Financial Conglomerates

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 45 /POJK.03/2020
CONCERNING
FINANCIAL CONGLOMERATES
BY THE GRACE OF GOD THE ALMIGHTY
THE COMMISSIONERS' COUNCIL OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that to create a healthy financial services industry with high competitiveness, steps are needed for the management of financial conglomerates; b. that in line with the restructuring of financial services institutions having ownership and/or control relationships in various financial services sectors, it is necessary to establish criteria and the scope of financial conglomerates considering their impact on financial system stability;
c. that to improve the efficiency and effectiveness of risk-based supervision, readjustment of regulations regarding financial conglomerates is needed;
d. that based on the considerations referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning Financial Conglomerates;

Recalling:

1. Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3970);
2. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
3. Law Number 21 of 2008 concerning Sharia Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
4. 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);
5. Law Number 40 of 2014 concerning Insurance (State Gazette of the Republic of Indonesia Year 2014 Number 337, Supplement to the State Gazette of the Republic of Indonesia Number 5618);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING FINANCIAL CONGLOMERATES.

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

1. Financial Services Institutions, hereinafter abbreviated as FSI, are institutions that conduct activities in the banking, capital market, insurance, pension fund, financing institution, and other Financial Services Institution sectors.
2. Financial Conglomerate is an FSI that is part of one group or cluster due to ownership and/or control linkages.
3. Control is an action aimed at influencing the management and/or policy of an FSI, in any manner, whether directly or indirectly.
4. Main Entity is the parent FSI of a Financial Conglomerate or an FSI designated by the controlling shareholders of the Financial Conglomerate.
5. Corporate Charter is an agreement between the Main Entity and member FSIs of the Financial Conglomerate.

CHAPTER II
CRITERIA
Article 2
(1) The criteria for a Financial Conglomerate are:
a. group or cluster total assets greater than or equal to IDR 100,000,000,000,000.00 (one hundred trillion rupiah); and b. business activities in more than 1 (one) type of FSI.
(2) Two (2) or more FSIs located in one group or cluster due to ownership and/or Control linkages that do not meet the criteria as referred to in paragraph (1) may be designated by the Financial Services Authority as a Financial Conglomerate. (3) Corporate actions that cause a Financial Conglomerate to no longer meet the Financial Conglomerate criteria remain a Financial Conglomerate until 1 (one) reporting period after no longer meeting the Financial Conglomerate criteria as referred to in paragraph (1). (4) In the event that a Financial Conglomerate experiences a decrease in total asset value to less than IDR 100,000,000,000,000.00 (one hundred trillion rupiah) so that it no longer meets the Financial Conglomerate criteria as referred to in paragraph (1) letter a, the Financial Conglomerate still fulfills its obligations as a Financial Conglomerate in accordance with the Financial Services Authority Regulation. (5) With certain considerations, the Financial Services Authority may designate the Financial Conglomerate as referred to in paragraph (4) to no longer be a Financial Conglomerate.

Article 3
The calculation of the total asset value of the Financial Conglomerate as referred to in Article 2 paragraph (1) letter a is based on financial reports at the end of June and the end of December.

Article 4
(1) The Financial Conglomerate as referred to in Article 2 paragraph (1) has a structure consisting of a Main Entity and:
a. subsidiaries; and/or b. related companies and their subsidiaries.
(2) The Financial Conglomerate as referred to in Article 2 paragraph (1) includes the following types of FSIs:
a. banks; b. insurance companies and reinsurance companies;
c. financing companies; and/or
d. securities companies.

CHAPTER III
CORPORATE CHARTER
Article 5
(1) The Main Entity is required to prepare and possess a Corporate Charter.
(2) The Corporate Charter as referred to in paragraph (1) contains at least:
a. objectives, basis of preparation, and scope; b. the structure of the Financial Conglomerate; and
c. the duties and responsibilities of the Board of Directors of the Main Entity and the Board of Directors of member FSIs of the Financial Conglomerate.
(3) The scope of duties and responsibilities for the management of the Financial Conglomerate between the Main Entity and member FSIs of the Financial Conglomerate is adjusted to the characteristics and complexity of the Financial Conglomerate's business. (4) The Corporate Charter as referred to in paragraph (1) must be signed by:
a. the Board of Directors of the Main Entity; and b. the Board of Directors of member FSIs of the Financial Conglomerate.
(5) The Main Entity and/or member FSIs of the Financial Conglomerate that do not fulfill the provisions as referred to in paragraph (1) and/or paragraph (4) are subject to administrative sanctions in the form of written reprimands or written warnings. (6) In the event that the Board of Directors of the Main Entity and/or the Board of Directors of member FSIs of the Financial Conglomerate do not fulfill the provisions as referred to in paragraph (1) and/or paragraph (4), they may be subject to administrative sanctions in the form of prohibition from acting as a principal in accordance with the Financial Services Authority Regulation regarding the re-evaluation of principals of financial services institutions.

Article 6
(1) The Main Entity is required to submit the Corporate Charter document to the Financial Services Authority no later than December 31, 2020, for the first time.
(2) In the event of changes to the Main Entity's Corporate Charter, the Main Entity is required to submit the Corporate Charter change document to the Financial Services Authority no later than 1 (one) month since signing. (3) For FSIs located in one group or cluster that meet the Financial Conglomerate criteria after December 31, 2020, the Corporate Charter document must be submitted no later than the 15th (fifteenth) day of the second month after the end of the relevant reporting month. (4) In the event that the 15th (fifteenth) falls on a Saturday, Sunday, or holiday, the Corporate Charter document is submitted on the next working day. (5) The Corporate Charter as referred to in paragraph (1) is submitted by the Main Entity to the Financial Services Authority c/o the supervisor of the Main Entity through:
a. the Department or Directorate of Supervision for each Financial Services Institution or the Financial Services Authority Regional Office in Jakarta, for Financial Conglomerates whose Main Entity is located in the Special Capital Region of Jakarta and Banten Province; or b. the Financial Services Authority Regional Office or the local Financial Services Authority Office, for Financial Conglomerates whose Main Entity is headquartered outside the Special Capital Region of Jakarta and Banten Province. (6) The Main Entity that does not submit the Corporate Charter reporting obligation after the deadline for submission as referred to in paragraph (1), and/or paragraph (2) is subject to administrative sanctions in the form of a fine of IDR 1,000,000.00 (one million rupiah) per day and a maximum of IDR 30,000,000.00 (thirty million rupiah).

CHAPTER IV
OTHER PROVISIONS
Article 7
Relationships between FSIs owned and directly controlled by the Central Government of the Republic of Indonesia are excluded from the definition of Financial Conglomerates.

Article 8
For Financial Conglomerates that no longer meet the criteria as Financial Conglomerates as referred to in Article 2, the obligation to submit reports on the implementation of monitoring of banking synergy in accordance with the Financial Services Authority Regulation concerning banking synergy in one ownership for the development of Sharia banking shifts from the Main Entity to the director who oversees the compliance function at the bank that is the controlling shareholder or the bank designated as the parent company operator in accordance with the Financial Services Authority Regulation concerning the consolidation of general banks.

CHAPTER V
TRANSITIONAL PROVISIONS
Article 9
For Financial Conglomerates that have been designated prior to the implementation of this Financial Services Authority Regulation and no longer meet the criteria as Financial Conglomerates as referred to in Article 2 paragraph (1), they remain Financial Conglomerates and implement all obligations as Financial Conglomerates until the reporting period ending December 2020.

Article 10
The mechanism for imposing sanctions as referred to in Article 5 paragraph (5), Article 5 paragraph (6), and/or Article 6 paragraph (6) is in accordance with the Financial Services Authority Regulation for FSIs in each financial services sector.

CHAPTER VI
CLOSING PROVISIONS
Article 11
Upon the implementation of this Financial Services Authority Regulation:
a. Article 4 paragraph (2) of Financial Services Authority Regulation Number 17/POJK.03/2014 concerning the Implementation of Integrated Risk Management for Financial Conglomerates (State Gazette of the Republic of Indonesia Year 2014 Number 348); and b. Article 3 paragraph (2) of Financial Services Authority Regulation Number 18/POJK.03/2014 concerning the Implementation of Integrated Governance for Financial Conglomerates (State Gazette of the Republic of Indonesia Year 2014 Number 349), are repealed and declared invalid.

Article 12
This Financial Services Authority Regulation comes into force on the date of its promulgation.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

In order that everyone may know it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on October 14, 2020
CHAIRMAN OF THE COMMISSIONERS' COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on October 16, 2020
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 237

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 45 /POJK.03/2020
CONCERNING
FINANCIAL CONGLOMERATES

I. GENERAL
A healthy and safe financial services sector condition is a primary prerequisite for the financial system to be able to support the achievement of financial system stability and play an optimal role in the national economy. The development of globalization, information technology, and product innovation as well as activities, financial services institutions has created a very complex, dynamic, and interrelated financial system among financial services sectors both in products and institutions, as well as ownership in a Financial Conglomerate, thereby causing an increase in the industry's risk exposure in Indonesia, specifically Financial Conglomerates that have activities in more than 1 (one) type of financial services institution and have a significant impact on financial system stability.

In order to create a healthy financial services industry with high competitiveness, steps are needed to organize the structure of Financial Conglomerates, including through the establishment of Financial Conglomerate criteria, which were previously regulated in the Financial Services Authority Regulation concerning the implementation of integrated risk management for financial conglomerates, the Financial Services Authority Regulation concerning the implementation of integrated governance for financial conglomerates, and the Financial Services Authority Regulation concerning the obligation to provide integrated minimum capital for financial conglomerates.

The organization of Financial Conglomerates is one of the important factors in supporting the effectiveness of risk-based supervision against Financial Conglomerates in accordance with international best practices. In relation to these matters, regulations regarding the criteria and scope of Financial Conglomerates as well as the Corporate Charter are needed to maintain financial system stability.

II. ARTICLE BY ARTICLE
Article 1
Clear enough.

Article 2
Paragraph (1)
Letter a
Clear enough.
Letter b
Example:
a. Group "A" has FSIs in the form of a general bank and rural bank (BPR) with assets greater than or equal to IDR 100,000,000,000,000.00 (one hundred trillion rupiah), then Group "A" is not a Financial Conglomerate because a general bank and BPR are the same type of FSI. b. Group "B" has FSIs in the form of an insurance company and a financing company with total assets greater than or equal to IDR 100,000,000,000,000.00 (one hundred trillion rupiah), then Group "B" is a Financial Conglomerate because it consists of 2 (two) different types of FSIs and total assets are greater than or equal to IDR 100,000,000,000,000.00 (one hundred trillion rupiah).

Paragraph (2)
The designation as a Financial Conglomerate considers, among others, the significant influence on the financial system and/or the complexity of business activities of the Financial Conglomerate. The designation of a Financial Conglomerate by the Financial Services Authority is conveyed via letter to the FSI. Example:
a. Bank "A" has a subsidiary Bank Syariah "B" and BPR "C" with consolidated total assets of IDR 115,000,000,000,000.00 (one hundred fifteen trillion rupiah). Based on the criteria as referred to in Article 2 paragraph (1) letter b, Bank "A", Bank Syariah "B", and BPR "C" are not a Financial Conglomerate because they are the same type of FSI. However, based on the Financial Services Authority's assessment, Bank "A", Bank Syariah "B", and BPR "C" as a group have a fairly significant influence on financial system stability, so the Financial Services Authority can designate them as a Financial Conglomerate. b. Insurance company "AB" has total assets of IDR 50,000,000,000,000.00 (fifty trillion rupiah). It is known that there is Bank "CD" and securities company "EF" with total assets of IDR 35,000,000,000,000.00 (thirty-five trillion rupiah) and IDR 20,000,000,000,000.00 (twenty trillion rupiah) respectively, having ownership or Control relationships with the shareholders of insurance company "AB". With adequate supporting documents including proof of ownership, the Financial Services Authority has the authority to designate insurance company "AB", bank "CD", and securities company "EF" as a Financial Conglomerate because they meet the criteria as referred to in Article 2 paragraph (1).

Paragraph (3)
What is meant by "corporate action" is an action that causes a permanent change in the structure of the Financial Conglomerate.
Example:
Financial Conglomerate CDE ("KK-CDE") consisting of a bank and an insurance company decides to sell all assets of the insurance company it owns in November 2022, so that as of December 31, 2022, "KK-CDE" no longer meets the criteria as referred to in Article 2 paragraph (1). However, "KK-CDE" still has obligations in accordance with regulations regarding Financial Conglomerates until the reporting period ending December 31, 2022.

Paragraph (4)
Clear enough.

Paragraph (5)
Certain considerations include, among others, a significant decrease in total assets below IDR 100,000,000,000,000.00 (one hundred trillion rupiah).

Article 3
What is meant by "financial report" is a financial report audited by a public accountant (audited) or a financial report not audited by a public accountant (unaudited).

Article 4
Paragraph (1)
Clear enough.

Paragraph (2)
Letter a
What is meant by "bank" is a conventional general bank, Sharia general bank, rural bank, and Sharia rural financing bank.
Letter b
What is meant by "insurance company and reinsurance company" is an insurance company, reinsurance company, Sharia insurance company, and Sharia reinsurance company.
Letter c
What is meant by "financing company" is a financing company and a Sharia financing company.
Letter d
Clear enough.

Article 5
Clear enough.

Article 6
Paragraph (1)
Clear enough.

Paragraph (2)
Clear enough.

Paragraph (3)
If an FSI group as of June 30, 2021 has total assets greater than or equal to IDR 100,000,000,000,000.00 (one hundred trillion rupiah) and meets the criteria as a Financial Conglomerate, then the Corporate Charter document must be submitted to the Financial Services Authority no later than August 15, 2021.

Paragraph (4)
Clear enough.

Paragraph (5)
Main Entity:
a. Banks, report to the Bank Supervision Department, Regional Office or Financial Services Authority Office according to the location of the Main Entity; b. Insurance companies and reinsurance companies, report to the Insurance Supervision Directorate and the Health Social Security Implementing Body;
c. Financing companies, report to the Financing Institution Supervision Directorate;
d. Sharia insurance companies, Sharia reinsurance companies, and Sharia financing companies, report to the IKNB Sharia Directorate; or e. Securities companies, report to the Securities Institution Supervision Directorate.

Paragraph (6)
Clear enough.

Article 7
Clear enough.

Article 8
Clear enough.

Article 9
Example:
Financial Conglomerate ABC ("KK-ABC") was originally a Financial Conglomerate based on previous regulations regarding Financial Conglomerates, after the issuance of these regulations, "KK-ABC" is no longer a Financial Conglomerate because one of the criteria in Article 2 paragraph (1) is not met. However, "KK-ABC" still has obligations in accordance with regulations regarding Financial Conglomerates until the reporting period ending December 2020.

Article 10
Clear enough.

Article 11
Clear enough.

Article 12
Clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6569