FINANCIAL SERVICES AUTHORITY

REPUBLIC OF INDONESIA

FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 3 /POJK.05/20172017

CONCERNING

GOOD CORPORATE GOVERNANCE FOR GUARANTEE INSTITUTIONS

BY THE GRACE OF GOD THE ALMIGHTY

THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering: that to implement the provisions of Article 15 paragraph (2),

Article 16 paragraph (2), Article 17 paragraph (4), and Article 26 paragraph (4)

of Law Number 1 of 2016 concerning Guarantees,

it is necessary to establish a Financial Services Authority Regulation

concerning Good Corporate Governance for Guarantee Institutions;

Considering: 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. Law Number 1 of 2016 concerning

Guarantees (State Gazette of the Republic of Indonesia

Year 2016 Number 9, Supplement to the State Gazette

of the Republic of Indonesia Number 5835);

DECIDES:

To establish: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING GOOD

CORPORATE GOVERNANCE FOR GUARANTEE INSTITUTIONS.

COPY

CHAPTER I

GENERAL PROVISIONS

Article 1

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

1. Guarantee is the activity of providing a guarantee by the Guarantor for the fulfillment of financial obligations of the Guaranteed party to the Guarantee Recipient as referred to in Law Number 1 of 2016 concerning Guarantees.

2. Sharia Guarantee is the activity of providing a guarantee by the Guarantor for the fulfillment of financial obligations of the Guaranteed party to the Guarantee Recipient based on Sharia Principles as referred to in Law Number 1 of 2016 concerning Guarantees.

3. Sharia Principles are Islamic legal principles in guarantee activities based on fatwas issued by institutions having authority in issuing fatwas in the Sharia field as referred to in Law Number 1 of 2016 concerning Guarantees.

4. Reinsurance is the activity of providing a guarantee for the fulfillment of financial obligations of the Reinsurance Company as referred to in Law Number 1 of 2016 concerning Guarantees.

5. Sharia Reinsurance is the activity of providing a guarantee for the fulfillment of financial obligations of Sharia Reinsurance Companies and Sharia Business Units as referred to in Law Number 1 of 2016 concerning Guarantees.

6. Guarantee Institution is a Reinsurance Company, Sharia Reinsurance Company, Reinsurance Company, and Sharia Reinsurance Company that conduct guarantee activities as referred to in Law Number 1 of 2016 concerning Guarantees.

7. Reinsurance Company is a legal entity operating in the financial sector with its main business activity being Guarantee activities as referred to in Law Number 1 of 2016 concerning Guarantees.

8. Sharia Reinsurance Company is a legal entity operating in the financial sector with its main business activity being Sharia Guarantee activities as referred to in Law Number 1 of 2016 concerning Guarantees.

9. Reinsurance Company is a legal entity operating in the financial sector with its business activity being Reinsurance as referred to in Law Number 1 of 2016 concerning Guarantees.

10. Sharia Reinsurance Company is a legal entity operating in the financial sector with its business activity being Sharia Reinsurance as referred to in Law Number 1 of 2016 concerning Guarantees.

11. Guarantor is the party conducting guarantee activities as referred to in Law Number 1 of 2016 concerning Guarantees.

12. Guarantee Recipient is a financial institution or non-financial institution that has provided Credit, Financing, Sharia-Based Financing, or service contracts to the Guaranteed party as referred to in Law Number 1 of 2016 concerning Guarantees.

13. Guaranteed party is the party that has obtained Credit, Financing, Sharia-Based Financing, or service contracts from a financial institution or non-financial institution guaranteed by a Reinsurance Company or Sharia Reinsurance Company as referred to in Law Number 1 of 2016 concerning Guarantees.

14. Sharia Business Unit, hereinafter referred to as UUS, is a work unit of a Reinsurance Company that functions as the head office of offices or units conducting Sharia-Based Guarantee activities as referred to in Law Number 1 of 2016 concerning Guarantees.

15. Good Corporate Governance is a set of processes implemented in a Guarantee Institution to determine decisions and manage the Guarantee Institution using principles including transparency, accountability, responsibility, independence, and fairness.

16. Stakeholders are parties having an interest in the Guarantee Institution, directly or indirectly, including the Guaranteed party, members/shareholders, employees, Guarantee Recipients, suppliers of goods and services, and/or the government.

17. Board of Directors is the board of directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Guarantee Institutions in the form of a limited liability company or equivalent to the Board of Directors for Guarantee Institutions in the form of a state-owned enterprise or cooperative.

18. Board of Commissioners is the board of commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Guarantee Institutions in the form of a limited liability company or equivalent to the Board of Commissioners for Guarantee Institutions in the form of a state-owned enterprise or cooperative.

19. Sharia Supervisory Board, hereinafter abbreviated as DPS, is a part of the organ of Sharia Reinsurance Companies, Sharia Reinsurance Companies, and Reinsurance Companies having a UUS, which has the task and function of supervising the implementation of Sharia Guarantee and Sharia Reinsurance activities to ensure compliance with Sharia Principles.

20. General Meeting of Shareholders, hereinafter abbreviated as GMS, is the general meeting of shareholders as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Guarantee Institutions in the form of a limited liability company or equivalent to the GMS for Guarantee Institutions in the form of a state-owned enterprise or cooperative.

21. Independent Commissioner is a member of the Board of Commissioners who is not affiliated with shareholders, members of the Board of Directors, other members of the Board of Commissioners, and/or members of the DPS, meaning they do not have financial, managerial, share ownership, and/or family relationships with shareholders, members of the Board of Directors, other members of the Board of Commissioners, and/or members of DPS, or other relationships that could influence their ability to act independently.

22. Affiliation is a relationship between a person or legal entity with one or more persons or other legal entities, such that one of them can influence the management or policy of the other person or legal entity, or vice versa.

23. Conflict of Interest is a state where there is a conflict between the economic interests of the Guarantee Institution and the personal economic interests of shareholders, members of the Board of Directors, members of the Board of Commissioners, DPS, and/or employees of the Guarantee Institution.

CHAPTER II

IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE

Article 2

Good Corporate Governance principles include:

a. transparency, namely openness in the decision-making process and openness in disclosure and provision of relevant information regarding the Guarantee Institution, which is easily accessible by Stakeholders in accordance with guarantee legislation and standards, principles, and practices of healthy business conduct;

b. accountability, namely clarity of functions and implementation of accountability of the Guarantee Institution's organs so that the performance of the institution's business conduct can run transparently, fairly, effectively, and efficiently;

c. responsibility, namely the suitability of the management of the Guarantee Institution with guarantee legislation and ethical values as well as standards, principles, and practices of healthy business conduct;

d. independence, namely the state of the Guarantee Institution being managed autonomously and professionally and free from Conflicts of Interest and influences or pressures from any party that are not in accordance with guarantee legislation, ethical values, and standards, principles, and practices of healthy business conduct; and

e. fairness, namely equality and balance in fulfilling the rights of Stakeholders arising from agreements, guarantee legislation, and ethical values as well as standards, principles, and practices of healthy business conduct.

Article 3

The implementation of Good Corporate Governance aims to:

a. optimize the value of the Guarantee Institution for Stakeholders;

b. improve the management of the Guarantee Institution professionally, effectively, and efficiently;

c. increase the compliance of the Guarantee Institution's organs and the ranks below them so that in making decisions and taking actions they are based on high ethics, compliance with legislation, and awareness of the social responsibility of the Guarantee Institution towards Stakeholders and environmental sustainability;

d. realize a healthier, reliable, trustworthy, and competitive Guarantee Institution; and

e. increase the contribution of the Guarantee Institution to the national economy.

Article 4

(1) Guarantee Institutions are required to implement Good Corporate Governance principles as referred to in Article 2 in all their business activities at all levels or stages of the organization.

(2) The implementation of Good Corporate Governance principles as referred to in paragraph (1) must be formulated in a guideline containing at least:

a. the implementation of tasks and responsibilities of the Board of Directors, Board of Commissioners, and DPS;

b. the implementation of tasks by work units and committees carrying out the internal control functions of the Guarantee Institution;

c. the application of compliance functions, internal auditors, and external auditors;

d. the application of risk management, including internal control systems and the application of information technology governance;

e. the application of remuneration policies; and

f. transparency of the financial and non-financial conditions of the Guarantee Institution.

CHAPTER III

GENERAL MEETING OF SHAREHOLDERS

Article 5

(1) The GMS of the Guarantee Institution must be held in accordance with legislation and the transparent and accountable articles of association of the Guarantee Institution.

(2) In making decisions, the GMS must strive to maintain the balance of interests of all parties, especially the interests of the Guaranteed party, Guarantee Recipients, and minority shareholders.

(3) Every GMS must produce minutes containing at least the time, agenda, participants, opinions developed during the GMS, and GMS decisions.

CHAPTER IV

SHAREHOLDERS

Article 6

Shareholders of the Guarantee Institution through the GMS must ensure that the Guarantee Institution is run based on healthy business conduct.

Article 7

(1) Shareholders of the Guarantee Institution are prohibited from interfering in the operational activities of the Guarantee Institution that are the responsibility of the Board of Directors in accordance with the articles of association of the Guarantee Institution and legislation, except in the context of exercising rights and obligations as the GMS.

(2) Shareholders of the Guarantee Institution who serve as members of the Board of Directors, members of the Board of Commissioners, or members of the DPS at the same Guarantee Institution must prioritize the interests of the Guarantee Institution.

CHAPTER V

BOARD OF DIRECTORS

Article 8

(1) Guarantee Institutions must have at least 2 (two) members of the Board of Directors.

(2) At least 50% (fifty percent) of the number of Board of Directors members of the Guarantee Institution must have knowledge and experience in risk management in accordance with the business field of the Guarantee Institution.

Article 9

(1) All members of the Board of Directors of a Guarantee Institution whose shareholders are:

a. Indonesian citizens; and/or

b. Indonesian legal entities, owned directly or indirectly by Indonesian citizens,

must be Indonesian citizens.

(2) Guarantee Institutions containing foreign ownership, whether direct or indirect, must have at least 50% (fifty percent) of Board of Directors members who are Indonesian citizens.

(3) Members of the Board of Directors of the Guarantee Institution as referred to in paragraph (1) and paragraph (2) must reside within the territory of the Republic of Indonesia.

(4) For Board of Directors members with foreign citizenship, they must possess:

a. a residence permit; and

b. a work permit,

from the competent authority.

(5) All members of the Board of Directors of the Guarantee Institution must have knowledge relevant to their positions.

Article 10

(1) Guarantee Institutions must have a Board of Directors member overseeing the compliance function.

(2) The Board of Directors member overseeing the compliance function as referred to in paragraph (1) cannot be held concurrently by a Board of Directors member overseeing the marketing function, business and operational functions, and financial functions, except for the Chief Executive Director.

Article 11

The Board of Directors of the Guarantee Institution must meet the following criteria:

a. able to act with good faith, honesty, and professionalism;

b. able to act in the interests of the Guarantee Institution, the Guaranteed party, and/or the Guarantee Recipient;

c. prioritizing the interests of the Guarantee Institution, the Guaranteed party, and/or the Guarantee Recipient over personal interests;

d. able to make decisions based on independent and objective assessments for the interests of the Guarantee Institution, the Guaranteed party, and/or the Guarantee Recipient; and

e. able to avoid abuse of authority to obtain undue personal gains or cause losses to the Guarantee Institution.

Article 12

The Board of Directors of the Guarantee Institution must:

a. ensure effective, precise, and rapid decision-making and act independently, without interests that can hinder their ability to carry out tasks independently and critically;

b. comply with legislation, articles of association, and other internal regulations of the Guarantee Institution in carrying out their duties;

c. manage the Guarantee Institution according to their authority and responsibilities;

d. account for the implementation of their duties to the GMS;

e. ensure that the Guarantee Institution considers the interests of all parties, especially the interests of the Guaranteed party and/or the Guarantee Recipient;

f. ensure that information regarding the Guarantee Institution is provided to the Board of Commissioners and DPS in a timely and complete manner; and

g. assist in meeting the needs of the DPS in using committee members, employees of the Guarantee Institution, and professional experts whose organizational structure is under the Board of Directors.

Article 13

(1) The Board of Directors of the Guarantee Institution must form an investment committee.

(2) The members of the investment committee as referred to in paragraph (1) must consist of at least:

a. a Board of Directors member overseeing the investment management function; and

b. guarantee experts.

(3) The investment committee as referred to in paragraph (1) assists the Board of Directors in formulating investment policies and supervising the implementation of established investment policies.

Article 14

(1) Members of the Board of Directors of the Guarantee Institution are prohibited from holding concurrent positions at the Guarantee Institution or other business entities.

(2) Concurrent positions as referred to in paragraph (1) do not include:

a. serving as a member of the Board of Commissioners at a Guarantee Institution with a smaller operational area than the operational area where the respective Director serves;

b. serving as a supervisor at a controlled subsidiary; and/or

c. serving as a manager in an association or educational institution,

provided that such concurrent positions do not cause the individual to neglect the implementation of tasks and authorities as a member of the Board of Directors of the Guarantee Institution.

Article 15

(1) Guarantee Institutions are prohibited from appointing Board of Directors members from active employees or officials of the Financial Services Authority.

(2) Guarantee Institutions are prohibited from appointing Board of Directors members from former employees or officials of the Financial Services Authority if the individual ceased working at the Financial Services Authority for less than 1 (one) year.

Article 16

Members of the Board of Directors of the Guarantee Institution are prohibited from:

a. conducting transactions that have a Conflict of Interest with the activities of the Guarantee Institution where the respective Director serves;

b. utilizing their position at the Guarantee Institution where they serve for personal, family, and/or third-party interests that can harm or reduce the profits of the Guarantee Institution where they serve;

c. taking and/or receiving personal gains from the Guarantee Institution where they serve, other than remuneration and facilities established based on GMS decisions; and

d. fulfilling shareholder requests related to the operational activities of the Guarantee Institution where they serve, other than those established in the GMS.

Article 17

(1) The Board of Directors of the Guarantee Institution must hold Board of Directors meetings regularly at least 1 (one) time in 1 (one) month.

(2) Members of the Board of Directors of the Guarantee Institution must attend at least 50% (fifty percent) of the total Board of Directors meetings in a 1 (one) year period.

(3) The results of Board of Directors meetings as referred to in paragraph (1) must be recorded in the minutes of the Board of Directors meeting and documented properly.

(4) Dissenting opinions occurring in Board of Directors meeting decisions must be clearly stated in the minutes of the Board of Directors meeting, accompanied by the reasons for the dissenting opinions.

(5) Members of the Board of Directors of the Guarantee Institution, whether present or absent, have the right to receive copies of the minutes of the Board of Directors meeting.

(6) The number of Board of Directors meetings held and the attendance of each Board of Directors member must be included in the report on the implementation of Good Corporate Governance.

CHAPTER VI

BOARD OF COMMISSIONERS

Article 18

Guarantee Institutions must have at least 2 (two) members of the Board of Commissioners.

Article 19

(1) Guarantee Institutions must have at least 1 (one) member of the Board of Commissioners residing in Indonesia.

(2) For Board of Commissioners members with foreign citizenship residing within the territory of the Republic of Indonesia, they must possess:

a. a residence permit; and

b. a work permit,

from the competent authority.

(3) Members of the Board of Commissioners of the Guarantee Institution are prohibited from holding concurrent positions as members of the Board of Commissioners at more than 3 (three) Guarantee Institutions or other business entities.

(4) Concurrent positions as referred to in paragraph (3) do not include:

a. functional tasks performed by a Board of Commissioner who is not an Independent Commissioner on behalf of a shareholder of the Guarantee Institution in the form of a legal entity within its business group; and/or

b. positions held by a Board of Commissioner in an organization or non-profit institution,

provided that the individual does not neglect the implementation of tasks and responsibilities as a member of the Board of Commissioners of the Guarantee Institution.

Article 20

(1) Guarantee Institutions are prohibited from appointing Board of Commissioners members from active employees or officials of the Financial Services Authority.

(2) Guarantee Institutions are prohibited from appointing Board of Commissioners members from former employees or officials of the Financial Services Authority if the individual ceased working at the Financial Services Authority for less than 6 (six) months.

Article 21

Members of the Board of Commissioners of the Guarantee Institution must:

a. carry out supervisory tasks and provide advice to the Board of Directors;

b. supervise the Board of Directors in maintaining the balance of interests of all parties;

c. prepare reports on the activities of the Board of Commissioners, which are part of the report on the implementation of Good Corporate Governance;

d. monitor the effectiveness of the implementation of Good Corporate Governance;

e. provide approval in cases where the DPS requires assistance from committee members whose organizational structure is under the Board of Commissioners; and

f. ensure that the Board of Directors has followed up on audit findings and recommendations from the internal audit work unit of the Guarantee Institution, external auditors, results of supervision by the Financial Services Authority, and/or results of supervision by other authorities.

Article 22

Members of the Board of Commissioners of the Guarantee Institution are prohibited from:

a. conducting transactions that have a Conflict of Interest with the activities of the Guarantee Institution where the respective Commissioner serves;

b. utilizing their position at the Guarantee Institution where they serve for personal, family, and/or third-party interests that can harm or reduce the profits of the Guarantee Institution where they serve;

c. taking and/or receiving personal gains from the Guarantee Institution where they serve, other than remuneration and facilities established based on GMS decisions; and

d. interfering in the operational activities of the Guarantee Institution that are the responsibility of the Board of Directors.

Article 23

Members of the Board of Commissioners of the Guarantee Institution have the right to receive complete and timely information from the Board of Directors regarding the Guarantee Institution.

Article 24

(1) Guarantee Institutions must have an Independent Commissioner in cases:

a. having national or provincial operational areas; or

b. having foreign ownership.

(2) Independent Commissioners as referred to in paragraph (1) must:

a. be Indonesian citizens; and

b. reside in Indonesia.

Article 25

Independent Commissioners of the Guarantee Institution as referred to in Article 24 must meet the following requirements:

a. not having an Affiliation relationship with members of the Board of Directors, members of the Board of Commissioners, members of the DPS, or shareholders of the Guarantee Institution, within the same Guarantee Institution;

b. never having served as a member of the Board of Directors, member of the Board of Commissioners, member of the DPS, or held a position 1 (one) level below the Board of Directors at the same Guarantee Institution or other business entities having an Affiliation relationship with the Guarantee Institution within the last 6 (six) months;

c. understanding guarantee legislation, Sharia Guarantee, Reinsurance, and/or Sharia Reinsurance legislation and other relevant legislation; and

d. having good knowledge of the financial conditions of the Guarantee Institution where the Independent Commissioner serves.

Article 26

Independent Commissioners have the main task of performing supervisory functions to voice the interests of the Guaranteed party, Guarantee Recipients, and other Stakeholders.

Article 27

(1) Independent Commissioners must report to the Financial Services Authority no later than 10 (ten) calendar days since the discovery of:

a. violations of guarantee legislation; and/or

b. conditions or estimated conditions that can endanger the continuity of the business of the Guarantee Institution.

(2) In the event that the deadline for submitting the report as referred to in paragraph (1) falls on a holiday, the deadline for submitting the report is the first working day following it.

Article 28

Guarantee Institutions are prohibited from dismissing Independent Commissioners due to actions taken by Independent Commissioners in performing their duties as referred to in Article 26 and Article 27 paragraph (1).

Article 29

(1) Guarantee Institutions are required to form an audit committee in the event that:
a. they have national or provincial operational areas; or b. there is foreign ownership.

(2) One of the members of the audit committee as referred to in paragraph (1) is an Independent Commissioner who simultaneously serves as the chairman of the committee.

(3) The audit committee as referred to in paragraph (1) is tasked with assisting the Board of Commissioners in monitoring and ensuring the effectiveness of the internal control system and the performance of internal and external auditors by monitoring and evaluating the planning and implementation of audits to assess the adequacy of internal controls, including the financial reporting process.

(4) In addition to the audit committee as referred to in paragraph (1), the Board of Commissioners of Guarantee Institutions may form other committees to support the implementation of the Board of Commissioners' duties.

Article 30

Guarantee Institutions with a district-level scope are required to have a function that assists the Board of Commissioners in monitoring and ensuring the effectiveness of the internal control system and the performance of internal and external auditors by monitoring and evaluating the planning and implementation of audits to assess the adequacy of internal controls, including the financial reporting process.

Article 31

(1) The Board of Commissioners of Guarantee Institutions is required to hold Board of Commissioners meetings at least 1 (one) time every 3 (three) months.

(2) Members of the Board of Commissioners of Guarantee Institutions are required to attend Board of Commissioners meetings at least 75% (seventy-five percent) of the total number of Board of Commissioners meetings within a 1 (one) year period.

(3) The results of Board of Commissioners meetings as referred to in paragraph (1) must be recorded in the Board of Commissioners meeting minutes and documented properly.

(4) Differences of opinion (dissenting opinions) occurring in Board of Commissioners meeting decisions must be clearly stated in the Board of Commissioners meeting minutes, accompanied by the reasons for such differences of opinion.

(5) Members of the Board of Commissioners of Guarantee Institutions, whether present or absent from the Board of Commissioners meetings, have the right to receive copies of the Board of Commissioners meeting minutes.

(6) The number of Board of Commissioners meetings held and the attendance of each Board of Commissioners member must be included in the report on the implementation of Good Corporate Governance.

Article 32

The Board of Commissioners of Guarantee Institutions is required to ensure effective, precise, and rapid decision-making and to act independently in performing their duties.

CHAPTER VII
SHARIA SUPERVISORY BOARD

Article 33

(1) Sharia Guarantee Companies, Sharia Reinsurance Companies, and Guarantee Companies with Sharia Business Units (UUS) are required to have a Sharia Supervisory Board (DPS).

(2) The DPS as referred to in paragraph (1) consists of 1 (one) Sharia expert or more, appointed by the General Meeting of Shareholders (RUPS) based on recommendations from the National Sharia Board of the Indonesian Ulema Council (DSN MUI) and stipulated in a notarial deed.

Article 34

(1) The DPS must have at least the duties and authority to provide advice and suggestions to the Board of Directors, supervise the Sharia aspects of the operational activities of Sharia Guarantee Companies, Sharia Reinsurance Companies, or Guarantee Companies with Sharia Business Units (UUS), and act as representatives of Sharia Guarantee Companies, Sharia Reinsurance Companies, or Guarantee Companies with Sharia Business Units (UUS) on the National Sharia Board of the Indonesian Ulema Council.

(2) The duties and authority as referred to in paragraph (1) must be included in the articles of association of Sharia Guarantee Companies, Sharia Reinsurance Companies, and Guarantee Companies with Sharia Business Units (UUS).

Article 35

(1) DPS members are prohibited from holding concurrent positions as members of the Board of Directors or members of the Board of Commissioners in Sharia Guarantee Companies, Sharia Reinsurance Companies, and Guarantee Companies with Sharia Business Units (UUS) that are the same.

(2) DPS members are prohibited from holding concurrent positions as members of the Board of Directors, members of the Board of Commissioners, or members of the DPS in more than 4 (four) other Sharia financial institutions.

Article 36

DPS members as referred to in Article 33 paragraph (1) must meet the following criteria:
a. able to act with good faith, honesty, and professionalism; b. able to act in the interests of Sharia Guarantee Companies, Sharia Reinsurance Companies, UUS, and/or other Stakeholders;
c. prioritizing the interests of Sharia Guarantee Companies, Sharia Reinsurance Companies, UUS, and/or other Stakeholders over personal interests;
d. able to make decisions based on independent and objective assessments for the interests of Sharia Guarantee Companies, Sharia Reinsurance Companies, UUS, and/or other Stakeholders; and e. able to avoid abusing their authority to obtain improper personal benefits or cause losses to Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS.

Article 37

The DPS of Sharia Guarantee Companies, Sharia Reinsurance Companies, and Guarantee Companies with Sharia Business Units (UUS) is required to ensure effective, precise, and rapid decision-making and to act independently, having no interests that could interfere with their ability to perform their duties independently and objectively.

Article 38

(1) The DPS is required to perform supervision duties and provide advice and suggestions to the Board of Directors so that the activities of Sharia Guarantee Companies, Sharia Reinsurance Companies, or Guarantee Companies with Sharia Business Units (UUS) comply with Sharia Principles.

(2) The supervision and advice/suggestion activities performed by the DPS as referred to in paragraph (1) are conducted regarding:
a. Sharia Guarantee and Sharia Reinsurance activities; b. Sharia Guarantee and Sharia Reinsurance contracts marketed by Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS; and
c. marketing practices of Sharia Guarantee and Sharia Reinsurance conducted by Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS.

(3) In performing supervision and advice/suggestion duties as referred to in paragraph (2), the DPS may be assisted by committee members and/or employees whose organizational structure is under the Board of Commissioners and/or Board of Directors.

Article 39

DPS members have the right to obtain complete and timely information from the Board of Directors regarding Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS.

Article 40

(1) The DPS is required to hold DPS meetings periodically at least 4 (four) times in 1 (one) year.

(2) The results of DPS meetings as referred to in paragraph (1) must be recorded in the DPS meeting minutes and documented properly.

(3) Differences of opinion (dissenting opinions) occurring in DPS meeting decisions must be clearly stated in the DPS meeting minutes, accompanied by the reasons for such differences of opinion.

(4) DPS members, whether present or absent from DPS meetings, have the right to receive copies of the DPS meeting minutes.

(5) The number of DPS meetings held and the attendance of each DPS member must be included in the report on the implementation of Good Corporate Governance.

Article 41

DPS members are prohibited from:
a. conducting transactions involving Conflicts of Interest with the activities of Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS where the DPS member serves; b. utilizing their position at Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS where they serve for personal, family, and/or other interests that can harm or reduce the profits of Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS where they serve; and
c. taking and/or receiving personal benefits from Sharia Guarantee Companies, Sharia Reinsurance Companies, and UUS where they serve, other than remuneration and other facilities determined by the General Meeting of Shareholders (RUPS) decision.

Article 42

(1) In the event that the DPS assesses that there are Board of Directors policies or actions related to matters as referred to in Article 38 paragraph (2) that do not comply with Sharia Principles, the DPS is required to request explanations from the Board of Directors regarding such non-compliant policies or actions.

(2) In the event that the Board of Directors rejects the DPS assessment as referred to in paragraph (1), the DPS is required to report comprehensively to the Financial Services Authority (OJK) and copy the Board of Directors no later than 7 (seven) working days since the Board of Directors' explanation was received by the DPS.

(3) In the event that the Board of Directors accepts the DPS assessment as referred to in paragraph (1), the DPS requests the Board of Directors to make corrections to such policies or actions to ensure compliance with Sharia Principles.

(4) In the event that Board of Directors members do not make corrections to policies or actions as referred to in paragraph (3), the DPS is required to immediately report comprehensively to the Financial Services Authority (OJK) and copy the Board of Directors no later than 7 (seven) working days since it was known that Board of Directors members did not make the intended corrections.

CHAPTER VIII
SHARE OWNERSHIP TRANSPARENCY

Article 43

Members of the Board of Directors, members of the Board of Commissioners, and members of the DPS of Guarantee Institutions are required to disclose regarding:
a. their share ownership reaching 5% (five percent) or more in the Guarantee Institution where the Board of Directors, Board of Commissioners, and DPS members serve and/or in other business entities located domestically and internationally; and b. financial and family relationships with other Board of Directors members, other Board of Commissioners members, other DPS members, and/or shareholders of the Guarantee Institution where the Board of Directors, Board of Commissioners, and DPS members serve, to the Guarantee Institution where the Board of Directors, Board of Commissioners, and DPS members serve, and included in the report on the implementation of Good Corporate Governance.

CHAPTER IX
EXTERNAL AUDITORS

Article 44

(1) External auditors of Guarantee Institutions must be appointed by the General Meeting of Shareholders (RUPS) from candidate external auditors proposed by the Board of Commissioners based on audit committee proposals.

(2) External auditors of Guarantee Institutions with a district-level business scope must be appointed by the General Meeting of Shareholders (RUPS) from candidate external auditors proposed by the Board of Commissioners.

(3) External auditors of Guarantee Institutions as referred to in paragraph (1) and paragraph (2) must be registered with the Financial Services Authority (OJK).

(4) The nomination of external auditors as referred to in paragraph (1) and paragraph (2) must be accompanied by:
a. reasons for nomination and the amount of remuneration or service fees proposed for the external auditor; and b. a statement of willingness signed by the external auditor, to be free from the influence of the Board of Directors, Board of Commissioners members, DPS, and interested parties in the Guarantee Institution, and willingness to provide information regarding audit results to the Financial Services Authority (OJK).

(5) Guarantee Institutions are required to provide all accounting records and supporting data necessary for external auditors, enabling external auditors to provide their opinions on the fairness and compliance of the Guarantee Institution's financial reports with applicable audit standards.

CHAPTER X
REMUNERATION PRACTICES AND POLICIES

Article 45

(1) Guarantee Institutions are required to implement remuneration policies for Board of Directors members, Board of Commissioners members, DPS, and employees that encourage prudent behavior aligned with the long-term interests of the Guarantee Institution and fair treatment of Insured Parties, Guarantors, Guarantee Recipients, and/or other Stakeholders.

(2) The remuneration policy as referred to in paragraph (1) must consider at least:
a. financial performance and fulfillment of obligations of the Guarantee Institution as regulated in applicable laws and regulations; b. individual performance;
c. fairness with Guarantee Institutions and/or equivalent job levels (peer group); and
d. considerations of the long-term goals and strategies of the Guarantee Institution.

CHAPTER XI
GUARANTEE, SHARIA GUARANTEE, REINSURANCE, AND SHARIA REINSURANCE GOVERNANCE

Article 46

(1) Guarantee Institutions are required to formulate policies and plans for Guarantee, Sharia Guarantee, Reinsurance, and Sharia Reinsurance, stipulated in the annual business plan of the Guarantee Institution.

(2) The policies and plans for Guarantee, Sharia Guarantee, Reinsurance, and Sharia Reinsurance as referred to in paragraph (1) must:
a. be determined by the Board of Directors; and b. be socialized to management and employees in relevant work units.

Article 47

The Board of Directors is required to make decisions on Guarantee, Sharia Guarantee, Reinsurance, and Sharia Reinsurance professionally and optimize the added value of the Guarantee Institution's assets while still considering protection for Guarantee Recipients, Insured Parties, and/or other Stakeholders.

Article 48

(1) Guarantee Institutions are required to have a work unit or employees responsible for:
a. performing marketing, guarantee analysis, claims and subrogation, and handling Insured Party complaints functions; b. formulating and implementing standards and operational procedures for Guarantee, Sharia Guarantee, Reinsurance, and/or Sharia Reinsurance; and
c. formulating and implementing internal control systems and procedures to ensure that the provision of Guarantee, Sharia Guarantee, Reinsurance, and Sharia Reinsurance is conducted in accordance with Guarantee, Sharia Guarantee, Reinsurance, and Sharia Reinsurance policies and strategies, and does not violate applicable laws and regulations.

(2) To perform the functions as referred to in paragraph (1) letter a, Guarantee Institutions are required to have employees with knowledge and experience in Guarantee, Sharia Guarantee, Reinsurance, and/or Sharia Reinsurance.

CHAPTER XII
INFORMATION TECHNOLOGY GOVERNANCE

Article 49

(1) Guarantee Institutions are required to implement effective information technology governance.

(2) Information technology governance as referred to in paragraph (1) must contain at least:
a. information system organizational structure; b. information system usage guidelines accompanied by instructions or work orders for each function (standard operating procedure); and
c. data security and incident management guidelines (disaster recovery plan).

CHAPTER XIII
RISK MANAGEMENT AND INTERNAL CONTROL

Article 50

(1) Guarantee Institutions are required to implement risk management by effectively identifying, assessing, and monitoring business risks.

(2) Risk management as referred to in paragraph (1) must be adjusted to the goals, business policies, size and complexity of business, and the capabilities of the Guarantee Institution.

Article 51

(1) The Board of Directors of Guarantee Institutions is required to establish effective and efficient internal controls to provide reasonable assurance that business activities are conducted in accordance with business goals and strategies, the articles of association, other internal regulations of the Guarantee Institution, and applicable laws and regulations.

(2) Internal controls as referred to in paragraph (1) must include at least the following:
a. internal control environment in the Guarantee Institution that is disciplined and structured; b. assessment and management of business risks, which is a process to identify, analyze, assess, and manage business risks;
c. control activities, which are actions taken in a control process regarding Guarantee Institution activities at every level and unit within the organizational structure of the Guarantee Institution, at least regarding authority, authorization, verification, reconciliation, performance assessment, division of tasks, and security of Guarantee Institution assets;
d. information systems and communication, which is a process of presenting reports regarding operational, financial, and compliance activities in the fields of Guarantee, Sharia Guarantee, Reinsurance, and Sharia Reinsurance; e. monitoring procedures, which is an assessment process of the quality of the internal control system, including the internal audit function, at every level and unit of the organizational structure of the Guarantee Institution, so that it can be implemented optimally; and f. reporting mechanisms to the Board of Directors with copies to the audit committee, in the event of deviations in the quality of the internal control system, including the internal audit function, at every level and unit of the organizational structure of the Guarantee Institution.

CHAPTER XIV
ANNUAL BUSINESS PLAN

Article 52

(1) Guarantee Institutions are required to formulate an annual business plan.

(2) The annual business plan as referred to in paragraph (1) must include at least:
a. executive summary; b. management policies and strategies;
c. implementation of risk management and compliance;
d. implementation of Good Corporate Governance; e. financial performance of the Guarantee Institution for the previous period; f. projected financial reports along with the assumptions used; g. projected ratios and financial health levels; h. development and marketing plans for Guarantee or Sharia Guarantee;
i. development and/or office network expansion plans;
j. capital plans; k. financing plans;
l. organizational and human resource development plans; and
m. other information.

(3) Guarantee Institutions are required to submit the annual business plan as referred to in paragraph (1) to the Financial Services Authority (OJK) no later than January 30 of the respective year.

(4) Guarantee Institutions are required to submit the annual business plan as referred to in paragraph (1) for the first time for the year 2017 no later than January 30, 2017.

CHAPTER XV
INFORMATION DISCLOSURE

Article 53

(1) Guarantee Institutions are required to provide information to the Financial Services Authority (OJK) completely, timely, and efficiently.

(2) Guarantee Institutions are required to have reliable and trustworthy financial reporting systems for supervision purposes and for other Stakeholders.

Article 54

(1) Guarantee Institutions are required to disclose important matters to the Financial Services Authority (OJK), at least including:
a. resignation or dismissal of external auditors; b. material transactions with related parties;
c. Conflicts of Interest that are ongoing and/or may occur; and
d. other material information regarding the Guarantee Institution.

(2) The disclosure of important matters as referred to in paragraph (1) is included in the report on the implementation of Good Corporate Governance.

CHAPTER XVI
BUSINESS ETHICS

Article 55

(1) The Board of Directors, Board of Commissioners, DPS, and employees of Guarantee Institutions are prohibited from offering or providing anything, directly or indirectly, to other parties, to influence decision-making related to guarantee transactions, in violation of applicable laws and regulations.

(2) The Board of Directors, Board of Commissioners, DPS, and employees of Guarantee Institutions are prohibited from receiving anything for personal interests in violation of applicable laws and regulations, directly or indirectly, which can influence decision-making related to transactions involving Guarantee, Sharia Guarantee, Reinsurance, and Sharia Reinsurance.

Article 56

Guarantee Institutions are required to create guidelines on ethical behavior, containing business ethics values, as a guide for company organs and all employees of Guarantee Institutions.

CHAPTER XVII
REPORTING

Article 57

(1) Guarantee Institutions are required to conduct periodic self-assessments on the implementation of Good Corporate Governance.

(2) Self-assessments on the implementation of Good Corporate Governance as referred to in paragraph (1) are conducted based on Good Corporate Governance guidelines.

Article 58

(1) Guarantee Institutions are required to formulate reports on the implementation of Good Corporate Governance at the end of each fiscal year.

(2) Reports on the implementation of Good Corporate Governance as referred to in paragraph (1) must include at least:
a. transparency of Good Corporate Governance implementation, which includes disclosure of all aspects of implementing Good Corporate Governance principles as referred to in Article 2; b. self-assessments on the implementation of Good Corporate Governance as referred to in Article 57; and
c. action plans, including corrective actions required, completion times, and obstacles/difficulties in completion, if there are still deficiencies in the implementation of Good Corporate Governance.

(3) Reports on the implementation of Good Corporate Governance as referred to in paragraph (1) must be submitted no later than April 30 of the following year.

(4) If April 30 as referred to in paragraph (3) is a holiday, the deadline for submitting the report is the first working day after the aforementioned April 30.

(5) Guarantee Institutions are required to submit reports on the implementation of Good Corporate Governance as referred to in paragraph (1) for the first time in the 2017 period, submitted no later than April 30, 2018.

(6) Further regulations regarding the form, structure, and procedures for submitting reports on the implementation of Good Corporate Governance as referred to in paragraph (1) are regulated in Financial Services Authority (OJK) circular letters.

CHAPTER XVIII
ADMINISTRATIVE SANCTIONS

Article 59

(1) Guarantee Institutions that do not fulfill the provisions as referred to in Article 4, Article 5 paragraph (1) and (3), Article 7 paragraph (1), Article 8 paragraph (1), Article 9 paragraph (1), (2), (3), and (4), Article 10 paragraph (1), Article 11, Article 12, Article 13 paragraph (1), Article 14 paragraph (1), Article 15, Article 16, Article 17 paragraph (1), (2), (3), and (4), Article 18, Article 19 paragraph (1), (2), and (3), Article 20, Article 21, Article 22, Article 24, Article 27 paragraph (1), Article 28, Article 29 paragraph (1), Article 30, Article 31 paragraph (1), (2), (3), and (4), Article 32, Article 33 paragraph (1), Article 34 paragraph (2), Article 35, Article 37, Article 38 paragraph (1), Article 40 paragraph (1), (2), and (3), Article 41, Article 42 paragraph (1), (2), and (4), Article 43, Article 44, Article 45 paragraph (1), Article 46, Article 47, Article 48, Article 49 paragraph (1), Article 50 paragraph (1), Article 51 paragraph (1), Article 52 paragraph (1), (3), and (4), Article 53, Article 54 paragraph (1), Article 55, Article 56, Article 57 paragraph (1), and Article 58 paragraph (1), (3), and (5) of this Financial Services Authority Regulation are subject to administrative sanctions in the form of:
a. written warnings;

b. administrative fines;
c. suspension of business activities; or
d. revocation of business licenses.
(2) Written warnings as referred to in paragraph (1) letter a are issued in writing by the Financial Services Authority to Guarantee Institutions at most 3 (three) times consecutively, with each warning valid for a maximum of 2 (two) months. (3) In the event that before the expiration of the validity period of the warning sanctions as referred to in paragraph (2), the Guarantee Institution has fulfilled the provisions as referred to in paragraph (1), the Financial Services Authority revokes the warning sanctions. (4) In the event that the validity period of the third warning sanction as referred to in paragraph (2) expires and the Guarantee Institution still fails to fulfill the provisions as referred to in paragraph (1), the Financial Services Authority imposes sanctions for suspension of business activities. (5) Sanctions for suspension of business activities as referred to in paragraph (1) letter c are issued in writing by the Financial Services Authority to the relevant Guarantee Institution, and the suspension of business activities applies for 6 (six) months from the issuance of the suspension of business activities sanction letter. (6) If the validity period of the warning sanctions as referred to in paragraph (2) and the sanctions for suspension of business activities as referred to in paragraph (5) expire on a holiday, the warning sanctions and sanctions for suspension of business activities apply until the next working day. (7) In the event that before the expiration of the validity period of the sanctions for suspension of business activities as referred to in paragraph (5), the Guarantee Institution has fulfilled the provisions as referred to in paragraph (1), the Financial Services Authority revokes the sanctions for suspension of business activities. (8) In the event that the sanctions for suspension of business activities as referred to in paragraph (5) are still in effect and the Guarantee Institution continues to conduct business activities, the Financial Services Authority may directly impose sanctions for revocation of business licenses. (9) In the event that by the expiration of the validity period of the sanctions for suspension of business activities as referred to in paragraph (5), the Guarantee Institution has not fulfilled the provisions as referred to in paragraph (1), the Financial Services Authority revokes the business license of the relevant Guarantee Institution. (10) The Financial Services Authority may announce sanctions for suspension of business activities as referred to in paragraph (4) or revocation of business licenses as referred to in paragraph (8) and paragraph (9) to the public.

CHAPTER XIX
TRANSITIONAL PROVISIONS

Article 60
For Guarantee Institutions that have obtained business licenses before the enactment of this Financial Services Authority Regulation, the provisions as referred to in Article 8 paragraph (1), Article 9 paragraph (2), Article 18, Article 24 paragraph (1), and Article 29 paragraph (1) are declared to apply 2 (two) years from the enactment of this Financial Services Authority Regulation.

CHAPTER XX
CLOSING PROVISIONS

Article 61
At the time this Financial Services Authority Regulation comes into force, provisions regarding Good Corporate Governance for Guarantee Institutions are subject to this Financial Services Authority Regulation.

Article 62
This Financial Services Authority Regulation comes into force on the date of its enactment.
To ensure that everyone knows it, it is ordered to publish this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on 11 January 2017

CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY,

signed

MULIAMAN D. HADAD

Published in Jakarta on 11 January 2017

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

signed

YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 8

A copy in accordance with the original
Legal Director 1
Department of Law

signed

Yuliana