Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units

The Financial Services Authority (OJK) issued Circular Letter 15/SEOJK.03/2024 to operationalize the detailed implementation of Sharia governance for Sharia Commercial Banks (BUS) and Sharia Business Units (UUS), serving as the execution rule for POJK No. 2 of 2024. The regulation establishes comprehensive requirements for the Sharia Supervisory Board (DPS), including fitness and propriety assessments, duties, remuneration, and reporting, while defining the roles of Sharia governance functions such as Sharia risk management, compliance, and internal audit. It further mandates external reviews of Sharia governance implementation by independent parties and maintains the validity of prior Bank Indonesia circulars to the extent they do not conflict with this new framework.

Indonesia

Otoritas Jasa Keuangan (Financial Services Authority)

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Sector: Banking

Sub-Sector: Sharia Banking

Type of Regulation: OJK Circular Letter

Regulation Number: 15/SEOJK.03/2024

Effective Date: 11/26/2024

Attachment 1 SEOJK 15-SEOJK.03-2024 Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units.pdf Abstract SEOJK 15-SEOJK.03-2024 Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units.pdf FAQ SEOJK 15-SEOJK.03-2024 Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units.pdf

Page Content Circular Letter of the Financial Services Authority of the Republic of Indonesia Number 15/SEOJK.03/2024 regarding Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units

Abstract: This Circular Letter (SEOJK) is prepared to strengthen the implementation of governance in Sharia banking, following the issuance of POJK Number 2 of 2024 regarding Implementation of Sharia Governance for BUS and UUS (Sharia Governance POJK) on February 16, 2024. The issuance of the Sharia Governance POJK is part of the work program of the Roadmap for the Development and Strengthening of Sharia Banking 2023-2027 (RP3SI 2023-2027). The Sharia Governance POJK complements general governance regulations, namely POJK Number 17 of 2023 regarding Implementation of Governance for Commercial Banks, which also applies to BUS and UUS. This SEOJK serves as the implementing regulation for the Sharia Governance POJK, regulating matters concerning the DPS (assessment of competence and propriety/CCC, duties and responsibilities, working relationships between DPS and the Board of Directors and Board of Commissioners, support for the implementation of DPS duties and responsibilities, remuneration, and DPS supervision result reports), functions related to Sharia governance (Sharia risk management, Sharia compliance, and Sharia internal audit), as well as external reviews of Sharia governance implementation. The legal basis for this SEOJK is: Law Number 4 of 2023; POJK Number 2 of 2024; and regulations regarding the implementation of competence and propriety applied to DPS, namely POJK Number 27/POJK.03/2016 and SEOJK Number 39/SEOJK.03/2016. This SEOJK regulates the following matters:

DPS, including the implementation of DPS competence and propriety assessments, duties and responsibilities, working relationships with the Board of Directors and Board of Commissioners, support for the implementation of DPS duties and responsibilities, remuneration, and DPS supervision result reports.
Functions related to Sharia governance, which include criteria for Executive Officials overseeing functions related to Sharia governance, duties and responsibilities of functions related to Sharia governance, and working relationships.
External review of Sharia governance implementation, which includes scope, appointment of AP/KAP as independent parties conducting the review, working papers, and reports on the results of the Sharia governance implementation review.

Note: This SEOJK takes effect on the date of establishment, namely November 26, 2024. Upon the effectiveness of this SEOJK, Bank Indonesia Circular Letter Number 12/13/DPbS dated April 30, 2010 regarding the Implementation of Good Corporate Governance for Sharia Commercial Banks and Sharia Business Units remains valid insofar as it does not conflict with this SEOJK. Attachment: 19 pages.