Circular Letter of the Financial Services Authority Number 3/SEOJK.03/2017 Concerning the Change of Business Activities of Rural Credit Banks to Sharia Rural Financing Banks

To:
The Board of Directors of Rural Credit Banks
At your place.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 3 /SEOJK.03/2017 CONCERNING THE CHANGE OF BUSINESS ACTIVITIES OF RURAL CREDIT BANKS TO SHARIA RURAL FINANCING BANKS

In view of the issuance of the Financial Services Authority Regulation Number 64/POJK.03/2016 concerning the Change of Business Activities of Conventional Banks to Sharia Banks (State Gazette of the Republic of Indonesia Year 2016 Number 295, Supplement to the State Gazette of the Republic of Indonesia Number 5985), it is necessary to regulate the implementation of the change of business activities of Rural Credit Banks to Sharia Rural Financing Banks in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

A. APPLICATION REQUIREMENTS FOR CHANGE OF BUSINESS ACTIVITIES PERMIT

The application for a permit to change business activities is submitted by the Board of Directors of the Rural Credit Bank (BPR) using the letter format as contained in Appendix I and supported by the following documents:

1. Draft deed of amendment of the articles of association which at least contains:
   a. name and domicile; b. confirmation that the bank conducts business activities as a Sharia Rural Financing Bank (BPRS);
   c. capitalization, in case of changes;
   d. ownership, in case of changes; e. provisions regarding the appointment of members of the Board of Directors, members of the Board of Commissioners, and members of the Sharia Supervisory Board (DPS) which must obtain prior approval from the Financial Services Authority; f. provisions regarding the number, authority, responsibility, duties, and other requirements for the Board of Directors, Board of Commissioners, and DPS which must comply with applicable laws and regulations; g. provisions regarding the General Meeting of Shareholders (GMS) which stipulate that the duties of management, remuneration of the Board of Directors and Board of Commissioners, annual accountability reports, appointment and public accountant service fees, use of profits, and other matters must comply with applicable laws and regulations; and h. provisions regarding the GMS which must be led by the Principal Commissioner or Lead Commissioner.

The draft deed of amendment of the articles of association may request approval from the competent authority simultaneously with the application for a permit to change business activities to the Financial Services Authority. Articles of association that have been approved by the competent authority must be promptly submitted to the Financial Services Authority as a completeness document for the permit application.

2. Minutes of the GMS.

3. List of prospective shareholders along with details of their respective share ownership, in case of changes in ownership:
   a. in the event that prospective shareholders are individuals, the following documents must be attached:

1. recent 4 x 6 cm passport-sized photos;
2. photocopy of identification, namely the Citizen Identity Card (KTP);
3. Curriculum Vitae, with format examples as regulated in the provisions concerning the fitness and propriety test/assessment;
4. a stamped declaration letter which at least contains that the concerned party:
   a) has never been sentenced for proven criminal acts consisting of:
   (1) criminal acts in the financial services sector whose sentence has been completed within the last 20 (twenty) years before nomination; (2) criminal acts, namely criminal acts contained in the Criminal Code (KUHP) and/or similar KUHP abroad with a prison sentence threat of 1 (one) year or more whose sentence has been completed within the last 10 (ten) years before nomination; and/or (3) other criminal acts with a prison sentence threat of 1 (one) year or more, including corruption, money laundering, narcotics/psychotropics, smuggling, customs, excise, human trafficking, illegal arms trade, terrorism, counterfeiting money, in the field of taxation, in the field of forestry, in the field of the environment, in the field of marine and fisheries, whose sentence has been completed within the last 20 (twenty) years before nomination; b) is willing to increase capitalization, if deemed necessary by the Financial Services Authority; c) does not conduct certain activities that are estimated to worsen the financial and non-financial conditions of the BPRS; d) does not receive the provision of funds and/or facilities that are not fair from the BPRS; and e) implements the direction and development strategy of a healthy BPRS, which prioritizes financing for productive micro and small businesses for the local community;
5. Annual Tax Return (SPT);
6. photocopy of the Taxpayer Identification Number (NPWP);
7. in the event that prospective individual shareholders are Principal Shareholders (PSP), additional documents as regulated in the provisions concerning the fitness and propriety test/assessment applicable to BPRS must be attached;
   b. in the event that prospective shareholders are legal entities, the following documents must be attached:
8. deed of establishment of the legal entity containing the articles of association along with amendments that have received approval from the competent authority;
9. documents as referred to in letter a number 1) to number 4) sub-letter a) of:
   a) each member of the Board of Directors and members of the Board of Commissioners, for Limited Liability Company legal entities; or b) each member of the management, for legal entities other than Limited Liability Companies;
10. a stamped declaration letter of the legal entity signed by the authorized official representing according to the articles of association of the legal entity, stating:
    a) has never been sentenced for proven criminal acts consisting of:
    (1) criminal acts in the Financial Services Sector whose sentence has been completed within the last 20 (twenty) years before nomination; (2) criminal acts, namely criminal acts contained in the KUHP and/or similar KUHP abroad with a prison sentence threat of 1 (one) year or more whose sentence has been completed within the last 10 (ten) years before nomination; and/or (3) other criminal acts with a prison sentence threat of 1 (one) year or more, including corruption, money laundering, narcotics/psychotropics, smuggling, customs, excise, human trafficking, illegal arms trade, terrorism, counterfeiting money, in the field of taxation, in the field of forestry, in the field of the environment, in the field of marine and fisheries, whose sentence has been completed within the last 20 (twenty) years before nomination; b) is willing to increase capitalization, if deemed necessary by the Financial Services Authority;
11. list of shareholders along with the quantity and value of shares owned by each shareholder;
12. financial reports for the last 2 (two) years before the date of the permit application letter for the change of business activities, including balance sheets, profit and loss statements, cash flow statements, statements of changes in equity, and notes to the financial statements;
13. audited financial reports with a position at the latest by the end of the year before the date of the permit application letter for the change of business activities, for legal entities having an investment of Rp1,000,000,000.00 (one billion rupiah) or more; and
14. in the event that legal entities are prospective Principal Shareholders (PSP), additional documents as regulated in the provisions concerning the fitness and propriety test/assessment applicable to BPRS must be attached;
    c. in the event that prospective shareholders are local governments, the following documents must be attached:
15. a letter of certification stating the name of the authorized official representing the local government;
16. documents as referred to in letter a number 1) and number 2) of the authorized official representing the local government;
17. a letter of certification or document explaining the source of funds in the event of additional paid-in capital; and
18. in the event that local governments are prospective Principal Shareholders (PSP), a document in the form of a declaration letter stating that the local government is willing:
    a) to overcome capitalization and liquidity difficulties faced by the BPRS in conducting its business activities; and b) to implement the strategic plan and direction of development of a healthy BPRS, which prioritizes financing for productive micro and small businesses for the local community; signed by the authorized official representing the local government.

4. List of prospective members of the Board of Directors and prospective members of the Board of Commissioners originating from existing or newly nominated members of the Board of Directors or Board of Commissioners of the BPR, accompanied by documents as regulated in the provisions concerning the fitness and propriety test/assessment applicable to BPR.

5. List of prospective members of the DPS accompanied by documents:
   a. recent 4 x 6 cm passport-sized photos; b. photocopy of KTP;
   c. Curriculum Vitae, with format examples as regulated in the provisions concerning the fitness and propriety test/assessment;
   d. a stamped declaration letter stating that the concerned party:

1. has never been sentenced for proven criminal acts consisting of:
   a) criminal acts in the financial services sector whose sentence has been completed within the last 20 (twenty) years before nomination; b) criminal acts, namely criminal acts contained in the KUHP and/or similar KUHP abroad with a prison sentence threat of 1 (one) year or more whose sentence has been completed within the last 10 (ten) years before nomination; and/or c) other criminal acts with a prison sentence threat of 1 (one) year or more, including corruption, money laundering, narcotics/psychotropics, smuggling, customs, excise, human trafficking, illegal arms trade, terrorism, counterfeiting money, in the field of taxation, in the field of forestry, in the field of the environment, in the field of marine and fisheries, whose sentence has been completed within the last 20 (twenty) years before nomination;
2. is committed to fulfilling laws and regulations, specifically in the field of banking and Sharia banking, and is willing to support the policies of the Financial Services Authority;
3. is committed to the operational development of a healthy BPRS;
4. is not currently prohibited from becoming Principal Parties, which among others are not included in the List of Disqualified (DTL);
5. does not have non-performing loans and/or financing;
6. has never been declared bankrupt and/or has never been a shareholder, controller, member of the Board of Directors, or member of the Board of Commissioners who was declared guilty causing a company to be declared bankrupt within the last 5 (five) years before nomination;
7. does not violate applicable provisions regarding holding dual positions;
   e. a letter of certification or certificate from educational and training institutions and/or the National Sharia Board – Indonesian Ulema Council regarding education and/or training in the field of Sharia muamalah and in the field of banking and/or finance in general that has been attended; and f. a recommendation letter from the National Sharia Board – Indonesian Ulema Council.

6. Declaration letter from shareholders that the source of funds used in the context of BPR ownership, in the event of additional paid-in capital:
   a. does not originate from loans or financing facilities in any form from banks and/or other parties; and/or b. does not originate from and for the purpose of money laundering. In the event that prospective BPR shareholders are legal entities, the declaration letter is signed by the authorized management representing the respective legal entity.

7. Organizational structure plan and names of Executive Officials.

8. Analysis of the potential and feasibility of establishing a BPRS.

9. Business plan which at least contains:
   a. business activity plans covering fund mobilization and distribution and achievement strategies; and b. monthly balance sheet projections and cumulative monthly profit and loss statements for 12 (twelve) months starting from when the BPRS operates.

10. Initial financial reports as a BPRS showing that the current year profit and loss and last year's profit and loss have a balance of Rp0.00 (zero rupiah) or nil.

11. Corporate plan in the form of a long-term strategic plan to achieve the mission and vision of the BPRS.

12. Complete and comprehensive work systems and procedures used in BPR operational activities.

13. Plan to settle all rights and obligations of the BPR towards customers who are unwilling to become BPRS customers.

14. Proof of operational readiness at least consisting of:
    a. readiness of office buildings and equipment including photos of the office building and room layout; b. documents showing the readiness of information system technology, including among others core banking systems and information regarding telecommunications networks;
    c. proof of ownership or documents controlling office buildings, including among others proof of land rights or lease agreements; and
    d. examples of forms or documents with the iB logo to be used for BPRS operations.

15. BPR office network along with locations to be used as BPRS offices, including among others head offices, branch offices, and cash offices.

B. IMPLEMENTATION OF CHANGE OF BUSINESS ACTIVITIES

The report on the implementation of the change of business activities is submitted using the letter format as contained in Appendix II, accompanied by proof of the announcement of the implementation of the change of business activities in a local daily newspaper or announcement board at the BPR office domicile.

II. SUBMISSION OF APPLICATION REQUIREMENTS FOR PERMITS AND REPORTING OF THE IMPLEMENTATION OF CHANGE OF BUSINESS ACTIVITIES TO THE FINANCIAL SERVICES AUTHORITY

Permit applications and/or submissions of reports on the change of business activities are submitted to the Financial Services Authority at the address of the Sharia Banking Department, with copies to the Regional Office of the Financial Services Authority or Office of the Financial Services Authority, for BPRs or BPRSs with headquarters in the working area of the Regional Office of the Financial Services Authority or Office of the Financial Services Authority.

III. CLOSING

1. With the implementation of this Financial Services Authority Circular Letter, the Bank Indonesia Circular Letter Number 11/25/DPbS concerning the Change of Business Activities of Rural Credit Banks to Sharia Rural Financing Banks is revoked and declared invalid.

2. Provisions in this Financial Services Authority Circular Letter take effect on the date of establishment.

Established in Jakarta on January 3, 2017
EXECUTIVE HEAD OF BANKING SUPERVISION
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy in accordance with the original
Legal Director 1
Legal Department signed
Yuliana

APPENDIX I
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 3 /SEOJK.03/2017 CONCERNING THE CHANGE OF BUSINESS ACTIVITIES OF RURAL CREDIT BANKS TO SHARIA RURAL FINANCING BANKS

Number: .................... (Place), (Date, Month, Year)
Attachment: ....................
To
Sharia Banking Department
Financial Services Authority
Subject: Application for Permit to Change Business Activities of BPR to BPRS

Assalamu’alaikum Wr. Wb.

Hereby we submit an application for a permit to change business activities from ......(name of BPR) to .........(name of BPRS) which is domiciled at ………

To complete the aforementioned application, we submit the following:

1. draft deed of amendment of the articles of association;
2. minutes of the General Meeting of Shareholders;
3. list of prospective shareholders along with details of their respective share ownership 1);
4. list of prospective members of the Board of Directors, members of the Board of Commissioners, and members of the Sharia Supervisory Board (DPS);
5. declaration letter from shareholders;
6. organizational structure plan and names of Executive Officials;
7. analysis of the potential and feasibility of establishing a BPRS;
8. business plan;
9. initial financial reports as a BPRS;
10. corporate plan in the form of a long-term strategic plan to achieve the mission and vision of the BPRS;
11. work systems and procedures;
12. plan to settle all rights and obligations of the BPR towards customers who are unwilling to become BPRS customers;
13. proof of operational readiness; and
14. BPRS office network along with locations to be used as BPRS offices.

If there are questions or other matters related to this application letter, you may contact our employee namely ………via telephone…….or email……..

This application is submitted, thank you for your attention.
Wassalamu’alaikum Wr. Wb.
BPR BOARD OF DIRECTORS

Copy to: 2)

1. In case of changes.
2. Regional Office of the Financial Services Authority or local Office of the Financial Services Authority for BPRs or BPRSs with headquarters in the working area of the Regional Office of the Financial Services Authority or Office of the Financial Services Authority.

Established in Jakarta on January 3, 2017
EXECUTIVE HEAD OF BANKING SUPERVISION
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy in accordance with the original
Legal Director 1
Legal Department signed
Yuliana

APPENDIX II
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 3 /SEOJK.03/2017 CONCERNING THE CHANGE OF BUSINESS ACTIVITIES OF RURAL CREDIT BANKS TO SHARIA RURAL FINANCING BANKS

Number: .................... (Place), (Date, Month, Year)
Attachment: ....................
To
Sharia Banking Department
Financial Services Authority
Subject: Report on the Implementation of the Change of Business Activities of BPR to BPRS

Assalamu’alaikum Wr. Wb.

Referring to the copy of the Decision of the Financial Services Authority Commissioners Number …………… dated ………….. concerning the Granting of Permit to Change Business Activities of Rural Credit Banks to Sharia Rural Financing Banks .................., hereby reported that we have started business activities on date …………...

Attached are proofs of announcements in local daily newspapers or announcement boards at the BPR office domicile.

This is for your information.
Wassalamu’alaikum Wr. Wb.
BPRS BOARD OF DIRECTORS

Copy to: 1)

1. Regional Office of the Financial Services Authority or local Office of the Financial Services Authority for BPRs or BPRSs with headquarters in the working area of the Regional Office of the Financial Services Authority or Office of the Financial Services Authority.

Established in Jakarta on January 3, 2017
EXECUTIVE HEAD OF BANKING SUPERVISION
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy in accordance with the original
Legal Director 1
Legal Department signed
Yuliana