Amendment to Financial Services Authority Circular Number 9/SEOJK.03/2019 Regarding Reassessment for Key Parties of Banks

To:
Bank Board of Directors
Location.

COPY
FINANCIAL SERVICES AUTHORITY CIRCULAR
REPUBLIC OF INDONESIA
NUMBER 32 /SEOJK.03/2021
REGARDING
AMENDMENT TO FINANCIAL SERVICES AUTHORITY CIRCULAR NUMBER 9/SEOJK.03/2019 REGARDING REASSESSMENT FOR KEY PARTIES OF BANKS

In view of the establishment of Financial Services Authority Regulation Number 14/POJK.03/2021 regarding the Amendment to Financial Services Authority Regulation Number 34/POJK.03/2018 regarding Reassessment for Key Parties of Financial Service Institutions, hereinafter referred to as the POJK Amending the POJK on Reassessment, and in order to provide further explanation regarding the addition of provisions in the scope, procedures, and consequences of the final results of reassessment, it is necessary to make several changes in the Financial Services Authority Circular Number 9/SEOJK.03/2019 regarding Reassessment for Key Parties of Banks as follows:

1. Provisions of sub-clause I.1.e, sub-clause I.1.k, and sub-clause I.1.l are amended, so that they read as follows:

e. Key Party Management is the key party management as referred to in the POJK Amending the POJK on Reassessment.

k. Executive Officials are Bank officials who are directly responsible to members of the Board of Directors or have significant influence over the policies and/or operations of the Bank:

1. for Commercial Banks (BUK) and Rural Banks (BUS), including division heads including officials above division heads other than the Board of Directors, regional office heads, branch office heads, functional office heads holding positions no lower than equivalent to branch office heads, heads of risk management work units, heads of compliance work units, and heads of internal audit work units, and/or other equivalent officials, in accordance with Financial Services Authority Regulations regarding Commercial Banks and Financial Services Authority Regulations regarding Rural Banks (BUS); and
2. for Rural Banks (BPR) and Sharia Rural Banks (BPRS), including branch office leaders, division heads, section heads, managers, appointed officials responsible for the implementation of risk management, compliance, or internal audit functions, and/or other equivalent officials, in accordance with Financial Services Authority Regulations regarding BPR and Financial Services Authority Regulations regarding BPRS.

l. Prudential principles in the financial service sector and/or good management principles of Financial Service Institutions (LJK) as regulated in the POJK Amending the POJK on Reassessment, for Banks are:

1. prudential principles and/or sound banking principles in the Bank's business activities, services, and operations which refer to regulations including but not limited to asset quality, lending or financing, maximum limits for granting credit and providing large funds, maximum limits for distributing funds and providing large funds, maximum limits for granting credit, maximum limits for distributing funds, Bank risk management, minimum capital provision requirements, and/or the provision of Bank products; and
2. Bank management principles which refer to regulations including but not limited to the application of governance for Banks.

2. The provision of sub-clause III.2.c is amended so that it reads as follows:

c. committing acts that violate prudential principles and sound banking principles and/or good Bank management principles, including but not limited to:

1. granting credit or financing not based on Bank standard operating procedures or Bank lending policy guidelines;
2. credit or financing restructuring conducted not in accordance with regulations;
3. providing funds that violate maximum limits for granting credit and providing large funds, maximum limits for distributing funds and providing large funds, maximum limits for granting credit, and maximum limits for distributing funds;
4. providing funds to parties, sectors, or for activities prohibited by statutory regulations;
5. issuing products and/or conducting activities that affect the Bank's financial condition and risk profile but have not yet received approval from the Financial Services Authority and/or permits/approvals from other competent authorities;
6. making capital deposits with sources of funds not in accordance with regulations; and/or
7. violating Financial Services Authority regulations that can be subject to administrative sanctions in the form of reassessment.

3. The provision of sub-clause III.8 is amended so that it reads as follows:

4. What is meant by the Reassessment Service Provider (PSP) not taking necessary measures when the Bank faces solvency (capital) and/or liquidity difficulties as referred to in Article 4 letter g of the POJK Amending the POJK on Reassessment, includes but is not limited to the PSP not taking measures such as increasing the Bank's capital deposits or obtaining strategic investors for the purpose of increasing the Bank's capital deposits.

5. Between the provisions of sub-clause III.10 and III.11, 1 (one) number is inserted, namely number 10A, so that it reads as follows:

10A. What is meant by hindering or obstructing:
a. efforts and the implementation of the authority of the Financial Services Authority; and/or b. efforts by Key Parties of Banks and/or other parties, in handling solvency (capital) and/or liquidity problems of Financial Service Institutions (LJK) as referred to in Article 4 letter i or Article 5 letter j of the POJK Amending the POJK on Reassessment, namely Key Parties of Banks:
a. hindering or obstructing efforts and the implementation of the authority of the Financial Services Authority; b. hindering or obstructing efforts by other Key Parties of Banks, namely efforts by one or more other Key Parties;
c. hindering or obstructing efforts by other parties (for example, prospective PSPs, prospective investors, Bank Indonesia, or the Deposit Insurance Agency),
in handling solvency (capital) and/or liquidity problems of Banks.

5. The provision of sub-clause III is added 1 (one) number, namely number 12, so that it reads as follows:

6. What is meant by integrity, financial feasibility, financial reputation, and/or competence problems other than:
   a. letters a through i contradicting statutory regulations as referred to in Article 4 letter j of the POJK Amending the POJK on Reassessment; or b. letters a through j contradicting statutory regulations as referred to in Article 5 letter k of the POJK Amending the POJK on Reassessment, includes but is not limited to:
   i. the scope of reassessment other than numbers 1 through 11 regarding violations of regulations in the banking sector, as well as the capital market sector and/or non-bank financial industry sectors related to Banks; and/or
   ii. violations of regulations outside the financial service sector, including but not limited to violations of regulations regarding payment systems, taxation, as well as electronic information and transactions, which can significantly impact the Bank's financial condition.

7. Between the provisions of sub-clause IV.1 and sub-clause IV.2, 2 (two) numbers are inserted, namely numbers 1A and 1B, so that they read as follows:

1A. With specific considerations, the determination of the final results of reassessment can be conducted without following all steps of reassessment as referred to in Article 6 paragraph (2) of the POJK on Reassessment. What is meant by "specific considerations" includes but is not limited to conditions assessed to cause the Bank to potentially experience difficulties that can endanger the Bank's business continuity and/or threaten financial system stability. Conditions assessed to threaten financial system stability are problems in systemic banks that can affect the condition of financial system stability.

1B. With specific considerations, the time limit for submitting responses from Key Parties can be set to less than 10 (ten) working days as referred to in Article 6 paragraph (3) and paragraph (5) of the POJK on Reassessment. What is meant by "specific considerations" includes but is not limited to conditions where the Financial Services Authority needs to obtain immediate responses from parties undergoing reassessment due to the need to accelerate the handling of Bank problems. What is meant by conditions where the Financial Services Authority needs to obtain immediate responses includes but is not limited to:
a. if the submission of responses from Key Parties is conducted within a time limit of 10 (ten) working days, it impacts among others:
i. the Bank may experience an increase in supervision status to intensive supervision or special supervision;
ii. the Bank's business activities, services, and/or operations may be significantly disrupted; and/or
iii. the Key Parties being reassessed, other Key Parties, and/or other parties at the Bank have the potential to take actions to conceal violations, obscure violations, and/or actions that can harm the Bank;
and/or b. Key Party problems influence or become considerations for assessing other Key Party problems, which meet the conditions as referred to in letter a.
In the event that the Financial Services Authority will set a time limit for submitting responses from Key Parties of less than 10 (ten) working days, the Financial Services Authority sets the number of working days for submitting responses from Key Parties at the time:
a. requests for clarification of evidence, data, and/or information to Key Parties being reassessed, whether clarifications in the form of written responses and/or clarifications in the form of face-to-face meetings; and/or b. submission of preliminary results of reassessment to Key Parties being reassessed, whether in the form of written responses and/or through face-to-face meetings. Follow-up actions by Key Parties, whether through written responses and/or through face-to-face meetings, are conducted by Key Parties within the submission time limit based on the number of working days set by the Financial Services Authority.

7. The provision of sub-clause V is added 1 (one) number, namely number 12, so that it reads as follows:

8. What is meant by Key Parties determined with the predicate "Fail" are treated as related parties of Banks in accordance with statutory regulations for Commercial Banks (BUK), Rural Banks (BUS), Sharia Unit Banks (UUS), Rural Banks (BPR), or Sharia Rural Banks (BPRS) which are related to maximum limits for granting credit and providing large funds, maximum limits for distributing funds and providing large funds, maximum limits for granting credit, and maximum limits for distributing funds.
   The time limit for treating Key Parties determined with the predicate "Fail" as related parties of Banks is in accordance with the time limit for prohibitions against Key Parties determined with the predicate "Fail" as referred to in Article 11 paragraph (1) of the POJK Amending the POJK on Reassessment.

9. The provision of sub-clause VIII is amended so that it reads as follows:

10. At the time this Financial Services Authority Circular comes into force, the provisions in this Financial Services Authority Circular are also applied to reassessment processes currently being conducted for Key Parties based on the POJK on Reassessment and the POJK Amending the POJK on Reassessment.

11. For parties included in the list of parties prohibited from becoming Key Parties or Key Parties determined with the predicate "Fail" based on:
    a. Bank Indonesia Regulation Number 12/23/PBI/2010 regarding Fit and Proper Test (Lembaran Negara Republik Indonesia Tahun 2010 Nomor 155, Tambahan Lembaran Negara Republik Indonesia Nomor 5180); b. Bank Indonesia Regulation Number 14/6/PBI/2012 regarding Fit and Proper Test for Sharia Banks and Sharia Banking Units (Lembaran Negara Republik Indonesia Tahun 2012 Nomor 136, Tambahan Lembaran Negara Republik Indonesia Nomor 5322);
    c. Bank Indonesia Regulation Number 14/9/PBI/2012 regarding Fit and Proper Test for Rural Banks (Lembaran Negara Republik Indonesia Tahun 2012 Nomor 150, Tambahan Lembaran Negara Republik Indonesia Nomor 5331); or
    d. Financial Services Authority Regulation Number 34/POJK.03/2018 regarding Reassessment for Key Parties of Financial Service Institutions (Lembaran Negara Republik Indonesia Tahun 2018 Nomor 259, Tambahan Lembaran Negara Republik Indonesia Nomor 6285), are treated as related parties of Banks as referred to in the POJK Amending the POJK on Reassessment.

12. The provisions in this Financial Services Authority Circular come into force on the date of determination.

Determined in Jakarta on 27 December 2021
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, sd
HERU KRISTIYANA

This copy is in accordance with the original
Legal Director
Legal Department sd
Mufli Asmawidjaja