COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 2 /POJK.03/2022
CONCERNING
ASSET QUALITY ASSESSMENT
FOR ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that a healthy and developing Islamic banking system is needed, which is able to compete nationally and internationally; b. that to create a healthy Islamic banking system that can grow stably and with quality, banks need to maintain asset quality and form adequate asset quality assessment provisions;
c. that regulations concerning the asset quality assessment of Islamic commercial banks and Islamic business units need to be adjusted to current conditions;
d. that based on considerations as referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning Asset Quality Assessment for Islamic Commercial Banks and Islamic Business Units;

Recalling:

Law Number 21 of 2008 concerning Islamic Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
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);

DECIDING:
Establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING ASSET QUALITY ASSESSMENT FOR ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS.

CHAPTER I
GENERAL PROVISIONS

Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

Bank means Islamic commercial banks and Islamic business units.
Islamic Commercial Bank means a Bank that carries out business activities based on Sharia principles, which in its activities provides services in payment transactions.
Islamic Business Unit means a work unit of the head office of a conventional commercial bank that functions as the head office of an office or unit that carries out business activities based on Sharia principles.
Assets means productive assets and non-productive assets.
Productive Assets means the provision or disbursement of funds by the Bank to obtain income.
Non-Productive Assets means collateral taken over, abandoned properties, inter-office accounts, or deferred accounts that have potential losses.
Sharia Principles means Islamic legal principles in banking activities based on fatwas issued by institutions having authority in setting fatwas in the Sharia field.
Placement in Other Banks means the investment of Bank funds in Other Banks and/or Sharia Microfinance Banks in the form of current accounts, savings, deposits, deposit certificates, financing, and other similar investments based on Sharia Principles.
Spot and Forward Receivables means receivables that are potential profits arising from the positive difference between the contract value and the fair value of a spot and forward transaction based on Sharia Principles on the reporting date.
Sharia Securities means securities issued based on Sharia Principles by parties authorized to issue Sharia Securities in accordance with applicable laws and regulations as evidence of participation in the ownership of Sharia Securities assets, both in Rupiah and foreign currency.
Acceptance Receivables means receivables arising as a result of acceptance performed on time bills.
Financing means the provision of funds or receivables equated therewith in the form of profit-sharing transactions, leasing transactions including service leasing, sales transactions, and lending transactions based on agreements or consensus between the Bank and other parties that obligate the financed party and/or the party given financial facilities to return the funds after a certain period with compensation in the form of profit sharing, ujrah, margin, or without compensation.
Financing based on mudarabah contract, hereinafter referred to as Mudarabah Financing, means Financing in the form of a business partnership between a Bank providing all capital and customers acting as fund managers, sharing business profits according to agreements stipulated in the contract, while losses are borne entirely by the Bank unless the customer commits intentional errors, negligence, or breaches the agreement.
Financing based on musyarakah contract, hereinafter referred to as Musyarakah Financing, means Financing in the form of a partnership between the Bank and customers for a specific business where each party provides a portion of funds, with the provision that profits will be shared according to agreement, while losses are borne according to each party's fund portion.
Financing based on ijarah contract, hereinafter referred to as Ijarah Financing, means Financing to transfer the right to use or benefit from an item or service based on a lease transaction, without following the transfer of ownership of the item itself.
Financing based on ijarah muntahiyyah bi al-tamlik contract, hereinafter referred to as IMBT Financing, means Financing to transfer the right to use or benefit from an item based on a lease transaction with an option to transfer ownership of the item.
Financing based on murabahah contract, hereinafter referred to as Murabahah Financing, means Financing of an item by stating the purchase price to the buyer and the buyer pays it with a higher price as agreed profit.
Financing based on istishna’ contract, hereinafter referred to as Istishna’ Financing, means Financing of an item in the form of ordering the manufacture of a specific item with agreed criteria and requirements between the customer and the seller or manufacturer, with payment according to agreement.
Financing based on qardh contract, hereinafter referred to as Qardh Financing, means Financing in the form of a cash loan to customers with the provision that customers must return the received funds at the agreed time.
Capital Participation means the investment of funds by Islamic Commercial Banks in the form of shares in companies operating in the Sharia financial sector, including investment in the form of mandatory convertible sukuk or certain types of transactions that result in the Islamic Commercial Bank having or will have shares in companies operating in the Sharia financial sector.
Temporary Capital Participation means capital participation by the Bank in the form of shares in customer companies to overcome the consequences of the failure of Financing based on Sharia Principles.
Administrative Account Transactions are commitment and contingent liabilities including the issuance of guarantees, letters of credit, standby letters of credit, or other commitment and contingent liabilities based on Sharia Principles.
Sharia Bank Indonesia Certificates, hereinafter abbreviated as SBIS, are Sharia-based securities in Rupiah issued by Bank Indonesia with a short maturity.
Projected Profit Sharing, hereinafter abbreviated as PBH, is the estimated income to be received by the Bank from customers for Mudarabah Financing and Musyarakah Financing after considering the profit-sharing ratio, with amounts and maturity dates agreed between the Bank and customers.
Realized Profit Sharing, hereinafter abbreviated as RBH, is income received by the Bank from customers for Mudarabah Financing and Musyarakah Financing after considering the profit-sharing ratio.
Collateral Taken Over, hereinafter abbreviated as AYDA, is assets obtained by the Bank, either partially or fully, through purchase via auction or outside auction based on voluntary surrender by the collateral owner or based on power of attorney to sell outside auction from the collateral owner, in the event that customers do not fulfill obligations to the Bank.
Abandoned Properties are fixed assets in the form of properties owned by the Bank but not used for the Bank's usual business activities.
Inter-Office Accounts are receivables arising from inter-office transactions that have not been settled within a certain period.
Deferred Accounts are accounts whose recording purpose is unidentified or not supported by adequate recording documentation, so they cannot be reclassified into the appropriate account.
Asset Quality Assessment Provisions, hereinafter abbreviated as PPKA, are provisions calculated as a certain percentage based on Asset quality for the purpose of calculating the Bank's minimum capital provision obligations.
Impairment Loss Reserves, hereinafter abbreviated as CKPN, are provisions formed for the decline in value of financial instruments in accordance with financial accounting standards.
Related Parties are individuals or companies that have a control relationship with Islamic Commercial Banks and conventional commercial banks having Islamic Business Units, either directly or indirectly, through ownership, management, and/or financial relationships.
Minimum Capital Provision Obligations, hereinafter abbreviated as KPMM, are Minimum Capital Provision Obligations in accordance with Financial Services Authority Regulations concerning Minimum Capital Provision Obligations for Islamic Commercial Banks for Islamic Commercial Banks and in accordance with Financial Services Authority Regulations concerning Minimum Capital Provision Obligations for commercial banks for Islamic Business Units.
Board of Directors is the organ of Islamic Commercial Banks and conventional commercial banks having Islamic Business Units that is authorized and fully responsible for the management of the Bank for the interests of the Bank, in accordance with the purpose and objectives of the Bank and representing the Bank, both inside and outside of court, in accordance with the articles of association.
Board of Commissioners is the organ of Islamic Commercial Banks and conventional commercial banks having Islamic Business Units that is tasked with conducting general and/or specific supervision in accordance with the articles of association and providing advice to the Board of Directors.
Financing Restructuring is improvement efforts carried out by the Bank in Financing activities for customers experiencing difficulties in fulfilling obligations.

CHAPTER II
ASSET QUALITY

Article 2
(1) Banks are required to manage Assets based on the principle of prudence and Sharia Principles.
(2) In implementing the principle of prudence as referred to in paragraph (1), the Board of Directors is required to assess, monitor, and take necessary steps to maintain Bank Assets in good quality.

Article 3
(1) Banks are required to perform assessment and determination of Asset quality.
(2) In the event of a difference in Asset quality determination between the Bank and the Financial Services Authority, the Asset quality determined by the Financial Services Authority shall apply. (3) Banks are required to adjust Asset quality in accordance with the Financial Services Authority's determination as referred to in paragraph (2) in:
a. reports submitted to the Financial Services Authority; and b. publication reports in accordance with Financial Services Authority Regulations concerning transparency and publication of bank reports, in the next reporting period after written notification from the Financial Services Authority.

Article 4
(1) For:
a. Banks that violate regulations as referred to in Article 2 paragraph (1), Article 3 paragraph (1), and/or paragraph (3); and/or b. Boards of Directors that violate regulations as referred to in Article 2 paragraph (2), administrative sanctions in the form of written reprimands shall be imposed. (2) In the event that:
a. Banks and/or Boards of Directors have been subjected to administrative sanctions as referred to in paragraph (1) and continue to violate regulations as referred to in Article 2 paragraph (1), paragraph (2), Article 3 paragraph (1), and/or paragraph (3); or b. have not been subjected to administrative sanctions as referred to in paragraph (1) but based on the Financial Services Authority's assessment there are violations that require immediate sanctions, Banks may be subjected to administrative sanctions in the form of suspension of certain business activities. (3) In the event that:
a. Banks and/or Boards of Directors have been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continue to violate regulations as referred to in Article 2 paragraph (1), paragraph (2), Article 3 paragraph (1), and/or paragraph (3); or b. have not been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the Financial Services Authority's assessment there are violations that require immediate sanctions, members of the Board of Directors, members of the Board of Commissioners, and/or executive officials of the Bank may be subjected to administrative sanctions in the form of bans as principal parties in accordance with Financial Services Authority Regulations concerning re-evaluation for principal parties of financial service institutions.

CHAPTER III
PRODUCTIVE ASSETS

First Section
General

Article 5
(1) Types of Productive Assets consist of:
a. placements in Bank Indonesia; b. Placements in Other Banks;
c. Spot and Forward Receivables;
d. Sharia Securities; e. Acceptance Receivables; f. Financing; g. Capital Participation; h. Temporary Capital Participation;
i. Administrative Account Transactions; and
j. other forms of fund provision that can be equated to Productive Assets.
(2) Banks are required to set the same quality for all Productive Assets provided by 1 (one) Bank used to finance:
a. 1 (one) customer; or b. 1 (one) same project.
(3) In the event of differences in quality determination for Productive Assets as referred to in paragraph (2), the quality of each Productive Asset follows the lowest Productive Asset quality. (4) In the event that the quality assessment for Productive Assets is determined based on different assessment factors, Banks may not follow the lowest Asset quality as referred to in paragraph (3).

Article 6
(1) Banks are required to set the same quality for Productive Assets provided by more than 1 (one) Bank used to finance:
a. 1 (one) customer; or b. 1 (one) same project.
(2) Regulations as referred to in paragraph (1) apply to:
a. Productive Assets provided by each Bank with an amount exceeding Rp10,000,000,000.00 (ten billion Rupiah) to 1 (one) customer or 1 (one) same project; b. Productive Assets provided by Banks with an amount exceeding Rp1,000,000,000.00 (one billion Rupiah) up to Rp10,000,000,000.00 (ten billion Rupiah) to 1 (one) customer who is among the 50 (fifty) largest customers of that Bank, provided that Productive Assets provided by other Banks to that customer exceed Rp10,000,000,000.00 (ten billion Rupiah); and/or
c. Productive Assets provided based on joint Financing agreements to 1 (one) customer or 1 (one) same project.
(3) In the event of differences in quality determination for Productive Assets as referred to in paragraph (1) and paragraph (2), the quality of Productive Assets determined by each Bank follows the lowest Productive Asset quality. (4) In the event that the quality assessment for Productive Assets is determined based on different assessment factors, Banks may not follow the lowest Asset quality as referred to in paragraph (3).

Article 7
(1) Banks may set different qualities for Productive Assets provided to customers as referred to in Article 5 paragraph (2) letter a and Article 6 paragraph (1) letter a, provided that customers meet at least the following requirements:
a. customers have several different projects; and b. there is a clear separation between the cash flows of each project.
(2) Banks setting different qualities for Productive Assets provided to customers as referred to in paragraph (1) are required to:
a. inform a list containing customer names along with details of each Productive Asset to the Financial Services Authority; and b. document matters related to the quality determination as referred to in paragraph (1). (3) In the event that, based on the results of Financial Services Authority supervision, it is known that the assessment performed by the Bank does not meet the requirements as referred to in paragraph (1), the quality of Productive Assets shall be set equally as referred to in Article 5 paragraph (2) letter a or Article 6 paragraph (1) letter a.

Article 8
Banks are required to adjust the quality assessment of Productive Assets as referred to in Article 6 at least every 3 (three) months for positions at the end of March, end of June, end of September, and end of December.

Article 9
(1) Banks are required to have internal regulations governing criteria and requirements for customers who have obligations to submit financial reports audited by public accountants to the Bank, including rules regarding submission deadlines. (2) Banks are required to include the customer's obligation to submit financial reports audited by public accountants as referred to in paragraph (1) in agreements between the Bank and customers. (3) Internal regulations as referred to in paragraph (1) must take into account applicable laws and regulations. (4) The quality of Productive Assets from customers who are late in submitting financial reports as referred to in paragraph (1) is downgraded by one level and assessed at highest as substandard.

Second Section
Financing

Article 10
Financing quality is determined based on assessment factors:
a. business prospects; b. customer performance; and
c. repayment ability.

Article 11
(1) Assessment of business prospects as referred to in Article 10 letter a includes assessment of components:
a. business growth potential; b. market conditions and customer position in competition;
c. management quality and workforce issues;
d. support from business groups or affiliates; and e. efforts made by customers to maintain the environment.
(2) Assessment of customer performance as referred to in Article 10 letter b includes assessment of components:
a. profitability; b. capital structure;
c. cash flow; and
d. sensitivity to market risk.
(3) Assessment of repayment ability as referred to in Article 10 letter c includes assessment of components:
a. accuracy of principal and profit sharing/ujrah/margin payments; b. availability and accuracy of customer financial information;
c. completeness of Financing documentation;
d. compliance with Financing agreements; e. suitability of fund usage; and f. fairness of payment sources for obligations.
(4) Criteria for each component in determining Financing quality refer to Appendix I, which is an integral part of this Financial Services Authority Regulation.

Article 12
(1) Determination of Financing quality is performed by analyzing assessment factors as referred to in Article 10 while considering components as referred to in Article 11. (2) Determination of Financing quality as referred to in paragraph (1) is performed by considering:
a. the significance and materiality of each assessment factor and component; and b. the relevance of assessment factors and components to the respective customer.
(3) Based on assessment as referred to in paragraph (1) and paragraph (2), Financing quality is determined as:
a. performing; b. special attention;
c. substandard;
d. doubtful; or e. loss.

Article 13
(1) Quality assessment of Mudarabah Financing and Musyarakah Financing performed based on repayment ability refers to the accuracy of principal payments and/or the achievement ratio of RBH against PBH. (2) Calculation of the achievement ratio of RBH against PBH as referred to in paragraph (1) is performed based on accumulation during the period of Mudarabah Financing and Musyarakah Financing that has run. (3) PBH is calculated in specific periods based on business feasibility analysis and customer incoming cash flows during the term of Mudarabah Financing and Musyarakah Financing. (4) In the event of changes in macroeconomic, market, and political conditions affecting customer business, Banks may change PBH based on agreement with customers. (5) Banks are required to include PBH and/or changes in PBH in Mudarabah Financing and Musyarakah Financing agreements between the Bank and customers.

Article 14
(1) Principal installment payments in Mudarabah Financing and Musyarakah Financing can be performed periodically or at the end of Financing.
(2) Banks are required to take steps to reduce the risk of non-payment of Financing principal at maturity if in Mudarabah Financing and Musyarakah Financing it is agreed that there are no periodic principal installment payments. (3) Banks are required to include principal installment or repayment of Mudarabah Financing and Musyarakah Financing in Financing agreements between the Bank and customers.

Third Section
Sharia Securities

Article 15
(1) The quality of Sharia Securities measured at fair value through profit or loss or measured at fair value through other comprehensive income is determined to have performing quality, provided they meet the following requirements:
a. actively traded on stock exchanges in:

Indonesia; and/or
other countries included in major exchanges;
b. fair value information is transparent;
c. compensation has been received in the correct amount and time, according to agreement; and
d. not yet matured.
(2) The quality of Sharia Securities that do not meet the requirements as referred to in paragraph (1) letters a and/or b, or are measured at amortized cost, is determined as:
a. performing, if:
having an investment grade rating or higher;
compensation has been received in the correct amount and time, according to agreement; and
not yet matured;
b. substandard, if:
having an investment grade rating or higher;
there are delays in periodic profit sharing/ujrah/margin payments and/or other similar obligations; and
not yet matured,
or
having a rating at lowest 1 (one) level below investment grade;
there are no delays in periodic profit sharing/ujrah/margin payments and/or other similar obligations; and
not yet matured; or
c. loss, if Sharia Securities do not meet the criteria as referred to in letters a and b.
(3) In the event that Banks hold Sharia Securities in the form of sukuk that are conducted without a public offering that do not meet regulations in accordance with Financial Services Authority Regulations concerning the issuance of debt-like effects and/or sukuk conducted without a public offer

Generally, the quality of Sharia Securities is determined as non-performing.

(4) The quality of Sharia Securities in the form of Sukuk originating from the content of the contract and/or contract amendments that result in the non-fulfillment of Sharia Principles is determined based on the financing quality provisions as referred to in Article 10.

Article 16

(1) The rating of Sharia Securities as referred to in Article 15 paragraph (2) is based on ratings issued by rating agencies within the last 1 (one) year.

(2) In the event that the rating issued by the rating agency within the last 1 (one) year as referred to in paragraph (1) is not available, the Sharia Securities are considered to have no rating.

Article 17

Sharia Securities owned by the Bank issued by Bank Indonesia or the Central Government of the Republic of Indonesia are determined to have performing quality.

Article 18

(1) Banks are prohibited from holding Productive Assets in the form of shares and/or Sharia Securities linked or guaranteed by underlying assets in the form of shares.

(2) The prohibition as referred to in paragraph (1) is exempted for Capital Participation or Temporary Capital Participation conducted with the approval of the Financial Services Authority in accordance with Financial Services Authority Regulations regarding prudential principles in capital participation activities.

Article 19

Banks holding Sharia Securities linked or guaranteed by underlying assets must:
a. possess evidence of the underlying assets; b. possess rights to the underlying assets or rights to the value of the underlying assets;
c. possess clear, precise, and accurate information regarding the details of the underlying assets, including the issuer and the value of each underlying asset, including any changes thereto; and
d. account for the composition and issuer details of the underlying assets and adjust the accounting in the event of changes to the asset composition.

Article 20

(1) The quality of Sharia Securities linked or guaranteed by underlying assets as referred to in Article 19 is determined:
a. for Sharia Securities whose obligation payments are directly related to the underlying assets and cannot be redeemed (non-redemption) by the issuer, the quality determination is based on:

the quality of the Sharia Securities as referred to in Article 15; or
the quality of the underlying assets of the Sharia Securities in the event that the Sharia Securities have no rating; or
b. for Sharia Securities that do not meet the criteria as referred to in letter a, the quality determination is based on the quality of the Sharia Securities as referred to in Article 15.

(2) The quality of the underlying assets of the Sharia Securities as referred to in paragraph (1) letter a number 2 is determined based on the type of asset and the quality of the underlying assets.

(3) In the event that the underlying assets of the Sharia Securities as referred to in paragraph (2) have varying qualities, the quality of the Sharia Securities is determined based on the quality of each underlying asset and calculated proportionally.

(4) For Sharia Securities in the form of mutual funds, the quality determination is based on:
a. the quality of the mutual fund in accordance with the assessment of Sharia Securities quality as referred to in Article 15; or b. the quality of the underlying assets of the mutual fund and the quality of the mutual fund issuer, in the event that the mutual fund has no rating.

Article 21

(1) The quality of Sharia Securities with issuers or endorsers being banks is regulated:
a. in the event that the Sharia Securities have ratings and/or are actively traded on the Indonesian stock exchange, the quality is determined based on the lowest result between:

the assessment results based on the Sharia Securities quality provisions as referred to in Article 15; or
the assessment results based on the Interbank Placement quality provisions from the issuing bank or the bank providing the endorsement; or
b. in the event that the Sharia Securities are not traded on the stock exchange and/or do not have ratings, the quality of the Sharia Securities:
issued or endorsed by banks in Indonesia is determined based on the Interbank Placement quality; or
issued or endorsed by banks outside Indonesia is determined based on:
a) the Interbank Placement quality for Sharia Securities with a term of up to 1 (one) year; or b) the quality of Sharia Securities as referred to in Article 15 paragraph (2) for Sharia Securities with a term of more than 1 (one) year.

(2) In the event that Sharia Securities with issuers being other banks are in the form of Sharia Securities linked or guaranteed by underlying assets, Banks must still meet the provisions as referred to in Article 19.

(3) The quality of Sharia Securities with issuers being non-bank entities outside Indonesia, which based on their characteristics are not traded on the stock exchange and do not have ratings, is determined based on the financing quality provisions as referred to in Article 10.

(4) The quality of Sharia Securities issued by non-bank entities outside Indonesia, which based on their characteristics are not traded on the stock exchange, is determined based on the Sharia Securities quality provisions as referred to in Article 15 paragraph (2).

Article 22

The quality of accepted bills that are not accepted by other banks is determined based on the financing quality provisions as referred to in Article 10.

Part Four
Interbank Placements

Article 23

(1) The quality of Interbank Placements is determined:
a. performing, with criteria:

the bank receiving the placement has a Minimum Capital Requirement (KPMM) ratio at the lowest equal to the KPMM ratio in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements; and
there are no outstanding principal payments and/or profit shares/bonuses/remuneration;
b. less active, with criteria:
the bank receiving the placement has a Minimum Capital Requirement (KPMM) ratio at the lowest equal to the KPMM ratio in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements; and
there are outstanding principal payments and/or profit shares/bonuses/remuneration for up to 5 (five) working days; or
c. non-performing, with criteria:
the bank receiving the placement has a Minimum Capital Requirement (KPMM) ratio lower than the KPMM ratio in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements;
the bank receiving the placement has been determined and announced as a bank under special supervision subject to restrictions on certain business activities;
the bank receiving the placement has its business license revoked; and/or
there are outstanding principal payments and/or profit shares/bonuses/remuneration for more than 5 (five) working days.

(2) The quality of Interbank Placements to Islamic People's Financing Banks in the context of financing distribution through linkage programs with an executing pattern is determined:
a. performing, with criteria:

the Islamic People's Financing Bank receiving the placement has a Minimum Capital Requirement (KPMM) ratio at the lowest equal to the KPMM ratio in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements and the fulfillment of core capital for Islamic People's Financing Banks; and
there are no outstanding principal payments and/or profit shares/bonuses/remuneration;
b. less active, with criteria:
the Islamic People's Financing Bank receiving the placement has a Minimum Capital Requirement (KPMM) ratio at the lowest equal to the KPMM ratio in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements and the fulfillment of core capital for Islamic People's Financing Banks; and
there are outstanding principal payments and/or profit shares/bonuses/remuneration for up to 30 (thirty) days; or
c. non-performing, with criteria:
the Islamic People's Financing Bank receiving the placement has a Minimum Capital Requirement (KPMM) ratio lower than the KPMM ratio in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements and the fulfillment of core capital for Islamic People's Financing Banks;
the Islamic People's Financing Bank receiving the placement has been determined and announced as a bank under special supervision or has been subject to administrative sanctions involving the temporary suspension of certain business activities;
the Islamic People's Financing Bank receiving the placement has its business license revoked; and/or
there are outstanding principal payments and/or profit shares/bonuses/remuneration for more than 30 (thirty) working days.

Part Five
Placements at Bank Indonesia

Article 24

All forms of placements at Bank Indonesia are determined to have performing quality.

Part Six
Acceptance Claims, Claims on Sharia Securities Purchased with a Promise to Sell Back, and Spot and Forward Claims

Article 25

The quality of Acceptance Claims is determined based on:
a. the Interbank Placement quality as referred to in Article 23 paragraph (1) in the event that the party obligated to settle the claim is another bank; or b. the financing quality as referred to in Article 10 in the event that the party obligated to settle the claim is a customer.

Article 26

(1) The quality of claims on Sharia Securities purchased with a promise to sell back is determined based on:
a. the Interbank Placement quality as referred to in Article 23 paragraph (1) in the event that the party selling the Sharia Securities is another bank; or b. the financing quality as referred to in Article 10 in the event that the party selling the Sharia Securities is not a bank.

(2) Claims on Sharia Securities purchased with a promise to sell back with underlying assets in the form of Sharia State Treasury Bills, fixed rate Ijarah, and/or other similar instruments based on Sharia Principles are determined to have performing quality.

Article 27

The quality of Spot and Forward Claims is determined based on:
a. the determination of Interbank Placement quality as referred to in Article 23 paragraph (1) in the event that the counterparty to the transaction is another bank; or b. the financing quality as referred to in Article 10 in the event that the counterparty to the transaction is not a bank.

Part Seven
Capital Participation and Temporary Capital Participation

Article 28

(1) The measurement and/or recording of Capital Participation is conducted using:
a. acquisition cost; b. fair value; or
c. the equity method,
in accordance with financial accounting standards.

(2) The quality of Capital Participation measured with acquisition cost is determined:
a. performing, with criteria that the entity where the General Islamic Bank conducts Capital Participation earns profit and has not experienced cumulative losses based on the latest audited annual financial reports; b. less active, with criteria that the entity where the General Islamic Bank conducts Capital Participation has experienced cumulative losses of up to 25% (twenty-five percent) of the capital of the entity where the General Islamic Bank conducts Capital Participation based on the latest audited annual financial reports;
c. doubtful, with criteria that the entity where the General Islamic Bank conducts Capital Participation has experienced cumulative losses of more than 25% (twenty-five percent) up to 50% (fifty percent) of the capital of the entity where the General Islamic Bank conducts Capital Participation based on the latest audited annual financial reports; or
d. non-performing, with criteria that the entity where the General Islamic Bank conducts Capital Participation has experienced cumulative losses of more than 50% (fifty percent) of the capital of the entity where the General Islamic Bank conducts Capital Participation based on the latest audited annual financial reports.

(3) The quality of Capital Participation measured with fair value or the equity method is determined as performing.

Article 29

(1) The quality of Temporary Capital Participation is determined:
a. performing, with criteria that the term of Temporary Capital Participation is up to 1 (one) year; b. less active, with criteria that the term of Temporary Capital Participation is more than 1 (one) year up to 4 (four) years;
c. doubtful, with criteria that the term of Temporary Capital Participation is more than 4 (four) years up to 5 (five) years; or
d. non-performing, with criteria:

the term of Temporary Capital Participation is more than 5 (five) years; or
the entity where the Bank conducts Temporary Capital Participation has cumulative profits but the Temporary Capital Participation has not yet been withdrawn.

(2) In the event that:
a. the sale of Temporary Capital Participation is estimated to be conducted at a price lower than the recorded value; and/or b. the sale of Temporary Capital Participation within a period of 5 (five) years is estimated to be difficult to conduct, Banks are required to downgrade the quality of Temporary Capital Participation as referred to in paragraph (1).

Part Eight
Administrative Account Transactions

Article 30

(1) The quality of Administrative Account Transactions is determined based on:
a. the determination of Interbank Placement quality as referred to in Article 23 paragraph (1) in the event that the counterparty to the Administrative Account Transaction is a bank; or b. the determination of financing quality as referred to in Article 10 in the event that the counterparty to the Administrative Account Transaction is a customer.

(2) The assessment of Administrative Account Transactions is conducted on all facilities provided, both those that are commitment-based and contingent.

Part Nine
Productive Assets Secured by Cash Collateral

Article 31

(1) The portion of Productive Assets secured by cash collateral is determined to have performing quality.

(2) The cash collateral as referred to in paragraph (1) consists of:
a. current accounts, time deposits, savings, guarantee deposits, and/or gold; b. Sharia Securities (SBIS), Bank Indonesia Sukuk, State Sharia Securities, other fund placements at Bank Indonesia, and/or other fund placements at the central government;
c. central government guarantees in accordance with applicable laws and regulations; and/or
d. standby letters of credit from prime banks, issued in accordance with the Uniform Customs and Practice for Documentary Credits or International Standby Practices.

(3) The cash collateral as referred to in paragraph (2) letters a and b must meet the following requirements:
a. the collateral is blocked and accompanied by a withdrawal power of attorney from the collateral owner for the benefit of the receiving bank, including partial withdrawal to pay outstanding principal installments and/or profit share/ujrah/margin, or the collateral is accompanied by a sales power of attorney; b. the blocking period as referred to in letter a is at least equal to the term of the Productive Asset;
c. it has strong legal ties as collateral, free from all other obligations, free from disputes, not pledged to other parties, including having clear guarantee purposes; and
d. for cash collateral as referred to in paragraph (2) letter a, it must be stored at the fund-providing bank.

(4) The cash collateral as referred to in paragraph (2) letters c and d must meet the following requirements:
a. it is unconditional and irrevocable; b. it has a term at least equal to the term of the Productive Asset;
c. it is not counter-guaranteed by the fund-providing bank or a bank that is not a prime bank; and
d. the withdrawal term is in accordance with the guarantee documents for cash collateral as referred to in paragraph (2) letter c, including partial withdrawal to pay outstanding principal installments and/or profit share/ujrah/margin; or e. it can be withdrawn within a maximum of 7 (seven) working days from the claim submission for cash collateral as referred to in paragraph (2) letter d, including partial withdrawal to pay outstanding principal installments and/or profit share/ujrah/margin.

(5) Prime banks as referred to in paragraph (2) letter d must meet the requirements of having:
a. an investment-grade rating issued by a rating agency, at the lowest:

AA- based on Standard & Poor's assessment;
Aa3 based on Moody's assessment;
AA- based on Fitch assessment; or
an investment-grade rating equivalent to numbers 1, 2, and/or 3 based on assessments by rating agencies recognized by the Financial Services Authority,
based on assessments of long-term business prospects; and b. total assets included in the 200 (two hundred) largest in the world.

Article 32

(1) Banks are required to claim or submit claims for the withdrawal of cash collateral as referred to in Article 31 no later than 7 (seven) working days after the customer defaults.

(2) Defaulting customers as referred to in paragraph (1) are those who:
a. have outstanding principal, profit share/ujrah/margin, and/or other claims for 90 (ninety) days even though the Productive Asset has not yet matured; b. do not make payments of principal, profit share/ujrah/margin, and/or other claims when the Productive Asset matures; or
c. do not meet other requirements besides the payment of principal and/or profit share/ujrah/margin.

Part Ten
Small-Amount Financing and Fund Provision, as well as Financing and Fund Provision in Specific Regions

Article 33

(1) The determination of Productive Asset quality may be based solely on the timeliness of principal and/or profit share/ujrah/margin payments, for:
a. Financing and other fund provisions provided by the Bank to 1 (one) customer or 1 (one) project with an amount of at most Rp5,000,000,000.00 (five billion rupiah); b. Financing and other fund provisions to customers with business locations in specific regions with amounts exceeding Rp5,000,000,000.00 (five billion rupiah) based on the determination of the Commissioners of the Financial Services Authority;
c. Financing and other fund provisions provided by the Bank to micro, small, and medium enterprise customers with amounts:

exceeding Rp5,000,000,000.00 (five billion rupiah) up to Rp15,000,000,000.00 (fifteen billion rupiah) for Banks that meet the criteria:
a) having a credit risk management application quality sufficiency rating of at least satisfactory; and b) having a Minimum Capital Requirement (KPMM) ratio at the lowest in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements; or
exceeding Rp15,000,000,000.00 (fifteen billion rupiah) up to Rp25,000,000,000.00 (twenty-five billion rupiah) for Banks that meet the criteria:
a) having a credit risk management application quality sufficiency rating of very strong (strong); and b) having a Minimum Capital Requirement (KPMM) ratio at the lowest in accordance with Financial Services Authority Regulations regarding Minimum Capital Requirements.

(2) The assessment of Productive Asset quality in the form of Financing and other fund provisions as referred to in paragraph (1) letter c for Islamic Business Units:
a. the credit risk management application quality sufficiency rating refers to the credit risk management application quality sufficiency rating of the Islamic Business Unit; and b. the KPMM ratio refers to the KPMM ratio of the conventional general bank having such Islamic Business Unit.

(3) The credit risk management application quality sufficiency rating and KPMM ratio of Banks used in the assessment of Financing and other fund provisions as referred to in paragraph (1) letter c and paragraph (2) are based on assessments by the Financial Services Authority.

(4) The results of assessments by the Financial Services Authority as referred to in paragraph (3) can be known by the Bank through prudential meetings between the Bank and the Financial Services Authority.

(5) The use of rating predicates as referred to in paragraph (3):
a. the rating predicate position of December of the previous year is used for the assessment of Financing and other fund provisions for the period from February to July; and b. the rating predicate position of June is used for the assessment of Financing and other fund provisions for the period from August to January of the following year.

(6) In the event that adjustments to assessments for the position of December or June as referred to in paragraph (3) are made by the Financial Services Authority, the assessment used is the latest adjusted assessment.

(7) The provisions as referred to in paragraph (1) letter c do not apply to Financing and other fund provisions provided to 1 (one) micro, small, and medium enterprise customer with an amount exceeding Rp5,000,000,000.00 (five billion rupiah) that are:
a. Restructured Financing; and/or b. fund provisions to the Bank's 50 (fifty) largest customers.

(8) The determination of quality for Restructured Financing as referred to in paragraph (7) letter a remains conducted based on provisions regarding Financing Restructuring.

(9) The determination of quality for Financing and other fund provisions provided by Banks to:
a. micro, small, and medium enterprise customers with amounts exceeding Rp1,000,000,000.00 (one billion rupiah) up to Rp10,000,000,000.00 (ten billion rupiah); and b. including the Bank's 50 (fifty) largest customers, is not influenced by the quality of Productive Assets provided by other banks to finance 1 (one) customer or 1 (one) project as referred to in Article 6 paragraph (2) letter b.

(10) In the event of significant deviations in healthy financing principles, the Financial Services Authority determines the quality assessment of Productive Assets provided by Banks to micro, small, and medium enterprise customers as referred to in paragraph (1) letter c based on assessment factors as referred to in Article 10.

Part Eleven
Export-Oriented Productive Assets

Article 34

(1) Productive Assets in the form of fund investments oriented towards exports to financial institutions meeting specific requirements are determined to have performing quality.

(2) The portion of Productive Assets receiving guarantees from financial institutions meeting specific requirements is determined to have performing quality.

(3) Specific requirements as referred to in paragraph (1) and paragraph (2):
a. are owned by the central government; b. conduct business activities providing national export financing; and
c. are established by Law with sovereign status.

(4) Guarantees from financial institutions as referred to in paragraph (2) must meet the following requirements:
a. they are unconditional and irrevocable; b. the withdrawal term is in accordance with the guarantee documents, including partial withdrawal to pay outstanding principal installments and/or profit share/ujrah/margin;
c. they have a term at least equal to the term of the Productive Asset; and
d. they are not counter-guaranteed.

(5) Banks must submit claims against the guarantees received as referred to in paragraph (4) no later than 7 (seven) working days after the customer defaults.

(6) Defaulting customers as referred to in paragraph (5) are those who:
a. have outstanding principal, profit share/ujrah/margin, and/or other claims for 90 (ninety) days even though the Productive Asset has not yet matured; b. do not make payments of principal, profit share/ujrah/margin, and/or other claims when the Productive Asset matures; or
c. do not meet other requirements besides the payment of principal and/or profit share/ujrah/margin.

Part Twelve
Administrative Sanctions
Article 35
(1) Banks that violate the provisions as referred to in Article 5 paragraph (2), Article 6 paragraph (1), Article 7 paragraph (2), Article 8, Article 9 paragraph (1), paragraph (2), paragraph (3), Article 13 paragraph (5), Article 14 paragraph (2), paragraph (3), Article 18 paragraph (1), Article 19, Article 29 paragraph (2), and/or Article 32 paragraph (1) shall be subject to administrative sanctions in the form of a written reprimand. (2) In the event that:
a. The Bank has been subject to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 5 paragraph (2), Article 6 paragraph (1), Article 7 paragraph (2), Article 8, Article 9 paragraph (1), paragraph (2), paragraph (3), Article 13 paragraph (5), Article 14 paragraph (2), paragraph (3), Article 18 paragraph (1), Article 19, Article 29 paragraph (2), and/or Article 32 paragraph (1); or b. has not been subject to administrative sanctions as referred to in paragraph (1) but based on the assessment of the Financial Services Authority there are violations that require immediate sanctions, the Bank may be subject to administrative sanctions in the form of suspension of certain business activities. (3) In the event that:
a. The Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 5 paragraph (2), Article 6 paragraph (1), Article 7 paragraph (2), Article 8, Article 9 paragraph (1), paragraph (2), paragraph (3), Article 13 paragraph (5), Article 14 paragraph (2), paragraph (3), Article 18 paragraph (1), Article 19, Article 29 paragraph (2), and/or Article 32 paragraph (1); or b. has not been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the assessment of the Financial Services Authority there are violations that require immediate sanctions, members of the Board of Directors, members of the Board of Commissioners, and/or executive officials of the Bank may be subject to administrative sanctions in the form of prohibition from acting as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions.

CHAPTER IV
NON-PRODUCTIVE ASSETS

Part One
AYDA
Article 36
(1) Banks must have written policies and procedures regarding AYDA.
(2) Banks must undertake resolution efforts for AYDA held.
(3) Banks must document resolution efforts for AYDA as referred to in paragraph (2).

Article 37
Banks must determine the quality of Productive Assets as non-performing before taking possession of collateral.

Article 38
(1) Banks must conduct re-evaluation of AYDA in accordance with financial accounting standards at the time of taking possession of collateral.
(2) Re-evaluation as referred to in paragraph (1) must be conducted by an independent appraiser for AYDA with a value of at least Rp5,000,000,000.00 (five billion rupiah). (3) Re-evaluation as referred to in paragraph (1) may be conducted by the Bank's internal appraiser for AYDA values less than Rp5,000,000,000.00 (five billion rupiah). (4) Independent appraisers as referred to in paragraph (2) are public appraisal service offices that meet the requirements:
a. are not Related Parties to the Bank; b. are not part of a group of facility recipients with Bank customers;
c. conduct appraisal activities based on professional ethics and regulations established by the competent authority;
d. use appraisal methods based on professional appraisal standards issued by the competent authority; e. have a business license from the competent authority as a public appraisal service office; and f. are registered as members of an association recognized by the competent authority.

Article 39
(1) AYDA for which resolution efforts have been undertaken as referred to in Article 36 paragraph (2) is determined to have the following quality:
a. Good, with criteria that AYDA is held for up to 1 (one) year; b. Less Good, with criteria that AYDA is held for more than 1 (one) year up to 3 (three) years;
c. Doubtful, with criteria that AYDA is held for more than 3 (three) years up to 5 (five) years; or
d. Non-Performing, with criteria that AYDA is held for more than 5 (five) years.
(2) In the event that the Bank does not undertake resolution efforts as referred to in Article 36 paragraph (2) and paragraph (3), the Financial Services Authority may downgrade the quality of AYDA by one level from the quality as referred to in paragraph (1).

Part Two
Vacant Properties
Article 40
(1) Banks must identify and determine Vacant Properties held.
(2) Properties that are not included in Vacant Properties as referred to in paragraph (1) include:
a. properties categorized as Bank assets in Ijarah Financing and IMBT Financing; b. properties used to support Bank business activities and held in reasonable quantities;
c. properties used for educational facilities; and
d. other properties that have been determined to be used in business activities in the near future.
(3) The determination of Vacant Properties as referred to in paragraph (1) must be approved by the Board of Directors and documented.
(4) The portion of a property that is not used by the Bank from a property that is predominantly used for Bank business activities is not classified as Vacant Property.
(5) In the event that the Bank does not use the majority portion of a property, the portion of the property not used for Bank business activities is classified as Vacant Property proportionally.

Article 41
(1) Banks must undertake resolution efforts for Vacant Properties held.
(2) Banks must document resolution efforts for Vacant Properties as referred to in paragraph (1).

Article 42
(1) Vacant Properties for which resolution efforts have been undertaken as referred to in Article 41 are determined to have the following quality:
a. Good, with criteria that Vacant Properties are held for up to 1 (one) year; b. Less Good, with criteria that Vacant Properties are held for more than 1 (one) year up to 3 (three) years;
c. Doubtful, with criteria that Vacant Properties are held for more than 3 (three) years up to 5 (five) years; or
d. Non-Performing, with criteria that Vacant Properties are held for more than 5 (five) years.
(2) In the event that the Bank does not undertake resolution efforts as referred to in Article 41, the Financial Services Authority may downgrade the quality of Vacant Properties by one level from the quality as referred to in paragraph (1).

Part Three
Inter-Office Accounts and Deferred Accounts
Article 43
(1) Banks must undertake resolution efforts for Inter-Office Accounts and Deferred Accounts.
(2) The quality of Inter-Office Accounts and Deferred Accounts is determined:
a. Good, with criteria that Inter-Office Accounts and Deferred Accounts are recorded in the Bank's books for up to 180 (one hundred eighty) days; or b. Non-Performing, with criteria that Inter-Office Accounts and Deferred Accounts are recorded in the Bank's books for more than 180 (one hundred eighty) days.

Article 44
(1) Banks that violate the provisions as referred to in Article 36, Article 37, Article 38 paragraph (1), paragraph (2), Article 40 paragraph (1), paragraph (3), Article 41, and/or Article 43 paragraph (1) shall be subject to administrative sanctions in the form of a written reprimand. (2) In the event that:
a. The Bank has been subject to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 36, Article 37, Article 38 paragraph (1), paragraph (2), Article 40 paragraph (1), paragraph (3), Article 41, and/or Article 43 paragraph (1); or b. has not been subject to administrative sanctions as referred to in paragraph (1) but based on the assessment of the Financial Services Authority there are violations that require immediate sanctions, the Bank may be subject to administrative sanctions in the form of suspension of certain business activities. (3) In the event that:
a. The Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 36, Article 37, Article 38 paragraph (1), paragraph (2), Article 40 paragraph (1), paragraph (3), Article 41, and/or Article 43 paragraph (1); or b. has not been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the assessment of the Financial Services Authority there are violations that require immediate sanctions, members of the Board of Directors, members of the Board of Commissioners, and/or executive officials of the Bank may be subject to administrative sanctions in the form of prohibition from acting as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions.

CHAPTER V
PPKA AND CKPN

Part One
PPKA
Paragraph 1
General
Article 45
(1) Banks must calculate and establish PPKA for Productive Assets and Non-Productive Assets.
(2) PPKA as referred to in paragraph (1) consists of:
a. general provisions for Productive Assets; and b. special provisions for Productive Assets and Non-Productive Assets.

Article 46
(1) General provisions as referred to in Article 45 paragraph (2) letter a are determined to be at least 1% (one percent) of Productive Assets with Good quality.
(2) General provisions as referred to in paragraph (1) are excluded for Productive Assets in the form of:
a. undrawn Financing facilities that are part of Administrative Account Transactions; b. SBIS, Bank Indonesia sukuk, Sharia State Securities, other Sharia Securities issued by Bank Indonesia, other Sharia Securities issued by the central government, and/or other fund placements at Bank Indonesia;
c. portions of Productive Assets secured with cash collateral as referred to in Article 31; and/or
d. Ijarah Financing and IMBT Financing.
(3) Special provisions as referred to in Article 45 paragraph (2) letter b are determined to be at least:
a. 5% (five percent) of Assets with Special Attention quality after deducting collateral value; b. 15% (fifteen percent) of Assets with Less Good quality after deducting collateral value;
c. 50% (fifty percent) of Assets with Doubtful quality after deducting collateral value; or
d. 100% (one hundred percent) of Assets with Non-Performing quality after deducting collateral value.
(4) Banks that do not meet the provisions of Article 18 paragraph (1) and Article 19 must calculate and establish PPKA at 100% (one hundred percent).
(5) The use of collateral value as a deduction in the calculation of PPKA establishment as referred to in paragraph (3) is only performed for Productive Assets.

Article 47
The calculation of PPKA for Productive Assets in the form of Financing is determined:
a. Murabahah Financing, Istishna’ Financing, and Multi-service Financing are calculated based on the principal price balance; b. Qardh Financing, Mudarabah Financing, and Musyarakah Financing are calculated based on the debit balance; and
c. Ijarah Financing and IMBT Financing are calculated based on the outstanding principal lease portion.

Article 48
Banks must establish depreciation or amortization for Productive Assets for:
a. Ijarah Financing in accordance with the Bank's depreciation or amortization policy for similar Assets; and/or b. IMBT Financing in accordance with the lease term.

Paragraph 2
Collateral as a Deduction for PPKA
Article 49
Collateral that can be counted as a deduction in the PPKA calculation is determined:
a. Sharia Securities and shares actively traded on the stock exchange in Indonesia or other countries' stock exchanges that are included in the main exchange, or have an investment-grade rating and are pledged; b. land, buildings, and residential houses secured with a mortgage;
c. apartment units secured with a fiduciary guarantee or mortgage;
d. machines that are an integral part of land secured with a mortgage; e. aircraft or sea vessels with a size greater than 20 (twenty) cubic meters secured with a hypothec; f. motor vehicles and inventory secured with fiduciary guarantee; and/or g. warehouse receipts secured with a guarantee right over warehouse receipts.

Article 50
(1) Collateral as referred to in Article 49 must:
a. be accompanied by valid legal documents; b. be secured in accordance with statutory regulations so as to provide preferential rights or guarantee rights that give the Bank a prioritized position; and
c. be insured with a banker’s clause having a term of at least the same length as the collateral security term as referred to in Article 49.
(2) Insurance companies providing insurance protection for collateral as referred to in paragraph (1) letter c must meet the requirements:
a. meet Sharia Principles; b. obtain a business license from the Financial Services Authority;
c. meet capital adequacy provisions as determined by the Financial Services Authority; and
d. are not Related Parties to the Bank or groups of facility recipients with Bank customers, unless reinsured to an insurance company that is not a Related Party to the Bank or groups of facility recipients with Bank customers. (3) In the event that there is no insurance company meeting Sharia Principles as referred to in paragraph (2) letter a that can provide comprehensive insurance protection for collateral, the Bank may use conventional insurance companies as additional insurance protection. (4) In the event that there is no insurance product in an insurance company meeting Sharia Principles as referred to in paragraph (2) letter a that can provide insurance protection for the type of collateral as referred to in Article 49, the Bank may use conventional insurance products. (5) The use of conventional insurance company services as referred to in paragraph (3) or conventional insurance products as referred to in paragraph (4) must be accompanied by a Bank statement and an opinion from the Sharia supervisory board.

Article 51
(1) Collateral that can be counted as a deduction in the PPKA calculation as referred to in Article 49 must at least be appraised by:
a. an independent appraiser as referred to in Article 38 paragraph (4) for Productive Assets originating from customers or groups of facility recipients with amounts greater than Rp10,000,000,000.00 (ten billion rupiah); or b. the Bank's internal appraiser for Productive Assets originating from customers or groups of facility recipients with amounts up to Rp10,000,000,000.00 (ten billion rupiah). (2) Banks must conduct appraisal of collateral as referred to in paragraph (1) from the beginning of the provision of Productive Assets.

Article 52
(1) The value of collateral that can be counted as a deduction in the PPKA calculation is determined:
a. Sharia Securities and shares actively traded on the stock exchange in Indonesia or other countries' stock exchanges that are included in the main exchange, or have an investment-grade rating, at most 50% (fifty percent) of the recorded value of Sharia Securities; b. land and/or buildings used for residential purposes and apartment units secured with fiduciary guarantee or mortgage, at most:

70% (seventy percent) of the appraisal value if:
a) appraisal by an independent appraiser is conducted within the last 18 (eighteen) months; or b) appraisal by an internal appraiser is conducted within the last 12 (twelve) months;
50% (fifty percent) of the appraisal value if:
a) appraisal by an independent appraiser is conducted more than 18 (eighteen) months up to 24 (twenty-four) months ago; or b) appraisal by an internal appraiser is conducted more than 12 (twelve) months up to 18 (eighteen) months ago;
30% (thirty percent) of the appraisal value if:
a) appraisal by an independent appraiser is conducted more than 24 (twenty-four) months up to 30 (thirty) months ago; or b) appraisal by an internal appraiser is conducted more than 18 (eighteen) months up to 24 (twenty-four) months ago; and
0% (zero percent) of the appraisal value if:
a) appraisal by an independent appraiser is conducted more than 30 (thirty) months ago; or b) appraisal by an internal appraiser is conducted more than 24 (twenty-four) months ago; or
c. land and/or buildings not for residential purposes, machines considered as an integral part of land, aircraft, sea vessels, motor vehicles, inventory, and warehouse receipts, at most:
70% (seventy percent) of the appraisal value if appraisal is conducted within the last 12 (twelve) months;
50% (fifty percent) of the appraisal value if appraisal is conducted more than 12 (twelve) months up to 18 (eighteen) months ago;
30% (thirty percent) of the appraisal value if appraisal is conducted more than 18 (eighteen) months up to 24 (twenty-four) months ago; or
0% (zero percent) of the appraisal value if appraisal is conducted more than 24 (twenty-four) months ago.
(2) In the event that there are multiple appraisals for the same collateral position, whether conducted by independent appraisers or internal appraisers, the Bank must use the lowest value. (3) Based on specific considerations, the Financial Services Authority may determine the value of collateral that can be counted as a deduction in the PPKA calculation to be lower than the determination as referred to in paragraph (1).

Article 53
The value of collateral that can be counted as a deduction in the PPKA calculation as referred to in Article 49 is prohibited from exceeding the collateral security value.

Article 54
(1) In the event that the Bank does not meet the provisions as referred to in Article 49, Article 50, Article 52, and/or Article 53, the Financial Services Authority is authorized to recalculate the collateral value that has been deducted in PPKA. (2) Banks must adjust the PPKA calculation in accordance with the calculation determined by the Financial Services Authority as referred to in paragraph (1) in the KPMM ratio calculation report and/or publication report in accordance with the Financial Services Authority Regulation regarding transparency and publication of bank reports. (3) The PPKA calculation as referred to in paragraph (2) must be adjusted at the latest in the next reporting period after notification from the Financial Services Authority.

Part Two
CKPN
Article 55
Banks must establish CKPN in accordance with financial accounting standards.

Part Three
Administrative Sanctions
Article 56
(1) Banks that violate the provisions as referred to in Article 45 paragraph (1), Article 48, Article 50 paragraph (1), Article 51 paragraph (2), Article 52 paragraph (2), Article 53, Article 54 paragraph (2), paragraph (3), and/or Article 55 shall be subject to administrative sanctions in the form of a written reprimand. (2) In the event that:
a. The Bank has been subject to administrative sanctions as referred to in paragraph (1) and continues to violate the provisions as referred to in Article 45 paragraph (1), Article 50 paragraph (1), Article 51 paragraph (2), Article 52 paragraph (2), Article 53, Article 54 paragraph (2), paragraph (3), and/or Article 55; or b. has not been subject to administrative sanctions as referred to in paragraph (1) but based on the assessment of the Financial Services Authority there are violations that require immediate sanctions, the Bank may be subject to administrative sanctions in the form of suspension of certain business activities. (3) In the event that:
a. The Bank has been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continues to violate the provisions as referred to in Article 45 paragraph (1), Article 50 paragraph (1), Article 51 paragraph (2), Article 52 paragraph (2), Article 53, Article 54 paragraph (2), paragraph (3), and/or Article 55; or b. has not been subject to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the assessment of the Financial Services Authority there are violations that require immediate sanctions, members of the Board of Directors, members of the Board of Commissioners, and/or executive officials of the Bank may be subject to administrative sanctions in the form of prohibition from acting as principal parties in accordance with the Financial Services Authority Regulation regarding re-evaluation of principal parties of financial service institutions.

CHAPTER VI
FINANCING RESTRUCTURING

Part One
General
Article 57
Financing Restructuring must meet the criteria:
a. the customer experiences difficulty in paying principal and/or profit share/ujrah/margin of Financing; and b. the customer still has a good business prospect and is assessed to be able to fulfill obligations after Financing is restructured.

Article 58
Banks are prohibited from conducting Financing Restructuring with the purpose of:
a. improving the quality of Financing; and/or b. avoiding the increase in the establishment of PPKA, without meeting the customer criteria as referred to in Article 57.

Article 59
In conducting Financing Restructuring, Banks must observe the principles:
a. objectivity; b. independence;
c. avoiding conflicts of interest; and
d. fairness.

Part Two
Accounting Treatment of Financing Restructuring
Article 60
Banks must apply accounting treatment for Financing Restructuring in accordance with financial accounting standards.

Part Three
Policies, Procedures, and Guidelines for Financing Restructuring
Article 61
(1) Banks must have written policies and procedures regarding Financing Restructuring.
(2) Policies regarding Financing Restructuring as referred to in paragraph (1) must be approved by the Board of Commissioners.
(3) Written procedures regarding Financing Restructuring as referred to in paragraph (1) must be approved by the Board of Directors.
(4) The Board of Commissioners must actively supervise the implementation of Financing Restructuring policies as referred to in paragraph (1).
(5) The Board of Directors must actively supervise the implementation of written procedures regarding Financing Restructuring as referred to in paragraph (1).
(6) Written policies and procedures regarding Financing Restructuring as referred to in paragraph (1) are an inseparable part of the Bank's risk management policies in accordance with the Financial Services Authority Regulation regarding the application of risk management for Sharia Commercial Banks and Sharia Business Units.

Article 62
(1) In applying the prudence principle as referred to in Article 2 paragraph (1), Banks must have Financing Restructuring guidelines.
(2) Financing Restructuring guidelines as referred to in paragraph (1) refer to Appendix II which is an inseparable part of this Financial Services Authority Regulation.

Article 63
(1) Decisions on Financing Restructuring must be made by:
a. parties with higher authority than the parties deciding on the provision of Financing; and b. parties different from the parties deciding on the provision of Financing. (2) In the event that the decision on the provision of Financing is made by parties with higher authority...

highest, Restructuring of Financing is carried out through a decision in the Board of Directors meeting.
(3) Restructuring of Financing must be carried out by officials or employees who are not involved in the decision-making for the Financing being restructured.
(4) In the implementation of Restructuring of Financing, the formation of special work units is adjusted to the needs of each Bank in accordance with the Financial Services Authority Regulations regarding the obligation to formulate and implement credit or financing policies for general banks.

Article 64
(1) Banks must analyze Financing to be restructured based on the business prospects of the customer and the ability to pay according to cash flow projections.
(2) Financing to Related Parties to be restructured must be analyzed by an independent financial consultant who has a business license and a good reputation.
(3) Every stage in the implementation of Restructuring of Financing and the results of the analysis conducted by the Bank and the independent financial consultant regarding the restructured Financing must be documented completely and clearly. (4) The provisions as referred to in paragraph (1), paragraph (2), and paragraph (3) also apply to Financing that is restructured again.

Fourth Section
Determination of the Quality of Restructured Financing

Article 65
(1) The quality of Financing after restructuring is determined:

a. at the highest equal to the quality of Financing before Restructuring of Financing was carried out, if the customer has not met the obligation to pay principal installments and/or profit share/ujrah/margin consecutively for 3 (three) periods according to the agreed time; b. may increase at most 1 (one) level from the quality of Financing before Restructuring of Financing was carried out, after the customer meets the obligation to pay principal installments and/or profit share/ujrah/margin consecutively for 3 (three) periods as referred to in letter a; and
c. based on valuation factors as referred to in Article 10:

after the determination of Financing quality as referred to in letter b; or
in the event that the customer does not meet the requirements and/or payment obligations in the Restructuring of Financing agreement, both during and after 3 (three) periods of payment obligations according to the agreed time.
(2) The determination of the quality of restructured Financing up to the amount of Rp1,000,000,000.00 (one billion rupiah):
a. up to 3 (three) periods of payment obligations is determined:
at most Substandard for Financing classified as Doubtful or Loss; or
remains the same for Financing classified as Good, Special Mention, or Substandard,
before Restructuring of Financing was carried out; and b. after 3 (three) periods of payment obligations, the quality of the restructured Financing is determined based on valuation factors regarding the timeliness of principal and/or profit share/ujrah/margin payments. (3) In the event that Restructuring of Financing carried out by the Bank is not supported by adequate analysis and documentation as referred to in Article 64, the Financial Services Authority has the authority to determine the quality of the restructured Financing based on valuation factors as referred to in Article 10. (4) In the event that the period for fulfilling the obligation to pay principal installments and/or profit share/ujrah/margin is less than 1 (one) month, the quality improvement as referred to in paragraph (1) letter b can be carried out at the earliest within 3 (three) months since the Restructuring of Financing was carried out. (5) The determination of quality as referred to in paragraph (1), paragraph (3), and paragraph (4) also applies to Financing that is restructured again. (6) Additional quality of Financing as part of the Restructuring of Financing package is determined to be the same as the quality of the restructured Financing.

Article 66
(1) The determination of the quality of restructured Financing with the provision of a grace period for principal and/or profit share/ujrah/margin payments is determined:
a. during the grace period for principal and/or profit share/ujrah/margin payments, the quality of Financing follows the quality of Financing before restructuring was carried out; and b. after the grace period for principal and/or profit share/ujrah/margin payments ends, the quality of Financing follows the determination of Financing quality as referred to in Article 65.

(2) In the event that Mudarabah Financing and Musyarakah Financing are restructured, the calculation of the achievement of the RBH to PBH ratio as referred to in Article 13 paragraph (1) is carried out based on accumulation during the Financing period since the Restructuring of Financing agreement.

Article 67
(1) The determination of the quality of Productive Assets as referred to in Article 5, Article 6, and Article 7 also applies to restructured Financing.
(2) In the event that restructured Financing as referred to in paragraph (1) amounts to more than Rp10,000,000,000.00 (ten billion rupiah), the determination of Financing quality is not influenced by the quality of Financing given by other Banks to the customer or the same project with an amount of less than or equal to Rp10,000,000,000.00 (ten billion rupiah).

Fifth Section
Restructuring of Financing Through Temporary Equity Participation

Article 68
(1) Banks may carry out Restructuring of Financing in the form of Temporary Equity Participation.
(2) Restructuring of Financing in the form of Temporary Equity Participation as referred to in paragraph (1) is carried out for Financing that has a quality of Substandard, Doubtful, or Loss.

Article 69
(1) Banks must withdraw Temporary Equity Participation if:
a. the customer's company where the participation was made has obtained cumulative profit; or b. the maximum period of 5 (five) years has been exceeded.
(2) Banks must write off Temporary Equity Participation that has exceeded the 5 (five) year period from the Bank's financial position report.

Sixth Section
Corrections in the Framework of Restructuring of Financing

Article 70
In the event that:
a. according to the assessment of the Financial Services Authority, Restructuring of Financing is carried out for the purpose as referred to in Article 58; b. Restructuring of Financing is not supported by complete documents and adequate analysis regarding the ability to pay and business prospects of the customer;
c. the customer does not implement the Restructuring of Financing agreement; and/or
d. Restructuring of Financing is not carried out in accordance with this Financial Services Authority Regulation, the Financial Services Authority has the authority to make corrections regarding the determination of the quality of restructured Financing and the calculation of PPKA.

Seventh Section
Administrative Sanctions

Article 71
(1) For:
a. Banks that violate provisions as referred to in Article 58, Article 59, Article 60, Article 61 paragraph (1), Article 63 paragraph (1), paragraph (3), Article 64 paragraph (1), paragraph (2), and/or Article 69; b. Directors who violate provisions as referred to in Article 61 paragraph (3) and/or paragraph (5); and/or
c. Board of Commissioners who violate provisions as referred to in Article 61 paragraph (2) and/or paragraph (4),
subject to administrative sanctions in the form of written reprimands.
(2) In the event that:
a. Banks, Directors, and/or Board of Commissioners have been subjected to administrative sanctions as referred to in paragraph (1) and continue to violate provisions as referred to in Article 58, Article 59, Article 60, Article 61 paragraph (1), paragraph (2), paragraph (3), paragraph (4), paragraph (5), Article 63 paragraph (1), paragraph (3), Article 64 paragraph (1), paragraph (2), and/or Article 69; or b. have not been subjected to administrative sanctions as referred to in paragraph (1) but based on the assessment of the Financial Services Authority there are violations that need to be sanctioned immediately, Banks may be subjected to administrative sanctions in the form of suspension of certain business activities. (3) In the event that:
a. Banks, Directors, and/or Board of Commissioners have been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continue to violate provisions as referred to in Article 58, Article 59, Article 60, Article 61 paragraph (1), paragraph (2), paragraph (3), paragraph (4), paragraph (5), Article 63 paragraph (1), paragraph (3), Article 64 paragraph (1), paragraph (2), and/or Article 69; or b. have not been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the assessment of the Financial Services Authority there are violations that need to be sanctioned immediately, members of the Board of Directors, members of the Board of Commissioners, and/or executive officials of the Bank may be subjected to administrative sanctions in the form of prohibition as a key party in accordance with Financial Services Authority Regulations regarding the re-evaluation of key parties of financial service institutions.

CHAPTER VII
WRITE-OFF

Article 72
(1) Banks must have written policies and procedures regarding write-offs in accordance with financial accounting standards.
(2) Policies regarding write-offs as referred to in paragraph (1) must be approved by the Board of Commissioners.
(3) Written procedures regarding write-offs as referred to in paragraph (1) must be approved by the Board of Directors.
(4) The Board of Commissioners must actively supervise the implementation of write-off policies as referred to in paragraph (1).
(5) The Board of Directors must actively supervise the implementation of written procedures regarding write-offs as referred to in paragraph (1).
(6) Written policies and procedures regarding write-offs as referred to in paragraph (1) are an inseparable part of the Bank's risk management policies in accordance with Financial Services Authority Regulations regarding the application of risk management for Islamic General Banks and Islamic Business Units.

Article 73
(1) In the event that a Bank carries out a write-off of Productive Assets, the Bank must form a CKPN of 100% (one hundred percent) and the quality of Productive Assets has been determined as Loss before the write-off is carried out. (2) Write-offs cannot be carried out against part of Productive Assets.

Article 74
(1) Write-offs as referred to in Article 73 paragraph (1) are carried out after the Bank has made various efforts to recover the Productive Assets provided.
(2) Banks must document the efforts made as referred to in paragraph (1) as well as the basis for consideration for the implementation of write-offs.
(3) Banks must administer data and information regarding Productive Assets that have been written off.

Article 75
(1) For:
a. Banks that violate provisions as referred to in Article 72 paragraph (1), Article 74 paragraph (2), and/or paragraph (3); b. Directors who violate provisions as referred to in Article 72 paragraph (3) and/or paragraph (5); and/or
c. Board of Commissioners who violate provisions as referred to in Article 72 paragraph (2) and/or paragraph (4),
subject to administrative sanctions in the form of written reprimands.
(2) In the event that:
a. Banks, Directors, and/or Board of Commissioners have been subjected to administrative sanctions as referred to in paragraph (1) and continue to violate provisions as referred to in Article 72 paragraph (1), paragraph (2), paragraph (3), paragraph (4), paragraph (5), Article 74 paragraph (2), and/or paragraph (3); or b. have not been subjected to administrative sanctions as referred to in paragraph (1) but based on the assessment of the Financial Services Authority there are violations that need to be sanctioned immediately, Banks may be subjected to administrative sanctions in the form of suspension of certain business activities. (3) In the event that:
a. Banks, Directors, and/or Board of Commissioners have been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) and continue to violate provisions as referred to in Article 72 paragraph (1), paragraph (2), paragraph (3), paragraph (4), paragraph (5), Article 74 paragraph (2), and/or paragraph (3); or b. have not been subjected to administrative sanctions as referred to in paragraph (1) and/or paragraph (2) but based on the assessment of the Financial Services Authority there are violations that need to be sanctioned immediately, members of the Board of Directors, members of the Board of Commissioners, and/or executive officials of the Bank may be subjected to administrative sanctions in the form of prohibition as a key party in accordance with Financial Services Authority Regulations regarding the re-evaluation of key parties of financial service institutions.

CHAPTER VIII
REPORTING

Article 76
(1) Banks must submit reports on differences in the quality of Productive Assets as referred to in Article 7 paragraph (1) no later than the 10th of the following month after the position of the obligation to adjust the quality assessment of Productive Assets as referred to in Article 8 through the Financial Services Authority reporting system. (2) The procedure for submitting reports on differences in the quality of Productive Assets is carried out in the form of unstructured reports in accordance with Financial Services Authority Regulations regarding the reporting of general banks through the Financial Services Authority reporting system. (3) Submission of reports on differences in the quality of Productive Assets is addressed to:
a. the Department of Islamic Bank Supervision or the Regional Office of the Financial Services Authority in Jakarta, for Banks headquartered in the Special Capital Region of Jakarta Province and Banten Province; or b. the Regional Office of the Financial Services Authority or the Local Office of the Financial Services Authority, for Banks headquartered outside the Special Capital Region of Jakarta Province and Banten Province. (4) The format for reports on differences in the quality of Productive Assets refers to Appendix III part A which is an inseparable part of this Financial Services Authority Regulation. (5) Banks that violate provisions as referred to in paragraph (1) are subject to administrative sanctions in the form of written reprimands. (6) In the event that:
a. Banks have been subjected to administrative sanctions as referred to in paragraph (5) and continue to violate provisions as referred to in paragraph (1); or b. have not been subjected to administrative sanctions as referred to in paragraph (5) but based on the assessment of the Financial Services Authority there are violations that need to be sanctioned immediately, Banks may be subjected to administrative sanctions in the form of suspension of certain business activities. (7) In the event that:
a. Banks have been subjected to administrative sanctions as referred to in paragraph (5) and/or paragraph (6) and continue to violate provisions as referred to in paragraph (1); or b. have not been subjected to administrative sanctions as referred to in paragraph (5) and/or paragraph (6) but based on the assessment of the Financial Services Authority there are violations that need to be sanctioned immediately, members of the Board of Directors, members of the Board of Commissioners, and/or executive officials of the Bank may be subjected to administrative sanctions in the form of prohibition as a key party in accordance with Financial Services Authority Regulations regarding the re-evaluation of key parties of financial service institutions.

Article 77
(1) Banks must submit reports on Restructuring of Financing every month for the end-of-month position through the Financial Services Authority reporting system.
(2) The procedure and deadline for submitting reports on Restructuring of Financing are carried out in the form of structured reports in accordance with Financial Services Authority Regulations regarding the reporting of general banks through the Financial Services Authority reporting system. (3) The format for reports on Restructuring of Financing refers to Appendix III part B which is an inseparable part of this Financial Services Authority Regulation. (4) Banks that violate provisions as referred to in paragraph (1) are subject to administrative sanctions in accordance with Financial Services Authority Regulations regarding the reporting of general banks through the Financial Services Authority reporting system.

CHAPTER IX
OTHER PROVISIONS

Article 78
In certain considerations, the Financial Services Authority may establish other policies regarding regulations that already exist in this Financial Services Authority Regulation in accordance with regulations concerning government administration.

CHAPTER X
CLOSING PROVISIONS

Article 79
The obligation to adjust the quality of Productive Assets as referred to in Article 8 is first carried out for the end-of-March 2022 position.

Article 80
Reports on differences in the quality of Productive Assets as referred to in Article 76 paragraph (1) are submitted for the first time for data positions after the obligation to adjust the quality assessment of Productive Assets is carried out for the first time as referred to in Article 79.

Article 81
At the time this Financial Services Authority Regulation comes into force, Financial Services Authority Regulation Number 16/POJK.03/2014 concerning the Assessment of Asset Quality for Islamic General Banks and Islamic Business Units (State Gazette of the Republic of Indonesia Year 2014 Number 347, Supplement to the State Gazette of the Republic of Indonesia Number 5625) as amended by Financial Services Authority Regulation Number 19/POJK.03/2018 concerning Amendments to Financial Services Authority Regulation Number 16/POJK.03/2014 concerning the Assessment of Asset Quality for Islamic General Banks and Islamic Business Units (State Gazette of the Republic of Indonesia Year 2018 Number 167, Supplement to the State Gazette of the Republic of Indonesia Number 6251) and its implementing provisions are repealed and declared invalid.

Article 82
This Financial Services Authority Regulation comes into force on the date of its promulgation.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

For everyone to know, order the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on January 31, 2022
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on February 7, 2022
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2022 NUMBER 37

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 2 /POJK.03/2022
CONCERNING
ASSESSMENT OF ASSET QUALITY
FOR ISLAMIC GENERAL BANKS AND ISLAMIC BUSINESS UNITS

I. GENERAL

The development of the financial services industry business currently creates competition among financial service institutions, both nationally and internationally. Banks, as one of the financial service institutions, are required to be able to face this competition supported by the adequate application of prudential principles and Sharia Principles. To realize this, Banks need to maintain the continuity of the Bank's business through credit risk management at an adequate level. One of the sources of credit risk for Banks in the midst of increasingly tight business competition is productive assets provided by several Banks, so it is necessary to take anticipatory actions by establishing the same quality for the aforementioned productive assets.

In addition, in line with the current condition of the Islamic banking industry and to reduce the potential for regulatory arbitrage resulting in inconsistencies in regulations in the banking industry, it is necessary to harmonize regulations regarding asset quality in Islamic banking. In this regard, it is necessary to refine the provisions regarding the assessment of Bank Asset quality in a Financial Services Authority Regulation.

II. ARTICLE BY ARTICLE

Article 1
Clear enough.

Article 2
Paragraph (1)
Prudential principles in Asset management are the management of Assets carried out among others:

in accordance with Financial Services Authority Regulations regarding the application of risk management for Islamic General Banks and Islamic Business Units and Financial Services Authority Regulations regarding the application of anti-money laundering and counter-terrorism financing programs in the financial services sector;
based on business feasibility analysis by paying attention to at least the 5C factors (character, capital, capacity, condition of economy, and collateral); and/or
based on assessment of business prospects, performance, and ability to pay.
The application of Sharia Principles in Asset management includes among others Assets managed that do not contain elements of riba, maisir, garar, haram, and zalim.

Paragraph (2)
What is meant by "assess" includes among others evaluating the condition of the customer and/or the feasibility of the business to be financed.
What is meant by "monitor" includes among others supervising the development of customer performance and other related information that can affect the quality of Bank Assets over time. Steps required to keep Bank Assets in good quality include among others by applying credit risk management effectively, including through the formulation of policies and guidelines in accordance with Financial Services Authority Regulations regarding the obligation to formulate and implement credit or financing policies for general banks.

Article 3
Paragraph (1)
Clear enough.

Paragraph (2)
The determination of Asset quality established by the Financial Services Authority is based among others on the results of Bank examinations or supervision and confirmed to the Bank.

Paragraph (3)
Written notifications carried out by the Financial Services Authority include among others supervisory letters or in the minutes of the final meeting of the Bank examination (exit meeting).

Article 4
Clear enough.

Article 5
Paragraph (1)
Letter a
Clear enough.

Letter b
Clear enough.

Letter c
Clear enough.

Letter d
Clear enough.

Letter e
Clear enough.

Letter f
Clear enough.

Letter g
Clear enough.

Letter h
Clear enough.

Letter i
Clear enough.

Letter j
Other forms of fund provision that can be equated with Productive Assets include among others fund provision that has a scheme like Financing.

Paragraph (2)
The obligation to establish the same quality also applies to customers of Islamic Business Units with conventional general bank customers who have Islamic Business Units.

Letter a
Customers in this paragraph are individuals, business entities, and/or legal entities that are separate entities generating cash flow as the source of repayment for Productive Assets. Example:
Bank "A" provides Mudarabah Financing and Musyarakah Financing to customer "Tomi".
Since the Financing is used to finance 1 (one) customer, Bank "A" establishes the same quality of Productive Assets for Mudarabah Financing and Musyarakah Financing to customer "Tomi".

Letter b
The same project includes among others:

there is a significant business chain linkage in the production process carried out by several customers. Linkage is considered significant among others if the production process in one entity depends on the production process of another entity, for example, there is a dependency on raw materials in the production process; and/or
the continuity of cash flow of one entity will be significantly disrupted so as to experience difficulties in meeting obligations if the cash flow of another entity is disrupted.

Example:
Bank “B” provides Financing facilities to customers “Arif” and “Dimas” which are used to finance the same project, namely project “X”. The main source of repayment for the Financing, by both customer “Arif” and customer “Dimas”, comes from the cash flow to be obtained from project “X”. Given that the Financing is used to finance the same project, Bank “B” sets the same Productive Asset quality for the Financing provided to customer “Arif” and customer “Dimas”.

Paragraph (3)
Example 1:
Bank “A” provides Mudarabah Financing and Murabahah Financing facilities to customer “Toni”. The assessment results conducted by Bank “A” for each of these facilities are as follows:
a. special attention, for Mudarabah Financing; and b. doubtful, for Murabahah Financing.
Given that the Financing is used to finance 1 (one) customer, the Productive Asset quality set by Bank “A” for the Financing provided to customer “Toni” follows the lowest Productive Asset quality, namely doubtful.

Example 2:
Bank “B” provides Financing facilities to customer “Arif” and customer “Dimas” which are used to finance the same project, namely project “X”. The main source of repayment for the Financing, by both customer “Arif” and customer “Dimas”, comes from the cash flow to be obtained from project “X”. The assessment results conducted by Bank “B” for the Financing provided to customer “Arif” and customer “Dimas” are as follows:
a. special attention, for customer “Arif”; and b. doubtful, for customer “Dimas”.

Given that the Financing is used to finance the same project, the Productive Asset quality set by Bank “B” for the Financing provided to customer “Arif” and customer “Dimas” follows the lowest Productive Asset quality, namely doubtful.

Paragraph (4)
Example:
The quality of Financing is set based on assessment factors consisting of business prospects, customer performance, and repayment ability. On the other hand, the quality of Sharia Securities is set based on assessment factors consisting of investment grade rating, timeliness of payment of remuneration or other similar obligations, and payment maturity. Given the difference in assessment factors for setting the quality of Financing and Sharia Securities, the quality of Financing and Sharia Securities can be set differently even for the same customer or project.

Article 6
Paragraph (1)
Example 1:
Bank “A” and Bank “B” provide Financing facilities to customer “Ardi”. Given that the facilities are provided to the same customer, the Productive Asset quality set by Bank “A” and Bank “B” for the Financing facilities provided to customer “Ardi” must be the same.

Example 2:
Bank “C” and Bank “D” each provide Financing facilities to customer “Khansa” and customer “Rima” which are used to finance the same project, namely project “X”.
Given that the facilities are provided for the same project, the Productive Asset quality set for these Financing facilities, both to customer “Khansa” by Bank “C” and to customer “Rima” by Bank “D”, must be the same.

The Productive Asset quality provided by other banks can be obtained, among others, from debtor information in accordance with Financial Services Authority Regulations regarding reporting and requesting debtor information through the financial information service system.

Paragraph (2)
Letter a
The amount limit as referred to in this regulation is calculated against the ceiling of all facilities provided to each customer or each project, both for individual customers and groups of customers receiving facilities for Productive Assets used to finance the same project. What is meant by “group of customers receiving facilities” is:

group of customers receiving facilities for Islamic Commercial Banks in accordance with Financial Services Authority Regulations regarding maximum limits for fund disbursement and large fund provision for Islamic Commercial Banks; and
borrower groups for Sharia Business Units in accordance with Financial Services Authority Regulations regarding maximum limits for credit provision and large fund provision for commercial banks.

Productive Assets provided by each Bank with an amount greater than IDR 10,000,000,000.00 (ten billion rupiah) to 1 (one) customer or 1 (one) project of the same kind, are not influenced by the Productive Asset quality provided by other banks to the same customer or project with an amount less than or equal to IDR 10,000,000,000.00 (ten billion rupiah).

Letter b
The 50 (fifty) largest customers are determined on an individual Bank basis. For Sharia Business Units, the 50 (fifty) largest customers do not include customers from conventional commercial banks that have such Sharia Business Units. The amount limit as referred to in this regulation is calculated against the ceiling of all facilities provided to each customer.

Productive Assets provided by a Bank with an amount greater than IDR 1,000,000,000.00 (one billion rupiah) up to IDR 10,000,000,000.00 (ten billion rupiah) to 1 (one) customer who is one of the 50 (fifty) largest customers of that Bank, are not influenced by the Productive Asset quality provided by other banks to the same customer or project with an amount less than or equal to IDR 10,000,000,000.00 (ten billion rupiah).

Example:
Customer “Ina” is:

one of the 50 (fifty) largest customers of Bank “A” with a Financing portfolio of IDR 4,000,000,000.00 (four billion rupiah) which is of good quality; and
a customer of Bank “B” with a Financing portfolio of IDR 7,000,000,000.00 (seven billion rupiah) which is of special attention quality.
Bank “A” does not need to equalize the Productive Asset quality for the Financing provided to customer “Ina” to special attention because it considers that Bank “B”’s Financing portfolio to customer “Ina” is less than IDR 10,000,000,000.00 (ten billion rupiah).

Letter c
Productive Assets provided based on joint Financing agreements, i.e., Financing structures such as syndication. In setting the same quality for Productive Assets provided based on joint Financing agreements, there is no minimum amount limit. Thus, Productive Assets provided to 1 (one) customer or 1 (one) project of the same kind based on joint Financing agreements are set with the same quality even if the Productive Assets provided by each Bank are less than or equal to IDR 10,000,000,000.00 (ten billion rupiah).

Paragraph (3)
Example:
Bank “A” and Bank “B” provide Financing facilities to customer “Ahmad”, with assessment results at each Bank being:
a. special attention, at Bank “A”; and b. doubtful, at Bank “B”.
Given that the Financing is used to finance 1 (one) customer, the Productive Asset quality set for the Financing provided to customer “Ahmad” follows the lowest Productive Asset quality, namely doubtful.

Article 7
Paragraph (1)
Letter a
Sufficiently clear.

Letter b
Example of clear separation of cash flows from each project, i.e., there is no significant correlation in cash flows between projects. Cash flow correlation is considered significant, among others, if the continuity of cash flow of one project will be significantly disrupted if the cash flow of another project experiences disruption.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
Documentation includes, among others, supporting documents that explain the customer's condition so that there is no need to set the same quality. Such supporting documents are data or information that support the assessment from the aspects of business prospects, performance, and customer repayment ability as well as the Bank's considerations in conducting the assessment, which can be documents regarding funding sources or cash flows.

Paragraph (3)
Sufficiently clear.

Article 8
a. Adjustment of Productive Asset quality assessment for positions at the end of March, end of June, end of September, and end of December is conducted with reference to the Productive Asset quality assessment of the previous month. In conducting the adjustment of Productive Asset quality assessment, Banks that follow the lower Productive Asset quality set by other banks (Follower Bank) need to specifically account for changes in Productive Asset quality caused by the mechanism as referred to in Article 6. Subsequently, the Follower Bank actively monitors every month the Productive Asset quality specifically accounted for to see the development of the Productive Asset quality of the said customer or project at other banks (Initiator Bank). b. Banks that do not need to adjust customer Productive Asset quality (Initiator Bank) with the Productive Asset quality of the same customer at other banks or worse than the Productive Asset quality at other banks and then the condition of the said customer improves in the following month, the said Bank must immediately improve the Productive Asset quality of said customer without having to wait for the Productive Asset quality assessment of the customer at other banks at the position at the end of March, end of June, end of September, and end of December.
c. For positions at the end of months other than the end of March, end of June, end of September, and end of December, the Follower Bank can make changes to the adjusted Productive Asset quality following the improvement of Productive Asset quality that has been adjusted by the Initiator Bank, provided that the Productive Asset quality is in accordance with the Productive Asset quality at the Follower Bank.

Article 9
Paragraph (1)
Audit of financial statements by public accountants is intended to obtain an opinion on the fairness of the customer's financial statements, given that the customer's financial condition is one of the criteria in setting Productive Asset quality.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Regulatory provisions include, among others, the Law regarding Limited Liability Companies and regulatory provisions regarding annual financial information of companies.

Paragraph (4)
Sufficiently clear.

Article 10
Sufficiently clear.

Article 11
Paragraph (1)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Letter e
Efforts made by customers to maintain the environment are directed at customers who have obligations to carry out environmental management efforts in accordance with regulatory provisions. Efforts made by large-scale and/or high-risk customers to maintain environmental sustainability are evidenced, among others, by analyses of environmental impacts to ensure that the financed project has maintained environmental sustainability. The Bank considers the results of the assessment of the company's performance rating program in environmental management issued by the ministry in charge of environmental and forestry affairs.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Article 12
Paragraph (1)
Sufficiently clear.

Paragraph (2)
What is meant by “significance and materiality” is the Bank's consideration in conducting analysis regarding the magnitude of the impact of assessment factors and components on the setting of Financing quality.

Paragraph (3)
Sufficiently clear.

Article 13
Paragraph (1)
Sufficiently clear.

Paragraph (2)
What is meant by “accumulation during the period of Mudarabah Financing and Musyarakah Financing that has been running” is the sum of RBH or PBH from the beginning of Financing until the position of the assessment month. Example:
Mudarabah Financing is provided in January 2022, with a duration of 1 (one) year.
The calculation of accumulated PBH conducted in April 2022 is PBH of January 2022 plus PBH of February 2022 plus PBH of March 2022 plus PBH of April 2022.

Paragraph (3)
PBH can be set in annual, semi-annual, quarterly, or monthly periods based on agreement between the Bank and the customer, considering among others the business cycle and customer incoming cash flow.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Sufficiently clear.

Article 14
Paragraph (1)
The setting of the installment payment period is adjusted to the characteristics of the customer's business being financed.

Paragraph (2)
Steps to reduce the risk of non-payment of Financing principal at maturity include, among others, evaluating the customer's business performance based on revenue realization reports submitted by the customer periodically.

Paragraph (3)
Sufficiently clear.

Article 15
Paragraph (1)
Categories of Sharia Securities measured at fair value through profit or loss or measured at fair value through other comprehensive income are based on financial accounting standards.

Letter a
The criterion for actively traded is the existence of significant and reasonable transaction volume in the last 10 (ten) working days.
Foreign stock exchanges that are included in the main stock exchanges are the 25 (twenty-five) stock exchanges with the largest stock market capitalization values in the world.

Letter b
Fair value information must be transparently obtainable from media publications customary for stock exchange transactions.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Paragraph (2)
Categories of Sharia Securities measured at amortized cost are based on financial accounting standards. The use of ratings is in accordance with Financial Services Authority Regulations regarding rating agencies and ratings recognized by the Financial Services Authority.

Sharia Securities that have 2 (two) or more ratings, the rating of the Sharia Securities used is the rating in accordance with Financial Services Authority Regulations regarding guidelines for calculating risk-weighted assets for credit risk using the standard approach for Islamic Commercial Banks.

Paragraph (3)
What is meant by “not meeting regulations” is Sharia Securities that meet the criteria but their issuance is not conducted by meeting regulations in accordance with Financial Services Authority Regulations regarding the issuance of debt-like effects and/or sukuk conducted without a public offering.

Paragraph (4)
Sufficiently clear.

Article 16
Paragraph (1)
Rating agencies are rating agencies recognized by the Financial Services Authority as referred to in Financial Services Authority Regulations regarding rating agencies and ratings recognized by the Financial Services Authority.

Paragraph (2)
Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Sufficiently clear.

Article 19
Sharia Securities that are linked or guaranteed by underlying assets include, among others, Sharia mutual funds and asset-backed securities.

Letter a
The existence of assets can be evidenced, among others, by being stored at a custodian bank, the Indonesia Stock Exchange (IDX) or Indonesia Dealing and Clearing House (IDC), or Bank Indonesia.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Article 20
Paragraph (1)
Letter a
Payment of obligations of Sharia Securities is categorized as directly related to underlying assets with the condition that the payment of principal and profit sharing/ujrah/margin of Sharia Securities only comes from the payment of principal and profit sharing/ujrah/margin from the underlying assets.

Letter b
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Letter a
The setting of quality for mutual funds based on Sharia Securities quality assessment regulations is conducted against mutual funds as a single product and not against each type of underlying asset of the mutual fund.

Letter b
The quality of mutual funds is set based on the quality of each type of underlying asset and the quality of the mutual fund issuer in accordance with Financing quality regulations, considering among others performance, liquidity, issuer reputation or other related parties such as insurance, and portfolio diversification held by the issuer.

Article 21
Paragraph (1)
What is meant by “bank” is Islamic Commercial Banks and conventional commercial banks that have Sharia Business Units.

Letter a
Sufficiently clear.

Letter b
Example:
Sharia Securities that are not traded on stock exchanges and do not have ratings, consisting of accepted export bills.

Number 1
Sufficiently clear.

Number 2
The term of Sharia Securities is the term of the initial agreement and does not include the term of extension of said Sharia Securities.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Article 22
Accepted export bills include, among others, letters of credit and domestic documentary credits.

Article 23
Paragraph (1)
Financial Services Authority Regulations regarding Minimum Capital Provision Requirements:
a. for Islamic Commercial Banks, Financial Services Authority Regulations regarding Minimum Capital Provision Requirements for Islamic Commercial Banks; and b. for conventional commercial banks and conventional commercial banks that have Sharia Business Units, Financial Services Authority Regulations regarding Minimum Capital Provision Requirements for commercial banks.

The KPMM Ratio is based on the latest published financial statements in accordance with the period set by the Financial Services Authority. The absence of the latest published financial statements or the KPMM ratio in the latest published financial statements results in the bank being considered to have KPMM less than the regulations.

Paragraph (2)
Linkage program is cooperation between Banks and Sharia People's Credit Banks in disbursing Financing to micro and small businesses.
Linkage program with an executing pattern is Financing provided by the Bank to the Sharia People's Credit Bank to be re-lent to micro and small business customers whose risk becomes the burden of the Sharia People's Credit Bank.

Article 24
Fund placements at Bank Indonesia include, among others, current accounts, SBIS, Sharia time deposits, and Sharia rupiah fund placements.

Article 25
Sufficiently clear.

Article 26
Paragraph (1)
Claims on Sharia Securities purchased with an agreement to sell back (reverse repo) are claims arising from the purchase of Sharia Securities from other parties which are accompanied by an agreement to sell back to said other parties at a specified time and price.

Paragraph (2)
Sufficiently clear.

Article 27
Sufficiently clear.

Article 28
Sufficiently clear.

Article 29
Paragraph (1)
The term of Temporary Capital Participation is calculated from the date the Bank makes the Temporary Capital Participation.

Paragraph (2)
The estimated term for the sale of Temporary Capital Participation is calculated from the date the Bank makes the Temporary Capital Participation.

Article 30
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Criteria for commitments and contingencies are in accordance with financial accounting standards.

Article 31
Paragraph (1)
Example 1:
Bank “A” provides Murabahah Financing facilities with cash collateral and Mudarabah Financing facilities with non-cash collateral to customer “Reza”. The assessment results conducted by Bank “A” for each of these facilities are as follows:
a. good, for Murabahah Financing; and b. special attention, for Mudarabah Financing.
Given that the collateral for Murabahah Financing is cash collateral, the Productive Asset quality set by Bank “A” for the Murabahah Financing provided to customer “Reza” does not follow the lowest Productive Asset quality, namely special attention, even though it is used to finance 1 (one) same customer.

Example 2:
Bank “B” provides Financing facilities to customer “Ratna” with cash collateral and customer “Ayu” with non-cash collateral which are used to finance the same project, namely project “Z”. The main source of repayment for the Financing, by both customer “Ratna” and customer “Ayu”, comes from the cash flow to be obtained from project “Z”. The assessment results conducted by Bank “B” for the Financing provided to customer “Ratna” and customer “Ayu” are as follows:
a. good, for customer “Ratna”; and b. special attention, for customer “Ayu”.
Given that the collateral for customer “Ratna”’s Financing is cash collateral, even though the Financing is used to finance the same project, the Productive Asset quality set by Bank “B” for the Financing provided to customer “Ratna” does not follow the Financing quality provided to customer “Ayu” as the lowest Productive Asset quality, namely special attention.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Uniform Customs and Practice for Documentary Credits is a document used as an international guideline in letter of credit transactions.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Letter a
Unconditional means:

the benefits obtained by the funding-providing Bank do not decrease substantially even if losses occur due to factors beyond the Bank's control; and
do not contain procedural requirements, such as:
a) requiring a time limit for submitting default notices; b) requiring proof of good faith by the funding-providing Bank; and/or c) requiring the release of guarantees by first conducting mutual offsetting with the obligations of the funding-providing Bank to the guarantor.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Letter e
Sufficiently clear.

Paragraph (5)
Letter a
The rating used for prime banks that have 2 (two) or more ratings is the rating in accordance with Financial Services Authority Regulations regarding guidelines for calculating risk-weighted assets for credit risk using the standard approach for Islamic Commercial Banks.

Letter b
Total assets that are included in the top 200 (two hundred) in the world based on information contained in the banker’s almanac.

Article 32
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Example:
Other requirements such as the customer transferring collateral to other parties without the Bank's approval, while in the agreement between the Bank and the customer it is agreed that the customer can only transfer collateral with the Bank's approval.

Article 33
Paragraph (1)
The amount limit in this regulation is calculated against the ceiling of all facilities provided to each customer or project, both for individual customers and groups of customers receiving facilities where the Financing and other fund provisions are used to finance the same project.

Letter a
Other fund provision includes, among others, the issuance of guarantees and/or letters of credit.
Financing and other fund provision include all types of Financing or other fund provision provided to all categories of customers.

Letter b
Included in specific regions are areas that, according to the assessment of the Financial Services Authority (OJK), require special handling to encourage economic development in areas designated by the Financial Services Authority. The limit for providing Financing and other fund provision facilities is calculated against all facilities received by each customer, whether for individual customers or groups of facility recipients.

Example:
The Financial Services Authority assesses that there is a need for accelerated economic growth in region “X”, so the asset quality assessment for financing up to IDR 5,000,000,000.00 (five billion rupiah) can be assessed solely based on the accuracy of principal and/or profit-sharing/ujrah/margin payments. However, if the Financial Services Authority sets a higher limit up to IDR 7,000,000,000.00 (seven billion rupiah) in the determination of the Financial Services Authority Commissioners, then financing with an amount up to IDR 7,000,000,000.00 (seven billion rupiah) can be assessed solely based on the accuracy of principal and/or profit-sharing/ujrah/margin payments.

Letter c
Micro, small, and medium enterprise criteria are in accordance with the Law on Job Creation.

Number 1
Letter a)
Assessment of the adequacy of risk management implementation quality is in accordance with the Financial Services Authority Regulation concerning the assessment of the health level of Islamic Commercial Banks and Islamic Business Units. Letter b) Clear enough.

Number 2
Clear enough.

Paragraph (2)
Clear enough.

Paragraph (3)
Clear enough.

Paragraph (4)
Clear enough.

Paragraph (5)
Clear enough.

Paragraph (6)
Clear enough.

Paragraph (7)
Letter a
Clear enough.
Letter b
The 50 (fifty) largest customers are determined individually for each Bank. For Islamic Business Units, the 50 (fifty) largest customers do not include customers from conventional commercial banks that own such Islamic Business Units.

Paragraph (8)
Clear enough.

Paragraph (9)
Clear enough.

Paragraph (10)
Clear enough.

Article 34
Paragraph (1)
Export-oriented fund investment is stipulated in an agreement between the Bank and a financial institution that meets certain requirements.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
Clear enough.
Paragraph (5)
Clear enough.
Paragraph (6)
Clear enough.

Article 35
Clear enough.

Article 36
Paragraph (1)
Written policies and procedures include mechanisms and requirements for the takeover of collateral.
Paragraph (2)
This regulation is intended so that the Bank conducts business activities in accordance with its function as a collector and distributor of public funds.
Resolution efforts include actively marketing and selling Non-Performing Financing (AYDA).
At the time of sale, the difference between the book value and the sales proceeds of AYDA is recognized as:
a. Sales proceeds of AYDA greater than the book value represent excess sales proceeds returned to customers after being reduced by the actual costs incurred by the bank related to the maintenance of such AYDA (at cost). b. Sales proceeds of AYDA less than the book value represent a shortfall in sales proceeds charged by the Bank to customers. The Bank continues to form Provisions for Credit Losses (PPKA) for the charges established against customers in accordance with the quality of Financing before the collateral takeover. If customers cannot settle the remaining obligations, the Bank records it as a loss. Paragraph (3) Documentation includes, among others, evidence, data, and information regarding efforts to market and sell AYDA.

Article 37
Clear enough.

Article 38
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
Letter a
The term “Related Parties” is in accordance with the Financial Services Authority Regulation concerning maximum limits for fund distribution and large fund provision for Islamic Commercial Banks, and the Financial Services Authority Regulation concerning maximum limits for credit granting and large fund provision for commercial banks. Letter b Clear enough. Letter c Clear enough. Letter d Clear enough. Letter e Clear enough. Letter f Clear enough.

Article 39
Clear enough.

Article 40
Paragraph (1)
Vacant Property includes, among others, land and/or buildings that are not used for the Bank's business activities, such as buildings and/or land that are leased.
Paragraph (2)
Letter a
Clear enough.
Letter b
Property used to support the Bank's business activities and owned in reasonable amounts includes, among others, official residences.
Letter c
Clear enough.
Letter d
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
Property used for the Bank's business activities in the majority, i.e., with a share of more than 50% (fifty percent).
The measurement of the portion used for the Bank's business activities is done separately for each property.
Example:
Property “A” is used for the Bank's business activities by 65% (sixty-five percent). Therefore, property “A” as a whole is not classified as Vacant Property.

Paragraph (5)
Example:
Property “B” is used for the Bank's business activities by 40% (forty percent).
Property “C” as a whole is not used for the Bank's business activities.
Therefore, property “B” is classified as Vacant Property by 60% (sixty percent) and property “C” as a whole is classified as Vacant Property.

Article 41
Paragraph (1)
Resolution efforts can include actively marketing to sell Vacant Property.
Paragraph (2)
Documentation includes, among others, evidence, data, and information regarding efforts to market Vacant Property for sale.

Article 42
Paragraph (1)
Example:
The Bank has owned property “B” for 2 (two) years and it is used for the Bank's business activities by 40% (forty percent). Therefore, property “B” is classified as Vacant Property by 60% (sixty percent) with substandard quality. Paragraph (2) Clear enough.

Article 43
Paragraph (1)
Resolution efforts are necessary so that all Bank transactions are recognized and recorded based on the characteristics of those transactions and to reduce the possibility of transaction manipulation that could result in losses for the Bank. Paragraph (2) Inter-office accounts assessed are considered asset-side Inter-office accounts without mutual offsetting with liability-side Inter-office accounts, considering that the transaction counterparty has not yet been confirmed as the same party or office.

Article 44
Clear enough.

Article 45
Paragraph (1)
The Bank calculates and forms Provisions for Credit Losses (PPKA) for both Productive Assets and Non-Productive Assets to meet the principle of prudence.
The results of PPKA calculations are not recorded in the Bank's financial statements but will be used in the calculation of the Capital Adequacy Ratio (KPMM).
The calculation and formation of PPKA for Non-Productive Assets are also intended to encourage the Bank to undertake resolution efforts and to anticipate potential losses. Paragraph (2) Clear enough.

Article 46
Clear enough.

Article 47
Clear enough.

Article 48
Depreciation or amortization for Ijarah Financing or IMBT Financing is in accordance with financial accounting standards.
The chosen depreciation or amortization policy must be consistent and reflect the expected pattern of consumption of economic benefits in the future from the objects of Ijarah Financing and IMBT Financing.

Article 49
Letter a
Investment-grade ratings are based on ratings issued by rating agencies within the last year, so the absence of a rating for the Securities in question means the Securities are considered to have no rating. Letter b Collateral binding with land rights (hak tanggungan) is in accordance with applicable laws and regulations, including but not limited to registration matters, so that the Bank has preferential rights over the aforementioned collateral. Letter c Collateral binding with fiduciary rights is in accordance with the Law on Fiduciary Security, including registration matters that ensure the Bank has preferential rights over the aforementioned collateral. Letter d The installation of land rights over land along with machinery located on it is clearly stated in the deed of encumbrance of land rights. Letter e Collateral binding with mortgage (hipotek) is in accordance with applicable laws and regulations, including but not limited to registration matters, so that the Bank has preferential rights over the aforementioned collateral. Letter f Clear enough. Letter g Warehouse receipts, i.e., warehouse receipts in accordance with the Law on Warehouse Receipt Systems.

Article 50
Paragraph (1)
Letter a
Clear enough.
Letter b
Binding that provides preferential rights or security rights that give priority status, i.e., binding done with pawn (gadai), mortgage (hipotek), land rights (hak tanggungan), fiduciary security (jaminan fidusia), and/or warehouse receipt security (jaminan resi gudang). Letter c Banker’s clause is a clause that gives the Bank the right to receive insurance compensation after a claim payment occurs. Insurance protection is adjusted to the type of collateral that can be considered a reduction in the calculation of Provisions for Credit Losses (PPKA). Paragraph (2) Letter a Insurance companies that meet Sharia Principles include Islamic Business Units of conventional insurance companies. Letter b Clear enough. Letter c Clear enough. Letter d Clear enough. Paragraph (3) The use of conventional insurance company services to add protection provided by insurance companies that meet Sharia Principles. Additional insurance protection includes, among others, coinsurance where insurance companies that meet Sharia Principles act as leaders. Paragraph (4) Clear enough. Paragraph (5) The Bank's statement of opinion is a form of the Bank's accountability to ensure that there is no:
a. insurance company that meets Sharia Principles that can provide insurance protection for collateral; or b. insurance products from insurance companies that meet Sharia Principles that can provide insurance protection for specific types of collateral. Sharia Supervisory Board opinions include opinions on the use of conventional insurance company services or conventional insurance products.

Article 51
Paragraph (1)
The limit of IDR 10,000,000,000.00 (ten billion rupiah) is calculated against all facilities provided to customers or groups of facility recipients.
Letter a
Clear enough.
Letter b
Collateral assessment by the Bank's internal appraiser refers to the valuation standards used by independent appraisers.
Paragraph (2)
Clear enough.

Article 52
Paragraph (1)
Letter a
Investment-grade ratings are in accordance with Financial Services Authority regulations concerning rating agencies and ratings recognized by the Financial Services Authority. Letter b Assessment is a written statement from an independent appraiser or the Bank's internal appraiser regarding the estimation and opinion on the economic value of collateral based on analysis of objective and relevant facts according to generally accepted methods and principles established by associations and/or competent institutions. Letter c Land and/or buildings not for residence include, among others, shops (ruko), plantation land, and mining land. Paragraph (2) Clear enough. Paragraph (3) Specific considerations include, among others, considerations regarding historical data of collateral realization values, which are generally much lower than the collateral values already considered as reductions in PPKA calculations and/or there are significant differences between assessment results and the present value calculation of the collateral.

Article 53
The consideration of collateral as a reduction in Provisions for Credit Losses (PPKA) that must be calculated by the Bank is related to the function of collateral as a credit risk mitigation tool, so that collateral that can be considered a reduction in PPKA is collateral that can be realized by the Bank in the event of default on the fund provision provided. Example:
Collateral assessment for land and buildings is conducted within the last 12 (twelve) months with a collateral assessment result of IDR 100,000,000,000.00 (one hundred billion rupiah). Collateral that can be considered as a reduction in the calculation of PPKA is 70% (seventy percent) x IDR 100,000,000,000.00 (one hundred billion rupiah) = IDR 70,000,000,000.00 (seventy billion rupiah). For the binding value against the aforementioned collateral of IDR 60,000,000,000.00 (sixty billion rupiah), the collateral that can be considered as a reduction in the calculation of PPKA is IDR 60,000,000,000.00 (sixty billion rupiah).

Article 54
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
Notification from the Financial Services Authority includes, among others, written notifications in the form of guidance letters or in the final meeting of Bank examinations (exit meeting) and/or prudential meetings for Bank health level assessments.

Article 55
Clear enough.

Article 56
Clear enough.

Article 57
Financing Restructuring is carried out, among others, by:

changing the schedule of customer obligations;
changing the duration;
changing the installment amount;
changing the ratio in Mudarabah Financing or Musyarakah Financing;
changing the Profit Sharing Ratio (PBH) in Mudarabah Financing or Musyarakah Financing;
granting discounts;
adding Financing facilities;
converting Financing contracts; and/or
converting Financing into Temporary Capital Contributions.
Letter a
Customers experiencing difficulties in paying principal and/or profit-sharing/ujrah/margin of Financing are customers who cannot fully meet their obligations.
Granting discounts as appreciation to customers who pay installments on time in accordance with the fatwa of the National Sharia Board-Majelis Ulama Indonesia, such as discounts on Murabahah bills, is not included as one of the methods of Financing Restructuring. Letter b Financing Restructuring criteria for consumer financing customers who still have good business prospects if there are clear sources of installment payments.

Article 58
Clear enough.

Article 59
Letter a
The term “objectivity” refers to an attitude of honesty without being influenced by personal opinions and considerations or groups in making decisions or taking actions. Letter b The term “independence” refers to the professional management of the Bank without influence or pressure from any party. Letter c Conflicts of interest include, among others, differences between the economic interests of the Bank and the personal economic interests of shareholders, members of the Board of Directors, members of the Board of Commissioners, executive officials, and/or Related Parties with the Bank. Letter d The term “fairness” refers to justice and equality in fulfilling the rights of stakeholders arising from agreements and applicable laws and regulations.

Article 60
Accounting treatment for Financing Restructuring, among others, is applied to:
a. recognition of losses arising; and b. recognition of profit-sharing/ujrah/margin and other receipts.

Article 61
Clear enough.

Article 62
Clear enough.

Article 63
Paragraph (1)
Financing Restructuring decisions are made while still paying attention to good governance principles.
Example:
In December 2021, Bank “A” provided Financing facilities to customer “Yanuar” based on the decision of official “Oktri” who served as the Ciputat branch manager.
In March 2022, customer “Yanuar” applied for Financing Restructuring, and official “Oktri” had taken office as the Tangerang Selatan area manager. Official “Oktri” could not make a decision on customer “Yanuar”'s application because official “Oktri” was the official who decided on the provision of Financing to customer “Yanuar” in December 2021, even though he had higher authority. Paragraph (2) The highest authority and meeting mechanisms of the Board of Directors are determined based on the articles of association or internal Bank regulations. Paragraph (3) Financing Restructuring is carried out by officials or employees who are not involved in the provision of Financing being restructured, with the aim of maintaining objectivity. Officials or employees who are not involved in the provision of Financing being restructured do not include officials or employees who propose Financing Restructuring. Paragraph (4) Clear enough.

Article 64
Clear enough.

Article 65
Clear enough.

Article 66
Paragraph (1)
Clear enough.
Paragraph (2)
The term “accumulation during the period of Mudarabah Financing and Musyarakah Financing that has been running since the Financing Restructuring agreement” refers to the sum of Profit Sharing (RBH) or Profit Sharing Ratio (PBH) from the start of Financing Restructuring until the assessment month position. Example:
Musyarakah Financing was provided in January 2022, with a duration of 2 (two) years. In March 2023, it was approved to conduct Financing Restructuring.
The calculation of accumulated PBH conducted in June 2023, i.e., PBH of March 2023 plus PBH of April 2023 plus PBH of May 2023 plus PBH of June 2023, does not consider accumulated PBH before Financing Restructuring was conducted.

Article 67
Paragraph (1)
Clear enough.
Paragraph (2)
Example:
Customer “Herlin” is:
a. a customer of Bank “A” with a portfolio of restructured Financing amounting to IDR 12,000,000,000.00 (twelve billion rupiah) which is of special attention quality; and b. a customer of Bank “B” with a financing portfolio of IDR 7,000,000,000.00 (seven billion rupiah) which is of substandard quality. Bank “A” does not need to equalize the Asset Quality for Financing provided to customer “Herlin” to substandard because it considers Bank “B”'s financing portfolio for customer “Herlin” to be less than IDR 10,000,000,000.00 (ten billion rupiah). The amount limit as referred to in this regulation is calculated against the limit of all facilities provided to each customer or each project, whether for individual customers or groups of facility recipients, for Productive Assets used to finance the same project.

Article 68
Clear enough.

Article 69
Paragraph (1)
Letter a
The term “cumulative profit” refers to company profit after being adjusted for losses from previous years.
Letter b
Clear enough.
Paragraph (2)
Clear enough.

Article 70
Clear enough.

Article 71
Clear enough.

Article 72
Paragraph (1)
Written policies and procedures for write-off include, among others, criteria, requirements, limits, authority, responsibilities, and procedures for write-off.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.
Paragraph (4)
Clear enough.
Paragraph (5)
Clear enough.
Paragraph (6)
Clear enough.

Article 73
Paragraph (1)
Clear enough.
Paragraph (2)
Write-off implementation is carried out on all Productive Assets provided and bound in one agreement.

Article 74
Paragraph (1)
Efforts that can be taken include, among others, billing customers, Financing Restructuring, requesting payment from parties who provided guarantees for the aforementioned Productive Assets, and/or resolving Financing through collateral takeover. Paragraph (2) Clear enough. Paragraph (3) Clear enough.

Article 75
Clear enough.

Article 76
Clear enough.

Article 77
Clear enough.

Article 78
Clear enough.

Article 79
Clear enough.

Article 80
Clear enough.

Article 81
Clear enough.

Article 82
Clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6764

APPENDIX I
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 2 /POJK.03/2022
CONCERNING
ASSET QUALITY ASSESSMENT OF ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS

Part A
DETERMINATION OF FINANCING QUALITY BASED ON PROFIT-SHARING CONTRACTS AND BUSINESS PROSPECTS

Component | Financing Quality
--- | --- | --- | --- | --- | ---
| Substandard | Special Attention | Substandard | Doubtful | Bad

Potential business growth | Customer business activities have good business growth potential. | Customer business activities have limited business growth potential. | Customer business activities show very limited or no business growth potential. | Customer business activities have declining conditions.
| | | | | • Customer business activities have very doubtful conditions and are difficult to recover; and/or |
| --- | --- | --- | --- | --- |
| | | | | • It is highly likely that customer business activities will cease. |

PROSPECTS
Component | Financing Quality
--- | --- | --- | --- | --- | ---
2. Market conditions and customer position in competition | • Stable market and not influenced by changes in economic conditions;

Limited competition, including a strong position in the market; and/or
Operating at optimum capacity. | • Customer position in the market is good, not greatly influenced by changes in economic conditions;
Market share is comparable to competitors; and/or
Operating at nearly optimum capacity. | • Market is influenced by changes in economic conditions;
Customer position in the market is quite good but has many competitors, yet can recover if implementing new business strategies; and/or
Not operating at optimum capacity. | • Market is greatly influenced by changes in economic conditions;
Business competition is very intense and operations experience serious problems; and/or
Capacity is not at a level that supports operations. | • Loss of market share in line with declining economic conditions; and/or
Operations are unsustainable.

Management quality and labor issues | • Management quality is very good; and/or

Labor is adequate and has never been recorded as experiencing disputes or labor strikes, or has experienced minor disputes or strikes that were resolved well. | • Management quality is good; and/or
Labor is generally adequate and has experienced disputes or labor strikes that were resolved well, but there is still a possibility of recurrence. | • Management quality is quite good; and/or
Labor is excessive and there are disputes or strikes that have a fairly material impact on customer business activities. | • Management quality is poor; and/or
Labor is excessive in fairly large numbers and there are disputes or strikes that have a fairly material impact on customer business activities.
| • Management quality is very poor; and/or
Labor is excessive in large numbers and there are disputes or labor strikes that have a material impact on customer business activities.

PROSPECTS
Component | Financing Quality
--- | --- | --- | --- | --- | ---
4. Support from business groups or affiliates | Business group or affiliate conditions are stable and supportive of business. | Business group or affiliate conditions are stable and do not have a burdensome impact on customers. | Business groups or affiliates begin to have a burdensome impact on customers. | Business groups or affiliates provide a continuously burdensome impact on customers. | Business groups or affiliates severely harm customers.
5. Efforts made by customers to maintain the environment (for large-scale customers with significant environmental impact). | Environmental management efforts are good and at least meet minimum requirements according to applicable laws and regulations. | Environmental management efforts are not good and have not met minimum requirements according to applicable laws and regulations. | Environmental management efforts are not good and have not met minimum requirements according to applicable laws and regulations, with fairly material deviations. | Environmental management efforts are not good or have been carried out but have not met minimum requirements according to applicable laws and regulations, with material deviations. | Environmental management efforts are not good or have been carried out but have not met minimum requirements according to applicable laws and regulations, and have the possibility of being sued in court.

CUSTOMER PERFORMANCE

Component	Financing Quality
	Current	Special Mention	Substandard	Doubtful	Loss
1. Profitability	Profit acquisition is equal to or higher than the profit target and stable.	Profit acquisition is equal to the profit target but has the potential to decline.	Profit acquisition is low.	• Profit acquisition is very low or negative; and/or<br>• Operational losses are financed by asset sales.<br>• Experiences significant losses; and/or<br>• All obligations cannot be met.
2. Capital Condition	• Capital is strong; and/or<br>• Debt-to-equity ratio according to the customer's business characteristics is very low.	• Capital is sufficiently strong and the owner has the ability to provide additional capital if needed; and/or<br>• Debt-to-equity ratio according to the customer's business characteristics is low.	Debt-to-equity ratio according to the customer's business characteristics is moderately high.	Debt-to-equity ratio according to the customer's business characteristics is high.	Debt-to-equity ratio according to the customer's business characteristics is very high.
3. Cash Flow	• Liquidity and working capital are strong; and/or<br>• Cash flow analysis shows that the customer is able to meet principal installment and profit share payment obligations without additional funding support.	• Liquidity and working capital are generally good; and/or<br>• Cash flow analysis shows that although the customer is able to meet principal installment and profit share payments, there are indications of certain problems that, if not addressed, will affect future payments.	• Liquidity is insufficient and working capital is limited; and/or<br>• Cash flow analysis shows that the customer is only able to meet part of the principal installment and/or profit share payments.	a. Liquidity is very low;<br>b. Cash flow analysis shows inability to meet principal installment and profit share payment obligations; and/or<br>c. New financing is used to meet maturing obligations.	• Liquidity difficulties;<br>• Cash flow analysis shows that the customer is unable to cover production costs; and/or<br>• New financing is used to cover operational losses.
4. Sensitivity to Market Risk	The amount of portfolio sensitive to foreign exchange rate changes is relatively small or has been well hedged.	Some portfolios are sensitive to foreign exchange rate changes but are still controllable.	Business activities are affected by foreign exchange rate changes.	Business activities are threatened due to foreign exchange rate changes.	Business activities are threatened due to foreign exchange rate fluctuations.

REPAYMENT ABILITY

Component	Financing Quality
	Current	Special Mention	Substandard	Doubtful	Loss
1. Accuracy of Principal Installment and Profit Share Payment
a. Principal Installment Payment Exists	• Principal installment payment is on time; or<br>• Financing has not yet matured; and<br>• PS ≥ 80% PI.	• Overdue principal installment payment up to 90 (ninety) days; or<br>• Overdue principal repayment up to 30 (thirty) days after maturity; and/or<br>• 50% < PS/PI < 80%	• Overdue principal installment payment exceeds 90 (ninety) days up to 120 (one hundred twenty) days; or<br>• Overdue principal repayment exceeds 30 (thirty) days up to 60 (sixty) days after maturity; and/or<br>• 50% < PS/PI < 80% for a period of more than 1 (one) period up to 6 (six) accumulated payment periods; or<br>• PS ≤ 50% PI for up to 3 (three) accumulated payment periods.	• Overdue principal installment payment exceeds 120 (one hundred twenty) days up to 180 (one hundred eighty) days; or<br>• Overdue principal repayment exceeds 60 (sixty) days up to 90 (ninety) days after maturity; and/or<br>• 50% < PS/PI < 80% for a period of more than 6 (six) periods up to 9 (nine) accumulated payment periods; or<br>• PS ≤ 50% PI for a period of more than 3 (three) periods up to 6 (six) accumulated payment periods.	• Overdue principal installment payment exceeds 180 (one hundred eighty) days; or<br>• Overdue principal repayment exceeds 90 (ninety) days after maturity; and/or<br>• 50% < PS/PI < 80% for a period of more than 9 (nine) accumulated payment periods; or<br>• PS ≤ 50% PI for a period of more than 6 (six) accumulated payment periods.
b. No Principal Installment Payment	• Financing has not yet matured; and<br>• PS ≥ 80% PI.	• Overdue principal repayment up to 30 (thirty) days after maturity; and/or<br>• 50% < PS/PI < 80%	• Overdue principal repayment has exceeded 30 (thirty) days up to 60 (sixty) days after maturity; and/or<br>• 50% < PS/PI < 80% for a period of more than 1 (one) period up to 6 (six) accumulated payment periods; or<br>• PS ≤ 50% PI for up to 3 (three) accumulated payment periods.	• Overdue principal repayment exceeds 60 (sixty) days up to 90 (ninety) days after maturity; and/or<br>• 50% < PS/PI < 80% for a period of more than 6 (six) periods up to 9 (nine) accumulated payment periods; or<br>• PS ≤ 50% PI for a period of more than 3 (three) periods up to 6 (six) accumulated payment periods.	• Overdue principal repayment exceeds 90 (ninety) days after maturity; and/or<br>• 50% < PS/PI < 80% for a period of more than 9 (nine) accumulated payment periods; or<br>• PS ≤ 50% PI for a period of more than 6 (six) accumulated payment periods.
2. Availability and Accuracy of Customer Financial Information	• Customer relationship with the Bank is good and financial information is always available regularly and accurately; and/or<br>• There are recent financial reports and Bank analysis results on financial reports or financial information submitted by the customer.	• Customer relationship with the Bank is fairly good and financial information is always available regularly and accurately; and/or<br>• There are recent financial reports and Bank analysis results on financial reports or financial information submitted by the customer.	• Customer relationship with the Bank has deteriorated and available financial information cannot be trusted; or<br>• There are no Bank analysis results on financial reports or financial information submitted by the customer.	• Customer relationship with the Bank is deteriorating; and/or<br>• Financial information is not available or financial information is available but cannot be trusted.	• Customer relationship with the Bank is very poor; and/or<br>• Financial information is not available or financial information is available but cannot be trusted.
3. Completeness of Financing Documentation	Financing documentation is complete and correct.	Financing documentation is complete but there are still items that need confirmation.	Financing documentation is incomplete.	Financing documentation is not complete.	No Financing documentation exists.
4. Compliance with Financing Agreement	No violation of the Financing agreement.	Non-material violation in the Financing agreement.	Moderately material violation in the Financing agreement.	Material violation in the Financing agreement.	Very material violation in the Financing agreement.
5. Appropriateness of Facility Usage	• Use of funds is in accordance with the purpose of the Financing application;<br>• The amount and type of facilities provided are in accordance with needs; and/or<br>• Financing extension is in accordance with customer needs analysis.	• Use of funds is less in accordance with the purpose of the Financing application, with an immaterial amount;<br>• The amount and type of facilities provided are greater than needs, with an immaterial amount; and/or<br>• Financing extension is less in accordance with customer needs analysis.	• Use of funds is less in accordance with the purpose of the Financing application, with a moderately material amount;<br>• The amount and type of facilities provided are greater than needs, with a moderately material amount; and/or<br>• Financing extension is not in accordance with customer needs analysis, including Financing extension being conducted to hide financial difficulties.	• Use of funds is less in accordance with the purpose of the Financing application, with a material amount;<br>• The amount and type of facilities provided are greater than needs, with a material amount; and/or<br>• Financing extension is not in accordance with customer needs analysis, including Financing extension being conducted to hide financial difficulties, with a moderately material deviation.	• Most of the use of funds is not in accordance with the purpose of the Financing application;<br>• The amount and type of facilities provided are greater than needs with a very material amount; and/or<br>• Financing extension without customer needs analysis.
6. Fairness of Payment Source for Obligations	• Payment source can be clearly identified and agreed upon by the Bank and customer; and/or<br>• Payment source is in accordance with the structure or type of Financing.	• Payment source can be identified and agreed upon by the Bank and customer; and/or<br>• Payment source is less in accordance with the structure or type of Financing.	• Payment comes from other agreed payment sources; and/or<br>• Payment source is less in accordance with the structure or type of Financing to a moderately material extent.	• Payment source is unknown, while the agreed payment source is no longer possible; and/or<br>• Payment source is less in accordance with the structure or type of Financing to a material extent.	• No possible payment source exists; and/or<br>• Payment source is not in accordance with the structure or type of Financing.

PART B

DETERMINATION OF FINANCING QUALITY BASED ON SALE-AND-PURCHASE AND LOAN AGREEMENTS

BUSINESS PROSPECTS

Component	Financing Quality
	Current	Special Mention	Substandard	Doubtful	Loss
1. Potential for Business Growth	Customer's business activities have good business growth potential.	Customer's business activities have limited business growth potential.	Customer's business activities show very limited business growth potential or no growth.	Customer's business activities have deteriorating business conditions.	• Customer's business activities have very doubtful business conditions and are difficult to recover; and/or<br>• It is highly likely that customer's business activities will cease.
2. Market Condition and Customer's Position in Competition	• Stable market not influenced by changes in economic conditions;<br>• Limited competition, including a strong position in the market; and/or<br>• Operating at optimum capacity.	• Customer's market position is good, not significantly influenced by changes in economic conditions;<br>• Market share is comparable to competitors; and/or<br>• Operating at nearly optimum capacity.	• Market is influenced by changes in economic conditions;<br>• Customer's market position is fairly good but with many competitors, yet can recover if implementing new business strategies; and/or<br>• Not operating at optimum capacity.	• Market is highly influenced by changes in economic conditions;<br>• Business competition is very tight and operations experience serious problems; and/or<br>• Capacity is not at a level that can support operations.	• Loss of market share in line with deteriorating economic conditions; and/or<br>• Operations are unsustainable.
3. Management Quality and Labor Issues	• Management quality is very good; and/or<br>• Labor is adequate and has never been recorded to experience labor disputes or strikes, or has experienced minor disputes or strikes that were resolved well.	• Management quality is good; and/or<br>• Labor is generally adequate and has experienced labor disputes or strikes that were resolved well but there is still a possibility of recurrence.	• Management quality is fairly good; and/or<br>• Labor is excessive and there are disputes or strikes with a moderately material impact on customer's business activities.	• Management quality is poor; and/or<br>• Labor is excessive in a fairly large amount and there are disputes or strikes with a moderately material impact on customer's business activities.	• Management quality is very poor; and/or<br>• Labor is excessive in a large amount and there are labor disputes or strikes with a material impact on customer's business activities.
4. Support from Business Group or Affiliates	Business group or affiliate conditions are stable and supportive of the business.	Business group or affiliate conditions are stable and do not have a burdensome impact on the customer.	Business group or affiliates begin to have a burdensome impact on the customer.	Business group or affiliates have a continuous burdensome impact on the customer.	Business group or affiliates are very detrimental to the customer.
5. Efforts Made by Customer to Maintain the Environment (for large-scale customers with significant environmental impact)	Environmental management efforts are good and at least meet the minimum requirements according to statutory regulations.	Environmental management efforts are not good and do not meet the minimum requirements according to statutory regulations.	Environmental management efforts are not good and do not meet the minimum requirements according to statutory regulations, with a moderately material deviation.	Environmental management efforts are not good or management efforts have been made but do not meet the minimum requirements according to statutory regulations, with a material deviation.	Environmental management efforts are not good or management efforts have been made but do not meet the minimum requirements according to statutory regulations, and have the possibility of being sued in court.

CUSTOMER PERFORMANCE

Component	Financing Quality
	Current	Special Mention	Substandard	Doubtful	Loss
1. Profitability	Profit acquisition is equal to or higher than the profit target and stable.	Profit acquisition is equal to the profit target but has the potential to decline.	Profit acquisition is low.	• Profit acquisition is very low or negative; and/or<br>• Operational losses are financed by asset sales.<br>• Experiences significant losses; and/or<br>• All obligations cannot be met.
2. Capital Condition	• Capital is strong; and/or<br>• Debt-to-equity ratio according to the customer's business characteristics is very low.	• Capital is sufficiently strong and the owner has the ability to provide additional capital if needed; and/or<br>• Debt-to-equity ratio according to the customer's business characteristics is low.	Debt-to-equity ratio according to the customer's business characteristics is moderately high.	Debt-to-equity ratio according to the customer's business characteristics is high.	Debt-to-equity ratio according to the customer's business characteristics is very high.
3. Cash Flow	• Liquidity and working capital are strong; and/or<br>• Cash flow analysis shows that the customer is able to meet principal and margin payment obligations without additional funding support.	• Liquidity and working capital are generally good; and/or<br>• Cash flow analysis shows that although the customer is able to meet principal and margin payments, there are indications of certain problems that, if not addressed, will affect future payments.	• Liquidity is insufficient and working capital is limited; and/or<br>• Cash flow analysis shows that the customer is only able to meet part of the principal and margin payments.	• Liquidity is very low;<br>• Cash flow analysis shows inability to meet principal and margin payment obligations; and/or<br>• New financing is used to meet maturing obligations.	• Liquidity difficulties;<br>• Cash flow analysis shows that the customer is unable to cover production costs; and/or<br>• New financing is used to cover operational losses.
4. Sensitivity to Market Risk	The amount of portfolio sensitive to foreign exchange rate changes is relatively small or has been well hedged.	Some portfolios are sensitive to foreign exchange rate changes but are still controllable.	Business activities are affected by foreign exchange rate changes.	Business activities are threatened due to foreign exchange rate changes.	Business activities are threatened due to foreign exchange rate fluctuations.

REPAYMENT ABILITY

Component	Financing Quality
	Current	Special Mention	Substandard	Doubtful	Loss
1. Accuracy of Principal and Margin Installment Payment	Principal installment payment is on time and there are no arrears.	There are arrears for principal installment and/or margin payments not exceeding 90 (ninety) days.	There are arrears for principal installment and/or margin payments that have exceeded 90 (ninety) days up to 180 (one hundred eighty) days.	There are arrears for principal installment and/or margin payments that have exceeded 180 (one hundred eighty) days up to 270 (two hundred seventy) days.	There are arrears for principal installment and/or margin payments that have exceeded 270 (two hundred seventy) days.
2. Availability and Accuracy of Customer Financial Information	• Customer relationship with the Bank is good and financial information is always available regularly and accurately; and/or<br>• There are recent financial reports and Bank analysis results on financial reports or financial information submitted by the customer.	• Customer relationship with the Bank is fairly good and financial information is always available regularly and accurately; and/or<br>• There are recent financial reports and Bank analysis results on financial reports or financial information submitted by the customer.	• Customer relationship with the Bank has deteriorated and available financial information cannot be trusted; and/or<br>• There are no Bank analysis results on financial reports or financial information submitted by the customer.	• Customer relationship with the Bank is deteriorating; and/or<br>• Financial information is not available or financial information is available but cannot be trusted.	• Customer relationship with the Bank is very poor; and/or<br>• Financial information is not available or financial information is available but cannot be trusted.
3. Completeness of Financing Documentation	Financing documentation is complete and correct.	Financing documentation is complete but there are still items that need confirmation.	Financing documentation is incomplete.	Financing documentation is not complete.	No Financing documentation exists.
4. Compliance with Financing Agreement	No violation of the Financing agreement.	Non-material violation in the Financing agreement.	Moderately material violation in the Financing agreement.	Material violation in the Financing agreement.	Very material violation in the Financing agreement.
5. Appropriateness of Facility Usage	• Use of facilities is in accordance with the purpose of the Financing application;<br>• The amount and type of facilities provided are in accordance with needs; and/or<br>• Financing extension is in accordance with customer needs analysis.	• Use of facilities is less in accordance with the purpose of the Financing application, with an immaterial amount;<br>• The amount and type of facilities provided are greater than needs, with an immaterial amount; and/or<br>• Financing extension is less in accordance with customer needs analysis.	• Use of facilities is less in accordance with the purpose of the Financing application, with a moderately material amount;<br>• The amount and type of facilities provided are greater than needs, with a moderately material amount; and/or<br>• Financing extension is not in accordance with customer needs analysis, including Financing extension being conducted to hide financial difficulties.	• Use of facilities is less in accordance with the purpose of the Financing application, with a material amount;<br>• The amount and type of facilities provided are greater than needs, with a material amount; and/or<br>• Financing extension is not in accordance with customer needs analysis, including Financing extension being conducted to hide financial difficulties, with a moderately material deviation.	• Most of the use of facilities is not in accordance with the purpose of the Financing application;<br>• The amount and type of facilities provided are greater than needs with a very material amount; and/or<br>• Financing extension without customer needs analysis.
6. Fairness of Payment Source for Obligations	• Payment source can be clearly identified and agreed upon by the Bank and customer; and/or<br>• Payment source is in accordance with the structure or type of Financing.	• Payment source can be identified and agreed upon by the Bank and customer; and/or<br>• Payment source is less in accordance with the structure or type of Financing.	• Payment comes from other agreed payment sources; and/or<br>• Payment source is less in accordance with the structure or type of Financing to a moderately material extent.	• Payment source is unknown, while the agreed payment source is no longer possible; and/or<br>• Payment source is less in accordance with the structure or type of Financing to a material extent.	• No possible payment source exists; and/or<br>• Payment source is not in accordance with the structure or type of Financing.

Part C
ASSET QUALITY DETERMINATION BASED ON LEASE CONTRACT (Ijarah) BUSINESS PROSPECTS Components Financing Quality Performing Special Mention Substandard Doubtful Loss

Business Growth Potential
The customer's business activities have good business growth potential.
The customer's business activities have limited business growth potential.
The customer's business activities show very limited business growth potential or no growth.
The customer's business activities have deteriorating business conditions.

The customer's business activities have highly doubtful conditions and are difficult to recover; and/or
it is highly likely that the customer's business activities will cease.

Market Conditions and Customer's Competitive Position

A stable market not influenced by changes in economic conditions;
limited competition, including a strong market position; and/or
operating at optimum capacity.
The customer's market position is good, not significantly influenced by changes in economic conditions;
market share is comparable to competitors; and/or
operating at nearly optimum capacity.
The market is influenced by changes in economic conditions;
the customer's market position is quite good but faces many competitors, yet can recover if implementing new business strategies; and/or
not operating at optimum capacity.
The market is highly influenced by changes in economic conditions;
business competition is very intense and operations face serious problems; and/or
capacity is not at a level supporting operations.
Loss of market share in line with deteriorating economic conditions; and/or
operations are unsustainable.

Management Quality and Labor Issues

Management quality is very good; and/or
labor is adequate and has never recorded labor disputes or strikes, or has experienced minor disputes/strikes that were well resolved.
Management quality is good; and/or
labor is generally adequate and has experienced labor disputes/strikes that were well resolved, but there is a possibility of recurrence.
Management quality is quite good; and/or
labor is excessive and there are disputes/strikes having a fairly material impact on the customer's business activities.
Management quality is poor; and/or
labor is excessively large in quantity and there are disputes/strikes having a fairly material impact on the customer's business activities.
Management quality is very poor; and/or
labor is excessively large in quantity and there are labor disputes/strikes having a material impact on the customer's business activities.

Support from Business Group or Affiliates
The business group or affiliate conditions are stable and supportive of the business.
The business group or affiliate conditions are stable and do not have a burdensome impact on the customer.
The business group or affiliate begins to have a burdensome impact on the customer.
The business group or affiliate has a continuous burdensome impact on the customer.
The business group or affiliate is highly detrimental to the customer.
Customer's Efforts to Maintain the Environment (for large-scale customers with significant environmental impact)
Environmental management efforts are good and at least meet the minimum requirements according to statutory regulations.
Environmental management efforts are poor and do not meet the minimum requirements according to statutory regulations.
Environmental management efforts are poor and do not meet the minimum requirements according to statutory regulations, with fairly material deviations.
Environmental management efforts are poor or efforts have been made but do not meet the minimum requirements according to statutory regulations, with material deviations. Environmental management efforts are poor or efforts have been made but do not meet the minimum requirements according to statutory regulations, and have the possibility of being sued in court.

CUSTOMER PERFORMANCE
Components
Financing Quality
Performing Special Mention Substandard Doubtful Loss

Profitability
Profit obtained is equal to or higher than the profit target and is stable.
Profit obtained is equal to the profit target but has the potential to decrease.
Profit obtained is low.

Profit obtained is very low or negative; and/or
operational losses are financed by asset sales.
Experiencing large losses; and/or
all obligations cannot be met.

Capital Conditions

Capital is strong; and/or
the debt-to-equity ratio according to the customer's business characteristics is very low.
Capital is quite strong and owners have the ability to provide additional capital if needed; and/or
the debt-to-equity ratio according to the customer's business characteristics is low.
The debt-to-equity ratio according to the customer's business characteristics is quite high.
The debt-to-equity ratio according to the customer's business characteristics is high.
The debt-to-equity ratio according to the customer's business characteristics is very high.

Cash Flow

Liquidity and working capital are strong; and/or
cash flow analysis shows that the customer can meet lease payment obligations without additional funding support.
Liquidity and working capital are generally good; and/or
cash flow analysis shows that although the customer can meet lease payment obligations, there are indications of certain issues that, if not addressed, will affect future payments.
Liquidity is low and working capital is limited; and/or
cash flow analysis shows that the customer can only meet part of the lease payments.
Liquidity is very low;
cash flow analysis shows the inability to meet lease payment obligations; and/or
new financing is used to meet maturing obligations.
Liquidity difficulties;
cash flow analysis shows that the customer cannot cover production costs; and/or
new financing is used to cover operational losses.

Sensitivity to Market Risk
The amount of portfolio sensitive to foreign exchange rate changes is relatively small or has been well hedged.
Some portfolios are sensitive to foreign exchange rate changes but are still controlled.
Business activities are affected by foreign exchange rate changes.
Business activities are threatened due to foreign exchange rate changes.
Business activities are threatened due to foreign exchange rate fluctuations.

PAYMENT ABILITY
Components
Financing Quality
Performing Special Mention Substandard Doubtful Loss

Timeliness of Lease Payments
Lease payments are made on time and there are no arrears.
There are lease payment arrears not exceeding 90 (ninety) days.
There are lease payment arrears exceeding 90 (ninety) days up to 180 (one hundred eighty) days.
There are lease payment arrears exceeding 180 (one hundred eighty) days up to 270 (two hundred seventy) days.
There are lease payment arrears exceeding 270 (two hundred seventy) days.
Availability and Accuracy of Customer Financial Information

The customer's relationship with the Bank is good and financial information is always available regularly and accurately; and/or
there are recent financial reports and the Bank's analysis of the financial reports or financial information submitted by the customer.
The customer's relationship with the Bank is quite good and financial information is always available regularly and accurately; and/or
there are recent financial reports and the Bank's analysis of the financial reports or financial information submitted by the customer.
The customer's relationship with the Bank has deteriorated and the available financial information cannot be trusted; and/or
there is no Bank analysis of the financial reports or financial information submitted by the customer.
The customer's relationship with the Bank has further deteriorated; and/or
financial information is not available or financial information is available but cannot be trusted.
The customer's relationship with the Bank is very poor; and/or
financial information is not available or financial information is available but cannot be trusted.

Completeness of Financing Documentation
Financing documentation is complete and correct.
Financing documentation is complete but there are still items that need confirmation.
Financing documentation is incomplete.
Financing documentation is not complete.
There is no Financing documentation.
Compliance with Financing Agreements
There are no violations of the Financing agreement.
Non-fundamental violations in the Financing agreement.
Fairly fundamental violations in the Financing agreement.
Fundamental violations in the Financing agreement.
Very fundamental violations in the Financing agreement.
Appropriateness of Facility Usage

Facility usage is in accordance with the purpose of the Financing application;
the amount and type of facilities provided are in accordance with needs; and/or
Financing extension is in accordance with the customer's needs analysis.
Facility usage is less in accordance with the purpose of the Financing application, with an immaterial amount;
the amount and type of facilities provided are greater than needs, with an immaterial amount; and/or
Financing extension is less in accordance with the customer's needs analysis.
Facility usage is less in accordance with the purpose of the Financing application, with a fairly material amount;
the amount and type of facilities provided are greater than needs, with a fairly material amount; and/or
Financing extension is not in accordance with the customer's needs analysis, including Financing extension performed to conceal financial difficulties.
Facility usage is less in accordance with the purpose of the Financing application, with a material amount;
the amount and type of facilities provided are greater than needs, with a material amount; and/or
Financing extension is not in accordance with the customer's needs analysis, including Financing extension performed to conceal financial difficulties, with fairly material deviations.
Most facility usage is not in accordance with the purpose of the Financing application;
the amount and type of facilities provided are greater than needs with a very material amount; and/or
Financing extension without customer needs analysis.

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

Fairness of Payment Source for Obligations

The payment source can be clearly identified and agreed upon by the Bank and the customer; and/or
the payment source is in accordance with the structure or type of Financing.
The payment source can be identified and agreed upon by the Bank and the customer; and/or
the payment source is less in accordance with the structure or type of Financing.
Payments originate from other agreed payment sources; and/or
the payment source is less in accordance with the structure or type of Financing in a fairly material manner.
The payment source is unknown, while the agreed payment source is no longer possible; and/or
the payment source is less in accordance with the structure or type of Financing in a material manner.
There is no possible payment source; and/or
the payment source is not in accordance with the structure or type of Financing.

Determined in Jakarta on January 31, 2022
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

APPENDIX II
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 2/POJK.03/2022
CONCERNING
ASSET QUALITY ASSESSMENT
FOR ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS FINANCING RESTRUCTURING GUIDELINES To minimize potential losses due to customers experiencing performance deterioration, the Bank may conduct Financing Restructuring for customers experiencing payment difficulties for principal and/or profit share/ujrah/margin, provided that the customer still has good business prospects and is assessed to be able to meet obligations after the Financing is restructured. The aforementioned Financing Restructuring is implemented in accordance with prudential principles, Sharia Principles, and accounting standards. A. Procedures and Methods In applying prudential principles and Sharia Principles, the Bank must have Financing Restructuring guidelines containing procedures and methods for implementing Financing Restructuring, which must contain at least:

Analysis and Documentation
In conducting analysis of Financing to be restructured, the Bank must consider at least:
a. Evaluation of customer issues, including:

evaluation of the causes of principal and/or profit/ujrah/margin arrears based on financial reports, cash flow, financial projections, market conditions, and other factors related to the customer's business;
estimation of the return of all principal and/or profit share/ujrah/margin based on the Financing agreement before and after Financing Restructuring. The estimation is based on financial ratios, including projected financial ratios, reflecting the customer's financial condition and ability to meet payment obligations; and
evaluation of customer management performance to determine whether customer organizational restructuring is necessary, which can be done by replacing shareholders, directors, and other managerial changes. If necessary, the Bank may use external experts to conduct such organizational restructuring.
b. Approaches and assumptions used in calculating cash flow projections and the value to be received from principal installments and/or profit share/ujrah/margin.
c. Analysis, conclusions, and recommendations in adjusting Financing terms such as changing the tenure and/or adding facilities. Such adjustments are made considering the business cycle and the customer's payment ability so that the customer is expected to meet principal and/or profit share/ujrah/margin installment obligations until maturity.
d. If Financing Restructuring is conducted by providing additional Financing, the purpose and use of such additional Financing must be clear. Additional Financing is not permitted to settle principal and/or profit share/ujrah/margin arrears. In cases where Financing Restructuring results in the customer's obligations becoming larger, the Bank may require new collateral. e. Adjustments to the repayment schedule reflect the customer's payment ability. f. Granting payment grace periods is based on analysis based on the business cycle and/or the customer's business alignment, reflecting the duration of the payment grace period and the ability to pay principal and/or profit share/ujrah/margin after the payment grace period duration ends. g. Details related to Financing term transparency, including financial agreements in the Financing contract, such as plans for the customer's company capital increase or clauses allowing the Bank to change profit share/ujrah/margin as long as it does not conflict with Sharia Principles, in line with the customer's payment ability. h. Requirements that the Financing agreement and other documents related to the implementation of Financing Restructuring must have legal force.
i. Completeness of documents required in the implementation of Financing Restructuring.

Monitoring Procedures
The Bank must have written procedures to monitor restructured Financing to ensure the customer's ability to make payments in accordance with the terms in the renewed Financing agreement. Some steps the Bank must take in monitoring the implementation of Financing Restructuring include:
a. requesting the customer to submit financial reports accompanied by key financial ratios, business development, implementation of action plans, and other documents or reports required by the Bank to continuously monitor the customer's business and financial conditions. The customer also reports the impact of various actions taken as part of Financing Restructuring, such as the customer's company capital increase and policies not to distribute dividends; b. evaluating restructured Financing at least every quarter, including in cases of significant differences between projections and realization, including principal installments and/or profit share/ujrah/margin, cash flow, and/or collateral valuation; and/or
c. formulating steps to be taken if the customer experiences payment difficulties again after Financing Restructuring.

B. Examples of Financing Quality Determination

In January 2022, the Bank conducted Financing Restructuring on customer “A”’s Murabahah Financing facility with Financing quality determined as Loss. In the Financing Restructuring agreement, it was stated that customer “A” must pay principal installments and/or margin monthly starting from February 7, 2022. Subsequently, customer “A” in 3 (three) consecutive payment periods, namely on February 7, 2022, March 7, 2022, and April 7, 2022, was able to meet payment obligations according to the Financing Restructuring agreement schedule. Thus, the Financing quality of customer “A” since February 2022 was determined as follows:
Period
Agreement Fulfillment
Financing Quality at End of Month
Payment
Assessment
Other Criteria
February 2022 fulfilled fulfilled at most Loss (as per Financing quality before restructuring) March 2022 fulfilled fulfilled at most Loss (as per Financing quality before restructuring) April 2022 fulfilled fulfilled at most Doubtful (can increase at most 1 (one) level from Financing quality before restructuring) May 2022, and subsequent months fulfilled fulfilled based on business prospect assessment factors, customer performance, and payment ability
In January 2022, the Bank conducted Financing Restructuring on customer “B”’s Murabahah Financing facility with Financing quality determined as Doubtful. In the Financing Restructuring agreement, it was stated that customer “B” must pay principal installments and/or margin monthly starting from February 7, 2022. Subsequently, in the third payment period, namely on April 7, 2022, customer “B” was unable to meet payment obligations on time.
Thus, the Financing quality of customer “B” since February 2022 was determined as follows:
Period
Agreement Fulfillment
Financing Quality at End of Month
Payment
Assessment
Other Criteria
February 2022 fulfilled fulfilled at most Doubtful (as per Financing quality before restructuring) March 2022 fulfilled fulfilled at most Doubtful (as per Financing quality before restructuring) April 2022 not fulfilled fulfilled based on business prospect assessment factors, customer performance, and payment ability, at most Doubtful May 2022 fulfilled fulfilled at most Doubtful (as per Financing quality before restructuring) June 2022 fulfilled fulfilled at most Doubtful (as per Financing quality before restructuring) July 2022 fulfilled fulfilled at most Substandard (can increase at most 1 (one) level from Financing quality before restructuring) August 2022, and subsequent months fulfilled fulfilled based on business prospect assessment factors, customer performance, and payment ability
In January 2022, the Bank conducted Financing Restructuring on customer “C”’s Murabahah Financing facility with Financing quality determined as Substandard. In the Financing Restructuring agreement, it was stated that customer “C” must pay principal installments and/or margin monthly starting from February 7, 2022, in addition, the customer was also requested to replace one director by January 31, 2022. Customer “C” always met payment obligations on time. However, the replacement of the director was only done in April 2022, so before the replacement of the director, customer “C” was considered not to have met the agreed requirements. Thus, the Financing quality of customer “C” since February 2022 was determined as follows:
Period
Agreement Fulfillment
Financing Quality at End of Month
Payment
Assessment
Other Criteria
February 2022 fulfilled not fulfilled based on business prospect assessment factors, customer performance, and payment ability, at most Substandard March 2022 fulfilled not fulfilled based on business prospect assessment factors, customer performance, and payment ability, at most Substandard April 2022 fulfilled fulfilled at most Special Mention (can increase at most 1 (one) level from Financing quality before restructuring) May 2022, and subsequent months fulfilled fulfilled based on business prospect assessment factors, customer performance, and payment ability
Financing for working capital, namely payments every month only consisting of profit share payments and principal payments are made at the end of the period, so Financing quality increases 1 (one) level directly calculated since 3 (three) consecutive margin payments after Financing Restructuring.
In January 2022, the Bank conducted Financing Restructuring on customer “D”’s Musyarakah working capital Financing facility with Financing quality determined as Doubtful. In the Financing Restructuring agreement, it was stated that customer “D” must pay profit share monthly starting from February 7, 2022. Thus, the quality

Financing for customer "D" since February 2022 is established as follows:

Period	Fulfillment of Requirements	Financing Quality at End of Month
Payment	Assessment of Other Requirements
February 2022	meet	meet	highest doubtful (as the quality of Financing before restructuring)
March 2022	meet	meet	highest doubtful (as the quality of Financing before restructuring)
April 2022	meet	meet	highest less active (may increase highest 1 (one) level from the quality of Financing before restructuring)
May 2022, and subsequent months	meet	meet	based on factors of business prospect assessment, customer performance, and repayment ability

Provision of Financing with other schemes such as quarterly, semi-annual, or annual principal payments, so that the quality of Financing can increase 1 (one) level after 3 (three) consecutive payments after Financing Restructuring.

In January 2022, the Bank carried out Financing Restructuring on the Murabahah Financing facility for customer "E" with the Financing quality established as doubtful. In the Financing Restructuring agreement, it was stated that customer "E" must pay principal installments quarterly starting from March 7, 2022. However, customer "E" made the first payment in June 2022. Thus, the quality of Financing for customer "E" since March 2022 is established as follows:

Period	Fulfillment of Requirements	Financing Quality at End of Month
Payment	Assessment of Other Requirements
March 2022	meet	meet	highest doubtful (as the quality of Financing before restructuring)
June 2022	meet	meet	highest doubtful (as the quality of Financing before restructuring)
September	meet	meet	highest doubtful (as the quality of Financing before restructuring)
December	meet	meet	highest less active (may increase highest 1 (one) level from the quality of Financing before restructuring)
March 2023, and subsequent months	meet	meet	based on factors of business prospect assessment, customer performance, and repayment ability

In carrying out Financing Restructuring, the Bank may provide relief in the form of payment grace periods. The quality of Financing after restructuring with the provision of payment grace periods is regulated differently, namely during the payment grace period, the quality of Financing is established the same as the quality of Financing before restructuring was carried out. Generally, payment grace periods can be given by the Bank to customers in the form of postponement of principal payments or profit sharing/ujrah/margin.

Financing Restructuring is carried out on the Murabahah Financing facility for customer "X" with the Financing quality established as less active. For customer "X", the Bank provides a principal payment grace period for 3 (three) months, while margin payments are made every month. During the payment grace period, the quality of Financing for the customer is established following the quality before Financing Restructuring was carried out, namely less active. After the end of the payment grace period, customer "X" can fulfill obligations according to the Financing Restructuring agreement. Thus, the quality of Financing for customer "X" is established as follows:

Period	Payment Assessment	Financing Quality at End of Month
Principal	Margin
1 -	meet	meet	highest less active (as the quality of Financing before restructuring)
2 -	meet	meet	highest less active (as the quality of Financing before restructuring)
3 -	meet	meet	highest less active (as the quality of Financing before restructuring)
4	meet	meet	highest less active (as the quality of Financing before restructuring)
5	meet	meet	highest less active (as the quality of Financing before restructuring)
6	meet	meet	highest special attention (may increase highest 1 (one) level from the quality of Financing before restructuring)
7, and subsequent periods	meet	meet	based on factors of business prospect assessment, customer performance, and repayment ability

Financing Restructuring is carried out on the Murabahah Financing facility for customer "Y" with the Financing quality established as doubtful. For customer "Y", the Bank provides a principal payment grace period for 6 (six) months, while margin payments are made every month.

During the payment grace period, the quality of Financing for the customer is established following the quality before Financing Restructuring was carried out, namely doubtful. After the end of the payment grace period, customer "Y" can fulfill obligations according to the Financing Restructuring agreement. Thus, the quality of Financing for customer "Y" is established as follows:

Period	Payment Assessment	Financing Quality at End of Month
Principal	Margin
1 -	meet	meet	highest doubtful (as the quality of Financing before restructuring)
2 -	meet	meet	highest doubtful (as the quality of Financing before restructuring)
3 -	meet	meet	highest doubtful (as the quality of Financing before restructuring)
4 -	meet	meet	highest doubtful (as the quality of Financing before restructuring)
5 -	meet	meet	highest doubtful (as the quality of Financing before restructuring)
6 -	meet	meet	highest doubtful (as the quality of Financing before restructuring)
7	meet	meet	highest doubtful (as the quality of Financing before restructuring)
8	meet	meet	highest doubtful (as the quality of Financing before restructuring)
9	meet	meet	highest less active (may increase highest 1 (one) level from the quality of Financing before restructuring)
10, and subsequent periods	meet	meet	based on factors of business prospect assessment, customer performance, and repayment ability

C. Application of Sharia Principles in Financing Restructuring
The application of Sharia Principles in Financing Restructuring includes among others:

The Bank may impose compensation (ta'widh) on customers who are negligent or violate agreements so as to cause losses to the Bank.
Compensation is established at the amount of actual costs incurred by the Bank in collecting the Bank's rights that are the customer's payment obligations. Compensation is not in the form of potential losses that are estimated to occur (potential loss) due to lost opportunities (opportunity loss/al-furshah al-dha'i'ah).
The establishment of compensation and calculation methods must be stated in changes to the Financing contract.
Financing Restructuring is carried out in accordance with the fatwa of the National Sharia Council-Indonesian Ulema Council.

D. Financing Restructuring Based on Financing Characteristics Financing Restructuring is carried out by paying attention to the characteristics of each form of Financing.

Mudarabah Financing and Musyarakah Financing
Restructuring of Mudarabah Financing and Musyarakah Financing is carried out among others by:
a. changing the schedule of customer obligations; b. changing the duration;
c. changing the amount of installments;
d. changing the ratio and/or profit sharing; e. providing discounts; f. adding Financing facilities; and/or g. converting Financing into Temporary Equity Participation, using the musyarakah contract.
Murabahah Financing and Istishna' Financing
Restructuring of Murabahah Financing and Istishna' Financing is carried out among others by:
a. changing the schedule of customer obligations; b. changing the duration;
c. changing the amount of installments;
d. providing discounts; e. adding Financing facilities; f. converting the contract into Mudarabah Financing, Musyarakah Financing, or IMBT Financing; and/or g. converting Financing into Temporary Equity Participation, using the musyarakah contract.
Ijarah Financing and IMBT Financing
Restructuring of Ijarah Financing and IMBT Financing is carried out among others by:
a. changing the schedule of customer obligations; b. changing the duration;
c. changing the amount of installments;
d. providing discounts; e. converting the contract into Mudarabah Financing or Musyarakah Financing; and/or f. converting Financing into Temporary Equity Participation, using the musyarakah contract.
Qardh Financing
Restructuring of Qardh Financing is carried out among others by:
a. changing the schedule of customer obligations; b. changing the duration;
c. changing the amount of installments;
d. providing discounts; and/or e. converting Financing into Temporary Equity Participation, using the musyarakah contract.
Multi-service Financing
Restructuring of Multi-service Financing is carried out among others by:
a. changing the schedule of customer obligations; b. changing the duration;
c. changing the amount of installments; and/or
d. providing discounts.

This copy is in accordance with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja

Determined in Jakarta on January 31, 2022
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

APPENDIX III
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 2 /POJK.03/2022
CONCERNING
ASSET QUALITY ASSESSMENT
OF ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS

Part A
REPORT ON DIFFERENCES IN PRODUCTIVE ASSET QUALITY Bank Name :
Data Position :
No. Customer Name
Customer ID
NIK/NPWP
At Reporting Bank At Other Banks
Account Number
Facility Type
Recorded Value
Duration
Quality
Other Bank Name
Financing Type
Plafond
Recorded Value
Duration
Quality

Part B
FINANCING RESTRUCTURING REPORT

Report Format
in millions of rupiah
Customer Name
Customer ID
NIK/NPWP
Address
Restructuring Method
Usage Type
Economic Sector
Restructuring Method
Restructuring Frequency
I II III IV V VI VII VIII
Total Recorded Value Restructured This Month
Recorded Value Restructured Last Month
Cumulative Recorded Value of Restructured Financing Before Financing Restructuring Contract Type Plafond Recorded Value Currency Type Ratio (%) Percentage Profit Sharing/Ujrah/Margin Principal Arrears Profit Sharing/Ujrah/Margin Arrears Duration Quality Collateral Start Due Date Assessment Date Value IX X XI XII XIII XIV XV XVI XVII XVIII XIX XX XXI

After Financing Restructuring
Contract Type
Plafond
Recorded Value
Currency Type
Ratio
(%)
Percentage
Profit Sharing/Ujrah/Margin
Duration
Quality
Collateral
Losses
Start Restructuring Due Date
Assessment Date
Value
XXII XXIII XXIV XXV XXVI XXVII XXVIII XXIX XXX XXXI XXXII XXXIII XXXIV XXXV XXXVI

Filling Guidelines
I. Name
Individual Customers
Filled with the full name of the individual customer without abbreviation, with the provisions:
a. Individual customers as stated in the Identity Card (KTP). If the name stated in the KTP contains abbreviated parts, family names or surnames, and/or the word "bin" or "binti" then it must be filled in completely. b. Included in individual customers are trading businesses, industries, or other businesses whose Taxpayer Identification Number (NPWP) is the same as the individual NPWP. In the event that trading businesses, industries, or other businesses are owned by individuals, filled with the owner's name as stated in the KTP.
Business Entity Customers
a. Filled with the name of the business entity customer as stated in the NPWP document or deed (not including the form of business entity). If the name stated in the NPWP document or deed contains abbreviated parts then it must be filled in completely. b. Types of business entities such as PT, CV, Firma, and Persero, are filled behind the name of the business entity. Example:
Abece Defgeha PT, Satu Dua Tiga PT (Persero).
Group Customers
a. Group customers are customers formed based on common interests and led by a chairman and are not in the form of a business entity that obtains one or more funding provision facilities. b. Filled with the name of the group customer with the provision of filling in accordance with the filling of individual customers. Example:
Melati Fishermen Farmers Group, filled with the name "Melati Fishermen Farmers Group".

II. Customer ID

Filled with the debtor ID as reported in the Integrated Commercial Bank Report.
Debtor ID is unique for each customer, namely 1 (one) number for each 1 (one) customer.
If the debtor ID contains characters other than letters and numbers then those characters do not need to be included.
Example of data filling:
No. Customer ID Filling
ABC-12345 ABC12345
987-654321 987654321
III. NIK/NPWP
NIK is the Population Identity Number which is a unique, distinctive, single identity number attached to a person registered as an Indonesian citizen.
NPWP is the Taxpayer Identification Number obtained by individuals or business entities as a sign that the person concerned has been registered as a taxpayer at the local Tax Service Office.
Filled with NIK for individual customers or NPWP for corporate customers as recorded in the Bank's internal system.
If NIK or NPWP contains characters other than numbers then those characters do not need to be included.
Example of data filling:
No. NIK/NPWP Filling
12.345.678.9.000.000 123456789000000
98.765.432.1-000.000 987654321000000
IV. Address
Filled with the customer's address as stated in the KTP (for individual customers) or NPWP document (for business entity customers).

V. Restructuring Method - Restructuring Method

Filled with characters as many as 1 (one) or 2 (two) digits according to the restructuring method code.
Data filling reference:
No. Description Code
Reduction in profit sharing/ujrah/margin rate 1
Extension of Financing duration 2
Reduction of Financing principal arrears 3
Reduction of profit sharing/ujrah/margin arrears 4
Addition of Financing facilities 5
Conversion of Financing into Temporary Equity Participation 6
Contract conversion 7
Addition of Financing facilities and reduction of profit sharing/ujrah/margin arrears 8
Addition of Financing facilities and extension of Financing duration 9
Addition of Financing facilities and reduction in profit sharing/ujrah/margin rate 10
Addition of Financing facilities, reduction of profit sharing/ujrah/margin arrears, and reduction in profit sharing/ujrah/margin rate 11
Addition of Financing facilities, reduction of profit sharing/ujrah/margin arrears, and extension of Financing duration 12
Others 99
VI. Restructuring Method - Restructuring Frequency
Filled with the number of Financing restructurings given by the Bank to the customer.
VII. Usage Type
Filled with characters as many as 1 (one) digit according to the Financing usage type code.
Data filling reference:
No. Usage Type Code
Working Capital 1
Investment 2
Consumption 3
VIII. Economic Sector
Filled with characters as many as 6 (six) digits of the economic sector code referring to the list of reference economic sector codes in accordance with provisions of legislation regarding integrated commercial bank reports.
In the event that Financing is used to finance more than 1 (one) type of economic activity that cannot be separated, the classification method focuses on the priority economic sector, namely the sector that receives the largest facility.
IX. Before Financing Restructuring - Contract Type
Filled with characters as many as 3 (three) digits according to the contract type code before restructuring.
Data filling reference:
No. Contract Type Code
Mudarabah 020
Mudarabah Muqayyadah 025
Musyarakah 030
Musyarakah Mutanaqisah 035
Ijarah 040
Ijarah Muntahiya Bittamlik 045
Multi-service - Education 061
Multi-service - Pilgrimage 062
Multi-service - Health 063
Multi-service - Marriage 064
Multi-service - Others 069
Murabahah Receivables 070
Istishna' Receivables 080
Qardh 100
Other Profit Sharing Financing 119
Others 999

X. Before Financing Restructuring - Plafond

Filled with the effective plafond nominal of the Financing facility before restructuring. The plafond value is equivalent to the contract value, namely the value/nominal of the transaction stated in the contract between the bank and the customer before restructuring.
Filling of the plafond amount in rupiah currency and foreign currency is expressed in millions of rupiah.
Plafond for Financing facilities is filled as follows:
a. Joint Financing or syndication
Filled with the share of the plafond of each participating bank. b. Other Financing Filled with the plafond amount according to the agreement or contract.
XI. Before Financing Restructuring - Recorded Value
Filled with the total recorded value of each account at the reporting month position before restructuring.
Filling in foreign currency after conversion into millions of rupiah with the exchange rate on the last date at the end of the reporting month for each account before restructuring. Exchange rate is the average of buy and sell exchange rates based on Bank Indonesia's closing exchange rate at the end of the reporting month.
XII. Before Financing Restructuring - Currency Type
Filled with characters as many as 3 (three) digits of the currency type code of the Financing facility given by the Bank before restructuring referring to the list of reference currency type codes in accordance with provisions of legislation regarding integrated commercial bank reports.
If the Financing facility is given in foreign currency but in its withdrawal the Bank gives it in rupiah currency (multi currency), such Financing is reported as foreign currency according to the contract.

XIII. Before Financing Restructuring - Ratio (%)

Filled with the percentage of profit that becomes the Bank's share according to the Financing contract before restructuring.
Only for contract types that apply ratios.
Filled in units of percent with 2 (two) decimal places, using a dot (.) as a separator.
Example of data filling:
No. Ratio Percentage Filling
29,33% 29.33
100% 100.00
XIV. Before Financing Restructuring - Percentage of Profit Sharing/
Ujrah/Margin
Filled with the agreed return rate or indication of return rate in the form of profit sharing/ujrah/margin from a Financing before restructuring.
If several return percentage rates are given in one account, filled with the highest return percentage.
Filled in units of percent with 2 (two) decimal places, using a dot (.) as a separator.
Example of data filling:
No. Percentage
Profit Sharing/Ujrah/Margin
Filling
12,90% 12.90
100% 100.00
XV. Before Financing Restructuring - Principal Arrears
Filled with the nominal amount of principal arrears from Financing before restructuring in millions of rupiah.
XVI. Before Financing Restructuring - Profit Sharing/
Ujrah/Margin Arrears
Filled with the balance of profit sharing/ujrah/margin that has not been settled until the reporting date position before restructuring in millions of rupiah.

XVII. Before Financing Restructuring - Duration - Start

Date, month, and year of the start of the agreement as stated in the contract before restructuring.
Filled with numbers as many as 8 (eight) digits with format yyyymmdd.
Example of data filling:
No. Start Date Filling
7 June 2020 20200607
18-12-2009 20091218
25/04/2010 20100425
XVIII. Before Financing Restructuring - Duration - Due Date
Date, month, and year of the end of the agreement before restructuring.
Filled with numbers as many as 8 (eight) digits with format yyyymmdd.
Example of data filling refers to the filling guidelines for the "Duration-Start" column.
XIX. Before Financing Restructuring - Quality
Quality of Financing before restructuring.
Filled with characters as many as 1 (one) digit according to the Financing quality code.
Data filling reference:
No. Quality Code
Active 1
Special Attention 2
Less Active 3
Doubtful 4
Non-Performing 5
XX. Before Financing Restructuring - Collateral - Assessment Date
Date, month, and year of the last collateral assessment before restructuring.
Filled with numbers as many as 8 (eight) digits with format yyyymmdd.
Example of data filling refers to the filling guidelines for the "Before Financing Restructuring - Duration

Start" column.
XXI. Before Financing Restructuring - Collateral - Value
Filled with the appraisal value conducted by an independent appraiser or the Bank's internal appraiser on the collateral before restructuring in millions of rupiah.
XXII. After Financing Restructuring - Contract Type

Filled with the contract type after restructuring.
Filling guidelines refer to section IX.
XXIII. After Financing Restructuring - Plafond
Filled with the effective plafond nominal of the Financing facility after restructuring. The plafond value is equivalent to the contract value, namely the value/nominal of the transaction stated in the contract between the bank and the customer after restructuring.
Filling guidelines refer to section X.
XXIV. After Financing Restructuring - Recorded Value
Filled with the total recorded value of each account at the reporting month position after restructuring.
Filling guidelines refer to section XI.
XXV. After Financing Restructuring - Currency Type
Filled with the currency type of the Financing facility after restructuring.
Filling guidelines refer to section XII.
XXVI. After Financing Restructuring - Ratio (%)
Filled with the percentage of profit that becomes the Bank's share according to the Financing contract after restructuring.
Filling guidelines refer to section XIII.

XXVII. After Financing Restructuring - Percentage of Profit Sharing/
Ujrah/Margin

Filled with the agreed return rate or indication of return rate in the form of profit sharing/ujrah/margin from a Financing after restructuring.
Filling guidelines refer to section XIV.
XXVIII. After Financing Restructuring - Duration - Start
Date, month, and year of the start of the agreement as stated in the contract after restructuring.
Filling guidelines refer to section XVII.
XXIX. After Financing Restructuring - Duration - Due Date
Date, month, and year of the end of the agreement after restructuring.
Filling guidelines refer to section XVIII.
XXX. After Financing Restructuring - Quality
Quality of Financing after restructuring.
Filling guidelines refer to section XIX.
XXXI. After Financing Restructuring - Collateral - Assessment Date
Date, month, and year of the last collateral assessment after restructuring.
Filling guidelines refer to section XX.
XXXII. After Financing Restructuring - Collateral - Value
Filled with the appraisal value conducted by an independent appraiser or the Bank's internal appraiser on the collateral after restructuring in millions of rupiah.
XXXIII. After Financing Restructuring - Restructuring Losses
Filled with the loss value due to Financing restructuring in millions of rupiah.
XXXIV. Total Recorded Value Restructured This Month
Filled with the sum of the recorded value of all Financing restructured during the reporting month in millions of rupiah.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Mufli Asmawidjaja
XXXV. Recorded Value of Restructured Financing from Last Month
Filled with the recorded value of all Financing that was restructured in the previous month's report in millions of rupiah.
XXXVI. Cumulative Recorded Value of Restructured Financing
Filled with the total recorded value of Financing that was restructured in millions of rupiah.
Established in Jakarta on January 31, 2022
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Financial Services Authority Regulation Number 2 of 2022 Concerning Asset Quality Assessment for Islamic Commercial Banks and Islamic Business Units

CUSTOMER PERFORMANCE

REPAYMENT ABILITY

PART B

DETERMINATION OF FINANCING QUALITY BASED ON SALE-AND-PURCHASE AND LOAN AGREEMENTS

BUSINESS PROSPECTS

CUSTOMER PERFORMANCE

REPAYMENT ABILITY

Lineage: In force

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