Financial Services Authority Regulation Number 42/POJK.03/2017 on the Obligation to Prepare and Implement Credit or Financing Policies for Commercial Banks

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 42 /POJK.03/2017
ON
THE OBLIGATION TO PREPARE AND IMPLEMENT CREDIT OR FINANCING POLICIES FOR COMMERCIAL BANKS BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS BOARD OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that banks conduct business activities primarily using funds entrusted to them by the public, so the interests and trust of the public must be protected and maintained; b. that the provision of credit or financing is the main activity of banks which involves risks that can affect the health and continuity of the bank's business, so in its implementation, banks must be based on the principles of healthy credit or financing;
c. that in order for the provision of credit or financing to be implemented consistently and based on the principles of healthy credit, a written bank credit or financing policy is required;
d. that in connection with the transfer of the functions, duties, and authorities for the regulation and supervision of financial services in the banking sector from Bank Indonesia to the Financial Services Authority, it is necessary to regulate again the obligation to prepare and implement bank credit or financing policies for commercial banks; e. that based on the considerations as referred to in letters a through d, it is necessary to establish a Financial Services Authority Regulation on the Obligation to Prepare and Implement Bank Credit or Financing Policies for Commercial Banks; Recalling:

1. 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 on Amendments to Law Number 7 of 1992 on Banking (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 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);
3. 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);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION ON THE OBLIGATION TO PREPARE AND IMPLEMENT CREDIT OR FINANCING POLICIES FOR COMMERCIAL BANKS.

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

1. Bank means Commercial Banks as referred to in Law Number 7 of 1992 on Banking as amended by Law Number 10 of 1998 on Amendments to Law Number 7 of 1992 on Banking, including branch offices located outside the country, as well as Islamic Commercial Banks and Islamic Business Units as referred to in Law Number 21 of 2008 on Islamic Banking.
2. Credit means the provision of money or receivables that can be equated with it, based on a loan agreement between the Bank and another party that obligates the borrower to repay their debt after a certain period with interest as referred to in Law Number 7 of 1992 on Banking as amended by Law Number 10 of 1998 on Amendments to Law Number 7 of 1992 on Banking.
3. Financing means the provision of funds or receivables that can be equated with it in the form of:
   a. profit-sharing transactions in the form of mudharabah and musyarakah; b. leasing transactions in the form of ijarah or lease-to-own in the form of ijarah muntahiya bittamlik;
   c. sales transactions in the form of murabahah receivables, salam, and istishna’;
   d. borrowing transactions in the form of qardh receivables; and e. service leasing transactions in the form of ijarah for multi-service transactions, based on an agreement between the Islamic Bank and/or Islamic Business Unit (IBU) and another party that obligates the financed party and/or the party receiving fund facilities to return the funds after a certain period with remuneration ujrah, without remuneration, or profit-sharing as referred to in Law Number 21 of 2008 on Islamic Banking.

CHAPTER II
PROCEDURES FOR PREPARING AND IMPLEMENTING BANK CREDIT OR FINANCING POLICIES
Article 2
(1) Banks are required to have a written bank credit or financing policy.
(2) The bank credit or financing policy as referred to in paragraph (1) must at least contain all aspects set forth in the Guidelines for Preparing Bank Credit or Financing Policies as contained in the Appendix which is an integral part of this Financial Services Authority Regulation. (3) The bank credit or financing policy as referred to in paragraph (2) must be approved by the bank's board of commissioners.

Article 3
The bank credit or financing policy as referred to in Article 2 must at least cover and regulate the main matters set forth in the Guidelines for Preparing Bank Credit or Financing Policies as follows:

1. prudential principles in credit or financing;
2. organization and management of credit or financing;
3. credit or financing approval policies;
4. documentation and administration of credit or financing;
5. supervision of credit or financing; and
6. resolution of problematic credit or financing.

Article 4
Banks are required to comply with the bank credit or financing policy that has been prepared as referred to in Article 2 in the implementation of providing Credit or Financing and the management of credit or financing consistently and uniformly.

Article 5
Banks that obtain business licenses after this Financial Services Authority Regulation comes into force are required to have, apply, and implement the bank credit or financing policy from the start of their business activities.

Article 6
In preparing the bank credit or financing policy, banks are required to pay attention to the application of risk management as regulated in the Financial Services Authority regulations governing the application of risk management for commercial banks and the Financial Services Authority regulations governing the application of risk management for Islamic commercial banks and Islamic business units.

CHAPTER III
SANCTIONS
Article 7
Violations of the provisions as referred to in Article 2 paragraph (1), Article 2 paragraph (3), Article 4, Article 5, and/or Article 6 of this Financial Services Authority Regulation are subject to administrative sanctions that affect the assessment of the Bank's health and other administrative sanctions in accordance with applicable legislation.

Article 8
Upon the commencement of this Financial Services Authority Regulation:

1. Bank Indonesia Board of Directors Decision Number 10/106/KEP/DIR/UPK on Amendments to Several Provisions on Investment Credit for Government Banks;
2. Bank Indonesia Board of Directors Decision Number 13/23A/KEP/DIR/UPK on Amendments to Bank Indonesia Board of Directors Decision Number 10/106/KEP/DIR/UPK on Amendments to Several Provisions on Investment Credit for Government Banks;
3. Bank Indonesia Board of Directors Decision Number 27/121/KEP/DIR on Submission of Taxpayer Identification Numbers and Financial Statements in Credit Applications;
4. Bank Indonesia Board of Directors Decision Number 28/83/KEP/DIR on Amendments to Bank Indonesia Board of Directors Decision Number 27/121/KEP/DIR on Submission of Taxpayer Identification Numbers and Financial Statements in Credit Applications;
5. Bank Indonesia Board of Directors Decision Number 27/162/KEP/DIR on the Obligation to Prepare and Implement Bank Credit Policies for Commercial Banks;
6. Bank Indonesia Circular Letter Number 27/3/UKU on Submission of Taxpayer Identification Numbers and Financial Statements in Credit Applications; and
7. Bank Indonesia Circular Letter Number 27/7/UPPB on the Obligation to Prepare and Implement Bank Credit Policies for Commercial Banks,
   are repealed and declared invalid.

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

Article 9
This Financial Services Authority Regulation comes into force on the date of its promulgation.
To be known by everyone, ordering the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on 12 July 2017
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD
Promulgated in Jakarta on 12 July 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 148

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 42 /POJK.03/2017
ON
THE OBLIGATION TO PREPARE AND IMPLEMENT CREDIT OR FINANCING POLICIES FOR COMMERCIAL BANKS

I. GENERAL
Banks must maintain the interests and trust of the public considering that most of the funds used by Banks to conduct their business activities come from public deposits entrusted to the Bank. As one of the main business activities conducted by Banks, credit or financing involves relatively high risks that can harm the Bank's finances and affect the health and continuity of the Bank's business. To reduce potential risks faced, Banks are required to apply prudential principles and the principles of healthy credit or financing in conducting credit or financing business activities from the process of providing Credit or Financing, supervision after Credit or Financing is provided, to procedures for resolution in the event of problematic Credit or Financing. This also includes the preparation of organization and management of credit or financing as well as the management of documentation and administration in carrying out the Bank's credit or financing business. Therefore, a written bank credit or financing policy is required as a standard reference in the implementation of providing Bank Credit or Financing so that it is expected to help Banks face various potential risks and avoid losses that may be incurred.

II. ARTICLE BY ARTICLE
Article 1
Clearly sufficient.
Article 2
Clearly sufficient.
Article 3
Clearly sufficient.
Article 4
Clearly sufficient.
Article 5
Clearly sufficient.
Article 6
Clearly sufficient.
Article 7
Clearly sufficient.
Article 8
Clearly sufficient.
Article 9
Clearly sufficient.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6091