Sufficiently clear.

Pasal 6
Paragraph (1)
The assessment of the Health Level of LPEI using a Risk approach is based on comprehensive analysis of performance, risk profiles, problems faced, and the development prospects of LPEI. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear.

Pasal 7
Sufficiently clear.

Pasal 8
Sufficiently clear.

Pasal 9
Paragraph (1)
The application of LPEI Governance principles in every LPEI activity, including during the formulation of vision, mission, strategic plans, policy implementation, and internal supervision steps at all levels or organizational tiers. Paragraph (2) Letter a What is meant by “openness” is a state of LPEI business operations that ensures openness in the decision-making process regarding LPEI business operations in accordance with applicable laws and regulations and general practice. Letter b What is meant by “accountability” is a state of LPEI business operations that can explain the functions of every party related to LPEI in accordance with applicable laws and regulations and general practice. Letter c What is meant by “responsibility” is a state of LPEI business operations that can affirm and explain the roles and status of every party related to LPEI for every policy formulation and implementation process at LPEI. Letter d What is meant by “independence” is a state where LPEI is managed professionally, free from conflicts of interest and/or influence or pressure from any party that is not in accordance with applicable laws and regulations and general practice. Letter e What is meant by “fairness” is justice and equality in fulfilling the rights of every party arising from agreements and applicable laws and regulations. Paragraph (3) Sufficiently clear.

Pasal 10
Sufficiently clear.

Pasal 11
What is meant by “independently” is the Board of Directors in carrying out their duties and responsibilities free from the interference of other parties, implemented based on Laws concerning LPEI.

Pasal 12
Sufficiently clear.

Pasal 13
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Sufficiently clear.
Letter d
Results of supervision by other authorities, such as the Supreme Audit Agency (BPK) and the Ministry of Finance.

Pasal 14
What is meant by the time limit “from the time of discovery” includes, among others, a Board of Directors meeting agreeing on the existence of a violation. Letter a What is meant by “other laws and regulations related to LPEI business activities” includes, among others, Otoritas Jasa Keuangan Regulations concerning Business Plans of Nonbank Financial Institutions. Letter b Sufficiently clear.

Pasal 15
Paragraph (1)
Letter a
The Audit Committee assists the Board of Directors in ensuring the effectiveness of the internal control system and the effectiveness of the execution of external and internal auditor tasks by monitoring and evaluating the planning and execution of audits, as well as monitoring the follow-up of audit results to assess the adequacy of external controls, including the adequacy of the financial reporting process. Letter b The Risk Monitoring Committee assists the Board of Directors in conducting periodic assessments and providing recommendations regarding business Risks in relation to national export financing provided by LPEI. Letter c The Remuneration and Nomination Committee assists the Board of Directors in formulating policies regarding remuneration and nomination policies for employees, Board of Directors, Executive Directors, and Managing Directors, and conducts periodic evaluations of the implementation of remuneration and nomination policies. Paragraph (2) Sufficiently clear Paragraph (3) Sufficiently clear Paragraph (4) Sufficiently clear

Pasal 16
Sufficiently clear.

Pasal 17
Letter a
Sufficiently clear.
Letter b
What is meant by “financial relationship” is when a person receives income, financial assistance, and/or loans from the Board of Directors. What is meant by “family relationship” is family relations up to the second degree, both vertically and horizontally, including husband and wife, parents-in-law, children-in-law, siblings, and step/adopted siblings of the husband or wife, along with the husband or wife of the respective sibling. Letter c Sufficiently clear.

Pasal 18
Sufficiently clear.

Pasal 19
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
What is meant by the Risk Management work unit is a work unit that carries out Risk Management functions as referred to in Otoritas Jasa Keuangan Regulations concerning risk management of nonbank financial institutions. Letter d Sufficiently clear.

Pasal 20
Sufficiently clear.

Pasal 21
Sufficiently clear.

Pasal 22
Letter a
Sufficiently clear.
Letter b
What is meant by “financial relationship” is when a person receives income, financial assistance, and/or loans from the Board of Directors and Managing Directors. What is meant by “family relationship” is family relations up to the second degree, both vertically and horizontally, including husband and wife, parents-in-law, children-in-law, siblings, and step/adopted siblings of the husband or wife, along with the husband or wife of the respective sibling.

Pasal 23
Sufficiently clear.

Pasal 24
Sufficiently clear.

Pasal 25
Letter a
Number 1
What is meant by “provisions” includes provisions of laws and regulations, internal LPEI provisions, and applicable accounting standards. Number 2 Sufficiently clear. Number 3 Sufficiently clear. Letter b Sufficiently clear. Letter c Sufficiently clear. Letter d Sufficiently clear. Letter e Sufficiently clear. Letter f Sufficiently clear. Letter g Assessments are based on the duties and responsibilities of each Board of Directors member, Executive Director, and Managing Director of LPEI, according to the job descriptions at LPEI. What is meant by “strategic management to carry out in the context of developing healthy LPEI” includes the ability to interpret the vision and mission of LPEI, anticipate economic and financial developments, and analyze the financial industry situation and the financed industrial sector. Letter h Sufficiently clear. Letter i Sufficiently clear. Letter j Sufficiently clear.

Pasal 26
Paragraph (1)
What is meant by “other information” includes information from mass media and complaints submitted to the Otoritas Jasa Keuangan. Paragraph (2) Letter a Sufficiently clear. Letter b Clarification implementation with the assessed party can be conducted through face-to-face meetings accompanied by minutes and/or through letters. Letter c The final assessment results are submitted in writing, containing the final assessment rating along with the basis for consideration. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Pasal 27
Sufficiently clear.

Pasal 28
Sufficiently clear.

Pasal 29
Sufficiently clear.

Pasal 30
Sufficiently clear.

Pasal 31
Sufficiently clear.

Pasal 33
Sufficiently clear.

Pasal 34
Paragraph (1)
The application of Risk Management includes the application of anti-money laundering and counter-terrorism financing programs. Paragraph (2) Sufficiently clear. Paragraph (3) Business complexity includes diversity in transaction types, products or services, and business networks. Paragraph (4) Letter a What is meant by “Strategic Risk” is Risk resulting from inaccuracies in the taking and/or execution of strategic decisions, as well as failures in anticipating changes in the business environment. Letter b What is meant by “Operational Risk” is Risk resulting from insufficient and/or non-functional internal processes, human error, system failures, and/or external events affecting LPEI operations. Letter c What is meant by “Insurance Risk” is Risk of failure to meet obligations to policyholders, insured parties, or participants due to insufficient risk selection (underwriting) processes, premium or contribution setting, use of reinsurance, and/or claims handling. Letter d What is meant by “Credit Risk” is Risk resulting from the failure of other parties to meet obligations to LPEI, including Guarantee Risks. Letter e What is meant by “Market Risk” is Risk on Asset, liability, equity, and/or administrative account positions, including Derivative Transactions, resulting from overall changes in market conditions. Letter f What is meant by “Liquidity Risk” is Risk resulting from LPEI’s inability to meet due liabilities from cash flow funding sources and/or Liquid Assets that can be easily converted into cash, without disrupting LPEI’s activities and financial conditions. Letter g What is meant by “Legal Risk” is Risk arising from legal lawsuits and/or weaknesses in legal aspects. Letter h What is meant by “Compliance Risk” is Risk resulting from LPEI’s failure to comply with and/or implement laws and regulations and provisions. Letter i What is meant by “Reputation Risk” is Risk resulting from a decrease in stakeholder trust stemming from negative perceptions of LPEI. Letter j What is meant by “Investment Risk” is Risk resulting from LPEI sharing in the losses of financed customers’ businesses in profit-sharing based financing. Letter k What is meant by “Yield Risk” is Risk resulting from changes in the yield rates paid by LPEI to funding providers due to changes in the yield rates received by LPEI from fund distribution, which can affect the behavior of funding providers towards LPEI. Paragraph (5) Sufficiently clear.

Pasal 35
What is meant by “every job level” is Executive Directors, Board of Directors, Sharia Supervisory Board, and all other positions related to the application of Risk Management.

Pasal 36
Paragraph (1)
Letter a
Risk Management policies include the determination and approval of Risk limits, whether overall (composite) Risk, per Risk type, per functional activity, or per material/significant transactions. Letter b Transactions requiring Executive Director approval include transactions that have exceeded the authority of the LPEI official one level below the Executive Director, in accordance with applicable internal LPEI policies and procedures. Letter c The development of Risk Management culture includes adequate communication to all organizational levels regarding the importance of effective internal controls. Letter d The improvement of human resource competence includes, among others, continuous education and training programs regarding the application of Risk Management. Letter e What is meant by independent includes, among others, the separation of functions between Risk Management functions that perform Risk identification, measurement, control, and monitoring, and functions that conduct and complete business and operational activities. Letter f Periodic reviews are intended, among others, to anticipate changes in external and internal factors. Paragraph (2) Sufficiently clear. Paragraph (3) Inherent Risk is known by the term inherent risk.

Pasal 37
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
What is meant by “transactions requiring Board of Directors approval” are business or operational activities that have exceeded the authority of the Executive Director to make such decisions, in accordance with applicable internal LPEI policies and procedures. Paragraph (2) The frequency of periodic evaluations is adjusted to LPEI’s needs, considering the size and complexity of LPEI, with at least 1 (one) time in 1 (one) year. In the event of internal and/or external factors significantly affecting LPEI’s business activities, LPEI may conduct evaluations of Risk Management policies and strategies outside of periodic evaluations. Paragraph (3) Sufficiently clear.

Pasal 38
Sufficiently clear.

Article 39
Risk Management Policy is established, among other things, by formulating a Risk Management strategy to ensure that:
a. LPEI maintains Risk exposure in accordance with LPEI's internal policies and procedures, legislation, and other regulations; and b. LPEI is managed by human resources possessing knowledge, experience, and expertise in Risk Management commensurate with the complexity of LPEI's business. The formulation of the Risk Management strategy is carried out by considering LPEI's financial condition, LPEI's organizational structure, and Risks arising as a result of changes in external and internal factors. Letter a Sufficiently clear. Letter b Sufficiently clear. Letter c The level of Risk to be taken (risk appetite) considers the experience held by LPEI in managing Risk and LPEI's capital adequacy in absorbing Risk. Risk tolerance (risk tolerance) is the potential loss that can be absorbed by LPEI's capital. Letter d The determination of Risk rating assessment serves as the basis for LPEI to categorize its Risk ratings. Risk ratings for LPEI are categorized into 5 (five) ratings, namely:

rating 1;
rating 2;
rating 3;
rating 4; and
rating 5.
Letter e
The formulation of an emergency plan is known as a contingency plan. The worst-case condition is known as a worst case scenario. Example:
Force majeure conditions that can disrupt LPEI's operations.
Letter f
Sufficiently clear.

Article 40
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
The definition of periodically is at least 1 (one) time within 1 (one) year or a higher frequency, depending on the type of Risk, needs, and LPEI's development. Letter c What is meant by adequate documentation is written, complete documentation that facilitates an audit trail for the purposes of LPEI's internal control. Paragraph (3) The determination of Risk limits can be stated in LPEI's risk appetite statement.

Article 41
Paragraph (1)
What is meant by "Risk factors (risk factors)" are various parameters that influence Risk exposure.
What is meant by "material Risk factors (risk factors)" are Risk factors, both quantitative and qualitative, that have a significant impact on LPEI's financial condition. Paragraph (2) Letter a Sufficiently clear. Letter b What is meant by "informative" includes being easy to understand. Letter c What is meant by "having competence in Risk Management" includes having expertise certificates and proof of having attended training in Risk Management.

Article 42
Paragraph (1)
The Risk identification process can be based, among other things, on LPEI's past loss experience.
Paragraph (2)
To carry out Risk measurement, LPEI can use various approaches, both qualitative and quantitative, adjusted to the business objectives and the complexity of LPEI's business. Letter a The definition of periodically is at least 1 (one) time within 6 (six) months or a higher frequency, depending on LPEI's business development and external conditions that directly affect LPEI's condition. Letter b What is meant by "material changes" are changes in LPEI's business activities and Risk factors, which can affect LPEI's financial condition. Paragraph (3) Risk control can be carried out, among other things, through hedging, Risk mitigation methods, and the addition of Capital to absorb potential losses. Paragraph (4) Letter a Evaluation of Risk exposure is carried out through monitoring and reporting of material Risks or those impacting LPEI's capital/funding conditions, which is based, among other things, on the assessment of potential Risk using historical trends. Letter b Sufficiently clear.

Article 43
Paragraph (1)
What is meant by "having competence in Risk Management information systems" includes having expertise certificates and proof of having attended training in Risk Management information systems. Paragraph (2) Letter a Reports or information on Risk exposure include quantitative and qualitative exposure, both overall (composite) and details by type of Risk and type of functional activity. Letter b Sufficiently clear. Letter c Sufficiently clear. Paragraph (3) What is meant by "regularly" is the frequency of reports or information submitted to the Executive Director, adjusted to LPEI's needs.

Article 44
Sufficiently clear.

Article 45
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Complete, accurate, useful, and timely financial and management information is needed for decision-making that is appropriate and accountable, and communicated to interested parties. Letter d Effectiveness and efficiency in business and operational activities are needed, among other things, to protect Assets and other LPEI resources from related Risks. Letter e The effectiveness of Risk culture (risk culture) is intended to identify weaknesses and deviations earlier and to continuously reassess the fairness of existing policies and procedures at LPEI.

Article 46
Sufficiently clear.

Article 47
Letter a
The Risk Management Committee must be non-structural.
Letter b
Sufficiently clear.

Article 48
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
What is meant by "an official one level below the Executive Director" is an official who is directly responsible to the Executive Director or has significant influence on policies and/or LPEI's operations related to the implementation of Risk Management, including division heads, heads of Risk Management units, heads of compliance units, and heads of internal audit units. Paragraph (2) Sufficiently clear. Paragraph (3) Letter a Sufficiently clear. Letter b Sufficiently clear. Letter c Decisions deviating from normal procedures include, among other things, significant expansion of business beyond LPEI's business plan and taking positions or Risk exposures that deviate from established limits and exceed LPEI's capital adequacy in absorbing Risk.

Article 49
Paragraph (1)
LPEI determines an appropriate organizational structure suitable for LPEI's conditions, including financial capabilities and human resources. Paragraph (2) The definition of independence is reflected, among other things, by:
a. separation of functions and duties between the Risk Management function and the business and operational (risk-taking) function and the internal control function; and b. a decision-making process that is impartial or does not favor specific business and operational functions or ignore other operational functions. Paragraph (3) Sufficiently clear. Paragraph (4) Authority and responsibility of LPEI's Risk Management function commensurate with LPEI's business objectives and complexity. Letter a Risk identification includes coordinating with all work units within LPEI. Letter b Sufficiently clear. Letter c Sufficiently clear. Letter d Overall Risk, known as "composite risk," is the Risk faced by LPEI by considering all types of Risk at LPEI. Testing using abnormal condition assumptions, known as "stress testing," is a test of Risk positions using several abnormal condition assumptions to determine the impact of such abnormal conditions on LPEI's Risk positions. Testing using historical data, known as "back testing," is a test of Risk positions using historical data to determine the effectiveness of Risk Management. Letter e Reviews are carried out, among other things, based on internal audit findings and/or the development of internationally applicable Risk Management practices. Letter f Included in such reviews are assessments of LPEI's ability to develop or expand business activities and reviews of proposed system and procedure changes. Letter g Models for internal purposes are known as internal models. Letter h Recommendations include recommendations related to the size or maximum Risk exposure that must be maintained by LPEI. Letter i Risk Profile is a comprehensive overview of the magnitude of potential Risk inherent in LPEI's entire portfolio or exposure. Report submission frequency can be increased if market conditions change rapidly.

Article 50
The frequency of Risk exposure information submission is adjusted to the characteristics of the type of Risk.

Article 51
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
The trial period is intended to ensure that Risk measurement and monitoring methods have been tested.
Letter d
Sufficiently clear.
Letter e
Sufficiently clear.
Letter f
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
Sufficiently clear.

Article 52
Included in the category of approving actions is knowing but not prohibiting or allowing the occurrence of activities that are not LPEI's business activities using LPEI's facilities by the Executive Director, Board of Directors, Sharia Supervisory Board, and/or employees.

Article 53
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Risks that must be disclosed by LPEI are risks relevant to customers regarding LPEI's new products and activities.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.

Article 54
Letter a
Sufficiently clear.
Letter b
Provision for impairment losses is a reserve formed for the decline in value of financial instruments in accordance with financial accounting standards. Letter c Sufficiently clear. Letter d Sufficiently clear. Letter e Sufficiently clear. Letter f Sufficiently clear. Letter g Sufficiently clear.

Article 55
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Financing quality categorized as troubled financing consists of financing with fair, doubtful, and bad quality.

Article 56
Paragraph (1)
What is meant by "Borrower" includes:
a. debtor for fund investment in the form of Financing, b. guarantor for Guarantees,
c. counterparty from the insured party for Insurance,
d. issuer of securities, seller of securities, collective investment contract manager, and/or reference entity for fund placement in the form of securities; e. banks and non-bank third parties, for fund investment in the form of Acceptance Claims; and f. other parties obligated to settle claims to LPEI. Paragraph (2) What is meant by "Government Assignment" is an assignment to LPEI based on a Minister of Finance Decree (KMK). Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 57
Sufficiently clear.

Article 58
Sufficiently clear.

Article 59
Sufficiently clear.

Article 60
Letter a
Sufficiently clear.
Letter b
The location of activities being in a specific area is intended, among other things, to encourage economic activities in a region, for example, in underdeveloped areas or areas affected by disasters.

Article 61
Sufficiently clear.

Article 62
Sufficiently clear.

Article 63
Sufficiently clear.

Article 64
Sufficiently clear.

Article 65
Sufficiently clear.

Article 66
Sufficiently clear.

Article 67
Sufficiently clear.

Article 68
Sufficiently clear.

Article 69
Sufficiently clear.

Article 70
Sufficiently clear.

Article 71
Paragraph (1)
Sufficiently clear.
Paragraph (2)
What is meant by "investment-grade" for foreign governments is that the foreign government providing a guarantee over the productive assets has a debt rating of at least BBB+ or equivalent issued by a rating agency recognized by the Financial Services Authority. Paragraph (3) Letter a Sufficiently clear. Letter b What is meant by total assets included in the top 200 (two hundred) largest in the world is based on information contained, among other things, in the banker's almanac or export credit agency (ECA). Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 72
Sufficiently clear.

Article 73
Sufficiently clear.

Article 74
Sufficiently clear.

Article 75
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Related parties are insurance companies that have ownership, management, and/or financial relationships, except due to ownership relationships with the government, either directly or indirectly.

Article 76
Sufficiently clear.

Article 77
Sufficiently clear.

Article 78
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
What is meant by "net realizable value" commonly known as net realizable value is the fair value of collateral minus the estimated disposal costs. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 79
Sufficiently clear.

Article 80
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Letter a
Estimates for claims still in the settlement process are reasonable estimates for claims that have occurred and have been reported but are still in the settlement process, including loss adjuster fees, minus claim expenses that will become the reinsurer's portion. Letter b Estimates for claims that have occurred but have not been reported, commonly known as incurred but not reported or IBNR, are reasonable estimates for claims that have occurred but have not been reported using claim ratio methods, including loss adjuster fees, minus claim expenses that will become the reinsurer's portion.

Article 81
Sufficiently clear.

Article 82
Sufficiently clear.

Article 83
Sufficiently clear.

Article 84
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Example:
There is a transaction providing funds to an unrelated party, but for this fund provision, there is a benefit received by a related party, classified as fund provision to a related party. This provision is intended to anticipate efforts to avoid the limit on fund provision to related parties of 10% (ten) percent.

Article 85
Sufficiently clear.

Article 86
Sufficiently clear.

Article 87
Paragraph (1)
Sufficiently clear.
Paragraph (2)
With the requirement of no promise to repurchase is commonly known as without recourse.
Paragraph (3)
With the requirement of a promise to repurchase is commonly known as with recourse.
Paragraph (4)
Sufficiently clear.

Article 88
Sufficiently clear.

Article 89
Sufficiently clear.

Article 90
Paragraph (1)
Examples of Administrative Account transactions include letters of credit, standby letters of credit, or similar other instruments. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear.

Article 91
Sufficiently clear.

Article 92
Sufficiently clear.

Article 93
Sufficiently clear.

Article 94
Sufficiently clear.

Article 95
Sufficiently clear.

Article 96
Sufficiently clear.

Article 97
Sufficiently clear.

Article 98
Sufficiently clear.

Article 99
Sufficiently clear.

Article 100
Sufficiently clear.

Article 101
Sufficiently clear.

Article 102
Sufficiently clear.

Article 103
Sufficiently clear.

Article 104
Sufficiently clear.

Article 105
Sufficiently clear.

Article 106
Paragraph (1)
Sufficiently clear.
Paragraph (2)
What is meant by "potential future credit exposure" is the potential possibility of risk occurrence that can affect the value of the Derivative Claim underlying the derivative instrument owned by LPEI. Paragraph (3) Offset is commonly known as set off.

Article 107
Paragraph (1)
Letter a
What is meant by "assessment of inherent risk" is an assessment of risks inherent in LPEI's activities, both quantifiable and non-quantifiable, that have the potential to affect LPEI's financial position. Letter b Sufficiently clear. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Article 108
Sufficiently clear.

Article 109
Sufficiently clear.

Article 110
Sufficiently clear.

Article 111
Sufficiently clear.

Article 112
Sufficiently clear.

Article 113
Sufficiently clear.

Article 114
Sufficiently clear.

Article 115
Paragraph (1)
Sufficiently clear.
Paragraph (2)
A smaller factor rating order reflects a better LPEI condition.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
Sufficiently clear.

Article 116
Sufficiently clear.

Article 117
Paragraph (1)
Sufficiently clear.
Paragraph (2)
A smaller Composite Rating order reflects a healthier LPEI condition.
Paragraph (3)
Conditions that are generally very healthy and assessed as very capable of facing significant negative impacts from changes in business conditions and other external factors are reflected in the assessment factor ratings, including Good Corporate Governance, Risk Profile, profitability, and capital, which are generally very good. If there are weaknesses, they are generally not significant. Paragraph (4) Conditions that are generally healthy and assessed as capable of facing significant negative impacts from changes in business conditions and other external factors are reflected in the assessment factor ratings, including Good Corporate Governance, Risk Profile, profitability, and capital, which are generally good. If there are weaknesses, they are generally less significant. Paragraph (5) Conditions that are generally fairly healthy and assessed as fairly capable of facing significant negative impacts from changes in business conditions and other external factors are reflected in the assessment factor ratings, including Good Corporate Governance, Risk Profile, profitability, and capital, which are generally fairly good. If there are weaknesses, they are generally fairly significant, and if not successfully addressed by management, they can disrupt LPEI's business continuity. Paragraph (6) Conditions that are generally less healthy and assessed as less capable of facing significant negative impacts from changes in business conditions and other external factors are reflected in the assessment factor ratings, including Good Corporate Governance, Risk Profile, profitability, and capital, which are generally less good. There are weaknesses that are generally significant and cannot be well addressed by management, disrupting LPEI's business continuity. Paragraph (7) Conditions that are generally unhealthy and assessed as unable to face significant negative impacts from changes in business conditions and other external factors are reflected in the assessment factor ratings, including Good Corporate Governance, Risk Profile, profitability, and capital, which are generally poor. There are weaknesses that are generally very significant, requiring financial support from shareholders or funding from other parties to strengthen LPEI's financial condition. Paragraph (8) Sufficiently clear.

Article 118
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Updating the self-assessment of LPEI's Health Level is carried out, among other things:
a. when LPEI's financial condition deteriorates; b. when there are external and internal factors that can significantly affect LPEI's Health Level; or
c. when there are other conditions that, in the opinion of the Financial Services Authority and/or LPEI, require an update of the health level assessment.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
What is meant by "data communication network system" includes submission via electronic mail.
Paragraph (7)
Sufficiently clear.

Article 119
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
What is meant by "other information" is information that will significantly affect the results of LPEI's Health Level assessment. Other information can be:
a. information from whistleblowers; b. information from assessment results by other competent authorities; and/or
c. information known to the public, such as assessment results from rating agencies and information from mass media.

Article 120
Paragraph (1)
What is meant by "prudential meeting" is a meeting conducted between the supervisor and LPEI to explore information related to the process of implementing the self-assessment of Health Level. Paragraph (2) Sufficiently clear.

Article 121
Sufficiently clear.

Article 122
Sufficiently clear.

Article 123
Paragraph (1)
What is meant by "LPEI Health Level assessment results" is the LPEI Health Level assessment results conducted by the Financial Services Authority and/or self-assessment results. Paragraph (2) What is meant by "UUS Health Level assessment results" is the UUS Health Level assessment results conducted by the Financial Services Authority and/or self-assessment results. What is meant by "action plan" is an action plan regarding UUS health levels. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear. Paragraph (6) Sufficiently clear.

Article 124
Sufficiently clear.

Article 125
Sufficiently clear.

Article 126
Sufficiently clear.

Article 127
Sufficiently clear.

Article 128
Sufficiently clear.

Article 129
Sufficiently clear.

Article 130
Sufficiently clear.

Article 131
Sufficiently clear.

Article 132
Sufficiently clear.

Article 133
Sufficiently clear.

Article 134
Sufficiently clear.

Article 135
Sufficiently clear.

Article 136
Sufficiently clear.

Article 137
Sufficiently clear.

Article 138
Sufficiently clear.

Article 139
Sufficiently clear.

Article 140
Sufficiently clear.

Article 141
Sufficiently clear.

Article 142
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 1/OJK

APPENDIX
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 9 /POJK.05/2022
CONCERNING
SUPERVISION OF INDONESIAN EXPORT FINANCING INSTITUTIONS

I. GUIDELINES FOR ASSESSING THE QUALITY OF FINANCING OF INDONESIAN EXPORT FINANCING INSTITUTIONS

BUSINESS PROSPECTS
COMPONENT
FAIR WITH SPECIAL ATTENTION
FAIR
DOUBTFUL
BAD

Potential business growth
Business activities have good growth potential.
Business activities have limited growth potential.
Business activities show very limited growth potential or no growth.
Business activities are declining.

Business continuity is highly doubtful and difficult to recover.
It is highly likely that business activities will cease.

Market conditions and borrower's position in competition

Stable market not influenced by changes in economic conditions.
Limited competition, including a strong position in the market.
Operating at optimum capacity.
Good market position, not significantly influenced by changes in economic conditions.
Market share comparable to competitors.
Operating at nearly optimum capacity.
Market influenced by changes in economic conditions.
Market position is fairly good but with many competitors, yet can recover if implementing new business strategies.
Not operating at optimum capacity.
Market is highly influenced by changes in economic conditions.
Business competition is very tight and company operations experience serious problems.
Capacity is not at a level that supports operations.
Loss of market share in line with declining economic conditions.
Operations are not continuous.

PROSPECT OF BUSINESS
COMPONENT
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Management quality and labor issues

Very good management.
Adequate workforce and never recorded to have experienced labor disputes or strikes, or has experienced minor disputes/strikes that were resolved well.
Good management.
Workforce is generally adequate, has experienced labor disputes/strikes that were resolved well but there is still a possibility of recurrence.
Management is fairly good.
Excess workforce and there are labor disputes/strikes with fairly material impact on the borrower's business activities.
Management is less experienced.
Excess workforce in a fairly large number so as to cause unrest and there are labor disputes/strikes with fairly material impact on the borrower's business activities.
Management is very weak.
Excess workforce in a large number so as to cause unrest and there are labor disputes/strikes with material impact on the borrower's business activities.
Support from group or affiliate
Affiliate company or group is stable and supports the business.
Affiliate company or group is stable and does not have a burdensome impact on the borrower.
Relationship with affiliate company or group begins to give a burdensome impact on the borrower.
Affiliate company or group has given a burdensome impact on the borrower.
Affiliate company is very harmful to the borrower.

PROSPECT OF BUSINESS
COMPONENT
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Efforts made by the borrower in maintaining environmental protection (for large-scale borrowers that have significant impact on the environment) Good environmental management efforts and achieve results that are at least in accordance with the minimum requirements as regulated in applicable laws and regulations. Poor environmental management efforts and have not reached the minimum requirements as regulated in applicable laws and regulations. Poor environmental management efforts and have not reached the minimum requirements as regulated in applicable laws and regulations, with fairly material deviations. The company has not implemented meaningful environmental management efforts or has implemented management but has not reached the requirements as regulated in applicable laws and regulations, with material deviations. The company has not implemented meaningful environmental management efforts or has implemented management but has not reached the minimum requirements as regulated in applicable laws and regulations, and has the possibility of being sued in court. BORROWER PERFORMANCE COMPONENT QUALITY NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Profit acquisition High and stable profit acquisition. Profit acquisition is fairly good but has the potential to decrease. Low profit acquisition. • Very small or negative profit.

Operational losses are financed by
asset sales.
Experiencing large losses.
Borrower is unable to meet
all obligations and
Capital structure
Strong capital structure. Fair capital structure and owners have the ability to provide additional capital if needed.
Debt-to-equity ratio is fairly high.
High debt-to-equity ratio.
Very high debt-to-equity ratio. provide additional capital if needed.
Cash flow • Strong liquidity and working capital.
Cash flow analysis
shows that the borrower can meet principal and interest payment obligations without support from additional funding sources.
Liquidity and working
capital are generally good.
Cash flow analysis
shows that although the borrower is able to meet principal and interest payment obligations there are indications of certain problems that if not addressed will affect payments in the near future.
Liquidity is poor and
working capital is limited.
Cash flow analysis
shows that the borrower is only able to pay interest and part of the principal.
Liquidity is very low.
Cash flow analysis
shows inability to pay principal and interest.
New loans are used to
meet obligations that are due.
Liquidity difficulties.
Cash flow analysis
shows that the borrower is unable to cover production costs.
New loans are used to
meet obligations that are due, materially.

BORROWER PERFORMANCE
COMPONENT
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Sensitivity to market risk Number of portfolios sensitive to foreign exchange rate and interest rate changes but still relatively controlled. Some portfolios are sensitive to foreign exchange rate and interest rate changes. Business activities are affected by foreign exchange rate and interest rate changes. Business activities are threatened due to foreign exchange rate fluctuations. Business activities are threatened due to foreign exchange rate fluctuations. or hedging has been done well. ABILITY TO PAY COMPONENT QUALITY NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Timeliness of principal and interest payments Payments are on time, account development is good and there are no arrears, or if there are arrears they do not exceed 30 (thirty) days, and in accordance with financing requirements. There are arrears of principal and/or interest that have exceeded 30 (thirty) days up to 90 (ninety) days. There are arrears of principal and/or interest that have exceeded 90 (ninety) days up to 120 (one hundred twenty) days. There are arrears of principal and/or interest that have exceeded 120 (one hundred twenty) days up to 180 (one hundred eighty) days. There are arrears of principal and/or interest that have exceeded 180 (one hundred eight ty) days. Availability and accuracy of financial information

Borrower's relationship
with LPEI is good, the borrower always
Borrower's relationship
with LPEI is fairly good and the borrower always Borrower's relationship with LPEI deteriorates and financial information Borrower's relationship with LPEI becomes more deteriorated and financial Borrower's relationship with LPEI is very poor and financial financial information submits financial information regularly and accurately.
There is recent financial
reports and the results of
LPEI analysis of financial reports/financial information submitted by the borrower. submits financial information regularly and is still accurate.
There is recent financial
reports and the results of
LPEI analysis of financial reports/financial information submitted by the borrower. cannot be trusted or there is no LPEI analysis of financial reports/financial information submitted by the borrower. information is not available or cannot be trusted. information is not available or cannot be trusted. ABILITY TO PAY COMPONENT QUALITY NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Completeness of financing documentation Financing documentation is complete. Financing documentation is complete. Financing documentation is incomplete. Financing documentation is incomplete. No financing documentation exists. Compliance with financing agreements There are no violations of financing agreements. Non-principal violations of financing agreements. Violations of principal financing requirements that are fairly principal. Principal violations of principal requirements in financing agreements. Very principal violations of principal requirements in financing agreements. Appropriateness of fund usage
Fund usage is in accordance with
financing applications.
The amount and type
of facilities are provided in accordance with needs.
Financing extensions are in accordance with
borrower's needs analysis.
Fund usage is less
in accordance with financing applications, but the amount is not material.
The amount and type
of facilities are provided larger than needs, but the amount is not material.
Fund usage
is less in accordance with financing applications, with a fairly material amount.
The amount and type
of facilities are provided larger than needs, with a fairly material amount.
Financing extensions
are not in accordance with borrower's needs analysis (financing extensions to hide financial difficulties).
Fund usage
is less in accordance with financing applications, with a material amount.
The amount and type
of facilities are provided larger than needs, with a material amount.
Financing extensions
are not in accordance with borrower's needs analysis (financing extensions to hide financial difficulties), with fairly material deviations.
Most of the fund usage
is not in accordance with financing applications.
The amount and type
of facilities are provided larger than needs with a very material amount.
Financing extensions
without borrower's needs analysis.

ABILITY TO PAY
COMPONENT
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Fairness of source of payment obligations

Payment sources can be identified
clearly and agreed upon by LPEI and the borrower.
Payment sources are in accordance with
the structure/type of financing.
Repayment schemes are fair
(including the provision of grace periods).
Foreign exchange income
is sufficient to support foreign exchange financing repayment.
Payment sources can be identified and
agreed upon by LPEI and the borrower.
Payment sources
are less in accordance with the structure/type of financing.
Repayment schemes are fairly
fair (including the provision of grace periods).
Foreign exchange income is less
sufficient to support foreign exchange financing repayment.
Payments come from
sources other than those agreed upon.
Payment sources
are less in accordance with the structure/type of financing in a fairly material manner.
Repayment schemes are less
fair and there is the provision of grace periods that are not in accordance with the type of financing.
Foreign exchange income
is not sufficient to support foreign exchange financing repayment, fairly materially.
Payment sources
are unknown, while the agreed sources are no longer possible.
Payment sources
are less in accordance with the structure/type of financing materially.
Repayment schemes are less
fair and there is the provision of grace periods that are not in accordance with the type of financing with a fairly long time frame.
Foreign exchange income is not
sufficient to support foreign exchange financing repayment materially.
There are no
possible payment sources.
Payment sources
are not in accordance with the structure/type of financing.
Repayment schemes are not
fair and there is the provision of grace periods that are not in accordance with the type of financing with a fairly long time frame.
There is no
foreign exchange income to support foreign exchange financing repayment.

II. GUIDELINES FOR ASSESSING FINANCING QUALITY WITH SHARIA PRINCIPLES AT THE INDONESIAN EXPORT FINANCING INSTITUTION

CLASSIFICATION OF MUDARABAH AND MUSYARAKAH QUALITY
PROSPECT
OF BUSINESS
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Growth Potential of business

The growth potential of
the borrower's business activities is good.
Business activities have
limited growth potential.
The growth potential of
the borrower's business activities is very limited or does not experience growth.
The borrower's business activities
decline.
The borrower's business continuity is very
doubted to recover and it is highly likely that the business will cease.
Market conditions and the borrower's position in competition
Stable market and
not influenced by changes in economic conditions.
Limited competition, including
a strong position in the market.
Good market position, not
much influenced by changes in economic conditions.
Market share is comparable
to competitors.
The market is influenced by changes in economic
conditions.
The market position is fairly
good but there are many competitors, but can recover if implementing new business strategies.
The market is highly influenced
by changes in economic conditions.
Business competition is very
tight and the company's operations experience serious problems.
Loss of market share in line with
deteriorating economic conditions.
Management quality and labor issues
Very good management (independent
management, experienced and has the ability).
Good management. • Fairly good management (independent
management, experienced, but lacks the ability).
Management is less experienced.
Management is very weak.
Adequate workforce and never recorded
to have experienced disputes or strikes.
Workforce is fairly adequate, there have been
disputes or strikes that have no material impact and have been resolved well, so that generally the relationship between leaders and employees is fairly good.
Excess workforce, and
there are disputes or strikes that have fairly material impact on business activities.
Excess workforce in a large number
so as to cause unrest, and there are disputes or strikes that have fairly material impact on business activities.
Labor strikes that are difficult
to resolve, with very material impact on business activities.

PROSPECT
OF BUSINESS
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Support from group or affiliate

Affiliate company or
group is stable and supports the business.
Affiliate company or
group is stable and does not have a burdensome impact on the borrower.
Relationship with
affiliate company or group begins to give a burdensome impact on the borrower.
Affiliate company or
group has given a burdensome impact on the borrower.
Affiliate company or
group is very harmful to the borrower.
Efforts made by the borrower in maintaining environmental protection (for large-scale borrowers that have significant impact on the environment)
Good environmental management
efforts and achieve results that are at least in accordance with the minimum requirements as regulated in applicable laws and regulations.
Poor environmental management
efforts and have not reached the minimum requirements as regulated in applicable laws and regulations.
Poor environmental management
efforts and have not reached the minimum requirements as regulated in applicable laws and regulations, with fairly material deviations.
The company has not implemented
meaningful environmental management efforts or has implemented management but has not reached the requirements as regulated in applicable laws and regulations, with material deviations.
The company has not implemented
environmental management efforts meaningfully or has implemented management but has not reached the minimum requirements as regulated in applicable laws and regulations, and has the possibility of being sued in court. BORROWER PERFORMANCE (Performance) QUALITY NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Profit acquisition • Profit acquisition is equal to or higher than the profit target; and
Profit acquisition is stable.
Profit acquisition is fairly good
but has the potential to decrease.
Profit acquisition is lower
than the profit target.
Profit acquisition is very small
or negative.
Operational losses are financed by asset sales.
Experiencing large losses.
The borrower is unable
to meet all obligations and
Capital structure
Strong capital structure
with debt amounts lower than equity.
Fair capital structure
and owners have the ability to provide additional capital if needed.
Debt-to-equity ratio is fairly high.
High debt-to-equity ratio.
Very high debt-to-equity ratio.
Liquidity and cash flow
Strong liquidity and working
capital.
Liquidity and working capital
are generally good.
Liquidity is poor and
working capital is limited.
Liquidity is very low. • Liquidity difficulties.
Cash flow analysis
shows that the borrower can meet financing repayment obligations and profit share portions without support from additional funding sources.
Cash flow analysis
shows that although the borrower is able to meet financing repayment obligations and profit share portions there are indications of certain problems that if not addressed will affect payments in the near future.
Cash flow analysis
shows that the borrower is only able to provide profit share portions and/or part of financing installments.
Financing extensions to
cover financial difficulties.
Cash flow analysis
shows inability to repay financing installments and profit share portions.
New financing is used to
meet obligations that are due.
Cash flow analysis
shows that the borrower is unable to cover production costs.
New financing is used to
cover operational losses.

BORROWER PERFORMANCE
(Performance)
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Sensitivity to market risk

Number of portfolios that
are sensitive to changes in foreign exchange rates are relatively small or have been hedged well.
Some portfolios are sensitive
to changes in foreign exchange rates but are still controlled.
Business activities
are affected by changes in foreign exchange rates.
Business activities are
threatened due to changes in foreign exchange rates.
Business activities
are threatened due to fluctuations in foreign exchange rates.
ABILITY TO PAY
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Principal installments and profit share payments
Principal financing
installment payments are on time or if there are arrears they do not exceed 30 (thirty) days; and
RP is equal to or more
than 70% of PP.
There are arrears
of principal financing installments that have exceeded 30 (thirty) days up to 90 (ninety) days; and/or
RP is equal to or more than
70% of PP.
There are arrears
of principal financing installments that have exceeded 90 (ninety) days up to 120 (one hundred twenty) days; and/or
RP is above 30% of PP and
less than 70% of PP
(30% PP < RP < 70%
PP).
There are arrears
of principal financing installments that have exceeded 120 (one hundred twenty) days up to 180 (one hundred eighty) days; and/or
RP ≤ 30% of PP up to 3 (three)
payment periods.
There are arrears
of principal financing installments that have exceeded 180 (one hundred eight ty) days; and/or
RP ≤ 30% of PP for more than
3 (three) payment periods.
Availability and accuracy of borrower's financial information
The borrower always
submits financial information regularly and accurately.
The borrower submits
financial information regularly and accurately.
The borrower
submits financial information irregularly but still accurate.
The borrower submits
financial information irregularly and questionable.
The borrower does not
submit financial information.

ABILITY TO PAY
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS Completeness of documentation

Financing documentation is complete
and collateral attachments are strong.
Financing documentation
is complete and collateral attachments are strong.
Financing documentation
is incomplete and collateral attachments are weak.
Financing documentation
is incomplete and collateral attachments are weak.
Financing documentation
and/or collateral attachments are non-existent.
Compliance with requirements/ agreements
Violations of financing requirements that are not
principal.
Principal violations of
principal/main requirements in financing.
Financing extensions to
hide financial difficulties.
Fairness of source of payment obligations
Payment sources can be identified
clearly and agreed upon by LPEI and the borrower.
Payment sources are in accordance with
the structure/type of financing received.
Payment sources can be identified and
agreed upon by LPEI and the borrower.
Payment sources
are less in accordance with the structure/type of financing received.
Payments come from
sources other than those agreed upon.
Payment sources
are less in accordance with the structure/type of financing received in a fairly material manner.
Payment sources
are unknown, while the agreed sources are no longer possible.
Payment sources
are less in accordance with the structure/type of financing received materially.
There are no
possible payment sources.
Payment sources
are not in accordance with the structure/type of financing received.

CLASSIFICATION OF MURABAHAH, ISTISHNA, QARDH, AND MULTI-SERVICE TRANSACTIONS QUALITY
PROSPECT
OF BUSINESS
QUALITY
NORMAL SPECIAL ATTENTION SUBSTANDARD DOUBTFUL LOSS

The growth potential of
the borrower's business activities is good.
The growth potential of
the borrower's business activities is limited.
The borrower's business activities
show growth potential that is very limited or do not experience growth.
The borrower's business activities
decline.
The borrower's business continuity is very
doubted to recover and it is highly likely that the business will cease.
Stable market and
not influenced by changes in economic conditions.
Limited competition, including
a strong position in the market.
Good market position, not
much influenced by changes in economic conditions.
Market share is comparable
to competitors.
The market is influenced by changes in economic
conditions.
The market position is fairly
good but there are many competitors, but can recover if implementing new business strategies.
The market is highly influenced
by changes in economic conditions.
Business competition is very
tight and the company's operations experience serious problems.
Loss of market share in line with
deteriorating economic conditions.
Very good management (independent
management, experienced and has the ability).
Good management (independent
management, lacking experience, but has the ability).
Fairly good management. • Management is less experienced.
Management is very weak.
Affiliate company or
group is stable and supports the business.
Affiliate company or
group is stable and does not have a burdensome impact on the borrower.
Relationship with
affiliate company or group begins to give a burdensome impact on the borrower.
Affiliate company or
group has given a burdensome impact on the borrower.
Affiliate company or
group is very harmful to the borrower.

PROSPECTS
BUSINESS
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Adequate workforce and no recorded history of disputes or strikes.
Workforce is generally adequate and has no recorded history of disputes or strikes.
Excess workforce but management-employee relations are generally good.
Excess workforce in large numbers, potentially causing unrest.
Labor strikes occur that are difficult to resolve.

Efforts made by the customer to maintain the environment (for large-scale customers with significant environmental impact)

Good environmental management efforts achieving results at least in accordance with minimum requirements as regulated in applicable laws and regulations.
Poor environmental management efforts not meeting minimum requirements as regulated in applicable laws and regulations.
Poor environmental management efforts not meeting minimum requirements as regulated in applicable laws and regulations, with sufficiently material deviations.
The company has not implemented meaningful environmental management efforts or has implemented efforts but has not met the requirements as regulated in applicable laws and regulations, with material deviations.
The company has not implemented meaningful environmental management efforts or has implemented efforts but has not met the minimum requirements as regulated in applicable laws and regulations, and has the possibility of being sued in court.

CUSTOMER PERFORMANCE
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

High and stable profit acquisition.
Profit acquisition is quite good but has potential to decline.
Low profit acquisition.
Very small or negative profit.
Operational losses financed by asset sales.
Experiencing significant losses.
Customer unable to meet all obligations and
Strong capitalization.
Capitalization is quite good and owners have the ability to provide additional capital if needed.
Debt-to-equity ratio is quite high.
Debt-to-equity ratio is high.
Debt-to-equity ratio is very high.
Strong liquidity and working capital.
Liquidity and working capital are generally good.
Limited liquidity and working capital.
Very low liquidity.
Liquidity difficulties.
Cash flow analysis shows that the customer can meet principal and margin payment obligations without additional funding support.
Cash flow analysis shows that the customer can meet principal and margin repayment obligations but there are indications of certain problems that, if not addressed, will affect future payments.
Cash flow analysis shows that the customer can only pay principal and part of the margin.
Cash flow analysis shows inability to pay principal and margin.
Cash flow analysis shows that the customer is unable to cover production costs.

CUSTOMER PERFORMANCE
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

The amount of portfolio sensitive to foreign exchange rate changes is relatively small or has been well hedged.
Some portfolios are sensitive to foreign exchange rate changes but remain controllable.
Business activities are affected by foreign exchange rate changes.
Business activities are threatened by foreign exchange rate changes.
Business activities are threatened by foreign exchange rate fluctuations.
Extension of receivables to cover financial difficulties.
New receivables used to meet maturing obligations.
New receivables used to cover operational losses.

PAYMENT ABILITY
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Installment payments are made on time and there are no arrears or if there are arrears, they do not exceed 30 (thirty) days, and in accordance with the contract requirements.
There are arrears in principal and/or margin installment payments that have exceeded 30 (thirty) days up to 90 (ninety) days.
There are arrears in principal and/or margin installment payments that have exceeded 90 (ninety) days up to 180 (one hundred eighty) days.
There are arrears in principal and/or margin installment payments that have exceeded 180 (one hundred eighty) days up to 270 (two hundred seventy) days.
There are arrears in principal and/or margin installment payments that have exceeded 270 (two hundred seventy) days.
The customer always submits financial information regularly and accurately.
The customer submits financial information regularly and still accurately.
The customer submits financial information irregularly and it is questionable.
The customer does not submit financial information or it is untrustworthy.
Loan agreement documentation is complete and collateral attachment is strong.
Loan agreement documentation is complete and collateral attachment is strong.
Loan agreement documentation is incomplete and collateral attachment is strong.
Loan agreement documentation is incomplete and collateral attachment is weak.
Loan agreement documentation and/or collateral attachment is non-existent.
Violation of non-principal loan agreement requirements.
Violation of principal loan agreement requirements.
Principal violation of principal loan agreement requirements.
Extension of loan agreement to hide financial difficulties.

CLASSIFICATION OF IJARAH OR IJARAH MUNTAHIYAH BI TAMLIK QUALITY

PROSPECTS
BUSINESS
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Good potential for customer business activity growth.
Limited potential for customer business activity growth.
Customer business activities show very limited growth potential or no growth.
Customer business activities are declining.
Business continuity is highly doubtful to recover.
High probability that business activities will cease.
Stable market not influenced by economic condition changes.
Limited competition, including a strong position in the market.
Good market position, not significantly influenced by economic condition changes.
Market share comparable to competitors.
Market influenced by economic condition changes.
Market position is quite good but with many competitors, yet can recover if implementing new business strategies.
Market is highly influenced by economic condition changes.
Business competition is very tight and company operations experience serious problems.
Loss of market share in line with declining economic conditions.
Very good management (independent, experienced, and capable management).
Good management (independent, less experienced, but capable management).
Fair management.
Management is less experienced.
Very weak management.
Affiliate or group company is stable and supports the business.
Affiliate or group company is stable and has no adverse impact on the customer.
Relationship with affiliate or group company begins to have an adverse impact on the customer.
Affiliate or group company has had an adverse impact on the customer.
Affiliate or group company is highly detrimental to the customer.

PROSPECTS
BUSINESS
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Adequate workforce and no recorded history of disputes or strikes.
Workforce is generally adequate and has no recorded history of disputes or strikes.
Excess workforce but management-employee relations are generally good.
Excess workforce in large numbers, potentially causing unrest.
Labor strikes occur that are difficult to resolve.

Efforts made by the customer to maintain the environment (for large-scale customers with significant environmental impact)

Good environmental management efforts achieving results at least in accordance with minimum requirements as regulated in applicable laws and regulations.
Poor environmental management efforts not meeting minimum requirements as regulated in applicable laws and regulations.
Poor environmental management efforts not meeting minimum requirements as regulated in applicable laws and regulations, with sufficiently material deviations.
The company has not implemented meaningful environmental management efforts or has implemented efforts but has not met the requirements as regulated in applicable laws and regulations, with material deviations.
The company has not implemented meaningful environmental management efforts or has implemented efforts but has not met the minimum requirements as regulated in applicable laws and regulations, and has the possibility of being sued in court.

CUSTOMER PERFORMANCE
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

High and stable profit acquisition.
Profit acquisition is quite good but has potential to decline.
Low profit acquisition.
Very small or negative profit.
Operational losses financed by asset sales.
Experiencing significant losses.
Customer unable to meet all obligations and
Strong capitalization.
Capitalization is quite good and owners have the ability to provide additional capital if needed.
Debt-to-equity ratio is quite high.
Debt-to-equity ratio is high.
Debt-to-equity ratio is very high.
Strong liquidity and working capital.
Liquidity and working capital are generally good.
Limited liquidity and working capital.
Very low liquidity.
Liquidity difficulties.
Cash flow analysis shows that the customer can meet lease payment obligations without additional funding support.
Cash flow analysis shows that the customer can meet lease payment obligations but there are indications of certain problems that, if not addressed, will affect future payments.
Cash flow analysis shows that the customer can only pay part of the lease payment obligations.
Cash flow analysis shows inability to pay lease.
Cash flow analysis shows that the customer is unable to cover production costs.

CUSTOMER PERFORMANCE
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

The amount of portfolio sensitive to foreign exchange rate changes is relatively small or has been well hedged.
Some portfolios are sensitive to foreign exchange rate changes but remain controllable.
Business activities are affected by foreign exchange rate changes.
Business activities are threatened by foreign exchange rate changes.
Business activities are threatened by foreign exchange rate fluctuations.
Extension of receivables to cover financial difficulties.
New receivables used to meet maturing obligations.
New receivables used to cover operational losses.

PAYMENT ABILITY
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Lease payments are made on time, or if arrears occur, they do not exceed 30 (thirty) days.
There are lease arrears that have exceeded 30 (thirty) days up to 90 (ninety) days.
There are lease arrears that have exceeded 90 (ninety) days up to 180 (one hundred eighty) days.
There are lease arrears that have exceeded 180 (one hundred eighty) days up to 270 (two hundred seventy) days.
There are lease arrears that have exceeded 270 (two hundred seventy) days.
The customer always submits financial information regularly and accurately.
The customer submits financial information irregularly but still accurately.
The customer submits financial information irregularly and it is questionable.
The customer does not submit financial information.

PAYMENT ABILITY
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Complete documentation and strong collateral attachment.
Incomplete documentation and strong collateral attachment.
Incomplete documentation and weak collateral attachment.
Lease documentation and/or collateral attachment is non-existent.
Violation of lease requirements.
Principal violation of lease requirements.
Extension of lease to hide financial difficulties.

CLASSIFICATION OF SALAM QUALITY

PROSPECTS
BUSINESS
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Good potential for customer business activity growth.
Limited potential for customer business activity growth.
Very limited or no growth potential for customer business activities.
Customer business activities are declining.
Business continuity is highly doubtful to recover and there is a high probability that the business will cease.

PROSPECTS
BUSINESS
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Stable market not influenced by economic condition changes.
Limited competition, including a strong position in the market.
Good market position, not significantly influenced by economic condition changes.
Market share comparable to competitors.
Market influenced by economic condition changes.
Market position is quite good but with many competitors, yet can recover if implementing new business strategies.
Market is highly influenced by economic condition changes.
Business competition is very tight and company operations experience serious problems.
Loss of market share in line with declining economic conditions.
Very good management (independent, experienced, and capable management).
Good management (independent, less experienced, but capable management).
Fair management.
Management is less experienced.
Very weak management.
Affiliate or group company is stable and supports the business.
Affiliate or group company is stable and has no adverse impact on the customer.
Relationship with affiliate or group company begins to have an adverse impact on the customer.
Affiliate or group company has had an adverse impact on the customer.
Affiliate or group company is highly detrimental to the customer.
Adequate workforce and no recorded history of disputes or strikes.
Workforce is generally adequate and has no recorded history of disputes or strikes.
Excess workforce but management-employee relations are generally good.
Excess workforce in large numbers, potentially causing unrest.
Labor strikes occur that are difficult to resolve.

PROSPECTS
BUSINESS
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Efforts made by the customer to maintain the environment (for large-scale customers with significant environmental impact)

Good environmental management efforts achieving results at least in accordance with minimum requirements as regulated in applicable laws and regulations.
Poor environmental management efforts not meeting minimum requirements as regulated in applicable laws and regulations.
Poor environmental management efforts not meeting minimum requirements as regulated in applicable laws and regulations, with sufficiently material deviations.
The company has not implemented meaningful environmental management efforts or has implemented efforts but has not met the requirements as regulated in applicable laws and regulations, with material deviations.
The company has not implemented meaningful environmental management efforts or has implemented efforts but has not met the minimum requirements as regulated in applicable laws and regulations, and has the possibility of being sued in court.

CUSTOMER PERFORMANCE
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

High and stable profit acquisition.
Profit acquisition is quite good but has potential to decline.
Low profit acquisition.
Very small or negative profit.
Operational losses financed by asset sales.
Experiencing significant losses.
Customer unable to meet all obligations and
Strong capitalization.
Capitalization is quite good and owners have the ability to provide additional capital if needed.
Debt-to-equity ratio is quite high.
Debt-to-equity ratio is high.
Debt-to-equity ratio is very high.
Strong liquidity and working capital.
Liquidity and working capital are generally good.
Limited liquidity and working capital.
Very low liquidity.
Liquidity difficulties.
Cash flow analysis shows that the customer can meet Salam obligations according to the contract on time without additional funding support.
Cash flow analysis shows that the customer can meet Salam obligations according to the contract but there are indications of certain problems that, if not addressed, will affect future Salam goods delivery obligations.
Cash flow analysis shows that the customer can only meet part of the Salam obligations.
Cash flow analysis shows inability to meet Salam obligations.
Cash flow analysis shows that the customer is unable to cover production costs.

CUSTOMER PERFORMANCE
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

The amount of portfolio sensitive to foreign exchange rate changes is relatively small or has been well hedged.
Some portfolios are sensitive to foreign exchange rate changes but remain controllable.
Business activities are affected by foreign exchange rate changes.
Business activities are threatened by foreign exchange rate changes.
Business activities are threatened by foreign exchange rate fluctuations.
Extension of Salam contract duration to cover financial difficulties.
New receivables used to meet maturing obligations.
New receivables used to cover operational losses.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja

DELIVERY ABILITY
OF ORDERED GOODS
PERFORMING
SPECIAL ATTENTION
SUBSTANDARD
DOUBTFUL
LOSS

Salam receivables are not yet due.
Salam receivables are due up to 30 (thirty) days.
Salam receivables are due up to 60 (sixty) days.
Salam receivables are due up to 90 (ninety) days.
Salam receivables are due beyond 90 (ninety) days.
Supplier always submits financial information regularly and accurately.
There is an extension of the delivery period for ordered goods.
Violation of Salam agreement requirements.
Principal violation of Salam agreement requirements.
Principal violation of Salam agreement requirements.
Supplier submits financial information irregularly but still accurately.
Supplier submits financial information irregularly and inaccurately.
Supplier submits financial information irregularly and it is questionable.
Supplier does not submit financial information.

Determined in Jakarta on 14 June 2022
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signature
WIMBOH SANTOSO

Financial Services Authority Regulation Number 9 of 2022 Concerning the Supervision of the Indonesian Export Financing Institution

Lineage: In force