Implementation of Sharia Governance for Sharia Economic Banks

The Indonesian Financial Services Authority (OJK) issued Regulation No. 25 of 2024 to establish Sharia governance frameworks for Sharia Economic Banks (BPRS) as part of the 2024-2027 development roadmap. The regulation mandates specific Sharia governance structures, including the duties of the Sharia Supervisory Board, Sharia risk management, Sharia compliance, Sharia internal audit, and external Sharia governance reviews. This regulation repeals previous OJK regulations on Sharia governance and BPRS operations to ensure alignment with the new comprehensive governance standards.

Indonesia

Otoritas Jasa Keuangan (Financial Services Authority)

Regulation of the Financial Services Authority Republic of Indonesia Number 25 of 2024 concerning the Implementation of Sharia Governance for Sharia Economic Banks

Abstract: This OJK Regulation is formulated to realize the 3rd Pillar of the Indonesia Sharia Banking Development and Strengthening Roadmap 2023-2027, namely "strengthening the characteristics of Sharia banking," as well as the 1st Pillar of the 2024-2027 Development and Strengthening Roadmap for Economic Banks and Sharia Economic Banks, namely "strengthening structure and competitiveness." This OJK Regulation will complement the governance framework in Sharia Economic Banks (BPRS), which will encompass general governance (in accordance with OJK Regulation Number 9 of 2024 concerning the Implementation of Governance for Economic Banks and Sharia Economic Banks) as well as Sharia governance.

The legal basis for this Financial Services Authority Regulation (OJK Regulation) is: Law Number 21 of 2008 as amended several times, lastly with Law Number 4 of 2023; and Law Number 21 of 2011 as amended with Law Number 4 of 2023.

This OJK Regulation regulates the implementation of a Sharia governance framework manifested at least through: a. the execution of duties, responsibilities, and authorities of the Sharia Supervisory Board (DPS); b. the implementation of Sharia risk management functions and Sharia compliance functions; c. the implementation of Sharia internal audit functions; and d. the execution of external reviews of Sharia Governance.

Sharia Economic Banks (BPRS) conduct the management and development of the quality of the DPS, human resources executing Sharia risk management functions and Sharia compliance functions, and human resources executing Sharia internal audit functions on an ongoing basis in accordance with OJK Regulations concerning the quality development of human resources for economic banks and Sharia economic banks.

Note: This Financial Services Authority Regulation takes effect on the date of its promulgation. This Financial Services Authority Regulation was promulgated on November 29, 2024, and established on November 29, 2024.

Upon the taking effect of this Financial Services Authority Regulation, the implementation provisions of Financial Services Authority Regulation Number 24/POJK.03/2018 concerning the Implementation of Governance for Sharia Financing Economic Banks shall remain in effect insofar as they do not conflict with the provisions in this Financial Services Authority Regulation.

Upon the taking effect of this Financial Services Authority Regulation: a. Financial Services Authority Regulation Number 24/POJK.03/2018 concerning the Implementation of Governance for Sharia Financing Economic Banks; and b. Financial Services Authority Regulation Number 26 of 2022 concerning Sharia Financing Economic Banks, are repealed and declared invalid.

Explanation: 12 pages.