Financial Services Authority Regulation Number 8/POJK.03/2014 Concerning the Assessment of the Health Level of Islamic Commercial Banks and Islamic Business Units

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 8/POJK.03/2014
CONCERNING
THE ASSESSMENT OF THE HEALTH LEVEL OF ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS BY THE GRACE OF THE MOST HIGH GOD, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that the health of banks is a means for supervisory authorities in determining strategies and supervisory focus on banks; b. that changes in business complexity and risk profiles, which can originate from banks or from bank subsidiaries, and changes in the international approach to assessing bank conditions, affect the approach to assessing the health level of banks;
c. that in order to improve the effectiveness of the health level assessment of banks to face changes as referred to in letter b, it is necessary to refine the health level assessment of banks with a risk-based approach (Risk-based Bank Rating);
d. that the assessment of the health level of banks also needs to be adjusted to the implementation of consolidated supervision; e. that based on the considerations as referred to in letters a, b, c, and d...

d, it is necessary to regulate the Assessment of the Health Level of Islamic Commercial Banks and Islamic Business Units in a Financial Services Authority Regulation; Recalling:

1. Law Number 21 of 2008 concerning 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);
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);
   DECIDING:
   Decree: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE ASSESSMENT OF THE HEALTH LEVEL OF ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS.

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

1. Bank means Islamic Commercial Banks and Islamic Business Units.
2. Islamic Commercial Bank means an Islamic Commercial Bank as referred to in Law Number 21 of 2008 concerning Islamic Banking.
3. Islamic Business Unit means an Islamic Business Unit as referred to in Law Number 21 of 2008 concerning Islamic Banking.
4. Board of Directors means the Board of Directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies.
5. Board of Commissioners means the Board of Commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies.
6. Bank Health Level is the result of the assessment of the Bank's condition conducted based on risk, including risks related to the implementation of Sharia principles and the Bank's performance, also known as Risk-based Bank Rating.
7. Composite Rating is the final rating of the result of the Bank Health Level assessment.
8. Subsidiary Company is a company owned and/or controlled by the Bank directly or indirectly, both domestically and abroad, that meets the criteria as referred to in the applicable regulations regarding the implementation of consolidated risk management for Banks that exercise control over subsidiary companies.
9. Control is Control as regulated in the applicable regulations regarding the transparency of the Bank's financial condition.

Article 2
(1) Banks are required to maintain and/or improve the Bank Health Level by applying prudential principles, Sharia principles, and risk management in carrying out business activities.
(2) In order to fulfill responsibilities for the continuity of the Bank's business, the Board of Directors and the Board of Commissioners are responsible for maintaining and monitoring the Bank Health Level and taking necessary steps to maintain and/or improve the Bank Health Level as referred to in paragraph (1). (3) Islamic Commercial Banks are required to conduct Bank Health Level assessments both individually and on a consolidated basis. (4) Islamic Business Units are required to conduct Bank Health Level assessments individually.

CHAPTER II
ASSESSMENT OF THE HEALTH LEVEL OF BANKS
Article 3
(1) Banks are required to conduct a self-assessment of the Bank Health Level as regulated in Article 2 paragraph (3) and paragraph (4).
(2) The self-assessment of the Bank Health Level as referred to in paragraph (1) is conducted at least every semester for the end-of-month positions in June and December.
(3) Banks are required to update the self-assessment of the Bank Health Level from time to time when necessary.
(4) The results of the self-assessment of the Bank Health Level as referred to in paragraph (2) and paragraph (3), which have received approval from the Board of Directors, must be submitted to the Board of Commissioners. (5) Banks are required to submit the results of the self-assessment of the Bank Health Level as referred to in paragraph (4) to the Financial Services Authority as follows:
a. for the assessment of the Bank Health Level individually, at the latest on July 31 for the assessment of the Bank Health Level for the end-of-month position in June and January 31 for the assessment of the Bank Health Level for the end-of-month position in December; and b. for the assessment of the Bank Health Level on a consolidated basis, at the latest on August 15 for the assessment of the Bank Health Level for the end-of-month position in June and February 15 for the assessment of the Bank Health Level for the end-of-month position in December.

Article 4
(1) The Financial Services Authority conducts the assessment of the Bank Health Level every semester for the end-of-month positions in June and December.
(2) The Financial Services Authority updates the assessment of the Bank Health Level from time to time when necessary.
(3) The assessment of the Bank Health Level as referred to in paragraph (1) and the update of the assessment of the Bank Health Level as referred to in paragraph (2) are conducted based on examination results, periodic reports submitted by the Bank, and/or other information.

Article 5
(1) In the event that there is a difference in the results of the assessment of the Bank Health Level conducted by the Financial Services Authority as referred to in Article 4 with the results of the self-assessment of the Bank Health Level as referred to in Article 3, the Financial Services Authority is required to hold a prudential meeting with the bank. (2) If after conducting the prudential meeting as referred to in paragraph (1), there is still a difference in the results of the assessment of the Bank Health Level, then the result of the assessment of the Bank Health Level conducted by the Financial Services Authority shall prevail.

CHAPTER III
MECHANISM FOR THE ASSESSMENT OF THE HEALTH LEVEL OF BANKS INDIVIDUALLY
Article 6
(1) Islamic Commercial Banks are required to conduct the assessment of the Bank Health Level individually as referred to in Article 2 paragraph (3), with the scope of assessment covering the following factors:
a. risk profile; b. Good Corporate Governance;
c. earnings; and
d. capital.
(2) Islamic Business Units are required to conduct the assessment of the Bank Health Level individually as referred to in Article 2 paragraph (4), with the scope of assessment covering the risk profile factor.

Article 7
(1) The assessment of the risk profile factor as referred to in Article 6 paragraph (1) letter a and Article 6 paragraph (2) is an assessment of inherent risk and the quality of risk management implementation in the Bank's operations conducted against 10 (ten) risks, namely:
a. credit risk; b. market risk;
c. liquidity risk;
d. operational risk; e. legal risk; f. strategic risk; g. compliance risk; h. reputation risk;
i. yield risk; and
j. investment risk.
(2) The assessment of the Good Corporate Governance factor as referred to in Article 6 paragraph (1) letter b is an assessment of the Islamic Commercial Bank's management regarding the implementation of Good Corporate Governance principles. (3) The assessment of the earnings factor as referred to in Article 6 paragraph (1) letter c includes the assessment of earnings performance, earnings sources, and earnings stability (sustainability) of the Islamic Commercial Bank. (4) The assessment of the capital factor as referred to in Article 6 paragraph (1) letter d includes the assessment of the adequacy of capital and capital management of the Islamic Commercial Bank.

Article 8
(1) Each factor of the Bank Health Level assessment as referred to in Article 6 is assigned a rating based on a comprehensive and structured analysis framework.
(2) The rating of each factor of the Bank Health Level assessment as referred to in paragraph (1) is categorized as follows:
a. rating 1; b. rating 2;
c. rating 3;
d. rating 4; and e. rating 5.
(3) The determination of the risk profile factor rating is conducted in the following stages:
a. determination of the risk level of each risk as referred to in Article 7 paragraph (1); b. determination of the composite inherent risk level and the composite quality of risk management implementation; and
c. determination of the risk profile factor rating based on a comprehensive and structured analysis of the results of the determination as referred to in letters a and b, considering the significance of each risk to the overall risk profile.
(4) The determination of the Good Corporate Governance factor rating is conducted based on a comprehensive and structured analysis of the results of the assessment of the implementation of Good Corporate Governance principles by the Islamic Commercial Bank and other information related to the Good Corporate Governance of the Islamic Commercial Bank. (5) The determination of the earnings factor rating is conducted based on a comprehensive and structured analysis of earnings parameters/indicators, considering the significance of each parameter/indicator and taking into account other issues affecting the earnings of the Islamic Commercial Bank. (6) The determination of the capital factor rating for the Islamic Commercial Bank is conducted based on a comprehensive and structured analysis of capital parameters/indicators, considering the significance of each parameter/indicator and taking into account other issues affecting the capital of the Islamic Commercial Bank.

Article 9
(1) The Composite Rating of the Bank Health Level is determined based on a comprehensive and structured analysis of the rating of each factor as referred to in Article 8 paragraph (3), paragraph (4), paragraph (5), and paragraph (6), considering the materiality and significance of each factor. (2) The Composite Rating of the Bank Health Level as referred to in paragraph (1) is categorized as follows:
a. Composite Rating 1 (CR-1); b. Composite Rating 2 (CR-2);
c. Composite Rating 3 (CR-3);
d. Composite Rating 4 (CR-4); e. Composite Rating 5 (CR-5).
(3) Composite Rating 1 (CR-1) reflects a Bank condition that is generally very healthy, thus assessed as very capable of facing significant negative influences from changes in business conditions and other external factors. (4) Composite Rating 2 (CR-2) reflects a Bank condition that is generally healthy, thus assessed as capable of facing significant negative influences from changes in business conditions and other external factors. (5) Composite Rating 3 (CR-3) reflects a Bank condition that is generally fairly healthy, thus assessed as fairly capable of facing significant negative influences from changes in business conditions and other external factors. (6) Composite Rating 4 (CR-4) reflects a Bank condition that is generally less healthy, thus assessed as less capable of facing significant negative influences from changes in business conditions and other external factors. (7) Composite Rating 5 (CR-5) reflects a Bank condition that is generally unhealthy, thus assessed as unable to face significant negative influences from changes in business conditions and other external factors.

Article 10
In the event that, based on the results of identification and assessment by the Financial Services Authority, problems or violations are found that significantly affect or will affect the operations and/or continuity of the Bank's business, the Financial Services Authority is authorized to downgrade the Composite Rating of the Bank Health Level.

CHAPTER IV
MECHANISM FOR THE ASSESSMENT OF THE HEALTH LEVEL OF ISLAMIC COMMERCIAL BANKS ON A CONSOLIDATED BASIS
Article 11
(1) Islamic Commercial Banks are required to conduct the assessment of the Bank Health Level on a consolidated basis as referred to in Article 2 paragraph (3), with the scope of assessment covering the following factors:
a. risk profile; b. Good Corporate Governance;
c. earnings; and
d. capital.
(2) The determination of the risk profile factor rating for Islamic Commercial Banks on a consolidated basis is conducted by considering:
a. the significance or materiality of the share of Subsidiary Companies to the Islamic Commercial Bank on a consolidated basis; and/or b. issues with Subsidiary Companies that significantly affect the risk profile of the Islamic Commercial Bank on a consolidated basis. (3) The determination of the Good Corporate Governance factor rating on a consolidated basis is conducted by considering:
a. the significance or materiality of the share of Subsidiary Companies to the Islamic Commercial Bank on a consolidated basis; and/or b. issues related to the implementation of Good Corporate Governance principles in Subsidiary Companies that significantly affect the implementation of Good Corporate Governance principles. (4) The determination of the earnings factor rating on a consolidated basis is conducted based on a comprehensive and structured analysis of specific earnings parameters/indicators generated from the consolidated financial reports of the Islamic Commercial Bank and other financial information, considering:
a. the significance or materiality of the share of Subsidiary Companies to the Islamic Commercial Bank on a consolidated basis; and/or b. earnings issues in Subsidiary Companies that significantly affect earnings on a consolidated basis. (5) The determination of the capital factor rating on a consolidated basis is conducted by considering the risk profile based on a comprehensive and structured analysis of specific capital parameters/indicators generated from the consolidated financial reports of the Islamic Commercial Bank and other financial information, considering:
a. the significance or materiality of the share of Subsidiary Companies to the Islamic Commercial Bank on a consolidated basis; and/or b. capital issues in Subsidiary Companies that significantly affect capital on a consolidated basis.

Article 12
For Islamic Commercial Banks that conduct the assessment of the Bank Health Level on a consolidated basis:
a. the mechanism for determining the rating of each assessment factor and the determination of the composite rating of the Bank Health Level on a consolidated basis; and b. the categorization of the rating of each assessment factor and the composite rating on a consolidated basis, must refer to the mechanism for determining and categorizing ratings for Banks individually as regulated in Article 8, Article 9, and Article 10.

CHAPTER V
FOLLOW-UP ON THE RESULTS OF THE ASSESSMENT OF THE HEALTH LEVEL OF BANKS
Article 13
(1) In the event that the results of the assessment of the Bank Health Level conducted by the Financial Services Authority and/or the results of the self-assessment by the Bank include:
a. Bank Health Level factor ratings assigned as rating 4 or rating 5; b. Composite Rating of the Bank Health Level assigned as rating 4 or rating 5; and/or
c. Composite Rating of the Bank Health Level assigned as rating 3, but there are significant issues that need to be addressed so as not to disrupt the continuity of the Bank's business,
then the Board of Directors, Board of Commissioners, and/or controlling shareholders of the Bank are required to submit an action plan to the Financial Services Authority.
(2) The Financial Services Authority is authorized to request the Bank to adjust the action plan as referred to in paragraph (1).
(3) Banks are required to submit the action plan:
a. within a specific time limit set by the Financial Services Authority, for action plans that are follow-ups to the results of the assessment of the Bank Health Level by the Financial Services Authority; b. at the latest on August 15, for the assessment of the Bank Health Level for the end-of-month position in June and February 15 for the assessment of the Bank Health Level for the end-of-month position in December, for action plans that are follow-ups to the assessment of the Bank Health Level based on the Bank's self-assessment results.

Article 14
Banks are required to submit reports on the implementation of the action plan as referred to in Article 13 at the latest:
a. 10 (ten) working days after the target completion time of the action plan; and/or b. 10 (ten) working days after the end of the month and conducted monthly, if there are significant issues that will disrupt the timely completion of the action plan.

Article 15
The Financial Services Authority is authorized to conduct examinations regarding the implementation of the action plan by the Bank.

CHAPTER VI
SANCTIONS
Article 16
Banks that violate the provisions as regulated in Article 2, Article 3, Article 6, Article 7, Article 8, Article 9, Article 11, Article 12, Article 13, Article 14, and Article 17 paragraph (1) and paragraph (2) are subject to administrative sanctions in the form of:
a. written reprimand; b. downgrade of the Bank Health Level;
c. suspension of certain business activities; and/or
d. inclusion of management and/or shareholders of the Bank in the list of parties who receive a failed predicate in the fit and proper test.

CHAPTER VII
OTHER PROVISIONS
Article 17
(1) In preparation for the effective implementation of the assessment of the Bank Health Level both individually and on a consolidated basis, Islamic Commercial Banks are required to conduct a trial of the assessment of the Bank Health Level as referred to in this Financial Services Authority Regulation for the Bank Health Level position of Islamic Commercial Banks at the end of March 2014. (2) In preparation for the effective implementation of the assessment of the Bank Health Level individually, Islamic Business Units are required to conduct a trial of the assessment of the Bank Health Level as referred to in this Financial Services Authority Regulation for the Bank Health Level position of Islamic Business Units at the end of March 2014. (3) The Financial Services Authority is authorized to request the results of the trial assessment of the Bank Health Level as referred to in paragraph (1) and paragraph (2).

Article 18
The implementation details of this Financial Services Authority Regulation are further regulated in a Circular Letter of the Financial Services Authority.

CHAPTER VIII
CLOSING PROVISIONS
Article 19
(1) With the implementation of this Financial Services Authority Regulation, Bank Indonesia Regulation Number 9/1/PBI/2007 concerning the System for the Assessment of the Health Level of Islamic Commercial Banks is declared no longer effective as of July 1, 2014. (2) The assessment of the Bank Health Level according to this Financial Services Authority Regulation is effectively implemented as of July 1, 2014 for the assessment of the Bank Health Level for the end-of-month position in June 2014.

Article 20
This Financial Services Authority Regulation comes into force on the date of its enactment.
To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Approved in Jakarta
On June 11, 2014
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY,
Ttd.
MULIAMAN D. HADAD
Promulgated in Jakarta on June 13, 2014
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Ttd.
AMIR SYAMSUDIN
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2014 NUMBER 134 Copy matches the original DIRECTOR OF LAW 1 MINISTRY OF LAW, Ttd.
TINI KUSTINI

EXPLANATION
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 8/POJK.03/2014
CONCERNING
THE ASSESSMENT OF THE HEALTH LEVEL OF ISLAMIC COMMERCIAL BANKS AND ISLAMIC BUSINESS UNITS

I. GENERAL
In accordance with Law Number 21 of 2008 concerning Islamic Banking, Banks are required to maintain their health level. The health of the Bank must be maintained and/or improved so that public trust in the Bank remains intact. In addition, the Bank Health Level is used as one of the means to evaluate the conditions and problems faced by the Bank and to determine follow-up actions to address weaknesses or problems of the Bank, either in the form of corrective action by the Bank or supervisory action by the Financial Services Authority. The health of the Bank, which is a reflection of the Bank's condition and performance, is a means for supervisory authorities in determining strategies and supervisory focus on the Bank. In addition, the health of the Bank is also of interest to all relevant parties, including owners, managers (management), and the public using Bank services. The development of the banking industry, especially products and services that are increasingly complex and diverse, can increase risk exposure and the Bank's risk profile. In line with this, the international assessment approach also directs towards a risk-based supervisory approach, including additional risks related to the implementation of Sharia principles. The increase in risk exposure and risk profile, as well as the implementation of this risk-based supervisory approach, will subsequently affect the assessment of the Bank Health Level. In accordance with the dynamic development of Bank business which influences the level of risk faced, the methodology for assessing the Bank Health Level needs to be refined so that it can better reflect the current and future conditions of the Bank. Such adjustments need to be made so that the assessment of the Bank Health Level can be used more effectively as a tool to evaluate Bank performance, including in the implementation of risk management with a focus on significant risks, compliance with applicable regulations, and the application of prudential principles and Sharia principles. Such adjustments are made by refining the assessment of the Bank Health Level using a risk-based approach and adjusting the factors of the Bank Health Level assessment. The assessment of the Bank Health Level using a risk-based approach is a comprehensive and structured assessment of the results of the integration of risk profiles and performance, which includes the implementation of good governance, earnings, and capital. This approach enables the Financial Services Authority as a supervisor to take appropriate and timely supervisory actions because the assessment is conducted comprehensively on all assessment factors and focuses on significant risks, and can be immediately communicated to the Bank in order to establish supervisory follow-up. In addition, in line with the implementation of risk-based supervision, supervision is not sufficient to be conducted only for Banks individually but must also be conducted for Banks on a consolidated basis,
including in the assessment of the health level. Therefore, the assessment of the Bank Health Level must also include the assessment of the Bank Health Level on a consolidated basis. In this regard, the assessment of the Bank Health Level needs to be regulated again to align with developments that have occurred.

II. ARTICLE BY ARTICLE
Article 1
It is clear enough.
Article 2
Paragraph (1)
It is clear enough.
Paragraph (2)...

Paragraph (2)
Clearly stated.
Paragraph (3)
The assessment of the Bank's Health Level on a consolidated basis is applied to Islamic Commercial Banks that exercise Control over Subsidiary Companies.
Paragraph (4)
The assessment of the Health Level of Islamic Business Units is an inseparable part of the assessment of the Health Level of the Conventional Commercial Bank that is its parent.

Article 3
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3)
The updating of the Bank's Health Level self-assessment is carried out at any time, including in the event of:
a. the Bank's financial condition deteriorating; b. the Bank facing problems including liquidity and capital risks; or
c. other conditions that the Financial Services Authority deems require an update of the health level assessment.
Paragraph (4)
Clearly stated.
Paragraph (5)
In the event that the deadline for submitting the results of the Bank's Health Level self-assessment falls on a holiday, the results of the Bank's Health Level self-assessment shall be submitted on the next working day.

Article 4
Paragraph (1)
Clearly stated.
Paragraph (2)
The updating of the Bank's Health Level at any time is carried out, including in the event of:
a. the Bank's financial condition deteriorating; b. the Bank facing problems including liquidity and capital risks; or
c. other conditions deemed by the Financial Services Authority to require an update of the health level assessment.
Paragraph (3)
Other information may include:
a. information from the results of assessments by other competent authorities; b. information known to the public such as assessment results from rating agencies and information from the mass media; and/or
c. data or information related to branches of foreign banks regarding the financial condition and rating of their headquarters abroad, produced by competent authorities or international rating agencies.

Article 5
Paragraph (1)
What is meant by a prudential meeting is a meeting conducted between the supervisor and the Bank to gather information related to the process of implementing the self-assessment of the Health Level assessment. Paragraph (2) Clearly Stated.

Article 6
Paragraph (1)
The assessment of the Health Level of the Bank for Islamic Commercial Banks is carried out based on a comprehensive and structured analysis of performance, risk profiles, issues faced, and the Bank's development prospects. Paragraph (2) The assessment of the Health Level of the Bank for Islamic Business Units is carried out based on a comprehensive and structured analysis of performance, risk profiles, issues faced, and the Islamic Business Unit's development prospects.

Article 7
Paragraph (1)
The inherent risk assessment is an assessment of risks inherent in the Bank's business activities, both quantifiable and non-quantifiable, which have the potential to affect the Bank's financial position.
The assessment of the quality of risk management implementation is an assessment of the aspects: (i) risk governance, (ii) risk management framework, (iii) risk management process, adequacy of human resources, and adequacy of management information systems; and (iv) adequacy of risk control systems, taking into account the characteristics and complexity of the Bank's business. Definitions and scope for each risk refer to the prevailing regulations regarding the implementation of risk management for Banks. Paragraph (2) The assessment of the implementation of Good Corporate Governance is evaluated within a governance system consisting of 3 (three) governance aspects, namely governance structure, governance process, and governance outcome. The focus of the assessment regarding the implementation of Good Corporate Governance principles refers to the prevailing regulations regarding the Implementation of Good Corporate Governance for Islamic Commercial Banks, taking into account the characteristics and complexity of the Islamic Commercial Bank's business. Paragraph (3) The assessment of the profitability performance, profitability sources, and stability of profitability of Islamic Commercial Banks is carried out by considering aspects of level, trend, structure, and stability of profitability, taking into account peer group performance and the management of profitability of Islamic Commercial Banks, both through quantitative and qualitative aspect analysis. Quantitative aspect analysis is conducted using main indicators as the basis for assessment. In addition, if necessary, the use of other supporting indicators can be added to sharpen the analysis, adjusted to the business scale, characteristics, and/or complexity of the Islamic Commercial Bank's business. Qualitative aspect analysis is conducted, among others, by considering profitability management, the contribution of profitability to increasing capital, and profitability prospects. Paragraph (4) The assessment of the level of capital adequacy and capital management is carried out by Islamic Commercial Banks by considering the risk profile, level, trend, structure, and stability of capital, taking into account peer group performance and the capital management of Islamic Commercial Banks, both through quantitative and qualitative aspect analysis. Quantitative aspect analysis is conducted using main indicators. In addition, if necessary, the use of other supporting indicators can be added to sharpen the analysis, by considering the business scale, characteristics, and/or complexity of the Islamic Commercial Bank's business. Qualitative aspect analysis is conducted, among others, by considering capital management and the ability to access capital.

Article 8
Paragraph (1)
Clearly stated.
Paragraph (2)
The order of factors with a smaller rank reflects a better Bank condition.
Paragraph (3)
Letter a
The risk level is set based on the inherent risk level and the quality of risk management implementation for each risk.
Letter b
The setting of the composite inherent risk level and the quality of risk management implementation is carried out based on a comprehensive and structured analysis of the inherent risk level and the quality of risk management implementation for each risk, taking into account the significance of each risk to the overall risk profile. Letter c Clearly stated. Paragraph (4) Clearly stated. Paragraph (5) Clearly stated. Paragraph (6) The setting of the capital factor rank for Islamic Commercial Banks is carried out, among others, by considering the additional capital charge associated with the Islamic Commercial Bank's risk profile, referring to the prevailing regulations regarding Minimum Capital Fulfillment Requirements for Islamic Commercial Banks and Islamic Business Units.

Article 9
Paragraph (1)
Comprehensive analysis is also carried out by considering the Bank's ability to face significant changes in external conditions.
Paragraph (2)
The order of Composite Ranks with a smaller value reflects a healthier Bank condition.
Paragraph (3)
What is meant by a Bank condition that is generally very healthy is a Bank condition that is assessed as very capable of facing significant negative influences from changes in business conditions and other external factors, reflected in the rank of assessment factors, for Islamic Commercial Banks in the form of risk profiles, Good Corporate Governance implementation, profitability, and capital that are generally very good, while for Islamic Business Units in the form of risk profiles that are generally very good. If there are weaknesses, generally these weaknesses are not significant. Paragraph (4) What is meant by a Bank condition that is generally healthy is a Bank condition that is assessed as capable of facing significant negative influences from changes in business conditions and other external factors, reflected in the rank of assessment factors, for Islamic Commercial Banks in the form of risk profiles, Good Corporate Governance implementation, profitability, and capital that are generally good, while for Islamic Business Units in the form of risk profiles that are generally good. If there are weaknesses, generally these weaknesses are less significant. Paragraph (5) What is meant by a Bank condition that is generally fairly healthy is a Bank condition that is assessed as fairly capable of facing significant negative influences from changes in business conditions and other external factors, reflected in the rank of assessment factors, for Islamic Commercial Banks in the form of risk profiles, Good Corporate Governance implementation, profitability, and capital that are generally fairly good, while for Islamic Business Units in the form of risk profiles that are generally fairly good. If there are weaknesses, generally these weaknesses are fairly significant and if not handled well by management, it can disrupt the continuity of the Bank's business. Paragraph (6) What is meant by a Bank condition that is generally less healthy is a Bank condition that is assessed as less capable of facing significant negative influences from changes in business conditions and other external factors, reflected in the rank of assessment factors, for Islamic Commercial Banks in the form of risk profiles, Good Corporate Governance implementation, profitability, and capital that are generally less good, while for Islamic Business Units in the form of risk profiles that are generally less good. There are weaknesses that are generally significant and cannot be handled well by management, disrupting the continuity of the Bank's business. Paragraph (7) What is meant by a Bank condition that is generally unhealthy is a Bank condition that is assessed as unable to face significant negative influences from changes in business conditions and other external factors, reflected in the rank of assessment factors, for Islamic Commercial Banks in the form of risk profiles, Good Corporate Governance implementation, profitability, and capital that are generally not good, while
for Islamic Business Units in the form of risk profiles that are generally not good. There are weaknesses that are generally very significant, so that to overcome them, funding support from shareholders or funding sources from other parties is needed to strengthen the Bank's financial condition.

Article 10
The analysis of the significance of the influence of an issue is carried out by considering, among others, the following matters:
a. the negative impact of the issue and/or violation of regulations on business continuity/Bank performance; b. indications of intentional violation of regulations;
c. indications of intentional non-fulfillment of commitments; and/or
d. the number and/or frequency of violations.
Examples of issues or violations that have a significant impact include manipulation including window dressing and internal management disputes that affect operations and/or the continuity of the Bank's business.

Article 11
Paragraph (1)
The assessment of the Bank's Health Level is carried out based on a comprehensive and structured analysis of performance, risk profiles, issues faced, and the Bank's development prospects.
The assessment of each factor is carried out on a consolidated basis between the Bank and Subsidiary Companies.
Paragraph (2)
The risks of Subsidiary Companies assessed for the measurement of the consolidated risk profile are set by considering the business characteristics of the Subsidiary Company and its influence on the Bank's consolidated risk profile. The measurement of the risk level on a consolidated basis is carried out using risk measurement parameters that are appropriate to the business characteristics of the Subsidiary Company. Paragraph (3) The Good Corporate Governance assessment factors of the Subsidiary Company used for the assessment of the implementation of Good Corporate Governance principles on a consolidated basis are set by considering the business characteristics of the Subsidiary Company and its influence on the Bank's consolidated Good Corporate Governance. Paragraph (4) Clearly stated. Paragraph (5) Clearly stated.

Article 12
Clearly stated.

Article 13
Paragraph (1)
What is meant by an action plan is a Bank commitment containing a plan of improvement steps to be implemented by the Bank in order to address significant issues faced, along with completion time targets accepted by the Financial Services Authority. Paragraph (2) Clearly stated. Paragraph (3) Letter a The specific deadline for submitting the action plan is set by the Financial Services Authority by considering the level of complexity and significance of the Bank's issues. Letter b In the event that the deadline for submitting the action plan based on the results of the Bank's Health Level self-assessment falls on a holiday, the action plan based on the results of the Bank's Health Level self-assessment shall be submitted on the next working day.

Article 14
Letter a
The completion time targets for the action plan include the completion time targets for each stage of the action plan as well as overall completion.
The implementation report of the action plan submitted by the Bank includes, among others, an explanation regarding the realization of the implementation of the action plan, accompanied by evidence of implementation and/or supporting documents related thereto. Letter b The implementation report of the action plan submitted by the Bank includes, among others, an explanation regarding the progress and issues faced in the implementation of the action plan, accompanied by evidence and/or supporting documents related thereto.

Article 15
Clearly stated.

Article 16
The listing of Bank officials and/or shareholders in the list of parties who received a failed predicate in the fit and proper test is carried out after going through an assessment process in accordance with the prevailing fit and proper test assessment regulations.

Article 17
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3)
Clearly stated.

Article 18
Clearly stated.

Article 19
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.

Article 20
Clearly stated.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5544