Circular Letter of the Financial Services Authority Number 44/SEOJK.03/2017 Regarding Single Ownership in Indonesian Banking

To:

1. The Board of Directors of Conventional Commercial Banks; and
2. The Board of Directors of Sharia Commercial Banks,
   In their respective places.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 44 /SEOJK.03/2017

REGARDING

SINGLE OWNERSHIP IN INDONESIAN BANKING

In light of the implementation of the Financial Services Authority Regulation Number 39/POJK.03/2017 Regarding Single Ownership in Indonesian Banking (State Gazette of the Republic of Indonesia Year 2017 Number 145, Supplement to the State Gazette of the Republic of Indonesia Number 6088), hereinafter referred to as the POJK on Single Ownership, and in light of the transfer of functions, duties, and authority for the regulation and supervision of financial services in the banking sector from Bank Indonesia to the Financial Services Authority, it is necessary to regulate the implementation of Single Ownership in Indonesian banking again in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

1. In order to face the dynamics of regional and global economic development, it is necessary to increase the resilience of the national banking industry, including through the implementation of the Single Ownership policy in Indonesian banking as regulated in the POJK on Single Ownership.

2. The implementation of the Single Ownership policy in Indonesian banking can be carried out in several ways as referred to in the POJK on Single Ownership, namely:
   a. merger or consolidation of controlled Banks; b. establishing a Parent Company in the Banking Sector (Bank Holding Company); or
   c. establishing a Holding Function.

II. MERGER OR CONSOLIDATION

1. In the event that the Controlling Shareholder (PSP) chooses to carry out a merger or consolidation of controlled Banks as referred to in item I.2.a., the Financial Services Authority provides incentives in the form of:
   a. extension of the time limit for completion of exceeding the Maximum Credit Limit (BMPK); b. facilitation for opening branch offices;
   c. temporary relaxation of governance implementation; and/or
   d. other incentives, in accordance with provisions of legislation regarding incentives in the context of banking consolidation, as referred to in the POJK on Single Ownership.
   The procedures for providing these incentives refer to the provisions of legislation regarding incentives in the context of banking consolidation.

2. The merger or consolidation of controlled Banks as referred to in item I.2.a. is carried out by the Controlling Shareholder (PSP) that will carry out the takeover of Banks so as to become the controller of more than 1 (one) Bank.

3. The takeover as referred to in number 2 is carried out in a single continuous process without interruption with the merger or consolidation.

4. For PSPs that will carry out the takeover of Banks as referred to in number 2, the merger or consolidation plan is submitted to the Financial Services Authority at the time of submitting the application for takeover permission.

5. The merger or consolidation of controlled Banks as referred to in item I.2.a. is implemented no later than 1 (one) year after the takeover is legally executed, for PSPs as referred to in number 2.

6. In the event that the PSP requires an extension of the time limit for completing the merger or consolidation, the application is submitted to the Financial Services Authority no later than 20 (twenty) working days before the time limit as referred to in number 5.

7. The takeover plan followed by a merger or consolidation as referred to in number 3 must be included in the Bank Business Plan submitted to the Financial Services Authority in the section on management policy and strategy as referred to in the Financial Services Authority regulations governing bank business plans.

8. The Financial Services Authority conducts an assessment of competence and propriety for prospective PSPs, prospective directors and/or prospective commissioners of the resulting Bank from the merger or consolidation, referring to the Financial Services Authority regulations governing the assessment of competence and propriety.

III. ESTABLISHMENT OF A PARENT COMPANY IN THE BANKING SECTOR (BANK HOLDING COMPANY)

1. As referred to in item I.2.b, the establishment of a Parent Company in the Banking Sector (Bank Holding Company) is one of the alternatives for fulfilling the Single Ownership obligation in Indonesian banking.

2. The establishment of a Parent Company in the Banking Sector (Bank Holding Company) as referred to in number 1 is carried out by the PSP that will carry out the takeover of Banks so as to become the controller of more than 1 (one) Bank.

3. The takeover plan and/or the plan for the establishment of a Parent Company in the Banking Sector (Bank Holding Company) as well as the plan for the transfer of Bank shares to the Parent Company in the Banking Sector (Bank Holding Company) are included in the Bank Business Plan submitted to the Financial Services Authority, in the section on management policy and strategy as referred to in the Financial Services Authority regulations governing bank business plans.

4. The company that will act as a Parent Company in the Banking Sector (Bank Holding Company) must be a limited liability legal entity established and domiciled in Indonesia, so that its establishment procedures follow the provisions regulated in the Law on Limited Liability Companies.

5. The Parent Company in the Banking Sector (Bank Holding Company) is located 1 (one) level above the directly controlled Bank.

6. In the event that the establishment of a Parent Company in the Banking Sector (Bank Holding Company) is preceded by a takeover process, the takeover can only be carried out in a single continuous process without interruption with the establishment of the Parent Company in the Banking Sector (Bank Holding Company) and the transfer of shares from the PSP to the Parent Company in the Banking Sector (Bank Holding Company).

7. The procedure for establishing a Parent Company in the Banking Sector (Bank Holding Company) is as follows:
   a. The application for the establishment of a Parent Company in the Banking Sector (Bank Holding Company) is submitted to the Financial Services Authority at the address:
   1) Department of Licensing and Banking Information, for Commercial Banks; or
   2) Sharia Banking Department, for Sharia Commercial Banks.
   b. The submission of the application as referred to in letter a is accompanied by supporting documents consisting of:
   1) minutes of the General Meeting of Shareholders (RUPS) of each Bank;
   2) draft articles of association of the limited liability company to be proposed as the Parent Company in the Banking Sector (Bank Holding Company) or a copy of the articles of association of the limited liability company that has been approved by the competent authority for PSPs that already have a limited liability company to be proposed as the Parent Company in the Banking Sector (Bank Holding Company);
   3) draft deed of transfer of Bank shares owned by the PSP to the Parent Company in the Banking Sector (Bank Holding Company);
   4) draft plan for the Parent Company in the Banking Sector (Bank Holding Company);
   5) draft organizational structure and list of prospective members of the board of directors and prospective members of the board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company) accompanied by supporting documents in the form of:
   a) 1 (one) recent 1 (one) month 4x6 cm size photo; b) photocopy of a valid identification card in the form of an Identity Card (KTP) or passport; c) curriculum vitae; d) personal statement letter stating that they have never committed disgraceful acts in the banking, financial, and other business sectors, have never been sentenced for proven criminal offenses, and are not currently serving a sanction prohibiting them from becoming a PSP, shareholder, director, and/or commissioner of a Bank, Rural Bank, and/or Sharia Rural Financing Bank as regulated in the Financial Services Authority regulations governing the assessment of competence and propriety; and e) personal statement letter stating that they have never been declared bankrupt and have never been a shareholder, member of the board of directors, and/or member of the board of commissioners who were declared guilty of causing a company to be declared bankrupt based on a court decision within 5 (five) years prior to the date of the application submission; and
   6) competence and propriety assessment questionnaire.
   c. For PSPs as referred to in number 2, the plan for the establishment of a Parent Company in the Banking Sector (Bank Holding Company) is submitted to the Financial Services Authority at the time of submitting the application for takeover permission, while the application for the establishment of a Parent Company in the Banking Sector (Bank Holding Company) is submitted to the Financial Services Authority no later than 3 (three) months after the takeover is legally executed.
   d. The Financial Services Authority conducts an assessment of competence and propriety for prospective members of the board of directors and prospective members of the board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company), referring to the procedures for conducting the assessment of competence and propriety for prospective members of the board of directors and prospective members of the board of commissioners of Banks as regulated in the Financial Services Authority regulations governing the assessment of competence and propriety. e. The Financial Services Authority has the authority to grant:
   1) approval or rejection for prospective members of the board of directors and/or prospective members of the board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company);
   2) approval or rejection for the application for the establishment of a Parent Company in the Banking Sector (Bank Holding Company); and
   3) confirmation regarding the plan for the transfer of Bank shares to the Parent Company in the Banking Sector (Bank Holding Company),
   no later than 30 (thirty) working days after all required documents are received completely and correctly. f. In accordance with the POJK on Single Ownership, PSPs as referred to in number 2 are required to establish a Parent Company in the Banking Sector (Bank Holding Company) and transfer shares to the Parent Company in the Banking Sector (Bank Holding Company) no later than 1 (one) year after the takeover is legally executed. g. The realization of the establishment of a Parent Company in the Banking Sector (Bank Holding Company) is reported to the Financial Services Authority at the address:
   1) Department of Supervision of the Relevant Bank or Department of Sharia Banking for Banks headquartered in the Special Capital Region of Jakarta Province; or
   2) Regional Office of the Financial Services Authority or Local Office of the Financial Services Authority, according to the region where the Bank's headquarters is located,
   no later than 10 (ten) working days after the establishment of the Parent Company in the Banking Sector (Bank Holding Company). h. The realization of the transfer of PSP shares to the Parent Company in the Banking Sector (Bank Holding Company) is reported to the Financial Services Authority no later than 10 (ten) working days after the implementation of the share transfer, accompanied by:
   1) minutes of the RUPS of the Bank controlled by the PSP;
   2) ownership data of the Bank after the change in share composition; and
   3) in the event that the change in share ownership composition is caused by an increase in paid-up capital, accompanied by:
   a) proof of deposit; and b) personal statement letter as referred to in item b.5).d) and item b.5).e).
   i. Changes to the Board of Directors and Board of Commissioners of the Parent Company in the Banking Sector (Bank Holding Company)
   1) In accordance with the POJK on Single Ownership, prospective members of the board of directors and prospective members of the board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company) must obtain approval from the Financial Services Authority before being appointed and holding office.
   2) The application to obtain the aforementioned approval is submitted to the Financial Services Authority at the address:
   a) Department of Licensing and Banking Information, for Commercial Banks; or b) Department of Sharia Banking, for Sharia Commercial Banks.
   3) In order to grant approval or rejection for the aforementioned application, the Financial Services Authority conducts an assessment of competence and propriety for prospective members of the board of directors and/or prospective members of the board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company), referring to the procedures for assessing the competence and propriety for prospective members of the board of directors and prospective members of the board of commissioners of Banks as regulated in the Financial Services Authority regulations governing the assessment of competence and propriety.
   4) Approval or rejection for the submission of prospective members of the board of directors and/or prospective members of the board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company) is given no later than 30 (thirty) working days after all required documents are received completely and correctly.
   5) The approval of the Financial Services Authority as referred to in number 4) is valid for a period of 6 (six) months.
   6) The appointment of the board of directors and/or board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company) by the RUPS is declared effective after obtaining approval from the Financial Services Authority.
   7) The appointment of the board of directors and/or board of commissioners of the Parent Company in the Banking Sector (Bank Holding Company) is reported to the Financial Services Authority no later than 10 (ten) working days after the effective date of appointment, accompanied by the minutes of the RUPS.

8. In order to provide strategic direction and consolidate financial reports from Banks that are subsidiaries, the Parent Company in the Banking Sector (Bank Holding Company) performs the following duties:
   a. Establishing the strategic work program of the Parent Company in the Banking Sector (Bank Holding Company) for a minimum period of 3 (three) years ahead. b. Providing strategic direction for a minimum period of 3 (three) years ahead and consolidating the work programs of Banks that are subsidiaries.
   c. Approving and supervising the implementation of the strategic work programs of Banks that are subsidiaries.
   d. Consolidating the financial reports of subsidiaries with the financial reports of the Parent Company in the Banking Sector (Bank Holding Company) and creating other necessary consolidation reports.

9. The capital of the Parent Company in the Banking Sector (Bank Holding Company) is regulated as follows:
   a. The amount of paid-up capital of the Parent Company in the Banking Sector (Bank Holding Company) is at least equal to the total nominal value of shares invested by the PSP in the Bank. b. In the event that at the time of the establishment of the Parent Company in the Banking Sector (Bank Holding Company) the amount of paid-up capital is smaller than the total nominal value of shares invested by the PSP in the Bank required to fulfill the Single Ownership obligation in Indonesian banking, the addition of paid-up capital by the PSP can be carried out through the transfer of PSP shares in the said Bank to the Parent Company in the Banking Sector (Bank Holding Company).
   c. The ownership of Bank shares by the Parent Company in the Banking Sector (Bank Holding Company) is at most equal to the net equity of the Parent Company in the Banking Sector (Bank Holding Company).
   d. The term "net equity" refers to the sum of paid-up capital with reserves and profits, minus participations and losses.

10. The Parent Company in the Banking Sector (Bank Holding Company) can stand alone as 1 (one) legal entity or be a financial holding company that consolidates financial institutions owned by the PSP.

11. A financial holding company acting as a Parent Company in the Banking Sector (Bank Holding Company) must establish a Parent Company in the Banking Sector (Bank Holding Company) activity unit as the executor of holding activities for Banks that are subsidiaries.

12. The Parent Company in the Banking Sector (Bank Holding Company) activity unit in a financial holding company is led by one of the directors of the financial holding company.

13. The Financial Services Authority conducts an assessment of competence and propriety for the director of the financial holding company appointed to oversee the Parent Company in the Banking Sector (Bank Holding Company) activity unit as the executor of holding for controlled Banks. The implementation of the assessment of competence and propriety for the director of the financial holding company refers to the procedures for assessing the competence and propriety for prospective members of the board of directors of Banks as regulated in the Financial Services Authority regulations governing the assessment of competence and propriety.

14. In the event that the PSP requires an extension of the time limit for establishing the Parent Company in the Banking Sector (Bank Holding Company), the application is submitted to the Financial Services Authority no later than 20 (twenty) working days before the time limit as referred to in item 7.f.

15. The PSP reports the realization of the establishment of the Parent Company in the Banking Sector (Bank Holding Company) activity unit in the financial holding company to the Financial Services Authority no later than 10 (ten) working days after the realization of the establishment of the Parent Company in the Banking Sector (Bank Holding Company) activity unit in the financial holding company at the address as referred to in item 7.g.

16. In accordance with the POJK on Single Ownership, PSPs as referred to in number 2 who choose to establish a Parent Company in the Banking Sector (Bank Holding Company) activity unit in a financial holding company are required to establish the Parent Company in the Banking Sector (Bank Holding Company) activity unit in the financial holding company no later than 6 (six) months after the takeover is legally executed.

IV. ESTABLISHMENT OF HOLDING FUNCTION

1. The Holding Function can only be carried out by PSPs in the form of:
   a. Banks with Indonesian legal entity status; or b. Central Government Agencies.

2. The Holding Function in a PSP in the form of a Bank with Indonesian legal entity status is led by a director who oversees the strategic planning field.

3. The PSP submits information and supporting documents regarding the plan for the establishment of the Holding Function to the Financial Services Authority, consisting of:
   a. organizational structure of the Holding Function; b. list of executors of the Holding Function, accompanied by documents as referred to in item III.7.b.5); and
   c. letter of appointment to become an executor of the Holding Function.

4. The Holding Function located under a Central Government Agency is led by an official of level I (one) or an official 1 (one) level below the minister.

5. The procedure for establishing the Holding Function is as follows:
   a. The takeover plan and the plan for the establishment of the Holding Function are included in the Bank Business Plan submitted to the Financial Services Authority, in the section on management policy and strategy as referred to in the Financial Services Authority regulations governing bank business plans. b. The application for the establishment of the Holding Function is submitted to the Financial Services Authority at the address:
   1) Department of Supervision of the Relevant Bank or Department of Sharia Banking for Banks headquartered in the Special Capital Region of Jakarta Province; or
   2) Regional Office of the Financial Services Authority or Local Office of the Financial Services Authority, according to the region where the Bank's headquarters is located.
   c. The submission of the application as referred to in letter b is accompanied by supporting documents consisting of:
   1) minutes of the RUPS of each Bank containing the plan for the establishment of the Holding Function; and
   2) draft arrangement of executors and organizational structure of the Holding Function.
   d. The establishment of the Holding Function is carried out by the PSP that will carry out the takeover of Banks so as to become the controller of more than 1 (one) Bank. e. For PSPs as referred to in letter d, the plan for the establishment of the Holding Function is submitted to the Financial Services Authority at the time of submitting the application for takeover permission, while the application for the establishment of the Holding Function is submitted to the Financial Services Authority no later than 3 (three) months after the takeover is legally executed. f. The Financial Services Authority will grant approval for the application for the establishment of the Holding Function no later than 30 (thirty) working days after all required documents are received completely and correctly. g. In accordance with the POJK on Single Ownership, PSPs as referred to in letter d are required to establish the Holding Function no later than 6 (six) months after the takeover is legally executed. h. The realization of the establishment of the Holding Function is reported to the Financial Services Authority at the address:
   1) Department of Supervision of the Relevant Bank or Department of Sharia Banking for Banks headquartered in the Special Capital Region of Jakarta Province; or
   2) Regional Office of the Financial Services Authority or Local Office of the Financial Services Authority, according to the region where the Bank's headquarters is located,
   no later than 10 (ten) working days after the realization of the establishment of the Holding Function.

6. In order to provide strategic direction and consolidate financial reports from Banks that are subsidiaries, the Holding Function has duties as stated in the duties of the Parent Company in the Banking Sector (Bank Holding Company) in item III.8.

7. In the event that the establishment of the Holding Function is preceded by a takeover process, the takeover can only be carried out in a single continuous process without interruption with the establishment of the Holding Function.

8. In the event that the PSP requires an extension of the time limit for establishing the Holding Function, the application is submitted to the Financial Services Authority no later than 20 (twenty) working days before the time limit as referred to in item 5.g.

V. SUPERVISION AND REPORTING

1. The Financial Services Authority conducts supervision of the Parent Company in the Banking Sector (Bank Holding Company) and the Holding Function, including conducting examinations, both periodically and ad hoc when necessary.

2. In order to implement such supervision, the Parent Company in the Banking Sector (Bank Holding Company) and the Holding Function must submit to the Financial Services Authority (OJK):

a. the strategic work program of the Parent Company in the Banking Sector (Bank Holding Company) as referred to in item III.8, or the strategic work program of the Holding Function as referred to in item IV.6, to the Financial Services Authority annually, at the latest by the end of February;

b. the supervision report of the Parent Company in the Banking Sector (Bank Holding Company) and the Holding Function regarding the Bank, submitted every semester, respectively for the positions of June and December. For the position of June, the aforementioned supervision report must be submitted at the latest by the end of August, while for the position of December, it must be submitted at the latest by the end of February of the following year; and

c. other reports, including the transparency report on the financial condition of the Parent Company in the Banking Sector (Bank Holding Company) and the report on the implementation of consolidated risk management for the Parent Company in the Banking Sector (Bank Holding Company) that controls a Bank, with formats, procedures, and reporting periods referring to the regulations of the Financial Services Authority regarding transparency and publication of bank reports and the regulations of the Financial Services Authority regarding the implementation of consolidated risk management for banks that control subsidiaries.

3. In accordance with the POJK on Single Ownership, the PSP through the Bank must submit a plan to fulfill the Single Ownership requirements to the Financial Services Authority, which must contain at least the chosen adjustment method, the action plan, and the implementation schedule, which are known by the Bank's Directors and Commissioners.

4. In accordance with the POJK on Single Ownership, the Bank must submit progress reports on the fulfillment of Single Ownership requirements to the Financial Services Authority

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

every quarter calculated from the approval of the Financial Services Authority regarding the plan to fulfill the Single Ownership requirements, including if there are obstacles in the implementation of the Single Ownership policy in Indonesian banking and the action plan to overcome the aforementioned obstacles, as well as the target completion timeframe.

5. Work programs, plans to fulfill Single Ownership requirements, and reports as referred to in numbers 2 through 4, must be submitted to:

a. the relevant Bank Supervision Department or Islamic Banking Department, for Banks headquartered in the Special Capital Region of Jakarta Province; or

b. the Regional Office of the Financial Services Authority or the local Office of the Financial Services Authority, according to the region where the Bank's headquarters is located.

VI. CLOSING

At the time this Circular Letter of the Financial Services Authority takes effect, Bank Indonesia Circular Letter No. 15/2/DPNP regarding Single Ownership in Indonesian Banking is revoked and declared invalid.

The provisions in this Circular Letter of the Financial Services Authority take effect on the date of issuance.

Established in Jakarta on July 19, 2017

CHIEF EXECUTIVE OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON