Financial Reporting Integrity of Banks

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 15 OF 2024
CONCERNING
FINANCIAL REPORTING INTEGRITY OF BANKS
BY THE GRACE OF GOD THE ALMIGHTY
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that financial information and bank financial reports are used in decision-making by regulators and stakeholders, thus requiring precision and accuracy in the process of compiling financial information and financial reports with integrity; b. that financial information and financial reports with integrity require strengthening the implementation of governance and internal controls in the bank financial reporting process, including the role of the Board of Directors, Board of Commissioners, Sharia Supervisory Board, controlling shareholders, executive officials, and affiliated parties of the bank;
c. that to support the strengthening of the implementation of governance and internal controls in the bank financial reporting process, regulations regarding the integrity of bank financial reporting are needed;
d. that based on the considerations as referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning the Integrity of Bank Financial Reporting;

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 several times, lastly with Law Number 4 of 2023 concerning 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 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 with Law Number 4 of 2023 concerning 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);
3. 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 with Law Number 4 of 2023 concerning 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 INTEGRITY OF BANK FINANCIAL REPORTING.

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

1. Bank is a business entity that gathers funds from the public in the form of deposits and channels them to the public in the form of credit or financing and/or other forms to improve the people's standard of living.
2. Commercial Bank is a Bank that conducts business activities conventionally and/or based on Sharia principles, which in its activities provides services in the payment circulation, including branch offices of banks located abroad and Sharia business units.
3. Rural Economic Bank, hereinafter abbreviated as BPR, is a Bank that conducts business activities conventionally and/or based on Sharia principles, which in its activities does not directly provide services in giro circulation.
4. Board of Directors is the Bank organ authorized and fully responsible for managing the Bank for the interests 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 articles of association for Banks with the legal entity form of a limited liability company, the head of branch offices and officials one level below the head of branch offices for branch offices of banks located abroad, or organs or equivalent parties for Banks with legal entity forms other than limited liability companies.
5. Board of Commissioners of Commercial Banks is the Commercial Bank organ tasked with conducting general and/or specific supervision in accordance with the articles of association and providing advice to the Board of Directors for Commercial Banks with the legal entity form of a limited liability company, or parties appointed to carry out supervisory functions for branch offices of banks located abroad.
6. Board of Commissioners of BPR is the board of commissioners for BPRs with the legal entity form of a limited liability company, commissioners for BPRs with the legal entity form of a regional state-owned enterprise, supervisory boards for BPRs with the legal entity form of a regional public enterprise and regional enterprise, and supervisors for BPRs with the legal entity form of a cooperative.
7. Sharia Supervisory Board is a party that has the task and function of supervising the implementation of Commercial Bank and BPR business activities based on Sharia principles to ensure they are in accordance with Sharia principles.
8. Controlling Shareholder is a legal entity, individual, and/or business group that owns shares or shares equivalent to Bank shares and has the ability to control the Bank, including the ultimate controlling shareholder.
9. Executive Official is a Bank official who reports directly to members of the Board of Directors or has significant influence over Bank policies and/or operations.
10. Affiliated Party is the Bank's core depositor, parties that control or are controlled by the Bank directly or indirectly in accordance with the control principles in financial accounting standards, and/or parties who, in the assessment of the Financial Services Authority, participate in influencing the management of the Bank directly or indirectly.
11. Financial Information is information in the form of numbers and financial ratios regulated in statutory regulations in the financial services sector.
12. Financial Report is a report regarding the financial position and financial performance compiled by the Bank, whether in the form of complete or condensed financial reports.

CHAPTER II
COMPILATION OF FINANCIAL INFORMATION AND REPORTS OF BANKS
Article 2
(1) Banks are required to have an integrated financial reporting process to ensure the truthfulness, accuracy, and transparency of the Financial Information and Financial Reports produced.
(2) The compilation of Financial Information is carried out in accordance with statutory regulations in the financial services sector.
(3) The compilation of Financial Reports is carried out in accordance with financial accounting standards.

Article 3
The Board of Directors, Board of Commissioners of Commercial Banks, Board of Commissioners of BPR, Sharia Supervisory Board, and Executive Officials are prohibited from carrying out actions that intentionally cause:
a. Financial Information and/or Financial Reports of the Bank not to reflect the Bank's actual conditions; b. manipulation of Financial Information and/or Financial Reports of the Bank;
c. Financial Reports of the Bank not to be in accordance with financial accounting standards and Financial Services Authority regulations regarding the recording of financial transactions; and/or
d. Financial Information and/or Financial Reports of the Bank not to be in accordance with statutory regulations in the financial services sector.

Article 4
(1) Banks are required to compile and establish internal control policies and procedures in the Bank's financial reporting process to:
a. ensure the truthfulness, accuracy, and transparency of Financial Information and Financial Reports; b. increase efficiency and effectiveness of operations in the financial reporting process;
c. ensure compliance with statutory regulations in the financial reporting process; and
d. ensure that Financial Reports have been compiled in accordance with financial accounting standards and Financial Services Authority regulations regarding the recording of financial transactions.
(2) The policies and procedures as referred to in paragraph (1) must at least contain:
a. prohibitions for all Board of Directors, Board of Commissioners of Commercial Banks, Board of Commissioners of BPR, Sharia Supervisory Board, Controlling Shareholders, Executive Officials, and Bank employees from carrying out activities that can cause Financial Information and Financial Reports not to reflect actual conditions materially; b. procedures for recording financial transactions so that Financial Reports can be prepared in accordance with financial accounting standards and Financial Services Authority regulations regarding the recording of financial transactions;
c. procedures for maintaining records of financial transactions so that records reflect fair and accurate financial transactions;
d. procedures to ensure that financial transactions have been carried out and approved by authorized parties; and e. procedures to prevent or detect unauthorized transactions in a timely manner that can have a material impact on the Bank's Financial Reports. (3) Banks are required to ensure the implementation of internal control policies and procedures in the Bank's financial reporting process. (4) In implementing the policies and procedures as referred to in paragraph (3), Banks are required to provide information systems that support financial reporting in accordance with financial accounting standards and Financial Services Authority regulations regarding the recording of financial transactions.

Article 5
(1) Commercial Banks are required to form a special work unit responsible for preventing fraud or manipulation in the Financial Information and/or Financial Reports of Commercial Banks.
(2) For BPRs that have:
a. core capital of less than IDR 80,000,000,000.00 (eighty billion rupiah) are required to form a special work unit or appoint an Executive Official responsible for preventing fraud or manipulation in the Financial Information and/or Financial Reports of BPRs; b. core capital of at least IDR 80,000,000,000.00 (eighty billion rupiah) are required to form a special work unit responsible for preventing fraud or manipulation in the Financial Information and/or Financial Reports of BPRs. (3) The special work unit as referred to in paragraph (1) and paragraph (2) can be held concurrently by a work unit handling risk management functions, compliance functions, or anti-fraud functions. (4) The Executive Official as referred to in paragraph (2) letter a can be held concurrently by an Executive Official handling risk management functions, compliance functions, or anti-fraud functions.

Article 6
(1) Banks that violate the provisions as referred to in Article 2 paragraph (1), Article 4, Article 5 paragraph (1), and/or paragraph (2) are subject to administrative sanctions in the form of written reprimands.
(2) In the event that a Commercial Bank has been subject to administrative sanctions as referred to in paragraph (1) and has not yet fulfilled the provisions as referred to in Article 2 paragraph (1), Article 4, and/or Article 5 paragraph (1), the Commercial Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new products; b. suspension of certain 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 health level assessment.
(3) In the event that a BPR has been subject to administrative sanctions as referred to in paragraph (1) and has not yet fulfilled the provisions as referred to in Article 2 paragraph (1), Article 4, and/or Article 5 paragraph (2), the BPR is subject to administrative sanctions in the form of:
a. temporary suspension of some operational activities; b. prohibition on expanding business activities; and/or
c. reduction of governance factor assessment in the health level assessment.
(4) In the event that a Commercial Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) or a BPR has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (3), the Bank's principal party may be subject to administrative sanctions in the form of prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions. (5) In addition to administrative sanctions as referred to in paragraph (1), paragraph (2), and/or paragraph (4), Commercial Banks that violate the provisions as referred to in Article 2 paragraph (1), Article 4, and/or Article 5 paragraph (1) 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. (6) In addition to administrative sanctions as referred to in paragraph (1), paragraph (3), and/or paragraph (4), BPRs that violate the provisions as referred to in Article 2 paragraph (1), Article 4, and/or Article 5 paragraph (2) may be subject to administrative sanctions in the form of fines of at least IDR 10,000,000.00 (ten million rupiah) and at most IDR 100,000,000.00 (one hundred million rupiah) for each violation committed.

Article 7
(1) The Board of Directors of Commercial Banks, Board of Commissioners of Commercial Banks, Sharia Supervisory Board of Commercial Banks, and Executive Officials of Commercial Banks that violate the provisions as referred to in Article 3 are subject to administrative sanctions in the form of:
a. prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions; and/or b. 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) per person. (2) The Board of Directors of BPRs, Board of Commissioners of BPRs, Sharia Supervisory Board of BPRs, and Executive Officials of BPRs that violate the provisions as referred to in Article 3 are subject to administrative sanctions in the form of:
a. prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions; and/or b. fines of at least IDR 10,000,000.00 (ten million rupiah) and at most IDR 100,000,000.00 (one hundred million rupiah) per person.

CHAPTER III
TASKS AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS, BOARD OF COMMISSIONERS, AND AUDIT COMMITTEE IN THE FINANCIAL REPORTING PROCESS
Article 8
(1) The Board of Directors is responsible for:
a. the compilation and presentation of Financial Information and Financial Reports; b. the compliance of the compilation and presentation of Financial Reports with financial accounting standards and Financial Services Authority regulations regarding the recording of financial transactions;
c. the completeness and truthfulness of the content of Financial Reports; and
d. the implementation of internal controls in the Bank's financial reporting process.
(2) The Board of Directors is required to submit a report on internal controls in the Bank's financial reporting process as referred to in paragraph (1) to the Financial Services Authority.
(3) The report on internal controls in the Bank's financial reporting process as referred to in paragraph (2) must at least contain:
a. a statement from the Board of Directors regarding the Board of Directors' responsibility for the implementation of internal controls in the Bank's financial reporting process; and b. the results of the Board of Directors' assessment of the effectiveness of internal controls in the Bank's financial reporting process.

Article 9
(1) The Board of Commissioners of Commercial Banks and the Board of Commissioners of BPRs are required to supervise the implementation of internal control policies and procedures in the Bank's financial reporting process. (2) The Board of Commissioners of Commercial Banks and the Board of Commissioners of BPRs are required to carry out their tasks and responsibilities with good faith and the principle of prudence. (3) The results of supervision by the Board of Commissioners of Commercial Banks and the Board of Commissioners of BPRs as referred to in paragraph (1) for:
a. Commercial Banks are recorded in the supervision report of the business plan in accordance with the Financial Services Authority Regulation regarding bank business plans; or b. BPRs are recorded in the supervision report and implementation of the business plan in accordance with the Financial Services Authority Regulation regarding rural credit bank and sharia rural financing bank business plans.

Article 10
(1) The Bank's Audit Committee is required to carry out tasks and responsibilities to monitor and evaluate:
a. the implementation of internal control policies and procedures in the Bank's financial reporting process; and b. the compliance of Financial Reports with financial accounting standards and Financial Services Authority regulations regarding the recording of financial transactions. (2) The results of monitoring and evaluation as referred to in paragraph (1) are used to provide recommendations to the Board of Commissioners of Commercial Banks and the Board of Commissioners of BPRs to ensure the integrity of the financial reporting process at the Bank. (3) In the event that a BPR is not required to have an audit committee, the tasks and responsibilities of the audit committee as referred to in paragraph (1) are carried out by the Board of Commissioners of BPR.

Article 11
(1) Banks that violate the provisions as referred to in Article 8 paragraph (2), paragraph (3), Article 9 paragraph (1), paragraph (2), and/or Article 10 paragraph (1) are subject to administrative sanctions in the form of written reprimands. (2) In the event that a Commercial Bank has been subject to administrative sanctions as referred to in paragraph (1) and has not yet fulfilled the provisions as referred to in Article 8 paragraph (2), paragraph (3), Article 9 paragraph (1), paragraph (2), and/or Article 10 paragraph (1), the Commercial Bank is subject to administrative sanctions in the form of:
a. prohibition on issuing new products; b. suspension of certain business activities;
c. prohibition on expanding business activities;
d. prohibition on conducting new business activities; and/or e. assessment of governance factors in the health level assessment.
(3) In the event that a BPR has been subject to administrative sanctions as referred to in paragraph (1) and has not yet fulfilled the provisions as referred to in Article 8 paragraph (2), paragraph (3), Article 9 paragraph (1), paragraph (2), and/or Article 10 paragraph (1), the BPR is subject to administrative sanctions in the form of:
a. temporary suspension of some operational activities; b. prohibition on expanding business activities; and/or
c. reduction of governance factor assessment in the health level assessment.
(4) In the event that a Commercial Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) or a BPR has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (3), the Bank's principal party may be subject to administrative sanctions in the form of prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions. (5) In addition to administrative sanctions as referred to in paragraph (1), paragraph (2), and/or paragraph (4), Commercial Banks that violate the provisions as referred to in Article 8 paragraph (2), paragraph (3), Article 9 paragraph (1), paragraph (2), and/or Article 10 paragraph (1) 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. (6) In addition to administrative sanctions as referred to in paragraph (1), paragraph (3), and/or paragraph (4), BPRs that violate the provisions as referred to in Article 8 paragraph (2), paragraph (3), Article 9 paragraph (1), paragraph (2), and/or Article 10 paragraph (1) may be subject to administrative sanctions in the form of fines of at least IDR 10,000,000.00 (ten million rupiah) and at most IDR 100,000,000.00 (one hundred million rupiah) for each violation committed.

Article 12
(1) The Board of Directors and/or Board of Commissioners of Commercial Banks that violate the provisions as referred to in Article 8 paragraph (2), paragraph (3), Article 9 paragraph (1), and/or paragraph (2) may be subject to administrative sanctions in the form of:
a. prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions; and/or b. 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) per person. (2) The Board of Directors and/or Board of Commissioners of BPRs that violate the provisions as referred to in Article 8 paragraph (2), paragraph (3), Article 9 paragraph (1), and/or paragraph (2) may be subject to administrative sanctions in the form of:
a. prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions; and/or b. fines of at least IDR 10,000,000.00 (ten million rupiah) and at most IDR 100,000,000.00 (one hundred million rupiah) per person.

CHAPTER IV
ASPECTS OF SHAREHOLDERS AND AFFILIATED PARTIES IN THE FINANCIAL REPORTING PROCESS
Article 13
(1) Controlling Shareholders must support the Bank's high-quality and reliable financial reporting process.
(2) Controlling Shareholders are prohibited from carrying out intervention actions that can cause misstatement in the Bank's Financial Information or Financial Reports and/or significant weaknesses in the Bank's financial reporting process.

Article 14
(1) Affiliated Parties are prohibited from intervening with the Board of Directors, Board of Commissioners of Commercial Banks, Board of Commissioners of BPRs, Sharia Supervisory Board, Controlling Shareholders, and/or Executive Officials in the Bank's financial reporting process. (2) Intervention actions as referred to in paragraph (1) are actions that:
a. harm or have the potential to harm the Bank; and/or b. cause the Bank to be non-compliant with statutory regulations in the financial reporting process.

Article 15
(1) Controlling Shareholders of Commercial Banks that violate the provisions as referred to in Article 13 paragraph (2) are subject to administrative sanctions in the form of:
a. prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions; and/or b. 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). (2) Controlling Shareholders of BPRs that violate the provisions as referred to in Article 13 paragraph (2) are subject to administrative sanctions in the form of:
a. prohibition as a principal party in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions; and/or

b. a fine of at least Rp10,000,000.00 (ten million rupiah) and at most Rp100,000,000.00 (one hundred million rupiah).
(3) Affiliated Parties that violate the provisions as referred to in Article 14 paragraph (1) are subject to administrative sanctions in the form of:
a. a fine of at least Rp2,000,000,000.00 (two billion rupiah) and at most Rp50,000,000,000.00 (fifty billion rupiah), for Affiliated Parties of General Banks; or b. a fine of at least Rp10,000,000.00 (ten million rupiah) and at most Rp100,000,000.00 (one hundred million rupiah), for Affiliated Parties of Rural Banks.

CHAPTER V
SUBMISSION OF INFORMATION AND REPORTS TO THE FINANCIAL SERVICES AUTHORITY

Article 16
In the event that significant weaknesses or conditions that may endanger the Bank's continuity in the Bank's financial reporting process are known, the Board of Directors, Board of Commissioners of General Banks, Board of Commissioners of Rural Banks, Sharia Supervisory Board, Controlling Shareholders, Executive Officials, and/or other parties must provide information to the Financial Services Authority.

Article 17
Information regarding significant weaknesses or conditions that may endanger the Bank's continuity in the Bank's financial reporting process as referred to in Article 16 is submitted online or offline to the Financial Services Authority and addressed to:
a. the Department of Supervision of the relevant Bank for Banks whose headquarters or branches are located in the Special Capital Region of Jakarta; or b. the local Financial Services Authority Office according to the territory where the Bank's headquarters is located.

Article 18
(1) For General Banks, the internal control report in the Bank's financial reporting process as referred to in Article 8 paragraph (2) is submitted as part of the public financial report and annual financial performance information in accordance with the Financial Services Authority Regulation regarding transparency and publication of bank reports. (2) For Rural Banks, the internal control report in the Bank's financial reporting process as referred to in Article 8 paragraph (2) is submitted as part of the annual report in accordance with the Financial Services Authority Regulation regarding reporting of rural economy banks and Sharia rural economy banks.

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CHAPTER VI
OTHER PROVISIONS

Article 19
The Financial Services Authority has the authority to order:
a. the Board of Directors, Board of Commissioners of General Banks, Board of Commissioners of Rural Banks, Sharia Supervisory Board, and/or Executive Officials who violate Article 3; b. Controlling Shareholders who violate Article 13 paragraph (2); and/or
c. Affiliated Parties who violate Article 14 paragraph (1),
to return the profits obtained to the Bank.

CHAPTER VII
TRANSITIONAL PROVISIONS

Article 20
(1) Banks formulate, establish, and ensure the implementation of internal control policies and procedures in the Bank's financial reporting process as referred to in Article 4 paragraph (1) and paragraph (3) within a maximum of 3 (three) months from the date of the Financial Services Authority Regulation is promulgated. (2) Banks form a special working unit or designate Executive Officials responsible for preventing fraud or manipulation in Financial Information and/or Bank Financial Reports as referred to in Article 5 within a maximum of 6 (six) months from the date of the Financial Services Authority Regulation is promulgated.

Article 21
Violations committed by the Board of Directors, Board of Commissioners of General Banks, Board of Commissioners of Rural Banks, Sharia Supervisory Board, Controlling Shareholders, Executive Officials, and/or Affiliated Parties that occurred before this Financial Services Authority Regulation came into force and such violations continue to occur, which are discovered by the Financial Services Authority after this Financial Services Authority Regulation comes into force, are subject to sanctions in accordance with this Financial Services Authority Regulation.

CHAPTER VIII
CLOSING PROVISIONS

Article 22
This Financial Services Authority Regulation comes into force on the date of its promulgation.

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This copy is in accordance with the original
Director of Legal Development
Legal Department
Aat Windradi

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.

Established in Jakarta on October 2, 2024

CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
MAHENDRA SIREGAR

Promulgated in Jakarta on October 9, 2024

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
SUPRATMAN ANDI AGTAS

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2024 NUMBER 24/OJK

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EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 15 OF 2024
CONCERNING
BANK FINANCIAL REPORTING INTEGRITY

I. GENERAL

The Financial Services Authority, as the regulator and supervisor of the banking industry, processes Financial Information and Financial Reports routinely submitted by Banks for the purpose of direct and indirect supervision. The banking supervision pillar will run well if the Financial Information and Financial Reports prepared by Banks are of high quality. In addition to being used by regulators, Financial Information and Financial Reports published by Banks routinely are also used by other stakeholders, including investors, depositors, and the public, in making economic decisions. In preparing Financial Reports, Banks refer to financial accounting standards and present Financial Information that is relevant and accurately represents the Bank's condition. The integrity of Financial Information and Financial Reports is one of the main things that must be believed to maintain the trust of regulators and the public in the banking industry and to support decision-making by market actors and the public.

To achieve Financial Information and Financial Reports with integrity, it is necessary to strengthen the implementation of governance and internal controls in the Bank's financial reporting process. The internal controls mentioned are expected to become a solid foundation to maintain the reliability, accuracy, and consistency of the Bank's Financial Information and Financial Reports, while reducing the risk of errors or misuse in the financial reporting process. The role of various parties is needed to support the implementation of good governance and internal controls in the financial reporting process that is effective, including the role of the Board of Directors, Board of Commissioners of General Banks, Board of Commissioners of Rural Banks, Sharia Supervisory Board, Controlling Shareholders, Executive Officials, and Affiliated Parties. This is also strengthened in Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, which regulates the prohibition for everyone, including directors, commissioners, and bank employees, among others, to make or cause false records in accounting books or in Bank reports, to remove, not include, or cause the non-inclusion of records in accounting books or in Bank reports, and to change, obscure, hide, delete, or remove the existence of a record in accounting books or Bank reports.

In relation to this matter, to support the strengthening of the integrity of Bank financial reporting, regulations regarding the integrity of bank financial reporting are needed.

II. ARTICLE BY ARTICLE EXPLANATION

Article 1
It is clear enough.

Article 2
Paragraph (1)
What is meant by "truthfulness" is Financial Information and Financial Reports as they are and there are no material misstatements.
What is meant by "accuracy" is Financial Information and Financial Reports that represent information that is neutral or free from bias.
What is meant by "transparency" is Financial Information and Financial Reports that can be seen by various parties needing Financial Information and Financial Reports and have included all relevant information.

Paragraph (2)
Examples of Financial Information:
a. minimum capital adequacy ratio requirements in accordance with the Financial Services Authority Regulation regarding minimum capital adequacy requirements for banks; and b. assessment of productive asset quality such as credits or financing in accordance with the Financial Services Authority Regulation regarding the assessment of bank asset quality.

Paragraph (3)
Financial accounting standards include standards for recognition, measurement, presentation, and disclosure of financial transactions, as well as Financial Services Authority regulations regarding the recording of financial transactions.

Article 3
Taking actions that intentionally include:
a. manipulating, making false records, or changing accounting records or supporting documentation used as the basis for preparing Financial Information or Bank Financial Reports; b. removing or causing the non-recording of a transaction or information in the accounting books, documents, or Bank Financial Reports;
c. incorrectly applying accounting principles related to recognition, measurement, presentation, or disclosure in Bank Financial Reports;
d. obscuring, hiding, deleting, removing, or damaging the recording of a transaction or information in the accounting books, documents, or Bank Financial Reports; and/or e. engaging in other activities such as allowing the occurrence of manipulation of Financial Information and/or Financial Reports of the Bank's subsidiaries, with the aim of providing benefits to the person concerned or other parties.

Letter a
It is clear enough.

Letter b
Manipulation of Financial Information and/or Bank Financial Reports by Executive Officials, Directors, Board of Commissioners of General Banks, Board of Commissioners of Rural Banks, Sharia Supervisory Board, or Controlling Shareholders includes:
a. Directors intentionally hiding or ordering Bank employees to hide significant bills or costs that should have been charged to the current year in accordance with financial accounting standards, so that the Bank's profit becomes significantly higher and affects the amount of Directors' bonuses to be received. b. Executive Officials intentionally recognizing fictitious income to achieve division performance targets and obtain bonuses.
c. Controlling Shareholders intentionally requesting Directors to improve the quality of credits or financing from business groups that are related parties of the Bank, so that the Bank's impairment loss reserves (CKPN) are smaller, nonperforming loans (NPL) are smaller, and the Bank's profit is larger, thereby affecting the earnings per share ratio which will raise the Bank's stock value so that the Bank can meet good rating criteria.

Letter c
It is clear enough.

Letter d
It is clear enough.

Article 4
Paragraph (1)
The formulation of internal control policies and procedures in the Bank's financial reporting process is carried out by the Chief Executive after obtaining approval from the Board of Commissioners of General Banks or Board of Commissioners of Rural Banks and is evaluated by the Sharia Supervisory Board for General Banks or the Sharia Supervisory Board for Rural Banks that carry out business activities based on Sharia principles.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Article 5
It is clear enough.

Article 6
It is clear enough.

Article 7
It is clear enough.

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Article 8
Paragraph (1)
Letter a
It is clear enough.

Letter b
See the explanation of Article 2 paragraph (3).

Letter c
It is clear enough.

Letter d
What is meant by "internal control in the financial reporting process" is control designed to provide assurance over the reliability of the financial reporting process and the preparation of Financial Reports in accordance with financial accounting standards and Financial Services Authority regulations regarding the recording of financial transactions.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Article 9
Paragraph (1)
Supervision by the Board of Commissioners of General Banks and Board of Commissioners of Rural Banks includes directing, monitoring, and evaluating the implementation of internal controls over financial reporting.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Article 10
It is clear enough.

Article 11
It is clear enough.

Article 12
It is clear enough.

Article 13
It is clear enough.

Article 14
It is clear enough.

Article 15
It is clear enough.

Article 16
Significant weaknesses in the Bank's financial reporting process can occur even if the Bank's Financial Reports are not materially misstated.
Examples:
a. lack of segregation of duties between the party making the recording and the party approving a financial transaction; b. lack of hierarchical review procedures for significant financial transactions; and/or
c. lack of periodic updates and/or reviews of the use of information technology in the Bank's financial reporting, thereby impacting financial reporting that does not comply with financial accounting standards.

Conditions that may endanger the Bank's continuity in the financial reporting process include, among others, the deferral of costs so that the Bank's minimum capital adequacy ratio can be maintained in accordance with the minimum capital adequacy limit.

Information submitted to the Financial Services Authority includes, among others:
a. the identity of the party submitting the information; and b. details of significant weaknesses or conditions that may endanger the Bank's continuity, such as the date of the event, the form of the weakness, and the impact of the weakness or the impact of the condition mentioned.

Article 17
Examples of online information submission: through the Financial Services Authority reporting system.
Examples of offline information submission: through letters.

Article 18
It is clear enough.

Article 19
It is clear enough.

Article 20
It is clear enough.

Article 21
Example:
The Board of Directors of Bank ABC manipulates Financial Reports by recording fictitious assets, namely land worth Rp100,000,000,000.00 (one hundred billion rupiah) on December 31, 2022. The fictitious asset is still recorded and discovered by the Financial Services Authority during the examination of the Financial Report as of March 31, 2025. The error by the Board of Directors in manipulating Financial Reports discovered during the examination as of March 31, 2025, is subject to sanctions in accordance with this Financial Services Authority Regulation.

Article 22
It is clear enough.

SUPPLEMENTARY STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 92/OJK

https://jdih.ojk.go.id/