Financial Services Authority Regulation Number 63/POJK.05/2016 Regarding Amendments to Financial Services Authority Regulation Number 11/POJK.05/2014 Regarding Direct Examinations of Non-Bank Financial Institutions

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 63 /POJK.05/2016
CONCERNING
AMENDMENTS TO THE FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 11/POJK.05/2014 CONCERNING DIRECT EXAMINATIONS OF NON-BANK FINANCIAL INSTITUTIONS

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

Considering:
a. that in the context of supervising non-bank financial institutions, direct examinations are necessary to ascertain the factual condition of non-bank financial institutions; b. that in line with this objective, regulations regarding direct examinations of non-bank financial institutions need to be expanded in accordance with industry needs, so that the regulations as established by the Financial Services Authority Regulation Number 11/POJK.05/2014 concerning Direct Examinations of Non-Bank Financial Institutions need to be refined;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Amendments to the Financial Services Authority Regulation Number 11/POJK.05/2014 concerning Direct Examinations of Non-Bank Financial Institutions;

Considering:

1. Law Number 11 of 1992 concerning Pension Funds (State Gazette of the Republic of Indonesia of 1992 Number 37, Supplement to the State Gazette of the Republic of Indonesia Number 3477);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia of 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
3. Law Number 40 of 2014 concerning Insurance (State Gazette of the Republic of Indonesia of 2014 Number 337, Supplement to the State Gazette of the Republic of Indonesia Number 5618);
4. Law Number 1 of 2016 concerning Guarantees (State Gazette of the Republic of Indonesia of 2016 Number 9, Supplement to the State Gazette of the Republic of Indonesia Number 5835);
5. Government Regulation Number 73 of 1992 concerning the Conduct of Insurance Business (State Gazette of the Republic of Indonesia of 1992 Number 120, Supplement to the State Gazette of the Republic of Indonesia Number 3506) as amended several times, lastly with Government Regulation Number 81 of 2008 (State Gazette of the Republic of Indonesia of 2008 Number 212, Supplement to the State Gazette of the Republic of Indonesia Number 4954);
6. Government Regulation Number 76 of 1992 concerning Employer Pension Funds (State Gazette of the Republic of Indonesia of 1992 Number 126, Supplement to the State Gazette of the Republic of Indonesia Number 3507);
7. Government Regulation Number 77 of 1992 concerning Financial Institution Pension Funds (State Gazette of the Republic of Indonesia of 1992 Number 127, Supplement to the State Gazette of the Republic of Indonesia Number 3508);
8. Financial Services Authority Regulation Number 11/POJK.05/2014 concerning Direct Examinations of Non-Bank Financial Institutions (State Gazette of the Republic of Indonesia of 2014 Number 198, Supplement to the State Gazette of the Republic of Indonesia Number 5576);

DECIDING:
To Establish: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING AMENDMENTS TO THE FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 11/POJK.05/2014 CONCERNING DIRECT EXAMINATIONS OF NON-BANK FINANCIAL INSTITUTIONS.

Article I
Several provisions in the Financial Services Authority Regulation Number 11/POJK.05/2014 concerning Direct Examinations of Non-Bank Financial Institutions (State Gazette of the Republic of Indonesia of 2014 Number 198, Supplement to the State Gazette of the Republic of Indonesia Number 5576) are amended as follows:

1. The provisions of item 1 and item 4 of Article 1 are amended, so that Article 1 reads as follows:

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

1. Non-Bank Financial Institutions are:
   a. insurance companies, sharia insurance companies, reinsurance companies, and sharia reinsurance companies as referred to in Law Number 40 of 2014 concerning Insurance, including those conducting part of their business using sharia principles; b. financing companies, including those conducting all or part of their business using sharia principles, as referred to in legislation in the field of financing institutions;
   c. pension funds as referred to in Law Number 11 of 1992 concerning Pension Funds, including those conducting all or part of their business using sharia principles;
   d. insurance broker companies, reinsurance broker companies, and insurance loss assessor companies as referred to in Law Number 40 of 2014 concerning Insurance; and e. guarantee institutions as referred to in Law Number 1 of 2016 concerning Guarantees, including those conducting part of their business using sharia principles.

2. Direct Examination is a series of activities to search for, collect, process, and evaluate data and/or information regarding Non-Bank Financial Institutions conducted at the offices of Non-Bank Financial Institutions and at other places directly or indirectly related to the activities of Non-Bank Financial Institutions;

3. Examiner is the party appointed by the Financial Services Authority to conduct Direct Examinations;

4. Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution having the functions, duties, and authorities for regulation, supervision, examination, and investigation, as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

5. The provision of paragraph (2) of Article 4 is amended and 1 (one) paragraph is inserted between paragraph (2) and paragraph (3) of Article 4, namely paragraph (2a), so that Article 4 reads as follows:

Article 4
(1) The frequency of Direct Examinations is determined by the OJK in accordance with the risk-based supervision plan.
(2) The frequency of Direct Examinations for insurance broker companies, reinsurance broker companies, and insurance loss assessor companies as referred to in Article 1 item 1 letter d is determined by the OJK and conducted at least 1 (one) time within 5 (five) years. (2a) The frequency of Direct Examinations for guarantee institutions as referred to in Article 1 item 1 letter e is determined by the OJK and conducted at least 1 (one) time within 1 (one) year. (3) The scope of Direct Examinations covers all aspects of the conduct of business activities of Non-Bank Financial Institutions or specific aspects of the business activities of Non-Bank Financial Institutions.

3. The provision of paragraph (1) of Article 14 is amended and Article 14 is added with 1 (one) paragraph, namely paragraph (6), so that Article 14 reads as follows:

Article 14
(1) Non-Bank Financial Institutions that do not meet the provisions as referred to in Article 7 and/or Article 14 paragraph (1) and/or paragraph (2) shall be subject to administrative sanctions in the form of:
a. written warnings; b. fines, namely the obligation to pay a certain amount of money;
c. the obligation for the Board of Directors or equivalent bodies of Non-Bank Financial Institutions to undergo re-assessment of competence and propriety;
d. restrictions on business activities; e. suspension of business activities; and/or f. revocation of business licenses.
(2) Sanctions as referred to in paragraph (1) letters b through f may be imposed with or without prior imposition of written warning sanctions as referred to in paragraph (1) letter a. (3) Fine sanctions as referred to in paragraph (1) letter b may be imposed separately or together with the imposition of sanctions as referred to in paragraph (1) letters c through f. (4) The amount of fine sanctions as referred to in paragraph (1) letter b is determined by the OJK based on regulations concerning administrative sanctions in the form of fines applicable to each financial services sector. (5) The OJK may announce the imposition of administrative sanctions as referred to in paragraph (1) to the public. (6) Provisions regarding the procedures for applying sanctions as referred to in paragraph (1), paragraph (2), and paragraph (3) refer to the applicable legislation for each financial services sector.

Article II

1. Direct Examination activities of Non-Bank Financial Institutions that are still ongoing at the time this OJK Regulation is promulgated shall be completed based on the previously applicable provisions.

2. At the time this OJK Regulation takes effect, Financial Services Authority Regulation Number 7/POJK.05/2014 concerning Examination of Guarantee Institutions (State Gazette of the Republic of Indonesia of 2014 Number 74, Supplement to the State Gazette of the Republic of Indonesia of the Year Number 5529) is repealed and declared invalid.

3. This OJK Regulation takes effect on the date of promulgation.

To ensure that everyone knows it, it is ordered to promulgate this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on 21 December 2016

CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY,

signed
MULIAMAN D. HADAD

Promulgated in Jakarta on 27 December 2016

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA OF 2016 NUMBER 294

Copy in accordance with the original
Director of Legal Affairs 1
Ministry of Law

signed
Yuliana

EXPLANATION
OF
AMENDMENTS TO THE FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 11/POJK.05/2014 CONCERNING DIRECT EXAMINATIONS OF NON-BANK FINANCIAL INSTITUTIONS

I. GENERAL
Financial Services Authority Regulation Number 11/POJK.05/2015 concerning Direct Examinations for Non-Bank Financial Institutions serves as the legal basis for the OJK in conducting Direct Examinations at Non-Bank Financial Institutions. To further encourage the scope of Direct Examinations and considering the addition of Non-Bank Financial Institutions supervised using Direct Examination supervision, amendments to the aforementioned OJK Regulation are necessary. Changes to the aforementioned OJK Regulation include adding Guarantee Institutions as part of Non-Bank Financial Institutions whose supervision by the OJK is conducted through Direct Examinations. In light of this, the OJK establishes this OJK Regulation, which constitutes an amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 concerning Direct Examinations for Non-Bank Financial Institutions.

II. ARTICLE BY ARTICLE
Article I
Item 1
Article 1
This is sufficiently clear.

Item 2
Article 4
Paragraph (1)
Direct Examination is one of the supervisory activities conducted by the OJK. The frequency of Direct Examinations is determined by the OJK based on the risk-based supervision plan for Non-Bank Financial Institutions. Paragraph (2) This is sufficiently clear. Paragraph (2a) Direct Examinations at Guarantee Institutions may be conducted more than 1 (one) time within 1 (one) year with specific reasons, such as mergers and consolidations. Paragraph (3) In the event that Direct Examinations are conducted on specific aspects of the business activities of Non-Bank Financial Institutions, Examiners only assess one or more aspects of the conduct of business of Non-Bank Financial Institutions. The aspects of business activities of Non-Bank Financial Institutions referred to include, among others, strategy, management, governance, assets and liabilities, operations, and funding support.

Item 3
Article 14
The imposition of sanctions for violations of this OJK Regulation is adjusted to the type and level of violations committed by Non-Bank Financial Institutions.

Article II
This is sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5984