FINANCIAL SERVICES AUTHORITY

REPUBLIC OF INDONESIA

COPY

FINANCIAL SERVICES AUTHORITY REGULATION

REPUBLIC OF INDONESIA

NUMBER 10 OF 2023

REGARDING

THE SEPARATION OF SHARIA BUSINESS UNITS OF GUARANTEE COMPANIES

BY THE GRACE OF THE ALMIGHTY GOD

THE COMMISSIONER COUNCIL OF THE FINANCIAL SERVICES AUTHORITY,

Considering: that to implement the provisions of Article 62 paragraph (3) of Law Number 1 of 2016 concerning Guarantees as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, it is necessary to establish a Financial Services Authority Regulation concerning the Separation of Sharia Business Units of Guarantee Companies;

Recalling: 1. 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);
2. Law Number 1 of 2016 concerning Guarantees (State Gazette of the Republic of Indonesia Year 2016 Number 9, Supplement to the State Gazette of the Republic of Indonesia Number 5835) 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);

DECIDES:

To Establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE SEPARATION OF SHARIA BUSINESS UNITS OF GUARANTEE COMPANIES.

CHAPTER I

GENERAL PROVISIONS

Article 1

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

Guarantee is the activity of providing guarantees by the guarantor for the fulfillment of financial obligations of the assured to the guarantee recipient.
Sharia Guarantee is the activity of providing guarantees by the guarantor for the fulfillment of financial obligations of the assured to the guarantee recipient based on Sharia principles.
Guarantee Company is a legal entity operating in the financial sector with the main business activity of conducting Guarantees.
Sharia Guarantee Company is a legal entity operating in the financial sector with the main business activity of conducting Sharia Guarantees.
Sharia Business Unit, hereinafter referred to as UUS, is a work unit of the Guarantee Company functioning as the head office of offices or units that conduct business activities of Guarantees based on Sharia principles.
Separation of UUS is a legal act performed by the Guarantee Company to separate the UUS, resulting in the assets, liabilities, and equity of the Guarantee Company transferring by law to the Sharia Guarantee Company.

CHAPTER II

SEPARATION OF UUS

First Section

Objective of Separation of UUS

Article 2

The Separation of UUS is conducted with the objectives:
a. strengthening the resilience structure and competitiveness of the guarantee industry; b. creating more effective and efficient business operations;
c. strengthening technology investments and human resources; and
d. protecting the interests of the assured and guarantee recipients.

Second Section

Forms of Separation of UUS

Article 3

(1) The Separation of UUS is conducted with the following provisions:
a. the UUS meets certain requirements established by the Financial Services Authority; b. there is a request from the Guarantee Company itself; or
c. the implementation of the Financial Services Authority's authority in the context of consolidation.
(2) The Separation of UUS as referred to in paragraph (1) is conducted by:
a. establishing a new Sharia Guarantee Company resulting from the Separation of UUS, followed by the transfer of the guarantee portfolio to the new Sharia Guarantee Company resulting from the Separation of UUS; or b. transferring the entire guarantee portfolio in the UUS to a Sharia Guarantee Company that has obtained a business license. (3) The Separation of UUS as referred to in paragraph (2) must be conducted by transferring the entire guarantee portfolio, accompanied by the transfer of all rights and obligations of the UUS, at least:
a. for UUS from Guarantee Companies choosing the method as referred to in paragraph (2) letter a, the transfer of the guarantee portfolio includes all assets, liabilities, and equity owned and managed by the UUS; b. for UUS from Guarantee Companies choosing the method as referred to in paragraph (2) letter b, the transfer of the guarantee portfolio includes the entire portfolio of guarantee assets. (4) The transfer of the portfolio as referred to in paragraph (3) must be conducted within a maximum of 6 (six) months from the date of approval of the Separation of UUS by the Financial Services Authority. (5) The Separation of UUS from the Guarantee Company as referred to in paragraph (2) is conducted by meeting the provisions of applicable laws and regulations.

Third Section

Criteria for Separation of UUS

Article 4

(1) Guarantee Companies that have UUS and whose UUS has met certain requirements established by the Financial Services Authority as referred to in Article 3 paragraph (1) letter a must conduct the Separation of UUS. (2) The requirements as referred to in paragraph (1) include:
a. the value of UUS assets has reached at least 50% (fifty percent) of the total asset value of its parent Guarantee Company; and b. the minimum equity of UUS has reached at least:

IDR 25,000,000,000.00 (twenty-five billion rupiah) for the district or city scope;
IDR 50,000,000,000.00 (fifty billion rupiah) for the provincial scope; and
IDR 100,000,000,000.00 (one hundred billion rupiah) for the national scope,
based on the latest annual financial report audited by a public accountant.
(3) In the event that during the process of Separation of UUS, the assets and/or equity of the UUS decrease and no longer meet the requirements as referred to in paragraph (2), such conditions do not eliminate the obligation of the Guarantee Company to conduct the Separation of UUS.

Article 5

The implementation of the Separation of UUS as referred to in Article 3 paragraph (2) must meet the provisions:
a. not reducing the rights of guarantee recipients or the assured; and b. not causing:

Guarantee Companies that have UUS;
New Sharia Guarantee Companies resulting from the Separation of UUS; and
Sharia Guarantee Companies receiving the transfer of the guarantee portfolio,
to violate provisions of laws and regulations in the field of guarantees.

Fourth Section

Authority of the Financial Services Authority in the Context of Implementation of Separation of UUS

Article 6

(1) The Financial Services Authority has the authority to request the Separation of UUS from Guarantee Companies that already have UUS in the context of guarantee consolidation. (2) Consolidation as referred to in paragraph (1) is implemented in accordance with the Financial Services Authority Regulation regarding business licensing and institutional structure of guarantee institutions.

Article 7

(1) Guarantee Companies that have UUS must conduct the Separation of UUS with a deadline of no later than December 31, 2031.
(2) Guarantee Companies that have UUS conducting the Separation of UUS by establishing a new Sharia Guarantee Company as referred to in Article 3 paragraph (2) letter a and have not yet met the minimum equity requirements as referred to in Article 4 paragraph (2) letter b must conduct:
a. increasing the equity of the UUS originating from the shareholders of the Guarantee Company; b. increasing the equity of the UUS originating from new investors; and/or
c. transferring the entire guarantee portfolio in the UUS to a Sharia Guarantee Company that has obtained a business license as referred to in Article 3 paragraph (2) letter b.
(3) For Guarantee Companies that have UUS and have not conducted the Separation of UUS until the deadline as referred to in paragraph (1), the Financial Services Authority has the authority to revoke the license to establish the UUS. (4) Guarantee Companies that have UUS and are subject to the revocation of the license to establish the UUS as referred to in paragraph (3) must settle rights and obligations to the assured and guarantee recipients.

Fifth Section

Capitalization of Sharia Guarantee Companies Resulting from Separation of UUS

Article 8

(1) Sharia Guarantee Companies resulting from the Separation of UUS as referred to in Article 3 paragraph (2) letter a must meet the minimum equity required in the Financial Services Authority Regulation regarding business licensing and institutional structure of guarantee institutions. (2) In the event that the equity of the UUS of the Guarantee Company is greater than the minimum equity required as referred to in paragraph (1), the value of the equity of the Sharia Guarantee Company resulting from the Separation of UUS must meet the provision of at least the equity of the UUS prior to the Separation of UUS. (3) Guarantee Companies that have UUS are prohibited from using business profits from the UUS other than for increasing the equity of the UUS.

Sixth Section

Mechanism and Procedures for Separation of UUS

Article 9

Guarantee Companies that have UUS must submit a work plan for the Separation of UUS to the Financial Services Authority to obtain approval no later than December 31, 2028.

Article 10

(1) Guarantee Companies conducting the Separation of UUS must:
a. notify the plan for the Separation of UUS to the assured and guarantee recipients; b. announce the plan for the Separation of UUS to the assured and guarantee recipients; and
c. provide restitution of rights to the assured and guarantee recipients if there is rejection.
(2) Sharia Guarantee Companies resulting from the Separation of UUS may only conduct business activities after obtaining a business license from the Financial Services Authority. (3) To obtain the business license as referred to in paragraph (2), the Board of Directors of the Sharia Guarantee Company must submit a business license application to the Financial Services Authority by meeting the provisions in the Financial Services Authority Regulation regarding business licensing and institutional structure of guarantee institutions. (4) Guarantee Companies must transfer the entire guarantee portfolio from the UUS to the Sharia Guarantee Company resulting from the Separation of UUS after the Sharia Guarantee Company resulting from the Separation of UUS has obtained a business license from the Financial Services Authority as referred to in paragraph (2). (5) The transfer of the guarantee portfolio from the UUS to the Sharia Guarantee Company resulting from the Separation of UUS as referred to in paragraph (4) must be conducted after obtaining approval from the Financial Services Authority. (6) The transfer of the guarantee portfolio from the UUS to the Sharia Guarantee Company receiving the Separation of UUS as referred to in Article 3 paragraph (2) letter b must be conducted with the approval of the Financial Services Authority. (7) The implementation of the transfer of the guarantee portfolio as referred to in paragraph (5) and paragraph (6) must be conducted in accordance with the transfer of the portfolio that has obtained approval from the Financial Services Authority. (8) Guarantee Companies conducting the Separation of UUS must:
a. notify the Separation of UUS to the assured and guarantee recipients; and b. announce the Separation of UUS to the assured and guarantee recipients, after the business license application as referred to in paragraph (3) and after the approval of the portfolio transfer as referred to in paragraph (5) and paragraph (6) is approved by the Financial Services Authority. (9) In the event that the process of Separation of UUS has been completed, Guarantee Companies conducting the Separation of UUS must:
a. report the implementation of the transfer of the guarantee portfolio from the UUS; and b. submit an application for the revocation of the license to establish the UUS, to the Financial Services Authority within a maximum of 10 (ten) working days after the date of implementation of the transfer of the guarantee portfolio from the UUS. (10) Guarantee Companies conducting the Separation of UUS must meet the Financial Services Authority Regulation regarding consumer and public protection in the financial services sector. (11) Further provisions regarding the mechanism, procedures, notification, announcement, reporting, and approval of the Financial Services Authority for the Separation of UUS are established by the Financial Services Authority.

Seventh Section

Administrative Sanctions

Article 11

(1) Violations of the provisions as referred to in Article 3 paragraph (3), Article 4 paragraph (1), Article 5, Article 7 paragraph (1), paragraph (2), and paragraph (4), Article 8, Article 9, and Article 10 paragraph (1), paragraph (3), paragraph (4), paragraph (5), paragraph (6), paragraph (7), paragraph (8), paragraph (9), and paragraph (10) are subject to administrative sanctions in the form of:
a. written warning; b. suspension of business activities; and/or
c. revocation of business license.
(2) Guarantee Companies violating the provisions:
a. submission of the work plan for the Separation of UUS as referred to in Article 9 are subject to additional administrative sanctions in the form of an administrative fine of IDR 50,000,000.00 (fifty million rupiah); and b. transfer of the guarantee portfolio from the UUS to the Sharia Guarantee Company as referred to in Article 10 paragraph (5) and paragraph (6) are subject to additional administrative sanctions in the form of an administrative fine of IDR 100,000,000.00 (one hundred million rupiah). (3) Guarantee Companies violating the reporting provisions to the Financial Services Authority as referred to in Article 10 paragraph (9) are subject to additional administrative sanctions in the form of an administrative fine of IDR 500,000.00 (five hundred thousand rupiah) per day of delay and at most IDR 100,000,000.00 (one hundred million rupiah). (4) In the event that Guarantee Companies and/or Sharia Guarantee Companies violate the provisions as referred to in paragraph (1) but the violation has been corrected, the Guarantee Companies and/or Sharia Guarantee Companies are subject to administrative sanctions in the form of a written warning that ends automatically. (5) In the event that Guarantee Companies and/or Sharia Guarantee Companies have met the provisions as referred to in paragraph (1), the Financial Services Authority revokes the administrative sanction in the form of a written warning.

Eighth Section

Re-evaluation of Key Parties

Article 12

In the event that the Financial Services Authority has imposed administrative sanctions as referred to in Article 11 paragraph (1) and the Guarantee Companies and/or Sharia Guarantee Companies have not met the provisions causing them to be subject to administrative sanctions, the Financial Services Authority has the authority to conduct a re-evaluation of the key parties of the Guarantee Companies and/or Sharia Guarantee Companies.

CHAPTER III

INCENTIVES IN THE SEPARATION OF UUS

First Section

Synergy in One Ownership

Article 13

(1) Sharia Guarantee Companies resulting from the Separation of UUS may conduct synergy with Guarantee Companies that have ownership relationships for the development of Sharia. (2) Synergy as referred to in paragraph (1) is implemented in accordance with the Financial Services Authority Regulation regarding business licensing and institutional structure of guarantee institutions.

Second Section

Incentives for Guarantee Companies Conducting Separation of UUS

Article 14

Guarantee Companies submitting applications for the Separation of UUS are not required to meet the minimum paid-up capital requirements for the establishment of Sharia Guarantee Companies resulting from the Separation of UUS as regulated in the Financial Services Authority Regulation regarding business licensing and institutional structure of guarantee institutions.

Third Section

Support from Sharia Financial Service Institutions

Article 15

Financial service institutions conducting business activities based on Sharia principles must prioritize the use of Sharia guarantee products and/or services.

CHAPTER IV

OTHER PROVISIONS

Article 16

The Financial Services Authority, based on certain considerations, may provide approvals or policies that differ from this Financial Services Authority Regulation.

CHAPTER V

TRANSITIONAL PROVISIONS

Article 17

(1) Applications for approval of the Separation of UUS that have been received by the Financial Services Authority before this Financial Services Authority Regulation is promulgated are processed in accordance with the Financial Services Authority Regulation regarding business licensing and institutional structure of guarantee institutions. (2) For Guarantee Companies that have submitted applications for the Separation of UUS before this Financial Services Authority Regulation is promulgated but have not yet met the conditions as referred to in Article 4 paragraph (2), they may submit an application for the cancellation of the Separation of UUS.

CHAPTER VI

CLOSING PROVISIONS

Article 18

At the time this Financial Services Authority Regulation takes effect, the provisions as referred to in Articles 32 through 34 of Financial Services Authority Regulation Number 1/POJK.05/2017 concerning Business Licensing and Institutional Structure of Guarantee Institutions (State Gazette of the Republic of Indonesia Year 2017 Number 6, Supplement to the State Gazette of the Republic of Indonesia Number 6013) are revoked and declared invalid.

Article 19

This Financial Services Authority Regulation takes effect on the date of its promulgation.

This copy is consistent with the original.
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

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

Established in Jakarta on July 11, 2023
CHAIRMAN OF THE COMMISSIONER COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
MAHENDRA SIREGAR

Promulgated in Jakarta on July 11, 2023
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2023 NUMBER 18/OJK

EXPLANATION

OF

FINANCIAL SERVICES AUTHORITY REGULATION

REPUBLIC OF INDONESIA

NUMBER 10 OF 2023

REGARDING

THE SEPARATION OF SHARIA BUSINESS UNITS OF GUARANTEE COMPANIES

I. GENERAL

In accordance with the mandate of Law Number 21 of 2011 concerning the Financial Services Authority as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK), which states that the Financial Services Authority is established with the goal of realizing a financial system that grows sustainably and stably, and is capable of protecting the interests of consumers and the public.

In relation to the mandate of Article 62 paragraph (3) of Law Number 1 of 2016 concerning Guarantees as amended by UU P2SK, which states that Guarantee Companies that have UUS, after meeting certain requirements established by the Financial Services Authority, must conduct the Separation of UUS into Sharia Guarantee Companies. Furthermore, it is mandated that the Financial Services Authority may request the Separation of UUS into Sharia Guarantee Companies in the context of guarantee consolidation.

Considering the very large Sharia market share, the obligation of Separation of UUS as mandated in UU P2SK will certainly have a very significant impact on market structure and the development of Sharia guarantees after all Guarantee Companies have conducted the Separation of UUS. Therefore, the preparation steps taken by Guarantee Companies need to receive support from all stakeholders so that the implementation of UU P2SK regarding the obligation of Separation of UUS can provide added value for the development of the Sharia guarantee industry in this country.

The regulation of Separation of UUS for Guarantee Companies is also aligned with the regulatory direction aimed at encouraging consolidation in the guarantee industry, through increased paid-up capital for the establishment of guarantee institutions, increased minimum equity for guarantee institutions, strengthened governance and risk management, strengthened guarantee industry ecosystem, and the application of international standards. This is intended to increase the resilience of guarantee institutions in crisis conditions, while supporting the transformation of business processes by optimizing information technology innovation, thereby able to increase the reach of guarantee institutions in providing products/services.

In relation to the above, the Financial Services Authority, as the organizer of regulation and supervision for financial service institutions, has an interest in ensuring that the implementation of Separation of UUS conducted by Guarantee Companies can be carried out well and is expected to encourage the Sharia guarantee industry to grow sustainably and not harm the interests of the assured and guarantee recipients. Therefore, the Financial Services Authority needs to issue provisions of the Financial Services Authority Regulation concerning the Separation of UUS of Guarantee Companies.

II. ARTICLE BY ARTICLE

Article 1

Quite clear.

Article 2

Quite clear.

Article 3

Quite clear.

Article 4

Paragraph (1)
Quite clear.

Paragraph (2)
Letter a
Quite clear.

Letter b
What is meant by “minimum equity of UUS” is the company fund equity in the UUS.

Paragraph (3)
Quite clear.

Article 5

Quite clear.

Article 6

Quite clear.

Article 7

Paragraph (1)
What is meant by “deadline” is the deadline for completing the implementation of the Separation of UUS.

Paragraph (2)
Quite clear.

Paragraph (3)
Quite clear.

Paragraph (4)
Quite clear.

Article 8

Quite clear.

Article 9

Quite clear.

Article 10

Quite clear.

Article 11

Quite clear.

Article 12

Quite clear.

Article 13

Paragraph (1)
The synergy of companies referred to is conducted among others in the use of information technology infrastructure, facilities and infrastructure, and human resources.

Paragraph (2)
Quite clear.

Article 14

Quite clear.

Article 15

Quite clear.

Article 16

What is meant by “certain considerations” includes among others the provision of approval for requests for extension of time limits requested by Guarantee Companies.

Article 17

Quite clear.

Article 18

Quite clear.

Article 19

Quite clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 43/OJK