Certification of Expertise in Risk Management and Certification of Qualification Experts in Guarantee or Shariah Guarantee at Guarantee Institutions

To:
Board of Directors of Guarantee Institutions
At:

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 17 /SEOJK.05/2019 CONCERNING CERTIFICATION OF EXPERTISE IN RISK MANAGEMENT AND CERTIFICATION OF QUALIFICATION EXPERTS IN GUARANTEE OR SHARIAH GUARANTEE AT GUARANTEE INSTITUTIONS

In relation to the mandate of Article 36 paragraph (2) and Article 37 paragraph (3) of Financial Services Authority Regulation Number 1/POJK.05/2017 concerning Business Licensing and Institutional Aspects of Guarantee Institutions (State Gazette of the Republic of Indonesia Year 2017 Number 6, Supplement to the State Gazette of the Republic of Indonesia Number 6013), it is necessary to regulate certification of expertise in risk management and certification of qualification experts in guarantee or Shariah guarantee at guarantee institutions in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS
In this Financial Services Authority Circular Letter, the following terms are defined:

1. Guarantee Institution is a guarantee company, Shariah guarantee company, reinsurance company, and Shariah reinsurance company that carries out guarantee activities as referred to in Law Number 1 of 2016 concerning Guarantees.

2. Board of Directors is the Board of Directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Guarantee Institutions in the form of a limited liability company or equivalent to the Board of Directors for Guarantee Institutions in the form of a public enterprise or cooperative.

3. Board of Commissioners is the Board of Commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Guarantee Institutions in the form of a limited liability company or equivalent to the Board of Commissioners for Guarantee Institutions in the form of a public enterprise or cooperative.

4. Guarantee Institution Expert Personnel is a person who has qualifications and/or expertise and has obtained proof of passing the certification of expertise in guarantee or Shariah guarantee.

5. Professional Certification Body, hereinafter abbreviated as LSP, is an institution carrying out professional certification activities that has obtained a license from the state institution authorized to grant licenses to professional certification institutions in Indonesia.

6. Guarantee Institution Professional Certification Body is an LSP that organizes professional certification activities in the field of guarantee or Shariah guarantee, established by the Guarantee Institution Association, and has been registered with the Financial Services Authority.

7. Certificate is a document issued by the LSP showing that the person whose name is listed has met the certification requirements for a specific competence.

8. Competence is work ability covering knowledge, skills, and/or expertise as well as work attitudes relevant to the implementation of tasks and job requirements.

9. Maintenance Program is a continuous program to increase the knowledge of Certificate holders regarding the latest developments at Guarantee Institutions.

10. Operational Risk is risk resulting from insufficient and/or non-functioning internal processes, human error, system failure, and/or external events that affect the operations of Guarantee Institutions.

11. Guarantee Risk is risk resulting from the failure of the guaranteed party to meet financial obligations to the guarantee recipient and/or risk resulting from the failure of co-guarantee or re-guarantee partners to meet their obligations.

12. Compliance Risk is risk resulting from failure to meet or implement regulatory provisions.

13. Liquidity Risk is risk resulting from the inability of Guarantee Institutions to meet their due obligations in cash.

14. Legal Risk is risk resulting from legal claims from other parties and/or weaknesses in legal aspects that can cause losses to Guarantee Institutions.

15. Market Risk is risk resulting from the decline in the value of an investment due to market conditions such as interest rates and exchange rates.

16. Strategic Risk is risk resulting from inaccuracies in decision-making and/or implementation of decisions and failure to anticipate changes in the business environment.

17. Reputational Risk is risk resulting from a decline in stakeholder trust stemming from negative perceptions of Guarantee Institutions.

II. CERTIFICATION OF EXPERTISE IN RISK MANAGEMENT OF GUARANTEE INSTITUTIONS

1. Certification of expertise in risk management of Guarantee Institutions is the process of issuing Certificates based on Competence in the field of risk management of Guarantee Institutions, carried out systematically and objectively through Competence testing.

2. Expertise in risk management of Guarantee Institutions as referred to in item 1 is part of the process of managing risks or uncertainties that affect the achievement of the business objectives of Guarantee Institutions.

3. Risks or uncertainties affecting the achievement of business objectives of Guarantee Institutions as referred to in item 2 consist of:
   a. Operational Risk; b. Guarantee Risk;
   c. Compliance Risk;
   d. Liquidity Risk; e. Legal Risk; f. Market Risk; g. Strategic Risk; and h. Reputational Risk.

4. Certificates of expertise in risk management of Guarantee Institutions are divided into 4 (four) modules, namely:
   a. Competence in the Certificate of expertise in risk management of Guarantee Institutions module 1 includes:

1. understanding and defining the scope of risk management; and
2. establishing criteria to assess risks to be faced by Guarantee Institutions;
   b. Competence in the Certificate of expertise in risk management of Guarantee Institutions module 2 involves identification, measurement, control, and monitoring of risks as follows:
3. Operational Risk;
4. Guarantee Risk;
5. Compliance Risk; and
6. Legal Risk;
   c. Competence in the Certificate of expertise in risk management of Guarantee Institutions module 3 involves identification, measurement, control, and monitoring of risks as follows:
7. Liquidity Risk; and
8. Market Risk; and
   d. Competence in the Certificate of expertise in risk management of Guarantee Institutions module 4 involves identification, measurement, control, and monitoring of risks as follows:
9. Strategic Risk; and
10. Reputational Risk.

III. CERTIFICATES OF EXPERTISE IN RISK MANAGEMENT FOR MEMBERS OF THE BOARD OF DIRECTORS AND MEMBERS OF THE BOARD OF COMMISSIONERS OF GUARANTEE INSTITUTIONS

1. Expertise in risk management for members of the Board of Directors and members of the Board of Commissioners of Guarantee Institutions is evidenced by the possession of Certificates of expertise in risk management of Guarantee Institutions.

2. Certificates of expertise in risk management for members of the Board of Directors and members of the Board of Commissioners of Guarantee Institutions are Certificates of expertise in risk management of Guarantee Institutions issued by the Guarantee Institution Professional Certification Body.

3. Certificates of expertise in risk management of Guarantee Institutions are requirements for assessing Competence in the evaluation of ability and suitability for members of the Board of Directors and members of the Board of Commissioners of Guarantee Institutions.

4. The types of Certificates of expertise in risk management of Guarantee Institutions held by members of the Board of Directors and members of the Board of Commissioners are adjusted to their positions and functions, as well as the operational scope of the Guarantee Institution.

5. The possession of Certificates of expertise in risk management of Guarantee Institutions by members of the Board of Directors and members of the Board of Commissioners is arranged based on positions and functions, as well as the operational scope of the Guarantee Institution as stated in the Appendix which is an integral part of this Financial Services Authority Circular Letter.

6. The possession of Certificates of expertise in risk management of Guarantee Institutions module 1, module 3, and module 4 is exempted for members of the Board of Directors and members of the Board of Commissioners who already possess Certificates of expertise in risk management issued by LSPs recognized by the Financial Services Authority before the issuance of this Financial Services Authority Circular Letter.

IV. PROVIDERS OF CERTIFICATION OF EXPERTISE IN RISK MANAGEMENT OF GUARANTEE INSTITUTIONS

1. Certificates of expertise in risk management of Guarantee Institutions are issued by the Guarantee Institution Professional Certification Body.

2. Certificates of expertise in risk management of Guarantee Institutions issued by international certification bodies or certification bodies outside the country may be considered for recognition as equivalent to Certificates of expertise in risk management for members of the Board of Directors and members of the Board of Commissioners of Guarantee Institutions issued by the Guarantee Institution Professional Certification Body.

3. The recognition of equivalence of Certificates of expertise in risk management of Guarantee Institutions issued by international certification bodies or certification bodies outside the country takes into account the following matters:
   a. the issuer of the certificate has been recognized and accepted internationally; b. the substance of the certification meets the provisions in this Financial Services Authority Circular Letter; and
   c. the certificate is still valid.

4. The recognition of equivalence of Certificates of expertise in risk management of Guarantee Institutions as referred to in item 3 is carried out by the Guarantee Institution Professional Certification Body.

5. The recognition of equivalence of Certificates of expertise in risk management of Guarantee Institutions is evidenced by a letter of statement issued by the Guarantee Institution Professional Certification Body.

V. CERTIFICATION OF QUALIFICATION EXPERTS IN GUARANTEE OR SHARIAH GUARANTEE

1. Certification of qualification experts in guarantee or Shariah guarantee is the process of issuing Certificates based on Competence in the field of guarantee or Shariah guarantee, carried out systematically and objectively through Competence testing.

2. Competence in the field of guarantee or Shariah guarantee as referred to in item 1 is Competence from the main business process functions of Guarantee Institutions.

3. The main business process functions of Guarantee Institutions consist of:
   a. product design; b. marketing;
   c. conducting guarantee or Shariah guarantee analysis;
   d. conducting re-guarantee or Shariah re-guarantee; e. risk management; f. claim determination; and g. subrogation management.

4. Competence in product design includes:
   a. understanding products and contracts; b. calculating and setting tariffs; and
   c. determining scope (coverage).

5. Competence in marketing includes:
   a. determining distribution channels; and b. designing cooperation agreements.

6. Competence in conducting guarantee or Shariah guarantee analysis includes:
   a. document verification; b. conducting surveys;
   c. understanding feasibility analysis; and
   d. understanding the collateral/guarantee agreement process.

7. Competence in conducting re-guarantee or Shariah re-guarantee includes:
   a. determining the re-guarantee or Shariah re-guarantee scheme; b. selecting reinsurance or Shariah reinsurance companies; and
   c. submitting re-guarantee or Shariah re-guarantee claims.

8. Competence in risk management includes:
   a. identifying risks; b. measuring risks;
   c. controlling risks; and
   d. monitoring risks.

9. Competence in claim determination includes:
   a. verifying claim submission documents; b. analyzing claim feasibility; and
   c. determining claims.

10. Competence in subrogation management includes:
    a. verifying subrogation documents; b. understanding collateral/guarantee execution;
    c. designing subrogation collection plans; and
    d. monitoring subrogation collections.

VI. CERTIFICATES OF QUALIFICATION EXPERTS IN GUARANTEE OR SHARIAH GUARANTEE FOR EXPERT PERSONNEL OF GUARANTEE INSTITUTIONS

1. Expert qualification for Guarantee Expert Personnel is evidenced by the possession of Certificates of qualification experts in the field of guarantee.

2. Expert qualification for Shariah Guarantee Expert Personnel is evidenced by the possession of Certificates of qualification experts in the field of Shariah guarantee.

VII. PROVIDERS OF CERTIFICATION OF QUALIFICATION EXPERTS IN GUARANTEE OR SHARIAH GUARANTEE

1. Certificates of qualification experts in the field of guarantee or Shariah guarantee are issued by the Guarantee Institution Professional Certification Body.

2. Certificates of qualification experts in the field of guarantee or Shariah guarantee issued by international certification bodies or certification bodies outside the country may be considered for recognition as equivalent to Certificates of qualification experts in guarantee or Shariah guarantee issued by the Guarantee Institution Professional Certification Body.

3. The recognition of equivalence of Certificates of qualification experts in the field of guarantee or Shariah guarantee issued by international certification bodies or certification bodies outside the country takes into account the following matters:
   a. the issuer of the certificate has been recognized and accepted internationally; b. the substance of the certification meets the provisions in this Financial Services Authority Circular Letter; and
   c. the certificate is still valid.

4. The recognition of equivalence of Certificates of qualification experts in the field of guarantee or Shariah guarantee as referred to in item 3 is carried out by the Guarantee Institution Professional Certification Body.

5. The recognition of equivalence of Certificates of qualification experts in the field of guarantee or Shariah guarantee is evidenced by a letter of statement issued by the Guarantee Institution Professional Certification Body.

VIII. MAINTENANCE PROGRAM

1. The Maintenance Program applies to:
   a. every member of the Board of Directors and member of the Board of Commissioners who already possesses Certificates of expertise in risk management of Guarantee Institutions issued by the Guarantee Institution Professional Certification Body; b. every member of the Board of Directors and member of the Board of Commissioners who already possesses Certificates of expertise in risk management issued by LSPs recognized by the Financial Services Authority;
   c. every member of the Board of Directors and member of the Board of Commissioners who already possesses Certificates of expertise in risk management of Guarantee Institutions issued by international certification bodies or certification bodies outside the country that are recognized as equivalent to Certificates of expertise in risk management for members of the Board of Directors and members of the Board of Commissioners of Guarantee Institutions issued by the Guarantee Institution Professional Certification Body;
   d. Expert Personnel of Guarantee Institutions who already possess Certificates of expertise in the field of guarantee or Shariah guarantee issued by the Guarantee Institution Professional Certification Body; and e. Expert Personnel of Guarantee Institutions who already possess Certificates of expertise in the field of guarantee or Shariah guarantee issued by international certification bodies or certification bodies outside the country that have been recognized as equivalent to Certificates of qualification experts in guarantee or Shariah guarantee issued by the Guarantee Institution Professional Certification Body.

2. The Maintenance Program can be carried out by:
   a. attending seminars, workshops, or similar activities; b. attending courses, training, or similar educational programs;
   c. writing papers, articles, or other written works that are published; or
   d. becoming a speaker in activities as referred to in letter a or becoming a teacher/instructor in activities as referred to in letter b.

3. The Maintenance Program for members of the Board of Directors, members of the Board of Commissioners, and Expert Personnel of Guarantee Institutions as referred to in item 1 is carried out periodically within the following timeframes:
   a. 1 (one) time in 4 (four) years for Certificates of expertise in risk management of Guarantee Institutions for each module, or recognized equivalents; and b. 1 (one) time in 2 (two) years for Certificates of qualification experts in the field of guarantee or Shariah guarantee, or recognized equivalents.

4. The Maintenance Program for members of the Board of Directors and members of the Board of Commissioners who possess Certificates of expertise in risk management issued by LSPs recognized by the Financial Services Authority is carried out by following the certification process for expertise in risk management of Guarantee Institutions.

5. The Maintenance Program for members of the Board of Directors and members of the Board of Commissioners who possess Certificates of expertise in risk management issued by LSPs recognized by the Financial Services Authority as referred to in item 4 for the first time is calculated from the date the last Certificate held was issued.
   Example: if the last Certificate was issued on June 13, 2019, then the Maintenance Program is carried out 4 (four) years from the date of Certificate issuance, i.e., June 13, 2023.

6. The Maintenance Program for members of the Board of Directors and members of the Board of Commissioners who already possess Certificates of expertise in risk management issued by international certification bodies or certification bodies outside the country that have received equivalence recognition, for the first time, is calculated from the date the equivalence statement letter is issued by the Guarantee Institution Professional Certification Body.

7. The Maintenance Program for Expert Personnel of Guarantee Institutions who already possess Certificates of qualification experts in the field of guarantee or Shariah guarantee issued by international certification bodies or certification bodies outside the country that have received equivalence recognition, for the first time, is calculated from the date the equivalence statement letter is issued by the Guarantee Institution Professional Certification Body.

8. The implementation of the Maintenance Program as referred to in item 2 is administered by the Guarantee Institution Professional Certification Body, evidenced by a letter of statement stating that the professional certification maintenance program has been fulfilled.

9. Guarantee Institutions record the professional certification maintenance programs that have been carried out by members of the Board of Directors, members of the Board of Commissioners, and Expert Personnel of Guarantee Institutions.

IX. REPORTING

1. Guarantee Institutions submit reports on certification of expertise in risk management and certification of qualification experts in the field of guarantee or Shariah guarantee to the Financial Services Authority in printed document form (hard copy) as follows:
   a. reports on certification of expertise in risk management for members of the Board of Directors and members of the Board of Commissioners are submitted once a year, at the latest by the end of January of the following year, and for the first time, at the latest by January 11, 2020; b. reports on certification of qualification experts in the field of guarantee or Shariah guarantee for Expert Personnel of Guarantee Institutions are submitted once a year, at the latest by the end of January of the following year, and for the first time, at the latest by January 11, 2020; or
   c. reports on certification as referred to in letter a and letter b must contain at least:

1. name;
2. position;
3. certification followed;
4. certification level;
5. date of Certificate issuance;
6. Certificate expiration date; and
7. brief information regarding the Certificate.

2. If the deadline for submitting reports as referred to in letter a and letter b falls on a holiday, the submission deadline is the first working day thereafter.

3. The address for submitting reports as referred to in item 1 is submitted to:
   Executive Head of Non-Bank Financial Industry Supervision Financial Services Authority Attention: Director of Special Financial Institution Supervision Wisma Mulia 2, Jl. Gatot Subroto No.42, RT.3/RW.2, Kuningan Barat, Mampang Prapatan, South Jakarta City, Special Capital Region of Jakarta, 12710.

This copy is in accordance with the original
Legal Director 1
Legal Department signed
Yuliana

4. The submission of reports as referred to in item 1 is carried out by one of the following methods:
   a. submitted directly; or b. sent via a courier service company.

5. Guarantee Institutions are deemed to have submitted reports as referred to in item 1, evidenced by:
   a. a receipt letter from the Financial Services Authority, if the report is submitted directly; or b. a shipping receipt from the courier service company, if the report is sent via a courier service company.

6. In the event of a change in the address of the Financial Services Authority for report submission as referred to in item 3, the Financial Services Authority will convey notification regarding the address change via letter or announcement.

X. CLOSING

The provisions in this Financial Services Authority Circular Letter shall come into force on the date of issuance.

Issued in Jakarta on September 17, 2019
EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTION SUPERVISION FINANCIAL SERVICES AUTHORITY, signed RISWINANDI

APPENDIX
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 17 /SEOJK.05/2019 CONCERNING CERTIFICATION OF EXPERTISE IN RISK MANAGEMENT AND CERTIFICATION OF QUALIFICATION EXPERTS IN GUARANTEE OR SHARIAH GUARANTEE AT GUARANTEE INSTITUTIONS

Certification of Expertise in Risk Management for Members of the Board of Directors and Members of the Board of Commissioners of Guarantee Institutions

Operational Scope of Guarantee Institution	Position and Function	Module 1	Module 2	Module 3	Module 4
Regency/City	1. Commissioner	✓
	2. President Director	✓	✓	✓	✓
	3. Directors overseeing guarantee or Shariah guarantee functions	✓	✓
	4. Directors overseeing finance and investment management functions	✓	✓
	5. Directors overseeing compliance and internal audit functions	✓	✓
	6. Directors overseeing risk management functions	✓	✓	✓
	7. Other Board of Directors Members	✓
Province	1. Commissioner	✓
	2. President Director	✓	✓	✓	✓
	3. Directors overseeing guarantee or Shariah guarantee functions	✓	✓	✓
	4. Directors overseeing finance and investment management functions	✓	✓
	5. Directors overseeing compliance and internal audit functions	✓	✓
	6. Directors overseeing risk management functions	✓	✓	✓	✓
	7. Other Board of Directors Members	✓	✓
National	1. Commissioner	✓	✓	✓
	2. President Director	✓	✓	✓	✓
	3. Directors overseeing guarantee or Shariah guarantee functions	✓	✓	✓
	4. Directors overseeing finance and investment management functions	✓	✓	✓
	5. Directors overseeing compliance and internal audit functions	✓	✓	✓
	6. Directors overseeing risk management functions	✓	✓	✓	✓
	7. Other Board of Directors Members	✓	✓	✓

This copy is in accordance with the original
Legal Director 1
Legal Department signed
Yuliana

Issued in Jakarta on September 17, 2019
EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTION SUPERVISION FINANCIAL SERVICES AUTHORITY, signed RISWINANDI