Regulatory AlertsDevelopment and Strengthening of Financing Companies, Infrastructure Financing Companies, and Venture Capital Companies
The Financial Services Authority (OJK) issued Regulation No. 46 of 2024 to implement mandates from the Financial Sector Development and Strengthening Law, establishing new rules for financing and venture capital entities. The regulation introduces significant operational changes, including converting branch office approvals to reporting requirements, redefining equity for capital adequacy, and imposing strict limits on financing facilities for productive sectors. It also mandates written agreements, enhances market-based discipline through industry associations, and sets clear procedures for liquidation following license revocation or merger.
Regulation of the Financial Services Authority Number 46 of 2024 on the Development and Strengthening of Financing Companies, Infrastructure Financing Companies, and Venture Capital Companies
Abstract: In order to create a reform of the Indonesian financial sector, which is a primary prerequisite for building a dynamic, strong, independent, sustainable, and just Indonesian economy, the Government has established Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector. Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector is drafted to increase collaboration by bringing about interconnectivity both among financial sector institutions and with all financial service industry sectors.
In line with these objectives and to follow up on the mandate of Article 106 paragraph (6), Article 107 paragraph (4), Article 109 paragraph (2), Article 112 paragraph (3), Article 113 paragraph (4), Article 114 paragraph (3), Article 115 paragraph (5), Article 116 paragraph (3), Article 121 paragraph (2), Article 122 paragraph (3), Article 123 paragraph (2), Article 124 paragraph (2), Article 125 paragraph (4), Article 128 paragraph (4), Article 282 paragraph (3), Article 252 paragraph (4), and Article 269 paragraph (4) of Law Number 4 of 2023 concerning Development, regulations regarding the development and strengthening of financing companies, Islamic financing companies, infrastructure financing companies, venture capital companies, and Islamic venture capital companies are required.
The legal basis for this Financial Services Authority Regulation (POJK) is: Law No. 21 of 2011 as amended by Law No. 4 of 2023; Law No. 4 of 2023; POJK No. 34/POJK.05/2015; POJK No. 35/POJK.05/2018 as amended by POJK No. 7/POJK.05/2022; POJK No. 10/POJK.05/2019; POJK No. 46/POJK.05/2020; and POJK No. 47/POJK.05/2020.
The Financial Services Authority Regulation on the Development and Strengthening of Financing Companies, Infrastructure Financing Companies, and Venture Capital Companies regulates the scope: a. Business Licensing for Financing Companies, Islamic Financing Companies, Infrastructure Financing Companies, Venture Capital Companies, and Islamic Venture Capital Companies; b. Business Operations of Financing Companies and Islamic Financing Companies; c. Business Operations of Infrastructure Financing Companies.
Notes: This Financial Services Authority Regulation takes effect on the date of promulgation. This Financial Services Authority Regulation was promulgated on December 31, 2024, and established on December 30, 2024.
Addition of Cooperative legal entities for Infrastructure Financing Companies and Financing Companies. Changes to regulations regarding the opening of branch offices for Financing Companies, which previously required approval from the Financial Services Authority, are changed to a mandatory reporting requirement to the Financial Services Authority.
Adjustment of regulations on the separation of Islamic business units for Financing Companies, Venture Capital Companies, and Infrastructure Financing Companies, namely, mandatory separation of Islamic business units if the equity of the Islamic business unit has reached > minimum equity of the parent company.
Regulations regarding the role of associations in building market-based discipline supervision in order to strengthen and/or rehabilitate the Financial Service Business industry.
Regulations prohibiting Financing Companies/Infrastructure Financing Companies from making agreements or contracts or setting requirements that mandate PP/PPI to provide Financing that would result in a violation of General Banking Principles (BMPP).
Regulations on Financial Service Business agreements that must be put into written form.
Regulations regarding the adjustment of financing distribution limits via Business Capital Facilities (FMU) in order to support productive business sectors, including MSMEs, namely: a. The financing value for each Working Capital Financing Debtor via Business Capital Facilities is at most Rp10,000,000,000 (ten billion rupiah). b. The financing value for each Multi-purpose Financing Debtor via Fund Facilities is at most Rp500,000,000 (five hundred million rupiah).
Adjustment of regulations that previously used equity with definitions in accordance with PSAK (Indonesian Financial Accounting Standards), to equity components established by OJK (rule-based). This is necessary as a guide for supervisors regarding the definition of equity/own capital as proposed for capital assessment, because equity recording based on SAK allows for the possibility of Other Comprehensive Income components in equity, which may not strengthen the company's capital capacity.
Regulations regarding liquidation for PP, PPI, and PMV after license revocation, license return requests, and mergers.