OJK Regulation No. 26 of 2024 on the Expansion of Banking Business Activities

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Sector: Banking

Sub-Sector: Rural Banks (BPR); Sharia Rural Banks (BPRS); Sharia Banking

Type of Regulation: OJK Regulation (POJK)

Regulation Number: 26 of 2024

Effective Date: 12/13/2024

Appendix 1 POJK 26 of 2024 Expansion of Banking Business Activities.pdf Abstract of POJK 26 of 2024 Expansion of Banking Business Activities.pdf FAQ of POJK 26 of 2024 Expansion of Banking Business Activities.pdf

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Regulation of the Financial Services Authority Republic of Indonesia Number 26 of 2024 concerning the Expansion of Banking Business Activities

Abstract: The issuance of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector has opened space for General Banks to conduct Equity Investment activities more broadly than before through the expansion of the scope of companies receiving Equity Investments from General Banks. In addition, there is an expansion of business activities by opening space for Rural Banks (BPR) or Sharia Rural Banks (BPRS) to conduct Equity Investments in Rural Banks or Sharia Rural Banks to Supporting Institutions, the transfer of Bank receivables, and the management of waqf for Banks operating on Sharia principles.

Furthermore, in line with the development of Bank products, it is necessary to update the currently applicable regulations to remain in line with generally applicable standards and implementations as well as customer needs, such as regulations governing Bank activities as providers of Foreign Currency Exchange Business Activities (KUPVA) and regulations regarding guarantees by General Banks.

Furthermore, in line with the needs and practices of interactions between Banks and customers that have been ongoing, regulations are also needed to underpin and support General Banks in utilizing Electronic Signatures and electronic agreements in providing services to customers. The use of Electronic Signatures and electronic agreements is expected to facilitate transactions for customers and General Banks according to their needs, while still paying attention to consumer protection principles.

The legal basis for this Financial Services Authority Regulation (POJK) is: Law No. 7 of 1992 as amended several times, lastly with Law No. 4 of 2023; Law No. 21 of 2008 as amended with Law No. 4 of 2023; Law No. 21 of 2011 as amended with Law No. 4 of 2023; and Law No. 4 of 2023.

This POJK regulates among others: a. Adjustment of the scope of Subsidiary Companies (investee) of General Banks to align with the P2SK Law; b. Equity Investment activities by BPR or BPRS:

1. BPR or BPRS are prohibited from conducting Equity Investments in BPR or BPRS other than to Supporting Institutions located within Indonesian territory.
2. Supporting Institutions consist of: a) companies established or whose business activities are prioritized to support the business activities of BPR or BPRS; and b) companies whose business characteristics are aimed at supporting the business activities of the BPR or BPRS industry.
3. The total portfolio of Equity Investments by BPR or BPRS shall not exceed 15% (fifteen percent) of the capital of the BPR or BPRS.
4. Exceeding the limit of Equity Investments by BPR or BPRS.
5. Mechanism for requesting approval for Equity Investments by BPR or BPRS.
6. Mechanism for implementing Divestment by BPR or BPRS. c. Transfer of receivables by Banks. d. Guarantees by General Banks must be conducted in accordance with applicable legislation and/or practices or standards applicable nationally and internationally. General Banks are required to conduct analysis in providing guarantee/warranty services. e. Utilization of Electronic Signatures and electronic agreements by General Banks. f. Requirements for Banks as providers of KUPVA and documentation of KUPVA implementation.

Note: This Financial Services Authority Regulation shall come into force on the date of its promulgation. This Financial Services Authority Regulation was promulgated on December 13, 2024, and was established on December 10, 2024. The provisions regarding Equity Investments by BPR or BPRS in this POJK shall come into force on January 1, 2025. This POJK applies to Banks (General Banks, BPR, and BPRS).

Upon the commencement of this Financial Services Authority Regulation:

• Board of Directors Decision of Bank Indonesia Number 23/72/KEP/DIR concerning the Provision of Guarantees by Banks dated February 28, 1991, and external implementation regulations;
• Board of Directors Decision of Bank Indonesia Number 23/88/KEP/DIR concerning the Provision of Guarantees by Banks dated March 18, 1991, and external implementation regulations;
• Bank Indonesia Regulation Number 5/6/PBI/2003 concerning Domestic Documentary Letters of Credit as amended by Bank Indonesia Regulation Number 10/5/PBI/2008 concerning Amendments to Bank Indonesia Regulation Number 5/6/PBI/2003 concerning Domestic Documentary Letters of Credit;
• Bank Indonesia Regulation Number 12/22/PBI/2010 concerning Foreign Currency Merchants, and external implementation regulations; and
• Articles 3, 4, 36, 37, and 38 of Financial Services Authority Regulation Number 22 of 2022 concerning Equity Investment Activities by General Banks, are repealed and declared invalid.

Explanation: 18 pages. Appendix I: 3 pages. Appendix II: 1 page. Appendix III: 1 page.