COPY

FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 20/POJK.03/2014
CONCERNING
RURAL BANKS

BY THE GRACE OF GOD THE ALMIGHTY,
THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:

a. that in order to support the optimal and sustainable growth of the Indonesian economy, it is necessary to enhance the resilience and competitiveness of the national banking industry; b. that in order to enhance the role and contribution of the Rural Bank industry to the regional economy, and to strengthen the competitiveness of Rural Banks, efforts are needed to enhance the resilience and competitiveness of Rural Banks through capital strengthening, ownership restructuring, and improvement of the quality of Rural Bank management;
c. that in Bank Indonesia Regulation Number: 8/26/PBI/2006 concerning Rural Banks, the development of Rural Banks is not yet accommodated, so it needs to be replaced;
d. that based on the considerations as referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning Rural Banks;

Recalling:

1. Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);
2. Law Number 21 of 2008 concerning Sharia Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
3. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);

Deciding: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING RURAL BANKS.

DECIDING:

CHAPTER I

GENERAL PROVISIONS

Article 1

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

1. Rural Bank, hereinafter referred to as BPR, is a bank that conducts conventional business activities and does not provide payment circulation services as referred to in the Banking Law.
2. Sharia Rural Bank, hereinafter referred to as BPRS, is a Sharia bank that does not provide payment circulation services as referred to in the Sharia Banking Law.
3. General Bank is a bank that conducts conventional and/or Sharia business activities and provides payment circulation services as referred to in the Banking Law.
4. Branch Office is a BPR office that is directly responsible to the head office of the respective BPR, with a clear business address where the Branch Office conducts its business.
5. Cash Office is a BPR office that provides cash services, excluding the provision of credit in assisting its head office, with a clear business address where the Cash Office conducts its business.
6. Cash Service Activities are Mobile Cash, Payment Point, and service activities using Automated Teller Machine (ATM) cards and/or debit cards.
7. Mobile Cash is a cash service activity to serve the community by moving around using transportation or at specific locations on a non-permanent basis, such as mobile cash vans, floating cash, or non-permanent BPR counters, excluding promotional activities.
8. Payment Point is a cash service activity to serve the community in the form of service or payment collection through cooperation between the BPR and other parties at a specific location, such as for telephone bills, electricity bills, employee salaries, and/or collection of deposits from third parties.
9. Electronic Banking Devices, hereinafter abbreviated as EBD, are cash or non-cash service activities to serve the community using electronic machine facilities but excluding the provision of giro instruments, located both inside and outside the BPR office, which can provide cash withdrawal or deposit services, payment through book transfer, interbank fund transfer, and/or customer account balance or transaction information services, using networks and/or machines owned by the BPR itself or through BPR cooperation with other parties, such as Automated Teller Machine (ATM), including Automated Deposit Machine (ADM) and Electronic Data Capture (EDC).
10. Board of Directors:
    a. for a BPR with the legal form of a Limited Liability Company, is the Board of Directors as referred to in the Limited Liability Company Law; b. for a BPR with the legal form of a Regional-Owned Enterprise, is the Board of Directors as referred to in the Regional-Owned Enterprise Law;
    c. for a BPR with the legal form of a Cooperative, is the Management as referred to in the Cooperative Law.
11. Board of Commissioners:
    a. for a BPR with the legal form of a Limited Liability Company, is the Commissioner as referred to in the Limited Liability Company Law; b. for a BPR with the legal form of a Regional-Owned Enterprise, is the Supervisor as referred to in the Regional-Owned Enterprise Law;
    c. for a BPR with the legal form of a Cooperative, is the Supervisor as referred to in the Cooperative Law.
12. Executive Officer is an officer who is directly responsible to the Director or has influence on BPR policy and operations, such as branch managers, division heads, section heads, managers, and/or other equivalent officers.
13. Controlling Shareholder, hereinafter abbreviated as CS, is an individual, legal entity, and/or business group that:
    a. owns shares of the company or BPR amounting to 25% (twenty-five percent) or more of the issued shares and has voting rights; or b. owns shares of the company or BPR amounting to less than 25% (twenty-five percent) of the issued shares and has voting rights but can be proven to have controlled the company or BPR, directly or indirectly.
14. Professional Certification Body is an implementing body for professional certification activities that obtains a license from the National Professional Certification Body or other institutions designated based on legislation.
15. General Meeting of Shareholders, hereinafter abbreviated as GMS:
    a. for a BPR with the legal form of a Limited Liability Company, is the GMS as referred to in the Limited Liability Company Law; b. for a BPR with the legal form of a Regional-Owned Enterprise, is the Shareholders Meeting/Preferred and Ordinary Shareholders Meeting as referred to in the Regional-Owned Enterprise Law;
    c. for a BPR with the legal form of a Cooperative, is the Members' Meeting as referred to in the Cooperative Law.
16. Unqualified List, hereinafter abbreviated as UQL, is a list managed by the Financial Services Authority containing parties who have received the designation of failing the competency and propriety test.

Article 2

The legal form of a BPR can be:
a. Limited Liability Company; b. Cooperative; or
c. Regional-Owned Enterprise.

CHAPTER II

ESTABLISHMENT OF RURAL BANKS

Article 3

Rural Banks may only be established and conduct business activities with a license from the Financial Services Authority.

Article 4

(1) BPRs may only be established and owned by:
a. Indonesian citizens; b. Indonesian legal entities; and/or
c. Local Governments.
(2) In fulfilling the requirement for an Indonesian legal entity as a prospective CS of a BPR, the legal entity must have been operating for at least 2 (two) years at the time of submitting the application for principle approval.

Article 5

(1) The paid-up capital for establishing a BPR is set at a minimum of:
a. IDR 14,000,000,000.00 (fourteen billion rupiah), for BPRs established in zone 1; b. IDR 28,000,000,000.00 (twenty-eight billion rupiah), for BPRs established in zone 2;
c. IDR 56,000,000,000.00 (fifty-six billion rupiah), for BPRs established in zone 3; and
d. IDR 4,000,000,000.00 (four billion rupiah), for BPRs established in zone 4.

(2) Considering the amount of paid-up capital, the Financial Services Authority has the authority to set the paid-up capital amount above the amount referred to in paragraph (1).

(3) The zoning barrier as referred to in paragraph (1) is determined based on the economic potential of the region and the level of competition of financial institutions in the respective regency or city.

(4) At least 50% (fifty percent) of the paid-up capital as referred to in paragraph (1) must be used for working capital.

Article 6

(1) The paid-up capital as referred to in Article 5 paragraph (1) must be placed in the form of a deposit at a General Bank in Indonesia under the name "Commissioners of the Financial Services Authority q.q. (name of prospective CS of BPR)" with the description for the establishment of the respective BPR, and the disbursement can only be carried out after obtaining approval from the Financial Services Authority.

(2) The placement of paid-up capital in the form of a deposit as referred to in paragraph (1) can be done in stages:
a. at least 50% (fifty percent) of the paid-up capital before submitting the application for principle approval for the establishment of the BPR; and b. the shortfall of the paid-up capital, deposited before submitting the application for the business license for the establishment of the BPR.

CHAPTER III

LICENSING OF RURAL BANKS

Article 7

The granting of licenses as referred to in Article 3 is done in 2 (two) stages:
a. Principle Approval, which is approval to carry out preparations for the establishment of the BPR; and b. Business License, which is a license granted to conduct BPR business activities after the preparations as referred to in letter a are completed.

Article 8

The application for principle approval as referred to in Article 7 letter a is submitted by a prospective CS to the Commissioners of the Financial Services Authority, accompanied by:
a. draft deed of establishment of the legal entity, containing the articles of association; b. ownership data:
1. list of prospective shareholders with details of each share ownership, for BPRs with the legal form of a Limited Liability Company or Regional-Owned Enterprise;
2. list of prospective members with details of basic savings and mandatory savings, for BPRs with the legal form of a Cooperative;
c. list of prospective members of the Board of Directors and Board of Commissioners;
d. proposed organizational structure and establishment hierarchy of the BPR; e. analysis of the potential and feasibility of establishing the BPR; f. proposed work system and procedures; g. proof of capital deposit as referred to in Article 6 in the form of a photocopy of the deposit receipt; h. statement letter from prospective shareholders for BPRs with the legal form of a Limited Liability Company or Regional-Owned Enterprise or from members for BPRs with the legal form of a Cooperative, that the capital deposit as referred to in letter g:
1. does not originate from loans or financing facilities in any form from Banks and/or other parties; and/or
2. does not originate from and for money laundering.

In the event that the prospective shareholder of the BPR is a Local Government, the statement letter can be replaced by a Decision of the Head of the Region.

i. proof of full payment of the BPR establishment licensing fee to the Financial Services Authority.

Article 9

(1) The Financial Services Authority grants approval or rejection of the principle approval application no later than 40 (forty) working days since the application along with the required documents is received completely.

(2) In order to grant approval or rejection as referred to in paragraph (1), the Financial Services Authority conducts:
a. research on the completeness and truthfulness of documents; b. assessment of the analysis of the potential and feasibility of establishing the BPR as referred to in Article 8 letter e;
c. competency and propriety test including administrative assessment and interviews with the prospective CS, prospective members of the Board of Directors, and prospective members of the Board of Commissioners, in accordance with regulations concerning the competency and propriety test for BPRs;
d. examination of capital deposits; and e. research on the financial performance of the BPR and/or other financial institutions under the same CS ownership.

(3) In addition to the information as referred to in paragraph (2), parties applying for the establishment of a BPR must present and explain to the Financial Services Authority regarding the analysis of the potential and feasibility of establishing the BPR, funding sources, establishment plans and objectives, and financial capability in order to determine the solvency and growth of the BPR.

Article 10

(1) The principle approval as referred to in Article 9 paragraph (1) is valid for a period of 1 (one) year calculated from the date the principle approval is granted and cannot be extended.

(2) Parties who have received principle approval are prohibited from conducting business activities before obtaining a business license.

(3) The principle approval that has been granted is void and declared invalid if, by the end of the period as referred to in paragraph (1), the party who has received the principle approval has not submitted a business license application to the Financial Services Authority.

Article 11

Parties who have received principle approval apply for a business license as referred to in Article 7 letter b to the Commissioners of the Financial Services Authority by attaching:
a. deed of establishment of the legal entity, containing the articles of association of the legal entity that has been approved by the competent authority; b. ownership data as referred to in Article 8 letter b in the event of changes;
c. list of prospective members of the Board of Directors and Board of Commissioners as referred to in Article 8 letter c in the event of changes;
d. organizational structure and work system and procedures, including personnel structure; e. proof of full payment of paid-up capital as referred to in Article 6 paragraph (1), in the form of a photocopy of the deposit receipt at a General Bank in Indonesia under the name "Commissioners of the Financial Services Authority q.q. (name of prospective CS of BPR)" with the description for the establishment of the respective BPR, and the disbursement can only be carried out after obtaining approval from the Financial Services Authority; f. statement letter from shareholders for BPRs with the legal form of a Limited Liability Company or Regional-Owned Enterprise or from members for BPRs with the legal form of a Cooperative, that the capital deposit as referred to in letter e:
1. does not originate from loans or financing facilities in any form from Banks and/or other parties; and/or
2. does not originate from and for money laundering.

In the event that the shareholder of the BPR is a Local Government, the statement letter can be replaced by a Decision of the Head of the Region.

g. proof of operational readiness, covering at least:
1. list of fixed assets and inventory;
2. proof of building possession in the form of proof of ownership or lease agreement for the office building supported by proof of ownership from the lessor;
3. photos of the office building and room layout;
4. examples of forms or documents to be used for BPR operations; and
5. Taxpayer Identification Number (NPWP).

Article 12

(1) The Financial Services Authority grants approval or rejection of the business license application no later than 40 (forty) working days since the application along with the required documents is received completely.

(2) In order to grant approval or rejection as referred to in paragraph (1), the Financial Services Authority conducts:
a. research on the completeness and truthfulness of documents; b. competency and propriety test for prospective CS, prospective members of the Board of Directors, and prospective members of the Board of Commissioners as referred to in Article 11 letters b and c in the event of replacement of previously proposed candidates;
c. examination of capital deposits; and
d. research on the financial performance of the BPR and/or other financial institutions under the same CS ownership.

Article 13

(1) BPRs that have received a business license from the Financial Services Authority must conduct BPR business activities no later than 40 (forty) working days calculated from the date the business license is issued.

(2) The implementation of business activities as referred to in paragraph (1) must be reported by the Board of Directors of the BPR to the Financial Services Authority no later than 10 (ten) working days since the date of operational implementation.

(3) In the event that the BPR has not conducted business activities within the period as referred to in paragraph (1), the issued business license is void and declared invalid.

Article 14

BPRs that have received a business license from the Commissioners of the Financial Services Authority must include the legal form and the words "Bank Perkreditan Rakyat" or abbreviated as "BPR" in front of the BPR name, in accordance with the BPR's articles of association.

CHAPTER IV

OWNERSHIP AND CAPITAL CHANGES OF RURAL BANKS

Article 15

Each BPR must have at least 1 (one) shareholder with a share ownership percentage of at least 25% (twenty-five percent) in accordance with the criteria regarding CS as regulated in the regulations concerning the competency and propriety test for BPRs.

Article 16

(1) Ownership of BPRs by legal entities must fulfill the following:
a. for Limited Liability Companies, Regional-Owned Enterprises, or Cooperatives, at most equal to the net own capital of the respective legal entity and does not exceed the amount determined for the legal entity in accordance with applicable legislation; and b. for foundations or other legal entities, at most equal to the amount determined for the legal entity in accordance with applicable legislation. (2) Ownership calculation is done at the beginning of the establishment of the BPR and at the time of additional paid-up capital injection by the legal entity as referred to in paragraph (1). (3) In the event that the legal entity as referred to in paragraph (1) owns at least 25% (twenty-five percent) of the BPR shares, the BPR must submit annual financial statements prepared by the legal entity in accordance with applicable legislation. (4) BPRs must submit the annual financial statements as referred to in paragraph (3) to the Financial Services Authority no later than the end of June after the reporting year.

Article 17

Funding sources for BPR ownership are prohibited:
a. originating from loans or financing facilities in any form from Banks and/or other parties, except if the funding source originates from the Regional Revenue and Expenditure Budget (APBD); and/or b. originating from and for the purpose of money laundering.

Article 18

(1) BPR shareholders are prohibited from withdrawing paid-up capital.
(2) In the event that a shareholder intends to resign as a BPR shareholder, the shareholder must transfer their share ownership to another party as long as it fulfills Financial Services Authority regulations and/or other applicable legislation.

Article 19

(1) Parties who can become BPR owners must fulfill the requirements:
a. have good character and morality; b. have a commitment to comply with applicable legislation;
c. have a commitment to the healthy development of BPR operations;
d. are not included in the UQL; e. have a commitment not to commit and/or repeat acts and/or actions that fall within the scope of the competency and propriety test as referred to in the regulations concerning the competency and propriety test for BPRs; f. do not have non-performing loans and/or non-performing financing; g. are not controllers, members of the Board of Directors, or members of the Board of Commissioners of a legal entity that has non-performing loans and/or non-performing financing; and/or h. have never been declared bankrupt or have never been shareholders, members of the Board of Directors, or members of the Board of Commissioners who were declared guilty of causing a company to be declared bankrupt based on court decisions within the last 5 (five) years before nomination. (2) Parties who can become CS must fulfill the requirements as referred to in paragraph (1) and financial feasibility requirements in accordance with the regulations concerning the competency and propriety test for BPRs. (3) In the event that the BPR owner is a legal entity, the requirements as referred to in paragraph (1) apply to the owner, members of the Board of Directors, members of the Board of Commissioners, or management of the respective legal entity.

Article 20

(1) In the context of increasing paid-up capital, shareholders and/or prospective shareholders must obtain approval from the Financial Services Authority.
(2) Shareholders and/or prospective shareholders submit an application for approval of increased paid-up capital as referred to in paragraph (1) to the Financial Services Authority attached with:
a. proof of capital deposit; and b. supporting documents.
(3) The increase in paid-up capital as referred to in paragraph (1) must be placed in the form of a deposit at a General Bank in Indonesia or at the respective BPR, except if sourced from dividends of the respective BPR. (4) The increase in paid-up capital placed in the form of a deposit at the respective BPR as referred to in paragraph (3) is only valid:
a. for BPRs that are not under special supervision; and b. conducted by the respective BPR shareholders.
(5) Procedures for increasing paid-up capital:
a. in the form of a deposit at a General Bank in Indonesia by stating the name "Commissioners of the Financial Services Authority q.q. (name of BPR)", and stating the name of the additional capital depositor and the description that disbursement can only be carried out after obtaining approval from the Financial Services Authority; and/or b. in the form of a deposit at the respective BPR by stating the name "Commissioners of the Financial Services Authority q.q. (name of BPR shareholder)" and stating the description that withdrawal can only be carried out after obtaining approval from the Financial Services Authority. (6) The Financial Services Authority grants approval or rejection of the application for increased paid-up capital as referred to in paragraph (2) no later than 20 (twenty) working days since the application along with the required documents is received completely.

(7) BPR must hold a General Meeting of Shareholders (RUPS) to approve the paid-up capital increase as referred to in paragraph (6), at the latest 60 (sixty) working days from the date of approval by the Financial Services Authority. (8) In the event that the RUPS cannot be held within the specified time as referred to in paragraph (7), the approval by the Financial Services Authority is void and declared invalid. (9) BPR is required to report the implementation of the paid-up capital increase to the Financial Services Authority at the latest 10 (ten) working days after the paid-up capital change is approved in the RUPS as referred to in paragraph (7), accompanied by:
a. proof of deposit; b. RUPS minutes;
c. a statement letter from shareholders as referred to in Article 8 letter h; and
d. ownership data in the form of:
1. a list of shareholders along with details of each shareholding amount, for BPRs with the legal entity status of a Limited Liability Company or Regional Company;
2. a list of members along with the amount of basic deposits and mandatory deposits, for BPRs with the legal entity status of a Cooperative.
(10) BPR is required to report the change in paid-up capital as referred to in paragraph (9) to the Financial Services Authority at the latest 10 (ten) working days from the date of the letter of acceptance of the notice of charter amendment or approval from the competent authority, in accordance with applicable legislation; and a. charter amendments in accordance with applicable legislation; and b. proof of reporting the change to the competent authority.

Article 21
(1) Changes in share ownership that require approval from the Financial Services Authority are changes due to:
a. transfer of shares resulting in a change in share ownership; b. replacement ...

(2) The Board of Directors of the BPR submits an application for change in share ownership as referred to in paragraph (1) to the Financial Services Authority accompanied by:
a. proof of capital deposit; and b. supporting documents.
(3) The Financial Services Authority provides approval or rejection of the application for change in share ownership as referred to in paragraph (1) at the latest 20 (twenty) working days from the date the application along with the required documents are received in complete form. (4) BPR must hold a General Meeting of Shareholders (RUPS) to approve the change in share ownership at the latest 60 (sixty) working days from the date of approval by the Financial Services Authority. (5) In the event that the RUPS cannot be held within the specified time as referred to in paragraph (4), the approval by the Financial Services Authority is void and declared invalid. (6) BPR is required to report the change in share ownership to the Financial Services Authority at the latest 10 (ten) working days after the change in share ownership is approved in the RUPS as referred to in paragraph (4), accompanied by:
a. proof of deposit; b. RUPS minutes;
c. a statement letter from shareholders as referred to in Article 8 letter h; and
d. ownership data in the form of:
1. a list of shareholders along with details of each shareholding amount, for BPRs with the legal entity status of a Limited Liability Company or Regional Company;
2. a list of members along with the amount of basic deposits and mandatory deposits, for BPRs with the legal entity status of a Cooperative.
(7) BPR is required to report the change in share ownership as referred to in paragraph (4) to the Financial Services Authority at the latest 10 (ten) working days from the date of the letter of acceptance of the notice of change ...

change of the articles of association or approval from the competent authority accompanied by:
a. changes to the articles of association in accordance with applicable legislation; and b. proof of reporting the change to the articles of association as referred to in letter a to the competent authority.

Article 22
(1) BPR is required to report changes in the composition of share ownership that do not result in the replacement and/or addition of Principal Shareholders (PSP) and are not caused by an increase in paid-up capital to the Financial Services Authority at the latest 10 (ten) working days from the RUPS accompanied by:
a. RUPS minutes; and b. ownership data in the form of:
1. a list of shareholders along with details of each shareholding amount, for BPRs with the legal entity status of a Limited Liability Company or Regional Company;
2. a list of members along with the amount of basic deposits and mandatory deposits, for BPRs with the legal entity status of a Cooperative.
(2) BPR is required to report the implementation of changes in the composition of share ownership as referred to in paragraph (1) to the Financial Services Authority at the latest 10 (ten) working days from the date of the letter of acceptance of the notice of charter amendment or approval from the competent authority, accompanied by:
a. charter amendments in accordance with applicable legislation; and b. proof of reporting the change to the articles of association as referred to in letter a to the competent authority, specifically for BPRs with the legal entity status of a Limited Liability Company and Cooperative.

Article 23
(1) BPR is required to report changes in basic capital to the Financial Services Authority at the latest 10 (ten) working days from the date the BPR receives the letter of approval for the charter amendment from the competent authority, accompanied by:
a. RUPS minutes ...