Maximum Limit on Credit Provision and Large Fund Provision for General Banks

EXTRACT
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 32 /POJK.03/2018
CONCERNING
MAXIMUM LIMIT ON CREDIT PROVISION AND LARGE FUND PROVISION FOR GENERAL BANKS BY THE GRACE OF THE ALMIGHTY GOD, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that the concentration of bank fund provision to borrowers or a group of borrowers is one of the causes of bank business failure; b. that to avoid bank business failure resulting from fund provision concentration, banks must manage fund provision in accordance with prudential principles;
c. that to manage fund provision in accordance with prudential principles, it is necessary to spread or diversify the portfolio of fund provision provided and to set limits on fund provision and large fund provision to certain parties and/or business groups;
d. that to support a more optimal economic growth rate, banks must support financing to the real sector, while still observing prudential principles; e. that based on the considerations referred to in letters a through d, it is necessary to establish a Financial Services Authority Regulation on the Maximum Limit on Credit Provision and Large Fund Provision for General Banks; 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. Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION ON THE MAXIMUM LIMIT ON CREDIT PROVISION AND LARGE FUND PROVISION FOR GENERAL BANKS.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation:

1. General Bank, hereinafter referred to as Bank, is a bank that conducts conventional business activities, including providing payment circulation services, including branch offices of banks located abroad.
2. Maximum Limit on Credit Provision, hereinafter abbreviated as BMPK, is the maximum percentage of fund provision established against:
   a. Bank capital for fund provision to related parties; or b. Core Capital (tier 1) of the Bank for fund provision to non-related parties.
3. Large Fund Provision is the nominal value of Fund Provision to 1 (one) borrower or 1 (one) group of borrowers, other than related parties, amounting to 10% (ten percent) or more of the Core Capital (tier 1) of the Bank.
4. Fund Provision is the investment of Bank funds in the form of:
   a. placements; b. derivative transactions;
   c. securities;
   d. securities sold with an agreement to repurchase (repo); e. claims on securities purchased with an agreement to resell (reverse repo); f. acceptance claims; g. credits; h. equity investments;
   i. temporary equity investments;
   j. administrative account transactions; and k. other forms of fund provision that can be equated with letters a through j.
5. Capital is:
   a. core capital (tier 1) and supplementary capital (tier 2) for Banks headquartered in Indonesia; or b. business funds, retained earnings, prior year profits, current year profits, general reserves, balance of fixed asset revaluation surplus, other comprehensive income, general reserves for Provision for Asset Impairment (PPA) on productive assets, and others based on approval by the Financial Services Authority, for branch offices of banks located abroad, taking into account capital reduction factors as referred to in the Financial Services Authority Regulation concerning minimum capital adequacy requirements for general banks.
6. Core Capital (tier 1) is:
   a. common equity tier 1 and additional tier 1 for Banks headquartered in Indonesia; or b. business funds, retained earnings, prior year profits, current year profits, general reserves, balance of fixed asset revaluation surplus, and other comprehensive income for branch offices of banks located abroad, taking into account capital reduction factors as referred to in the Financial Services Authority Regulation concerning minimum capital adequacy requirements for general banks.
7. Related Parties are individuals or companies that have a control relationship with the Bank, directly or indirectly, through ownership, management, and/or financial relationships.
8. BMPK Violation is the excess difference between the established BMPK percentage and the percentage of Fund Provision against:
   a. Bank Capital for Related Parties; or b. Core Capital (tier 1) of the Bank for non-Related Parties, using the Capital or Core Capital (tier 1) position of the last month before the realization of Fund Provision.
9. BMPK Exceedance is the excess difference between the established BMPK percentage and the percentage of Fund Provision against:
   a. Bank Capital for Related Parties; or b. Core Capital (tier 1) of the Bank for non-Related Parties, at the reporting date and excluding BMPK Violation.
10. Subsidiary Company is a company owned and/or controlled by the Bank directly or indirectly, both domestically and abroad, meeting the criteria as referred to in the Financial Services Authority Regulation concerning the application of consolidated risk management for banks controlling subsidiary companies.
11. Credit Risk Mitigation Technique, hereinafter referred to as CRM Technique, is the method of recognizing collateral, guarantees, credit guarantees, or credit insurance in calculating risk-weighted assets under the standard approach.
12. Placement is the investment of Bank funds in other banks, in the form of current accounts, interbank call money, savings, time deposits, certificates of deposit, credits, and other similar fund investments, excluding other Placements in Indonesia through the Interbank Money Market (PUAB) for daily liquidity management purposes.
13. Derivative Transaction is a financial instrument whose transaction is based on the value of the underlying asset, generally intended for hedging or trading.
14. Securities are debt instruments, bills, bonds, credit securities, or any derivatives thereof, or other interests, or obligations of the issuer, in a form commonly traded in the capital market and money market.
15. Securities Sold with an Agreement to Repurchase (Repo) is the sale of Securities from other parties accompanied by an agreement to repurchase from those parties at a specified time and price.
16. Claims on Securities Purchased with an Agreement to Resell (Reverse Repo) are claims arising from the purchase of Securities from other parties accompanied by an agreement to resell to those parties at a specified time and price.
17. Acceptance Claims are claims arising from acceptance of time bills.
18. Credit is the provision of money or claims that can be equated with it, based on loan approval or agreement between the Bank and other parties, obligating the borrower to repay the debt after a certain period with interest, including:
    a. overdrafts, i.e., negative balances in customer current accounts that cannot be fully paid by the end of the day; b. acquisition of claims for factoring activities; and
    c. acquisition or purchase of credits from other parties.
19. Equity Investment is the investment of Bank funds in the form of shares in companies operating in the financial sector, including investments in the form of mandatory convertible bonds or mandatory convertible sukuk, or certain types of transactions that result in the Bank having or acquiring shares in companies operating in the financial sector.
20. Temporary Equity Investment is equity investment by the Bank in the form of shares in debtor companies to overcome the consequences of credit failure.
21. Administrative Account Transaction is a commitment and contingent liability obligation, including the issuance of guarantees, letters of credit (L/C), standby letters of credit (SBLC), and/or other commitment and contingent liability obligations.
22. Borrower is an individual or company customer receiving Fund Provision from the Bank, including:
    a. counterparty for Fund Provision in the form of Placements and Derivative Transactions; b. party transferring credit risk (protection buyer) and/or reference entity, for Fund Provision in the form of Derivative Transactions with underlying assets in the form of credit (credit derivatives);
    c. issuer of Securities, party selling Securities, collective investment contract manager, and/or reference entity, for Fund Provision in the form of Securities;
    d. Bank or debtor, for Fund Provision in the form of Acceptance Claims; e. debtor, for Fund Provision in the form of Credit; f. party where the Bank makes Equity Investment, for Fund Provision in the form of Equity Investment; g. applicant, for Fund Provision in the form of guarantees, letters of credit (L/C), standby letters of credit (SBLC), or similar instruments; and/or h. other parties obligated to repay claims to the Bank.
23. Reference Entity is a party owing money or having payment obligations from the underlying asset, including:
    a. issuer of Securities designated as the underlying asset; and b. party obligated to repay claims from transferred credits or claims designated as the underlying asset.
24. Government of the Republic of Indonesia is:
    a. central government; and b. regional government.
25. State-Owned Enterprises, hereinafter abbreviated as SOEs, are enterprises whose capital is wholly or mostly owned by the state through direct investment originating from separated state assets, including companies directly owned by holding companies that are SOEs.
26. Prime Bank is a bank that has:
    a. investment rating given by a rating agency, at minimum:

1. BBB- based on Standard and Poor's assessment;
2. Baa3 based on Moody's assessment;
3. BBB- based on Fitch assessment; or
4. investment rating equivalent to numbers 1), 2), and/or 3) based on assessment by rating agencies recognized by the Financial Services Authority,
   based on assessment of the long-term business prospects of the bank; and b. total assets included in the 200 (two hundred) largest in the world based on information contained in the banker's almanac.

27. Board of Directors is:
    a. the corporate organ authorized and fully responsible for managing the corporation for the interests of the corporation in accordance with the purpose and objectives of the corporation and representing the corporation both inside and outside court, in accordance with the articles of association for Banks in the form of limited liability companies; b. equivalent to letter a for Banks in the form of regional public enterprises or regional enterprises; or
    c. branch office head and officials one level below the branch office head for Banks that are branch offices of banks located abroad.
28. Board of Commissioners is:
    a. the corporate organ tasked with general and/or specific supervision in accordance with the articles of association and providing advice to the Board of Directors for Banks in the form of limited liability companies; b. equivalent to letter a for Banks in the form of regional public enterprises or regional enterprises; or
    c. party appointed to perform supervisory functions for Banks that are branch offices of banks located abroad.
29. Executive Officials are officials directly responsible to the Board of Directors or having significant influence on the policies and/or operations of the Bank.

Article 2
(1) Banks are required to calculate BMPK and Large Fund Provision for each Fund Provision individually and on a consolidated basis.
(2) The calculation of BMPK and Large Fund Provision for each Fund Provision by the Bank on a consolidated basis as referred to in paragraph (1) does not include Fund Provision to Subsidiary Companies conducting insurance business activities. (3) The calculation of BMPK and Large Fund Provision on a consolidated basis as referred to in paragraph (1) must:
a. take into account Fund Provision from Subsidiary Companies to Bank debtors as one unit with the Bank's Fund Provision; and b. use:

1. Bank Capital for Related Parties; or
2. Core Capital (tier 1) of the Bank for non-Related Parties,
   consolidated.

Article 3
(1) Banks are required to apply prudential principles and risk management in providing Fund Provision, including Fund Provision to Related Parties, Large Fund Provision, and Fund Provision to other parties having interests in the Bank. (2) In applying the prudential principles and risk management as referred to in paragraph (1), Banks must have written policies, guidelines, and procedures regarding Fund Provision to Related Parties, Large Fund Provision, and/or Fund Provision to other parties having interests in the Bank. (3) The written policies, guidelines, and procedures regarding Fund Provision as referred to in paragraph (2) must at least include:
a. standards and criteria for selecting and assessing the eligibility of Borrowers and groups of Borrowers; b. standards and criteria for setting limits on Fund Provision;
c. Fund Provision management information systems;
d. Fund Provision monitoring systems; and e. determination of control measures to address Fund Provision concentration.
(4) The written policies, guidelines, and procedures regarding Fund Provision as referred to in paragraph (3) must be at least as prudent as or more prudent than the policies and procedures for general credit risk management implementation. (5) The written policies, guidelines, and procedures regarding Fund Provision as referred to in paragraph (3) must be reviewed periodically at least 1 (one) time every 3 (three) years, or at higher frequencies in the event of significant changes. (6) The policies, guidelines, and procedures regarding Fund Provision as referred to in paragraph (3) are an integral part of the credit risk policies, procedures, and determinations as referred to in the Financial Services Authority Regulation concerning the application of risk management for general banks.

Article 4
Banks are prohibited from:
a. making agreements, contracts, or setting requirements that obligate the Bank to provide Fund Provision that will result in a BMPK violation; and/or b. providing Fund Provision that results in a BMPK violation.

CHAPTER II
FUND PROVISION TO RELATED PARTIES

Article 5
The aggregate portfolio of Fund Provision to Related Parties with the Bank is set at a maximum of 10% (ten percent) of Bank Capital.

Article 6
(1) Banks are prohibited from providing Fund Provision to Related Parties contrary to general Fund Provision procedures.
(2) Banks are prohibited from providing Fund Provision to Related Parties without the approval of the Bank's Board of Commissioners.
(3) Banks are prohibited from purchasing low-quality assets from Related Parties.

Article 7
In the event that the quality of Fund Provision to Related Parties deteriorates to substandard, doubtful, or loss, the Bank must take resolution steps to improve by:
a. repaying Credit no later than 60 (sixty) days since the deterioration of Fund Provision quality; and/or b. restructuring Credit since the deterioration of Fund Provision quality.

Article 8
In the event that the Bank provides Fund Provision in the form of Equity Investment resulting in the party where the Bank makes the Equity Investment becoming a Related Party, the Bank must ensure:
a. the Fund Provision plan is set at a maximum of 10% (ten percent) of Bank Capital as referred to in Article 5; b. Fund Provision that will be and has been provided to the party where the Bank makes the Equity Investment, after being added to the entire portfolio of Fund Provision to Related Parties, is set at a maximum of 10% (ten percent) of Bank Capital as referred to in Article 5; and
c. meeting the provisions as referred to in Article 6.

Article 9
(1) Related Parties include:
a. individuals or companies that are controllers of the Bank; b. legal entities in cases where the Bank acts as a controller;
c. companies in cases where individuals or companies as referred to in letter a act as controllers;
d. members of the Board of Directors, members of the Board of Commissioners, and Executive Officials of the Bank; e. parties having horizontal or vertical family relationships:

1. from individuals who are controllers of the Bank as referred to in letter a; and
2. from members of the Board of Directors and/or members of the Board of Commissioners at the Bank as referred to in letter d;
   f. directors and/or commissioners of companies as referred to in letter a, letter b, and/or letter c; g. companies whose directors and/or commissioners are members of the Board of Commissioners at the Bank; h. companies where 50% (fifty percent) or more of the directors and/or commissioners are directors and/or commissioners at companies as referred to in letter a, letter b, and letter c;
   i. companies that:
3. directors, members of the Board of Commissioners, and/or Executive Officials of the Bank as referred to in letter d act as controllers; and
4. directors and/or commissioners of parties as referred to in letter a, letter b, and/or letter c act as controllers;
   j. collective investment contracts where the Bank and/or parties as referred to in letter a through letter i own 10% (ten percent) or more of the shares in the collective investment contract manager; k. companies having financial relationships with the Bank and/or parties as referred to in letter a through letter i;
   l. Borrowers who are non-bank individuals or companies having financial relationships through providing guarantees to parties as referred to in letter a through letter k;
   m. Borrowers having financial relationships through guarantees provided by parties as referred to in letter a through letter k; n. other banks having financial relationships through providing guarantees to parties as referred to in letter a through letter k in the event of counter guarantees from the Bank and/or parties as referred to in letter a through letter k to such other banks; and o. other companies containing interests in the form of share ownership of 10% (ten percent) or more individually or jointly, from parties as referred to in letter e. (2) Controllers as referred to in paragraph (1) letters a and b in cases where individuals or companies directly or indirectly:
   a. own 10% (ten percent) or more of the shares of the Bank or other companies individually or jointly; b. have option rights or other rights to own shares that, if executed, cause such parties to control and/or own 10% (ten percent) or more of the shares of the Bank or other companies individually or jointly;
   c. cooperate or act in concert to achieve common goals in controlling the Bank or other companies (acting in concert), with or without written agreements with other parties, so that jointly they control and/or own 10% (ten percent) or more of the shares of the Bank or other companies;
   d. cooperate or act in concert to achieve common goals in controlling the Bank or other companies (acting in concert), with or without written agreements with other parties, so that jointly they have option rights or other rights to own shares, which if executed cause such parties to control and/or own 10% (ten percent) or more of the shares of the Bank or other companies jointly; e. have the authority and/or ability to approve, appoint, and/or dismiss members of the Board of Commissioners and/or members of the Board of Directors of the Bank or other companies; f. have the ability to determine (controlling influence) the strategic policies of the Bank or other companies; g. control 1 (one) or more other companies that wholly or jointly control 10% (ten percent) or more of the shares of the Bank or other companies; and/or h. control controllers as referred to in letters a and g. (3) Controllers as referred to in paragraph (1) letters c and i in cases where individuals or companies directly or indirectly:
   a. own 10% (ten percent) or more of the shares of other companies and are the largest share ownership portion; b. own individually or jointly 25% (twenty-five percent) or more of the shares of other companies;
   c. have option rights or other rights to own shares that, if executed, cause such parties to control and/or own shares of other companies as referred to in letter a or letter b;
   d. cooperate or act in concert to achieve common goals in controlling other companies (acting in concert), with or without written agreements with other parties, so that jointly they control and/or own shares of other companies as referred to in letter a or letter b; e. cooperate or act in concert to achieve common goals in controlling other companies (acting in concert), with or without written agreements with other parties, so that jointly they control and/or own shares of other companies as referred to in letter a or letter b;

other, so that together they have the right of option or other rights to own shares, which, if those rights are exercised, cause the parties to control and/or jointly own shares in another company as referred to in letter a or letter b;

f. having the authority and/or ability to approve, appoint and/or dismiss members of the Board of Commissioners and/or members of the Board of Directors of another company; and/or

g. having the ability to determine (controlling influence) the operational policies or financial policies of another company.

Article 10
In determining Related Parties, the financial relationship as referred to in Article 9 paragraph (1) letters k to n does not apply to:

a. Fund Provision facilities granted by the Bank to borrowers in the Bank's general business activities; and

b. the provision of guarantees by insurance companies, guarantee companies, the Government of the Republic of Indonesia, and/or the government of other countries.

Article 11

(1) The head office and other branches of a branch office of a bank located outside the country are not included in the definition of Related Parties with the branch office of a bank located outside the country.

(2) Related Parties with the head office of a branch office of a bank located outside the country are included in the definition of Related Parties with the branch office of a bank located outside the country.

Article 12

(1) Credit to Executive Officials of the Bank is excluded from being considered as Credit granted to Related Parties as referred to in Article 5 and Article 9, provided it is granted for the welfare of the Bank's human resources based on allowance and position facility policies and is granted fairly.

(2) The criteria for being granted fairly as referred to in paragraph (1) must at least meet the requirements:

a. the Executive Official of the Bank has the ability to repay the Credit received;

b. the assessment of the Credit grant is conducted by paying attention to prudential principles equivalent to the granting of Credit to parties who are not Executive Officials of the Bank;

c. there is no special treatment among Executive Officials of the Bank in the granting of Credit; and

d. the procedure for granting Credit is regulated in general personnel regulations.

Article 13
Provision of Funds to legal entities as referred to in Article 9 paragraph (1) letter b that are controlled by the Bank through the Bank's pension fund is excluded from the calculation of Maximum Credit Granting (BMPK) to Related Parties as referred to in Article 5, provided it meets the requirements:

a. the control relationship between the Bank and the company controlled by the Bank's pension fund is solely caused by the ownership of the pension fund in the controlled company; and

b. the Provision of Funds is granted with fair requirements and in accordance with general Provision of Funds procedures.

Article 14

(1) Provision of Funds to companies where members of the Board of Directors and/or members of the Board of Commissioners of the company are:

a. members of the Board of Commissioners at the Bank, as referred to in Article 9 paragraph (1) letter d; and/or

b. family members of members of the Board of Commissioners of the Bank as referred to in Article 9 paragraph (1) letter e number 2,

are excluded from the calculation of BMPK to Related Parties as referred to in Article 5, provided they meet certain requirements.

(2) The certain requirements as referred to in paragraph (1) are:

a. the member of the Board of Commissioners at the Bank is an independent commissioner;

b. the Provision of Funds is granted with fair requirements and in accordance with general Provision of Funds procedures;

c. the independent commissioner is not directly or indirectly involved in decision-making for the Provision of Funds; and

d. there is no other control relationship.

Article 15
Temporary Equity Participation in Related Parties to address Credit failures as referred to in Financial Services Authority Regulations regulating prudential principles in equity participation is excluded from:

a. the calculation of BMPK to Related Parties as referred to in Article 5; and

b. the determination of Related Parties as referred to in Article 9.

CHAPTER III
PROVISION OF FUNDS TO OTHER THAN RELATED PARTIES

Article 16
Provision of Funds to:

a. 1 (one) Borrower other than a Related Party; or

b. 1 (one) group of Borrowers other than Related Parties,

is determined at a maximum of 25% (twenty-five percent) of the Bank's Core Capital (tier 1).

Article 17

(1) The Bank is required to classify Borrowers into a group of Borrowers as referred to in Article 16 letter b when the Borrower has a control relationship with another Borrower through ownership, management, and/or financial relationships.

(2) The ownership, management, and/or financial relationships as referred to in paragraph (1) include the following criteria:

a. the Borrower is the controller of another Borrower;

b. 1 (one) same party is the controller of several Borrowers;

c. 50% (fifty percent) of the members of the Board of Directors and/or members of the Board of Commissioners of the Borrower become members of the Board of Directors and/or members of the Board of Commissioners at another Borrower;

d. the Borrower has a financial relationship with another Borrower; and/or

e. the Borrower has a financial relationship in the form of issuing a guarantee to take over and/or pay off part or all of the obligations of another Borrower in the event that the other Borrower fails to meet its obligations to the Bank.

(3) The controller as referred to in paragraph (2) letters a and b is the controller as referred to in Article 9 paragraph (3).

(4) The classification of borrower groups through financial relationships as referred to in paragraph (2) letters d and e does not apply to:

a. Fund Provision facilities granted by the Bank to borrowers in the Bank's general business activities; and

b. the provision of guarantees by insurance companies, guarantee companies, the Government of the Republic of Indonesia, and/or the government of other countries.

Article 18

(1) The granting of Credit to borrowers through companies using the pass-through method is excluded from the classification of borrower groups as referred to in Article 17, provided certain requirements are met.

(2) The certain requirements as referred to in paragraph (1) are:

a. the Bank supervises the feasibility assessment conducted by the company regarding the borrower;

b. the Bank has direct risk exposure over the Provision of Funds distributed to the borrower;

c. the Credit agreement is conducted between the borrower and the Bank or with a party authorized to act for and on behalf of the Bank;

d. payment from the borrower is for the benefit of the Bank; and

e. the company does not guarantee to take over or pay off part or all of the borrower's obligations in the event the borrower fails to meet its obligations to the Bank.

Article 19

(1) The granting of Credit with a core-plasma partnership pattern with a scheme where the core company guarantees Credit to the plasma is excluded from the classification of borrower groups as referred to in Article 17, provided certain requirements are met.

(2) The certain requirements as referred to in paragraph (1) are:

a. the core company is not a Related Party with the Bank;

b. the plasma company is not a subsidiary or branch owned, controlled, or affiliated with the core company;

c. the plasma company produces components required by the core company as part of the core company's production; and

d. the Credit agreement with the plasma company is conducted directly by the Bank with the plasma company.

Article 20
Provincial governments and regency/city governments, as well as among each regency/city government, are excluded from the classification of borrower groups as referred to in Article 17.

CHAPTER IV
CALCULATION OF PROVISION OF FUNDS

First Section
General

Article 21

(1) Provisions of Funds calculated in the BMPK calculation and Large Fund Provisions are all Provisions of Funds in the banking book and trading book positions.

(2) The book value used as the calculation for Provisions of Funds is the book value of assets plus accrued interest receivable, if any, before being reduced by impairment loss reserves on assets according to accounting standards.

Article 22

(1) The Bank is prohibited from conducting an offset process between the value of Provisions of Funds in the banking book position and the trading book position.

(2) The Bank may conduct an offset process between long positions and short positions in the trading book position, resulting in a net position for positions that are identical.

(3) The Bank may conduct an offset process between long positions and short positions from one counterparty in the trading book position for positions that are not identical, provided certain requirements are met.

(4) The certain requirements as referred to in paragraph (3) are:

a. the Bank can determine the seniority level of financial instruments; and

b. the short position has a junior level or has the same level compared to the long position.

(5) In the event that the offset process in the trading book position as referred to in paragraph (2) and paragraph (3) results in a net short position, that position is not calculated in the BMPK calculation.

Second Section
Deposits

Article 23

(1) Provisions of Funds in the form of Deposits are established as Provisions of Funds to the counterparty.

(2) BMPK for Provisions of Funds in the form of Deposits is calculated based on book value.

(3) Provisions of Funds in the form of Deposits as referred to in paragraph (1) do not include Deposits in other Banks in Indonesia through PUAB for daily liquidity management purposes.

Article 24

(1) Deposits in every Prime Bank are excluded from the BMPK calculation.

(2) Deposits in every Prime Bank as referred to in paragraph (1) are determined at a maximum:

a. 90% (ninety percent) of the Bank's Capital for deposits in Prime Banks that are Related Parties; and

b. 75% (seventy-five percent) of the Bank's Core Capital (tier 1) for deposits in Prime Banks other than Related Parties.

(3) Provisions of Funds in every Prime Bank exceeding the exclusion amount as referred to in paragraph (2) are still calculated as BMPK up to a maximum of the determined limit of Provisions of Funds.

Third Section
Derivative Transactions

Article 25

(1) Provisions of Funds in the form of Derivative Transactions related to interest rates, exchange rates, and/or a combination of exchange rates and interest rates are established as Provisions of Funds to the counterparty.

(2) Provisions of Funds in the form of Derivative Transactions in the form of credit derivatives are:

a. for credit derivatives in the banking book position, established as Provisions of Funds to the Reference Entity; and/or

b. for credit derivatives in the trading book position:

1. credit derivatives in the form of credit default swaps, total return swaps, or other similar instruments are established as Provisions of Funds to the Reference Entity;

2. credit derivatives in the form of credit-linked notes or other similar instruments are established as Provisions of Funds to:

a) the Reference Entity; and

b) the issuer of the credit-linked notes; or

3. for credit derivatives other than those referred to in number 1) and number 2), Provisions of Funds are established according to the credit risk inherent in each credit derivative instrument.

Article 26
BMPK for Derivative Transactions as referred to in Article 25 and other transactions that have credit risk due to counterparty failure is calculated for the banking book and trading book positions based on the value of Provisions of Funds for credit risk due to counterparty failure.

Article 27

(1) BMPK for Derivative Transactions in the form of futures, forwards, swaps, and credit derivatives in the trading book position is calculated based on the two-legged approach.

(2) The transaction leg positions in the trading book position considered in BMPK are the transaction leg positions that are within the scope of Provisions of Funds, namely the long position.

(3) BMPK for Derivative Transactions in the form of options in the trading book position is calculated based on the value of the change in option price caused by default on the underlying asset.

(4) The calculation of BMPK over the trading book position as referred to in paragraph (1), paragraph (2), and paragraph (3) refers to Appendix I which is an integral part of this Financial Services Authority Regulation.

Article 28
The calculation of BMPK for Derivative Transactions in the trading book position is the sum of all calculations as referred to in Article 26 and Article 27.

Fourth Section
Securities

Article 29

(1) Provisions of Funds in the form of Securities are established as Provisions of Funds to the issuer of the Securities.

(2) BMPK for the purchase of Securities in the banking book and trading book positions is calculated based on book value.

Article 30

(1) Provisions of Funds in the form of Securities Sold with a Repurchase Agreement (Repo) are established as Provisions of Funds to:

a. the issuer of the Securities; and

b. the reverse party.

(2) Provisions of Funds as referred to in paragraph (1) letter a are calculated based on the book value of the Securities Sold with a Repurchase Agreement (Repo).

(3) Provisions of Funds as referred to in paragraph (1) letter b are calculated based on the positive difference between the book value of the Securities Sold with a Repurchase Agreement (Repo) and the book value of the repo liability.

Article 31

(1) Provisions of Funds in the form of Receivables from Securities Purchased with a Resale Agreement (Reverse Repo) are established as Provisions of Funds to the owner of the Securities sold via repo (repo party).

(2) BMPK for Receivables from Securities Purchased with a Resale Agreement (Reverse Repo) as referred to in paragraph (1) is calculated based on the book value of the reverse repo receivable.

Article 32

(1) The determination of the counterparty in the BMPK calculation for Provisions of Funds in the form of purchasing Securities linked or guaranteed by underlying assets, both for banking book and trading book positions, is determined based on the amount of Securities purchased.

(2) Provisions of Funds in the form of purchasing Securities linked or guaranteed by underlying assets where the total book value of the Securities purchased is less than 0.25% (zero point two five percent) of the Bank's Core Capital (tier 1) is established as Provisions of Funds to the issuer of the Securities linked or guaranteed by underlying assets.

(3) Provisions of Funds in the form of purchasing Securities linked or guaranteed by underlying assets where the total book value of the Securities purchased is equal to or greater than 0.25% (zero point two five percent) of the Bank's Core Capital (tier 1) is established as Provisions of Funds to the Reference Entity.

(4) BMPK for Securities linked or guaranteed by underlying assets is calculated using:

a. the book value of the Securities for Securities as referred to in paragraph (2); or

b. the look-through approach method, i.e., proportionally based on the proportion of underlying assets from each Reference Entity against the Securities for Securities as referred to in paragraph (3).

(5) In the event that the Bank cannot identify the underlying assets as referred to in paragraph (4) letter b, Provisions of Funds are established as:

a. Provisions of Funds to the issuer of the Securities in the event there is a proportion of the book value of the Securities purchased less than 0.25% (zero point two five percent) of the Bank's Core Capital (tier 1); or

b. Provisions of Funds to unknown clients in the event there is a proportion of the book value of the Securities purchased equal to or greater than 0.25% (zero point two five percent) of the Bank's Core Capital (tier 1).

(6) Provisions of Funds to unknown clients as referred to in paragraph (5) letter b are calculated collectively with Provisions of Funds to other unknown clients, while still considering the BMPK limit for borrower groups as referred to in Article 16 letter b.

(7) In the calculation of BMPK for Provisions of Funds in the form of purchasing Securities linked or guaranteed by underlying assets, the Bank must identify third parties that may cause additional risk factors in the Securities.

Article 33

(1) Provisions of Funds in the form of Securities in the form of covered bonds are established as Provisions of Funds to the issuer of the covered bond Securities.

(2) BMPK for the purchase of Securities in the form of covered bonds as referred to in paragraph (1) is calculated based on the book value of the covered bond, except for the purchase of Securities in the form of covered bonds that meet certain requirements.

(3) The certain requirements as referred to in paragraph (2) are:

a. the issuance of covered bonds meets the criteria:

1. bonds are issued by Banks or mortgage institutions and are legally protected to protect bondholders;

2. the proceeds from the issuance of covered bonds are invested in an asset and are able to cover claims attached to the bonds during the bond period; and

3. in the event of default by the bond issuer, the investment proceeds obtained are used based on priority for the replacement of principal and payment of interest;

b. having a main asset pool underlying consisting of:

1. receivables from or receivables guaranteed by the government, public sector entities, or multilateral development banks;

2. residential mortgage loans with a risk weight of at most 35% (thirty-five percent) and having a loan-to-value ratio of at most 80% (eighty percent); and/or

3. commercial property loans with a risk weight of at most 100% (one hundred percent) and having a loan-to-value ratio of at most 60% (sixty percent); and

c. the nominal value of the pool of assets used as the basis for issuing Securities in the form of covered bonds must exceed the outstanding value of the covered bonds by at least 10% (ten percent).

(4) The certain requirements as referred to in paragraph (3) must be met from the beginning of the Provision of Funds in the form of Securities in the form of covered bonds until the remaining term of the Securities in the form of covered bonds.

(5) BMPK for the purchase of Securities in the form of covered bonds that meet the certain requirements as referred to in paragraph (3) is calculated at a minimum of 20% (twenty percent) of the book value of the covered bond.

Article 34

(1) The takeover (negotiation) of Securities in the form of time export bills is excluded from the BMPK calculation as referred to in Article 5 and Article 9, provided certain requirements are met.

(2) The certain requirements as referred to in paragraph (1) are:

a. time export bills are issued based on time letters of credit (usance L/C) in accordance with the applicable Uniform Customs and Practice for Documentary Credits (UCP); and

b. have been accepted by a Prime Bank.

Fifth Section
Acceptance Receivables

Article 35

(1) Provisions of Funds in the form of Acceptance Receivables are established as Provisions of Funds to:

a. the bank if the party obligated to pay the receivable is another bank; and/or

b. the borrower if the party obligated to pay the receivable is the borrower.

(2) BMPK for Acceptance Receivables as referred to in paragraph (1) is calculated at the book value of the accepted bill.

Sixth Section
Credit

Article 36

(1) Provisions of Funds in the form of Credit are established as Provisions of Funds to the borrower.

(2) BMPK for Credit is calculated based on book value.

(3) The borrower for the takeover of receivables in factoring or the purchase of Credit with terms without recourse is the party obligated to pay the receivable.

(4) The borrower for the takeover in factoring or the purchase of Credit with terms with recourse is the party selling the receivable or Credit.

Seventh Section
Equity Participation

Article 37

(1) Provisions of Funds in the form of Equity Participation are established as Provisions of Funds to the entity where the Bank makes the Equity Participation.

(2) Equity Participation as referred to in paragraph (1) is Equity Participation that is not a factor reducing Capital as referred to in Financial Services Authority Regulations regulating minimum capital adequacy requirements for commercial banks.

(3) BMPK for Equity Participation as referred to in paragraph (1) is calculated based on the book value of the participation.

Eighth Section
Administrative Account Transactions

Article 38

(1) Provisions of Funds for Administrative Account Transactions in the form of guarantees, letters of credit (L/C), standby letters of credit (SBLC), or other similar instruments are established as Provisions of Funds to the applicant.

(2) BMPK for Administrative Account Transactions as referred to in paragraph (1) is calculated as the product of the book value of commitment liabilities or contingent liabilities multiplied by the credit conversion factor.

(3) The minimum value for the credit conversion factor as referred to in paragraph (2) is established at 10% (ten percent).

CHAPTER V
PROVISION OF FUNDS TO STATE-OWNED ENTERPRISES

Article 39

(1) Bank Provisions of Funds to State-Owned Enterprises (BUMN) for development purposes are determined at a maximum of 30% (thirty percent) of the Bank's Capital.

(2) The relationship between Banks in the form of State-Owned Enterprises or Regional-Owned Enterprises with Borrowers in the form of State-Owned Enterprises and/or Regional-Owned Enterprises is excluded from the definition of Related Parties as referred to in Article 9, provided the control relationship is solely caused by direct ownership by the central government or regional government.

(3) Among State-Owned Enterprises or among Regional-Owned Enterprises are not treated as a group of Borrowers as referred to in Article 17, provided the control relationship is solely caused by direct ownership by the central government or regional government.

(4) In the event that a Bank and a Borrower in the form of a State-Owned Enterprise or Regional-Owned Enterprise have a control relationship as referred to in Article 9, in addition to direct ownership by the central government or regional government, Provisions of Funds to that State-Owned Enterprise or Regional-Owned Enterprise are calculated as BMPK to Related Parties.

CHAPTER VI
CREDIT RISK MITIGATION TECHNIQUES

Article 40

(1) The Bank is required to apply Credit Risk Mitigation (MRK) Techniques that meet certain requirements in the BMPK calculation if the Bank acknowledges the existence of collateral, guarantees, sureties, or credit insurance as Credit Risk Mitigation Techniques in calculating risk-weighted assets using the standard approach.

(2) The application of Credit Risk Mitigation Techniques as referred to in paragraph (1) applies when the Borrower and the guarantor or issuer of the collateral are other than Related Parties.

Article 41

(1) The portion of Provisions of Funds that receives protection from credit risk mitigation instruments or the portion that is guaranteed is established as Provisions of Funds to the guarantor or issuer of the collateral.

(2) The portion of Provisions of Funds that does not receive protection from credit risk mitigation instruments or the portion that is not guaranteed is established as Provisions of Funds to the Borrower.

(3) The guaranteed portion as referred to in paragraph (1) that is calculated in BMPK is equal to the value recognized in the Credit Risk Mitigation Technique in the form of:

a. the portion of Provisions of Funds that receives protection from collateral for Provisions of Funds

with the MRK-collateral Technique under the simple approach; b. the collateral value after considering the haircut against each value for Fund Provision with the MRK-collateral Technique under the comprehensive approach;
c. the portion of Fund Provision guaranteed by a guarantee for Fund Provision with the MRK-guarantee Technique; and
d. the portion of Fund Provision protected by a guarantee institution or credit insurance for Fund Provision with the MRK-guarantee or credit insurance Technique.
(4) The entire portfolio of Fund Provision to guarantors or issuers of collateral as referred to in paragraph (1) is set at a maximum of 25% (twenty-five percent) of the Bank's Core Capital (tier 1). (5) The portion of Fund Provision to support government programs guaranteed by financial institutions operating in the field of guarantee or insurance that are State-Owned Enterprises (BUMN) or Regional-Owned Enterprises is excluded from the BMPK calculation.

CHAPTER VII
TREATMENT OF SPECIFIC BMPK

Article 42
BMPK calculation is excluded for:
a. Fund Provision to the central government; b. Placements at Bank Indonesia; and
c. purchase of Securities issued by the Government of the Republic of Indonesia and/or Bank Indonesia.

Article 43
(1) The portion of Fund Provision that obtains a guarantee from the Government of the Republic of Indonesia is excluded from the BMPK calculation.

(2) The guarantee as referred to in paragraph (1) must meet the following requirements:
a. the guarantee is unconditional and irrevocable; b. it can be liquidated no later than 7 (seven) working days from the claim submission, including partial liquidation to pay overdue principal installments and/or interest;
c. it has a duration at least equal to the duration of the Fund Provision; and
d. it is not counter-guaranteed.
(3) The Bank must submit a claim against the guarantee received as referred to in paragraph (2) no later than 7 (seven) working days from the date the Borrower defaults.
(4) The Borrower is deemed to have defaulted as referred to in paragraph (3) in the event:
a. there is an overdue of principal and/or interest and/or other charges for 90 (ninety) days even though the Fund Provision has not yet matured; b. payment of principal and/or interest and/or other charges is not received at the time the Fund Provision matures; or
c. other requirements besides the payment of principal and/or interest are not met, which can cause a default.

Article 44
(1) Export-oriented Fund Provision to financial institutions meeting specific requirements is excluded from the BMPK calculation.
(2) The portion of Fund Provision that obtains a guarantee from a financial institution meeting specific requirements is excluded from the BMPK calculation.
(3) The specific requirements as referred to in paragraph (1) and paragraph (2) are:
a. owned by the central government; b. its business activities provide financing for national exports; and
c. established by Law with sovereign status.
(4) The guarantee as referred to in paragraph (2) must meet the following requirements:
a. the guarantee is unconditional and irrevocable; b. it can be liquidated no later than 7 (seven) working days from the claim submission, including partial liquidation to pay overdue principal installments and/or interest;
c. it has a duration at least equal to the duration of the Fund Provision; and
d. it is not counter-guaranteed.
(5) The Bank must submit a claim against the guarantee received as referred to in paragraph (4) no later than 7 (seven) working days from the date the Borrower defaults.
(6) The Borrower is deemed to have defaulted as referred to in paragraph (5) in the event:
a. there is an overdue of principal and/or interest and/or other charges for 90 (ninety) days even though the Fund Provision has not yet matured; b. payment of principal and/or interest and/or other charges is not received at the time the Fund Provision matures; or
c. other requirements besides the payment of principal and/or interest are not met, which can cause a default.

Article 45
(1) The portion of Fund Provision guaranteed by specific collateral and meeting specific requirements is excluded from the BMPK calculation.

(2) The specific collateral as referred to in paragraph (1) is:
a. cash collateral in the form of current accounts, deposits, savings, guarantee deposits and/or gold; and b. collateral in the form of Securities issued by the Government of the Republic of Indonesia and/or Bank Indonesia. (3) The specific requirements as referred to in paragraph (1) are:
a. the collateral is blocked and accompanied by a power of attorney for liquidation from the owner of the collateral for the benefit of the Bank receiving the collateral, including partial liquidation to pay overdue principal installments and/or interest; b. it is unconditional and irrevocable;
c. the blocking period as referred to in letter a is at least equal to the duration of the Fund Provision;
d. it has a strong legal binding as collateral, free from all other obligations and disputes, not currently guaranteed to other parties, and has a clear guarantee purpose; and e. for cash collateral as referred to in paragraph (2) letter a, it is stored or accounted for at the Fund Providing Bank.

Article 46
(1) The portion of Fund Provision to Borrowers who obtain a guarantee from a Prime Bank is excluded from the BMPK calculation as referred to in Article 5 and Article 16, provided that the guarantee given meets the following requirements:
a. in the form of a standby letter of credit (SBLC) issued in accordance with the Uniform Customs and Practice for Documentary Credits (UCP) or International Standby Practices (ISP); b. it is unconditional and irrevocable;
c. it must be liquidatable no later than 7 (seven) working days from the claim submission, including partial liquidation;
d. it has a duration at least equal to the duration of the Fund Provision; and e. it is not counter-guaranteed by the Fund Providing Bank or a bank that is not a Prime Bank. (2) The Bank must submit a claim against the guarantee received as referred to in paragraph (1) no later than 7 (seven) working days from the date the Borrower defaults. (3) The Borrower is deemed to have defaulted as referred to in paragraph (2) in the event:
a. there is an overdue of principal and/or interest and/or other charges for 90 (ninety) days even though the Fund Provision has not yet matured; b. payment of principal and/or interest and/or other charges is not received at the time the Fund Provision matures; or
c. other requirements besides the payment of principal and/or interest are not met, which can cause a default.
(4) The exclusion from BMPK calculation as referred to in paragraph (1) is set at a maximum of:
a. 90% (ninety percent) of the Bank's Capital for Fund Provision to Related Parties; and b. 75% (seventy-five percent) of the Bank's Core Capital (tier 1) for Fund Provision to 1 (one) Borrower or 1 (one) group of Borrowers other than Related Parties.

Article 47
Fund Provision that has become a capital reduction factor as referred to in the Financial Services Authority Regulation regarding minimum capital fulfillment obligations is excluded from the BMPK calculation.

CHAPTER VIII
BMPK EXCEEDANCE

Article 48
(1) Fund Provision by a Bank is categorized as BMPK Exceedance caused by:
a. a decrease in the Bank's Capital or Core Capital (tier 1); b. exchange rate changes;
c. fair value changes;
d. business mergers, changes in ownership structure and/or changes in management structure that cause changes in Related Parties and/or groups of Borrowers; and/or e. changes in regulations. (2) The determination of Borrowers in the BMPK Exceedance calculation is done in accordance with the Fund Provision calculation provisions as referred to in Article 21 to Article 38. (3) BMPK Exceedance is calculated based on the value recorded on the reporting date.

CHAPTER IX
RESOLUTION OF BMPK VIOLATIONS AND BMPK EXCEEDANCE

Article 49
(1) In the event a Bank commits a BMPK Violation and/or BMPK Exceedance, the Bank is required to prepare an action plan for the resolution of the BMPK Violation and/or BMPK Exceedance. (2) The action plan as referred to in paragraph (1) must contain at least the improvement steps to be implemented by the Bank for the resolution of the BMPK Violation and/or BMPK Exceedance and the target time for resolution.

Article 50
(1) The target time for resolution as referred to in Article 49 paragraph (2) is set:
a. for BMPK Violations, no later than a period of 1 (one) month; b. for BMPK Exceedance caused by matters as referred to in Article 48 paragraph (1) letters a to c, no later than 9 (nine) months;
c. for BMPK Exceedance caused by matters as referred to in Article 48 paragraph (1) letter d, no later than 12 (twelve) months; and/or
d. for BMPK Exceedance caused by matters as referred to in Article 48 paragraph (1) letter e, no later than 18 (eighteen) months, since the deadline for submitting the action plan to the Financial Services Authority. (2) In the event the target time for resolution of the action plan as referred to in paragraph (1) is deemed unachievable, the Bank, based on the approval of the Financial Services Authority, may set a different target time for resolution of the action plan than the target time for resolution of the action plan as referred to in paragraph (1).

CHAPTER X
REPORTING

Article 51
(1) The Bank is required to submit the action plan for the resolution of BMPK Violations and/or BMPK Exceedance as referred to in Article 49 to the Financial Services Authority offline. (2) The Bank is required to submit the action plan as referred to in Article 49 no later than:
a. 1 (one) month since the Financial Services Authority determines that a BMPK Violation has occurred; b. 1 (one) month after the end of the reporting month for BMPK Exceedance caused by matters as referred to in Article 48 letters a, b, c, and d; and/or
c. 3 (three) months since the implementation of new regulations for BMPK Exceedance caused by matters as referred to in Article 48 letter e.

Article 52
(1) The Bank is required to submit reports on the implementation of the action plan for each BMPK Violation and BMPK Exceedance.
(2) The Bank is required to submit the report on the implementation of the action plan as referred to in paragraph (1) offline to the Financial Services Authority no later than 7 (seven) working days after the target time for resolution of the action plan.

Article 53
(1) The Bank is required to submit reports on Fund Provision, reports on Large Fund Provision, reports on the exclusion of Large Fund Provision, and reports on BMPK Violations or BMPK Exceedance, individually and on a consolidated basis. (2) The reports as referred to in paragraph (1) individually are submitted every month for the end-of-month position. (3) The reports as referred to in paragraph (1) on a consolidated basis are submitted every quarter for the end-of-month position in March, June, September, and December. (4) Provisions regarding the report format as referred to in paragraph (1) refer to Appendix II which is an integral part of this Financial Services Authority Regulation.

Article 54
(1) The Bank is required to submit the reports as referred to in Article 53 online through the Financial Services Authority reporting system.
(2) In the event that the submission of reports online to the Financial Services Authority as referred to in paragraph (1) cannot yet be done, the Bank submits the reports offline.

Article 55
(1) The Bank is required to submit the reports as referred to in Article 53 paragraph (1) no later than:
a. the 15th day after the end of the reporting month for individual reports; and b. the end of the month after the end of the reporting month, for consolidated reports.
(2) If the deadline for submitting the Large Fund Provision report and the reports as referred to in paragraph (1) falls on a Saturday, Sunday, and/or national holiday, the reports are submitted on the next working day. (3) In the event that the Financial Services Authority reporting system is available, the reports as referred to in Article 53 are submitted in accordance with the Financial Services Authority Regulation regarding the reporting of general banks through the Financial Services Authority reporting system.

Article 56
The obligation to submit reports as referred to in Article 54 paragraph (2) is first carried out for the end-of-month position in June 2019.

Article 57
(1) The Bank is required to correct reports on BMPK Violations or BMPK Exceedance of the Bank, and quarterly publication reports as referred to in the Financial Services Authority Regulation regarding transparency and publication of Bank reports in the event of violations of the implementation of this Financial Services Authority Regulation that were not reported in the reporting period of the violation occurrence. (2) Corrections to the reports on BMPK Violations or BMPK Exceedance of the Bank and quarterly publication reports as referred to in paragraph (1) are submitted offline to the Financial Services Authority no later than for the next period since the correction is determined by the Financial Services Authority.

Article 58
(1) The Bank is required to have and account for a detailed list of Related Parties with the Bank.
(2) The Bank is required to submit the detailed list of Related Parties as referred to in paragraph (1) offline to the Financial Services Authority if there are changes, for the end-of-month position reports in June and December. (3) The detailed list and changes of Related Parties as referred to in paragraph (1) and paragraph (2) must be submitted no later than the end of the month after the end-of-month position of the report. (4) The Financial Services Authority may at any time request the Bank to submit the detailed list and changes of Related Parties as referred to in paragraph (1) and paragraph (2).

Article 59
The offline submission as referred to in Article 51 paragraph (1), Article 52 paragraph (2), Article 54 paragraph (2), Article 57 paragraph (2), and Article 58 paragraph (2) is submitted to:
a. the Department of Supervision of the relevant Bank or the Regional Office of the Financial Services Authority in Jakarta, for Banks whose headquarters or branch offices of banks located abroad are in the Special Capital Region of Jakarta Province; or b. the Regional Office of the Financial Services Authority or the local Financial Services Authority Office, according to the area where the Bank's headquarters is located.

CHAPTER XI
ADMINISTRATIVE SANCTIONS

Article 60
Banks that do not implement the provisions as referred to in Article 2 paragraph (1) and (3), Article 3 paragraph (1), (2), and (5), Article 4, Article 6, Article 7, Article 8, Article 17 paragraph (1), Article 22 paragraph (1), Article 40 paragraph (1), Article 49, Article 51, Article 52, Article 53 paragraph (1), Article 54 paragraph (1), Article 55 paragraph (1), Article 57 paragraph (1), and/or Article 58 paragraph (1), (2), and (3) are subject to administrative sanctions in the form of:
a. written reprimand; b. reduction of the Bank's health level;
c. prohibition on expanding business activities;
d. prohibition on opening office networks; e. suspension of certain business activities; and/or f. listing of controlling shareholders, management, and/or executive officials of financial service institutions in the list of persons prohibited from becoming shareholders and management of financial service institutions in accordance with the Financial Services Authority Regulation regarding re-evaluation of key parties of financial service institutions.

Article 61
(1) Banks declared late in submitting the action plan for BMPK Violations after the deadline as referred to in Article 51 paragraph (2) letter a are subject to administrative sanctions in the form of a fine of Rp35,000,000.00 (thirty-five million rupiah) per reporting per working day of delay or a maximum of Rp500,000,000.00 (five hundred million rupiah). (2) Banks declared late in submitting:
a. the action plan for BMPK Exceedance after the deadline as referred to in Article 51 paragraph (2) letters b and c; and/or b. the report on the implementation of the action plan after the deadline as referred to in Article 52 paragraph (2), are subject to administrative sanctions in the form of a fine of Rp3,500,000.00 (three million five hundred thousand rupiah) per reporting per working day of delay or a maximum of Rp50,000,000.00 (fifty million rupiah).

Article 62
(1) Banks that are late in submitting reports as referred to in Article 55 paragraph (1) are subject to administrative sanctions in the form of a fine of Rp1,000,000.00 (one million rupiah) per working day of delay or a maximum of Rp50,000,000.00 (fifty million rupiah). (2) Banks that submit the detailed list of Related Parties after the deadline as referred to in Article 58 paragraph (3) are subject to administrative sanctions in the form of a fine of Rp1,000,000.00 (one million rupiah) per working day of delay or a maximum of Rp100,000,000.00 (one hundred million rupiah).

Article 63
(1) Banks that do not resolve BMPK Violations and/or BMPK Exceedance in accordance with the action plan as referred to in Article 50 and/or do not implement resolution steps in accordance with corrections determined by the Financial Services Authority as referred to in Article 57, after being given warnings 2 (two) times by the Financial Services Authority with a grace period of 1 (one) week for each warning, are subject to administrative sanctions as referred to in Article 60 letters e and/or f. (2) Banks that do not resolve BMPK Violations other than those referred to in paragraph (1) are subject to sanctions as referred to in paragraph (1); against the Board of Commissioners, Board of Directors, Bank employees, shareholders, and other affiliated parties, written orders as referred to in Article 9 letter d of Law Number 21 of 2011 concerning the Financial Services Authority may be issued. (3) In the event that the Bank does not implement the written order as referred to in paragraph (2), the Bank may be subject to criminal sanctions as referred to in Article 54 of Law Number 21 of 2011 concerning the Financial Services Authority.

CHAPTER XII
TRANSITIONAL PROVISIONS

Article 64
At the time this Financial Services Authority Regulation comes into force, the provisions in:
a. Bank Indonesia Regulation Number 7/3/PBI/2005 concerning Maximum Credit Granting Limits for General Banks (State Gazette of the Republic of Indonesia Year 2005 Number 13, Supplement to the State Gazette of the Republic of Indonesia Number 4472) as amended by Bank Indonesia Regulation Number 8/13/PBI/2006 concerning Amendments to Bank Indonesia Regulation Number 7/3/PBI/2005 concerning Maximum Credit Granting Limits for General Banks (State Gazette of the Republic of Indonesia Year 2006 Number 70, Supplement to the State Gazette of the Republic of Indonesia Number 4639); and b. Financial Services Authority Regulation Number 15/POJK.03/2018 concerning Maximum Credit Granting or Maximum Fund Disbursement Limits for Banks to Encourage the Growth of the Tourism Sector and Increase Foreign Exchange Reserves (State Gazette of the Republic of Indonesia Year 2018 Number 137, Supplement to the State Gazette of the Republic of Indonesia Number 6240), are declared to remain in force insofar as they do not conflict with the provisions in this Financial Services Authority Regulation.

CHAPTER XII
CLOSING PROVISIONS

Article 65
This Financial Services Authority Regulation comes into force on June 1, 2019.

This copy is in accordance with the original
Director of Law 1
Law Department signed
Yuliana

In order that everyone knows it, orders the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Determined in Jakarta on December 26, 2018
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on December 27, 2018
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2018 NUMBER 253

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 32 /POJK.03/2018
CONCERNING
MAXIMUM CREDIT GRANTING AND LARGE FUND PROVISION LIMITS FOR GENERAL BANKS

I. GENERAL
One of the causes of Bank business failure is Fund Provision not supported by the Bank's ability to manage Fund Provision concentration effectively. Counterparties that suddenly default can endanger the Bank's solvency. To reduce the potential for Bank business failure as a result of Fund Provision concentration, Banks are required to spread and diversify the Fund Provision portfolio, especially through limiting Fund Provision, both to Related Parties and non-Related Parties, at a certain percentage of the Bank's Capital or Core Capital (tier 1), known as BMPK and Large Fund Provision. The experience of the global financial crisis in 2008 showed that Banks did not have consistent measurement, grouping, and control methods for Bank Fund Provision, especially Large Fund Provision to Borrowers or a group of Borrowers. Thus, the calculation standards for Fund Provision and the setting of Fund Provision limits are adjusted to international standards, namely Basel III: Supervisory framework for measuring and controlling large exposures. The Large Fund Provision framework is a complement to the risk-based capital standard framework. This is because the risk-based capital standard is not specifically designed to protect Banks from large losses caused by default by specific parties. The minimum capital provision obligation, which is pillar 1 of the risk-based capital standard framework, assumes that Banks have a granular portfolio so that there is no concentration risk considered in calculating the minimum capital provision obligation. However, idiosyncratic risks related to Large Fund Provision to one party may exist in the Bank's portfolio. Thus, the large exposure framework is needed to protect Banks from large losses caused by the default of one party and/or a specific business group. Meanwhile, to increase Indonesia's economic growth and national competitiveness, efforts are needed to encourage the intermediary function of banking by providing flexibility or exemptions in the implementation of BMPK and Large Fund Provision while still paying attention to prudential principles. The flexibility or exemptions include Fund Provision to State-Owned Enterprises (BUMN) for development purposes including infrastructure development and priority sectors, namely the tourism sector, increasing foreign exchange through export-oriented Fund Provision, Fund Provision guaranteed by Prime Banks, and Fund Provision to customers with core-plasma partnership patterns.

II. ARTICLE BY ARTICLE
Article 1
Clear enough.
Article 2
Paragraph (1)
Large Fund Provision is also called large exposure.
Paragraph (2)
Clear enough.
Paragraph (3)
Clear enough.

Article 3
Paragraph (1)
The application of prudential principles and risk management aims to ensure that the Provision of Funds to Related Parties, Large Fund Provisions, and Provision of Funds to other parties having an interest in the Bank are conducted on an arm's length basis, adjusted to the Bank's capital adequacy, and are not significantly concentrated to a specific Borrower or group of Borrowers. Other parties having an interest in the Bank include, among others, Bank officials or employees and their families. Paragraph (2) Sufficiently clear. Paragraph (3) Letter a In conducting selection and feasibility assessment, the Bank must ensure the availability of sufficient information, including data and information regarding shareholders, management, business group structure, and financial condition of the Borrower and/or group of Borrowers. Letter b The Limit on Provision of Funds is set at the highest limit in accordance with the limits regulated in this Financial Services Authority Regulation. The Limit on Provision of Funds is set based on an analysis of the impact of the Provision of Funds on the Bank's financial position statement (balance sheet) structure and risk profile. The impact analysis on the Bank's financial position statement (balance sheet) structure and risk profile is conducted by considering the size, type, tenor, and diversification of the overall Provision of Funds portfolio so as to prevent the Provision of Funds portfolio from being concentrated on a specific Borrower or group of Borrowers. Letter c The management information system must enable the Bank to timely identify concentration of Provision of Funds, particularly to Related Parties, Large Fund Provisions, and/or Provision of Funds to other parties having an interest in the Bank. Furthermore, the management information system must include the availability of a reporting system regarding Provision of Funds that exceed or are estimated to exceed the Limit on Provision of Funds. Letter d The monitoring system for Provision of Funds to Related Parties, Large Fund Provisions, and/or Provision of Funds to other parties having an interest in the Bank must at least include:

1. compliance with the Limit on Provision of Funds;
2. adequacy of collateral compared to the Provision of Funds; and
3. identification of the quality of Provision of Funds.
   Letter e
   Control measures include, among others:
4. capital addition to address increased risk exposure;
5. syndication; and/or
6. asset securitization.
   Paragraph (4)
   Sufficiently clear.
   Paragraph (5)
   The frequency intensity of review can be increased in accordance with the development of the concentration of Provision of Funds risk.
   Paragraph (6)
   Sufficiently clear.

Article 4
Letter a
Obligations, agreements, or terms cover the forms of obligations, agreements, or terms established for the Provision of Funds, whether recorded in the financial position statement (balance sheet) or the commitment and contingency statement. Letter b Sufficiently clear.

Article 5
Sufficiently clear.

Article 6
Paragraph (1)
General Provision of Funds procedures are procedures applied at the Bank and apply equally to all Borrower customers, while still providing reasonable profit for the Bank. Paragraph (2) Sufficiently clear. Paragraph (3) Low-quality assets are assets that:

1. have less active, doubtful, or non-performing quality; and/or
2. have undergone Credit restructuring,
   as referred to in legislation regulating the assessment of commercial bank asset quality.

Article 7
Less active, doubtful, or non-performing quality is quality as referred to in legislation regulating the assessment of commercial bank asset quality.

Article 8
Sufficiently clear.

Article 9
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Sufficiently clear.
Letter d
Bank Executive Officials are division heads, regional office heads, branch office heads, functional office heads with a position no lower than equivalent to a branch office head, head of the risk management work unit, head of the compliance work unit, head of the internal audit work unit, and/or other equivalent officials. Letter e Horizontal or vertical family relationships are:

1. biological/step/adopted parents;
2. biological/step/adopted siblings;
3. biological/step/adopted children;
4. biological/step/adopted grandparents;
5. biological/step/adopted grandchildren;
6. biological/step/adopted siblings of parents;
7. husband or wife;
8. parents-in-law;
9. husband or wife of biological/step/adopted children;
10. grandparents of husband or wife;
11. husband or wife of biological/step/adopted grandchildren; or
12. biological/step/adopted siblings of husband or wife together with the husband or wife of the said sibling.
    Letter f
    Sufficiently clear.
    Letter g
    Sufficiently clear.
    Letter h
    The amount of 50% (fifty percent) or more is calculated from the cumulative total of the Board of Directors and/or Board of Commissioners.
    Letter i
    Sufficiently clear.
    Letter j
    Sufficiently clear.
    Letter k
    Financial relationships are analyzed from several factors, namely:
13. the existence of financial assistance from the Bank and/or Related Parties or financial assistance to the Bank and/or other Related Parties with terms that cause the party providing the financial assistance to have the ability to determine (controlling influence) the strategic policies of the company receiving the financial assistance;
14. the existence of significant business chain linkages in the Bank's or Related Party's business operations with other companies, resulting in dependency between one party and the other party that causes:
    a. one party is unable to easily transfer business transactions to another party; and b. the inability to easily transfer business transactions causes the cash flow of one party to experience significant disruption, thereby experiencing difficulty in fulfilling obligations; and/or
15. the existence of credit risk transfer through guarantees, where the guarantor party will take over part or all of the financial risk of the guaranteed party.
    Letter l
    Guarantee is a promise issued by one party to take over and/or settle part or all of the debtor's obligations in the event the debtor fails to fulfill obligations (default). Letter m Sufficiently clear. Letter n Sufficiently clear. Letter o Sufficiently clear. Paragraph (2) Joint control is joint control by owners over a subsidiary company based on contractual agreement. Joint control must be proven by the existence of a written agreement or commitment from owners to provide financial and non-financial support according to their respective ownership. Indirectly holding shares means controlling or holding shares jointly or through other parties, including:
16. shares of the Bank or other companies held by other parties whose voting rights can be used or controlled by the controller;
17. shares of the Bank or other companies held by parties controlled by the controller;
18. shares of the Bank or other companies held by affiliated parties of the controller;
19. shares of the Bank or other companies held by subsidiaries of companies controlled by the controller;
20. shares of the Bank or other companies held by parties acting for and on behalf of the controller (nominee shares) based on or not based on specific agreements;
21. shares of the Bank or other companies held by other parties whose transfer requires approval from the controller;
22. shares of other companies held by the Bank through companies controlled by the Bank in a hierarchical manner up to the final company (ultimate subsidiary);
23. shares of the Bank or other companies other than shares as referred to in items 1 to 7 that are controlled by the Bank or controller.
    Affiliated parties of the controller as referred to in item 3 are:
    a. members of the Board of Commissioners, members of the Board of Directors, or equivalents or their proxies, officials, or employees of the controlling company; b. managers, supervisors, administrators, or their proxies, officials, or employees of the controlling company, specifically for companies with legal status as cooperatives;
    c. parties providing services to the controlling company, including public accountants, appraisers, legal consultants, and other consultants proven to be controlled by the controller;
    d. parties having a family relationship with the controller through marriage and/or descent; or e. parties who, in the opinion of the Financial Services Authority, participate in influencing the management of the controller, including shareholders and their families, families of Board of Commissioners members, families of supervisors, families of Board of Directors members, and families of managers. Shares mean all types of shares that have voting rights. Letter a Sufficiently clear. Letter b Sufficiently clear. Letter c Sufficiently clear. Letter d Sufficiently clear. Letter e Sufficiently clear. Letter f Strategic policy is a policy concerning the determination of direction and objectives of business implementation that has a significant impact. Letter g Sufficiently clear. Letter h Sufficiently clear. Paragraph (3) Letter a Sufficiently clear. Letter b Sufficiently clear. Letter c Sufficiently clear. Letter d Sufficiently clear. Letter e Sufficiently clear. Letter f Sufficiently clear. Letter g Strategic policy is a policy concerning the determination of direction and objectives of business implementation that has a significant impact.

Article 10
Letter a
Provision of Funds facilities provided by the Bank to debtors in the Bank's business activities generally include loans and/or guarantees provided in various forms. Examples of guarantees provided in various forms are performance bonds, bid bonds, or acceptances. Letter b Sufficiently clear.

Article 11
Sufficiently clear.

Article 12
Sufficiently clear.

Article 13
Letter a
Example:
Bank "A" controls pension fund "B". The legal entity owned by pension fund "B" is not a Related Party of Bank "A" as long as:

1. there is no other direct control from Bank "A"; and/or
2. there is no control from pension fund "B" other than due to ownership relationships.
   Letter b
   Sufficiently clear.

Article 14
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Independent Commissioner is an independent commissioner as referred to in the Financial Services Authority Regulation regulating the application of governance for commercial banks. Letter b Sufficiently clear. Letter c Sufficiently clear. Letter d Sufficiently clear.

Article 15
Sufficiently clear.

Article 16
Sufficiently clear.

Article 17
Paragraph (1)
The Bank may have Provision of Funds to a group of Borrowers with specific control relationships. This control relationship causes that if one Borrower from the group of Borrowers experiences default, all Borrowers in the group of Borrowers may also experience default. Thus, the group of Borrowers must be treated as one party. Paragraph (2) Letter a Sufficiently clear. Letter b Example:
Company "A" and Company "B" receive Provision of Funds from the Bank, and each of these companies has 25% (twenty-five percent) or more of its shares owned by Company "C". Therefore, Company "A" and Company "B" are grouped into 1 (one) group of Borrowers. In the event Company "C" is a Borrower at the Bank, Company "A", Company "B", and Company "C" are grouped into 1 (one) group of Borrowers. Letter c Sufficiently clear. Letter d Financial relationships between Borrowers are analyzed based on several factors, namely:

1. the existence of financial assistance from one Borrower to another Borrower with terms that cause the Borrower providing the financial assistance to have the ability to determine (controlling influence) the strategic policies of the Borrower receiving the financial assistance;
2. the existence of significant business chain linkages in the operations of one Borrower with another Borrower, resulting in dependency between Borrowers that causes:
   a. one Borrower is unable to easily transfer business transactions to other parties; and b. the inability to easily transfer business transactions causes the cash flow of one Borrower to experience significant disruption, thereby experiencing difficulty in fulfilling obligations; and/or
3. the existence of credit risk transfer through guarantees, where one Borrower acting as guarantor will take over part or all of the financial risk of the guaranteed Borrower.
   Letter e
   Guarantee is a promise issued by a Borrower to take over and/or settle part or all of the obligations of another Borrower in the event of default.
   Paragraph (3)
   Sufficiently clear.
   Paragraph (4)
   Sufficiently clear.

Article 18
Paragraph (1)
Debtor through a company using the channeling method is the debtor (end-user).
Companies using the channeling method include, among others, financing companies or cooperatives.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
The Bank has direct risk, namely when the quality of Provision of Funds channeled by the Bank to customers (end-users) using the channeling method through financing institutions directly reflects the current risk of each customer (end-user). Letter c Collateral provided by customers is bound for the benefit of the Bank so that the Bank can directly execute the collateral in the event of default. Letter d Payments from the debtor (end-user) for the benefit of the Bank do not include the spread arising from the difference in interest rates received by the Bank and the financing institution, which is a service for the financing institution in conducting Credit management. Letter e Sufficiently clear.

Article 19
Paragraph (1)
Partnership pattern is a development pattern using a core company that helps guide surrounding people's companies as plasma companies in a mutually beneficial, integral, and sustainable cooperation system. Paragraph (2) Sufficiently clear.

Article 20
Based on Laws regulating regional government, provincial government, and district/city government are organized based on the principle of autonomy, among others, embodied in the implementation of government affairs that are the authority of each respective region, including the transfer of regional financial resources and the regional revenue and expenditure budget.

Article 21
Paragraph (1)
Banking book and trading book positions refer to Financial Services Authority Regulations regulating the minimum capital provision requirements for commercial banks.
Paragraph (2)
Sufficiently clear.

Article 22
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Identical means there is at least similarity in issuer, coupon rate, maturity, and currency type.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Letter a
In determining the seniority level of financial instruments, the Bank allocates the financial instrument into general seniority level groups, which reflect the priority of claim rights. Example:
Senior debt instruments have a higher seniority level compared to subordinated debt instruments.
Letter b
Sufficiently clear.
Paragraph (5)
Sufficiently clear.

Article 23
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Deposits in other Banks in Indonesia for daily liquidity management purposes are for a maximum of 14 (fourteen) days.

Article 24
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Deposits in each Prime Bank do not include deposits resulting from the application of MRK techniques.
Paragraph (3)
Sufficiently clear.

Article 25
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Credit derivatives are Derivative Transactions with underlying assets in the form of Credits.
Letter a
Sufficiently clear.
Letter b
Item 1)
Example 1:
Bank "A" takes over credit risk (protection seller) of the financial asset portfolio from Bank "B" in the form of a credit default swap. The credit default swap by Bank "A" on the financial asset portfolio of Bank "B" is established as Provision of Funds to the Reference Entity of the financial asset portfolio. Example 2:
Bank "A" makes a payment to Bank "B" for a certain amount of interest plus compensation for losses from the credit portfolio owned by Bank "B" which has been established as the underlying asset. Meanwhile, for the payment from Bank "A", Bank "B" pays interest obtained from the underlying asset to Bank "A". The Provision of Funds by Bank "A" in this total return swap transaction is established as Provision of Funds to the Reference Entity of the credit portfolio owned by Bank "B". Item 2) Example:
The issuer of credit linked notes is the party transferring credit risk (protection buyer). Bank "A" buys credit linked notes from Bank "B", where the underlying asset of the credit linked notes consists of financial assets owned by Bank "B". The purchase of credit linked notes by Bank "A" is calculated in the Maximum Credit Provision (BMPK) as Provision of Funds to:

1. Bank "B" as the issuer of the credit linked notes; and
2. The Reference Entity of the underlying asset of the credit linked notes.
   Item 3)
   Sufficiently clear.

Article 26
The definition of banking book and trading book refers to Financial Services Authority Regulations regulating the minimum capital provision requirements for commercial banks. The calculation of the value of Provision of Funds for credit risk due to counterparty failure (counterparty credit risk) refers to Financial Services Authority regulations regulating guidelines for calculating net exposure of derivative transactions in the calculation of risk-weighted assets for credit risk using the standardized approach.

Article 27
Paragraph (1)
The two-legged approach is as referred to in Financial Services Authority regulations regulating the use of the standardized method in calculating the minimum capital provision requirements for commercial banks while considering market risk. Paragraph (2) The Bank also considers equity risk and/or commodity risk on a consolidated basis in the event the Bank has a Subsidiary Company exposed to equity risk and/or commodity risk, but only the transaction leg that is within the scope of Provision of Funds, namely the long position, is calculated in the Maximum Credit Provision (BMPK). Example 1:
The Subsidiary Company has a future transaction on PT "X" shares, reported as a long position on PT "X" shares and a short position on the risk-free interest rate.
Example 2:
An interest-rate swap transaction conducted by the Bank by receiving floating interest rates and paying fixed interest rates is reported as a long position for floating interest rate instruments and as a short position for fixed interest rate instruments. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Article 28
Sufficiently clear.

Article 29
Sufficiently clear.

Article 30
Paragraph (1)
Repo transactions are examples of Securities Financing Transactions (SFT).
Paragraph (2)
Sufficiently clear.
Paragraph (3)
The positive difference between the book value of Securities Sold with a Repurchase Agreement (Repo) and the book value of repo liabilities is as calculated based on Financial Services Authority regulations regulating guidelines for calculating risk-weighted assets for credit risk using the standardized approach.

Article 31
Paragraph (1)
Reverse repo transactions are examples of Securities Financing Transactions (SFT).
Example:
Bank "A" buys securities of PT "X" owned by Bank "B" with the promise to sell them back.
The Maximum Credit Provision (BMPK) for the Claim on Securities Bought with a Resale Agreement (Reverse Repo) is established as Provision of Funds to Bank "B" as the seller or owner of the Securities sold via repo (repo party). Bank "B" still has Provision of Funds for securities to PT "X" as the issuer of the Securities. In the event Bank "B" cannot settle the repo claim on the maturity date of the repo transaction, Bank "A" will have Provision of Funds for Securities to PT "X". Paragraph (2) Sufficiently clear.

Article 32
Paragraph (1)
Securities linked or guaranteed by underlying assets are Securities whose price or value is determined, among others, based on the price or value of a specific instrument established as the underlying asset. Examples of such Securities include Asset-Backed Securities (ABS) and mutual funds. Paragraph (2) Example:
Bank "A" buys ABS "XYZ" or mutual fund "PQR" from PT "B" with a total purchase nominal of less than 0.25% (zero point two five percent) of the Core Capital (tier 1) of Bank "A". The Provision of Funds in the form of purchasing ABS or mutual funds is established as Provision of Funds to the issuer of ABS "XYZ" or the investment manager of mutual fund "PQR". Paragraph (3) Example 1:
Bank "A" buys ABS "XYZ" from PT "B" with a total purchase nominal equal to or more than 0.25% (zero point two five percent) of the Core Capital (tier 1) of Bank "A". The underlying asset of ABS "XYZ" is a portfolio of loans consisting of loans to PT "Alfa", PT "Beta", and PT "Gama". Thus, the Provision of Funds in the form of purchasing ABS "XYZ" is established as Provision of Funds to PT "Alfa", PT "Beta", and PT "Gama". Example 2:
Bank "A" buys mutual fund "PQR" from PT "B" with a total nominal purchase equal to or more than 0.25% (zero point two five percent) of the Core Capital (tier 1) of Bank "A". The underlying asset of mutual fund "PQR" consists of bonds of PT "A" and bonds of PT "B". Thus, the Provision of Funds in the form of purchasing mutual fund "PQR" is established as Provision of Funds to PT "A" and PT "B". Paragraph (4) Letter a Sufficiently clear. Letter b The look-through approach example is contained in Appendix I which is an inseparable part of this Financial Services Authority Regulation. Paragraph (5) In the event the Bank cannot identify the underlying asset so that the look-through approach cannot be used, the Bank demonstrates that considerations for regulatory arbitrage do not affect the decision to use the look-through approach. For example, the Bank does not avoid setting Large Fund Provision limits by investing in several individual transactions that are immaterial with identical underlying assets. Paragraph (6) Sufficiently clear. Paragraph (7) Examples of third parties include, among others, originators, investment managers, liquidity providers, and credit protection providers.

Article 33
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Letter a
Sufficiently clear.
Letter b
Item 1)
Government, public sector entities, or multilateral development banks are as referred to in Financial Services Authority regulations regulating guidelines for calculating risk-weighted assets for credit risk using the standardized approach. Item 2) Residential mortgage loans are as referred to in Financial Services Authority regulations regulating guidelines for calculating risk-weighted assets...

Risk-weighted for credit risk using the standardized approach.

Paragraph 3)
Commercial property-secured credit is as referred to in the regulations of the Financial Services Authority regarding guidelines for calculating risk-weighted assets for credit risk using the standardized approach.

Letter c
A pool of assets used as the basis for issuing covered bond securities may also consist of:

1. Substitution assets, i.e., cash or short-term liquid assets held as a substitute for the primary asset pool with the aim of enhancing the value of the asset pool (cover pool); or
2. Derivative transactions conducted as a hedge (hedging) against risks arising from covered bond transactions.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Sufficiently clear.

Article 34
Sufficiently clear.

Article 35
Paragraph (1)
Sufficiently clear.

Paragraph (2)
The recorded value of accepted bills is the claim value against the debtor (applicant) or the guarantor.

Article 36
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Example:
Bank "A" takes over the claim of PT "Z" against PT "X" with non-recourse terms of Rp150,000,000.00 (one hundred fifty million rupiah), then the Bank's BMPK is established as a Provision of Funds to PT "X".

Paragraph (4)
Example:
Bank "A" takes over the claim of PT "Z" against PT "X" with recourse terms of Rp150,000,000.00 (one hundred fifty million rupiah), then the Bank's BMPK is established as a Provision of Funds to PT "Z".

Article 37
Sufficiently clear.

Article 38
Paragraph (1)
Sufficiently clear.

Paragraph (2)
The credit conversion factor is as referred to in the regulations of the Financial Services Authority regarding guidelines for calculating risk-weighted assets for credit risk using the standardized approach.

Paragraph (3)
Sufficiently clear.

Article 39
Paragraph (1)
Provision of Funds to State-Owned Enterprises (BUMN) for development purposes includes, among others, Provision of Funds for:
a. Food procurement; b. Procurement of very simple housing;
c. Procurement, provision, and/or management of oil and gas as well as other equivalent alternative energy sources;
d. Procurement, provision, and/or management of water; e. Procurement, provision, and/or management of electricity; f. Procurement and/or processing of export-oriented commodities; g. Procurement of supporting infrastructure for land, sea, and air transportation in the form of road, bridge, railway, seaport, and airport construction; and/or h. Construction of National Strategic Tourism Areas (KSPN) designated and prioritized by the central government as referred to in legislation governing the acceleration of national strategic projects.

The calculation of Provision of Funds to 1 (one) BUMN is based on the total Provision of Funds received by that BUMN, for the purposes referred to in letters a through h and for other purposes.

Paragraph (2)
BUMD (Regional-Owned Enterprises) are business entities whose capital is wholly or largely owned by the region as referred to in legislation governing regional government.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Article 40
Paragraph (1)
Specific requirements for applying MRK Techniques in BMPK calculations refer to regulations of the Financial Services Authority governing guidelines for calculating risk-weighted assets for credit risk using the standardized approach.

In the event that a Bank does not recognize the existence of collateral, guarantees, credit guarantees, or credit insurance as an MRK Technique in calculating risk-weighted assets for credit risk using the standardized approach, the Bank is not required to apply the MRK Technique in BMPK calculations.

Paragraph (2)
Sufficiently clear.

Article 41
Sufficiently clear.

Article 42
Letter a
Central Government is as referred to in laws governing regional government.

Letter b
Deposits at Bank Indonesia are Bank funds placed, both in rupiah and foreign currency, at Bank Indonesia, including in the form of current accounts, transactions in the context of open market operations (fine-tune operation), and Bank Indonesia Facilities (FASBI).

Letter c
Sufficiently clear.

Article 43
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Unconditional means in the event that:

1. The benefits obtained by the fund-providing Bank from the guarantee do not diminish substantially even if losses occur due to factors beyond the Bank's control; and
2. It does not contain procedural requirements, such as:
   a. Requiring a time limit for submitting a notice of default; b. Requiring the fund-providing Bank to prove good faith; and/or
   c. Requiring the release of the guarantee to be done via offset first against the fund-providing Bank's obligations to the guarantor.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Article 44
Paragraph (1)
Export-oriented Provision of Funds is stipulated in an agreement between the Bank and a financial institution meeting specific requirements.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Sufficiently clear.

Paragraph (6)
Sufficiently clear.

Article 45
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
In the event that cash collateral is in the form of gold, the collateral value is determined based on fair value.

Letter b
Included in the definition of Provision of Funds guaranteed by securities issued by the Government of the Republic of Indonesia and/or Bank Indonesia are Claims on Securities Purchased with an Agreement to Sell Back (Reverse Repo).

In the event that the collateral is in the form of Government Securities (SUN), the collateral value is determined based on the market value of the SUN or, if market value is not available, based on fair value.

Paragraph (3)
Sufficiently clear.

Article 46
Sufficiently clear.

Article 47
Sufficiently clear.

Article 48
Paragraph (1)
Letter a
Decrease in Capital or Core Capital (tier 1) of the Bank is a decrease that results in the Bank's Capital or Core Capital (tier 1), as the denominator for BMPK calculation, becoming smaller.

Letter b
Exchange rate changes may result in an increase in the recorded value of Provision of Funds in foreign currency, thereby potentially causing an exceedance of BMPK. In accordance with financial accounting standards, adjustments for exchange rates are only made for financial instrument accounts; thus, Equity Investments in foreign currency are not adjusted with the exchange rate on the reporting date.

Letter c
Included in changes in fair value are changes in value in the recording of equity investments using the equity method that have been held for more than 1 (one) year or the recording of securities measured at fair value through profit or loss or through equity (mark to market).

Letter d
Business combinations, whether in the form of acquisition, merger, or other ownership structure changes, and/or changes in management structure, whether conducted by the Fund-Providing Bank or by the Borrower, may result in changes to the parties designated as Related Parties or borrower groups. Thus, as a result of business combinations and/or changes in management structure, the Bank must re-evaluate the exposure amount held against Borrowers in relation to the limits established for Related Parties and/or borrower groups as referred to in Article 5 and Article 16 letter b.

Letter e
Included in changes in regulations are changes in parties categorized as Related Parties or borrower groups.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
The recorded value on the reporting date is as regulated in the applicable financial accounting standards for each respective instrument.

Article 49
Paragraph (1)
Sufficiently clear.

Paragraph (2)
The action plan submitted by the Bank is the Bank's commitment to the Financial Services Authority.

Article 50
Sufficiently clear.

Article 51
Paragraph (1)
Sufficiently clear.

Paragraph (2)
For BMPK exceedances caused by business combinations, the deadline for submitting the action plan is no later than 1 (one) month after the end of the reporting month from the date of approval of the combination by the competent authority.

Article 52
Sufficiently clear.

Article 53
Sufficiently clear.

Article 54
Sufficiently clear.

Article 55
Sufficiently clear.

Article 56
Sufficiently clear.

Article 57
Sufficiently clear.

Article 58
Paragraph (1)
The detailed list of Related Parties must at least contain details of shareholders, management, business sector/business, and control relationships from and among each Related Party. Where possible, the preparation of the detailed list of Related Parties includes a corporate tree diagram.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Article 59
Sufficiently clear.

Article 60
Sufficiently clear.

Article 61
Sufficiently clear.

Article 62
Sufficiently clear.

Article 63
Sufficiently clear.

Article 64
Sufficiently clear.

Article 65
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6283

APPENDIX I
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 32 /POJK.03/2018
REGARDING
MAXIMUM CREDIT GRANTING AND LARGE EXPOSURE PROVISION FOR COMMERCIAL BANKS GUIDELINES FOR CALCULATING MAXIMUM CREDIT GRANTING AND LARGE EXPOSURE PROVISION FOR COMMERCIAL BANKS

A. GENERAL
One of the causes of Bank failure is the Provision of Funds not supported by the Bank's ability to manage the concentration of the Provision of Funds portfolio. Such concentration is caused not only by Credit exposure but also by excessive exposure to certain market factors or exposure arising from funding activities in the event that a Bank specifically relies on a certain borrower segment or funding source. With the increasingly complex relationships between individuals and companies, and between companies, Banks must be able to accurately identify and determine counterparties in relation to the measurement of concentration risk exposure.

The experience of the global financial crisis in 2008 showed that Banks lacked consistent measurement, grouping methods, and controls for Bank Provision of Funds, especially Large Exposure (large exposure) to one Borrower or a group of Borrowers. In response to this condition, the Basel Committee on Banking Supervision issued Basel III: supervisory framework for measuring and controlling large exposures in 2014. Regulations regarding Large Exposure limit the maximum loss that a Bank can face in the event of a sudden counterparty failure. This limitation is set at a level considered not to threaten the Bank's solvency.

The Large Exposure framework is also one of the tools to reduce contagion risk among global systemically important banks, thereby supporting global financial system stability. The framework is also viewed as a useful method to strengthen supervision and regulation of the shadow banking system.

Risks from Large Exposure are not the only type of concentration risk that can damage Bank resilience. Other types of concentration risk include sectoral and geographical exposure concentration, dependence on concentrated funding sources, and short net positions in Securities because Banks can suffer significant losses if the prices of such Securities increase. The Large Exposure regulatory framework focuses on losses arising from the default of one individual or group of Borrowers and does not account for other types of concentration risk.

B. RISK MANAGEMENT

1. In providing Funds, Banks are required to apply prudent principles and manage risks arising from such Provision of Funds. The application of prudent principles and risk management is carried out, among others, by establishing Provision of Funds limits. The establishment of such Provision of Funds limits must be based on an analysis of the impact of Provision of Funds on the Bank's balance sheet structure and risk profile, i.e., by considering the size, type, and term of Provision of Funds as well as the impact of Provision of Funds on the Bank's overall portfolio diversification policy and strategy. In addition to setting limits on exposure to specific parties, for internal purposes, Banks may set limits based on specific geographic areas and industrial sectors.

2. The analysis of the impact of Provision of Funds on the balance sheet structure and risk profile is carried out, among others, by measuring credit risk against a pool of Provision of Funds with similar characteristics, in terms of size, type, and/or term. Such credit risk is measured, among others, based on historical data on failure rates and credit rating migration of Provision of Funds over a certain period.

3. The analysis of such concentration risk is further elaborated into a maximum limit of Provision of Funds that can be granted to Borrowers. The maximum limit of Provision of Funds is generally determined based on the maximum loss from Provision of Funds that can be tolerated by the Bank's capital.

4. In addition to conducting analysis on the concentration of Provision of Funds to Borrowers and pools of Provision of Funds as described in number 2, Banks must also conduct analysis on the allocation established for each component of the Provision of Funds portfolio. This is intended so that the Bank can have an optimal portfolio composition from the Bank's overall balance sheet structure. In determining such allocation, the Bank must consider the risk correlation between components of the Provision of Funds portfolio and the volatility level of each portfolio component.

C. RELATED PARTIES AND BORROWER GROUPS
The determination of Related Parties and borrower groups can be analyzed based on ownership, management, and/or financial relationships.

1. Share Ownership
   Control relationships can arise, among others, as a result of share ownership with voting rights in a party, in the form of an individual or company against a company. The determination of share ownership includes joint share ownership or through other parties, such as shares from Related Parties/members of other groups or shares from their families.

a. Related Parties with the Bank

1. Controller of the Bank based on share ownership
   A party is considered to have a control relationship with the Bank in the event that such party owns 10% (ten percent) or more of the Bank's shares.

In the event that the party controlling the Bank is controlled by another party in the form of an individual or company, the controller of the controller is also established as the controller of the Bank. In determining the controller of the controller, there is no specific limit on the level of hierarchy, so it must be traced up to the ultimate shareholder.

Ultimate Controller

10% shares
PT A
10% shares
PT A1
10% shares
Bank
3% shares
Ultimate Controller
10% shares
PT A2
10% shares
PT A
7% shares
PT A1
Bank
10% shares

In the event that the controller of the Bank is an individual, parties having a vertical or horizontal family relationship with that individual are also controllers of the Bank. Control over the Bank as described above is exemplified by the ownership structure as in Figure 1 and Figure 2.

Figure 1. Bank Controller
Figure 1 is an example of a Bank owned directly by PT "A1". The controller of the controller in Figure 1 is PT "A" and the ultimate controller. Based on this, the ultimate controller, PT "A", and PT "A1" are established as controllers of the Bank, thus becoming Related Parties with the Bank.

Figure 2. Joint Bank Controller
Figure 2 is an example of Bank control conducted through joint share ownership by PT "A1" and PT "A". Based on this, the ultimate controller, PT "A", PT "A1", and PT "A2" are established as controllers of the Bank, thus becoming Related Parties with the Bank.

2. Legal entities in the event that the Bank acts as the controller
   In determining the controller of the Bank's controller, there is no specific limit on the level of hierarchy to determine legal entities under the Bank's control. The tracing of legal entities under the Bank's control is conducted up to the ultimate subsidiary.

This is exemplified in Figure 3.

Figure 3. Legal Entities Controlled by the Bank
In Figure 3, PT "B1" is a legal entity controlled by the Bank. PT "B" and the ultimate subsidiary are also legal entities under the Bank's control through PT "B1" in a hierarchical manner. Based on this, the ultimate subsidiary, PT "B", and PT "B1" are Related Parties with the Bank.

3% shares

10% shares > 10% shares
Ultimate Controller
PT A PT A2
10% shares
PT A1
7% shares
Bank
10% shares
PT B1
10% shares
10% shares
PT B
Ultimate Subsidiary

3. Companies in the event that an individual or company as referred to in number 1) acts as the controller
   In determining control parameters from the share ownership side, the percentage used is:
   a) 10% (ten percent) or more and that shareholding portion is the largest portion; or b) 25% (twenty-five percent) or more ownership of the shares of that company.

This is exemplified in Figure 4.

Figure 4. Affiliated Companies
In Figure 4, it can be seen that the party established as the controller of the Bank is PT "A" and the ultimate controller. PT "A" owns 25% (twenty-five percent) or more of the shares of PT "C1" and PT "C2". Meanwhile, the ultimate controller owns 10% (ten percent) of the shares of PT "C" and that shareholding is the largest portion. Thus, PT "C", PT "C1", and PT "C2" are established as Related Parties with the Bank.

4. Collective Investment Contracts
   Collective Investment Contract (KIK) is a contract between the investment manager and the custodian bank binding unitholders, where the investment manager is authorized to manage the collective investment portfolio and the custodian bank is authorized to carry out collective custody as referred to in Financial Services Authority Regulations governing mutual funds in the form of collective investment contracts. In BMPK regulations, the KIK investment manager is established as the party for determining control relationships.

In the event that the Bank and/or Related Parties with the Bank own 10% (ten percent) or more of the shares in a KIK investment manager, then investments in the KIK managed by that investment manager and/or Provision of Funds to that investment manager are established as Provision of Funds to Related Parties.

This is exemplified in Figure 5.

Figure 5. Collective Investment Contract (KIK)
In Figure 5, the Bank together with Bank Related Parties (PT “C2” and PT “B1”) cumulatively own more than 10% (ten percent) of the shares in the investment manager managing the KIK portfolio. Based on this, investments in the KIK and/or Provision of Funds to the KIK investment manager are established as Provision of Funds to Related Parties.

b. Borrower Groups other than Related Parties.
From the share ownership side, to determine the control relationship between 1 (one) Borrower and another Borrower, the following applies:

1. The Borrower, directly or indirectly, owns 10% (ten percent) or more of the shares of another Borrower and that shareholding portion is the largest portion; or
2. The Borrower, directly or indirectly, owns 25% (twenty-five percent) or more of the shares of another Borrower.

In the event that 1 (one) Borrower owns shares of another Borrower with the percentages as described in number 1) or number 2), both Borrowers are classified into 1 (one) Borrower Group. The classification of Borrower Groups also applies in the event that 1 (one) same party becomes the controller of several Borrowers, i.e., in the event that such party owns shares in several Borrowers with percentages as described in number 1) and/or number 2).

This is exemplified in Figure 6.

Figure 6. Borrowers under one control
In Figure 6, the Bank grants Credit to Borrower “1”, Borrower “2”, and Borrower “3” respectively. It can be seen that Borrower “1” and Borrower “2” are controlled by 1 (one) same party, i.e., the Controller. The Controller owns 25% (twenty-five percent) or more in Borrower “1” and Borrower “2” respectively, so Borrower “1” and Borrower “2” are classified into 1 (one) Borrower Group. Borrower “3” is controlled by the same controller as Borrower “1” and Borrower “2”. Control over Borrower “3” by the Controller is conducted hierarchically through Borrower “1” and Borrower “2” with a share ownership of 15% (fifteen percent) and this shareholding portion is the largest portion. Thus, Borrower “1”, Borrower “2”, and Borrower “3” are classified into 1 (one) Borrower Group and the BMPK for the entire Borrower Group must not exceed 25% (twenty-five percent) of the Bank's Core Capital (tier 1).

2. Management
   Control relationships can arise as a result of management relationships as referred to in Article 9 and Article 17 of this Financial Services Authority Regulation.

3. Financial
   Control relationships can be caused by financial relationships analyzed based on several criteria as follows:
   a. Financial interdependence
   Several factors used to determine the existence of financial interdependence between 2 (two) parties are as follows.

1. Transaction value between both parties.
   In the event that there are material transactions between 1 (one) party and another party that directly affect the financial health of that party, financial interdependence is established between those parties.

Examples of material transactions include in the event that 50% (fifty percent) or more of gross income or

gross annual outflows from one party originate from transactions with another party.

2. Transaction relationships between parties that can cause financial dependence are as follows:
   a) dependence on sales to specific parties; b) dependence in the production process where the production or production results of one party significantly depend on another party; and/or c) dependence on loans or funding sources from specific parties such that in the event of default from the funding source, no alternative funding sources are available.

Example:
The funding source to pay the debt of one party to another party is the same for each party, and that party has no other funding sources to repay the debt.

The analysis of these transaction relationships focuses only on the transactional relationship between one party directly with another party.

3. Cash flows from one party will be significantly disrupted due to cash flow disruptions from another party, thereby significantly affecting each party's ability to pay obligations to the Bank.

Furthermore, in the event one party defaults, this may correlate with the default of another party.

b. Risk Transfer through Guarantees

Another factor used to determine the existence of financial dependence between 2 (two) parties is the transfer of credit risk through guarantees, where the guarantor assumes part or all of the financial risk of the guaranteed party.

Forms of guarantees provided in determining financial relationships can consist of various forms such as: personal guarantee, corporate guarantee, and/or aval.

The financial relationships as described above apply to Related Parties with the Bank or not. In determining Related Parties, if among the parties having a financial relationship there are Related Parties with the Bank, then all parties having that financial relationship are designated as Related Parties with the Bank.

In the event that the financial relationship criteria do not automatically indicate financial dependence causing 2 (two) or more parties to become a Borrower Group, the Bank may not classify a Borrower into a Borrower Group as long as the Bank can demonstrate to the Financial Services Authority (OJK) that a Borrower that is economically closely related to another Borrower can overcome financial difficulties or overcome defaults experienced by the other Borrower, for example, by finding alternative business partners or funding sources within a reasonable period of time.

D. CALCULATION OF FUNDING PROVISIONING

1. BMPK Calculation for Borrower Groups

a. Example of BMPK calculation for a Borrower Group as follows:
Bank "XYZ" provides credit facilities to 3 (three) debtors, namely:

Debtor Name Recorded Value
"A" Rp27,000,000,000
"B" Rp3,000,000,000
"C" Rp3,000,000,000

Each debtor has a control relationship, so they are classified into 1 (one) Borrower Group, namely Borrower Group "ABC". Bank "XYZ"'s Core Capital (tier 1) is Rp100,000,000,000 (one hundred billion rupiah).

This Financial Services Authority Regulation establishes that the Bank's Funding Provisioning for debtor "A", debtor "B", debtor "C", and Borrower Group "ABC" is set at a maximum of 25% (twenty-five percent) of the Bank's Core Capital (tier 1), which is Rp25,000,000,000 (twenty-five billion rupiah).

Based on this, there are 2 (two) BMPK Violations from the Funding Provisioning conducted by Bank "XYZ" as follows:

Type of Violation Violation Percentage
BMPK Violation on
Credit to debtor "A"
{(Rp27,000,000,000 ÷ Rp100,000,000,000) x 100%} – 25% = 2% BMPK Violation on Credit to Borrower Group "ABC" [{(Rp27,000,000,000 + Rp3,000,000,000 + Rp3,000,000,000) ÷ Rp100,000,000,000} x 100%] – 25% = 8%.

b. Example of grouping Borrowers into several Borrower Groups

Bank "FSI" has debtors, namely Borrower Group "A" consisting of "B", "C", "D", "E", "F", and "G", and Borrower Group "W" consisting of "X", "Y", "Z", and "G". The ownership composition of each Borrower Group "A" and Borrower Group "W" can be seen in Figure 7.

Bank "FSI" then also provides credit to "G", which is owned by "E" by 26% (twenty-six percent) and "Y" by 64% (sixty-four percent).

"E" is a member of Borrower Group "A" while "Y" is a member of Borrower Group "W".

In the BMPK calculation, the Funding Provisioning provided by Bank "FSI" to "G" is also calculated as Funding Provisioning to Borrower Group "A" and Borrower Group "W".

Core Capital (tier 1) of Bank "FSI" is Rp100,000,000,000 (one hundred billion rupiah). The BMPK calculation for each Borrower Group "A" and Borrower Group "W" is 25% (twenty-five percent) of the Core Capital (tier 1) of Bank "FSI", which is Rp25,000,000,000 (twenty-five billion rupiah).

Funding Provisioning to Borrower Group "A" is Rp20,000,000,000 (twenty billion rupiah) and to Borrower Group "W" is Rp15,000,000,000 (fifteen billion rupiah).

The Funding Provisioning permitted to "G" must consider the exposure to both Borrower Groups as follows:

Funding Provisioning to Borrower Group "A" plus Funding Provisioning to "G" must be less than or equal to 25% of Core Capital (tier 1) of the Bank.
Rp20,000,000,000 + x < Rp25,000,000,000

Funding Provisioning to Borrower Group "W" plus Funding Provisioning to "G" must be less than or equal to 25% of Core Capital (tier 1) of the Bank.
Rp15,000,000,000 + x < Rp25,000,000,000

Note:
"x" is the maximum amount of Funding Provisioning that can be given to "G" so that if "x" is added to the exposure of each Borrower Group "A" and Borrower Group "W", it does not exceed 25% (twenty-five percent) of the Core Capital (tier 1) of Bank "FSI".

Based on this, the maximum Funding Provisioning that can be given to "G" is Rp5,000,000,000 (five billion rupiah) and "G" is designated as a member of each Borrower Group "A" and "W".

Thus, the calculation of Borrower "G"'s exposure in relation to determining the amount of exposure from each Borrower Group "A" and "W" that has control over the Borrower is not calculated proportionally, except in the event that the control relationship is caused solely by a financial relationship caused by the existence of a guarantee.

Figure 7. Grouping Borrowers into several Borrower Groups

2. Funding Provisioning

Funding Provisioning calculated in the BMPK and Large Fund Provisioning calculation is all Funding Provisioning in the banking book and trading book positions. The trading book position for financial instruments such as bonds and equity instruments owned by Subsidiary Companies is limited by the BMPK limit, but concentration exposure to specific commodities or currencies is not limited by the BMPK limit.

Exposure to Funding Provisioning that receives a risk weight of 1250% (one thousand two hundred fifty percent) in the calculation of risk-weighted assets according to the credit risk standard approach as referred to in the Financial Services Authority regulations regarding guidelines for calculating risk-weighted assets for credit risk using the standard approach, is also calculated in the BMPK calculation.

Explanation regarding several types of Funding Provisioning is as follows:

a. Derivative Transactions

BMPK for Derivative Transactions for banking book positions and trading book positions is calculated based on the net claim calculation of Derivative Transactions as referred to in the Financial Services Authority regulations regarding guidelines for calculating net claims of derivative transactions in the calculation of risk-weighted assets for credit risk using the standard approach.

1. Derivative Transactions other than credit derivatives

As an addition to the BMPK calculation for Derivative Transactions, for Derivative Transactions in the trading book position, the following is also calculated:
a) BMPK for Derivative Transactions in the form of futures, forwards, and swaps in the trading book position is calculated based on the two-legged approach as referred to in the Financial Services Authority regulations regarding guidelines for the use of the standard method in calculating minimum capital adequacy requirements for commercial banks by considering market risk. The transaction leg positions in the trading book position considered in the BMPK are transaction leg positions that are coverage in Funding Provisioning in the form of long positions. b) BMPK for Derivative Transactions in the form of options in the trading book position is calculated based on the value of changes in option prices caused by default on the underlying asset as follows:
i) for Derivative Transactions in the form of long call options, the market value of the option (V); ii) for Derivative Transactions in the form of short put options, the agreed value (strike price/S) of the option minus the market value of the option (V); iii) for Derivative Transactions in the form of short call options, the market value of the option (V); and iv) for Derivative Transactions in the form of long put options, the agreed value (strike price/S) of the option minus the market value of the option (V).

The occurrence of default on the underlying asset of Derivative Transactions in the form of short call options and long put options will cause the Bank to record profit, so it is established as an exposure with a negative value. This is explained as follows:

Position Call Put
Long V -S + V
Short -V S - V

The Bank sums up all values of long positions and short positions over Derivative Transactions in the form of options in the trading book position as described above. In the event the sum of net position values is negative, the value used is 0 (zero).

2. Derivative Transactions in the form of credit derivatives

Credit derivatives are contracts between 2 (two) parties that use derivative instruments to hedge by transferring risk from the party transferring credit risk (protection buyer) to the party assuming credit risk (protection seller) over financial assets (underlying asset) in the form of Securities, Credit granted, or other claims.

Credit derivative contracts stipulate that risk transfer is based on the occurrence of a credit event on the reference obligation owned by the Reference Entity.

Generally, credit derivatives include credit default swaps (CDS), total return swaps (TRS), credit linked notes (CLN), and other similar instruments.

In the event there are financial assets hedged using credit derivative transactions, the offset process in such hedging can be recognized as long as the underlying asset of the hedging and the hedged asset meet the requirements where the short position has a junior level or the same level compared to the long position.

For the party assuming credit risk (protection seller), i.e., the party assuming the risk of the underlying asset, the guarantee provided for the value loss of the underlying asset is subject to BMPK and is established as exposure to the Reference Entity.

a) Credit Default Swap

CDS transactions are transactions where the party assuming credit risk (protection seller) only makes payments to the party transferring credit risk (protection buyer) in the event a credit event occurs on the underlying asset. Meanwhile, the party transferring credit risk (protection buyer) only makes payments against the guarantee provided by the party assuming credit risk (protection seller) in the form of premiums. The CDS transaction mechanism is exemplified in Figure 8.

Figure 8. Credit Default Swap Scheme

Payments by the party assuming credit risk (protection seller) upon the occurrence of a credit event can be made as follows:
i) equal to the par value exchanged with the physical delivery of the underlying asset; ii) in the form of compensation equal to the difference between the par value and the recovery value of the underlying asset upon the occurrence of a credit event; or iii) a fixed amount previously agreed upon.

Example:
Bank "A" is the party assuming credit risk (protection seller) over the financial asset underlying Bank "B" in the form of a CDS. The purchase of CDS by Bank "A" from Bank "B" is established as Funding Provisioning to the Reference Entity over the financial asset underlying.

b) Total Return Swap

TRS transactions are transactions where the party transferring credit risk (protection buyer) swaps (swaps) the income (return) received from the financial asset underlying, plus a certain margin, including the increase in the value of the financial asset underlying, to the party assuming credit risk (protection seller). In return, the party assuming credit risk (protection seller) will make payments in a certain amount to the party transferring credit risk (protection buyer) plus compensation for the decline in the value of the financial asset underlying.

The party assuming credit risk (protection seller) assumes all credit risk (and market risk) of the financial asset underlying during the transaction period.

The TRS transaction mechanism as described above can be exemplified in Figure 9.

Example:
Bank "A" makes payments to Bank "B" of a certain interest amount plus compensation for losses from the credit portfolio owned by Bank "B" which has been established as the underlying asset. Meanwhile, over the payment from Bank "A", Bank "B" pays the interest obtained from the underlying asset to Bank "A".

Bank "A"'s Funding Provisioning in this TRS transaction is established as Funding Provisioning to the Reference Entity of the credit portfolio owned by Bank "B".

Figure 9. Total Return Swap

c) Credit Linked Notes

CLN transactions are Securities issued by the party transferring credit risk (protection buyer) which will be paid at par value at maturity with the condition that no credit event occurs against the underlying asset until the Securities mature. In the event a credit event occurs, the CLN holder cashes in the CLN to the CLN issuer with a value equal to the difference between the par value and the recovery value of the underlying asset upon the occurrence of a credit event. Based on its characteristics, CLN is a combination of bonds and CDS, so only the credit risk of the underlying asset is guaranteed. The difference between CLN and CDS or TRS is that the CLN buyer or the party assuming credit risk (protection seller) buys/makes payments upfront equal to the value of the underlying asset of the CLN.

Example:
CLN Issuer is the party transferring risk (protection buyer).
Bank "A" buys CLN from Bank "B", Bank "A" as the party assuming credit risk (protection seller) where the underlying asset of the CLN consists of financial assets owned by Bank "B". The purchase of CLN by Bank "A" is calculated in BMPK as Funding Provisioning to:
i) Bank "B" as the CLN issuer, in the event the purchase of CLN is recorded in the banking book; or ii) Bank "B" as the CLN issuer and the Reference Entity of the underlying asset of the CLN in the event the purchase of CLN is recorded in the trading book.

BMPK to the issuer for the purchase of CLN is calculated as with the purchase of Securities in general, namely equal to the recorded value of the Securities.

d) Credit derivatives in trading book position

In addition to calculating BMPK for Derivative Transactions as referred to in the Financial Services Authority regulations regarding guidelines for calculating net claims of derivative transactions in the calculation of risk-weighted assets for credit risk using the standard approach, the Bank calculates BMPK for credit derivatives in the trading book position as follows:
i) Bank acts as the party assuming credit risk (protection seller) BMPK is calculated based on the subtraction between:
(1) the recorded value of the maximum amount to be paid when default; with (2) the absolute value of credit protection.
In the event the market value of the credit derivative is positive (from the perspective of the protection seller), the positive market value will be added as exposure to the party transferring risk (protection buyer). This can occur when the present value of premiums already agreed upon but not yet paid exceeds the absolute market value of credit protection.

ii) Bank acts as the party transferring risk (protection buyer) The Bank hedges the underlying asset using credit derivatives, thus the Bank's exposure to the Reference Entity receiving the guarantee will be established as exposure to the party assuming credit risk (protection seller). In the event the underlying asset receives an exemption from the BMPK calculation (e.g., Funding Provisioning to the central government), the Bank still recognizes exposure to the party assuming credit risk (protection seller) even though the initial Funding Provisioning which is the underlying asset has been exempted from BMPK.

Exposure to the party assuming credit risk (protection seller) is established as:
(1) the value of the guarantee obtained; or
(2) the net claim value of the credit derivative transaction calculated based on the Financial Services Authority Circular regarding guidelines for calculating net claims of derivative transactions in the calculation of risk-weighted assets for credit risk using the standard approach, as long as it meets certain requirements.

Certain requirements as referred to in number (2) are as follows:
(1) credit derivatives in the form of CDS; and (2) the Reference Entity or the party assuming credit risk (protection seller) is not a financial services institution.

e) Others

For credit derivatives that have characteristics different from the three forms described in letters a) to c), the BMPK for credit derivatives is established based on the inherent credit risk and the magnitude of risk transferred or assumed from the credit derivative instrument.

b. Securities

1. Securities Sold with an Agreement to Repurchase (Repo) and Claims on Securities Purchased with Repo Purchase for the reverse party, are established as Funding Provisioning to the owner of the Securities sold via repo (repo party). Meanwhile, for the repo party, the Securities repoed are still calculated as Funding Provisioning to the issuer of the Securities.

Figure 10 is a general example of the mechanism of Securities transactions via repo.

Figure 10. Repo Transactions

2. Securities linked/guaranteed with underlying assets

Securities linked/guaranteed with underlying assets are a form of Securities where the price/value of the Securities is determined, among others, based on the price/value of a specific instrument established as the base instrument such as mutual funds or Asset-Backed Securities (ABS).

In the BMPK calculation for such Securities, the Bank can use the look-through approach (LTA) method or not use the LTA method as referred to in this Financial Services Authority Regulation.

The LTA method is that the BMPK for each Reference Entity is calculated proportionally based on the proportion of base assets/instruments of each Reference Entity to the Securities as a whole.

Regulations for Securities with the LTA method are as follows:
a) Securities in a structure where investors have pari passu ratings

Example:
Investment Manager PT "Prima" issues an open-end mutual fund worth Rp1,000,000,000 (one billion rupiah), the Bank buys 2% (two percent) share of the Securities in the form of the mutual fund with a purchase price of Rp20,000,000 (twenty million rupiah). The underlying assets of the mutual fund certificates consist of PT "A" bonds by 60% (sixty percent) and PT "B" bonds by 40% (forty percent) of the value of the mutual fund assets.

Based on this, the BMPK over the purchase of open-end mutual fund Securities is established to PT "A" and PT "B", each calculated proportionally against the purchase price of the mutual fund, namely:
a. Funding Provisioning to PT "A" = Rp20,000,000 x 60% = Rp12,000,000; and b. Funding Provisioning to PT "B" = Rp20,000,000 x 40% = Rp 8,000,000.

b) Securities in a structure where investors have different seniority ratings

Example:
Asset securitization activities where the issuance of Securities by the ABS issuer is based on the transfer of underlying financial assets from the original creditor (originator) where the cash flows from the collection of underlying assets are used to fulfill obligations for at least 2 (two) risk positions having different classes (tranches) and reflecting different levels of credit risk.

The BMPK calculation over Funding Provisioning in the form of the purchase of Securities in the structure form is measured for each class (tranche) in the structure with the assumption of pro-rata distribution of losses among investors in a class (tranche).

The calculation of the value of Funding Provisioning against the underlying asset is:
i) determining the lowest value between the value of the class (tranche) where the Bank invests and the nominal value of each underlying asset; and ii) establishing the pro-rata portion of the Bank's investment in that class (tranche) against the value determined in letter i).

3. Identification of additional risks for the purchase of Securities linked/guaranteed with underlying assets

In the event the Bank purchases Securities linked/guaranteed with underlying assets, the Bank identifies third parties that cause additional risk factors in the Securities and are not additional risk factors in the underlying assets. Such third parties can become risk factors for more than one Security purchased by the Bank. Examples of third parties are the originator, investment manager, liquidity provider, and credit enhancer.

The Bank can consider several third parties to be sources of potential additional risk.

In the event the Bank calculates BMPK for Securities linked/guaranteed with underlying assets

(underlying asset) not using the LTA method, the Bank identifies the structural risk inherent in the said Securities. This is independent of the results of the general additional risk assessment.

Regarding the identification of additional risk, the Bank performs the following actions:
a) The Bank classifies all investments in Securities linked/guaranteed by underlying assets into one group of Borrowers with third parties.

Example:
i) for structured finance instruments, liquidity facility providers or sponsors of short-term programs (asset-backed commercial paper, conduits, and structured investment vehicles) can be considered as additional risk factors. The exposure value considered in the Maximum Credit Limit (BMPK) is the amount invested in such instruments. ii) for synthetic transactions, the party assuming credit risk (protection seller) who sells protection via CDS can be a source of additional risk and a common factor for linking different structures. The exposure value considered in the BMPK is the percentage value against the underlying portfolio.

b) The Bank may add other Fund Provisions (e.g., Loans) to third parties other than Fund Provisions in the form of Securities purchases in the BMPK calculation. This is done based on considerations of the specific features of Securities linked/guaranteed by underlying assets and the role of third parties in each transaction.

Example:
For the party assuming credit risk (protection seller), the source of additional risk for the Bank investing in Securities linked/guaranteed by underlying assets is the default of the party assuming credit risk (protection seller). The Bank must sum the investment in such Securities with the exposure directly held by the Bank to the party assuming credit risk (protection seller) because both exposures can cause losses if the party assuming credit risk (protection seller) defaults. If the Bank ignores the Fund Provision portion that receives protection, this can lead to increased concentration risk exposure to the party assuming credit risk (protection seller).

c. Loans
In the case of Loans provided for the takeover of receivables in factoring activities or the purchase of Loans from other parties, the BMPK calculation is based on:

1. without recourse requirements, where the debtor is the party obligated to repay the transferred receivables; or
2. with recourse requirements, where the debtor is the party selling or transferring the receivables/Loans.
   This is illustrated in Figure 11.

Figure 11. Purchase of Receivables/Loans

d. Equity Investments
Fund Provisions in the form of Equity Investments are established as exposures to the company where the Bank makes the investment.
The amount of Fund Provision in the form of stock investments is equal to the book value of all costs incurred for the investment. For investments in the form of convertible bonds with equity options, the value considered is the value of the shares or equity that the Bank will obtain if the convertible bonds are converted into shares. For certain types of transactions resulting in the Bank having or acquiring shares, such as stock option transactions, the Fund Provision considered in the BMPK is equal to the total value of shares that will be held if the option is exercised.

E. FUND PROVISIONS TO STATE-OWNED ENTERPRISES (BUMN) Example:
BUMN “A” is a State-Owned Enterprise engaged in toll road construction.
BUMN “A” has 2 (two) subsidiaries, namely PT “AP1” and PT “AP2”. The BMPK calculation counts Fund Provisions directly to the BUMN and to the BUMN group.
Bank “X” provides Loans to BUMN “A”, PT “AP1”, and PT “AP2” (other than Related Parties of Bank “X”) as follows:

Debtor Book Value of Loan Description
BUMN “A” Rp10,000,000,000 Loan obtained for the purpose of building an office complex PT “AP1” Rp6,000,000,000 PT “AP2” Rp4,000,000,000 Total Fund Provision Rp20,000,000,000

Notes:

1. Bank “X” Capital = Rp 110,000,000,000
2. Core Capital (tier 1) of Bank “X” = Rp100,000,000,000
3. BMPK of Bank “X” to the BUMN “A” business group = 25% of Core Capital (tier 1) of Bank “X” = Rp25,000,000,000
4. Thus, Bank “X” can still provide Fund Provisions to the BUMN “A” business group amounting to Rp25,000,000,000 – Rp20,000,000,000 = Rp5,000,000,000.

In the event that BUMN “A” applies for a new Loan for the purpose of building a toll road, the new Fund Provision that can be provided to BUMN “A” must be calculated cumulatively, based on the exposure already held by the Bank over the BUMN “A” group against the 30% (thirty percent) limit of Bank “X” Capital as follows:

BMPK to BUMN for construction purposes 30% x Rp110,000,000,000 = Rp33,000,000,000 Total Fund Provision already provided Rp20,000,000,000 New Fund Provision that can be provided for toll road construction Rp33,000,000,000 – Rp20,000,000,000 = Rp13,000,000,000

This BMPK is larger by Rp8,000,000,000 (eight billion rupiah) compared to if the new Loan were not for construction purposes as referred to in this Financial Services Authority Regulation.

F. SPECIFIC BMPK TREATMENT
Example:
In calculating the BMPK for Fund Provisions guaranteed by a Prime Bank, Fund Provisions for each Prime Bank exceeding the fixed exemption amount are included in the BMPK calculation. Information regarding Fund Provisions is as follows:

Bank “X” Capital Rp150,000,000,000
BMPK Related Party = 10% of Bank “X” Capital Rp15,000,000,000 Fund Provisions by Bank “X”:

1. Purchase of Securities PT “B” Rp5,000,000,000
2. Long-term placement at Bank “C” Rp80,000,000,000
3. Placement at Prime Bank Related Party Rp70,000,000,000
4. Purchase of Securities PT “D” Rp20,000,000,000
5. Loan to PT “A” Rp100,000,000,000
   Total Fund Provision Rp275,000,000,000

PT “A”, PT “B”, Bank “C”, Prime Bank, and PT “D” are Related Parties with Bank “X”.

SBLC received by Bank “X” from Bank “Z” (Prime Bank) for the guarantee of PT “B” Rp90,000,000,000 SBLC received by Bank “X” from Bank “Z” (Prime Bank) for the guarantee of PT “C” Rp90,000,000,000

Calculation:

1. Placements exempted from BMPK calculation are Placements to Prime Banks, in this case, the Prime Bank Related Party.
   Exemption limit = 90% x Rp150,000,000,000 = Rp135,000,000,000.
   Meanwhile, the actual Placement at the Prime Bank Related Party is Rp70,000,000,000 (seventy billion rupiah).

2. The portion of Fund Provisions receiving SBLC guarantees from Prime Banks can be exempted from BMPK calculation at a maximum of 90% (ninety percent) of Bank “X” Capital for Fund Provisions to Related Parties.
   Exemption limit = 90% x Rp 150,000,000,000 = Rp135,000,000,000.
   This limit applies to the total Fund Provisions to Related Parties.

Excess SBLC = Rp90,000,000,000 + Rp90,000,000,000 - Rp135,000,000,000 = Rp45,000,000,000.
The excess SBLC of Rp45,000,000,000 (forty-five billion rupiah) cannot be used to guarantee Fund Provisions to PT “A” and PT “D”, including excess group BMPK exposure.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana
3. BMPK Violation amount:
Total Fund Provision Rp275,000,000,000
Placements exempted from BMPK calculation (Rp70,000,000,000) SBLC considered (Rp135,000,000,000) Total Fund Provision subject to BMPK calculation Rp70,000,000,000 BMPK Related Party (Rp15,000,000,000) BMPK Violation Rp55,000,000,000

Determined in Jakarta on 26 December 2018
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

APPENDIX II
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 32 /POJK.03/2018
CONCERNING
MAXIMUM CREDIT LIMIT AND LARGE FUND PROVISION FOR GENERAL BANKS GUIDELINES FOR PREPARING REPORTING ON MAXIMUM CREDIT LIMIT AND LARGE FUND PROVISION FOR GENERAL BANKS

INDIVIDUAL FUND PROVISION REPORT
Bank Name : PT Bank…. (individual)
Report Position : Month/Year (In Millions of Rupiah)

CONSOLIDATED FUND PROVISION REPORT
Bank Name : PT Bank…. (consolidated)
Report Position : Month/Year (In Millions of Rupiah)

Guidelines for Filling Out the Fund Provision Report In this form, the following matters are reported:

1. All Fund Provisions to Related Parties.
2. All Fund Provisions to non-Related Parties that do not violate or exceed the BMPK because they have guarantees/collateral that can be calculated as a reducing factor in the BMPK calculation.
3. Placements receiving specific BMPK treatment as referred to in this Financial Services Authority Regulation.

I. Name
This column is filled with the names of all Related Party Borrowers or non-Related Parties in the form of individuals or Borrower groups. If the Bank fills in a Borrower group, the Name column is filled with “Total”, followed on the next line by the names of each group member. Debtors in the form of “unknown client” as referred to in this Financial Services Authority Regulation are also written by the Bank as “unknown client”.

II. Individual/Group Member/Total Borrower Group
This column is filled with the code:
No. Individual/Group Member/Total Group Code
1 Individual 1
2 Borrower Group Member 2
3 Total Borrower Group 3
4 Total Related Party 4
5 BUMN 5
6 Total Individual/BUMN 6

III. Borrower Group Name
This column is filled with the name of the Borrower group.

IV. Relationship with the Bank
No. Relationship Code
1 Related Party 1
2 Non-Related Party 2

V. Status of Relationship with the Bank
This column is filled with the code:
No. Status of Relationship with the Bank Code
1 Individual Borrower 9900
2 Borrower Group
Controlling Other Borrowers 9910
Common Ownership 9920
Financial Dependency 9930
Guarantee 9940
Management/Management Relationship 9950
Explanation of the status of the relationship with the Bank as referred to in this Financial Services Authority Regulation and Appendix I, which is an integral part of this regulation.

VI. Type of Fund Provision
This column is filled with the type of Fund Provision provided by the reporting Bank to the Borrower as regulated in this appendix. This column is filled with the code:
No. Type of Fund Provision Code

1. Placement 1
2. Derivative Transactions other than credit derivatives 2
3. Credit derivatives 3
4. Securities 4
5. Securities Sold with Repurchase Agreement (Repo) 5
6. Claims on Securities Purchased with Resale Agreement 6
7. Acceptance Claims 7
8. Loans 8
9. Equity Investments 9
10. Temporary Equity Investments 10
11. Other Forms of Fund Provision 14
12. Guarantees 15
13. Letter of Credit (L/C) 16
14. Standby Letter of Credit (SBLC) 17
15. Other Forms of Fund Provision in Administrative Account Transactions
    For Borrowers receiving more than one type of Fund Provision from the reporting Bank, each type of Fund Provision is reported line by line.

VII. Time Period

1. Start
   This column is filled with the date, month, and year of the start of the Fund Provision provided.
2. Maturity
   This column is filled with the date, month, and year of the maturity of the Fund Provision.

VIII. Indonesian Rupiah Fund Provision Amount
This column is filled with the amount of Fund Provision received by the Borrower in Indonesian Rupiah.
In the case of consolidated reports, Fund Provisions are the amount of Fund Provisions after applying the MRK Technique.

IX. Foreign Currency Fund Provision
This column is filled with the amount of Fund Provision received by the Borrower in foreign currency after being converted into Rupiah using the exchange rate on the last day of the reporting month, conducted by the Borrower or one of the Borrower group members or one of the related members. In the case of consolidated reports, Fund Provisions are the amount of Fund Provisions after applying the MRK Technique.

X. Exchange Rate
Filled with the middle rate, which is the average of the buy and sell rates based on Reuters at 16:00 WIB on the last day of the reporting month.

XI. Capital
This column is filled with the total Bank Capital at the time of the reporting month, both individually and consolidated.

XII. Core Capital
This column is filled with the Core Capital (tier 1) of the Bank at the time of the reporting month, both individually and consolidated.

XIII. Form of Guarantee/Collateral
This column is filled with guarantees/collateral that can be calculated as a reducing factor in the BMPK and Large Fund Provision calculation as referred to in this Financial Services Authority Regulation, namely with the code:
No. Form of Guarantee/Collateral Code
1 Checking Account 1
2 Deposits 2
3 Savings 3
4 Guarantee Deposits 4
5 Gold 5
6 SBI 6
7 SUN 7
8 SBLC 8
9 Government of the Republic of Indonesia Guarantee (Government Guarantee) 9 10 Others 13 In the event that one Fund Provision uses more than one guarantee/collateral, all guarantees/collaterals are listed for one Fund Provision line by line.

XIV. Guaranteed Portion
This column is filled with the portion of Fund Provision that receives protection from credit risk mitigation instruments as referred to in this Financial Services Authority Regulation.

XV. Issuer of Guarantee/Collateral
This column is filled with the issuer of the guarantee/collateral, such as the Government of the Republic of Indonesia, Banks, or multilateral institutions, according to the third-party group code and Bank code as referred to in regulations governing periodic reports of general banks.

XVI. Guarantor Rating
This column is filled with the rating of the guarantee issuer. This column is filled with the number 00 for guarantees/collaterals issued by the Government of the Republic of Indonesia and Bank Indonesia.

XVII. Rating Agency
This column is filled with the name of the rating agency recognized by the Financial Services Authority as referred to in the Financial Services Authority Circular Letter regarding rating agencies and ratings recognized by the Financial Services Authority.

This column is filled with the code:
No. Rating Agency Code
1 Moody’s 30
2 Standard and Poor’s 31
3 Fitch Ratings 32
4 Others 33
5 None 34

XVIII. Rating Date
This column is filled with the date, month, and year when the rating was given.

XIX. Time Period

1. Start
   This column is filled with the date, month, and year of the start of the issuance of the guarantee/collateral.
2. Maturity
   This column is filled with the date, month, and year of the maturity of the guarantee/collateral.

XX. Quality
The Quality of Fund Provision is the quality of the Fund Provision provided by the Bank, assessed according to regulations on the quality assessment of bank assets with the following quality classification:
No. Quality Code
1 Performing 1
2 Special Attention 2
3 Substandard 3
4 Doubtful 4
5 Loss 5

XXI. Notes
This column is filled with other notes considered necessary.

Start Maturity Rupiah FX Start Maturity Rupiah FX % Total Fund Provision with Core Capital I II III IV V VI.1 VI.2 VII VIII IX X XI XII XIII XIV XV XVI XVII XVIII.1 XVIII.2 XIX XX XXI XXII Form of Guarantee/Collateral Guaranteed Portion Issuer of Guarantee/Collateral BORROWER Notes Name Individual/Group Member/Total Borrower Group Name of Borrower Group Status of Relationship with Bank Type of Fund Provision Time Period Guarantor Rating Rating Agency Rating Date Time Period Amount of Fund Provision Exchange Rate Core Capital FUND PROVISIONS ON REPORT DATE (BEFORE MRK TECHNIQUE) % Total Fund Provision with Core Capital GUARANTEES/COLLATERALS PROVIDED (MRK TECHNIQUE) Total Fund Provision after MRK Technique (Unsecured Portion)

LARGE FUND PROVISION REPORT
Bank Name : PT Bank…. (individual/consolidated)* Report Position : Month/Year (In Millions of Rupiah)

Guidelines for Filling Out the Large Fund Provision Report In this form, all Fund Provisions amounting to 10% (ten percent) or more of the Bank’s Core Capital (tier 1) to non-Related Parties are reported, before and after applying the MRK Technique.

I. Name
This column is filled with the names of all non-Related Party Borrowers in the form of individuals or Borrower groups. If the Bank fills in a Borrower group, the Name column is filled with “Total”, followed on the next line by the names of each Borrower group member. Debtors in the form of “unknown client” as referred to in this Financial Services Authority Regulation are also written by the Bank as “unknown client”.

II. Individual/Group Member/Total Borrower Group
This column is filled with the code:
No. Individual/Group Member/Total Group Code
1 Individual 1
2 Borrower Group Member 2
3 Total Borrower Group 3

III. Borrower Group Name
This column is filled with the name of the Borrower group.

IV. Status of Relationship with the Bank
This column is filled with the code:
No. Status of Relationship with the Bank Code
1 Individual Borrower 9900
2 Borrower Group
Controlling Other Borrowers 9910
Common Ownership 9920
Financial Dependency 9930
Guarantee 9940
Management/Management Relationship 9950
Explanation of the status of the relationship with the Bank as referred to in this Financial Services Authority Regulation and Appendix I, which is an integral part of this regulation.

V. Type of Fund Provision
This column is filled with the type of Fund Provision provided by the reporting Bank to the Borrower as regulated in these provisions. This column is filled with the code:
No. Type of Fund Provision Code

1. Placement 1
2. Derivative Transactions other than credit derivatives 2
3. Credit derivatives 3
4. Securities 4
5. Securities Sold with Repurchase Agreement (Repo) 5
6. Claims on Securities Purchased with Resale Agreement 6
7. Acceptance Claims 7
8. Loans 8
9. Equity Investments 9
10. Temporary Equity Investments 10
11. Other Forms of Fund Provision 14
12. Guarantees 15
13. Letter of Credit (L/C) 16
14. Standby Letter of Credit (SBLC) 17
15. Other Forms of Fund Provision in Administrative Account Transactions
    For Borrowers receiving more than one type of Fund Provision from the reporting Bank, each type of Fund Provision is reported line by line.

VI. Time Period

1. Start
   This column is filled with the date, month, and year of the start of the Fund Provision provided.
2. Maturity
   This column is filled with the date, month, and year of the maturity of the Fund Provision.

VII. Indonesian Rupiah Fund Provision Amount
This column is filled with the amount of Fund Provision, individually or consolidated, received by the Borrower in Indonesian Rupiah.

VIII. Foreign Currency Fund Provision
This column is filled with the amount of Fund Provision, individually or consolidated, received by the Borrower in foreign currency after being converted into Rupiah using the exchange rate on the last day of the reporting month, conducted by the Borrower or one of the Borrower group members or one of the related members.

IX. Exchange Rate
Filled with the middle rate, which is the average of the buy and sell rates based on Reuters at 16:00 WIB on the last day of the reporting month.

X. Core Capital
This column is filled with the Core Capital (tier 1) of the Bank at the time of the reporting month, both individually and consolidated.

XI. Percentage of Fund Provision with Core Capital (tier 1)
Percentage of Fund Provision with Core Capital (tier 1) of the Bank before applying the MRK Technique.

XII. Form of Guarantee/Collateral
This column is filled with guarantees/collaterals that can be calculated as a reducing factor in the BMPK and Large Fund Provision calculation as referred to in this Financial Services Authority Regulation, namely with the code:
No. Form of Guarantee/Collateral Code
1 Checking Account 1
2 Deposits 2
3 Savings 3
4 Guarantee Deposits 4
5 Gold 5
6 SBI 6
7 SUN 7
8 SBLC 8
9 Government of the Republic of Indonesia Guarantee (Government Guarantee) 9 10 Others 13 In the event that one Fund Provision uses more than one guarantee/collateral, all guarantees/collaterals are listed for one Fund Provision line by line.

XIII. Guaranteed Portion
This column is filled with the portion of Fund Provision that receives protection from credit risk mitigation instruments as referred to in this Financial Services Authority Regulation.

XIV. Issuer of Guarantee/Collateral
This column is filled with the issuer of the guarantee/collateral, such as the Government of the Republic of Indonesia, Banks, or multilateral institutions, according to the third-party group code and Bank code as referred to in regulations governing periodic reports of general banks.

XV. Guarantor Rating
This column is filled with the rating of the guarantee issuer. This column is filled with the number 00 for guarantees/collaterals issued by the Government of the Republic of Indonesia and Bank Indonesia.

XVI. Rating Agency
This column is filled with the name of the rating agency recognized by the Financial Services Authority as referred to in the Financial Services Authority Circular Letter regarding rating agencies and ratings recognized by the Financial Services Authority. This column is filled with the code:
No. Rating Agency Code
1 Moody’s 30
2 Standard and Poor’s 31
3 Fitch Ratings 32
4 Others 33
5 None 34

XVII. Rating Date
This column is filled with the date, month, and year when the rating was given.

XVIII. Time Period

1. Start
   This column is filled with the date, month, and year of the start of the issuance of the guarantee/collateral.
2. Maturity
   This column is filled with the date, month, and year of the maturity of the guarantee/collateral.

XIX. Indonesian Rupiah Fund Provision Amount after MRK Technique
This column is filled with the amount of Fund Provision, individually or consolidated, received by the Borrower in Indonesian Rupiah after applying the MRK Technique. Fund Provisions after the MRK Technique are the portion of Fund Provisions not secured by the MRK Technique as referred to in this Financial Services Authority Regulation.

XX. Foreign Currency Fund Provision Amount after MRK Technique
This column is filled with the amount of Fund Provision, individually or consolidated, received by the Borrower in foreign currency after being converted into Rupiah using the exchange rate on the last day of the reporting month, conducted by the Borrower or one of the Borrower group members or one of the related members after applying the MRK Technique. Fund Provisions after the MRK Technique are the portion of Fund Provisions not secured by the MRK Technique as referred to in this Financial Services Authority Regulation.

XXI. Percentage of Fund Provision with Core Capital
Percentage of Fund Provision with Core Capital (tier 1) of the Bank after applying the MRK Technique.

XXII. Notes
This column is filled with other notes considered necessary.

LARGE FUND PROVISION EXCLUSION REPORT
Bank Name : PT Bank…. (individual/consolidated)* Report Position : Month/Year (In Millions of Rupiah)

Guidelines for Filling Out Large Credit Provision and Large Fund Provision Exception Reports

In this form, all fund provisions of 10% (ten percent) or more of Core Capital (tier 1) to parties other than Related Parties, which are exempted from the BMPK (Maximum Credit Provision) and Large Fund Provision calculation based on this Financial Services Authority Regulation, are reported.

I. Name
This column is filled with the name of all Borrowers other than Related Parties, being individuals or groups of Borrowers. If the Bank fills in a group of Borrowers, the Name column is filled with "Total", followed on the next line by the names of each member of the Borrower group. Debtors classified as "unknown client" as referred to in this Financial Services Authority Regulation are also written by the Bank as "unknown client".

II. Individual/Group Member/Total Group of Borrowers
This column is filled with the following code:
No. Individual/Group Member/Total Group Code
1 Individual 1
2 Group Member of Borrowers 2
3 Total Group of Borrowers 3

III. Name of Group of Borrowers
This column is filled with the name of the Borrower group.

IV. Status of Relationship with the Bank
This column is filled with the following code:
No. Status of Relationship with the Bank Code
1 Individual Borrower 9900
2 Group of Borrowers
Controlling Other Borrowers 9910
Joint Ownership 9920
Financial Dependency 9930
Guarantee 9940
Management/Management Relationship 9950
Explanation of the status of the relationship with the Bank is as referred to in the Financial Services Authority Regulation and Appendix I, which is an integral part of this regulation.

V. Type of Fund Provision
This column is filled with the type of Fund Provision provided by the reporting Bank to the Borrower as regulated in this appendix. This column is filled with the following code:
No. Type of Fund Provision Code

1. Placement 1
2. Derivative Transactions other than credit derivatives 2
3. Credit derivatives 3
4. Securities 4
5. Securities Sold with Repurchase Agreement (Repo) 5
6. Claims on Securities Purchased with Sale Agreement 6
7. Acceptance Claims 7
8. Credit 8
9. Equity Participation 9
10. Temporary Equity Participation 10
11. Other Forms of Fund Provision 14
12. Guarantee 15
13. Letter of Credit (L/C) 16
14. Standby Letter of Credit (SBLC) 17
15. Other Forms of Fund Provision in Administrative Account Transactions
    For Borrowers who receive Fund Provision from the reporting Bank of more than one type, each type of Fund Provision is reported line by line.

VI. Duration

1. Start
   This column is filled with the date, month, and year of the start of the Fund Provision provided.
2. Maturity
   This column is filled with the date, month, and year of the maturity of the Fund Provision.

VII. Amount of Fund Provision in Rupiah
This column is filled with the amount of Fund Provision, individually or consolidated, received by the Borrower in Rupiah currency.

VIII. Foreign Currency Fund Provision
This column is filled with the amount of Fund Provision, individually or consolidated, received by the Borrower in foreign currency, converted into Rupiah using the exchange rate at the end of the reporting month conducted by the Borrower or one of the members of the Borrower group or one of the related members.

IX. Exchange Rate
Filled with the middle exchange rate, which is the average of the buy and sell exchange rates based on Reuters at 16:00 WIB at the end of the reporting month.

X. Core Capital
This column is filled with the Core Capital (tier 1) of the Bank at the time of the reporting month, both individually and consolidated.

XI. Form of Specific BMPK Treatment
This column is filled with the specific BMPK treatment as regulated in these provisions, namely with the following code:
No. Form of Specific BMPK Treatment Code
1 Fund Provision to the central government 1
2 Placement at Bank Indonesia 2
3 Purchase of Securities issued by the Government of the Republic of Indonesia and/or Bank Indonesia 3 4 Fund Provision guaranteed by the Government of the Republic of Indonesia 4 5 Fund Provision to financial institutions meeting certain requirements 5 6 Portion of Fund Provision guaranteed by financial institutions meeting certain requirements 6 7 Fund Provision guaranteed with cash collateral 7 8 Fund Provision guaranteed with collateral in the form of Securities issued by the Government of the Republic of Indonesia and/or Bank Indonesia 8 9 Fund Provision guaranteed with SBLC issued by a Prime Bank 9 10 Takeover of Securities in the form of time export bills that have been accepted by a Prime Bank 10 11 Placement in other banks in Indonesia for daily liquidity management 11 12 Guarantee by State-Owned Enterprises/Local Government-Owned Enterprises to support government programs 12 13 Others 16

In the event that one Fund Provision receives more than one specific BMPK treatment, all specific BMPK treatments are listed for one such Fund Provision line by line.

XII. Amount of Fund Provision in Rupiah Receiving Specific BMPK Treatment
This column is filled with the value of the Fund Provision in Rupiah, individually or consolidated, receiving specific BMPK treatment as referred to in this Financial Services Authority Regulation.

XIII. Amount of Foreign Currency Fund Provision Receiving Specific BMPK Treatment
This column is filled with the value of the Fund Provision in foreign currency, individually or consolidated, receiving specific BMPK treatment as referred to in this Financial Services Authority Regulation.

XIV. Percentage of Fund Provision with Core Capital
The percentage of Fund Provision receiving specific BMPK treatment with Core Capital (tier 1) of the Bank.

LARGE CREDIT PROVISION (BMPK) VIOLATION OR EXCEEDANCE REPORT Bank Name: PT Bank…. (individual) Report Position: Month/Year (In Millions of Rupiah)

CONSOLIDATED LARGE CREDIT PROVISION (BMPK) VIOLATION OR EXCEEDANCE REPORT Bank Name: PT Bank…. (consolidated) Report Position: Month/Year (In Millions of Rupiah) *) Consolidated capital for the calculation of BMPK Violation is the total Capital or Core Capital (tier 1) consolidated in the last quarter before the realization of Fund Provision. Consolidated capital for the calculation of BMPK Exceedance is the total Capital or Core Capital (tier 1) consolidated in the reporting month.

Guidelines for Filling Out BMPK Violation or Exceedance Reports

In this form, Borrowers or groups of Borrowers who commit violations or exceedances of BMPK are reported. In the event that a group of Borrowers commits a violation or exceedance, individual members of the Borrower group are reported in this form even if the individual members of the Borrower group do not commit BMPK violations or exceedances.

I. Name
This column is filled with the name of all Related Parties or non-Related Parties Borrowers, being individuals or groups of Borrowers. If the bank fills in a group of Borrowers, the Name column is filled with "Total", followed on the next line by the names of each member of the group. Debtors classified as "unknown client" as referred to in this Financial Services Authority Regulation are also written by the Bank as "unknown client". For Banks that do not have BMPK violations or exceedances, the Borrower Name column is filled with "Nihil". Meanwhile, for Banks that have negative capital, the Borrower Name column is filled with "ALL DEBTORS" and the remarks column is filled with "Negative Capital".

II. Individual/Group Member/Total Group of Borrowers
This column is filled with the following code:
No. Individual/Group Member/Total Group Code
1 Individual 1
2 Group Member of Borrowers 2
3 Total Group of Borrowers 3
4 Total Related Parties 4
5 State-Owned Enterprises (BUMN) 5
6 Total Individuals/State-Owned Enterprises 6

III. Name of Group of Borrowers
This column is filled with the name of the Borrower group.

IV. Relationship with the Bank
No. Relationship Code
1 Related Parties 1
2 Non-Related Parties 2

V. Status of Relationship with the Bank
This column is filled with the following code:
No. Status of Relationship with the Bank Code
1 Individual Borrower 9900
2 Group of Borrowers
Controlling Other Borrowers 9910
Joint Ownership 9920
Financial Dependency 9930
Guarantee 9940
Management/Management Relationship 9950
Explanation of the status of the relationship with the Bank as referred to in the Financial Services Authority Regulation and Appendix I, which is an integral part of this regulation.

VI. Type of Fund Provision
This column is filled with the type of Fund Provision provided by the reporting Bank to the Borrower as regulated in this appendix. This column is filled with the following code:
No. Type of Fund Provision Code

1. Placement 1
2. Derivative Transactions other than credit derivatives 2
3. Credit derivatives 3
4. Securities 4
5. Securities Sold with Repurchase Agreement (Repo) 5
6. Claims on Securities Purchased with Sale Agreement 6
7. Acceptance Claims 7
8. Credit 8
9. Equity Participation 9
10. Temporary Equity Participation 10
11. Other Forms of Fund Provision 14
12. Guarantee 15
13. Letter of Credit (L/C) 16
14. Standby Letter of Credit (SBLC) 17
15. Other Forms of Fund Provision in Administrative Account Transactions

For Borrowers who receive Fund Provision from the Bank of more than one type, each type of Fund Provision is reported line by line.

VII. Duration

1. Start
   This column is filled with the date, month, and year of the start of the Fund Provision provided.
2. Maturity
   This column is filled with the date, month, and year of the maturity of the Fund Provision.

VIII. Amount of Fund Provision in Rupiah
This column is filled with the amount of Fund Provision received by the Borrower in Rupiah currency.
In the event of a consolidated report, Fund Provision is the amount of Fund Provision after applying the MRK (Maximum Credit Provision) Technique.

IX. Foreign Currency Fund Provision
This column is filled with the amount of Fund Provision received by the Borrower in foreign currency, converted into Rupiah using the exchange rate at the end of the reporting month conducted by the Borrower or one of the members of the Borrower group or one of the related members. In the event of a consolidated report, Fund Provision is the amount of Fund Provision after applying the MRK (Maximum Credit Provision) Technique.

X. Exchange Rate
Filled with the middle exchange rate, which is the average of the buy and sell exchange rates based on Reuters at 16:00 WIB at the end of the reporting month.

XI. Capital
This column is filled with the total Capital of the Bank at the position of the last month before the realization of Fund Provision for the calculation of BMPK Violation individually. This column is filled with the total Capital at the time of the reporting month for the calculation of BMPK Exceedance individually.

XII. Core Capital
This column is filled with Core Capital (tier 1) at the position of the last month before the realization of Fund Provision for the calculation of BMPK Violation individually. This column is filled with Core Capital (tier 1) at the time of the reporting month for the calculation of BMPK Exceedance individually.

XIII. Form of Guarantee/Collateral
This column is filled with guarantees/collaterals that can be calculated as reducing factors in the calculation of BMPK and Large Fund Provision as referred to in this Financial Services Authority Regulation, namely with the following code:
No. Form of Guarantee/Collateral Code
1 Current Account 1
2 Deposits 2
3 Savings 3
4 Guarantee Deposits 4
5 Gold 5
6 SBI (Sertifikat Bank Indonesia) 6
7 SUN (Surat Utang Negara) 7
8 SBLC 8
9 Guarantee of the Government of the Republic of Indonesia (Government Guarantee) 9 10 Others 13

In the event that one Fund Provision uses more than one guarantee/collateral, all guarantees/collaterals are listed for one such Fund Provision line by line.

XIV. Guaranteed Portion
This column is filled with the portion of Fund Provision that receives protection from credit risk mitigation instruments as referred to in this Financial Services Authority Regulation.

XV. Issuer of Guarantee/Collateral
This column is filled with the issuer of the guarantee/collateral, such as the Government of the Republic of Indonesia, Banks, or multilateral institutions, according to the code group of third parties and the Bank code as referred to in provisions of legislation regulating periodic reports of general banks.

XVI. Rating of the Issuer of Guarantee/Collateral
This column is filled with the rating of the issuer. This column is filled with the number 00 for guarantees/collaterals issued by the Government of the Republic of Indonesia and Bank Indonesia.

XVII. Rating Agency
This column is filled with the name of the rating agency recognized by the Financial Services Authority as referred to in the Financial Services Authority Circular Letter regarding rating agencies and ratings recognized by the Financial Services Authority. This column is filled with the following code:
No. Rating Agency Code
1 Moody’s 30
2 Standard and Poor’s 31
3 Fitch Ratings 32
4 Others 33
5 None 34

XVIII. Rating Date
This column is filled with the date, month, and year when the rating was given.

XIX. Duration

1. Start
   This column is filled with the date, month, and year of the start of the issuance of the guarantee/collateral.
2. Maturity
   This column is filled with the date, month, and year of the maturity of the guarantee/collateral.

XX. BMPK Violation or Exceedance and Large Fund Provision
Nominal of Violation or Exceedance
This column is filled with the following calculation method:

1. BMPK for Individual Borrowers =
   {(Fund Provision – guaranteed portion) – 25% of Core Capital}

2. BMPK for Group of Borrowers =
   {(Fund Provision – guaranteed portion) – 25% of Core Capital}

3. BMPK for Specific State-Owned Enterprises (BUMN) =
   {(Fund Provision – guaranteed portion) – 30% of total Capital}

4. BMPK for Related Parties =
   {(Fund Provision – guaranteed portion) – 10% of total Capital}

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

XXI. Percentage of BMPK Violation or Exceedance
Percentage calculation (%), nominal of BMPK violation or BMPK exceedance divided by Bank Capital or Core Capital (tier 1) of the Bank multiplied by 100% (one hundred percent). This column is filled from the calculation result:
(BMPK Violation or BMPK Exceedance ÷ (Total Capital or Core Capital (tier 1)) x 100%

XXII. Quality
Quality of Fund Provision is the quality of the Fund Provision provided by the Bank, assessed according to provisions regarding the assessment of the quality of assets of general banks with the following quality classification:
No. Quality Code
1 Performing 1
2 Special Attention 2
3 Substandard 3
4 Doubtful 4
5 Loss 5

XXIII. Remarks
This column is filled with other remarks considered necessary.

Established in Jakarta on December 26, 2018
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO