FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 2/POJK.03/2016

ON

THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORKS IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS

BY THE GRACE OF THE ALMIGHTY GOD

THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that currently there is a slowdown in Indonesia's economic growth which can affect the performance and condition of the Islamic banking industry, thereby potentially disrupting Islamic banking growth; b. that in response to the slowing economic growth conditions, temporary policies are needed to encourage Islamic banking growth while still paying attention to prudence principles and Sharia principles;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on the Development of Islamic Banking Branch Networks in the Framework of National Economic Stimulus for Banks;

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY

Recalling:
a. Law Number 7 of 1992 on Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790); b. Law Number 21 of 2008 on 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);
c. Law Number 21 of 2011 on 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);

DECIDES:

To Establish: A FINANCIAL SERVICES AUTHABILITY REGULATION ON THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORKS IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS.

CHAPTER I

GENERAL PROVISIONS

Article 1

1. Bank means a Commercial Bank as referred to in Law Number 7 of 1992 on Banking as amended by Law Number 10 of 1998, including branches of banks located outside the country, and Islamic Commercial Banks and Islamic Business Units as referred to in Law Number 21 of 2008 on Islamic Banking.

2. Conventional Commercial Bank means a Commercial Bank as referred to in Law Number 7 of 1992 on Banking as amended by Law Number 10 of 1998 that conducts business activities conventionally.

3. Islamic Commercial Bank means an Islamic Commercial Bank as referred to in Law Number 21 of 2008 on Islamic Banking.

4. Islamic Business Unit means an Islamic Business Unit as referred to in Law Number 21 of 2008 on Islamic Banking.

5. Branch Office, hereinafter abbreviated as KC, means a Branch Office as referred to in regulations concerning Commercial Banks or regulations concerning Islamic Commercial Banks or Sharia Branch Offices as referred to in regulations concerning Islamic Business Units.

6. Sub-Branch Office, hereinafter abbreviated as KCP, means a Sub-Branch Office as referred to in regulations concerning Commercial Banks or regulations concerning Islamic Commercial Banks or Sharia Sub-Branch Offices as referred to in regulations concerning Islamic Business Units.

7. Functional Office, hereinafter abbreviated as KF, means a Functional Office as referred to in regulations concerning Commercial Banks or regulations concerning Islamic Commercial Banks or Sharia Functional Offices as referred to in regulations concerning Islamic Business Units.

8. Cash Office, hereinafter abbreviated as KK, means a Cash Office as referred to in regulations concerning Commercial Banks or regulations concerning Islamic Commercial Banks or Sharia Cash Offices as referred to in regulations concerning Islamic Business Units.

9. Cash Service Activities, hereinafter abbreviated as KPK, means Cash Service Activities as referred to in regulations concerning Commercial Banks or regulations concerning Islamic Commercial Banks or Sharia Cash Service Activities as referred to in regulations concerning Islamic Business Units.

10. Sharia Bank Service, hereinafter abbreviated as LSB, means fund collection and/or other banking services based on Sharia principles, excluding fund disbursement activities, conducted at the branch network of Conventional Commercial Banks for and on behalf of Islamic Commercial Banks.

11. Sharia Service, hereinafter abbreviated as LS, means fund collection, financing, and/or other banking services based on Sharia Principles conducted at the branch network of Conventional Commercial Banks for and on behalf of the Parent Branch Office of Islamic Business Units within the same bank.

12. Core Capital means core capital as referred to in regulations concerning minimum capital adequacy requirements for Commercial Banks or Islamic Commercial Banks.

13. Commercial Bank based on Business Activities, hereinafter called BUKU, means a Commercial Bank based on Business Activities as referred to in regulations concerning business activities and branch networks based on Core Capital of Banks.

14. Opening of Branch Networks means the opening of bank offices, including the opening of offices resulting from the relocation of addresses or changes in the status of bank offices.

15. Bank Business Plan, hereinafter abbreviated as RBB, means a bank business plan as referred to in regulations concerning bank business plans.

Article 2

The policy for the development of Islamic banking branch networks in the framework of national economic stimulus aims to:
a. Conventional Commercial Banks that support the development of Islamic banking networks by:

1. Reducing the allocation of Core Capital in the calculation of Opening of Branch Networks; and/or
2. Relaxing the balance of branch network distribution.
   b. Islamic Commercial Banks by:
3. Ease of requirements for establishing LSB related to the operational area of the parent Branch Office of LSB;
4. Expansion of mobile cash service coverage; and/or
5. Reduction of investment costs in the calculation of Core Capital allocation for Opening of Branch Networks.
   c. Islamic Business Units by:
6. Expansion of types of Conventional Commercial Bank offices that can conduct LS activities;
7. Ease of requirements for establishing LS related to the operational area of the parent Branch Office of LS;
8. Expansion of mobile cash service coverage; and/or
9. Reduction of investment costs in the calculation of Core Capital allocation for Opening of Branch Networks.

CHAPTER II

OPENING OF ISLAMIC BANKING SERVICE ACTIVITIES

First Section

Sharia Bank Services for Islamic Commercial Banks

Article 3

(1) Islamic Commercial Banks may cooperate with Conventional Commercial Banks that have ownership relationships with Islamic Commercial Banks in the form of LSB activities. (2) LSB activities may only be conducted if they meet the following requirements:
a. The Conventional Commercial Bank does not have an Islamic Business Unit; b. LSB activities are located within 1 (one) coordination area of the Financial Services Authority Regional Office with the Branch Office of the Islamic Commercial Bank that is the parent of LSB;
c. using human resources of Conventional Commercial Banks that have adequate knowledge of Sharia banking products and activities;
d. supported by adequate information system technology using the network of Conventional Commercial Banks and/or Islamic Commercial Banks; and e. there is a cooperation agreement between the Islamic Commercial Bank and the Conventional Commercial Bank. (3) The coordination area of the Financial Services Authority Regional Office as referred to in paragraph (2) letter b is submitted through a separate letter.

Second Section

Sharia Services for Islamic Business Units

Article 4

(1) LS activities may be implemented at the branch network of Conventional Commercial Banks that have Islamic Business Units with the following requirements:
a. the location of LS activities is within 1 (one) coordination area of the Financial Services Authority Regional Office with the Branch Office of the Islamic Business Unit that is the parent of LS; b. using human resources that have adequate knowledge of Sharia banking products and activities; and
c. supported by adequate information system technology.
(2) LS activities at the branch network of Conventional Commercial Banks that have Islamic Business Units as referred to in paragraph (1) are implemented as follows:
a. Branch Offices and/or Sub-Branch Offices may conduct fund collection, fund disbursement, and other banking services based on Sharia principles; b. operational Functional Offices and/or Cash Offices may conduct activities in accordance with the functions and activities that Functional Offices and/or Cash Offices can perform. (3) The coordination area of the Financial Services Authority Regional Office as referred to in paragraph (1) letter a is submitted through a separate letter.

CHAPTER III

CASH SERVICE ACTIVITIES

Article 5

Islamic Commercial Banks and Islamic Business Units may open mobile cash offices, such as mobile cash vehicles, to serve new customers for the opening of Hajj savings accounts and/or Umrah savings accounts, provided they meet the following requirements:
a. in the surrounding area of the mobile cash office location, there are no Sharia offices or offices providing Sharia services; b. placing adequate employees who can support the process of opening Hajj savings and/or Umrah savings accounts;
c. providing necessary support systems for the process of opening Hajj savings and/or Umrah savings accounts; and
d. having standard operating procedures for opening Hajj savings and/or Umrah savings accounts at mobile cash offices that are the same as those for opening such accounts at other offices.

Article 6

The requirement for the availability of Core Capital allocation does not apply to mobile cash offices conducting operational activities as referred to in Article 5.

CHAPTER IV

BRANCH NETWORKS BASED ON CORE CAPITAL OF BANKS

First Section

Reduction of Core Capital Allocation for Conventional Commercial Banks Supporting the Development of Islamic Banking Networks

Article 7

(1) Conventional Commercial Banks that support the development of Islamic banking networks are given incentives in the form of reduced Core Capital allocation in the calculation of Opening of Branch Networks, both existing and to be opened. (2) The development of Islamic banking networks as referred to in paragraph (1) is conducted by Conventional Commercial Banks in the form of providing Sharia services through LSB or LS activities at the branch network of Conventional Commercial Banks. (3) The reduction of Core Capital allocation in the calculation of Opening of Branch Networks as referred to in paragraph (1) is based on the larger incentive figure between:
a. achieving a certain ratio between the assets of Islamic Commercial Banks or Islamic Business Units and the assets of Conventional Commercial Banks; and b. the BUKU classification of Conventional Commercial Banks. (4) The Financial Services Authority determines the size of incentives in specific percentages for the calculation of Core Capital allocation reduction as referred to in paragraph (3) with reference to Appendix I which is an integral part of this Financial Services Authority Regulation. (5) The reduction of Core Capital allocation as referred to in paragraph (3) also takes into account the ratio of the number of LSB or LS to the number of Conventional Commercial Bank branch networks, with calculation examples as referred to in Appendix II which is an integral part of this Financial Services Authority Regulation. (6) Conventional Commercial Banks include the calculation of Core Capital allocation reduction in the RBB using asset ratios and LSB or LS ratios as of the end of September.

Second Section

Branch Network Distribution Balance for Conventional Commercial Banks Supporting the Development of Islamic Banking Networks

Article 8

(1) In the framework of branch network distribution balance, Islamic Commercial Banks and Conventional Commercial Banks that open branch networks in zone 1 or zone 2 in certain quantities must be followed by the opening of branch networks in zone 5 or zone 6. (2) The obligation as referred to in paragraph (1) applies to BUKU 3 and BUKU 4 and in its implementation must meet the availability of Core Capital allocation for Opening of Branch Networks. (3) The Branch Network Opening obligation as referred to in paragraph (2) does not apply to Islamic Commercial Banks or Conventional Commercial Banks owned by Regional Governments that conduct Branch Network Opening in zone 1 or zone 2 which are the provincial areas where the head office is located. (4) The branch network distribution balance for Islamic Commercial Banks and Conventional Commercial Banks as referred to in paragraph (1) is regulated as follows:
a. Opening 3 (three) KCs in zone 1 or zone 2 must be followed by the opening of 1 (one) KC in zone 5 or zone 6; b. Opening 3 (three) KCPs in zone 1 or zone 2 must be followed by the opening of 1 (one) KCP or 1 (one) KC in zone 5 or zone 6.

Article 9

The branch network distribution balance as referred to in Article 8 paragraph (4), for Conventional Commercial Banks that support the development of Islamic banking, is given the following relaxations:
a. For Conventional Commercial Banks that have a ratio of the number of LSB or LS to the number of Conventional Commercial Bank branch networks above 25% (twenty-five percent) up to 50% (fifty percent), the opening of 4 (four) KCs or KCPs in zone 1 or zone 2 must be followed by the opening of 1 (one) KC or KCP in zone 5 or zone 6; b. For Conventional Commercial Banks that have a ratio of the number of LSB or LS to the number of Conventional Commercial Bank branch networks above 50% (fifty percent) up to 75% (seventy-five percent), the opening of 5 (five) KCs or KCPs in zone 1 or zone 2 must be followed by the opening of 1 (one) KC or KCP in zone 5 or zone 6;
c. For Conventional Commercial Banks that have a ratio of the number of LSB or LS to the number of Conventional Commercial Bank branch networks above 75% (seventy-five percent), the opening of 6 (six) KCs or KCPs in zone 1 or zone 2 must be followed by the opening of 1 (one) KC or KCP in zone 5 or zone 6.

Article 10

The obligation to open KCs or KCPs in zone 5 or zone 6 as referred to in Article 8 paragraph (4) and Article 9 for Conventional Commercial Banks that have Islamic Business Units is regulated as follows:
a. In the event that the opening of KCs or KCPs in zone 1 or zone 2 are conventional offices, the obligation to open KCs or KCPs in zone 5 or zone 6 consists of conventional or Sharia KCs or KCPs; b. In the event that the opening of KCs or KCPs in zone 1 or zone 2 are Sharia offices, the obligation to open KCs or KCPs in zone 5 or zone 6 consists of Sharia KCs or KCPs.

Third Section

Investment Costs for Opening Branch Networks for Islamic Commercial Banks and Islamic Business Units

Article 11

(1) The Financial Services Authority determines the investment costs for Opening of Branch Networks based on BUKU.
(2) The details of investment costs for Opening of Branch Networks for Islamic Commercial Banks and Islamic Business Units BUKU 3 and BUKU 4 are adjusted with reference to Appendix III which is an integral part of this Financial Services Authority Regulation.

CHAPTER V

CLOSING PROVISIONS

Article 12

At the time this Financial Services Authority Regulation takes effect, the provisions in:
a. Bank Indonesia Regulation Number 15/13/PBI/2013 concerning Amendments to Bank Indonesia Regulation Number 11/3/PBI/2009 concerning Islamic Commercial Banks (State Gazette of the Republic of Indonesia Year 2013 Number 233, Supplement to the State Gazette of the Republic of Indonesia Number 5476); b. Bank Indonesia Regulation Number 15/14/PBI/2013 concerning Amendments to Bank Indonesia Regulation Number 11/10/PBI/2009 concerning Islamic Business Units (State Gazette of the Republic of Indonesia Year 2013 Number 234, Supplement to the State Gazette of the Republic of Indonesia Number 5477);
c. Bank Indonesia Regulation Number 14/26/PBI/2012 concerning Business Activities and Branch Networks Based on Core Capital of Banks (State Gazette of the Republic of Indonesia Year 2012 Number 286, Supplement to the State Gazette of the Republic of Indonesia Number 5384);
d. Bank Indonesia Circular Letter Number 15/7/DPNP dated March 8, 2013 concerning Opening of Branch Networks of Commercial Banks Based on Core Capital; and e. Bank Indonesia Circular Letter Number 15/8/DPbS dated March 27, 2013 concerning Opening of Branch Networks of Islamic Commercial Banks and Islamic Business Units Based on Core Capital, are declared to remain in force as long as they do not conflict with the provisions of this Financial Services Authority Regulation.

Article 13

This Financial Services Authority Regulation shall remain in effect until January 31, 2019.

Article 14

This Financial Services Authority Regulation shall take effect upon being enacted.

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

Established in Jakarta on January 21, 2016

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

Enacted in Jakarta on January 27, 2016

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2016 NUMBER 14 Copy in accordance with the original Legal Director 1 Legal Department signed Yuliana

EXPLANATION

OF

FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 2/POJK.03/2016

ON THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORKS

IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS

I. GENERAL

In order to encourage the growth of Islamic banking amidst the slowing national economic situation which also impacts the slowing development of Islamic banking, efforts are needed to increase the intermediary function of Islamic banking through countercyclical policies, including regulations concerning branch networks and core capital allocation. The aforementioned countercyclical policy aims to encourage intermediary functions in order to increase the growth and potential expansion of Islamic banking financing while maintaining the sustainability of the Islamic banking industry, which can impact banking system stability. This countercyclical policy is temporary (temporary policy), so as the performance and financial conditions of the Islamic banking industry and economic growth improve, the aforementioned policy can be readjusted. In light of the above considerations, it is necessary to regulate the development of Islamic banking branch networks in the framework of national economic stimulus for Banks in a Financial Services Authority Regulation.

II. ARTICLE BY ARTICLE

Article 1

Sufficiently clear.

Article 2

Letter a
Conventional Commercial Banks that support the development of Islamic banking networks, namely:

1. Conventional Commercial Banks that have Islamic Commercial Banks;
2. Conventional Commercial Banks that have Islamic Business Units; or
3. Conventional Commercial Banks that have ownership relationships with Islamic Commercial Banks.
   Conventional Commercial Banks have ownership relationships with Islamic Commercial Banks if:
4. The Conventional Commercial Bank is the Controlling Shareholder of the Islamic Commercial Bank; or
5. The Controlling Shareholder of the Conventional Commercial Bank is also the Controlling Shareholder of the Islamic Commercial Bank.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Article 3

Paragraph (1)
Conventional Commercial Banks have ownership relationships with Islamic Commercial Banks if:

1. The Conventional Commercial Bank is the Controlling Shareholder of the Islamic Commercial Bank; or
2. The Controlling Shareholder of the Conventional Commercial Bank is also the Controlling Shareholder of the Islamic Commercial Bank.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Islamic Commercial Banks may place human resources from Islamic Commercial Banks in LSB activities limited to marketing activities.

Letter d
Sufficiently clear.

Letter e
The cooperation agreement must at least cover the objectives and scope of cooperation, cooperation mechanisms, rights and obligations of the parties, confidentiality, cost allocation, reporting, liability for losses, evaluation, agreement duration, dispute resolution, and risk analysis and mitigation.

Paragraph (3)
Sufficiently clear.

Article 4

Paragraph (1)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
The term "adequate information system technology" refers to information system technology that enables automated and online recording of Sharia customer transactions, separate from conventional banking transaction records.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
Definition of operational Functional Offices of Conventional Commercial Banks refers to regulations concerning commercial banks.
Example 1:
KF conducts credit disbursement activities for Micro and Small Enterprises (UMK), so LS located at KF can only conduct activities in accordance with Sharia Micro and Small Enterprise financing disbursement activities. Example 2:
KK only conducts business activities outside fund disbursement, so LS located at KK can only conduct activities in accordance with KK business activities.

Paragraph (3)
Sufficiently clear.

Article 5

Letter a
The term "surrounding area" refers to the location of the mobile cash office within a 5 (five) kilometer radius.

Letter b
The term "adequate" refers to the sufficiency of the number of employees and employee capabilities in supporting the process of opening Hajj savings and/or Umrah savings accounts.

Letter c
The term "support systems" refers to the sufficiency of information technology needed for the process of opening Hajj savings and/or Umrah savings accounts.

Letter d
Sufficiently clear.

Article 6

Sufficiently clear.

Article 7

Paragraph (1)
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Letter a
The asset ratio of Islamic Commercial Banks uses the following formula:
Total assets of Islamic Commercial Banks X 100% / Total assets of Conventional Commercial Banks The asset ratio of Islamic Business Units uses the following formula:
Total assets of Islamic Business Units / (Total assets of Conventional Commercial Banks X 100% - Total assets of Islamic Business Units)

Letter b
Conventional Commercial Banks that support the development of Islamic banking networks, namely:

1. Conventional Commercial Banks that have Islamic Commercial Banks;
2. Conventional Commercial Banks that have Islamic Business Units; or
3. Conventional Commercial Banks that have ownership relationships with Islamic Commercial Banks.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Sufficiently clear.

Paragraph (6)
Sufficiently clear.

Article 8

Paragraph (1)
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
The term "Islamic Commercial Banks or Conventional Commercial Banks owned by Regional Governments" refers to Islamic Commercial Banks or Conventional Commercial Banks whose shares are majority-owned by Provincial Governments, Regency Governments, and/or City Governments. This regulation aims to support the role of Islamic Commercial Banks and Conventional Commercial Banks owned by Regional Governments in regional development.

Paragraph (4)
Sufficiently clear.

Article 9

Example:
Conventional Commercial Banks have a ratio of the number of LSB or LS to the number of Conventional Commercial Bank branch networks of 45% (forty-five percent), then:

1. Opening 4 (four) KCs in zone 1 or zone 2 must be followed by the opening of 1 (one) KC in zone 5 or zone 6.
2. Opening 4 (four) KCPs in zone 1 or zone 2 must be followed by the opening of 1 (one) KCP or 1 (one) KC in zone 5 or zone 6.

Article 10

Sufficiently clear.

Article 11

Sufficiently clear.

Article 12

Sufficiently clear.

Article 13

Sufficiently clear.

Article 14

Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5838

APPENDIX I
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 2 /POJK.03/2016
ON
THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORK IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS

AMOUNT OF INCENTIVE IN THE FRAMEWORK OF REDUCING CORE CAPITAL ALLOCATION FOR THE CALCULATION OF BRANCH OPENING

Incentive from Asset Ratio
Asset Ratio | Incentive

0.5% to 2.5% | 10%
2.5% to 5% | 15%
5% to 10% | 20%
10% | 25%

Incentive from BUKU
BUKU 1 | BUKU 2 | BUKU 3 | BUKU 4
10% | 15% | 20% | 25%

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

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

APPENDIX II
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 2 /POJK.03/2016
ON
THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORK IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS

EXAMPLE OF INCENTIVE FOR REDUCING CORE CAPITAL ALLOCATION FOR THE CALCULATION OF BRANCH OPENING

Example 1
Conventional General Bank A owns Islamic General Bank B with the following information:
a. has opened 1,440 Islamic Branch Offices (LSB) and has a total conventional general bank branch network of 1,800; b. has Core Capital of Rp50,000,000,000,000.00 (fifty trillion rupiah) (BUKU 4) with a Composite Health Level Rating of 2 in the last 1 year;
c. has an asset ratio (Islamic General Bank assets to Conventional General Bank assets) in September of 6% (six percent);
d. the core capital allocation requirement for existing offices is Rp24,000,000,000,000.00 (twenty-four trillion rupiah); e. in the RBB submitted a plan to open 50 conventional general bank offices with a core capital allocation requirement of Rp2,000,000,000,000.00 (two trillion rupiah).

From the above information, then:
a. the ratio of LSB to the conventional general bank branch network is 80% (eighty percent); b. the incentive amount obtained from the asset ratio is 20% (twenty percent) while the incentive amount obtained from the BUKU classification is 25% (twenty-five percent).

In relation to this, the reduction in core capital allocation obtained by Conventional General Bank A is as follows:
a. Reduction of core capital allocation for existing offices = Incentive amount x LSB ratio x total core capital allocation requirement for existing offices = 25% x 80% x Rp24,000,000,000,000.00 = Rp4,800,000,000,000.00

Thus, the remaining core capital after the calculation of core capital allocation for existing offices, which was originally only Rp26,000,000,000,000.00 (twenty-six trillion rupiah), increases to Rp30,800,000,000,000.00 (thirty trillion eight hundred billion rupiah). b. Reduction of core capital allocation for offices to be opened = Incentive amount x LSB ratio x total core capital allocation requirement for offices to be opened = 25% x 80% x Rp2,000,000,000,000.00 = Rp400,000,000,000.00

Thus, the remaining core capital after the calculation of core capital allocation for existing offices and offices to be opened, which was originally Rp26,000,000,000,000.00 (twenty-six trillion rupiah), increases to Rp29,200,000,000,000.00 (twenty-nine trillion two hundred billion rupiah).

Example 2
Conventional General Bank X owns Islamic Business Unit Y with the following information:
a. has opened 70 Islamic Branches (LS) and has 100 conventional branch offices; b. has Core Capital of Rp900,000,000,000.00 (nine hundred billion rupiah) (BUKU 1) with a Composite Health Level Rating of 3 in the last 1 year;
c. has an asset ratio (Islamic Business Unit assets to Conventional General Bank assets) in September of 4% (four percent);
d. the core capital allocation requirement for existing offices is Rp700,000,000,000.00 (seven hundred billion rupiah); e. in the RBB submitted a plan to open 5 conventional and Islamic offices with a core capital allocation requirement of Rp80,000,000,000.00 (eighty billion rupiah).

From the above information, then:
a. the ratio of LS to the conventional branch network is 70% (seventy percent); b. the incentive amount obtained from the asset ratio is 15% (fifteen percent) while the incentive amount obtained from the BUKU classification is 10% (ten percent).

In relation to this, the reduction in core capital allocation obtained by Conventional General Bank X is as follows:
a. Reduction of core capital allocation for existing offices = Incentive amount x LS ratio x total core capital allocation requirement for existing offices = 15% x 70% x Rp700,000,000,000.00 = Rp73,500,000,000.00

Thus, the remaining core capital after the calculation of core capital allocation for existing offices, which was originally only Rp200,000,000,000.00 (two hundred billion rupiah), increases to Rp273,500,000,000.00 (two hundred seventy-three billion five hundred million rupiah). b. Reduction of core capital allocation for offices to be opened = Incentive amount x LS ratio x total core capital allocation requirement for offices to be opened = 15% x 70% x Rp80,000,000,000.00 = Rp8,400,000,000.00

Thus, the remaining core capital after the calculation of core capital allocation for existing offices and offices to be opened, which was originally Rp200,000,000,000.00 (two hundred billion rupiah), increases to Rp201,900,000,000.00 (two hundred one billion nine hundred million rupiah).

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

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

APPENDIX III
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 2 /POJK.03/2016
ON
THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORK IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS

INVESTMENT COST FOR OPENING ISLAMIC GENERAL BANK AND ISLAMIC BUSINESS UNIT BRANCH NETWORKS

Office Type | Investment Cost for Opening Branch Network for BUKU 1 and BUKU 2 | Investment Cost for Opening Branch Network for BUKU 3 and BUKU 4 Main Office (Kantor Cabang) | Rp3,000,000,000.00 | Rp5,000,000,000.00 Operational Regional Office (Kantor Wilayah yang Bersifat Operasional) | Rp3,000,000,000.00 | Rp5,000,000,000.00 Sub-Branch Office (Kantor Cabang Pembantu) | Rp1,500,000,000.00 | Rp2,000,000,000.00 Functional Office Conducting Operational Activities (Kantor Fungsional yang Melakukan Kegiatan Operasional) | Rp1,500,000,000.00 | Rp2,000,000,000.00 Cash Office (Kantor Kas) | Rp500,000,000.00 | Rp1,000,000,000.00 Other offices that are operational outside the country or Representative Offices if conducting operational activities (Kantor lainnya yang bersifat operasional di luar negeri atau Kantor Perwakilan apabila melakukan kegiatan operasional) | Rp500,000,000.00 | Rp1,000,000,000.00

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

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

APPENDIX I
FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 2 /POJK.03/2016 ON THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORK IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS

APPENDIX II
FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 2 /POJK.03/2016 ON THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORK IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS

APPENDIX III
FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 2 /POJK.03/2016 ON THE DEVELOPMENT OF ISLAMIC BANKING BRANCH NETWORK IN THE FRAMEWORK OF NATIONAL ECONOMIC STIMULUS FOR BANKS