Financial Services Authority Regulation Number 7/POJK.05/2014 on Examination of Guarantee Institutions

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHABILITY REGULATION
NUMBER 7/POJK.05/2014
ON
EXAMINATION OF GUARANTEE INSTITUTIONS
BY THE GRACE OF THE ALMIGHTY GOD,
THE COMMISSIONERS' BOARD OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. That in order to ensure the effectiveness of supervision and oversight of Guarantee Institutions, examinations of Guarantee Institutions must be conducted to increase compliance with applicable regulations in the field of Guarantee Institutions; b. That based on the considerations referred to in letter a above, it is necessary to establish a Financial Services Authority Regulation on Examination of Guarantee Institutions; Recalling:

1. 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);
2. Presidential Regulation Number 2 of 2008 concerning Guarantee Institutions;
   DECIDES:
   Establish: FINANCIAL SERVICES AUTHORITY REGULATION ON EXAMINATION OF GUARANTEE INSTITUTIONS

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

1. Guarantee is the activity of providing guarantees for the fulfillment of the financial obligations of the Guaranteed Party.
2. Re-guarantee is the activity of providing guarantees for the fulfillment of the financial obligations of a Guarantee Company or Sharia Guarantee Company that has guaranteed the fulfillment of the financial obligations of the Guaranteed Party.
3. Guarantee Institution means a Guarantee Company, Sharia Guarantee Company, Re-guarantee Company, and Sharia Re-guarantee Company.
4. Guarantee Company is a legal entity operating in the financial sector with business activities conducting Guarantees.
5. Sharia Guarantee Company is a legal entity operating in the financial sector with business activities conducting Guarantees based on Sharia Principles.
6. Re-guarantee Company is a legal entity operating in the financial sector with business activities conducting Re-guarantees.
7. Sharia Re-guarantee Company is a legal entity operating in the financial sector with business activities conducting Re-guarantees based on Sharia Principles.
8. Sharia Principles are Islamic legal provisions based on fatwas or statements of Sharia compliance from the National Sharia Board of the Indonesian Ulema Council.
9. Examination is a series of activities to collect, search, process, and evaluate data and information regarding the business activities of Guarantee Institutions, with the aim of obtaining assurance regarding the truthfulness of periodic reports, compliance with regulations in the field of Guarantee Institutions, and ensuring that periodic reports correspond to the actual situation.
10. Examiner means an employee of the Financial Services Authority or another party appointed by the Financial Services Authority.
11. Order for Examination is a letter issued by the Financial Services Authority used by the Examiner as the basis for conducting an Examination.
12. Notification of Examination is a letter issued by the Financial Services Authority that is delivered to the Guarantee Institution to be examined.
13. Financial Services Authority is an independent institution free from the interference of other parties that has the function, duties, and authority for regulation, supervision, examination, and investigation as referred to in the Law concerning the Financial Services Authority.

CHAPTER II
EXAMINATION
Article 2
(1) In carrying out its supervisory function, the Financial Services Authority conducts Examinations of Guarantee Institutions.
(2) Examinations aim to:
a. Obtain assurance regarding the actual condition of the Guarantee Institution; b. Study the correspondence of the condition of the Guarantee Institution with laws and regulations, as well as standards, principles, and practices for conducting healthy Guarantee or Re-guarantee business; and
c. Ensure that the Guarantee Institution has made efforts to fulfill its obligations to the Recipient of Guarantee.

Article 3
(1) The implementation of Examinations of each Guarantee Institution is conducted:
a. periodically at least 1 (one) time in 1 (one) year; or b. at any time when necessary.
(2) Periodic Examinations as referred to in paragraph (1) include examinations of the substance of periodic reports and compliance with laws and regulations in the field of guarantee institutions. (3) Ad hoc Examinations as referred to in paragraph (1) letter b are special Examinations conducted when:
a. based on the analysis of the periodic reports of the Guarantee Institution, it is suspected that the business activities of the said Guarantee Institution deviate from laws and regulations in the field of Guarantee Institutions, which may pose risks to the interests of the Recipient of Guarantee and/or the Guaranteed Party in Guarantee or Re-guarantee activities; b. based on research of information obtained or complaint letters received by the Financial Services Authority, it is suspected that the business activities of the said Guarantee Institution deviate from laws and regulations in the field of Guarantee Institutions, which may pose risks to the interests of the Recipients of Guarantee; or
c. there are special reasons necessitating an Examination, including:

1. verification of the operational activities of the Guarantee Institution;
2. merger;
3. consolidation;
4. takeover; and/or
5. transfer of Guarantee or Re-guarantee portfolios.
   (4) Examinations as referred to in paragraph (1) are included in the annual examination plan established by the Financial Services Authority.

Article 4
(1) Examinations as referred to in Article 3 are conducted by Examiners based on the Order for Examination and the Notification of Examination.
(2) Before conducting the Examination as referred to in paragraph (1), the Notification of Examination must first be delivered to the Guarantee Institution.
(3) The Notification of Examination as referred to in paragraph (2) must be delivered no later than 3 (three) working days before the date of the Examination activity. (4) The provisions of paragraph (2) are excluded if it is suspected that the delivery of the Notification of Examination could cause actions to obscure the actual situation or actions to hide data, information, or reports necessary for the implementation of the Examination.

Article 5
Examinations as referred to in Article 3 are conducted based on Examination Guidelines, which are further regulated in a Regulation of the Commissioners' Board of the Financial Services Authority.

Article 6
(1) Examinations as referred to in Article 3 are conducted through the following stages:
a. preparation of the Examination; b. implementation of the Examination; and
c. reporting of the Examination results.
(2) Preparation of the Examination as referred to in paragraph (1) letter a is made based on the analysis of periodic reports and other supporting data.
(3) Implementation of the Examination as referred to in paragraph (1) letter b is conducted through Examinations at the office of the Guarantee Institution, Examinations at the office of the Financial Services Authority, or Examinations at other locations determined by the Financial Services Authority. (4) To support the implementation of examinations as referred to in paragraph (1) letter b, confirmations may be made with third parties related to the respective Guarantee Institution. (5) Reporting of the Examination results as referred to in paragraph (1) letter c must be prepared based on data or information obtained during the examination process, documented in Examination working papers.

Article 7
(1) At the time the Examination is about to begin, the Examiner is required to show the Order for Examination and the Examiner's identification.
(2) If the Examiner fails to meet the provisions of paragraph (1), the Guarantee Institution to be examined must refuse the Examination.
(3) If the Examiner has shown the Notification of Examination, the Order for Examination, and the Examiner's identification, the Examiner has the right to:
a. examine and/or borrow books, notes, and supporting documents, including outputs from data processing or other electronic data processing media and devices; b. obtain oral and/or written information from the examined Guarantee Institution;
c. enter places or rooms suspected to be locations for storing documents, money, or goods that can provide clues about the condition of the examined Guarantee Institution; and
d. obtain information and/or data required from third parties having relations with the examined Guarantee Institution.
(4) Examiners are required to keep confidential data and/or information obtained during the Examination from unauthorized parties, except in the course of carrying out functions, duties, and authorities based on decisions of the Financial Services Authority or as required by Law.

Article 8
(1) With regard to the provisions as referred to in Article 7 paragraph (2), the examined Guarantee Institution is prohibited from refusing and/or hindering the smooth process of the Examination. (2) In the implementation of the Examination, the examined Guarantee Institution is obligated to:
a. fulfill requests to provide or lend books, notes, and documents necessary for the smooth conduct of the Examination during the Examination; b. provide necessary information in writing and/or orally;
c. provide access to the Examiner to enter places or rooms deemed necessary; and
d. provide information and/or data required from third parties having relations with the examined Guarantee Institution.
(3) A Guarantee Institution is considered to be hindering the smooth process of the Examination if it does not fulfill the obligations as referred to in paragraph (2) and/or fulfills the obligations as referred to in paragraph (2) but the books, notes, documents, or information provided are incorrect or misleading. (4) If a Guarantee Institution is considered to be hindering the smooth process of the Examination, this will be recorded in the Examination results report. (5) Without prejudice to criminal provisions as regulated in Article 53 of Law Number 21 of 2011 concerning the Financial Services Authority, if a Guarantee Institution refuses and/or hinders the Examination as referred to in paragraph (1), the Examiner establishes a Report of Refusal of Examination with or without the signature of the Board of Directors of the Guarantee Institution. (6) The Board of Directors of a Guarantee Institution that refuses and/or hinders the Examination as referred to in paragraph (1) is required to participate in capability and suitability assessments.

Article 9
(1) After the implementation of the Examination as referred to in Article 6 paragraph (1) letter b ends, the Examiner is required to prepare a report of the Examination results. (2) The report of the Examination results as referred to in paragraph (1) consists of:
a. interim Examination results report; and b. final Examination results report.
(3) The report of the Examination results as referred to in paragraph (2) is signed by the Examiner and established by the Financial Services Authority.

Article 10
(1) The Financial Services Authority delivers the interim Examination results report to the Board of Directors of the Guarantee Institution no later than 30 (thirty) days after the end of the Examination implementation. (2) The examined Guarantee Institution may submit responses to the interim Examination results report as referred to in paragraph (1) to the Financial Services Authority no later than 20 (twenty) days after the date the interim Examination results report is established. (3) If, after the time limit as referred to in paragraph (2), the Guarantee Institution does not provide written responses to the interim Examination results report, the Financial Services Authority establishes the interim Examination results report as the final Examination results report no later than 15 (fifteen) days after the expiration of the time limit as referred to in paragraph (2). (4) If the Guarantee Institution submits responses that do not contain objections to the interim Examination results report previously delivered, so that no discussion is required, the Financial Services Authority establishes the interim Examination results report as the final Examination results report no later than 15 (fifteen) days after the receipt of the response from the examined Guarantee Institution. (5) If the Guarantee Institution submits responses containing objections to the interim Examination results report previously delivered and discussion of the interim Examination results report is required, the Financial Services Authority invites the respective Guarantee Institution to conduct discussions on the responses submitted. (6) The Discussion process regarding responses to the interim Examination results report as referred to in paragraph (5) is no later than 15 (fifteen) days from the receipt of the response letter. (7) Based on the results of the discussion as referred to in paragraph (6), the Financial Services Authority establishes the interim Examination results report as the final Examination results report no later than 15 (fifteen) days after the completion of the joint discussion with the examined Guarantee Institution.

CHAPTER III
CLOSING PROVISIONS
Article 11
At the time this Financial Services Authority Regulation takes effect, regulations concerning the examination of Guarantee Institutions are subject to this Financial Services Authority Regulation.

Article 12
This Financial Services Authority Regulation takes effect on the date of enactment.
For everyone to know, it is ordered to enact this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta
On 7 April 2014
CHAIRMAN OF THE COMMISSIONERS' BOARD
FINANCIAL SERVICES AUTHORITY
Signed, Signed,
MULIAMAN D. HADAD
Enacted in Jakarta on 8 April 2014

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Signed,
AMIR SYAMSUDIN
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2014 NUMBER 74 Copy in accordance with the original HEAD OF LEGAL ASSISTANCE DIVISION LAW DIRECTORATE, Signed, MUFLI ASMAWIDJAJA

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 7/POJK.05/2014
ON
EXAMINATION OF GUARANTEE INSTITUTIONS

I. GENERAL
Guarantee Institutions are one of the non-bank financial institutions expected to bridge the access of MSMEs to banking financing facilities, so that the growth of the MSME sector is expected to impact national economic growth. For this reason, effective and efficient business activities must be managed by Guarantee Institutions to achieve the aforementioned objectives. To ensure the effectiveness of the management of Guarantee Institution business activities, including compliance with applicable regulations, on-site supervision in the form of direct examinations is necessary. With the ratification of Law Number 21 of 2011 concerning the Financial Services Authority on November 22, 2011, the supervisory duties over Guarantee Institutions have shifted to the Financial Services Authority since December 31, 2012. Consequently, a legal basis is required for the Financial Services Authority to exercise its functions and authorities in supervising Guarantee Institutions through direct examinations. In this regard, the Financial Services Authority establishes the Financial Services Authority Regulation on Examination of Guarantee Institutions.

II. ARTICLE BY ARTICLE
Article 1
Sufficiently clear.
Article 2
Sufficiently clear.
Article 3
Paragraph (1)
Letter a
For Guarantee Companies or Re-guarantee Companies that have Sharia Business Units, periodic examinations must include at least 1 (one) time on the Guarantee Company or Re-guarantee Company as the parent entity, and at least 1 (one) time on the Sharia Business Unit owned within 1 (one) year. Letter b Sufficiently clear. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.
Article 4
Sufficiently clear.
Article 5
Sufficiently clear.
Article 6
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Third parties include creditors as Recipients of Guarantee, guarantee agents, debtor customers as the Guaranteed Party, and/or parties related to the investment placement of the Guarantee Institution. Paragraph (5) Sufficiently clear.
Article 7
Sufficiently clear.
Article 8
Sufficiently clear.
Article 9
Sufficiently clear.
Article 10
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
The maximum time limit of 15 (fifteen) days includes the time required to obtain the results of discussions between the Financial Services Authority and the examined Guarantee Institution. Paragraph (7) Sufficiently clear.
Article 11
Sufficiently clear.
Article 12
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5529