Circular Letter of the Financial Services Authority Number 28/SEOJK.03/2019 Regarding the Health Level Assessment System for Sharia Rural Financing Banks

To:
Directors of Sharia Rural Financing Banks (BPRS) At your place.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28/SEOJK.03/2019 REGARDING THE HEALTH LEVEL ASSESSMENT SYSTEM FOR SHARIA RURAL FINANCING BANKS

In view of the establishment of Financial Services Authority Regulation Number 20/POJK.03/2019 regarding the Health Level Assessment System for Sharia Rural Financing Banks, hereinafter referred to as POJK TKS BPRS, it is necessary to regulate the implementation of the aforementioned Financial Services Authority Regulation in the Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

1. The Health Level of Sharia Rural Financing Banks (BPRS) is the interest of all related parties, including BPRS owners, BPRS management, BPRS service users, the Financial Services Authority (OJK), and other parties. The results of the health level assessment are used by the Financial Services Authority to conduct supervision and regulation in order to implement appropriate development and enhancement strategies for BPRS. Furthermore, the health level is used by BPRS as one of the tools for management in determining policies and implementing BPRS management going forward.

2. The BPRS Health Level is the result of a composite assessment of various aspects that influence the condition or performance of BPRS. The BPRS Health Level assessment is conducted through Quantitative Assessment and Qualitative Assessment of Financial Factors, including BPRS's ability to manage various risks, as well as Qualitative Assessment of management factors, including BPRS's compliance with Sharia Principles and statutory regulations.

3. Quantitative Assessment is the assessment of the position, development, and projection of BPRS financial ratios, while Qualitative Assessment is the assessment of management factors and the results of the Quantitative Assessment, considering relevant supporting indicators and/or comparators.

4. Financial Factors are one of the factors forming the BPRS Health Level, consisting of capital adequacy factors, asset quality factors, profitability factors, and liquidity factors.

5. Ratios used to analyze Financial Factors are distinguished into primary ratios, supporting ratios, and observation ratios. Primary ratios are ratios that form the value of the Financial Factor rating; supporting ratios are ratios that add to or subtract from the value of the Financial Factor rating; while observation ratios are ratios that can be used as an additional consideration in the final assessment of Financial Factors.

II. SCOPE OF ASSESSMENT FACTORS

The BPRS Health Level assessment covers the assessment of factors consisting of:

1. Capital Adequacy
   The capital adequacy assessment aims to evaluate the adequacy of BPRS capital in managing current and future risk exposures through Quantitative and Qualitative Assessment of the following ratios or components:
   a. capital adequacy (primary ratio); b. projected capital adequacy (supporting ratio);
   c. equity adequacy (observation ratio);
   d. core capital adequacy against third-party funds (observation ratio); and e. intermediation function over investment funds using the profit-sharing method (observation ratio).

2. Asset Quality
   The asset quality assessment aims to evaluate the condition of BPRS assets in managing current and future risk exposures through Quantitative and Qualitative Assessment of the following ratios or components:
   a. productive asset quality (primary ratio); b. problematic financing (supporting ratio);
   c. average write-off financing return rate per financing account (observation ratio); and
   d. problematic financing customers (observation ratio).

3. Profitability
   The profitability assessment aims to evaluate BPRS's ability to support operational and capital activities, through Quantitative and Qualitative Assessment of the following ratios or components:
   a. operational efficiency (primary ratio); b. income-generating assets (supporting ratio);
   c. main operational net margin (supporting ratio);
   d. labor costs against total financing (observation ratio); e. return on asset (observation ratio); and f. return on equity (observation ratio).

4. Liquidity
   The liquidity assessment aims to evaluate BPRS's ability to meet short-term obligations and the adequacy of BPRS Liquidity Risk Management through Quantitative and Qualitative Assessment of the following ratios or components:
   a. cash ratio (primary ratio); and b. short-term mismatch (supporting ratio).

5. Management
   The management assessment aims to evaluate the managerial ability of BPRS management in conducting business, the adequacy of Risk Management, BPRS's compliance with the implementation of Sharia Principles, and BPRS's compliance with statutory regulations through Qualitative Assessment of the following components:
   a. general management quality and BPRS compliance with statutory regulations and internal BPRS regulations, consisting of 16 (sixteen) aspects with a weight of 35% (thirty-five percent); b. Risk Management quality, consisting of 6 (six) types of risk covering specific aspects with a weight of 40% (forty percent); and
   c. compliance with the implementation of Sharia Principles, consisting of 3 (three) aspects with a weight of 25% (twenty-five percent).

III. PROCEDURE FOR ASSESSING THE HEALTH LEVEL OF SHARIA RURAL FINANCING BANKS

The BPRS Health Level assessment is conducted in several stages as follows:

1. Assessment and/or rating stage for each ratio or component.
   Assessment of each ratio or component as referred to in Section II is conducted quantitatively for financial ratios by referring to Appendix IA through Appendix ID, which are an integral part of this Financial Services Authority Circular Letter. Meanwhile, management components are assessed qualitatively by referring to Appendix IE, which is an integral part of this Financial Services Authority Circular Letter.

2. Rating stage for each capital adequacy, asset quality, profitability, and liquidity factor.
   The rating of each factor is conducted in 2 (two) stages:
   a. Performing combined calculations using methods by referring to Appendix IF, which is an integral part of this Financial Services Authority Circular Letter, for primary and supporting ratios present in each factor, to obtain the quantitative basis for rating each factor. b. Rating each factor is conducted by referring to the factor rating criteria matrix by referring to Appendix IIA through Appendix IID, which are an integral part of this Financial Services Authority Circular Letter, and considering observation ratios and relevant supporting indicators and/or comparators (judgement).

3. Stage for determining the Financial Factor Rating.
   The Financial Factor Rating is determined in 2 (two) stages:
   a. Performing combined calculations through weighting of the factor rating values as follows:
   1) capital adequacy, with a weight of 25% (twenty-five percent);
   2) asset quality, with a weight of 45% (forty-five percent);
   3) profitability, with a weight of 15% (fifteen percent); and
   4) liquidity, with a weight of 15% (fifteen percent),
   to obtain the quantitative basis for determining the Financial Factor Rating. b. Rating determination is conducted by referring to the Financial Factor Rating criteria matrix by referring to Appendix IIIA, which is an integral part of this Financial Services Authority Circular Letter.

4. Stage for determining the management factor rating.
   The management factor rating is determined in 2 (two) stages:
   a. Performing combined calculations over 3 (three) management components with weights as referred to in Section II.5, to obtain the basis for determining the management factor rating. b. Rating determination is conducted by referring to the management factor rating criteria matrix by referring to Appendix IIIB, which is an integral part of this Financial Services Authority Circular Letter, considering relevant supporting indicators and/or comparators (judgement).

5. Stage for Determining the Composite BPRS Health Level Rating.
   The Composite BPRS Health Level Rating is determined by performing composite calculations of the Financial Factor Rating and the management factor rating by referring to the Composite Rating criteria matrix in Appendix IIIC, which is an integral part of this Financial Services Authority Circular Letter, and considering relevant supporting indicators and/or comparators (judgement).

6. BPRS's assessment of financial ratios is documented in a worksheet format by referring to Appendix IV, which is an integral part of this Financial Services Authority Circular Letter.

IV. CLOSING

Provisions in this Financial Services Authority Circular Letter shall take effect on the date of determination.

Determined in Jakarta on December 16, 2019
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
HERU KRISTIYANA

This copy corresponds to the original.
Legal Director 1
Legal Department signed
Yuliana

APPENDIX I
FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER
NUMBER 28/SEOJK.03/2019
REGARDING THE HEALTH LEVEL ASSESSMENT SYSTEM
FOR SHARIA RURAL FINANCING BANKS

APPENDIX IA. CALCULATION MATRIX OR ANALYSIS OF CAPITAL ADEQUACY FACTOR COMPONENTS

NO. COMPONENT CAPITAL ADEQUACY FACTOR FORMULA DESCRIPTION

1. Capital Adequacy Ratio (Capital Adequacy Ratio (CAR))
   (Primary Ratio)

• Calculation of Capital and Risk-Weighted Assets (RWA) as regulated in Financial Services Authority Regulations regarding minimum capital provision requirements and core capital fulfillment for Sharia rural financing banks.
• Ratio calculated per assessment date position.
  Objective:
  To measure BPRS capital adequacy in absorbing losses and fulfilling the applicable Minimum Capital Provision Requirement (KPMM). Rating Criteria:
• Rating 1
  CAR ≥ 15%
• Rating 2
  13.5% ≤ CAR < 15%
• Rating 3
  12% ≤ CAR < 13.5%
• Rating 4
  8% ≤ CAR < 12%
• Rating 5
  CAR < 8%

2. Projected Capital Adequacy Ratio
   (Supporting Ratio)

• CART1 is the result of the projection of KPMM for the next period based on regression calculations using KPMM data for the last 12 (twelve) months.
• CART0 is the BPRS KPMM value at the assessment period.
• Ratio calculated per assessment date position.
  Objective:
  To assess capital adequacy in absorbing risk from fund placement in the near future, through projected KPMM growth. Rating Criteria:
• Rating 1
  ∆CAR ≥ 1.2
• Rating 2
  1.1 ≤ ∆CAR < 1.2
• Rating 3
  1 ≤ ∆CAR < 1.1
• Rating 4
  0.9 ≤ ∆CAR < 1
• Rating 5
  ∆CAR < 0.9

Formula:
CAR_T = (CAR_T-1 + ∆CAR)
∆CAR = (CAR_T - CAR_T-1)

3. Equity Coverage Ratio (Equity Coverage Ratio (ECR))
   (Observation Ratio)

• Calculation of MTier1 as regulated in Financial Services Authority Regulations regarding minimum capital provision requirements and core capital fulfillment for Sharia rural financing banks.
• Mandatory Productive Asset Write-off Provisions (PPAPWD) as regulated in Financial Services Authority Regulations regarding productive asset quality and formation of productive asset write-off provisions for Sharia rural financing banks.
• Ratio calculated per assessment date position.
  Objective:
  To measure BPRS capital's ability to absorb risks from worsening productive asset quality. Rating Criteria:
• Rating 1
  ECR ≥ 4
• Rating 2
  3 ≤ ECR < 4
• Rating 3
  2 ≤ ECR < 3
• Rating 4
  1 ≤ ECR < 2
• Rating 5
  ECR < 1

Formula:
ECR = (MTier1 + PPAPWD) / M_PPAP

4. Core Capital Adequacy against Third-Party Funds Ratio (Equity to Debt Ratio (EDR))
   (Observation Ratio)

• Calculation of MTier1 as regulated in Financial Services Authority Regulations regarding minimum capital provision requirements and core capital fulfillment for Sharia rural financing banks.
• DPKg is Third-Party Funds (DPK) non-profit-sharing funds guaranteed by BPRS but not guaranteed by LPS.
• Ratio calculated per assessment date position.
  Objective:
  To measure core capital's ability to meet obligations to third-party fund owners not guaranteed by LPS. Rating Criteria:
• Rating 1
  EDR ≥ 2
• Rating 2
  1.5 ≤ EDR < 2
• Rating 3
  1 ≤ EDR < 1.5
• Rating 4
  0.5 ≤ EDR < 1
• Rating 5
  EDR < 0.5

Formula:
EDR = MTier1 / DPKg

5. Intermediation Function over Investment Funds using Profit-Sharing Method (FI)
   (Observation Ratio)

• DPs are third-party funds successfully collected by BPRS and using profit-sharing methods.
• DTotal is the total third-party funds successfully collected by BPRS.
• Ratio calculated per assessment date position.
  Objective:
  To measure the proportion of profit-sharing funds against total third-party funds, reflecting the intensity of BPRS's function as an intermediary institution. Rating Criteria:
• Rating 1
  FI ≥ 10%
• Rating 2
  7.5% ≤ FI < 10%
• Rating 3
  5% ≤ FI < 7.5%
• Rating 4
  2.5% ≤ FI < 5%
• Rating 5
  FI < 2.5%

Formula:
FI = DPs / DTotal

APPENDIX IB. CALCULATION MATRIX OR ANALYSIS OF ASSET QUALITY FACTOR COMPONENTS

NO. COMPONENT ASSET QUALITY FACTOR FORMULA DESCRIPTION

1. Productive Asset Quality Ratio (Earning Asset Quality (EAQ))
   (Primary Ratio)

• Earning Asset at Risk (EAaR) or classified productive assets are productive assets that are already or potentially not generating income or causing losses, determined as follows:
  a. 50% (fifty percent) of productive assets classified as less active; b. 75% (seventy-five percent) of productive assets classified as doubtful; and
  c. 100% (one hundred percent) of productive assets classified as non-performing.
• Earning Asset (EA) is productive assets as regulated in Financial Services Authority Regulations regarding productive asset quality and formation of productive asset write-off provisions for Sharia rural financing banks.
  Objective:
  To measure the proportion of unclassified productive assets against total productive assets. Rating Criteria:
• Rating 1
  EAQ ≥ 93%
• Rating 2
  90% ≤ EAQ < 93%
• Rating 3
  87% ≤ EAQ < 90%
• Rating 4
  84% ≤ EAQ < 87%
• Rating 5
  EAQ < 84%

Formula:
EAQ = 1 - (EAaR / EA)

• Ratio calculated per assessment date position.

2. Problematic Financing Ratio (Non Performing Financing (NPF))
   (Supporting Ratio)

• Total Problematic Financing (JPB) is the total financing classified as less active, doubtful, and non-performing as regulated in Financial Services Authority Regulations regarding productive asset quality and formation of productive asset write-off provisions for Sharia rural financing banks.
• Total Financing (JP) is the total financing owned by BPRS.
• Ratio calculated per assessment date position.
  Objective:
  To measure the proportion of problematic financing against total financing.
  Rating Criteria:
• Rating 1
  NPF ≤ 7%
• Rating 2
  7% < NPF ≤ 10%
• Rating 3
  10% < NPF ≤ 13%
• Rating 4
  13% < NPF ≤ 16%
• Rating 5
  NPF > 16%

Formula:
NPF = JPB / JP

3. Average Write-off Financing Return Rate per Account (Average Recover Rate (ARR))
   (Observation Ratio)

• Recovery Value (RV) or recovery value is the value of financing per account successfully collected by BPRS after being written off.
• Total Write Off (TWO) or total write-off is the total financing per account that has been written off by BPRS.
• Ratio calculated per assessment date position.
  Objective:
  To measure the return rate of financing that has been written off.
  Rating Criteria:
• Rating 1
  ARR > 40%
• Rating 2
  30% < ARR ≤ 40%
• Rating 3
  20% < ARR ≤ 30%
• Rating 4
  10% < ARR ≤ 20%
• Rating 5
  ARR ≤ 10%

4. Problematic Financing Customers Ratio (NPB)
   (Observation Ratio)

• Total Problematic Financing Customers (JNPB) is the total financing customers classified as less active, doubtful, and non-performing (number of accounts) as regulated in Financial Services Authority Regulations regarding productive asset quality and formation of productive asset write-off provisions for Sharia rural financing banks.
• Total Financing Customers (JNP) is the total financing customers owned by BPRS (number of accounts).
• Ratio calculated per assessment date position.
  Objective:
  To measure the proportion of problematic financing customers against the total number of financing customers. Rating Criteria:
• Rating 1
  NPB ≤ 7%
• Rating 2
  7% < NPB ≤ 10%
• Rating 3
  10% < NPB ≤ 13%
• Rating 4
  13% < NPB ≤ 16%
• Rating 5
  NPB > 16%

Formula:
NPB = JNPB / JNP

APPENDIX IC. CALCULATION MATRIX OR ANALYSIS OF PROFITABILITY FACTOR COMPONENTS

NO. COMPONENT

1. Operational Efficiency Ratio (REO)
   (Primary Ratio)

• Operational Expenses (BO) are expenses incurred by BPRS to finance BPRS operations, excluding profit-sharing to third-party funds.
  BO is calculated based on the accumulated difference in operational expenses over the last 12 (twelve) months from the reporting month and the shortfall of Asset Write-off Provisions (PPA) in that month.
• Operational Income (PO) is the income received by BPRS after being reduced by profit-sharing to third-party funds.
  PO is calculated based on the accumulated difference in operational income after profit-sharing distribution over the last 12 (twelve) months from the reporting month.
• The calculation difference between January and December of the previous year is equal to the nominal amount of January (December is considered zero).
• Ratio calculated per assessment date position.
  Objective:
  To measure BPRS operational efficiency.
  Rating Criteria:
• Rating 1
  REO ≤ 83%
• Rating 2
  83% < REO ≤ 85%
• Rating 3
  85% < REO ≤ 87%
• Rating 4
  87% < REO ≤ 89%
• Rating 5
  REO > 89%

Formula:
REO = BO / PO

2. Income-Generating Asset Ratio (Income Generating Asset (IGA))
   (Supporting Ratio)

• Productive Assets (AP) as regulated in Financial Services Authority Regulations regarding productive asset quality and formation of productive asset write-off provisions for Sharia rural financing banks.
  AP is calculated based on average data over the last 12 (twelve) months from the reporting month.
• Non Performing Asset (NPA) is AP classified as less active, doubtful, and non-performing as regulated in Financial Services Authority Regulations regarding productive asset quality and formation of productive asset write-off provisions for Sharia rural financing banks.
  NPA is calculated based on average data over the last 12 (twelve) months from the reporting month.
• Total Assets (TA) is the total assets owned by BPRS, calculated based on average data over the last 12 (twelve) months from the reporting month.
• Ratio calculated per assessment date position.
  Objective:
  To measure the proportion of assets generating income against total assets.
  Rating Criteria:
• Rating 1
  IGA > 87%
• Rating 2
  82% < IGA ≤ 87%
• Rating 3
  78% < IGA ≤ 82%
• Rating 4
  74% < IGA ≤ 78%
• Rating 5
  IGA ≤ 74%

Formula:
IGA = (AP - NPA) / TA

3. Main Operational Net Margin Ratio (NSOM)
   (Supporting Ratio)

• Main Operational Income (POu) is the income received by BPRS from fund disbursement activities.
  POu is calculated based on the accumulated difference in main income over the last 12 (twelve) months from the reporting month.
• Profit Sharing (BH) is the distribution of profit sharing conducted by BPRS on mudharabah funds received by BPRS.
  BH is calculated based on the accumulated difference in profit sharing over the last 12 (twelve) months from the reporting month.
• Main Operational Expenses (BOu) are expenses incurred by BPRS to finance BPRS's main activities.
  BOu is calculated based on the accumulated difference in main operational expenses over the last 12 (twelve) months from the reporting month.
• Productive Assets (AP) as regulated in Financial Services Authority Regulations regarding productive asset quality and formation of productive asset write-off provisions for Sharia rural financing banks.
  AP is calculated based on average data over the last 12 (twelve) months from the reporting month.
• The calculation difference between January and December of the previous year is equal to the nominal amount of January (December is considered zero).
• Ratio calculated per assessment date position.
  Objective:
  To measure the proportion of main operational income after being reduced by profit-sharing distribution and main operational expenses against productive assets. Rating Criteria:
• Rating 1
  NSOM ≥ 9%
• Rating 2
  7% ≤ NSOM < 9%
• Rating 3
  5% ≤ NSOM < 7%
• Rating 4
  3% ≤ NSOM < 5%
• Rating 5
  NSOM ≤ 3%

Formula:
NSOM = (POu - BH - BOu) / AP

4. Labor Costs against Total Financing Ratio (RTK)
   (Observation Ratio)

• Labor Costs (BTK) are expenses incurred by BPRS to finance labor.
  BTK is calculated based on the accumulated difference in labor costs over the last 12 (twelve) months from the reporting month.
• Financing Given (PYD) is financing disbursed by BPRS.
  PYD is calculated based on average data over the last 12 (twelve) months from the reporting month.
• The calculation difference between January and December of the previous year is equal to the nominal amount of January (December is considered zero).
• Ratio calculated per assessment date position.
  Objective:
  To measure the proportion of labor costs against financing given.
  Rating Criteria:
• Rating 1
  RTK ≤ 2%
• Rating 2
  2% < RTK ≤ 3.5%
• Rating 3
  3.5% < RTK ≤ 5%
• Rating 4
  5% < RTK ≤ 6.5%
• Rating 5
  RTK > 6.5%

Formula:
RTK = BTK / PYD

5. Return On Asset (ROA)
   (Observation Ratio)

• Earning Before Tax (EBT) is the profit obtained by BPRS before tax calculation and has considered PPA shortfalls.
  EBT is calculated based on the accumulated difference in profit or loss before tax over the last 12 (twelve) months from the reporting month.
• The calculation difference between January and December of the previous year is equal to the nominal amount of January (December is considered zero).
• Total Assets (TA) is the total assets owned by BPRS.
  TA is calculated based on average data over the last 12 (twelve) months from the reporting month.
• Ratio calculated per assessment date position.
  Objective:
  To measure BPRS profitability level over owned assets.
  Rating Criteria:
• Rating 1
  ROA > 1.450%
• Rating 2
  1.215% < ROA ≤ 1.450%
• Rating 3
  0.999% < ROA ≤ 1.215%
• Rating 4
  0.765% < ROA ≤ 0.999%
• Rating 5
  ROA ≤ 0.765%

Formula:
ROA = EBT / TA

NO.
COMPONENT
6. Return On Equity (ROE)
(Observation Ratio)

• Earning After Tax (EAT) is the profit obtained by the BPRS after tax calculation and has taken into account the shortfall of PPA.
  EAT is calculated based on the accumulation of the difference between profit or loss after tax over the last 12 (twelve) months from the reporting month.
• The difference in calculation between January and December of the previous year is equal to the nominal value of January (December is considered zero).
• Paid In Capital (PIC) is the paid-in capital owned by the BPRS.
  PIC is calculated based on average data over the last 12 (twelve) months from the reporting month.
• The ratio is calculated per the assessment date position.
  Objective:
  To measure the profitability level of the BPRS on the capital owned.
  Rating criteria:
• Rank 1
  ROE > 23%
• Rank 2
  18% < ROE ≤ 23%
• Rank 3
  13% < ROE ≤ 18%
• Rank 4
  8% < ROE ≤ 13%
• Rank 5
  ROE ≤ 8%
  PIC
  EAT ROE =

APPENDIX ID. MATRIX FOR CALCULATION OR ANALYSIS OF LIQUIDITY FACTOR COMPONENTS
NO.
COMPONENT
LIQUIDITY FACTOR
FORMULA DESCRIPTION

1. Cash Ratio (CR)
   (Main Ratio)

• Cash and Cash Equivalents are cash, current accounts, and savings at other banks.
• Current Liabilities include savings, deposits, liabilities to other banks, immediate liabilities, and other liabilities maturing within 1 (one) month.
• Data in the calculation of this component is obtained from weekly reports reported by the BPRS through the BPRS monthly report. The calculation uses average data in 1 (one) month.
• The ratio is calculated per the assessment date position.
  Objective:
  To measure the ability of the BPRS's liquid assets to meet short-term liquidity needs (up to 1 (one) month). Rating criteria:
• Rank 1
  CR ≥ 6%
• Rank 2
  5.5% ≤ CR < 6%
• Rank 3
  5% ≤ CR < 5.5%
• Rank 4
  4% ≤ CR < 5%
• Rank 5
  CR < 4%

2. Short Term Mismatch (STM)
   (Supporting Ratio)

• 3 (three) month Current Assets are assets that have a maturity of up to 3 (three) months including cash,
  Objective:
  To measure the ability of the BPRS's current assets to meet short-term liquidity needs (up to 3 (three) months).

NO.
COMPONENT
LIQUIDITY FACTOR
FORMULA DESCRIPTION placements at other banks, and financing.

• 3 (three) month Current Liabilities are liabilities that must be settled by the BPRS up to 3 (three) months including savings, deposits, liabilities to other banks, immediate liabilities, other liabilities, and received loans.
• The ratio is calculated per the assessment date position.
  Rating criteria:
• Rank 1
  STM > 110%
• Rank 2
  100% < STM ≤ 110%
• Rank 3
  90% < STM ≤ 100%
• Rank 4
  80% < STM ≤ 90%
• Rank 5
  STM ≤ 80%

APPENDIX IE. MATRIX FOR CALCULATION OR ANALYSIS OF MANAGEMENT FACTOR COMPONENTS
ASPECT
1. General Management Component
1. The BPRS has an effective organizational structure aligned with its function as a BPRS.
2. Each member of the Board of Directors, Board of Commissioners, and Sharia Supervisory Board (DPS) as well as branch leaders (if any) have appropriate qualifications.
3. Each member of the Board of Directors, Board of Commissioners, and DPS as well as branch leaders (if any) actually have authority within a reasonable span of control and have appropriate supporting devices for their duties.
4. The Board of Commissioners carries out supervisory functions over the implementation of the Board of Directors' duties within clear boundaries and authority, carried out effectively.
5. The Board of Directors, Board of Commissioners, and DPS actively carry out monitoring and evaluation of the BPRS's compliance with applicable laws and regulations so as to minimize violations of prudential regulations, including regulations on maximum fund disbursement limits for Sharia People's Financing Banks and Financial Services Authority regulations on the implementation of anti-money laundering and counter-terrorism financing programs in the financial services sector.
6. The BPRS:
a. establishes a clear and adequate mechanism for delegation of authority and work rules; and b. implements the delegation of authority and work rules mechanism as referred to in letter a consistently.
7. Adequate disclosure of every policy of the Board of Directors, Board of Commissioners, and branch leaders (if any) that contains conflicts of interest with BPRS stakeholders.
Objective:
To measure the quality of BPRS governance in conducting business activities.

ASPECT
8. Decisions taken by each member of the Board of Directors, Board of Commissioners, DPS, and branch leaders (if any) that have potential conflicts of interest are decisions that minimize losses.
9. No violation of regulations regarding dual positions occurred during the assessment period.
10. There is no involvement of third parties (e.g., individual advisors and professional services) that results in the transfer of duties and/or authority of the Board of Directors, Board of Commissioners, DPS, and branch leaders (if any) so that decision-making is not independent.
11. The BPRS implements transparency in accordance with applicable laws and regulations and conducts public education.
12. The Board of Directors and Board of Commissioners have good communication and cooperation skills with BPRS shareholders and employees.
13. The Board of Directors and Board of Commissioners are able to minimize the emergence of internal conflicts within the organization and provide effective and efficient resolution solutions.
14. The Board of Directors and Board of Commissioners have the ability to reject shareholder interference in the BPRS's daily operational activities.
15. The Board of Directors has a commitment to handle and resolve problems faced by the BPRS.
16. The Board of Directors conducts sufficient supervision over the implementation of employee duties.

ASPECT
2. Risk Management Component

1. CREDIT RISK
   a. The BPRS has Standard Operating Procedures (SOP) in providing financing and is updated periodically. b. In providing financing, the BPRS conducts an analysis of the debtor's ability to repay its obligations.
   c. In deciding on the provision of financing, it has been done by authorized officials.
   d. After financing is provided, the BPRS monitors the use of financing, as well as the debtor's ability and compliance in meeting its obligations. e. The BPRS reviews, assesses, and binds (if necessary) collateral. f. The BPRS documents financing completely and well.
2. LIQUIDITY RISK
   a. The BPRS conducts analysis, monitoring, and has monitoring tools for receivables and liabilities maturing to prevent the possibility of liquidity difficulties arising. b. The BPRS always has sufficient liquid funds to meet short-term obligations.
   c. In carrying out placements, the BPRS still optimizes profit.
   d. The BPRS sets minimum cash limits that must be held to anticipate short-term needs.
   Objective:
   To measure the quality of BPRS risk management.

ASPECT e. The Board of Directors and Board of Commissioners have shareholder commitment to provide liquid fund loans or increase BPRS capital so as to always comply with applicable laws and regulations.
3. OPERATIONAL RISK
a. The BPRS has SOPs in BPRS activities, including guidelines for implementing anti-money laundering and counter-terrorism financing programs in the financial services sector, receiving funds from third parties, guidelines for converting internal financial reports to monthly reports, and the BPRS evaluates SOPs periodically. b. The BPRS applies asset quality reporting policies and the formation of asset impairment provisions in accordance with applicable laws and regulations.
c. The BPRS always provides education or training to employees to increase employee knowledge regarding bank operations.
d. In carrying out operational activities, the BPRS Board of Directors does not do things that tend to benefit themselves, family, and groups that have the potential to harm the BPRS. e. The BPRS has a mechanism for applying objective sanctions for violations that occur.
4. LEGAL RISK
a. Financing agreements are in accordance with applicable laws and regulations. b. The BPRS has ensured that the collateral received meets the requirements of applicable laws and regulations.

ASPECT
c. The BPRS binds collateral in accordance with applicable laws and regulations.
d. The BPRS administers:
1) unused and empty deposit certificates and savings books; and
2) deposit certificates that have been cashed and savings books returned to the BPRS because the account has been closed,
well and securely.
5. REPUTATION RISK
a. The BPRS can always meet obligations, especially to customers. b. The BPRS is always transparent in informing products and services offered.
c. The BPRS Board of Directors and Board of Commissioners have good behavior.
d. The BPRS's business activities do not violate Sharia Principles.
6. COMPLIANCE RISK
a. The BPRS always takes effective follow-up on findings from examinations by the Financial Services Authority and other authorities. b. The BPRS conducts activities in accordance with Sharia Principles, applicable laws and regulations, and internal BPRS regulations.
c. The BPRS has never received sanctions from the Financial Services Authority and other authorities for late or incorrect reporting.

ASPECT
3. Sharia Compliance Management Component

1. The Board of Directors, Board of Commissioners, and DPS actively carry out monitoring and evaluation of the BPRS's compliance with the implementation of Sharia Principles.
2. The Board of Directors and Board of Commissioners take necessary steps to minimize violations of:
   a. the management code of ethics of the BPRS which is based on Sharia values and is binding internally; and b. Sharia Principles and applicable laws and regulations regarding the implementation of Sharia Principles in fund gathering and disbursement activities as well as banking service provision.
3. During the assessment period, the BPRS has carried out social functions.
   Objective:
   To measure the quality of compliance with Sharia Principles and the implementation of social functions.

APPENDIX IF. CALCULATION OF RATIO AGGREGATION
PROCEDURE FOR CALCULATING RATIO AGGREGATION ON FINANCIAL FACTOR COMPONENTS

1. Calculate main ratios, supporting ratios, and observation ratios in each component factor according to the formula established in Appendix IA to ID.
2. The ratio values obtained in step 1 are used to set the rank according to the parameters in each rank.
3. The value of the main ratio rank will become the factor rank value influenced by the supporting ratio rank as follows:
   a. If the supporting ratio rank is rank 3, then the ratio does not influence the factor rank (rank 3 is a neutral value that does not influence). b. If the supporting ratio rank is greater than rank 3, then the ratio will add to the factor rank value so that the factor rank becomes worse.
   c. If the supporting ratio rank is less than rank 3, then the ratio will reduce the factor rank value so that the factor rank becomes better.
4. The magnitude of the influence of the supporting ratio rank value on the factor rank is determined based on specific weights. The magnitude of the weight is established based on the judgment of the Financial Services Authority.
5. The sum of the main ratio rank value and the supporting ratio rank value will form the factor rank value.
6. In the final stage, the determination of the factor rank value is done by considering the observation ratio as well as relevant supporting and/or comparative indicators (judgment).

This copy is in accordance with the original
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ILLUSTRATION OF RATIO AGGREGATION CALCULATION ON FINANCIAL FACTOR COMPONENTS EXAMPLE: CAPITAL FACTOR No. Component/Ratio Type Ratio Rank Deviation Weight Weighted Rank Factor Rank Final Rank 1)* 2)* 3)* 4) 5)* 6)* 1 CAR U 14% 2 2.00 2.80 3.00 2 % CAR Pj 0.80 5 2 40% 0.80 3 ECR Pa 1.5 4 4 EDR Pa 1.8 2 5 FI Pa 3% 4 Description:
*) Steps according to the order of the ratio aggregation calculation procedure on the Financial Factor component. ) Weight is determined through Financial Services Authority judgment. Established in Jakarta on December 16, 2019 EXECUTIVE HEAD OF BANKING SUPERVISOR FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed HERU KRISTIYANA

APPENDIX II
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2019 REGARDING THE SYSTEM FOR ASSESSING THE HEALTH LEVEL OF SHARIA PEOPLE'S FINANCING BANKS

APPENDIX IIA. MATRIX OF CRITERIA FOR DETERMINING THE CAPITAL FACTOR RANK
FACTOR
RANK
1 2 3 4 5
Capital The BPRS has very adequate capital to absorb losses and perform write-offs due to asset quality deterioration. The BPRS has adequate capital to absorb losses and perform write-offs due to asset quality deterioration. The BPRS has sufficiently adequate capital to absorb losses and perform write-offs due to asset quality deterioration. The BPRS has less adequate capital to absorb losses and perform write-offs due to asset quality deterioration. The BPRS has inadequate capital to absorb losses and perform write-offs due to asset quality deterioration.

APPENDIX IIB. MATRIX OF CRITERIA FOR DETERMINING THE ASSET QUALITY FACTOR RANK
FACTOR
RANK
1 2 3 4 5
Asset Quality The BPRS has productive assets with a very high return level.
The BPRS has productive assets with a high return level.
The BPRS has productive assets with a sufficient return level.
The BPRS has productive assets with a low return level.
The BPRS has productive assets with a very low return level.

APPENDIX IIC. MATRIX OF CRITERIA FOR DETERMINING THE PROFITABILITY FACTOR RANK
FACTOR
RANK
1 2 3 4 5
Profitability The BPRS has very high and stable efficiency so that it has the potential to obtain high profits. The BPRS has high and stable efficiency so that it has the potential to obtain high profits. The BPRS has sufficiently adequate and stable efficiency so that it has the potential to obtain adequate profits. The BPRS has low and/or unstable efficiency so that it has potential losses. The BPRS has very low efficiency so that it has high potential losses.

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APPENDIX IID. MATRIX OF CRITERIA FOR DETERMINING THE LIQUIDITY FACTOR RANK
FACTOR
RANK
1 2 3 4 5
Liquidity The BPRS has very low potential for short-term liquidity difficulty problems.
The BPRS has low potential for short-term liquidity difficulty problems.
The BPRS has medium potential for short-term liquidity difficulty problems.
The BPRS has high potential for short-term liquidity difficulty problems.
The BPRS has very high potential for short-term liquidity difficulty problems.
Established in Jakarta on December 16, 2019
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
HERU KRISTIYANA

APPENDIX III
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2019 REGARDING THE SYSTEM FOR ASSESSING THE HEALTH LEVEL OF SHARIA PEOPLE'S FINANCING BANKS

APPENDIX IIIA. MATRIX OF CRITERIA FOR DETERMINING THE FINANCIAL FACTOR RANK
RANK
1 2 3 4 5
The BPRS has very good financial performance, meaning it has the ability to generate profit and a high efficiency level so that it is able to develop optimally. The BPRS has good financial performance, meaning it has the ability to generate profit and a fairly high efficiency level so that it is able to develop. The BPRS has fairly good financial performance, meaning it has the ability to generate profit and a medium efficiency level but still has some weaknesses in management that can lower the BPRS's financial condition. The BPRS has less good financial performance, meaning it is experiencing financial difficulties that have the potential to endanger business continuity. The BPRS has poor financial performance, meaning it is experiencing financial difficulties that endanger business continuity and have the potential to be unsalvageable.

APPENDIX IIIB. MATRIX OF CRITERIA FOR DETERMINING THE MANAGEMENT FACTOR RANK
RANK
A B C D
The BPRS has good governance quality, very adequate Risk Management, and/or a high level of compliance with Sharia Principles and implements social functions. The BPRS has fairly good governance quality, adequate Risk Management, and/or a medium level of compliance with Sharia Principles and implements social functions. The BPRS has less good governance quality, less adequate Risk Management, and/or a low level of compliance with Sharia Principles and implements social functions. The BPRS has poor governance quality, inadequate Risk Management, and/or a low level of compliance with Sharia Principles and implements social functions.

APPENDIX IIIC. MATRIX OF CRITERIA FOR DETERMINING THE COMPOSITE RANK
Conversion Table
Management
A 5 3 2 1 1
B 5 4 3 2 1
C 5 5 4 3 2
D 5 5 4 4 3
5 4 3 2 1
Financial (CAEL)
.

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RANK
1 2 3 4 5
The BPRS has a very good health level condition as a result of very good business management. The BPRS has a good health level condition as a result of good business management. The BPRS has a fairly good health level condition as a result of fairly good business management. The BPRS has a less good health level condition as a result of less good business management. The BPRS has a poor health level condition as a result of poor business management. Established in Jakarta on December 16, 2019 EXECUTIVE HEAD OF BANKING SUPERVISOR FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed HERU KRISTIYANA

APPENDIX IV
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2019 REGARDING THE SYSTEM FOR ASSESSING THE HEALTH LEVEL OF SHARIA PEOPLE'S FINANCING BANKS

APPENDIX IVA. WORK PAPER FOR DETERMINING THE CAPITAL FACTOR RANK
WORK PAPER - DETERMINATION OF CAPITAL FACTOR COMPONENT RANK NO. COMPONENT CALCULATION RESULT, ANALYSIS, AND CONCLUSION RANK 1 2 3 4 5

1. Capital Adequacy Ratio (CAR)
   (Main Ratio)
   Calculation Result (Ratio)
2. Capital Adequacy Projection Ratio
   (Supporting Ratio)
   Calculation Result (Ratio)
3. Equity Coverage Ratio (ECR)
   (Observation Ratio)
   Calculation Result (Ratio)
4. Equity to Debt Ratio (EDR)
   (Observation Ratio)
   Calculation Result (Ratio)
5. Intermediation Function on Investment Funds with Profit-Sharing Method (FI)
   (Observation Ratio)
   Calculation Result (Ratio)
   CONCLUSION Analysis and Conclusion:

GUIDELINES FOR DETERMINING THE CAPITAL FACTOR RANK

1. The BPRS prepares and gathers relevant data and information to calculate ratios and assess supporting indicators for each component by referring to the calculation matrix or analysis of capital factor components in Appendix IA which is an integral part of this Financial Services Authority Circular Letter.
2. The BPRS prepares work papers for the calculation and assessment of each component according to the work paper format for determining the capital factor rank as shown in the example format above. The format described above is not binding so that the BPRS can develop it according to the analysis results, including analysis of supporting indicators.
3. Based on the calculation and assessment results, the BPRS determines the rank of each component by referring to the calculation matrix or analysis of capital factor components in Appendix IA which is an integral part of this Financial Services Authority Circular Letter.
4. Based on the determination results, the BPRS can then determine the rank for the capital factor by referring to the criteria matrix for determining the capital factor rank in Appendix IIA which is an integral part of this Financial Services Authority Circular Letter. The process of determining the assessment factor rank is carried out after the BPRS considers the element of judgment based on the materiality and significance of each assessment component.
5. Data, information, analysis results, and other supporting data are documented adequately to ensure the effectiveness of the audit trail process for both internal and external auditors, as well as for the preparation of action plans requested by the Financial Services Authority.

APPENDIX IVB. WORK PAPER FOR DETERMINING THE ASSET QUALITY FACTOR RANK
WORK PAPER - DETERMINATION OF ASSET QUALITY FACTOR COMPONENT RANK NO. COMPONENT CALCULATION RESULT, ANALYSIS, AND CONCLUSION RANK 1 2 3 4 5 1. Earning Asset Quality (EAQ) Ratio (Main Ratio) Calculation Result (Ratio) 2. Non Performing Financing (NPF) Ratio (Supporting Ratio) Calculation Result (Ratio) 3. Average Recover Rate (ARR) Ratio per Account (Observation Ratio) Calculation Result (Ratio) 4. Non Performing Financing (NPB) Customer Ratio (Observation Ratio) Calculation Result (Ratio) CONCLUSION Analysis and Conclusion:

GUIDELINES FOR DETERMINING THE ASSET QUALITY FACTOR RANK

1. The BPRS prepares and gathers relevant data and information to calculate ratios and assess supporting indicators for each component by referring to the calculation matrix or analysis of asset quality factor components in Appendix IB which is an integral part of this Financial Services Authority Circular Letter.
2. The BPRS prepares work papers for the calculation and assessment of each component according to the work paper format for determining the asset quality factor rank as shown in the example format above. The format described above is not binding so that the BPRS can develop it according to the analysis results, including analysis of supporting indicators.
3. Based on the calculation and assessment results, the BPRS determines the rank of each component by referring to the calculation matrix or analysis of asset quality factor components in Appendix IB which is an integral part of this Financial Services Authority Circular Letter.
4. Based on the determination results, the BPRS can then determine the rank for the asset quality factor by referring to the criteria matrix for determining the asset quality factor rank in Appendix IIB which is an integral part of this Financial Services Authority Circular Letter. The process of determining the assessment factor rank is carried out after the BPRS considers the element of judgment based on the materiality and significance of each assessment component.
5. Data, information, analysis results, and other supporting data are documented adequately to ensure the effectiveness of the audit trail process for both internal and external auditors, as well as for the preparation of action plans requested by the Financial Services Authority.

APPENDIX IVC. WORK SHEET FOR DETERMINING THE RATING OF PROFITABILITY FACTOR
WORK SHEET - DETERMINATION OF THE RATING OF PROFITABILITY FACTOR COMPONENTS NO. COMPONENT CALCULATION RESULTS, ANALYSIS, AND CONCLUSION RATING 1 2 3 4 5

1. Operational Efficiency Ratio (OER)
   (Main Ratio)
   Calculation Result (Ratio)
2. Income Generating Asset Ratio (IGA)
   (Supporting Ratio)
   Calculation Result (Ratio)
3. Main Operational Net Margin Ratio (NSOM)
   (Supporting Ratio)
   Calculation Result (Ratio)
4. Labor Cost to Total Financing Ratio (RTK)
   (Observation Ratio)
   Calculation Result (Ratio)
5. Return On Asset (ROA)
   (Observation Ratio)
   Calculation Result (Ratio)
6. Return On Equity (ROE)
   (Observation Ratio)
   Calculation Result (Ratio)
   CONCLUSION Analysis and Conclusion:

GUIDELINES FOR DETERMINING THE RATING OF PROFITABILITY FACTOR

1. BPRS prepares and gathers relevant data and information to perform ratio calculations and assess supporting indicators for each component, referring to the calculation matrix or analysis of profitability factor components in Appendix IC, which is an integral part of this Otoritas Jasa Keuangan Circular.
2. BPRS prepares work sheets for the calculation and assessment of each component according to the work sheet format for determining the profitability factor rating, as shown in the example format above. The format described above is not binding, so BPRS may develop it according to the results of the analysis, including analysis of supporting indicators.
3. Based on the calculation and assessment results, BPRS determines the rating of each component by referring to the calculation matrix or analysis of profitability factor components in Appendix IC, which is an integral part of this Otoritas Jasa Keuangan Circular.
4. Based on the determination results, BPRS may then determine the rating for the profitability factor by referring to the rating criteria matrix for profitability factors in Appendix IIC, which is an integral part of this Otoritas Jasa Keuangan Circular. The process of determining the rating of this assessment factor is carried out after BPRS considers the element of judgment based on the materiality and significance of each assessment component.
5. Data, information, analysis results, and other supporting data are adequately documented to ensure the effectiveness of the audit trail process for both internal and external auditors, as well as for the preparation of action plans requested by the Otoritas Jasa Keuangan.

APPENDIX IVD. WORK SHEET FOR DETERMINING THE RATING OF LIQUIDITY FACTOR
WORK SHEET - DETERMINATION OF THE RATING OF LIQUIDITY FACTOR COMPONENTS NO. COMPONENT CALCULATION RESULTS, ANALYSIS, AND CONCLUSION RATING 1 2 3 4 5

1. Cash Ratio (CR)
   (Main Ratio)
   Calculation Result (Ratio)
2. Short Term Mismatch (STM)
   (Supporting Ratio)
   Calculation Result (Ratio)
   CONCLUSION Analysis and Conclusion:

GUIDELINES FOR DETERMINING THE RATING OF LIQUIDITY FACTOR

1. BPRS prepares and gathers relevant data and information to perform ratio calculations and assess supporting indicators for each component, referring to the calculation matrix or analysis of liquidity factor components in Appendix ID, which is an integral part of this Otoritas Jasa Keuangan Circular.
2. BPRS prepares work sheets for the calculation and assessment of each component according to the work sheet format for determining the liquidity factor rating, as shown in the example format above. The format described above is not binding, so BPRS may develop it according to the results of the analysis, including analysis of supporting indicators.
3. Based on the calculation and assessment results, BPRS determines the rating of each component by referring to the calculation matrix or analysis of liquidity factor components in Appendix ID, which is an integral part of this Otoritas Jasa Keuangan Circular.
4. Based on the determination results, BPRS may then determine the rating for the liquidity factor by referring to the rating criteria matrix for liquidity factors in Appendix IID, which is an integral part of this Otoritas Jasa Keuangan Circular. The process of determining the rating of this assessment factor is carried out after BPRS considers the element of judgment based on the materiality and significance of each assessment component.
5. Data, information, analysis results, and other supporting data are adequately documented to ensure the effectiveness of the audit trail process for both internal and external auditors, as well as for the preparation of action plans requested by the Otoritas Jasa Keuangan.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana
Determined in Jakarta on December 16, 2019
CHIEF EXECUTIVE OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
HERU KRISTIYANA