Financial Services Authority Regulation Number 14/POJK.03/2017 on Recovery Plan for Systemic Banks

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 14/POJK.03/2017
ON
RECOVERY PLAN FOR SYSTEMIC BANKS
BY THE GRACE OF THE ALMIGHTY GOD
THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering: that in order to implement the provisions of Article 18 paragraph (4), Article 19 paragraph (4), and Article 21 paragraph (1) of Law Number 9 of 2016 concerning the Prevention and Handling of Systemic Financial Crises, it is necessary to establish a Financial Services Authority Regulation concerning the Recovery Plan for Systemic Banks; 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 3790);
2. 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);
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);
4. Law Number 9 of 2016 concerning the Prevention and Handling of Systemic Financial Crises (State Gazette of the Republic of Indonesia Year 2016 Number 70, Supplement to the State Gazette of the Republic of Indonesia Number 5872);
DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE RECOVERY PLAN FOR SYSTEMIC BANKS.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation:

1. Bank means a general bank as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking, and a Sharia general bank as referred to in Law Number 21 of 2008 concerning Sharia Banking, excluding branches of banks located outside the country.
2. Systemic Bank means a Bank that, due to its asset size, capital, and liabilities; the breadth of its network or complexity of transactions for banking services; and its interconnection with other financial sector entities, may cause the failure of some or all other Banks or financial service sectors, both operationally and financially, if such Bank experiences disturbance or failure.
3. Recovery Plan means a plan to address potential financial problems that may occur in a Systemic Bank.
4. Recovery Options means the actions determined to be taken by a Systemic Bank to respond to financial stress experienced by the Systemic Bank in preventing, restoring, or improving financial conditions and the viability of the Systemic Bank.
5. Board of Directors means:
   a. for a Systemic Bank in the form of a Limited Liability Company, the Board of Directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for a Systemic Bank in the form of a Regional Public Enterprise or Regional Corporation, the Board of Directors as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   c. for a Systemic Bank in the form of a Cooperative, the Management Board as referred to in Law Number 25 of 1992 concerning Cooperatives;
6. Board of Commissioners means:
   a. for a Systemic Bank in the form of a Limited Liability Company, the Commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for a Systemic Bank in the form of a Regional Public Enterprise, the Supervisory Board as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   c. for a Systemic Bank in the form of a Regional Corporation, the Commissioners as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   d. for a Systemic Bank in the form of a Cooperative, the Supervisors as referred to in Law Number 25 of 1992 concerning Cooperatives.
7. Controlling Shareholder (hereinafter referred to as PSP) for a Systemic Bank means a legal entity, individual, and/or business group that:
   a. holds shares of the company or Systemic Bank amounting to 25% (twenty-five percent) or more of the issued shares with voting rights; or b. holds shares of the company or Systemic Bank less than 25% (twenty-five percent) of the issued shares with voting rights but can be proven to have controlled the company or Systemic Bank, directly or indirectly.
8. General Meeting of Shareholders, hereinafter referred to as GMS, means:
   a. for a Systemic Bank in the form of a Limited Liability Company, the GMS as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for a Systemic Bank in the form of a Regional Public Enterprise, the Regional Head as the representative of the Region as the capital owner as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   c. for a Systemic Bank in the form of a Regional Corporation, the General Meeting of Shareholders as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   d. for a Systemic Bank in the form of a Cooperative, the General Meeting of Members as referred to in Law Number 25 of 1992 concerning Cooperatives.
9. Financial Services Authority, hereinafter referred to as OJK, is an independent institution that has the functions, duties, and authorities for regulation, supervision, examination, and investigation as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

Article 2
Systemic Banks are required to prepare and submit a Recovery Plan to the OJK.

Article 3
(1) The Recovery Plan as referred to in Article 2 must obtain approval from shareholders in the GMS.
(2) In the event that the Recovery Plan submitted to the OJK has not obtained approval from shareholders in the GMS as referred to in paragraph (1), the Systemic Bank is required to request approval for the Recovery Plan at the next GMS.

Article 4
The submission of the Recovery Plan to the OJK as referred to in Article 2 must be signed by the Chief Executive Officer, the Lead Commissioner, and the PSP.

Article 5
The Board of Directors is required to:
a. prepare a Recovery Plan that is realistic and comprehensive; b. submit the Recovery Plan to shareholders at the GMS to obtain approval;
c. communicate the Recovery Plan to all levels or tiers of the Systemic Bank's organization;
d. conduct periodic evaluation and stress testing of the Recovery Plan; and e. implement the Recovery Plan effectively and on time.

Article 6
(1) The Recovery Plan as referred to in Article 2 must obtain approval from the Board of Commissioners.
(2) The Board of Commissioners is required to conduct:
a. supervision of the implementation of the Recovery Plan; and b. evaluation of the implementation of the Recovery Plan.

CHAPTER II
GUIDELINES FOR THE RECOVERY PLAN
Article 7
(1) Systemic Banks must have Recovery Plan guidelines containing at least:
a. parties involved and responsible for:

1. preparing the Recovery Plan;
2. submitting the Recovery Plan; and
3. communicating the Recovery Plan to all levels or tiers of the Systemic Bank's organization;
   b. parties involved and responsible for conducting evaluation and stress testing of the Recovery Plan; and
   c. parties involved and responsible for implementing the Recovery Plan.
   (2) To support the implementation of the Recovery Plan as referred to in paragraph (1) letter c, the Recovery Plan guidelines also contain at least:
   a. procedures to ensure timely implementation of the Recovery Plan; and b. decision-making procedures and escalation procedures in decision-making.
   (3) If necessary, Systemic Banks may form a crisis management group to implement the Recovery Plan.
   (4) The crisis management group as referred to in paragraph (3) is equipped with guidelines containing at least the procedures as referred to in paragraph (2).

Article 8
The Recovery Plan guidelines as referred to in Article 7 are prepared by considering governance principles at the Bank.

Article 9
Systemic Banks are required to develop reliable management information systems to support the evaluation and stress testing of the Recovery Plan, as well as the implementation of the Recovery Plan.

CHAPTER III
SCOPE OF THE RECOVERY PLAN
Article 10
The Recovery Plan as referred to in Article 2 contains at least:
a. executive summary; b. general description of the Systemic Bank;
c. Recovery Options; and
d. disclosure of the Recovery Plan.

First Section
Executive Summary
Article 11
The executive summary as referred to in Article 10 letter a includes at least a summary regarding:
a. general description of the Systemic Bank; b. Recovery Options; and
c. disclosure of the Recovery Plan.

Second Section
General Description of the Systemic Bank
Article 12
The general description of the Systemic Bank as referred to in Article 10 letter b includes at least:
a. the condition of the Systemic Bank; b. material business lines, office networks, and subsidiaries of the Systemic Bank;
c. the business group structure of the Systemic Bank;
d. the business interconnections of the Systemic Bank; and e. analysis of the impact of scenario changes to the condition of the Systemic Bank.

Article 13
The condition of the Systemic Bank as referred to in Article 12 letter a describes at least:
a. ownership; b. business aspects and performance;
c. business plans;
d. risk management strategies; e. office networks; and f. subsidiaries.

Article 14
(1) Material business lines, office networks, and subsidiaries of the Systemic Bank as referred to in Article 12 letter b describe business lines, office networks, and subsidiaries of the Systemic Bank that have at least the following criteria:
a. contribute to profit achievement activities, fund collection, fund distribution, including significantly to the financial performance of the Systemic Bank; b. bear significant risks in the worst-case scenario that can endanger the viability of the Systemic Bank individually and on a consolidated basis;
c. cannot be dissolved or closed without triggering significant risks to the Systemic Bank;
d. play an important role in the financial stability of the Systemic Bank; and/or e. conduct operational activities and risk management activities that directly support business functions, including operational interconnections between functions within the Systemic Bank. (2) Systemic Banks must disclose the material criteria for business lines, office networks, and subsidiaries of the Systemic Bank as referred to in paragraph (1).

Article 15
The business group structure of the Systemic Bank as referred to in Article 12 letter c describes the business structure related to the Systemic Bank, including the legal entity owning the Systemic Bank up to ultimate shareholders and sister companies.

Article 16
(1) Business interconnections of the Systemic Bank as referred to in Article 12 letter d include material interconnections both intra-group and externally.
(2) Material intra-group business interconnections of the Systemic Bank as referred to in paragraph (1) describe at least financial relationships, capital participation, and intra-group financial support agreements. (3) Material external business interconnections of the Systemic Bank as referred to in paragraph (1) describe at least exposures, liabilities, products, and/or services that are significant to main business partners. (4) Systemic Banks must disclose the material criteria for business interconnections of the Systemic Bank as referred to in paragraph (1).

Article 17
Analysis of the impact of scenario changes to the condition of the Systemic Bank as referred to in Article 12 letter e includes scenario analysis of stress conditions occurring in the Systemic Bank:
a. individually (idiosyncratic); and b. externally occurring in the financial market as a whole, which can be domestic or international (market-wide shock), against capital conditions, liquidity, profitability, and asset quality.

Third Section
Recovery Options
Article 18
(1) Systemic Banks are required to prepare and establish Recovery Options as referred to in Article 10 letter c in detail, accompanied by realistic implementation stages. (2) The establishment of Recovery Options as referred to in paragraph (1) is based on:
a. indicators used in the Recovery Plan; and b. trigger levels for each indicator used in the Recovery Plan as referred to in letter a, to activate the implementation of the Recovery Plan.

Article 19
(1) In preparing and establishing Recovery Options as referred to in Article 18 paragraph (1), Systemic Banks are required to establish indicators used in the Recovery Plan as referred to in Article 18 paragraph (2) letter a, which include:
a. capital; b. liquidity;
c. profitability; and
d. asset quality.
(2) Capital indicators as referred to in paragraph (1) letter a consist of at least:
a. Minimum Capital Requirement (KPMM) ratio; and b. Common Equity Tier 1 (CET 1) ratio.
(3) Liquidity indicators as referred to in paragraph (1) letter b consist of at least:
a. Rupiah Minimum Reserve Ratio (GWM) ratio; b. Liquidity Coverage Ratio (LCR); and
c. Net Stable Funding Ratio (NSFR).
(4) Profitability indicators as referred to in paragraph (1) letter c consist of at least:
a. Return on Asset (ROA) ratio; b. Return on Equity (ROE) ratio; and
c. Operational Expense to Operational Income (BOPO) ratio.
(5) Asset quality indicators as referred to in paragraph (1) letter d consist of at least:
a. Gross Non-Performing Loan (NPL) ratio or Gross Non-Performing Financing (NPF) ratio; and b. Net NPL ratio or Net NPF ratio.
(6) In the event that there are no other liquidity indicators besides the Rupiah Minimum Reserve Ratio (GWM) ratio, liquidity indicators for Systemic Banks that are Sharia general banks are at least the Rupiah Minimum Reserve Ratio (GWM) ratio as referred to in paragraph (3) letter a.

Article 20
(1) In addition to the indicators used in the Recovery Plan as referred to in Article 19, Systemic Banks may establish other indicators that are qualitative, which in the judgment of the Systemic Bank can cause significant problems to the financial condition of the Systemic Bank. (2) Systemic Banks establish Recovery Options for other qualitative indicators as referred to in paragraph (1).

Article 21
(1) Systemic Banks establish trigger levels for each indicator as referred to in Article 18 paragraph (2) letter b, to implement Recovery Options.
(2) In the event that there are provisions of legislation regarding capital, liquidity, profitability, and/or asset quality indicators, Systemic Banks are required to establish trigger levels at least in accordance with the provisions of the legislation. (3) The trigger levels established as referred to in paragraph (1) include the application of the Recovery Plan for the purposes of:
a. prevention so that the Systemic Bank can maintain the same or better size or ratio than the provisions of the legislation; b. restoration so that the Systemic Bank no longer violates the size or ratio of indicators in accordance with the provisions of the legislation; and
c. improvement of conditions that endanger the viability of the Systemic Bank.

Article 22
(1) Systemic Banks in preparing and establishing Recovery Options as referred to in Article 18 paragraph (1) must be accompanied by:
a. the order of implementation choices for Recovery Options, in the event of conditions requiring the Systemic Bank to implement Recovery Options; b. analysis or assessment of the feasibility of each Recovery Option;
c. analysis or assessment of the impact of each Recovery Option; and
d. analysis or assessment of the expected time frame for the implementation and effectiveness of each Recovery Option.
(2) The analysis or assessment of the feasibility of each Recovery Option as referred to in paragraph (1) letter b includes at least:
a. risk assessment related to Recovery Options, based on experience in implementing Recovery Options or other relevant measures; b. analysis regarding material obstacles in the timely implementation of Recovery Options and explanations of how to overcome obstacles; and
c. assessment of the adequacy of operational support for each Recovery Option.

Article 23
(1) In establishing Recovery Options for capital problems as referred to in Article 19 paragraph (1) letter a, Systemic Banks are required to establish Recovery Options in the form of:
a. increasing the capital of the Systemic Bank and changing the type of certain debts or investments into the capital of the Systemic Bank, which becomes the obligation of the PSP and/or ultimate shareholders; and/or b. increasing the capital of the Systemic Bank and changing the type of certain debts or investments into the capital of the Systemic Bank, involving other parties. (2) The obligation to increase capital by the PSP and/or ultimate shareholders as referred to in paragraph (1) letter a can be done through:
a. capital contributions; b. deferring dividend distribution;
c. stock dividend distribution; and/or
d. accounting for accumulated losses as shareholder expenses according to the order of shareholder responsibility based on the type of shares owned; and (3) The obligation to change the type of certain debts or investments into capital by the PSP and/or ultimate shareholders as referred to in paragraph (1) letter a is done by:
a. converting debt or investment instruments that have the characteristics of shareholder capital into common shares; and/or b. write-down for debt or investment instruments that have the characteristics of shareholder capital. (4) The obligation to increase capital involving other parties as referred to in paragraph (1) letter b can be done through:
a. issuing shares through a public offering (right issue); and/or b. issuing shares not through a public offering (private placement); and (5) The obligation to change the type of certain debts or investments into capital involving other parties as referred to in paragraph (1) letter b is done by:
a. converting debt or investment instruments that have the characteristics of other parties' capital into common shares; and/or b. write-down for debt or investment instruments that have the characteristics of other parties' capital. (6) Systemic Banks must first implement Recovery Options in the form of capital increases that are the obligation of the PSP and/or ultimate shareholders as referred to in paragraph (1) letter a, paragraph (2), and paragraph (3).

Article 24
(1) In applying Recovery Options in the form of obligations to change the type of certain debts or investments into the capital of the Systemic Bank as referred to in Article 23 paragraph (3) and paragraph (5), Systemic Banks must have debt or investment instruments that have capital characteristics. (2) The establishment of the amount of debt or investment instruments with capital characteristics that must be held by Systemic Banks as referred to in paragraph (1) considers at least:
a. the capital resilience of the Systemic Bank based on scenario analysis of the impact of changes from the condition of the Systemic Bank individually (idiosyncratic) and the condition of the Systemic Bank externally occurring in the financial market as a whole, which can be domestic or international (market-wide shock); and b. the impact of issuing debt or investment instruments with capital characteristics on profitability.

Article 25
In establishing Recovery Options for liquidity problems as referred to in Article 19 paragraph (1) letter b, Systemic Banks may establish Recovery Options in the form of:
a. ownership of credit lines in the money market; b. applying for short-term liquidity loans or short-term financing based on Sharia principles to Bank Indonesia; and/or
c. other Recovery Options.

Article 26
In establishing Recovery Options for profitability problems as referred to in Article 19 paragraph (1) letter c, Systemic Banks may establish Recovery Options in the form of:
a. increasing collection activities; b. cost efficiency programs;
c. sale of fixed assets; and/or
d. other Recovery Options.

Article 27
In establishing Recovery Options for asset quality problems as referred to in Article 19 paragraph (1) letter d, Systemic Banks may establish Recovery Options in the form of:
a. credit restructuring; b. write-off of productive assets; and/or
c. other Recovery Options.

Fourth Section
Disclosure of the Recovery Plan
Article 28
(1) Disclosure of the Recovery Plan as referred to in Article 10 letter d is submitted to:
a. internal parties; and b. external parties;

(2) Disclosure of the Recovery Plan to internal and external parties as referred to in paragraph (1) includes a general overview regarding:
a. actions to be taken by the Systemically Important Bank to address financial problems that will occur in the Systemically Important Bank; and b. management mechanisms for potential negative market reactions in the event the Recovery Plan is implemented.

CHAPTER IV
IMPLEMENTATION, EVALUATION AND TESTING (STRESS TESTING), AS WELL AS UPDATING THE RECOVERY PLAN

Article 29
Systemically Important Banks are required to implement the Recovery Plan as referred to in Article 2 when the trigger level established as referred to in Article 21 paragraph (1) is met.

Article 30
(1) The Board of Directors is required to conduct periodic evaluation and testing (stress testing) of the Recovery Plan as referred to in Article 2 to assess the feasibility of the Recovery Plan. (2) The periodic evaluation and testing (stress testing) of the Recovery Plan as referred to in paragraph (1) is conducted at least 1 (one) time in 1 (one) year or based on specific conditions that will have a significant impact on the Systemically Important Bank. (3) The determination of specific conditions that will have a significant impact on the Systemically Important Bank as referred to in paragraph (2) can be made based on the assessment of the Systemically Important Bank or based on the assessment of the OJK. (4) The results of the evaluation and testing (stress testing) of the Recovery Plan as referred to in paragraph (1) are reported by the Board of Directors to the Board of Commissioners.

Article 31
(1) Systemically Important Banks are required to update the Recovery Plan as referred to in Article 2 periodically at least 1 (one) time in 1 (one) year.
(2) Updates to the Recovery Plan as referred to in paragraph (1) containing changes:
a. trigger level; b. Recovery Options; and/or
c. fulfillment of the adequacy and feasibility of debt instruments or investments with capital characteristics owned by the Systemically Important Bank,
must obtain approval from shareholders in the Annual General Meeting of Shareholders (AGMS).
(3) In the event that the update of the Recovery Plan as referred to in paragraph (2) submitted to the OJK has not obtained approval in the AGMS, the Systemically Important Bank is required to request approval of the Recovery Plan in the next AGMS.

CHAPTER V
SUBMISSION OF THE RECOVERY PLAN

Article 32
For Banks that have been designated as Systemically Important Banks before this OJK Regulation takes effect, they are required to submit the Recovery Plan as referred to in Article 2 to the OJK for the first time no later than December 29, 2017.

Article 33
For Banks designated as Systemically Important Banks at the time or after this OJK Regulation takes effect, they are required to prepare and submit the Recovery Plan to the OJK no later than 6 (six) months since being designated as a Systemically Important Bank.

Article 34
(1) Systemically Important Banks are required to submit updates to the Recovery Plan as referred to in Article 31 to the OJK no later than:
a. the end of November for periodic updates to the Recovery Plan; and/or b. 1 (one) month after the evaluation and testing (stress testing) of the Recovery Plan based on specific conditions that will have a significant impact on the Systemically Important Bank. (2) The submission of updates to the Recovery Plan as referred to in paragraph (1) is accompanied by the results of the evaluation and testing (stress testing) as referred to in Article 30 accompanied by:
a. the feasibility of the trigger level; b. the feasibility of Recovery Options; and
c. the fulfillment of the adequacy and feasibility of debt instruments or investments with capital characteristics owned by the Systemically Important Bank.
(3) The submission of updates to the Recovery Plan as referred to in paragraph (1) must be signed by the President Director and the President Commissioner.
(4) In the event that the update of the Recovery Plan includes changes:
a. trigger level; b. Recovery Options; and/or
c. fulfillment of the adequacy and feasibility of debt instruments or investments with capital characteristics,
the submission of updates to the Recovery Plan as referred to in paragraph (1), in addition to being signed by the President Director and the President Commissioner, must also be signed by the Major Shareholder (PSP).

Article 35
(1) The OJK provides approval or rejection regarding the completeness of the Recovery Plan submitted by the Systemically Important Bank as referred to in Article 32, Article 33, and Article 34 paragraph (1). (2) In the event that, based on the OJK's assessment, the Recovery Plan submitted by the Systemically Important Bank as referred to in paragraph (1) is incomplete, the Systemically Important Bank is required to correct the Recovery Plan and submit it to the OJK no later than 10 (ten) working days since the order to correct the Recovery Plan.

Article 36
In the event that the deadline for submitting the Recovery Plan as referred to in Article 32, Article 33, Article 34 paragraph (1), and/or Article 35 paragraph (2) falls on a holiday, the submission of the Recovery Plan is no later than the next working day.

CHAPTER VI
FULFILLMENT OF OBLIGATIONS FOR DEBT INSTRUMENTS OR INVESTMENTS WITH CAPITAL CHARACTERISTICS

Article 37
(1) The fulfillment of obligations to have debt instruments or investments with capital characteristics for Banks that have been designated as Systemically Important Banks as referred to in Article 32, must be fulfilled by the Systemically Important Bank no later than December 31, 2018. (2) The fulfillment of obligations to have debt instruments or investments with capital characteristics for Banks designated as Systemically Important Banks as referred to in Article 33, must be fulfilled by the Systemically Important Bank no later than 18 (eighteen) months since the Recovery Plan was received in full by the OJK.

CHAPTER VII
OTHER PROVISIONS

Article 38
In the event that a Systemically Important Bank has implemented the Recovery Plan but the condition of the Systemically Important Bank does not show improvement, the OJK may establish other actions in accordance with applicable laws and regulations.

CHAPTER VIII
SANCTIONS

Article 39
Systemically Important Banks that violate the provisions as referred to in Article 2, Article 3, Article 4, Article 6 paragraph (1), Article 9, Article 18 paragraph (1), Article 19 paragraph (1), Article 21 paragraph (2), Article 22 paragraph (1), Article 23 paragraph (1), Article 23 paragraph (6), Article 24, Article 29, Article 31, Article 32, Article 33, Article 34 paragraph (1), Article 34 paragraph (3), Article 34 paragraph (4), Article 35 paragraph (2), and/or Article 37 are subject to administrative sanctions as referred to in Article 52 of Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking or as referred to in Article 58 of Law Number 21 of 2008 concerning Sharia Banking, namely:
a. written reprimand; b. prohibition on expanding business activities;
c. prohibition on opening office networks;
d. downgrade of the Systemically Important Bank's health level; e. suspension of certain business activities; and/or f. listing members of the Board of Directors, Board of Commissioners, executive officials, and/or shareholders of the Systemically Important Bank in the list of parties receiving the "Fail" (Tidak Lulus) status in the capability and propriety test (fit and proper test) as regulated in applicable laws and regulations regarding the capability and propriety test (fit and proper test).

Article 40
(1) Systemically Important Banks that are late in fulfilling the obligation to submit the Recovery Plan for the first time, update the Recovery Plan, and/or correct the Recovery Plan as referred to in Article 32, Article 33, Article 34 paragraph (1), and/or Article 35 paragraph (2) are subject to administrative sanctions in the form of a fine of IDR 1,000,000.00 (one million rupiah) per day of delay or at most IDR 100,000,000.00 (one hundred million rupiah). (2) The imposition of administrative sanctions in the form of a fine as referred to in paragraph (1) does not eliminate the Systemically Important Bank's obligation to submit the Recovery Plan, update the Recovery Plan, or correct the Recovery Plan as referred to in Article 32, Article 33, Article 34 paragraph (1), and/or Article 35 paragraph (2).

Article 41
Systemically Important Banks that are late in fulfilling the obligation to have debt instruments or investments with capital characteristics as referred to in Article 37 are subject to administrative sanctions in the form of:

1. a downgrade of the governance factor assessment in the Bank's health level; and
2. an announcement regarding the Systemically Important Bank's non-compliance in fulfilling the obligation to own debt instruments or investments with capital characteristics, on the OJK website.

Article 42
Directors who violate the provisions as referred to in Article 5 and/or Article 30 paragraph (1) or Commissioners who violate the provisions as referred to in Article 6 paragraph (2) are subject to administrative sanctions in the form of:
a. written reprimand; and/or b. listing members of the Board of Directors and/or Board of Commissioners in the list of parties receiving the "Fail" (Tidak Lulus) status in the capability and propriety test as regulated in applicable laws and regulations regarding the capability and propriety test (fit and proper test).

CHAPTER IX
CLOSING PROVISIONS

Article 43
This OJK Regulation takes effect on the date of enactment.

A copy of this is in accordance with the original Director of Law 1 Legal Department signed Yuliana

So that everyone knows, ordering the enactment of this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on April 4, 2017
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Enacted in Jakarta on April 7, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 64

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 14 /POJK.03/2017
CONCERNING
RECOVERY PLANS FOR SYSTEMICALLY IMPORTANT BANKS

I. GENERAL
Stability in the financial system is a condition that is always strived for and maintained in order to support the national economy towards the welfare of the Indonesian people based on Pancasila and the 1945 Constitution of the Republic of Indonesia. To realize a solid financial system stability to face financial crisis threats caused by pressure on financial conditions both domestically and internationally, Law Number 9 of 2016 concerning the Prevention and Handling of Financial System Crises (UU PPKSK) has been established. One of the prevention and handling measures for financial system crises as referred to in UU PPKSK is by preventing and handling Systemically Important Bank problems, which are an important part of the financial system. Therefore, Systemically Important Banks must be able to establish plans to be carried out if the Systemically Important Bank experiences financial stress conditions that can endanger the continuity of business. Such plans are formulated in the form of a Recovery Plan.

The Recovery Plan prepared by Systemically Important Banks will contain various scenarios aimed at preventing, recovering, and/or improving conditions that endanger the continuity of the Systemically Important Bank's business. The Recovery Plan for Banks designated as Systemically Important Banks emphasizes handling Systemically Important Bank problems prioritizing the use of the Systemically Important Bank's own resources and business approaches without using state budgets. Therefore, the Recovery Plan, which contains various scenarios for handling Systemically Important Bank problems, is a commitment of the Systemically Important Bank, controlling shareholders, and/or other parties. In implementation, even though Systemically Important Banks have established and implemented the Recovery Plan, in the event that improvement steps taken by the Systemically Important Bank are deemed insufficient by the OJK, the OJK may provide additional supervisory actions.

II. ARTICLE BY ARTICLE
Article 1
Sufficiently clear.

Article 2
Sufficiently clear.

Article 3
Paragraph (1)
The obligation for the Recovery Plan to obtain AGMS approval is considered because the Recovery Plan contains the role of shareholders, particularly the Major Shareholder (PSP), to improve financial conditions through capital additions. Paragraph (2) Sufficiently clear.

Article 4
Sufficiently clear.

Article 5
Sufficiently clear.

Article 6
Paragraph (1)
Approval from the Board of Commissioners regarding the Recovery Plan is given before shareholder approval in the AGMS.
Paragraph (2)
Sufficiently clear.

Article 7
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
The term "parties involved and responsible for implementing the Recovery Plan" includes internal parties and other related parties, including relevant work units, in accordance with the functions, authority, and responsibilities established by the Systemically Important Bank. Paragraph (2) Sufficiently clear. Paragraph (3) The crisis management group can take the form of a special work unit or task force consisting of internal parties and parties with the competence to address Systemically Important Bank financial problems if necessary. Paragraph (4) Sufficiently clear.

Article 8
Sufficiently clear.

Article 9
Sufficiently clear.

Article 10
Sufficiently clear.

Article 11
Sufficiently clear.

Article 12
Letter a
Sufficiently clear.
Letter b
Subsidiary company criteria include business groups of subsidiary companies.
Letter c
Sufficiently clear.
Letter d
Sufficiently clear.
Letter e
Sufficiently clear.

Article 13
Sufficiently clear.

Article 14
Sufficiently clear.

Article 15
The term "ultimate shareholders" refers to OJK regulations regarding the capability and propriety assessment for principals of financial service institutions.
The term "sister company" refers to OJK Regulations regarding the application of integrated risk management for financial conglomerates.

Article 16
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Intra-group financial support agreements include guarantees, loans, and commitments given or obtained by the Systemically Important Bank from its business group.
Paragraph (3)
Counterparties include customers, suppliers, and partners.
Paragraph (4)
Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
The term "trigger level" refers to the level at which Recovery Options are implemented.

Article 19
Paragraph (1)
Recovery Plan indicators established by the Systemically Important Bank must be able to represent and identify key vulnerabilities regarding financial problems faced by the Systemically Important Bank. Paragraph (2) Sufficiently clear. Paragraph (3) Letter a Sufficiently clear. Letter b The term "liquidity coverage ratio (LCR)" refers to OJK Regulations regarding the fulfillment of liquidity coverage ratio obligations for commercial banks. Letter c The term "net stable funding ratio (NSFR)" is the ratio between available stable funding and required stable funding. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear. Paragraph (6) Sufficiently clear.

Article 20
Paragraph (1)
Other qualitative indicators include:
a. requests from counterparties for accelerated repayment of Systemically Important Bank obligations; b. court decisions having a negative impact on the Systemically Important Bank;
c. negative news or publications regarding the Systemically Important Bank; and/or
d. significant decline in the Systemically Important Bank's reputation.
Paragraph (2)
Recovery Options for qualitative indicators aim to ensure that problems occurring in the Systemically Important Bank do not lead to and/or cause worsening financial conditions of the Systemically Important Bank.

Article 21
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Examples of applicable laws and regulations that can be used to establish trigger levels include regulations concerning KPMM (Capital Adequacy Ratio), CET 1, establishment of status and follow-up supervision of commercial banks, LCR, and/or NSFR. Paragraph (3) Letter a As a preventive example so that the Systemically Important Bank can maintain the same or better size or ratio than applicable laws and regulations for capital indicators, namely the KPMM ratio, the Systemically Important Bank establishes a trigger level so as not to violate additional capital regulations as a buffer, namely capital regulations related to the Capital Conservation Buffer, Countercyclical Buffer, and Capital Surcharge for Systemically Important Banks. Letter b As a recovery example so that the Systemically Important Bank no longer violates the size or ratio of indicators according to applicable laws and regulations for capital indicators, namely the KPMM ratio, the Systemically Important Bank establishes a trigger level so as not to violate the KPMM ratio, namely the KPMM ratio below the risk profile although still above 8% (eight percent). Letter c As an example of improvement from conditions endangering the continuity of the Systemically Important Bank's business for capital indicators, namely the KPMM ratio, the Systemically Important Bank establishes a trigger level so as not to violate the KPMM ratio of less than 8% (eight percent).

Article 22
Paragraph (1)
Letter a
The order of implementing Recovery Options aims so that the Systemically Important Bank can take appropriate actions to address financial problems faced, in this case, related to actions for prevention, recovery, or improvement from conditions endangering the continuity of the Systemically Important Bank's business. Letter b Sufficiently clear. Letter c Analysis or assessment is conducted by identifying:

1. internal and external parties that may be affected by Recovery Options; and/or
2. internal and external parties involved in the implementation of Recovery Options.
   Letter d
   Sufficiently clear.
   Paragraph (2)
   Letter a
   Sufficiently clear.
   Letter b
   Sufficiently clear.
   Letter c
   Assessment of operational support adequacy, such as information technology systems and human resources. This assessment of operational support adequacy also includes analysis of the Systemically Important Bank's internal operations, access of the Systemically Important Bank and subsidiary companies covered in the Recovery Plan to market infrastructure, such as clearing, settlement facilities, and payment systems.

Article 23
Paragraph (1)
Letter a
The term "certain investments" refers to types of investment instruments with capital characteristics that only exist in Sharia commercial banks.
Letter b
The term "certain investments" refers to types of investment instruments with capital characteristics that only exist in Sharia commercial banks.
The term "other parties" refers to parties other than the Major Shareholder (PSP) and/or ultimate shareholders.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Types of investment instruments with capital characteristics that only exist in Sharia commercial banks.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Types of investment instruments with capital characteristics that only exist in Sharia commercial banks.
Paragraph (6)
Sufficiently clear.

Article 24
Sufficiently clear.

Article 25
Letter a
In this case, the term "credit line" refers to facilities that can be received by the Systemically Important Bank from other parties that can be used to anticipate and/or cover the Systemically Important Bank's liquidity needs when necessary. Letter b Sufficiently clear. Letter c Sufficiently clear.

Article 26
Sufficiently clear.

Article 27
Sufficiently clear.

Article 28
Paragraph (1)
Letter a
The term "internal parties" includes all work units and all employees, especially those who will be involved in implementing the Recovery Plan.
Letter b
The term "external parties" includes investors, counterparties, and other interested parties.
Paragraph (2)
Sufficiently clear.

Article 29
Implementation of the Recovery Plan aims to prevent, recover, or improve conditions that endanger the continuity of the Systemically Important Bank's business.

Article 30
Paragraph (1)
The term "evaluation and testing (stress testing)" refers to the assessment of the Systemically Important Bank's condition at the time of implementation compared to the already established Recovery Plan, as well as the assessment of the feasibility of the Recovery Plan to anticipate various (scenario) stress conditions individually (idiosyncratic) and externally occurring in the overall financial market, which can be domestic or international (market-wide shock). Paragraph (2) The term "specific conditions that will have a significant impact on the Systemically Important Bank" refers to changes in the Systemically Important Bank's condition individually (idiosyncratic) and externally occurring in the overall financial market, which can be domestic or international (market-wide shock), that have the potential to endanger the continuity of the Systemically Important Bank's business. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Article 31
Sufficiently clear.

Article 32
Sufficiently clear.

Article 33
Sufficiently clear.

Article 34
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
The term "adequacy and feasibility of debt instruments or investments with capital characteristics" refers to the availability, both in terms of quantity and duration, of the aforementioned debt instruments or investments to face financial stress conditions. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Article 35
Sufficiently clear.

Article 36
The term "submission of the Recovery Plan" refers to the first submission, submission of updates, and submission of corrections.

Article 37
Sufficiently clear.

Article 38
Sufficiently clear.

Article 39
Sufficiently clear.

Article 40
Sufficiently clear.

Article 41
Sufficiently clear.

Article 42
Sufficiently clear.

Article 43
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6038