FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 24/POJK.03/2015

CONCERNING

PRODUCTS AND ACTIVITIES OF SHARIA BANKS AND SHARIA BUSINESS UNITS

BY THE GRACE OF THE ALMIGHTY GOD,

THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that the development and innovation of products and activities of Sharia Banks and Sharia Business Units are becoming increasingly complex and varied, thereby potentially increasing the risk exposure of Sharia Banks and Sharia Business Units; b. that to mitigate various risks related to the development and innovation of products and activities of Sharia Banks and Sharia Business Units, it is necessary to balance this with product and activity licensing and reporting mechanisms that are more appropriate for the development of Sharia Banks and Sharia Business Units;
c. that the development and innovation of products and activities of Sharia Banks and Sharia Business Units must continue to apply Sharia Principles, prudential principles, and customer protection principles;
d. that based on the considerations referred to in letters a, b, and c, it is necessary to establish regulations concerning Products and Activities of Sharia Banks and Sharia Business Units in a Financial Services Authority Regulation;

Recalling:

1. 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);
2. 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);

DECIDES:

To establish:
FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING PRODUCTS AND ACTIVITIES OF SHARIA BANKS AND SHARIA BUSINESS UNITS

CHAPTER I

GENERAL PROVISIONS

Article 1

In this Financial Services Authority Regulation:

1. Bank means Sharia Banks and Sharia Business Units.
2. Sharia Bank means Sharia Commercial Banks and Sharia Rural Banks.
3. Sharia Commercial Bank, hereinafter abbreviated as BUS, is a Sharia Commercial Bank as referred to in Law Number 21 of 2008 concerning Sharia Banking.
4. Sharia Rural Bank, hereinafter abbreviated as BPRS, is a Sharia Rural Bank as referred to in Law Number 21 of 2008 concerning Sharia Banking.
5. Sharia Business Unit, hereinafter abbreviated as UUS, is a Sharia Business Unit as referred to in Law Number 21 of 2008 concerning Sharia Banking.
6. Sharia Principle is the Sharia Principle as referred to in Law Number 21 of 2008 concerning Sharia Banking.
7. Bank based on Business Activities, hereinafter referred to as BOOK, is the BOOK as referred to in regulations governing business activities and office networks based on core capital.
8. Bank Product, hereinafter referred to as Product, is a financial instrument issued by the Bank based on agreements consistent with Sharia Principles.
9. Bank Activity, hereinafter referred to as Activity, is a service provided by the Bank to customers based on agreements consistent with Sharia Principles.

Article 2

Bank business activities in issuing Products and carrying out Activities must apply Sharia Principles, prudential principles, and customer protection principles.

CHAPTER II

NEW PRODUCTS AND ACTIVITIES

Article 3

(1) Banks in their business activities may issue Products and/or carry out new Activities.
(2) New Products and/or Activities as referred to in paragraph (1) must meet the following criteria:
a. have not been previously issued or carried out by the respective Bank; or b. have been previously issued or carried out by the Bank but involve the development of features or characteristics.

Article 4

(1) Banks must include plans to issue Products and/or carry out new Activities as referred to in Article 3 paragraph (2) letter a in the Bank's business plan. (2) Banks may change the Bank's business plan regarding the issuance of Products and/or the execution of certain Activities in the event of specific conditions. (3) Changes to the Bank's business plan as referred to in paragraph (2) are changes outside of business plan changes as regulated in regulations concerning Bank business plans.

CHAPTER III

RISK MANAGEMENT OF NEW PRODUCTS AND ACTIVITIES

Article 5

(1) Banks must have written policies and procedures to manage risks inherent in the Bank's new Products and/or Activities.
(2) Regulations concerning policies and procedures as referred to in paragraph (1) are regulated by a Financial Services Authority Circular Letter.

Article 6

The Sharia Supervisory Board must evaluate the fulfillment of Sharia Principles regarding the policies and procedures as referred to in Article 5 paragraph (1).

CHAPTER IV

LICENSING AND REPORTING OF NEW PRODUCTS AND ACTIVITIES

Article 7

(1) Banks must obtain approval from the Financial Services Authority to issue Products and/or carry out new Activities if the new Products and/or Activities are not listed in the codification of Bank Products and Activities. (2) Banks may only issue Products and/or carry out new Activities without approval from the Financial Services Authority if the new Products and/or Activities meet the following requirements:
a. are listed in the codification of Bank Products and Activities; b. are listed in the Bank's business plan;
c. are consistent with the BOOK classification; and
d. are supported by adequate operational readiness.
(3) The requirement as referred to in paragraph (2) letter c does not apply to BPRS.
(4) Regulations concerning the codification of Bank Products and Activities as referred to in paragraph (1) and paragraph (2) letter a are regulated by a Financial Services Authority Circular Letter.

Article 8

(1) Banks must submit an application for approval to issue Products and/or carry out new Activities as referred to in Article 7 paragraph (1) to the Financial Services Authority, accompanied by supporting documents. (2) The approval application as referred to in paragraph (1) must be submitted at the latest 30 (thirty) working days before the issuance of Products and/or the execution of new Activities. (3) Regulations concerning supporting documents as referred to in paragraph (1) are regulated by a Financial Services Authority Circular Letter.

Article 9

(1) Banks must issue Products and/or carry out new Activities as referred to in Article 8 paragraph (1) at the latest 6 (six) months from the date approval is granted by the Financial Services Authority. (2) If within the period as referred to in paragraph (1) the Bank has not issued Products and/or carried out new Activities, the approval to issue Products and/or carry out new Activities that has been granted is declared void and invalid.

Article 10

(1) Banks must submit reports on the realization of the issuance of Products and/or the execution of new Activities as referred to in Article 7 paragraph (2) and Article 8 paragraph (1) at the latest 7 (seven) working days after the issuance of Products and/or the execution of new Activities, accompanied by supporting documents. (2) Regulations concerning supporting documents as referred to in paragraph (1) are regulated by a Financial Services Authority Circular Letter.

CHAPTER V

EXPLANATION OF PRODUCTS AND ACTIVITIES

Article 11

(1) Banks must present to the Financial Services Authority regarding new Products and/or Activities as referred to in Article 7 paragraph (1).
(2) Banks must provide explanations regarding:
a. new Products and/or Activities that do not require approval from the Financial Services Authority as referred to in Article 7 paragraph (2); or b. Products that have been issued and/or Activities that have been carried out, if requested by the Financial Services Authority.

CHAPTER VI

CESSATION OF PRODUCTS AND ACTIVITIES

Article 12

(1) Banks may cease Products and/or Activities based on specific considerations.
(2) Banks must report plans to cease Products and/or certain Activities as referred to in paragraph (1) to the Financial Services Authority, accompanied by supporting documents. (3) Reports on cessation plans as referred to in paragraph (2) must be submitted to the Financial Services Authority at the latest 10 (ten) working days before the implementation of the cessation. (4) The Financial Services Authority provides confirmation regarding plans to cease Products and/or Activities as referred to in paragraph (2) at the latest 10 (ten) working days after the report on cessation plans and required documents are received completely. (5) In the event that the Financial Services Authority does not provide confirmation within the period as referred to in paragraph (4), Banks may cease Products and/or Activities. (6) Regulations concerning supporting documents as referred to in paragraph (2) are regulated by a Financial Services Authority Circular Letter.

Article 13

(1) Banks must submit reports on the realization of the cessation of Products and/or Activities as referred to in Article 12 paragraph (1) at the latest 7 (seven) working days after the cessation of Products and/or Activities, accompanied by supporting documents. (2) Regulations concerning supporting documents as referred to in paragraph (1) are regulated by a Financial Services Authority Circular Letter.

Article 14

(1) The Financial Services Authority is authorized to order Banks to cease Products and/or Activities in the event that:
a. Bank Products and/or Activities:

1. have not obtained approval as regulated in this Financial Services Authority Regulation;
2. are not consistent with the plan for the issuance of Products and/or execution of Activities approved by the Financial Services Authority;
3. are not consistent with reports on the realization of the issuance of Products and/or execution of Activities;
4. are not consistent with Sharia Principles; and/or
5. are not consistent with legislation.
   b. based on the Financial Services Authority's evaluation, the issuance of Products and/or execution of Activities is assessed or has the potential to:
6. cause material and/or significant losses to the Bank's financial condition; and/or
7. significantly increase the Bank's legal or reputational risk due to customer complaints or lawsuits;
   c. Banks do not apply adequate risk management for Products issued and/or Activities carried out; and/or
   d. there are other considerations.
   (2) The cessation of Products and/or Activities as referred to in paragraph (1) may be temporary or permanent based on the Financial Services Authority's assessment.

Article 15

(1) In the event that Banks are ordered to temporarily cease Products and/or Activities, Banks:
a. are prohibited from offering, selling, and/or entering into new agreements or transactions regarding such Products and/or Activities; and b. must perfect Products and/or Activities, within a period determined by the Financial Services Authority. (2) Banks must submit reports on the realization of the cessation of Products and/or Activities as referred to in paragraph (1) at the latest 7 (seven) working days after the cessation of Products and/or Activities. (3) The Financial Services Authority revokes the temporary cessation as referred to in paragraph (1) if Banks have perfected Products and/or Activities. (4) In the event that Banks cannot perfect Products and/or Activities within the period determined by the Financial Services Authority as referred to in paragraph (1) letter b, such Products and/or Activities may be subject to permanent cessation. (5) Banks may only re-issue Products and/or re-carry out Activities ordered to be ceased as referred to in paragraph (1) after receiving confirmation from the Financial Services Authority. (6) Banks must submit reports on the realization of the re-issuance of Products and/or re-execution of Activities as referred to in paragraph (5) at the latest 7 (seven) working days after the re-issuance of Products and/or re-execution of Activities.

Article 16

(1) In the event that Banks are ordered to permanently cease Products and/or Activities, Banks must:
a. immediately cease offering, selling, and/or entering into new agreements or transactions regarding such Products and/or Activities; b. submit action plans to the Financial Services Authority to resolve obligations to customers related to Products and/or Activities that have been ceased; and
c. resolve obligations to customers of Products and/or Activities that have been ceased in accordance with action plans approved by the Financial Services Authority.
(2) Action plans as referred to in paragraph (1) letter b must be submitted at the latest 20 (twenty) working days from the date of the letter ceasing Products and/or Activities.

Article 17

Banks must submit reports on the realization of the cessation of Products and/or Activities as referred to in Article 16 paragraph (1) at the latest 7 (seven) working days after the cessation of Products and/or Activities.

CHAPTER VII

FULFILLMENT OF SHARIA PRINCIPLES AND CUSTOMER PROTECTION PRINCIPLES

Article 18

(1) Banks must apply Sharia Principles in issuing Products and/or carrying out Activities.
(2) The fulfillment of the application of Sharia Principles as referred to in paragraph (1) must be supported by:
a. Fatwas of the National Sharia Board of the Indonesian Ulema Council that serve as the basis for the issuance of Products and/or execution of Activities; and b. opinions from the Bank's Sharia Supervisory Board regarding Products and/or Activities.

Article 19

(1) Banks must apply customer protection principles in issuing Products and/or carrying out Activities.
(2) The application of customer protection principles as referred to in paragraph (1) refers to regulations governing consumer protection in the financial services sector.

Article 20

Banks must apply transparency of information regarding Products and/or Activities in accordance with regulations governing the transparency of Bank product information.

CHAPTER VIII

OTHER PROVISIONS

Article 21

The Financial Services Authority may grant approval or rejection of applications for approval to issue Products and/or carry out new Activities based on specific considerations.

Article 22

The issuance of Products and/or execution of Activities by BUS and UUS, in addition to meeting the regulations as regulated in this Financial Services Authority Regulation, also refers to regulations governing business activities and office networks based on Bank core capital.

Article 23

In the event that the issuance of Products and/or execution of Activities by Banks is specifically regulated in Financial Services Authority regulations and/or regulations issued by other authorities, the issuance of Products and/or Activities referred to must also refer to other regulations and/or regulations of other authorities that specifically regulate such Products and/or Activities.

CHAPTER IX

SANCTIONS

Article 24

(1) BUS and UUS violating regulations in Article 7 paragraph (1) are subject to administrative sanctions in the form of written warnings and payment obligations in the form of fines of IDR 35,000,000.00 (thirty-five million rupiah) for each Product or Activity. (2) BPRS violating regulations in Article 7 paragraph (1) are subject to administrative sanctions in the form of written warnings and payment obligations in the form of fines of IDR 5,000,000.00 (five million rupiah) for each Product or Activity. (3) BUS and UUS that are late in submitting reports as referred to in Article 10 paragraph (1), Article 13 paragraph (1), Article 15 paragraph (2) and paragraph (6), and Article 17 are subject to administrative sanctions in the form of written warnings and payment obligations in the form of fines of IDR 100,000.00 (one hundred thousand rupiah) per day of delay. (4) BPRS that are late in submitting reports as referred to in Article 10 paragraph (1), Article 13 paragraph (1), Article 15 paragraph (2) and paragraph (6), and Article 17 are subject to administrative sanctions in the form of written warnings and payment obligations in the form of fines of IDR 25,000.00 (twenty-five thousand rupiah) per day of delay. (5) BUS and UUS that have not submitted reports as referred to in Article 10 paragraph (1), Article 13 paragraph (1), Article 15 paragraph (2) and paragraph (6), and Article 17 after 30 (thirty) days from the final deadline for report submission are subject to administrative sanctions in the form of written warnings and payment obligations in the form of fines of IDR 25,000,000.00 (twenty-five million rupiah) per report. (6) BPRS that have not submitted reports as referred to in Article 10 paragraph (1), Article 13 paragraph (1), Article 15 paragraph (2) and paragraph (6), and Article 17 after 30 (thirty) days from the final deadline for report submission are subject to administrative sanctions in the form of written warnings and payment obligations in the form of fines of IDR 5,000,000.00 (five million rupiah) per report.

Article 25

Banks violating regulations in Article 4 paragraph (1), Article 5 paragraph (1), Article 7 paragraph (2), Article 8 paragraph (1), Article 11, Article 12 paragraph (2), Article 15 paragraph (1) and paragraph (5), Article 16 paragraph (1) and paragraph (2), Article 18 paragraph (1), Article 19 paragraph (1), and Article 20 are subject to administrative sanctions in accordance with Article 58 of Law Number 21 of 2008 concerning Sharia Banking in the form of written warnings and/or a reduction in the Bank's health rating.

Article 26

The imposition of sanctions as referred to in Article 24 paragraph (3), paragraph (4), paragraph (5), and paragraph (6) does not reduce the Bank's obligation to submit reports on the realization of the issuance of new Products and/or execution of new Activities as referred to in Article 10 paragraph (1), Article 13 paragraph (1), Article 15 paragraph (2) and paragraph (6), and Article 17.

CHAPTER X

TRANSITIONAL PROVISIONS

Article 27

The obligation to include the issuance of Products and/or new Activities in business plans as referred to in Article 4 paragraph (1) does not apply to BPRS for the year 2015.

Article 28

Applications for approval or reports on the realization of the issuance of Products and/or execution of new Activities that have been submitted to the Financial Services Authority before this Financial Services Authority Regulation takes effect, but have not yet received approval or rejection, refer to this Financial Services Authority Regulation.

CHAPTER XI

CLOSING PROVISIONS

Article 29

(1) Upon the taking effect of this Financial Services Authority Regulation, Bank Indonesia Regulation Number 10/17/PBI/2008 concerning Sharia Bank Products and Sharia Business Units (State Gazette of the Republic of Indonesia Year 2008 Number 137, Supplement to the State Gazette of the Republic of Indonesia Number 4897) is revoked and declared invalid. (2) Implementation provisions of Bank Indonesia Regulation Number 10/17/PBI/2008 concerning Sharia Bank Products and Sharia Business Units remain valid as long as they have not been replaced and do not conflict with this Financial Services Authority Regulation.

Article 30

This Financial Services Authority Regulation takes 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 27 November 2015

CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY,

signed

MULIAMAN D. HADAD

Enacted in Jakarta on 8 December 2015

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

signed

YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 289

A copy consistent with the original
Legal Director 1
Legal Department

signed

Sudarmaji

EXPLANATION

OF

FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 24/POJK.03/2015

CONCERNING

PRODUCTS AND ACTIVITIES OF SHARIA BANKS AND SHARIA BUSINESS UNITS

I. GENERAL

As the Sharia banking industry continues to grow, the development and innovation of Products and Activities of Sharia Banks and Sharia Business Units (UUS) become important in meeting the increasingly growing needs of society. The increasing societal demand for Sharia banking services drives the development and innovation of Products and Activities of Sharia Banks and UUS to become increasingly complex and varied, thereby increasing the risk exposure faced by Sharia Banks and UUS.

In order to mitigate various potential risks arising from the development and innovation of Products and Activities of Sharia Banks and UUS while simultaneously encouraging the development of Sharia Banks and UUS, regulations concerning the mechanisms for the issuance, reporting, and cessation of Products and Activities of Sharia Banks and UUS are required.

Furthermore, considering the unique characteristics of Sharia banking in the development and innovation of Products and Activities, Sharia Banks and UUS must consistently apply Sharia Principles, prudential principles, and customer protection principles.

Based on these matters, regulations concerning Products and Activities of Sharia Banks and UUS are required in a Financial Services Authority Regulation.

II. ARTICLE BY ARTICLE EXPLANATION

Article 1

Sufficiently clear.

Article 2

Sufficiently clear.

Article 3

Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
What is meant by "development of features or characteristics" includes, among others, the addition and/or replacement of features or characteristics.

Article 4

Paragraph (1)
Plans for the issuance of Products and/or execution of new Activities are included in the Bank's business plan for the same year as the plan for the issuance of Products and/or execution of new Activities. The inclusion of plans for the issuance of new Products and/or execution of new Activities in the Bank's business plan refers to regulations governing business plans or Bank work plans.

Paragraph (2)
What is meant by "specific conditions" is the follow-up to policies established by the Financial Services Authority or other authorities (Bank Indonesia, Ministry of Finance, Ministry of Religious Affairs, and others) and/or the implementation of new Fatwas issued by the National Sharia Board – Indonesian Ulema Council.

Paragraph (3)
Sufficiently clear.

Article 5

Sufficiently clear.

Article 6

Sufficiently clear.

Article 7

Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
The inclusion of new Products and/or Activities in the Bank's business plan only applies to new Products and/or Activities because they meet the criteria of not having been previously issued or carried out by the respective Bank;

Letter c
Sufficiently clear.

Letter d
What is meant by "adequate operational readiness" includes, among others, information technology readiness, human resources, policies, and Standard Operating Procedures (SOP).

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Article 8

Sufficiently clear.

Article 9

Sufficiently clear.

Article 10

Paragraph (1)
The realization of the issuance of Products and/or execution of new Activities is calculated from the date the Products and/or Activities can be purchased or utilized by customers.

Paragraph (2)
Sufficiently clear.

Article 11

Sufficiently clear.

Article 12

Paragraph (1)
What is meant by "specific considerations" includes, among others, cost considerations, market potential, and/or information technology infrastructure.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
The Bank is responsible for all consequences of decisions to cease Products and/or Activities, including the settlement of rights and obligations with customers and other parties.

Paragraph (5)
Sufficiently clear.

Paragraph (6)
Sufficiently clear.

Article 13

Sufficiently clear.

Article 14

Paragraph (1)
Letter a
Number 1)
Sufficiently clear.

Number...

[End of Document]

Number 2)
Quite clear.
Number 3)
Quite clear.
Number 4)
The term “in accordance with Sharia Principles” refers, among other things, to the fatwas of the National Sharia Council of the Indonesian Ulema Council (DSN-MUI) and regulations governing the implementation of Sharia Principles in the business activities of Sharia Banks and UUS. Number 5) Quite clear. Letter b) Number 1) Conditions that have the potential to cause material and/or significant losses to the Bank’s financial condition may be caused by reputation risk and/or market risk from the issuance of Products and/or execution of Bank Activities. Number 2) Quite clear. Letter c) Quite clear. Letter d) The term “other considerations” refers, among other things, to the general economic conditions. Paragraph (2) Quite clear.
Article 15
Paragraph (1)
The determination of the time limit for perfecting Products and/or Activities takes into account the Bank’s capabilities.
Paragraph...

Paragraph (2)
Quite clear.
Paragraph (3)
Quite clear.
Paragraph (4)
Quite clear.
Paragraph (5)
Quite clear.
Paragraph (6)
Quite clear.
Article 16
Quite clear.
Article 17
Quite clear.
Article 18
Paragraph (1)
Quite clear.
Paragraph (2)
Letter a)
Quite clear.
Letter b)
The term “opinion from the Sharia Supervisory Board” refers to an opinion that, among other things, references the fatwas of the National Sharia Council of the Indonesian Ulema Council and regulations governing the implementation of Sharia Principles in the business activities of Sharia Banks and UUS.
Article 19
Paragraph (1)
Customer protection principles include:
a. transparency; b. fair treatment;
c. reliability;
d. confidentiality...

d. confidentiality and security of customer data/information; and e. handling of complaints and resolution of customer disputes in a simple, fast, and affordable manner. Paragraph (2) Quite clear.
Article 20
The scope of information transparency to be disclosed to customers refers to regulations regarding product information transparency, including procedures, schemes, and materials to be disclosed, such as the characteristics of Products and/or Activities, risks, as well as customer rights and obligations.
Article 21
The term “specific considerations” refers, among other things, to impacts on the stability of the Sharia banking industry and/or alignment with the direction of national Sharia banking development policy.
Article 22
Quite clear.
Article 23
Examples of regulations of the Financial Services Authority (OJK) and/or regulations issued by other authorities, such as regulations regarding agents selling Sharia State Securities; money markets based on Sharia Principles; agents selling Sharia mutual funds; bancassurance; custody with management (trust); payment service providers such as card payment instruments, electronic money (e-money), and fund transfer service providers; foreign exchange transaction business service providers; custodian banks; bank account administration; bank payment of customer funds; and the use of information technology.
Article...

Article 24
Quite clear.
Article 25
Quite clear.
Article 26
Quite clear.
Article 27
Quite clear.
Article 28
Quite clear.
Article 29
Quite clear.
Article 30
Quite clear.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5771 ---