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

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 2 OF 2024
CONCERNING
THE IMPLEMENTATION OF SHARIA GOVERNANCE FOR SHARIA COMMERCIAL BANKS AND SHARIA BUSINESS UNITS BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that with the increasing role of Islamic banking in supporting economic growth and national stability, it is necessary to strengthen Sharia governance in Sharia Commercial Banks and Sharia Business Units; b. that it is necessary to increase the authority and role of the Sharia Supervisory Board in the implementation of Sharia governance in Sharia Commercial Banks and Sharia Business Units;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning the Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units;

Recalling:

1. Law Number 21 of 2008 concerning Islamic Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867) as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253) as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE IMPLEMENTATION OF SHARIA GOVERNANCE FOR SHARIA COMMERCIAL BANKS AND SHARIA BUSINESS UNITS.

CHAPTER I
GENERAL PROVISIONS

Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Bank means Sharia Commercial Banks and Sharia Business Units.
2. Sharia Commercial Bank, hereinafter abbreviated as BUS, is a bank that conducts business activities based on Sharia principles, which in its activities provides services in the payment circulation.
3. Conventional Commercial Bank, hereinafter abbreviated as BUK, is a bank that conducts business activities conventionally, which in its activities provides services in the payment circulation.
4. Sharia Business Unit, hereinafter abbreviated as UUS, is a work unit of the BUK headquarters that functions as the parent office of offices or units that conduct business activities based on Sharia principles, or a work unit at the branch office of a bank located abroad that conducts conventional business activities, which functions as the parent office of Sharia auxiliary branches and/or Sharia units.
5. Sharia Principle means Islamic legal principles based on fatwas and/or Sharia conformity statements issued by an institution having authority in determining fatwas in the Sharia field.
6. General Meeting of Shareholders, hereinafter abbreviated as GMS, is the party having authority not delegated to the Board of Directors or Board of Commissioners within the limits determined by law regarding limited liability companies and/or the Articles of Association.
7. Board of Directors is the organ of BUS and BUKs having UUSs that has the authority and full responsibility for the management of the Bank for the benefit of the Bank, in accordance with the purpose and objectives of the Bank and representing the Bank, both inside and outside of court, in accordance with the provisions of the Articles of Association.
8. Board of Commissioners is the organ of BUS and BUKs having UUSs that is tasked with conducting general and/or specific supervision in accordance with the Articles of Association and providing advice to the Board of Directors.
9. Sharia Supervisory Board, hereinafter abbreviated as DPS, is the party having the task and function of supervising the implementation of BUS and BUKs having UUSs activities to ensure compliance with Sharia Principles.
10. Sharia Governance at the Bank is the structure, process, and mechanism for managing the Bank to ensure that the Bank's business activities are conducted in accordance with Sharia Principles.
11. Executive Official is an official of BUS and BUKs having UUSs who is directly responsible to members of the Board of Directors or has significant influence on the Bank's policies and/or operations.

CHAPTER II
IMPLEMENTATION OF SHARIA PRINCIPLES AND SHARIA GOVERNANCE FRAMEWORK

Article 2
(1) Banks are required to implement Sharia Principles in the conduct of business activities.
(2) Business activities as referred to in paragraph (1) consist of:
a. Bank business activities; and b. other activities conducted by the Bank other than business activities, at all levels or tiers of the organization, in accordance with applicable legislation.

Article 3
(1) Sharia Principles as referred to in Article 2 paragraph (1) are based on fatwas and/or Sharia conformity statements determined by the National Sharia Council of the Indonesian Ulema Council. (2) In order to formulate regulations related to Sharia Principles as referred to in paragraph (1), the Financial Services Authority establishes a Sharia Finance Development Committee. (3) The Sharia Finance Development Committee as referred to in paragraph (2) coordinates with the National Sharia Council of the Indonesian Ulema Council in the formulation of regulations as referred to in paragraph (2).

Article 4
(1) To ensure compliance with Sharia Principles as referred to in Article 2, Banks are required to implement Sharia Governance.
(2) In implementing Sharia Governance as referred to in paragraph (1), Banks are required to have a Sharia governance framework manifested at least through:
a. the implementation of the duties and responsibilities of the DPS; b. the application of the Sharia compliance function;
c. the application of the Sharia risk management function;
d. the application of the Sharia internal audit function; and e. the implementation of external review of Sharia governance.
(3) The Board of Directors overseeing the functions as referred to in paragraph (2) letters b, c, and d is responsible for the effectiveness of the implementation of these functions in fulfilling Sharia Principles. (4) The functions as referred to in paragraph (2) letters b, c, and d coordinate with the DPS in carrying out their duties.

Article 5
(1) Banks are required to have internal procedures regarding the implementation of Sharia Governance at the Bank in the conduct of business activities.
(2) Banks are required to conduct evaluation and revision of the internal procedures as referred to in paragraph (1) to ensure compliance with Sharia Principles and applicable legislation.

Article 6
The Financial Services Authority conducts assessments of the implementation of Sharia Governance at Banks.

Article 7
(1) Banks violating regulations as referred to in Article 2 paragraph (1), Article 4 paragraph (1), paragraph (2), and/or Article 5, are subject to administrative sanctions in the form of written reprimands. (2) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (1), and continues to violate regulations as referred to in Article 2 paragraph (1), Article 4 paragraph (1), paragraph (2), and/or Article 5, the Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new Bank products; b. suspension of certain Bank business activities;
c. prohibition on expanding business activities;
d. prohibition on conducting new business activities; and/or e. reduction of the governance factor assessment in the Bank's health level assessment.
(3) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2), the Bank's Principal Parties may be subject to administrative sanctions in the form of prohibitions as Principal Parties in accordance with Financial Services Authority Regulations concerning the re-evaluation of Principal Parties of financial service institutions. (4) In addition to administrative sanctions as referred to in paragraph (1), paragraph (2), and/or paragraph (3), Banks and/or controlling shareholders may be subject to administrative sanctions in the form of fines of at least IDR 2,000,000,000.00 (two billion rupiah) and at most IDR 50,000,000,000.00 (fifty billion rupiah) for each violation committed.

CHAPTER III
SHARIA SUPERVISORY BOARD (DPS)

Section One
Position, Number, and Criteria of DPS

Article 8
(1) DPS members are established as Principal Parties of the Bank in accordance with Financial Services Authority Regulations concerning the assessment of competence and propriety for Principal Parties of financial service institutions and Financial Services Authority Regulations concerning the re-evaluation of Principal Parties of financial service institutions. (2) Candidates for DPS members must obtain approval from the Financial Services Authority through a competence and propriety assessment before carrying out actions, tasks, and functions as Principal Parties as referred to in paragraph (1). (3) In order to obtain approval from the Financial Services Authority as referred to in paragraph (2), candidates for DPS members must obtain a recommendation from the National Sharia Council of the Indonesian Ulema Council. (4) DPS members while in office must possess:
a. integrity; b. competence; and
c. a good reputation.
(5) DPS members as Principal Parties as referred to in paragraph (1) become effective on January 1, 2025.
(6) Further provisions concerning the competence and propriety assessment of DPS members as referred to in paragraph (2) are established by the Financial Services Authority.

Article 9
DPS members are established as Related Parties in accordance with:
a. Financial Services Authority Regulations concerning the maximum limit for fund disbursement and large fund disbursement for Sharia Commercial Banks; and b. Financial Services Authority Regulations concerning the maximum limit for granting credit and providing large funds for commercial banks.

Article 10
(1) Banks are required to have DPS members with a minimum number of 3 (three) persons and a maximum of 50% (fifty percent) of the number of Board of Directors members.
(2) The number of DPS members as referred to in paragraph (1) becomes effective on January 1, 2026, except for Banks established after this Financial Services Authority Regulation takes effect.

Article 11
(1) The DPS must be led by a chairman chosen from among the DPS members.
(2) If necessary, other DPS members may be appointed as Deputy Chairmen of the DPS.

Section Two
Independence of DPS

Article 12
(1) DPS members are prohibited from holding concurrent positions:
a. as members of the Board of Directors, Board of Commissioners, or Executive Officials at financial institutions or financial companies, whether banks or non-banks; b. as DPS members at more than 1 (one) other Bank;
c. as members of Sharia Supervisory Boards at more than 2 (two) financial institutions other than Banks;
d. as members of the Board of Directors, Board of Commissioners, Sharia Supervisors, or Executive Officials at more than 1 (one) non-financial institution or company, whether located domestically or abroad; e. in functional task areas at banking financial institutions and/or non-banking financial institutions located domestically or abroad; f. as public officials; g. in other positions that may cause conflicts of interest in the execution of duties as DPS members; and/or h. in other positions in accordance with applicable legislation. (2) The prohibition on concurrent positions as referred to in paragraph (1) does not apply in the event that DPS members:
a. serve as members of the Board of Directors, Board of Commissioners, or Executive Officials who perform supervisory functions at 1 (one) non-bank subsidiary company controlled by the Bank; b. serve in organizations or non-profit institutions; and/or
c. serve as DPS members at other Banks and/or Sharia Supervisory Boards at financial institutions other than Banks, which are members of the Bank's financial conglomerate,
provided that this does not cause the individual to neglect the execution of duties and responsibilities as DPS members.
(3) With certain considerations, the Financial Services Authority may establish policies regarding concurrent positions as referred to in paragraph (1) letter e.
(4) For candidates for DPS members who hold concurrent positions as referred to in paragraph (2), a statement is required to:
a. maintain integrity; b. avoid all forms of conflict of interest; and
c. avoid actions that may harm the Bank and/or cause the Bank to violate prudential principles and/or Sharia Principles, during their tenure as DPS members.

Article 13
A majority of DPS members are prohibited from having family relationships up to the second degree with other DPS members, Board of Commissioners members, and/or Board of Directors members.

Section Three
Term of Office, Appointment, and Dismissal of DPS

Article 14
(1) The term of office for DPS members must be established for a period not exceeding the term of office of Board of Commissioners members.
(2) The Bank establishes in the Articles of Association regarding:
a. the term of office period for DPS members starting from the effective date of appointment of DPS members by the GMS; and b. other conditions in fulfilling the position of DPS members. (3) DPS members serve for a specific period and may be reappointed after obtaining GMS approval, for a maximum of 2 (two) consecutive terms of office. (4) DPS members who have served for 2 (two) consecutive terms of office may be reappointed in the subsequent period as DPS members considering:
a. the results of the DPS member performance assessment; b. the results of external reviews regarding the execution of DPS member duties; and
c. the DPS member's statement at the GMS regarding their independence.

Article 15
(1) Each proposal for the appointment and/or replacement of DPS members to the GMS must take into account the recommendation of the committee performing the nomination function.
(2) Members of the committee performing the nomination function who have a conflict of interest with the proposed recommendation must disclose this in the recommended proposal.
(3) The appointment and/or replacement of DPS members prioritize professional composition, independence, competency suitability, and consider diversity, which are appropriately needed in the execution of DPS duties and responsibilities. (4) The Bank establishes in the Articles of Association regarding the criteria, mechanisms, and procedures for the appointment, replacement, dismissal, and/or resignation of DPS members, including the authority attached to the DPS.

Article 16
(1) The dismissal or replacement of DPS members must prioritize the principal interests of the Bank.
(2) The dismissal or replacement of DPS members as referred to in paragraph (1) conducted before the end of the DPS member term of office must consider at least:
a. the DPS member is assessed as unable to carry out their duties and responsibilities; b. the dismissal or replacement of DPS members is not based on subjective assessments by shareholders, but on objective assessments related to Bank management;
c. the dismissal or replacement of DPS members has gone through planning and applicable mechanisms, which at least consider the nomination function and have been placed on the GMS agenda;
d. the dismissal or replacement of DPS members does not cause organizational and business activity problems for the Bank; e. the execution of dismissal or replacement of DPS members prioritizes good communication patterns among relevant parties; and f. it is conducted prioritizing the application of good governance and prudential aspects. (3) Dismissal or replacement of DPS members before the end of the term of office must obtain prior approval from the Financial Services Authority before being decided in the GMS. (4) In providing approval as referred to in paragraph (3), the Financial Services Authority conducts an assessment of the feasibility of the plan to dismiss or replace DPS members. (5) As material for assessment by the Financial Services Authority as referred to in paragraph (4), the Bank submits a request to the Financial Services Authority containing information regarding:
a. reasons or considerations for the dismissal or replacement of DPS members; and b. the Bank may include the profile of the replacement candidate assessed to meet the requirements for competence and propriety assessment. (6) The submission of the request to the Financial Services Authority as referred to in paragraph (5) must be submitted by the Bank at least 1 (one) month before the planned implementation of the GMS containing the agenda for the dismissal or replacement of DPS members. (7) In the event that the Financial Services Authority assesses that the plan to dismiss or replace DPS members is not feasible, then:
a. the plan to dismiss or replace DPS members is not approved by the Financial Services Authority; and b. the Bank is prohibited from including the agenda for the dismissal or replacement of DPS members in the GMS.

Article 17
(1) DPS members may resign from their position before the term of office ends through written notification to the Bank.
(2) In the event that a DPS member resigns, resulting in the number of DPS members becoming less than 3 (three) persons as referred to in Article 10, and the resignation has been established by the GMS and new DPS members are appointed, the resignation is valid. (3) The Financial Services Authority has the authority to conduct an evaluation of DPS member resignations to assess whether the resignation is voluntary, involves coercion, or other conditions.

Article 18
The authority of the Financial Services Authority to take corrective and evaluation actions regarding the appointment, dismissal, replacement, and/or resignation of DPS members may be communicated by the Financial Services Authority through written orders in accordance with Financial Services Authority Regulations concerning written orders.

Section Four
Duties, Responsibilities, and Authority of DPS

Article 19
The DPS is required to carry out duties and responsibilities in accordance with the Sharia Governance framework and good governance principles.

Article 20
(1) The DPS is tasked with conducting supervision for the benefit of the Bank over policies and the course of management by the Board of Directors to ensure compliance with Sharia Principles and is responsible for such supervision, as well as providing advice to the Board of Directors, including providing Sharia opinions regarding Bank activities. (2) The DPS is required to carry out duties, authority, and responsibilities for the benefit of the Bank with good faith. (3) In conducting supervision, the DPS is required to direct, monitor, and evaluate the implementation of Sharia Governance, including the application of Sharia risk management, Sharia compliance, and Sharia internal audit functions in an integrated manner, as well as the Bank's strategic policies related to the implementation of Sharia Principles, in accordance with applicable legislation, the Articles of Association, and/or GMS decisions. (4) The DPS receives and executes authority delegated and/or granted to the DPS in accordance with applicable legislation, the Articles of Association, and/or GMS decisions. (5) Further provisions regarding the duties and responsibilities of the DPS are established by the Financial Services Authority.

Article 21
(1) The DPS is required to submit reports on the results of DPS supervision to the Financial Services Authority on a semi-annual basis.
(2) The report as referred to in paragraph (1) must be submitted to the Financial Services Authority at the latest 2 (two) months after the end of the relevant semi-annual period. (3) The DPS may submit reports to the Financial Services Authority at any time if significant violations of Sharia Principles are found. (4) The submission of DPS supervision results reports to the Financial Services Authority as referred to in paragraph (1) is addressed to:
a. the Sharia Banking Department or the Financial Services Authority Office in Jakarta, for Banks with headquarters in the Special Capital Region of Jakarta Province or Banten Province; or b. the local Financial Services Authority Office, for Banks with headquarters outside the Special Capital Region of Jakarta Province or Banten Province, which is submitted online through the Financial Services Authority's reporting system in accordance with the procedures set forth in Financial Services Authority Regulations concerning the reporting of commercial banks through the Financial Services Authority's reporting system. (5) In the event that the Financial Services Authority's reporting system is unavailable or in a force majeure situation, submission is conducted through the Financial Services Authority's correspondence system. (6) In the event that the Financial Services Authority's correspondence system as referred to in paragraph (5) is unavailable due to a force majeure situation, submission is conducted offline to the Financial Services Authority. (7) Further provisions regarding DPS supervision results reports are established by the Financial Services Authority.

Article 22
The DPS is required to supervise the Board of Directors' follow-up on findings from audits or examinations and recommendations from the Bank's internal audit work units, external auditors, results of Financial Services Authority supervision, and/or results of supervision by other authorities and institutions, regarding the implementation of Sharia Principles.

Article 23
(1) The DPS is required to have guidelines and work regulations that are binding for each DPS member.
(2) The guidelines and work regulations as referred to in paragraph (1) must include at least:
a. the duties, responsibilities, and authority of the DPS; b. the arrangement of DPS authority and decision-making procedures;
c. the arrangement of DPS work ethics;
d. the arrangement of DPS meetings; e. prohibitions against the DPS; f. DPS performance evaluation; and g. the work relationship pattern between the DPS and the Board of Directors and Board of Commissioners.

Article 24
The DPS is required to provide time to carry out duties and responsibilities optimally in accordance with the guidelines and work regulations.

Article 25
The DPS is required to maintain all data and information related to the Bank in accordance with applicable legislation.

Article 26
(1) To support the implementation of Sharia Governance as referred to in Article 4 paragraph (1) at all levels and tiers of the organization, the DPS may become a member of each committee supporting the execution of the Board of Commissioners' tasks. (2) In the event that there are committees supporting the execution of the Board of Commissioners' tasks that do not include DPS members, such committees are required to request the DPS's opinion on every discussion related to Sharia Principles.

Article 27
Committees performing the nomination function at BUS or BUKs having UUSs, in addition to carrying out duties and responsibilities in accordance with Financial Services Authority Regulations concerning the implementation of governance for commercial banks, are required to be tasked and responsible for executing nomination policies:
a. formulating and providing recommendations regarding systems and procedures for the selection and/or replacement of DPS members to the Board of Commissioners for submission to the GMS; b. identifying and providing recommendations regarding candidates for DPS members to the Board of Commissioners for submission to the GMS; and
c. formulating mechanisms and conducting DPS performance assessments.

Article 28
Banks are required to have adequate support functions for the Sharia Supervisory Board (DPS) to support the implementation of the duties and responsibilities of the DPS.

Fifth Section
Support from the Board of Directors and Board of Commissioners for the Implementation of DPS Duties

Article 29
(1) The Board of Directors is required to support the implementation of DPS duties as referred to in Article 20 paragraph (1) and Article 22, at least:
a. providing accurate, relevant, and timely data and information to the DPS in the framework of implementing DPS duties; b. ensuring the availability and adequacy of internal reporting supported by adequate management information systems to support the process of implementing DPS duties; and
c. providing adequate facilities and infrastructure to support the process of implementing DPS duties.
(2) The Board of Directors is required to follow up on recommendations from the results of DPS supervision as referred to in Article 20 paragraph (1).
(3) The Board of Commissioners is required to ensure that the Board of Directors has followed up on recommendations from the results of DPS supervision as referred to in paragraph (2).

Sixth Section
DPS Meetings

Article 30
(1) The DPS is required to hold DPS meetings at least 1 (one) time in 1 (one) month.
(2) DPS meetings as referred to in paragraph (1) are held if attended by a majority of DPS members.
(3) The implementation of DPS meetings as referred to in paragraph (1) must be attended by all DPS members physically at least 2 (two) times in 1 (one) year.

Article 31
(1) Banks are required to hold joint DPS meetings with the Board of Directors at least 1 (one) time in 4 (four) months.
(2) DPS meetings as referred to in paragraph (1) are held if attended by a majority of DPS members and a majority of Board of Directors members.
(3) Banks are required to hold joint DPS meetings with the Board of Commissioners at least 1 (one) time in 4 (four) months.
(4) DPS meetings as referred to in paragraph (3) are held if attended by a majority of DPS members and a majority of Board of Commissioners members.
(5) Banks are required to have internal procedures in the implementation of DPS meetings as referred to in paragraph (1) and paragraph (3).

Article 32
(1) Decision-making in DPS meetings must first be carried out based on deliberation to reach consensus.
(2) In the event that deliberation to reach consensus as referred to in paragraph (1) is not achieved, decision-making in DPS meetings is carried out based on the majority of votes. (3) All DPS decisions as referred to in paragraph (1) and paragraph (2) are binding on all DPS members. (4) The DPS is required to create minutes of DPS meetings as referred to in paragraph (1) and document them. (5) Differences of opinion occurring in DPS meetings as referred to in paragraph (2) must be clearly stated in the minutes of DPS meetings along with the reasons for the differences of opinion.

Seventh Section
DPS Transparency Aspects

Article 33
(1) DPS members are required to disclose at least:
a. share ownership reaching 5% (five percent) or more, both in the Bank in question and in other banks and/or companies, located domestically and abroad; b. financial relationships with members of the Board of Directors, members of the Board of Commissioners, other DPS members, and/or controlling shareholders of the Bank;
c. family relationships up to the second degree with members of the Board of Directors, members of the Board of Commissioners, other DPS members, and/or controlling shareholders of the Bank; and
d. concurrent positions as DPS members in Banks, financial institutions other than Banks, and/or Sharia supervisors in non-financial institutions or companies, in the Sharia Governance Implementation Report as regulated in this Financial Services Authority Regulation. (2) DPS members are required to disclose remuneration and other facilities determined by the General Meeting of Shareholders (GMS) in accordance with the Financial Services Authority Regulation regarding the implementation of governance in providing remuneration for Sharia commercial banks and Sharia business units.

Article 34
(1) DPS members are prohibited from utilizing the Bank for personal, family, and/or third-party interests that can harm or reduce the Bank's profits.
(2) DPS members are prohibited from taking and/or receiving personal benefits from the Bank other than remuneration and other facilities determined by the GMS.

Eighth Section
DPS Remuneration

Article 35
(1) Remuneration policies for DPS members are formulated in accordance with the Financial Services Authority Regulation regarding the implementation of governance in providing remuneration for Sharia commercial banks and Sharia business units. (2) Remuneration policies for DPS members as referred to in paragraph (1) must be carried out by considering:
a. risks and complexity of DPS duties in accordance with the duties and responsibilities of DPS members; and b. proportionality to the remuneration of the Board of Commissioners.

Ninth Section
Administrative Sanctions

Article 36
(1) Banks that violate provisions as referred to in Article 8 paragraph (2), paragraph (4), Article 10 paragraph (1), Article 11 paragraph (1), Article 12 paragraph (1), paragraph (4), Article 13, Article 14 paragraph (1), Article 15 paragraph (1), paragraph (2), Article 16 paragraph (1), paragraph (2), paragraph (3), paragraph (7) letter b, Article 19, Article 20 paragraph (2), paragraph (3), Article 21 paragraph (1), paragraph (2), Article 22, Article 23, Article 24, Article 25, Article 26 paragraph (2), Article 27, Article 28, Article 29, Article 30 paragraph (1), paragraph (3), Article 31 paragraph (1), paragraph (3), paragraph (5), Article 32 paragraph (1), paragraph (4), paragraph (5), Article 33, Article 34, and/or Article 35 paragraph (2), are subject to administrative sanctions in the form of written reprimands. (2) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (1), and continues to violate provisions as referred to in Article 8 paragraph (2), paragraph (4), Article 10 paragraph (1), Article 11 paragraph (1), Article 12 paragraph (1), paragraph (4), Article 13, Article 14 paragraph (1), Article 15 paragraph (1), paragraph (2), Article 16 paragraph (1), paragraph (2), paragraph (3), paragraph (7) letter b, Article 19, Article 20 paragraph (2), paragraph (3), Article 21 paragraph (1), paragraph (2), Article 22, Article 23, Article 24, Article 25, Article 26 paragraph (2), Article 27, Article 28, Article 29, Article 30 paragraph (1), paragraph (3), Article 31 paragraph (1), paragraph (3), paragraph (5), Article 32 paragraph (1), paragraph (4), paragraph (5), Article 33, Article 34, and/or Article 35 paragraph (2), the Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new Bank products; b. suspension of certain Bank business activities;
c. prohibition on expanding business activities;
d. prohibition on conducting new business activities; and/or e. reduction of governance factor assessment in the Bank's health level assessment.
(3) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2), the Bank's principal parties may be subject to administrative sanctions in the form of prohibition as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions. (4) In addition to administrative sanctions as referred to in paragraph (1), paragraph (2), and/or paragraph (3), Banks and/or controlling shareholders may be subject to administrative sanctions in the form of fines of at least IDR 2,000,000,000.00 (two billion rupiah) and at most IDR 50,000,000,000.00 (fifty billion rupiah) for each violation committed.

CHAPTER IV
SHARIA COMPLIANCE FUNCTION, SHARIA RISK MANAGEMENT, SHARIA INTERNAL AUDIT, AND EXTERNAL REVIEW OF SHARIA GOVERNANCE

First Section
Sharia Compliance Function

Article 37
(1) Banks are required to have a Sharia compliance function supported by officials at least at the Executive Officer level who have knowledge and/or understanding of Sharia banking operations in the implementation of the Sharia compliance function. (2) The duties and responsibilities of the Sharia compliance function are carried out in accordance with the Financial Services Authority Regulation regarding the implementation of compliance functions for commercial banks. (3) Further provisions regarding the Sharia compliance function are determined by the Financial Services Authority.

Second Section
Sharia Risk Management Function

Article 38
(1) Banks are required to have a Sharia risk management function supported by officials at least at the Executive Officer level who have knowledge and/or understanding of Sharia banking operations in the implementation of the Sharia risk management function. (2) The duties and responsibilities of the Sharia risk management function are carried out in accordance with the Financial Services Authority Regulation regarding the implementation of risk management for Sharia commercial banks and Sharia business units. (3) Further provisions regarding the Sharia risk management function are determined by the Financial Services Authority.

Third Section
Sharia Internal Audit Function

Article 39
(1) Banks are required to have a Sharia internal audit function supported by officials at least at the Executive Officer level who have knowledge and/or understanding of Sharia banking operations in the implementation of the Sharia internal audit function. (2) Reports on the results of internal audits related to the implementation of Sharia Principles are submitted to the DPS, the President Director, and the Board of Commissioners. (3) The duties and responsibilities of the Sharia internal audit function are carried out in accordance with the Financial Services Authority Regulation regarding the implementation of internal audit functions in commercial banks. (4) Further provisions regarding the Sharia internal audit function are determined by the Financial Services Authority.

Fourth Section
External Review of Sharia Governance

Article 40
(1) Banks are required to conduct external reviews on the implementation of Sharia governance.
(2) External reviews as referred to in paragraph (1) are conducted by public accountants and/or public accounting firms registered with the Financial Services Authority.
(3) External reviews as referred to in paragraph (1) are carried out periodically at least 1 (one) time in 3 (three) years for the period from July to June of the third subsequent year. (4) The appointment of public accountants and/or public accounting firms in carrying out external reviews as referred to in paragraph (2) is done by the Board of Commissioners considering the recommendations of the audit committee. (5) Banks are required to submit reports on the results of external reviews as referred to in paragraph (3) to the Financial Services Authority at the latest 2 (two) months after the external review period ends. (6) Banks are required to follow up on recommendations from the results of external reviews as referred to in paragraph (5). (7) Provisions regarding the implementation of external reviews as referred to in paragraph (1) shall apply for the period from July 2024 to June 2027. (8) Further provisions regarding external reviews on the implementation of Sharia governance are determined by the Financial Services Authority.

Fifth Section
Administrative Sanctions

Article 41
(1) Banks that violate provisions as referred to in Article 37 paragraph (1) are subject to administrative sanctions in accordance with the Financial Services Authority Regulation regarding the implementation of compliance functions for commercial banks. (2) Banks that violate provisions as referred to in Article 38 paragraph (1) are subject to administrative sanctions in accordance with the Financial Services Authority Regulation regarding the implementation of risk management for Sharia commercial banks and Sharia business units. (3) Banks that violate provisions as referred to in Article 39 paragraph (1) are subject to administrative sanctions in accordance with the Financial Services Authority Regulation regarding the implementation of internal audit functions in commercial banks. (4) Banks that violate provisions as referred to in Article 40 paragraph (1), paragraph (5), and/or paragraph (6) are subject to administrative sanctions in the form of written reprimands. (5) In addition to administrative sanctions as referred to in paragraph (2), Banks may be subject to administrative sanctions in the form of prohibition on issuing new Bank products. (6) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (4), and continues to violate provisions as referred to in Article 40 paragraph (1), paragraph (5), and/or paragraph (6), the Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new Bank products; b. suspension of certain Bank business activities;
c. prohibition on expanding business activities;
d. prohibition on conducting new business activities; and/or e. reduction of governance factor assessment in the Bank's health level assessment.
(7) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (4) and/or paragraph (6), the Bank's principal parties may be subject to administrative sanctions in the form of prohibition as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions. (8) In addition to administrative sanctions as referred to in paragraph (1), paragraph (2), paragraph (3), paragraph (4), paragraph (5), paragraph (6), and/or paragraph (7), Banks and/or controlling shareholders may be subject to administrative sanctions in the form of fines of at least IDR 2,000,000,000.00 (two billion rupiah) and at most IDR 50,000,000,000.00 (fifty billion rupiah) for each violation committed.

CHAPTER V
SHARIA GOVERNANCE IMPLEMENTATION REPORT AND ASSESSMENT OF SHARIA GOVERNANCE IMPLEMENTATION

First Section
Sharia Governance Implementation Report

Article 42
(1) Banks are required to prepare a Sharia Governance Implementation Report which is an integral part of the governance implementation report at the end of each fiscal year in accordance with the Financial Services Authority Regulation regarding the implementation of governance for commercial banks. (2) Provisions regarding the scope and procedures for preparing the Sharia Governance Implementation Report as referred to in paragraph (1) are determined by the Financial Services Authority.

Second Section
Self-Assessment by Banks on the Implementation of Sharia Governance

Article 43
(1) Banks are required to conduct self-assessments on the implementation of Sharia Governance at least 2 (two) times in 1 (one) year.
(2) The results of self-assessments by Banks on the implementation of Sharia Governance as referred to in paragraph (1) are an inseparable part of the governance implementation report in accordance with the Financial Services Authority Regulation regarding the implementation of governance for commercial banks. (3) Provisions regarding self-assessment on the implementation of Sharia Governance as referred to in paragraph (1) are determined by the Financial Services Authority.

Third Section
Administrative Sanctions

Article 44
(1) Banks that violate provisions as referred to in Article 42 paragraph (1) and/or Article 43 paragraph (1) are subject to administrative sanctions in the form of written reprimands. (2) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (1), and continues to violate provisions as referred to in Article 42 paragraph (1) and/or Article 43 paragraph (1), the Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new Bank products; b. suspension of certain Bank business activities;
c. prohibition on expanding business activities;
d. prohibition on conducting new business activities; and/or e. reduction of governance factor assessment in the Bank's health level assessment.
(3) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2), the Bank's principal parties may be subject to administrative sanctions in the form of prohibition as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions. (4) In addition to administrative sanctions as referred to in paragraph (1), paragraph (2), and/or paragraph (3), Banks and/or controlling shareholders may be subject to administrative sanctions in the form of fines of at least IDR 2,000,000,000.00 (two billion rupiah) and at most IDR 50,000,000,000.00 (fifty billion rupiah) for each violation committed.

CHAPTER VI
FOLLOW-UP ON NON-COMPLIANCE WITH SHARIA PRINCIPLES

Article 45
(1) Banks are required to follow up in the event that non-compliance with Sharia Principles is known and/or found in business activities and/or bank operations.
(2) Banks that violate provisions as referred to in paragraph (1) are subject to administrative sanctions in the form of written reprimands.
(3) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (2), and continues to violate provisions as referred to in paragraph (1), the Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new Bank products; b. suspension of certain Bank business activities;
c. prohibition on expanding business activities;
d. prohibition on conducting new business activities; and/or e. reduction of governance factor assessment in the Bank's health level assessment.
(4) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (2) and/or paragraph (3), the Bank's principal parties may be subject to administrative sanctions in the form of prohibition as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions. (5) In addition to administrative sanctions as referred to in paragraph (2), paragraph (3), and/or paragraph (4), Banks and/or controlling shareholders may be subject to administrative sanctions in the form of fines of at least IDR 2,000,000,000.00 (two billion rupiah) and at most IDR 50,000,000,000.00 (fifty billion rupiah) for each violation committed.

CHAPTER VII
OTHER PROVISIONS

Article 46
(1) A majority of Board of Directors members and Board of Commissioners members are prohibited from having family relationships up to the second degree with DPS members.
(2) In fulfilling governance implementation, Board of Directors members and Board of Commissioners members are required to disclose:
a. financial relationships with DPS members; and b. family relationships up to the second degree with DPS members, in the Sharia Governance Implementation Report as regulated in this Financial Services Authority Regulation. (3) Banks that violate provisions as referred to in paragraph (1) and/or paragraph (2) are subject to administrative sanctions in the form of written reprimands. (4) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (3), and continues to violate provisions as referred to in paragraph (1) and/or paragraph (2), the Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new Bank products; b. suspension of certain Bank business activities;
c. prohibition on expanding business activities;
d. prohibition on conducting new business activities; and/or e. reduction of governance factor assessment in the Bank's health level assessment.
(5) In the event that a Bank has been subject to administrative sanctions as referred to in paragraph (3) and/or paragraph (4), the Bank's principal parties may be subject to administrative sanctions in the form of prohibition as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation for principal parties of financial service institutions. (6) In addition to administrative sanctions as referred to in paragraph (3), paragraph (4), and/or paragraph (5), Banks and/or controlling shareholders may be subject to administrative sanctions in the form of fines of at least IDR 2,000,000,000.00 (two billion rupiah) and at most IDR 50,000,000,000.00 (fifty billion rupiah) for each violation committed.

CHAPTER VIII
TRANSITIONAL PROVISIONS

Article 47
(1) Applications for prospective DPS members submitted before January 1, 2025, shall be processed in accordance with the Financial Services Authority Regulation regarding Sharia commercial banks or the Financial Services Authority Regulation regarding Sharia business units. (2) DPS members who have obtained approval from the Financial Services Authority before January 1, 2025, are not subject to the competency and propriety assessment process as referred to in the Financial Services Authority Regulation regarding competency and propriety assessment for principal parties of financial service institutions until the end of their term of office.

Article 48
At the time this Financial Services Authority Regulation comes into force:
a. DPS members who hold concurrent positions as prohibited in Article 12 paragraph (1) may continue to hold concurrent positions until the end of such term of office; and b. DPS members who are currently serving a term of office for more than 2 (two) periods as referred to in Article 14 paragraph (3) may continue to serve until the end of that term of office.

CHAPTER IX
CLOSING PROVISIONS

Article 49
At the time this Financial Services Authority Regulation comes into force:
a. Bank Indonesia Regulation Number 11/33/PBI/2009 regarding the Implementation of Good Corporate Governance for Sharia Commercial Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2009 Number 175, Supplement to the State Gazette of the Republic of Indonesia Number 5085); b. Article 58, Article 59 paragraph (1), Article 59 paragraph (3), Article 59 paragraph (4), and Article 60 of Financial Services Authority Regulation Number 16/POJK.03/2022 regarding Sharia Commercial Banks (State Gazette of the Republic of Indonesia Year 2022 Number 19/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 11/OJK); and
c. Article 14 paragraph (1), Article 14 paragraph (3), Article 14 paragraph (4), Article 15, Article 16, Article 19 paragraph (3), and Article 19 paragraph (4) of Financial Services Authority Regulation Number 12 of 2023 regarding Sharia Business Units (State Gazette of the Republic of Indonesia Year 2023 Number 20/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 45/OJK),
are repealed and declared invalid.

Article 50
At the time this Financial Services Authority Regulation comes into force:
a. Article 61 and Article 62 of Financial Services Authority Regulation Number 16/POJK.03/2022 regarding Sharia Commercial Banks (State Gazette of the Republic of Indonesia Year 2022 Number 19/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 11/OJK); and b. Article 17 and Article 18 of Financial Services Authority Regulation Number 12 of 2023 regarding Sharia Business Units (State Gazette of the Republic of Indonesia Year 2023 Number 20/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 45/OJK), are repealed and declared invalid on January 1, 2025.

Article 51
At the time this Financial Services Authority Regulation comes into force:
a. Article 59 paragraph (2) of Financial Services Authority Regulation Number 16/POJK.03/2022 regarding Sharia Commercial Banks (State Gazette of the Republic of Indonesia Year 2022 Number 19/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 11/OJK); and b. Article 14 paragraph (2) of Financial Services Authority Regulation Number 12 of 2023 regarding Sharia Business Units (State Gazette of the Republic of Indonesia Year 2023 Number 20/OJK, Supplement to the State Gazette of the Republic of Indonesia Number 45/OJK),

Revoked and declared invalid as of January 1, 2026.

Article 52
At the time this Financial Services Authority Regulation comes into force:
a. Financial Services Authority Regulation Number 27/POJK.03/2016 concerning the Assessment of Competence and Propriety of Principal Parties of Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2016 Number 147, Supplement to the State Gazette of the Republic of Indonesia Number 5098); b. Financial Services Authority Regulation Number 65/POJK.03/2016 concerning the Implementation of Risk Management for Sharia Commercial Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2016 Number 298, Supplement to the State Gazette of the Republic of Indonesia Number 5988);
c. Financial Services Authority Regulation Number 46/POJK.03/2017 concerning the Implementation of Compliance Functions for Commercial Banks (State Gazette of the Republic of Indonesia Year 2017 Number 152, Supplement to the State Gazette of the Republic of Indonesia Number 6095);
d. Financial Services Authority Regulation Number 59/POJK.03/2017 concerning the Implementation of Governance in the Provision of Remuneration for Sharia Commercial Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2017 Number 278, Supplement to the State Gazette of the Republic of Indonesia Number 6148); e. Financial Services Authority Regulation Number 1/POJK.03/2019 concerning the Implementation of Internal Audit Functions in Commercial Banks (State Gazette of the Republic of Indonesia Year 2019 Number 20, Supplement to the State Gazette of the Republic of Indonesia Number 6308); f. Financial Services Authority Regulation Number 32/POJK.03/2018 concerning Maximum Limits for Credit Provision and Large Fund Provision for Commercial Banks (State Gazette of the Republic of Indonesia Year 2018 Number 253, Supplement to the State Gazette of the Republic of Indonesia Number 6283) as amended by Financial Services Authority Regulation Number 38/POJK.03/2019 concerning Amendment to Financial Services Authority Regulation Number 32/POJK.03/2018 concerning Maximum Limits for Credit Provision and Large Fund Provision for Commercial Banks (State Gazette of the Republic of Indonesia Year 2019 Number 245, Supplement to the State Gazette of the Republic of Indonesia Number 6438); g. Financial Services Authority Regulation Number 34/POJK.03/2018 concerning Reassessment of Principal Parties of Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2018 Number 259, Supplement to the State Gazette of the Republic of Indonesia Number 6285) as amended by Financial Services Authority Regulation Number 14/POJK.03/2021 concerning Amendment to Financial Services Authority Regulation Number 34/POJK.03/2018 concerning Reassessment of Principal Parties of Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2021 Number 165, Supplement to the State Gazette of the Republic of Indonesia Number 6702); h. Financial Services Authority Regulation Number 26/POJK.03/2021 concerning Maximum Limits for Fund Disbursement and Large Fund Disbursement for Sharia Commercial Banks (State Gazette of the Republic of Indonesia Year 2021 Number 277, Supplement to the State Gazette of the Republic of Indonesia Number 6746); and
i. Implementation Provisions of Bank Indonesia Regulation Number 11/33/PBI/2009 concerning the Implementation of Good Corporate Governance for Sharia Commercial Banks and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2009 Number 175, Supplement to the State Gazette of the Republic of Indonesia Number 5085),
declared to remain in force insofar as they do not conflict with the provisions in this Financial Services Authority Regulation.

Article 53
This Financial Services Authority Regulation comes into force on the date of its promulgation.

This copy is in accordance with the original.
Legal Director 1
Legal Department
Mufli Asmawidjaja

To ensure that everyone knows it, order the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta on February 15, 2024
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
MAHENDRA SIREGAR

Promulgated in Jakarta on February 16, 2024
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2024 NUMBER 4/OJK signed

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 2 OF 2024
CONCERNING
THE IMPLEMENTATION OF SHARIA GOVERNANCE FOR SHARIA COMMERCIAL BANKS AND SHARIA BUSINESS UNITS

I. GENERAL

As an intermediary institution, banks play a role in contributing to the economy through support for economic growth and national stability. In efforts to achieve these goals, banking must be able to operate by implementing good corporate governance in all business activities.

In Sharia banks, the implementation of good governance is not limited to general governance systems, but also in the application of Sharia Principles. The main objective of Sharia Governance is to maintain compliance with Sharia Principles, which constitute the raison d’etre of Islamic financial institutions. The presence of a reliable Sharia Governance system is very important to ensure that bank activities do not contradict Sharia Principles in order to maintain public confidence in Sharia banking, which will ultimately have an impact on the performance of Sharia banking.

The implementation of Sharia Governance is also in line with the provisions of Law Number 21 of 2008 concerning Sharia Banking as amended several times, most recently with Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, which has increased the role of the Sharia Supervisory Board (Dewan Pengawas Syariah) as a party within Sharia Commercial Banks and Sharia Business Units tasked with supervising the implementation of Sharia Principles.

Furthermore, given that the obligation to implement Sharia Principles for Sharia banks in the Financial Services Authority regulatory framework has been regulated in various regulations regarding Sharia banking, this Financial Services Authority Regulation also serves as the umbrella for regulations related to the implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units. Thus, the implementation of Sharia Governance can be carried out in all business activities and lines of defense of Sharia Commercial Banks and Sharia Business Units, so it is hoped that it will provide a positive contribution in supporting the strengthening of the identity and competitiveness of Sharia Commercial Banks and Sharia Business Units, as well as supporting inclusive and sustainable national economic growth, thereby realizing a prosperous, advanced, and dignified society. In relation to this matter, to support the strengthening of rules regarding Sharia Governance for Sharia Commercial Banks and Sharia Business Units, it is necessary to update the regulations regarding the Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units.

II. ARTICLE BY ARTICLE

Article 1
It is clear enough.

Article 2
Paragraph (1)
The obligation to implement Sharia Principles in the conduct of bank business activities is part of the Board of Directors' responsibility for the implementation of bank management and the Board of Commissioners' responsibility for the overall supervision of the Board of Directors' duties.

Paragraph (2)
Letter a
It is clear enough.

Letter b
Other activities conducted by the Bank besides business activities include, among others, the procurement of goods and/or services, employee recruitment processes, and/or the disbursement of social and environmental responsibility funds.

Article 3
It is clear enough.

Article 4
Paragraph (1)
It is clear enough.

Paragraph (2)
Letter a
It is clear enough.

Letter b
The Sharia Compliance Function is formed as an independent work unit or is part of the compliance work unit.

Letter c
The Sharia Risk Management Function is formed as an independent work unit or is part of the risk management work unit.

Letter d
The Sharia Internal Audit Function is formed as an independent work unit or is part of the internal audit work unit.

Letter e
It is clear enough.

Paragraph (3)
Example:
Board of Directors members who oversee the compliance function are responsible for the effectiveness of the implementation of the Sharia Compliance Function, and Board of Directors members who oversee the risk management function are responsible for the implementation of the Sharia Risk Management Function.

Paragraph (4)
Coordination between functions related to Sharia Governance and the DPS is carried out, among others, through consultation or requests for opinions.

Article 5
Paragraph (1)
Internal procedures regarding the implementation of Sharia Governance in the Bank can be part of internal procedures regarding the implementation of good corporate governance in accordance with Financial Services Authority Regulations regarding the implementation of governance for commercial banks.

Internal Bank procedures include, among others, articles of association, decrees, manuals, policies or guidelines (standard operating procedures), corporate charters, other Bank operational documents, which are prepared in accordance with statutory regulations and in accordance with business processes and approval mechanisms at the Bank.

Paragraph (2)
It is clear enough.

Article 6
It is clear enough.

Article 7
It is clear enough.

Article 8
Paragraph (1)
DPS members are principal parties of the bank as managerial principal parties, similar to Board of Directors members and Board of Commissioners members.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Paragraph (5)
It is clear enough.

Paragraph (6)
It is clear enough.

Article 9
It is clear enough.

Article 10
Paragraph (1)
Example:

1. If Bank A has 5 (five) Board of Directors members, the number of DPS members is at least 3 (three).
2. If Bank B has 8 (eight) Board of Directors members, the number of DPS members is at least 3 (three) or at most 4 (four).
   Fulfillment of DPS members exceeding 3 (three) considers the complexity and/or scale of the Bank's business.

Paragraph (2)
For banks established after this Financial Services Authority Regulation comes into force, the aforementioned provisions apply directly from the time this Financial Services Authority Regulation comes into force.

Article 11
Paragraph (1)
It is clear enough.

Paragraph (2)
What is meant by "other DPS" is DPS other than the chairman who concurrently serves as a member in one Sharia Business Unit (BUS) or Sharia Business Unit (UUS).

Article 12
Paragraph (1)
Letter a
It is clear enough.

Letter b
It is clear enough.

Letter c
It is clear enough.

Letter d
It is clear enough.

Letter e
Functional duties include, among others, advisor, expert staff, and/or expert personnel.

Letter f
What is meant by "public official" is a person appointed and given the task to hold a specific position or office in a public body.
A public body is an executive, legislative, or judicial institution, and other bodies whose main functions and duties relate to the administration of the state, which are funded wholly or partly by the State Budget and/or Regional Budget.

The prohibition on concurrent positions in public bodies does not include, among others, positions in public bodies that are non-profit organizations or institutions such as the Indonesian Ulema Council (MUI), National Zakat Agency (Baznas), and National Sharia Board (BWI), as well as institutions engaged in education such as state universities.

Letter g
What is meant by "conflict of interest" is the difference between the economic interests of the Bank and the personal economic interests of DPS members.
Tasks in other positions that do not cause a conflict of interest may be carried out as long as they do not ignore the execution of duties and responsibilities as a DPS member.

Letter h
DPS members are prohibited from holding concurrent positions if there are statutory regulations in which a person is prohibited from holding concurrent positions in their office.

Paragraph (2)
Letter a
It is clear enough.

Letter b
Non-profit organizations include membership in committees (task forces) in specific fields outside the Bank.

Letter c
What is meant by "financial conglomerate" is a financial conglomerate in accordance with Financial Services Authority Regulations regarding financial conglomerates.

Paragraph (3)
Certain considerations include, among others, expertise, experience, and other added values possessed by DPS members required to support the Bank's strategy and development, as long as such concurrent positions do not cause the person to ignore the execution of duties and responsibilities as a DPS member.

Paragraph (4)
It is clear enough.

Article 13
What is meant by "majority" is more than 50% (fifty percent).
What is meant by "family relationship up to the second degree" is a relationship, both vertical and horizontal, including:
a. biological/step/adopted parents; b. biological/step/adopted siblings along with their husbands or wives;
c. biological/step/adopted children;
d. biological/step/adopted grandparents; e. biological/step/adopted grandchildren; f. biological/step/adopted siblings of parents along with their husbands or wives; g. husbands or wives; h. parents-in-law;
i. in-laws;
j. husbands or wives of biological/step/adopted children; k. grandparents of husbands or wives;
l. husbands or wives of biological/step/adopted grandchildren; and/or
m. biological/step/adopted siblings of husbands or wives along with their husbands or wives.

Article 14
Paragraph (1)
It is clear enough.

Paragraph (2)
Letter a
It is clear enough.

Letter b
Other conditions include, among others, when a DPS member whose term has expired has not had a replacement appointed by the General Meeting of Shareholders (GMS), the person concerned may still execute the same authorities until a replacement is appointed by the GMS.

Paragraph (3)
It is clear enough.

Paragraph (4)
Letter a
It is clear enough.

Letter b
Consideration of external review results for the extension of the term of office of DPS members is carried out after there are external review results in accordance with the implementation of provisions regarding external reviews based on this Financial Services Authority Regulation.

Letter c
It is clear enough.

Article 15
Paragraph (1)
The committee that performs nomination functions in accordance with Financial Services Authority Regulations regarding the implementation of governance for commercial banks.

Paragraph (2)
See explanation of paragraph (1).

Paragraph (3)
Considering diversity, including among others educational background, work experience, and expertise in Sharia banking.

Paragraph (4)
The determination aims to ensure that the Bank's management is carried out well.

Article 16
Paragraph (1)
Dismissal of DPS members includes temporary dismissal of DPS members.

Paragraph (2)
Letter a
It is clear enough.

Letter b
Objective assessments related to Bank management include, among others, aspects of performance, integrity, financial reputation, and/or competence.

Letter c
It is clear enough.

Letter d
It is clear enough.

Letter e
It is clear enough.

Letter f
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Paragraph (5)
It is clear enough.

Paragraph (6)
It is clear enough.

Paragraph (7)
It is clear enough.

Article 17
Paragraph (1)
The procedure for the resignation of DPS members is stated in the Bank's articles of association.

Paragraph (2)
It is clear enough.

Paragraph (3)
What is meant by "other conditions" is the resignation of the DPS member intended to release responsibility as a DPS member in handling Bank problems.

Article 18
It is clear enough.

Article 19
Principles of good corporate governance refer to Financial Services Authority Regulations regarding the implementation of governance for commercial banks.

Article 20
It is clear enough.

Article 21
Paragraph (1)
What is meant by "semi-annual" is a 6 (six) month period ending in June and December.

Paragraph (2)
It is clear enough.

Paragraph (3)
Significant violations of Sharia Principles include, among others, violations of Sharia Principles that have the potential to affect the financial condition and/or reputation of the Bank.

Paragraph (4)
It is clear enough.

Paragraph (5)
What is meant by "OJK correspondence system" is the OJK Reporting System with the address https://sipenaojk.ojk.go.id or another address determined by the Financial Services Authority. Force majeure conditions include, among others, the failure of the OJK reporting system.

Paragraph (6)
See explanation of force majeure conditions in paragraph (5).

Paragraph (7)
It is clear enough.

Article 22
Authorities and other institutions include payment system supervisory authorities, deposit insurance and resolution authorities, supervisory authorities over parent Banks, as well as authorities and other institutions authorized to conduct audits of the Bank.

Article 23
Paragraph (1)
Guidelines and rules of procedure for the DPS are also known as the DPS Charter.

Paragraph (2)
Letter a
It is clear enough.

Letter b
It is clear enough.

Letter c
It is clear enough.

Letter d
Meeting arrangements include, among others, regulations regarding meeting agendas, quorum requirements, decision-making, members' rights in the event of differing opinions in decision-making, and meeting minutes.

Letter e
It is clear enough.

Letter f
It is clear enough.

Letter g
The working relationship pattern between the DPS and the Board of Directors and Board of Commissioners includes, among others, meetings between the DPS and the Board of Directors and Board of Commissioners.

Article 24
It is clear enough.

Article 25
This obligation is intended to maintain the confidentiality of information and avoid potential insider information.

Article 26
Paragraph (1)
Committees supporting the execution of the Board of Commissioners' duties in accordance with Financial Services Authority Regulations regarding the implementation of governance for commercial banks, namely at least:
a. audit committee; b. risk monitoring committee; and
c. remuneration and nomination committee.

Paragraph (2)
Example:
a. The BUS Audit Committee requests opinions from the DPS in preparing the annual audit plan for the Sharia internal audit function, among others regarding the fulfillment of financing contracts. b. The BUS Risk Monitoring Committee requests DPS opinions in evaluating the suitability between Sharia risk management policies and their implementation, among others regarding profit-sharing calculation policies.
c. The committee performing remuneration functions at a Commercial Bank (BUK) that has a UUS requests DPS opinions in discussing DPS remuneration policies.
d. The committee performing nomination functions at a BUK that has a UUS requests DPS opinions in discussing the proposal of names of candidates for managers and/or employees nominated to hold strategic positions at the UUS and/or at the BUK directly related to UUS business activities.

Article 27
See explanation of Article 15 paragraph (1).

Article 28
What is meant by "adequate DPS support functions" is the existence of a sufficient number of human resources with appropriate competencies to support the execution of DPS duties and responsibilities.

DPS support functions can be held concurrently with other functions as long as they still meet applicable provisions, including principles of good corporate governance.

DPS support functions include, among others, secretarial functions, Sharia research functions, and Sharia development functions.

Article 29
Paragraph (1)
Letter a
Accurate, relevant, and timely data and information are required in relation to DPS duties and responsibilities to supervise the execution of Board of Directors' duties and responsibilities and control the implementation of Bank policies.

Letter b
It is clear enough.

Letter c
It is clear enough.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Article 30
It is clear enough.

Article 31
Paragraph (1)
Joint meetings of the DPS and Board of Directors are DPS meetings together with the Board of Directors, among others for the purpose of the DPS conducting supervision or providing instructions and/or guidance to the Board of Directors regarding the implementation of Sharia Principles.

Paragraph (2)
It is clear enough.

Paragraph (3)
Joint meetings of the DPS and Board of Commissioners are DPS meetings together with the Board of Commissioners, among others for the purpose of coordinating supervision regarding the implementation of Sharia Principles, including if violations of Sharia Principles are found that cause or have the potential to cause conditions that can endanger the continuity of the Bank's business.

Paragraph (4)
It is clear enough.

Paragraph (5)
Internal procedures in the conduct of meetings include, among others, the meeting chairperson, mechanisms for resolving differing opinions in meetings, mechanisms for meeting decision-making, and the preparation of meeting minutes.

Article 32
It is clear enough.

Article 33
Paragraph (1)
Letter a
Other companies include controlling shareholders and/or ultimate controlling shareholders of the Bank.

Letter b
What is meant by "financial relationship" is a person who receives income, financial assistance, or loans from:

1. Board of Directors members, Board of Commissioners members, and/or DPS members of the Bank;
2. companies whose controlling shareholders are Board of Directors members, Board of Commissioners members, and/or DPS members; and/or
3. controlling shareholders and/or ultimate controlling shareholders of the Bank.

Letter c
See explanation of "family relationship up to the second degree" in Article 13.

Letter d
It is clear enough.

Paragraph (2)
It is clear enough.

Article 34
Paragraph (1)
It is clear enough.

Paragraph (2)
Private gains do not include, among others, DPS members as Bank customers receiving profit-sharing/margin or remuneration fairly.

Article 35
Paragraph (1)
It is clear enough.

Paragraph (2)
Letter a
It is clear enough.

Letter b
Proportionality regarding the remuneration of the Board of Commissioners considers the comparison of risk and complexity of tasks between the DPS and the Board of Commissioners.

Article 36
It is clear enough.

Article 37
Paragraph (1)
The objective of the Sharia Compliance Function is to ensure that policies, regulations, systems and procedures, and business activities conducted by the Bank are in accordance with Sharia Principles. Possess knowledge and/or understanding of Sharia banking operations, including among others having obtained education and/or training, holding certifications, and/or having experience related to Sharia banking operations.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Article 38
Paragraph (1)
The objective of the Sharia Risk Management Function is to ensure the fulfillment of Sharia Principles in the implementation of Bank risk management in operations, business, and all Bank activities. Possess knowledge and/or understanding of Sharia banking operations, including among others having obtained education and/or training, holding certifications, and/or having experience related to Sharia banking operations.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Article 39
Paragraph (1)
The objective of the Sharia Internal Audit Function is to provide independent and objective assurance and consulting regarding the implementation of Sharia Principles in the execution of Bank management, by evaluating and improving the effectiveness of Bank risk management, controls, and governance processes. Possess knowledge and/or understanding of Sharia banking operations, including among others having obtained education and/or training, holding certifications, and/or having experience related to Sharia banking operations.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Article 40
Paragraph (1)
External reviews of the implementation of Sharia governance are conducted regarding the effectiveness of the DPS function and DPS support functions, the Sharia Compliance Function, the Sharia Risk Management Function, and the Sharia Internal Audit Function.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Paragraph (5)
It is clear enough.

Paragraph (6)
It is clear enough.

Paragraph (7)
It is clear enough.

Paragraph (8)
It is clear enough.

Article 41
It is clear enough.

Article 42
It is clear enough.

Article 43
Paragraph (1)
The self-assessment period is 2 (two) times a year, referring to the Bank health rating assessment period in accordance with Financial Services Authority Regulations regarding the assessment of the health level of Sharia commercial banks and Sharia business units.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Article 44
It is clear enough.

Article 45
Paragraph (1)
Follow-up on non-compliance with Sharia Principles in business activities and/or Bank operations is carried out in accordance with Bank policies, examples:

1. improvement of financing contracts; or
2. transfer of income obtained from business activities that do not comply with Sharia Principles to non-halal receipts.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Paragraph (5)
It is clear enough.

Article 46
Paragraph (1)
See explanation of Article 13.

Paragraph (2)
Letter a
See explanation of Article 33 paragraph (1) letter b.

Letter b
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Paragraph (5)
It is clear enough.

Paragraph (6)
It is clear enough.

Article 47
It is clear enough.

Article 48
It is clear enough.

Article 49
It is clear enough.

Article 50
It is clear enough.

Article 51
It is clear enough.

Article 52
It is clear enough.

Article 53
It is clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 72/OJK