Circular of the Financial Services Authority of the Republic of Indonesia Number 10/SEOJK.03/2023 Concerning the Implementation of Products of Sharia People's Economic Banks

Circular of the Financial Services Authority Republic of Indonesia Number 10/SEOJK.03/2023 Concerning Implementation of Products of Sharia People's Economic Banks

I. BACKGROUND This Circular of the Financial Services Authority regarding the Implementation of Products of Sharia People's Economic Banks (SEOJK BPRS Products) is issued to realize competitive Sharia People's Economic Banks that contribute significantly to the national economy and social development, and to align with statutory regulations to encourage the development of Sharia People's Economic Bank product implementation while maintaining adequate capital principles, effective risk management, and the application of prudential principles.

This SEOJK BPRS Products regulation is an implementing regulation of POJK Number 25/POJK.03/2021 concerning the Implementation of Products of Economic Banks and Sharia Economic Banks. This SEOJK BPRS Products replaces the previous regulation, namely SEOJK Number 37/SEOJK.03/2015 concerning Products and Activities of Sharia Financing People's Banks.

II. MAIN REGULATIONS This SEOJK BPRS Products consists of 10 Parts with main regulations, as follows:

A. Part I – General Provisions In the implementation of Products, BPRS ensures that the application of risk management and governance over the implementation of Products is carried out in accordance with Financial Services Authority Regulations regarding the application of risk management and governance for BPRS.

B. Part II – BPRS Products BPRS Products are classified into: Basic Products, namely products, services, and/or other activities attached to the BPRS business license involving fund collection, fund disbursement, fund placement, and/or other basic activities as listed in Attachment I-SEOJK. Advanced Products, namely products, services, and/or other activities to support BPRS business based on information technology, related to the implementation of activities or products of non-bank financial service institutions, or affecting the BPRS risk profile assessment, and requiring permits and/or approvals from other authorities. Advanced Products are Products not listed in Attachment I-SEOJK.

BPRS Products are categorized as New Products if: they have never been implemented previously by the respective BPRS; or they were implemented previously by the respective BPRS but have undergone product development resulting in changes to the product's inherent risk and the BPRS risk profile. BPRS Products categorized as New Products must be included in the BPRS business plan.

C. Part III – Principles of BPRS Product Implementation BPRS ensures the application of risk management, including compliance with Sharia Principles, and the application of governance over the implementation of Products is carried out in accordance with: a) Financial Services Authority Regulations regarding the application of risk management for BPRS; and b) Financial Services Authority Regulations regarding the application of governance for BPRS. BPRS implementing Advanced Products must observe the principles of: a) adequate capital; and b) effective application of risk management.

D. Part IV – Mechanism for Implementing New Products The BPRS Sharia Supervisory Board submits an opinion regarding New Products, which refers to fatwas and/or Sharia compliance statements issued by institutions with authority in setting fatwas in the Sharia field and regulations governing the implementation of Sharia Principles (opinion format as listed in the attachment in POJK on the Implementation of Products of BPR and BPRS, and as listed in Attachment II-SEOJK).

BPRS implementing new Basic Products involving other basic activities must submit a report on the implementation realization of the new Basic Product (report format as listed in the attachment in POJK on the Implementation of Products of BPR and BPRS).

BPRS intending to implement Advanced Products must obtain approval from the Financial Services Authority for the implementation of new Advanced Products, through the following mechanisms: Approval with limited pilot project (piloting review); Approval without through a limited pilot project; or Approval in the form of notification regarding the plan to implement new Advanced Products (instant-approval).

In the event that, in the Financial Services Authority's assessment, there is non-compliance with statutory regulations and/or potential to cause significant risk in the mechanism for implementing New Products, the Financial Services Authority has the authority to take specific actions, including: requesting the BPRS to meet requirements and/or adjust the implementation mechanism to through a limited pilot project; requesting the BPRS to meet requirements and/or adjust the implementation mechanism to approval without through a limited pilot project; or stopping the plan to implement new Advanced Products.

E. Part V – Adjustment of New Product Implementation Plans BPRS may adjust the plan for implementing New Products other than those previously submitted in the business plan, including adding plans for implementing new Products and/or refining plans for implementing new Products previously listed in the business plan.

F. Part VI – Cessation of BPRS Products Cessation of BPRS Products may be carried out based on the initiative of the BPRS or based on an order from the Financial Services Authority.

G. Part VII – Consumer Protection BPRS is required to apply consumer and community protection principles in the implementation of Products in accordance with statutory regulations regarding consumer and community protection in the financial services sector. In the event that BPRS implements Products requiring permits and/or approvals from other authorities, BPRS is also required to meet the consumer and community protection regulations issued by the competent authority.

In the event that Product implementation is carried out through cooperation with third parties, BPRS must ensure that the third party also applies consumer and community protection principles as agreed in the cooperation agreement.

H. Part VIII – Reporting BPRS submits reports on the implementation realization of new Products, reports on the plan for implementing limited pilot projects, reports on the realization of Product cessation, and/or requests for approval for the implementation of new Products online through the Financial Services Authority's reporting system and/or integrated licensing and registration system.

In the event that the reporting and/or licensing systems are not yet available, BPRS submits reports and/or requests for approval to: a) the Regional Office of the Financial Services Authority for BPRS headquartered in the working area of the Regional Office of the Financial Services Authority; or b) the Office of the Financial Services Authority for BPRS headquartered in the working area of the Office of the Financial Services Authority.

I. Part IX – Transitional Provisions Products and/or activities of BPRS that have been implemented in accordance with Attachment IV of Circular of the Financial Services Authority Number 37/SEOJK.03/2015 concerning Products and Activities of Sharia Financing People's Banks prior to the effectiveness of this Circular of the Financial Services Authority are adjusted or ceased with the following regulations: Adjusting terms and conditions to the characteristics of Basic Products as listed in Attachment I-SEOJK; or In the event that terms and conditions cannot be adjusted to the characteristics of Basic Products as in Attachment I due to binding agreements, BPRS ceases the product at the end of the term. If BPRS intends to re-implement the said product with characteristics not in accordance with Attachment I Basic Products as per this SEOJK, it must follow the Advanced Product mechanism through approval.

J. Part X – Closing This Circular of the Financial Services Authority takes effect on the date determined.