FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 16 /POJK.03/2017

CONCERNING

INTERMEDIARY BANKS

BY THE GRACE OF GOD THE ALMIGHTY,

THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in order to achieve financial system stability, efforts are needed to prevent and handle problematic banks; b. that one form of follow-up action in handling bank problems can be carried out through the establishment of an Intermediary Bank;
c. that based on considerations as referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Intermediary Banks.

Recalling:

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);
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);
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);
Law Number 9 of 2016 concerning Prevention and Handling of Financial System 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:

To Establish: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING INTERMEDIARY BANKS.

CHAPTER I

GENERAL PROVISIONS

Article 1

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

Bank means a 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 Bank as referred to in Law Number 21 concerning Sharia Banking.
Conventional Commercial Bank is a commercial bank that conducts business activities conventionally in providing payment transaction services.
Sharia Commercial Bank is a commercial bank that conducts business activities based on Sharia principles in providing payment transaction services.
Intermediary Bank is a commercial bank established by the Deposit Insurance Corporation to be used as a resolution vehicle by accepting the transfer of part or all of the assets and/or liabilities of a bank handled by the Deposit Insurance Corporation, subsequently conducting banking business activities, and having its ownership transferred to another party.
Source Bank is a Bank whose part or all of the assets and/or liabilities are transferred to the Intermediary Bank.
Sharia Business Unit is a work unit of the head office of a Conventional Commercial Bank that functions as the head office of a branch or unit that conducts business activities based on Sharia principles.
Deposit Insurance Corporation, hereinafter abbreviated as LPS, is the Deposit Insurance Corporation as referred to in Law Number 24 of 2004 concerning the Deposit Insurance Corporation as amended by Law Number 7 of 2009 concerning the Decree of Government Regulation in Lieu of Law Number 3 of 2008 concerning Amendments to Law Number 24 of 2004 concerning the Deposit Insurance Corporation into Law.
Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution that has the function, 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

An Intermediary Bank may only be established and conduct business activities after obtaining a license from the OJK.

Article 3

The legal form of an Intermediary Bank is a limited liability company.

Article 4

By type, Intermediary Banks consist of:
a. Intermediary Banks that conduct business activities as Conventional Commercial Banks; b. Intermediary Banks that conduct business activities as Sharia Commercial Banks.

CHAPTER II

ESTABLISHMENT OF INTERMEDIARY BANKS

Article 5

(1) An Intermediary Bank may only be established and owned by the LPS.
(2) In the establishment of an Intermediary Bank by the LPS as referred to in paragraph (1), the following do not apply:
a. provisions requiring a limited liability company to be established by 2 (two) or more persons as referred to in the Law concerning limited liability companies; and b. the maximum share ownership limit as regulated in OJK provisions concerning share ownership of commercial banks.

Article 6

The issuance of an Intermediary Bank license as referred to in Article 2 is carried out in 2 (two) stages, namely:
a. principle approval to prepare for the establishment of an Intermediary Bank; and b. business license to conduct Intermediary Bank business activities after the preparation for the establishment of the Intermediary Bank as referred to in letter a is completed.

First Section

Principle Approval

Article 7

The application for principle approval for the establishment of an Intermediary Bank as referred to in Article 6 letter a is submitted by the LPS.

Article 8

(1) The basic capital to obtain principle approval is at least equal to the basic capital for the establishment of a limited liability company.
(2) The basic capital as referred to in paragraph (1) must be fully placed and paid up.

Article 9

The application to obtain principle approval as referred to in Article 6 letter a is submitted by the LPS to the OJK, accompanied by documents:
a. articles of association containing at least:

name and domicile;
business activities as a Bank;
capital;
ownership;
authority, responsibility, and term of office of board of directors members and board of commissioners members, as well as Sharia supervisory board members for Intermediary Banks conducting business activities as Sharia Commercial Banks; and
provisions that the appointment of board of directors members, board of commissioners members, and Sharia supervisory board members for Intermediary Banks conducting business activities as Sharia Commercial Banks must obtain prior approval from the OJK;
b. proof of capital deposit; and
c. organizational structure and human resources, risk management guidelines, good corporate governance, work procedures, planned information technology systems to be used, business plan, and projections of balance sheet, profit and loss, and monthly cash flow statements.

Article 10

The document requirements for the application to obtain principle approval as referred to in Article 9 letter c may be replaced with a statement letter from the LPS stating that the document requirements will be fulfilled using data and/or documents of the prospective Source Bank whose part or all of the assets and/or liabilities will be transferred at the time of submitting the Intermediary Bank business license application.

Article 11

(1) In order to provide principle approval as referred to in Article 6 letter a, the OJK conducts an assessment of document completeness.
(2) Based on the results of the assessment of document completeness as referred to in paragraph (1), the OJK may request the LPS to complete and/or improve the documents for the application to obtain principle approval.

Article 12

Principle approval as referred to in Article 6 letter a is issued by the OJK within a maximum of 30 (thirty) working days after the complete application documents for principle approval are received.

Article 13

Principle approval as referred to in Article 12 is valid for a maximum period until the business license approval is issued by the OJK.

Article 14

An Intermediary Bank may only conduct business activities after obtaining a business license from the OJK.

Second Section

Business License

Article 15

The submission of the application for the business license for the establishment of an Intermediary Bank as referred to in Article 6 letter b is carried out when the prospective Source Bank has been designated as a Bank under special supervision.

Article 16

(1) The paid-up capital to obtain the business license for the establishment of an Intermediary Bank is equal to the capital according to the provisions of legislation regarding minimum capital provision obligations. (2) The amount of capital as referred to in paragraph (1) must be fully placed and paid up at the time of submitting the Intermediary Bank business license application.

Article 17

The application to obtain the Intermediary Bank business license as referred to in Article 6 letter b is submitted by the LPS to the OJK, accompanied by documents:
a. proof of paid-up capital settlement as referred to in Article 16 paragraph (2); b. composition of the board of directors, board of commissioners, and Sharia supervisory board for Intermediary Banks conducting business activities as Sharia Commercial Banks;
c. action plan at least covering the method and schedule of transfer, fulfillment and management of human resources, and migration of Intermediary Bank infrastructure;
d. documents as referred to in Article 9 letter c in the event that the documents were not fulfilled at the time of the application for principle approval as referred to in Article 10; e. proof of operational readiness; and f. administrative documents required in the assessment of the competence and propriety of prospective board of directors members and prospective board of commissioners members.

Article 18

(1) In order to provide approval for the business license application, the OJK conducts:
a. assessment of document completeness; and b. assessment of competence and propriety of prospective board of directors members and prospective board of commissioners members, and interviews with prospective Sharia supervisory board members for Intermediary Banks conducting business activities as Sharia Commercial Banks. (2) Based on the results of the assessment of document completeness as referred to in paragraph (1), the OJK may request the LPS to complete and/or improve documents, and/or submit prospective board of directors members, prospective board of commissioners members, and/or prospective Sharia supervisory board members for Intermediary Banks conducting business activities as Sharia Commercial Banks.

Article 19

The OJK provides approval for the Intermediary Bank business license application as referred to in Article 15 after there is a decision establishing that the rescue of the Source Bank is carried out through the establishment of an Intermediary Bank.

Article 20

(1) An Intermediary Bank that has obtained a business license from the OJK must carry out banking business activities within a maximum of 30 (thirty) working days counted from the date the business license is issued by the OJK. (2) The implementation of business activities as referred to in paragraph (1) must be reported by the board of directors of the Intermediary Bank to the OJK within a maximum of 10 (ten) working days after the date of operational activity implementation. (3) Based on a request from the LPS, the OJK may provide approval to extend the time limit for the implementation of business activities as referred to in paragraph (1).

Article 21

Under certain conditions, the LPS may submit applications for principle approval and business license for an Intermediary Bank as referred to in Article 6 at the same time.

Article 22

The application for principle approval and business license for an Intermediary Bank at the same time as referred to in Article 21 is accompanied by the completeness of documents as referred to in Article 9 letters a and c, as well as Article 17 letters a, b, c, e, and f.

Article 23

The provision of approval for the application for the establishment of an Intermediary Bank as referred to in Article 21 is issued by the OJK in the form of:
a. principle approval; and b. business license, which are issued simultaneously.

Article 24

In order to provide approval for the application for the establishment of an Intermediary Bank as referred to in Article 23, the OJK conducts steps as referred to in Article 11, Article 18, and Article 19.

CHAPTER III

BUSINESS ACTIVITIES AND BRANCH NETWORK

Article 25

An Intermediary Bank may use part or all of the facilities and infrastructure of the Source Bank.

First Section

Transfer of Assets and/or Liabilities

Article 26

(1) An Intermediary Bank receives the transfer of assets and/or liabilities from 1 (one) Source Bank.
(2) Under certain conditions, 1 (one) Intermediary Bank may be used to receive the transfer of assets and/or liabilities from more than 1 (one) Source Bank.

Article 27

(1) An Intermediary Bank as referred to in Article 4 letter a:
a. receives the transfer of assets and/or liabilities from 1 (one) or more Source Banks in the form of Banks conducting business activities conventionally; and/or b. receives the transfer of assets and/or liabilities other than assets and/or liabilities of the Sharia Business Unit in 1 (one) or more Source Banks conducting business activities as Conventional Commercial Banks that have a Sharia Business Unit. (2) An Intermediary Bank as referred to in Article 4 letter b:
a. receives the transfer of assets and/or liabilities from 1 (one) or more Source Banks in the form of Banks conducting business activities based on Sharia principles; and/or b. receives the transfer of assets and/or liabilities of the Sharia Business Unit in 1 (one) or more Source Banks conducting business activities as Conventional Commercial Banks that have a Sharia Business Unit.

Article 28

An Intermediary Bank may only receive the transfer of part or all of the assets and/or liabilities of a Source Bank that has specific criteria.

Article 29

(1) In the event that part or all of the assets and/or liabilities of another Source Bank will be transferred to an Intermediary Bank that has already conducted business activities, the Intermediary Bank must at least submit changes to:
a. business plan; b. action plan at least covering the method and schedule of transfer, fulfillment and management of human resources, and migration of infrastructure from the Source Bank to be transferred to the Intermediary Bank; and
c. capital requirement plan,
to the OJK at least 5 (five) days before the transfer is carried out.
(2) In the event that capital increase is required as a result of the addition of asset transfers from another Source Bank as referred to in paragraph (1), the Intermediary Bank must increase its capital first at the latest at the time of the transfer.

Article 30

The OJK may request the LPS to replace board of directors members, board of commissioners members, and/or Sharia supervisory board members of an Intermediary Bank that has conducted business activities as referred to in Article 29, in the event that in the opinion of the OJK the board of directors members, board of commissioners members, and/or Sharia supervisory board members of the Intermediary Bank are deemed no longer to meet competency requirements due to the addition of the transfer of part or all of the assets and liabilities.

Second Section

Intermediary Bank Operations

Article 31

(1) An Intermediary Bank may conduct products and business activities conducted by the Source Bank.
(2) Licensing to conduct products and business activities as referred to in paragraph (1) that are held by the Source Bank automatically transfers to the Intermediary Bank since the deed of transfer of part or all of the assets and/or liabilities is signed.

Article 32

An Intermediary Bank is required to fulfill all provisions of legislation for Conventional Commercial Banks and/or Sharia Commercial Banks except as otherwise regulated in this Financial Services Authority Regulation.

Article 33

(1) An Intermediary Bank is required to fulfill core capital requirements according to the business activities conducted by the Intermediary Bank within a maximum of 1 (one) year since the Intermediary Bank starts business activities. (2) In the event that an Intermediary Bank cannot fulfill the core capital requirements as referred to in paragraph (1), the Intermediary Bank is required to adjust its banking business activities according to the core capital held, within a maximum of 1 (one) year since the end of the time limit as referred to in paragraph (1).

Third Section

Branch Network

Article 34

(1) An Intermediary Bank may open new branch networks to support the operations of the Intermediary Bank.
(2) The opening of branch networks as referred to in paragraph (1) must be supported by the availability of core capital allocation.
(3) In calculating the availability of core capital allocation as referred to in paragraph (2), branch networks originating from the Source Bank are not included in the calculation of the availability of core capital allocation.

CHAPTER IV

TERMINATION OF INTERMEDIARY BANKS

Article 35

An Intermediary Bank is no longer an Intermediary Bank in the event that the LPS:
a. sells the shares of the Intermediary Bank to another party; or b. after transferring all assets and/or liabilities of the Intermediary Bank to a Bank or another party.

Article 36

(1) In the event that the LPS sells the shares of the Intermediary Bank to another party as referred to in Article 35 letter a:
a. the share sale must meet the number of shareholders requirements as regulated in the provisions of legislation; b. the party purchasing the shares of the Intermediary Bank that has been sold may hold shares in the Bank exceeding the maximum share ownership limit as shareholders who own Banks in handling or rescue by the LPS as regulated in OJK provisions concerning share ownership of commercial banks; and
c. in the event that at the time of the transfer of part or all of the ownership of the Intermediary Bank from the LPS to the new shareholders there are still financial obligations to be fulfilled, the financial obligations must be fulfilled by the new shareholders at the time the ownership of the Intermediary Bank transfers.
(2) The party purchasing shares of the Intermediary Bank exceeding the maximum share ownership limit as referred to in paragraph (1) letter b may only hold shares in the Bank exceeding the maximum share ownership limit for a maximum of 20 (twenty) years since the purchase of the Intermediary Bank shares from the LPS.

Article 37

In the event that the LPS transfers all assets and/or liabilities of the Intermediary Bank to a Bank or another party as referred to in Article 35 letter b, the transfer of all assets and/or liabilities may be carried out all at once or in stages.

Article 38

(1) The LPS submits an application for the revocation of the Intermediary Bank business license to the OJK within a maximum of 30 (thirty) working days since the transfer of all assets and/or liabilities to a Bank or another party is completed. (2) The procedure for the revocation of the Intermediary Bank business license as referred to in paragraph (1) refers to the provisions of legislation concerning the revocation of business licenses upon request of commercial bank shareholders.

Article 39

The LPS dissolves the legal entity of the Intermediary Bank after the revocation of the business license by the OJK.

CHAPTER V

OTHER PROVISIONS

Article 40

(1) The LPS submits an application for the revocation of the Source Bank business license to the OJK within a maximum of 5 (five) working days since the transfer of assets and/or liabilities is completed. (2) The LPS carries out the liquidation process and dissolution of the legal entity of the Source Bank after the revocation of the business license by the OJK. (3) Based on a request from the LPS, the OJK may provide approval to extend the time limit for the application for revocation of the Source Bank business license as referred to in paragraph (1).

Article 41

(1) An Intermediary Bank is exempted from the status of supervision as a bank under intensive supervision or a bank under special supervision.
(2) The Intermediary Bank as referred to in paragraph (1) remains obligated to carry out supervisory actions ordered by the OJK.

CHAPTER VI

SANCTIONS

Article 42

An Intermediary Bank that does not fulfill the provisions as referred to in Article 32, Article 33, and Article 36 paragraph (1) letter a is subject to administrative sanctions in the form of:
a. written reprimand; b. prohibition on expanding business activities;
c. prohibition on opening branch networks;
d. suspension of certain business activities; and/or e. listing of board of directors members, board of commissioners members, and/or executive officials in the list of parties receiving the "Fail" designation in the competence and propriety test as regulated in the provisions of legislation concerning the competence and propriety test (fit and proper test).

This copy is consistent with the original
Director of Law 1
Legal Department signed
Yuliana

CHAPTER VII

CLOSING PROVISIONS

Article 43

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

To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on April 4, 2017

CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Promulgated 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 66

EXPLANATION

OF

FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 16 /POJK.03/2017

CONCERNING

INTERMEDIARY BANKS

I. GENERAL

The financial crisis of 1997-1998 provided lessons for relevant parties in handling financial system stability. Improvement efforts were made to anticipate the failure of the financial system, particularly in banking.

The spirit behind the issuance of Law Number 9 of 2016 concerning Prevention and Handling of Financial System Crises is the handling of Bank problems using the Bank's own resources and a business approach without using the state budget. Banks that are unable to resolve the problems they face will be taken over by the Deposit Insurance Corporation for handling. One option for resolving the handling of problematic Banks is through the formation of an Intermediary Bank.

The formation of an Intermediary Bank serves as a means to separate the assets and liabilities of a problematic Bank that are assessed to have good quality from those assessed to be bad. With this separation, the Intermediary Bank will receive the transfer of assets and liabilities of good quality and subsequently the Intermediary Bank will conduct banking business activities and its ownership will be transferred to another party.

II. ARTICLE BY ARTICLE

Article 1

Sufficiently clear.

Article 2

Sufficiently clear.

Article 3

Sufficiently clear.

Article 4

Sufficiently clear.

Article 5

Sufficiently clear.

Article 6

Sufficiently clear.

Article 7

Sufficiently clear.

Article 8

Paragraph (1)
The amount of basic capital for the establishment of a limited liability company refers to the Law concerning limited liability companies.

Paragraph (2)
Sufficiently clear.

Article 9

Letter a
Number 1
Sufficiently clear.

Number 2
Sufficiently clear.

Number 3
Sufficiently clear.

Number 4
Sufficiently clear.

Number 5
The authority, responsibility, and term of office of Sharia supervisory board members are stated in the event that the Intermediary Bank is an Intermediary Bank conducting business activities as a Sharia Commercial Bank.

Number 6
The requirements and procedures for the appointment of prospective board of directors members and prospective board of commissioners members refer to OJK provisions regulating the assessment of competence and propriety. The requirement that Sharia supervisory board members must obtain prior approval from the OJK is fulfilled in the event that the Intermediary Bank conducts business activities as a Sharia Commercial Bank.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Article 10

Sufficiently clear.

Article 11

Sufficiently clear.

Article 12

Sufficiently clear.

Article 13

Sufficiently clear.

Article 14

Sufficiently clear.

Article 15

What is meant by "Bank under special supervision" is the bank supervision status as regulated in OJK Regulations concerning the determination of status and follow-up of supervision of commercial banks.

Article 16

Paragraph (1)
What is meant by "equal to the capital according to the provisions of legislation regarding minimum capital provision obligations" is the fulfillment of minimum capital provision obligations according to risk profile.

Paragraph (2)
Sufficiently clear.

Article 17

Letter a
Sufficiently clear.

Letter b
The composition of the Sharia supervisory board is stated in the event that the Intermediary Bank conducts business activities as a Sharia Commercial Bank.

Letter c
Sufficiently clear.

Letter d
Documents must be submitted at the time of the business license application because the documents in question have been replaced with a statement letter from the LPS in the application for principle approval.

Letter e
Proof of operational readiness includes among others:
1) list of fixed assets and inventory; and
2) forms or documents to be used for the operations of the Intermediary Bank.

Letter f
Clearly stated.

Article 18
Paragraph (1)
Letter a
Clearly stated.
Letter b
The assessment of competence and propriety for prospective members of the Board of Directors and prospective members of the Board of Commissioners is conducted with reference to OJK regulations governing the assessment of competence and propriety.

Paragraph (2)
Clearly stated.

Article 19
Clearly stated.

Article 20
Clearly stated.

Article 21
The term "certain conditions" refers to a financial system crisis condition as referred to in the Law concerning the prevention and handling of financial system crises.

Article 22
The fulfillment of paid-up capital repayment requirements to obtain a business license as referred to in Article 17 letter a also includes the fulfillment of proof of basic capital deposit requirements as referred to in Article 8 paragraph (1).

Article 23
Clearly stated.

Article 24
Clearly stated.

Article 25
The term "facilities and infrastructure of the Originating Bank" includes, among others, office networks, human resources, information technology systems, and/or work procedures.

Article 26
Paragraph (1)
Clearly stated.
Paragraph (2)
The term "certain conditions" refers to conditions based on LPS considerations, where 1 (one) Bank Perantara can be used to accept the transfer of assets and/or liabilities of more than 1 (one) Originating Bank.

Article 27
Clearly stated.

Article 28
Criteria for specific assets and liabilities that can be transferred refer to the Law concerning the prevention and handling of financial system crises.

Article 29
Paragraph (1)
Letter a
Clearly stated.
Letter b
Clearly stated.
Letter c
A capital requirement plan is necessary to increase the Bank's capital to absorb increased risks from assets received from other Originating Banks.

Paragraph (2)
Clearly stated.

Article 30
Clearly stated.

Article 31
Clearly stated.

Article 32
Clearly stated.

Article 33
Paragraph (1)
Provisions on business activities in accordance with core capital refer to OJK regulations governing business activities and office networks based on core capital.

Paragraph (2)
Clearly stated.

Article 34
Clearly stated.

Article 35
Clearly stated.

Article 36
Paragraph (1)
Letter a
Regulatory provisions include, among others, the Law concerning banking, the Law concerning limited liability companies, the Law concerning Islamic banking, and regulatory provisions concerning commercial banks.

Letter b
Clearly stated.

Letter c
Financial obligations include, among others, additional capital requirements as a buffer in the form of capital conservation buffer, countercyclical buffer, and/or capital surcharge for systemic banks.

Letter d
Clearly stated.

Paragraph (2)
Clearly stated.

Article 37
Clearly stated.

Article 38
Clearly stated.

Article 39
Clearly stated.

Article 40
Clearly stated.

Article 41
Clearly stated.

Article 42
Clearly stated.

Article 43
Clearly stated.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6040