Financial Services Authority Regulation Number 18/POJK.03/2020 Concerning Written Orders for Handling Bank Problems

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 18 /POJK.03/2020
CONCERNING
WRITTEN ORDERS FOR HANDLING BANK PROBLEMS
BY THE GRACE OF GOD ALMIGHTY
THE COMMISSIONER COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering: that in order to implement the provisions of Article 23 paragraph (2) of Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or in order to Face Threats that Endanger the National Economy and/or System Financial Stability, it is necessary to establish a Financial Services Authority Regulation concerning Written Orders for Handling Bank Problems; Recalling: 1. Law Number 21 Year 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);
2. Law Number 9 Year 2016 concerning Prevention and Handling of Financial System Crisis (State Gazette of the Republic of Indonesia Year 2016 Number 70, Supplement to the State Gazette of the Republic of Indonesia Number 5872);
3. Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or in order to Face Threats that Endanger the National Economy and/or System Financial Stability (State Gazette of the Republic of Indonesia Year 2020 Number 87, Supplement to the State Gazette of the Republic of Indonesia Number 6485);
DECIDES:
Establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING WRITTEN ORDERS FOR HANDLING BANK PROBLEMS.
CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined:

1. Bank is a business entity that gathers funds from the public in the form of deposits and distributes them to the public in the form of loans and/or other forms in order to improve the living standards of the many people, consisting of conventional commercial banks, Sharia commercial banks, rural credit banks, Sharia rural financing banks, and branches of banks located outside the country.
2. Conventional Commercial Bank, hereinafter abbreviated as BUK, is a Bank that conducts conventional business activities which in its activities provide services in payment circulation.
3. Sharia Commercial Bank, hereinafter abbreviated as BUS, is a Bank that conducts business activities based on Sharia principles which in its activities provide services in payment circulation.
4. Rural Credit Bank, hereinafter abbreviated as BPR, is a Bank that conducts conventional business activities which in its activities do not provide services in payment circulation.
5. Sharia Rural Financing Bank, hereinafter abbreviated as BPRS, is a Bank that conducts business activities based on Sharia principles which in its activities do not provide services in payment circulation.
6. Written Order for Handling Bank Problems, hereinafter referred to as Written Order, is a written order given by the Financial Services Authority to a Bank to carry out or receive a merger, consolidation, acquisition, and/or integration.
7. Merger is Merger as referred to in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, and the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks.
8. Consolidation is Consolidation as referred to in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, and the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks.
9. Acquisition is Acquisition as referred to in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, and the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks.
10. Integration is Integration as referred to in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks.
11. General Meeting of Shareholders, hereinafter abbreviated as GMS, is the GMS as referred to in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, and the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks.
12. Bank Principal Party is the controlling shareholder, members of the board of directors, and members of the board of commissioners.
    Article 2
    The Financial Services Authority has the authority to issue Written Orders to Banks to:
    a. carry out Merger, Consolidation, Acquisition, and/or Integration; and/or b. receive Merger, Consolidation, Acquisition, and/or Integration.
    CHAPTER II
    BANKS GIVEN WRITTEN ORDERS
    Article 3
    (1) The Financial Services Authority issues a Written Order as referred to in Article 2 letter a to Banks that meet the criteria:
    a. Banks that based on the Financial Services Authority's assessment experience financial problems that can disrupt business continuity or are assessed as unable to withstand pressures currently being faced or will be faced; and/or b. Banks with controlling shareholders who do not have the ability to carry out efforts to strengthen the Bank. (2) The Financial Services Authority issues a Written Order as referred to in Article 2 letter b to Banks that meet the criteria:
    a. the health level of BUK or BUS after receiving Merger, Consolidation, Acquisition, and/or Integration, at least Composite Rating 3 (CR-3); b. the health level of BPR after receiving Merger or Consolidation, at least Healthy Enough; or
    c. the health level of BPRS after receiving Merger or Consolidation, at least Composite Rating 3 (CR-3).
    CHAPTER III
    FOLLOW-UP TO WRITTEN ORDERS
    Article 4
    (1) Banks given a Written Order as referred to in Article 2 are required to formulate an action plan to follow up on the Written Order.
    (2) The action plan as referred to in paragraph (1) must at least contain a series of processes and schedules for the implementation of Merger, Consolidation, Acquisition, and/or Integration until the Merger, Consolidation, Acquisition, and/or Integration becomes effective, as regulated in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, or the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks. (3) Banks given a Written Order transmit information on the progress of the implementation of the action plan to follow up on the Written Order as referred to in paragraph (1) to the Financial Services Authority. (4) Banks given a Written Order are required to execute and maintain the smoothness of the process of Merger, Consolidation, Acquisition, and/or Integration in accordance with the action plan as referred to in paragraph (3). (5) Banks and/or Principal Parties of Banks that do not fulfill the provisions as referred to in paragraph (1) and/or paragraph (4) are subject to administrative sanctions in the form of written reprimands. (6) In the event that a Bank has been subjected to administrative sanctions as referred to in paragraph (5), and does not fulfill the provisions as referred to in paragraph (1) and/or paragraph (4), the Bank is subject to administrative sanctions in the form of:
    a. for BUK or BUS, the determination of BUK as a BPR or BPRS, or BUS as a BPRS based on the decision of the Financial Services Authority; or b. for BPR or BPRS, the temporary cessation of part of the business activities of the BPR or BPRS.
    (7) In the event that a Principal Party of a Bank has been subjected to administrative sanctions as referred to in paragraph (5), and does not fulfill the provisions as referred to in paragraph (1) and/or paragraph (4), the Principal Party of the Bank may be subject to administrative sanctions in the form of prohibition from acting as a principal party in accordance with the Financial Services Authority Regulation concerning re-evaluation of principal parties of financial service institutions.
    Article 5
    Requirements and procedures for Merger, Consolidation, Acquisition, and/or Integration carried out by Banks as a follow-up to Written Orders are in accordance with the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, or the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks, unless otherwise regulated in this Financial Services Authority Regulation.
    Article 6
    (1) Requirements and procedures otherwise regulated in this Financial Services Authority Regulation as referred to in Article 5:
    a. Banks may announce a summary draft of Merger, Consolidation, Acquisition, and/or Integration in daily newspapers in the Indonesian language by informing that details of the summary draft of Merger, Consolidation, Acquisition, and/or Integration can be accessed on the Bank's website. b. Banks may hold GMS and/or other meetings related to the process of Merger, Consolidation, Acquisition, and/or Integration through face-to-face meetings utilizing information technology.
    c. In the event that the holding of GMS and/or other meetings is conducted through face-to-face meetings utilizing information technology as referred to in letter b, Banks must determine the location for holding the GMS and/or other meetings related to the process of Merger, Consolidation, Acquisition, and/or Integration within the territory of the Republic of Indonesia.
    d. The implementation of clarification for the assessment of competence and propriety against prospective Principal Parties of Banks resulting from Merger, Consolidation, Acquisition, and/or Integration may be conducted through face-to-face meetings utilizing information technology. e. Submission of documents and/or administrative requirements in the licensing process and/or reporting on the implementation of Merger, Consolidation, Acquisition, and/or Integration online may be done by Banks via official electronic mail (e-mail) facilities addressed to the Financial Services Authority in the event that the Financial Services Authority's licensing system and reporting system are not yet available. f. Banks are required to archive documents and administrative requirements submitted online to the Financial Services Authority as referred to in letter e. g. Banks are required to submit documents related to Merger, Consolidation, Acquisition, and/or Integration as referred to in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, or the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks, without needing to be accompanied by a request for permission for Merger, Consolidation, Acquisition, and/or Integration. (2) Banks that do not fulfill the provisions as referred to in paragraph (1) letter f and/or letter g are subject to administrative sanctions in the form of written reprimands. (3) Principal Parties of Banks that do not fulfill the provisions as referred to in paragraph (1) letter f and/or letter g may be subject to administrative sanctions in the form of prohibition from acting as a principal party in accordance with the Financial Services Authority Regulation concerning re-evaluation of principal parties of financial service institutions.
    Article 7
    (1) Assessment and conversion of shares from each Bank that will carry out Merger, Consolidation, Acquisition, and/or Integration as a follow-up to Written Orders against the shares of the Bank resulting from Merger, Consolidation, Acquisition, and/or Integration, are determined based on agreement between the Banks involved in the Merger, Consolidation, Acquisition, and/or Integration. (2) In the event that there is no agreement as referred to in paragraph (1), share assessment and conversion are determined based on a fair assessment by the Bank receiving the Merger, Consolidation, Acquisition, and/or Integration.
    Article 8
    Banks with open company status given a Written Order to carry out or receive Merger, Consolidation, Acquisition, and/or Integration may be exempted from obligations regarding transparency for open company status with the approval of the Financial Services Authority.
    CHAPTER IV
    OTHER PROVISIONS
    Article 9
    (1) BUK or BUS given a Written Order to carry out or receive Merger, Consolidation, Acquisition, and/or Integration, may be exempted from provisions concerning:
    a. single ownership in Indonesian banking; b. commercial bank share ownership; and/or
    c. time limits for fulfilling minimum core capital, as regulated in the Financial Services Authority Regulation concerning commercial bank consolidation.
    (2) In the event that BPR or BPRS given a Written Order to carry out or receive Merger, Consolidation, and/or Acquisition are located in several provinces that border directly, the office network of the BPR or BPRS may still be maintained in accordance with the existing office network area of the BPR or BPRS.
    CHAPTER V
    CLOSING PROVISIONS
    Article 10
    This Financial Services Authority Regulation comes into force on the date of its enactment.

This copy is consistent with the original
Deputy Director of Legal Consultancy and Harmonization of Banking Regulations 1 Legal Directorate 1 Department of Law signed Wiwit Puspasari To ensure everyone knows it, ordering the unification of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia. Determined in Jakarta on April 20, 2020 CHAIRMAN OF THE COMMISSIONER COUNCIL FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed WIMBOH SANTOSO Unified in Jakarta on April 21, 2020 MINISTER OF LAW AND HUMAN RIGHTS REPUBLIC OF INDONESIA, signed YASONNA H. LAOLY STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 106

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 18 /POJK.03/2020
CONCERNING
WRITTEN ORDERS FOR HANDLING BANK PROBLEMS
I. GENERAL
To maintain financial system stability amidst conditions occurring due to the Corona Virus Disease 2019 (COVID-19) pandemic and/or to face threats of economic crisis and/or financial system stability, Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or In Order to Face Threats that Endanger the National Economy and/or System Financial Stability has been established. In efforts to maintain financial system stability, Article 23 paragraph (1) letter a of Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or In Order to Face Threats that Endanger the National Economy and/or System Financial Stability regulates the authority of the Financial Services Authority to issue Written Orders to financial service institutions to carry out Merger, Consolidation, Acquisition, Integration and/or conversion, or to receive Merger, Consolidation, Acquisition, Integration and/or conversion, which aims to:
a. maintain financial system stability amidst conditions occurring due to the Corona Virus Disease 2019 (COVID-19) pandemic; and/or b. face threats of economic crisis and/or financial system stability.
These two conditions can be considerations for the Financial Services Authority to issue Written Orders to Banks either to carry out or receive Merger, Consolidation, Acquisition, and/or Integration, as regulated in Article 23 paragraph (1) letter a of Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or In Order to Face Threats that Endanger the National Economy and/or System Financial Stability, in efforts to maintain financial system stability, specifically national banking stability. Conversion activities are not included as part of the Written Order to Banks, considering conversion is an action to change the business license of branches of banks located outside the country into a business license for commercial banks in efforts to strengthen the structure, resilience, and competitiveness of the national banking industry. In connection with the establishment of Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or In Order to Face Threats that Endanger the National Economy and/or System Financial Stability, Laws regulating the authority of Written Orders and supervisory actions that can be carried out by the Financial Services Authority as referred to in Law Number 7 Year 1992 concerning Banking as amended by Law Number 10 Year 1998 concerning Amendment to Law Number 7 Year 1992 concerning Banking, Law Number 21 Year 2008 concerning Sharia Banking, Law Number 21 Year 2011 concerning the Financial Services Authority, and/or Law Number 9 Year 2016 concerning Prevention and Handling of Financial System Crisis, remain in effect. With the authority granted, the Financial Services Authority has policy options other than those already regulated in the aforementioned Laws. More specifically, Written Orders as regulated in Article 23 paragraph (1) letter a of Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or In Order to Face Threats that Endanger the National Economy and/or System Financial Stability become one of the alternative supervisory actions of the Financial Services Authority which is a forward-looking anticipatory action, from several other alternatives as regulated in Laws and Financial Services Authority Regulations, to maintain financial system stability as mandated by Law. Without disregarding criminal sanctions as referred to in Article 26 of Government Regulation in Lieu of Law Number 1 Year 2020 concerning State Financial Policy and System Financial Stability for Handling Corona Virus Disease 2019 (COVID-19) Pandemic and/or In Order to Face Threats that Endanger the National Economy and/or System Financial Stability, violations of Written
Order provisions can be subject to administrative sanctions based on this Financial Services Authority Regulation. In connection with these matters, regulations are needed that serve as the basis for the mechanism and procedures for implementing Written Orders for handling Bank problems in a Financial Services Authority Regulation.
II. ARTICLE BY ARTICLE
Article 1
Clearly sufficient.
Article 2
Letter a
What is meant by "Written Order to Bank to carry out Acquisition" is a Written Order to a Bank to be acquired by another Bank.
Letter b
What is meant by "Written Order to Bank to receive Acquisition" is a Written Order to a Bank to acquire another Bank.
Article 3
Criteria for Banks to be given Written Orders consider individual bank (idiosyncratic) conditions and external conditions that will affect the performance and financial condition of the Bank in relation to:
a. the Corona Virus Disease 2019 (COVID-19) pandemic which puts pressure on financial system stability, and/or b. other conditions that can cause threats of economic crisis and/or financial system stability.
Paragraph (1)
Letter a
Clearly sufficient.
Letter b
Controlling shareholder means controlling shareholder as referred to in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, and the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks. What is meant by efforts to strengthen the Bank include among others:
a) adding or maintaining the Bank's capital and/or liquidity levels at an adequate level; and/or b) carrying out consolidation efforts as referred to in the Financial Services Authority Regulation concerning commercial bank consolidation.
Paragraph (2)
Letter a
What is meant by "health level of BUK or BUS" is the health level as referred to in the Financial Services Authority Regulation concerning assessment of commercial bank health levels and the Financial Services Authority Regulation concerning assessment of Sharia commercial bank health levels and Sharia business units. Letter b What is meant by "health level of BPR" is the health level as referred to in the provisions of legislation concerning procedures for assessing rural credit bank health levels. Letter c What is meant by "health level of BPRS" is the health level as referred to in the Financial Services Authority Regulation concerning the assessment system for Sharia rural financing bank health levels.
Article 4
Clearly sufficient.
Article 5
Clearly sufficient.
Article 6
Paragraph (1)
Letter a
For BUK or BUS, the announcement is carried out in daily newspapers in the Indonesian language with national circulation.
Letter b
Utilizing information technology includes among others through teleconference media, video conferencing, or other electronic media facilities.
Letter c
Clearly sufficient.
Letter d
Utilizing information technology includes among others through video conferencing or other electronic face-to-face media.
Letter e
Online submission via official electronic mail (e-mail) facilities addressed to the Financial Services Authority as the offline submission address as regulated in the Financial Services Authority Regulation concerning merger, consolidation, acquisition, integration, and conversion of commercial banks, or the Financial Services Authority Regulation concerning merger, consolidation, and acquisition of rural credit banks and Sharia rural financing banks. Letter f The Bank's obligation to archive documents and administrative requirements in the form of physical documents (hard copy). Letter g Clearly sufficient. Paragraph (2) Clearly sufficient. Paragraph (3) Clearly sufficient.
Article 7
Paragraph (1)
Banks that will carry out and Banks that receive Merger, Consolidation, Acquisition, and/or Integration may consider share assessment and conversion agreements based on:
a. fair market value; or b. results of internal Bank assessment or independent third-party assessment.
Paragraph (2)
Clearly sufficient.
Article 8
Clearly sufficient.
Article 9
Clearly sufficient.
Article 10
Clearly sufficient.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6493