OJK Circular No. 14/SEOJK.03/2016 on the Opening of Conventional Commercial Bank Branch Networks Based on Core Capital

To:
The Board of Directors of Conventional Commercial Banks at their locations.

COPY

CIRCULAR OF THE FINANCIAL SERVICES AUTHORITY
NUMBER 14 /SEOJK.03/2016

REGARDING

THE OPENING OF CONVENTIONAL COMMERCIAL BANK BRANCH NETWORKS BASED ON CORE CAPITAL

In connection with Financial Services Authority Regulation Number 6/POJK.03/2016 concerning Business Activities and Branch Networks Based on Bank Core Capital (State Gazette of the Republic of Indonesia Year 2016 Number 18, Supplement to the State Gazette of the Republic of Indonesia Number 5842), it is necessary to regulate implementation provisions regarding the Opening of Conventional Commercial Bank Branch Networks Based on Core Capital in a Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

1. The opening of Bank branches must be supported by adequate financial capacity, among others reflected in the availability of Core Capital allocation according to the location and type of Bank branch (Theoretical Capital).

2. The Financial Services Authority provides facilitation for the Opening of Branch Networks for Banks that can increase efficiency in Bank management and channel credit to Micro, Small and Medium Enterprises (MSMEs)/Micro and Small Enterprises (MSEs) in certain amounts.

3. Furthermore, in order to balance the distribution of Branch Networks, Banks are encouraged to expand into areas that are less served by banking services, in order to support national development efforts...

national development.

II. SCOPE

1. The Bank Branch Network in this Financial Services Authority Circular is:

a. domestic Bank branches, including Branch Offices, Regional Offices conducting operational activities, Assistant Branch Offices, Functional Offices conducting operational activities, or Cash Offices;

b. foreign Bank branches, including Branch Offices or other types of offices that are operational outside the country;

c. Assistant Branch Offices and offices below Assistant Branch Offices or Cash Offices of banks domiciled outside the country that conduct operational activities, as referred to in regulations concerning Commercial Banks and regulations concerning requirements and procedures for opening Branch Offices, Assistant Branch Offices, and Representative Offices of banks domiciled outside the country.

2. The Opening of Branch Networks in this Financial Services Authority Circular refers to the opening of Bank offices, including the opening of Bank offices resulting from the relocation of addresses or changes in the status of Bank offices.

3. The relocation of Bank office addresses as referred to in item 2 does not include the relocation of Bank office addresses in:

1) the same zone; or

2) a zone with lower Core Capital allocation requirements;

and there is no increase in the status of the Bank office.

III. DETERMINATION OF ZONES AND COEFFICIENTS FOR EACH ZONE

1. In order to open Branch Networks domestically, the Financial Services Authority groups all provinces in Indonesia into 6 (six) zones, namely Zone 1 through Zone 6.

2. The zone division as referred to in item 1 is determined based on an analysis of the level of bank saturation and the equitable distribution of development in each zone, among others using parameters...

parameters such as gross domestic product growth, regional gross domestic product growth, and the performance of credit disbursement and fund gathering linked to the population in each province.

3. Zone 1 indicates the most saturated zone, while Zone 6 indicates the least saturated zone. For each zone, a coefficient size is established, with the highest coefficient number being 5 for the most saturated zone and the lowest coefficient number being 0.5 for the least saturated zone.

4. The opening of Bank branch networks outside the country is grouped into Zone 1.

5. The grouping of provinces in each zone can be evaluated and revised.

6. In the event of a new province resulting from regional expansion, that province follows the zone of its parent province prior to expansion, as long as the Financial Services Authority has not yet determined a zone for the new province.

7. The list of zones and coefficients for each zone is as stated in Appendix I.

IV. DETERMINATION OF INVESTMENT COSTS FOR OPENING CONVENTIONAL BANK BRANCH NETWORKS

1. The Financial Services Authority establishes investment costs for the Opening of Branch Networks based on the type of Bank office for each Bank based on Business Activities (BUKU). The details of investment costs for the Opening of Branch Networks are as stated in Appendix II.

2. The investment cost for opening an Assistant Branch Office from a bank domiciled outside the country is equated with the investment cost for opening a Branch Office.

3. The amount of investment costs for the Opening of Branch Networks can be evaluated and revised.

V. CONSIDERATIONS FOR ACHIEVING EFFICIENCY LEVELS IN OPENING BRANCH NETWORKS

1. The calculation of the availability of Core Capital allocation considers the achievement of the Bank's efficiency level, which is among others measured through the ratio...

ratio of Operating Costs to Operating Income (BOPO) and the Net Interest Margin (NIM) ratio.

2. Banks that can increase efficiency to reach a certain efficiency range are given a reduction in Core Capital allocation.

3. For Banks that do not reach a certain efficiency range, the Financial Services Authority may reduce the number of planned Bank Branch Network openings even if the Bank has sufficient Core Capital allocation.

4. The Financial Services Authority establishes coefficients related to efficiency achievement for each Bank based on Business Activities (BUKU) as stated in Appendix III.

VI. CALCULATION OF CORE CAPITAL ALLOCATION FOR CONVENTIONAL COMMERCIAL BANKS

1. Banks calculate the Core Capital allocation according to location and office type against existing branch networks and against planned new Branch Network openings.

2. The calculation of Core Capital allocation is obtained from the multiplication of the zone coefficient for the Bank Branch Network location with the investment cost for the Opening of Branch Networks according to the office type for each BUKU and the coefficient related to efficiency achievement, with the following calculation:

TC = Core Capital Allocation in a zone
Kz = Coefficient of each zone
B = Investment cost for Opening of Branch Networks according to office type for each BUKU KF = Coefficient related to efficiency achievement

VII. CALCULATION OF AVAILABILITY OF CORE CAPITAL ALLOCATION FOR CONVENTIONAL COMMERCIAL BANKS

1. Banks submitting a plan for the Opening of Branch Networks must include the calculation of the availability of Core Capital allocation in the Bank Business Plan (RBB).

2. The availability of Core Capital allocation is calculated as follows:

ETC = M - Σ(TCp - JKEp)

ETC = Availability of Core Capital Allocation
M = Core Capital
TCp = Amount of Core Capital Allocation in a zone JKEp = Number of existing Bank Branch Networks in a zone

3. Based on the calculation results as referred to in item 2, in the event that:

a. A Bank has a positive Core Capital Allocation availability value, it has excess Core Capital capacity that can be allocated to open Branch Networks.

b. A Bank has a Core Capital Allocation availability value of zero or negative, it does not have excess Core Capital capacity that can be allocated to open Branch Networks.

4. The Core Capital Allocation availability requirements do not apply to:

a. the opening of Functional Offices conducting specific operational activities for credit disbursement to MSEs; or

b. the Opening of Branch Networks for Banks owned by Regional Governments within the province where the head office is located.

The province where the head office of the Bank is located also includes provinces resulting from regional expansion as long as the Regional Government of the province resulting from regional expansion does not hold a majority share in the Bank with its head office in the province resulting from regional expansion.

5. In calculating the availability of Core Capital allocation, Conventional Commercial Banks that have Sharia Business Units (UUS) must calculate the availability of Core Capital allocation for UUS Branch Networks.

6. The calculation regarding the availability of Core Capital allocation for UUS as referred to in item 5 refers to Financial Services Authority regulations concerning the Opening of Sharia Commercial Bank and UUS Branch Networks based on Core Capital.

VIII. DETERMINATION OF THE NUMBER OF OPENINGS OF CONVENTIONAL BANK BRANCH NETWORKS

1. Banks that meet health level requirements and have availability of Core Capital allocation according to location and office type can open Branch Networks in numbers corresponding to the availability of Core Capital allocation.

The aforementioned Banks can obtain additional incentives for the number of Branch Network openings if the Bank channels credit to:

a. Micro, Small and Medium Enterprises (MSMEs) of at least 20% (twenty percent) of the total credit portfolio; and/or

b. Micro and Small Enterprises (MSEs) of at least 10% (ten percent) of the total credit portfolio.

The amount of additional incentive Branch Networks that can be opened is as stated in Appendix IV.

2. Banks that meet health level requirements but do not have availability of Core Capital allocation according to location and office type can open Branch Networks if:

a. The Bank channels credit to:

1) MSMEs of at least 20% (twenty percent) of the total credit portfolio; or

2) MSEs of at least 10% (ten percent) of the total credit portfolio;

and

b. The Bank conducts capital raising from profit allocation and/or additional capital contributions.

The capital raising conducted by the Bank must mostly be allocated to cover the shortfall in Core Capital allocation for existing Branch Networks (maximum equal to the shortfall in Core Capital allocation for existing Branch Networks) and the remainder to support planned Branch Network openings.

3. The Financial Services Authority may reduce the number of planned Bank Branch Network openings even if the Bank has sufficient Core Capital allocation.

An example calculation for determining the number of branch network openings is stated in Appendix V.

IX. BALANCING THE DISTRIBUTION OF CONVENTIONAL BANK BRANCH NETWORKS IN CERTAIN ZONES

In order to increase the equitable distribution of Bank Branch Networks, the Opening of Branch Networks by BUKU 3 or BUKU 4 is regulated as follows:

1. The opening of 3 (three) Branch Offices (KC) in Zone 1 or Zone 2 must be followed by the opening of 1 (one) KC in Zone 5 or Zone 6.

2. The opening of 3 (three) Assistant Branch Offices (KCP) in Zone 1 or Zone 2 must be followed by the opening of 1 (one) KCP or 1 (one) KC in Zone 5 or Zone 6.

3. The obligation to open KC or KCP in Zone 5 or Zone 6 as referred to in items 1 and 2 can be a KC or KCP conducting conventional business activities or based on Sharia principles.

4. The obligation to open KC or KCP in Zone 5 or Zone 6 as referred to in item 3 must still consider the availability of Core Capital allocation.

5. The calculation of 3 (three) KC or 3 (three) KCP in Zone 1 or Zone 2 as referred to in items 1 and 2 is calculated cumulatively.

Example:
Bank A (BUKU 4) in 2014 opened 2 (two) KCs in Zone 1, and in 2015 Bank A opened 4 (four) KCs in Zone 1. Thus, Bank A must open 2 (two) KCs in Zone 5 or Zone 6.

6. Banks that have the obligation to open KC and/or KCP in Zone 5 or Zone 6 as referred to in items 1 and 2 but have not yet realized the obligation to open KC and/or KCP in Zone 5 or Zone 6 cannot open KC or KCP in Zone 1, Zone 2, Zone 3, and Zone 4.

7. The obligation for the Opening of Branch Networks as referred to in items 1 and 2 does not apply to Banks owned by Regional Governments that open KC or KCP in Zone 1 or Zone 2 which are the provinces where the head office is located.

Example:
A Bank with majority shares owned by a Regional Government with its head office in DKI Jakarta Province (Zone 1) and classified as BUKU 3, if it opens 3 (three) KCs in DKI Jakarta Province, is not obligated to open 1 (one) KC in Zone 5 or Zone 6.

8. The province where the head office of the Bank is located as referred to in item 7 also includes provinces resulting from regional expansion as long as the Regional Government of the province resulting from regional expansion does not hold a majority share in the Bank with its head office in the province resulting from regional expansion.

Example:
Bank A (BUKU 3) is a Bank with majority shares owned by a Regional Government with its head office in Province X which is in Zone 2.

There is a regional expansion in Province X into Province X and Province X1. In the event that Bank A opens 3 (three) KCs in Province X1, Bank A is not obligated to open 1 (one) KC in Zone 5 or Zone 6, as long as the Regional Government of Province X1 does not hold a majority share in the Bank with its head office in Province X1.

X. OTHERS

1. The calculation of the amount of Core Capital, the number of existing Branch Networks, efficiency achievement, and credit disbursement achievement to MSMEs and/or MSEs used in the Branch Network Opening plan in the RBB uses data from the end of September.

2. The Financial Services Authority assesses Core Capital, efficiency achievement, and credit disbursement achievement to MSMEs and/or MSEs, both at the time of assessing the Branch Network Opening plan in the RBB and when the Bank submits a request for the Branch Network Opening plan to the Financial Services Authority.

3. Procedures, methods, and other requirements to obtain permission or confirmation for the Opening of Bank Branch Networks from the Financial Services Authority must also comply with regulations concerning:

a. Commercial Banks; or

b. requirements and procedures for opening Branch Offices, Assistant Branch Offices, and Representative Offices of banks domiciled outside the country.

4. For Conventional Commercial Banks that have Sharia Commercial Banks, Banks that have Sharia Business Units, or Conventional Commercial Banks that have ownership relationships with Sharia Commercial Banks, in calculating the availability of Core Capital allocation, determining the number of Branch Network openings, and balancing the distribution of branch networks in certain zones, they must also consider regulations concerning the development of Sharia banking branch networks as a stimulus for the national economy for the Bank, as long as such regulations are still in effect.

5. Appendix I through Appendix V are an integral part of this Financial Services Authority Circular.

XI. TRANSITIONAL PROVISIONS

Adjustments to the 2016 Branch Network Opening plan must be included in the 2016 RBB revision, referring to regulations concerning the RBB, and submitted to the Financial Services Authority, at the following addresses:

1. Bank Supervision Department or Financial Services Authority Regional Office in Jakarta for Banks with head offices in the Jakarta area; or

2. Regional Office or local Financial Services Authority Office for Banks with head offices outside the Jakarta area.

XII. CLOSING PROVISIONS

1. With the implementation of this Financial Services Authority Circular, Bank Indonesia Circular Number 15/7/DPNP dated March 8, 2013, regarding the Opening of Conventional Commercial Bank Branch Networks based on Core Capital is repealed and declared invalid.

2. The provisions in this Financial Services Authority Circular take effect on the date of determination.

Determined in Jakarta on April 29, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY,

signed

NELSON TAMPUBOLON

Copy in accordance with the original

Legal Director 1
Legal Department

signed

Yuliana

APPENDIX I
CIRCULAR OF THE FINANCIAL SERVICES AUTHORITY
NUMBER 14 /SEOJK.03/2016
REGARDING
THE OPENING OF CONVENTIONAL COMMERCIAL BANK BRANCH NETWORKS BASED ON CORE CAPITAL

ZONES AND COEFFICIENTS FOR EACH ZONE

Zone 1 | Zone 2 | Zone 3 | Zone 4 | Zone 5 | Zone 6 Coefficient = 5 | Coefficient = 4 | Coefficient = 3 | Coefficient = 2 | Coefficient = 1 | Coefficient = 0.5

DKI Jakarta
Foreign Countries
West Java
Banten
Central Java
DI Yogyakarta
East Java
Bali
East Kalimantan
Riau Islands
North Sumatra
Riau
South Sumatra
Central Kalimantan
South Kalimantan
North Sulawesi
South Sulawesi
Papua
DI Aceh
Jambi
West Sumatra
Bangka Belitung
Lampung
Bengkulu
West Kalimantan
Southeast Sulawesi
North Kalimantan
East Nusa Tenggara
West Nusa Tenggara
Central Sulawesi
Gorontalo
West Sulawesi
North Maluku
Maluku
West Papua

Determined in Jakarta on April 29, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY,

signed

NELSON TAMPUBOLON

Copy in accordance with the original

Legal Director 1
Legal Department

signed

Yuliana

APPENDIX II
CIRCULAR OF THE FINANCIAL SERVICES AUTHORITY
NUMBER 14 /SEOJK.03/2016
REGARDING
THE OPENING OF CONVENTIONAL COMMERCIAL BANK BRANCH NETWORKS BASED ON CORE CAPITAL

INVESTMENT COSTS FOR OPENING BANK BRANCH NETWORKS

Type of Office | Investment Cost for Opening Branch Network in BUKU 1 and BUKU 2 | Investment Cost for Opening Branch Network in BUKU 3 and BUKU 4 Branch Office (KC) | Rp8,000,000,000.00 | Rp10,000,000,000.00 Operational Regional Office | Rp8,000,000,000.00 | Rp10,000,000,000.00 Assistant Branch Office (KCP) | Rp3,000,000,000.00 | Rp4,000,000,000.00 Functional Office Conducting Operational Activities | Rp3,000,000,000.00 | Rp4,000,000,000.00 Cash Office (KK) | Rp1,000,000,000.00 | Rp2,000,000,000.00 Other Operational Offices Outside the Country | Rp1,000,000,000.00 | Rp2,000,000,000.00

Determined in Jakarta on April 29, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY,

signed

NELSON TAMPUBOLON

Copy in accordance with the original

Legal Director 1
Legal Department

signed

Yuliana

APPENDIX III
CIRCULAR OF THE FINANCIAL SERVICES AUTHORITY
NUMBER 14 /SEOJK.03/2016
REGARDING
THE OPENING OF CONVENTIONAL COMMERCIAL BANK BRANCH NETWORKS BASED ON CORE CAPITAL

REDUCTION OF CORE CAPITAL ALLOCATION (CCA) AND COEFFICIENTS RELATED TO ACHIEVING BANK EFFICIENCY

1. BUKU 1

BOPO (%) | <80 | ≥80-<85 | ≥85-<90 | ≥90-<95 | ≥95 NIM (%) | ≥5 | ≥4.5-<5 | ≥4-<4.5 | ≥3.5-<4 | ≥3-<3.5 | <3

BOPO <80	BOPO ≥80-<85	BOPO ≥85-<90	BOPO ≥90-<95	BOPO ≥95
NIM ≥5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4.5-<5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4-<4.5	Reduction CCA 50%	Reduction CCA 40%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3.5-<4	Reduction CCA 60%	Reduction CCA 50%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3-<3.5	Reduction CCA 80%	Reduction CCA 60%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM <3	Reduction CCA 100%	Reduction CCA 80%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%

KF = 0.5 | KF = 1 | KF = 1 | KF = 1 | KF = 1
Supervisory Action | Supervisory Action | KF = 1 | KF = 0.5 | KF = 0.6 | KF = 0.4 | KF = 0.5 | KF = 0.2² | KF = 0.4 | KF = 0.2² | KF = 0

2. BUKU 2

BOPO (%) | <80 | ≥80-<85 | ≥85-<90 | ≥90-<95 | ≥95 NIM (%) | ≥5 | ≥4.5-<5 | ≥4-<4.5 | ≥3.5-<4 | ≥3-<3.5 | <3

BOPO <80	BOPO ≥80-<85	BOPO ≥85-<90	BOPO ≥90-<95	BOPO ≥95
NIM ≥5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4.5-<5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4-<4.5	Reduction CCA 50%	Reduction CCA 40%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3.5-<4	Reduction CCA 60%	Reduction CCA 50%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3-<3.5	Reduction CCA 80%	Reduction CCA 60%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM <3	Reduction CCA 100%	Reduction CCA 80%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%

KF = 0.5 | KF = 1 | KF = 1 | KF = 1 | KF = 1
Supervisory Action | Supervisory Action | KF = 1 | KF = 0.5 | KF = 0.6 | KF = 0.4 | KF = 0.5 | KF = 0.2² | KF = 0.4 | KF = 0.2² | KF = 0

3. BUKU 3

BOPO (%) | <70 | ≥70-<75 | ≥75-<80 | ≥80-<85 | ≥85 NIM (%) | ≥5 | ≥4.5-<5 | ≥4-<4.5 | ≥3.5-<4 | ≥3-<3.5 | <3

BOPO <70	BOPO ≥70-<75	BOPO ≥75-<80	BOPO ≥80-<85	BOPO ≥85
NIM ≥5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4.5-<5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4-<4.5	Reduction CCA 50%	Reduction CCA 40%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3.5-<4	Reduction CCA 60%	Reduction CCA 50%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3-<3.5	Reduction CCA 80%	Reduction CCA 60%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM <3	Reduction CCA 100%	Reduction CCA 80%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%

KF = 0.5 | KF = 1 | KF = 1 | KF = 1 | KF = 1
Supervisory Action | Supervisory Action | KF = 1 | KF = 0.5 | KF = 0.6 | KF = 0.4 | KF = 0.5 | KF = 0.2² | KF = 0.4 | KF = 0.2² | KF = 0

4. BUKU 4

BOPO (%) | <70 | ≥70-<75 | ≥75-<80 | ≥80-<85 | ≥85 NIM (%) | ≥5 | ≥4.5-<5 | ≥4-<4.5 | ≥3.5-<4 | ≥3-<3.5 | <3

BOPO <70	BOPO ≥70-<75	BOPO ≥75-<80	BOPO ≥80-<85	BOPO ≥85
NIM ≥5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4.5-<5	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥4-<4.5	Reduction CCA 50%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3.5-<4	Reduction CCA 60%	Reduction CCA 50%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM ≥3-<3.5	Reduction CCA 80%	Reduction CCA 60%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%
NIM <3	Reduction CCA 100%	Reduction CCA 80%	Reduction CCA 0%	Reduction CCA 0%	Reduction CCA 0%

Supervisory Action | Supervisory Action | KF = 0.5 | KF = 1 | KF = 1 | KF = 1 | KF = 1 | KF = 1 | KF = 1 | KF = 1 | KF = 1 | KF = 1 | KF = 0.5 | KF = 1 | KF = 0.4 | KF = 0.5 | KF = 0.2² | KF = 0.4 | KF = 0.2² | KF = 0

Determined in Jakarta on April 29, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY,

signed

NELSON TAMPUBOLON

Copy in accordance with the original

Legal Director 1
Legal Department

signed

Yuliana

APPENDIX IV
CIRCULAR OF THE FINANCIAL SERVICES AUTHORITY
NUMBER 14 /SEOJK.03/2016
REGARDING
THE OPENING OF CONVENTIONAL COMMERCIAL BANK BRANCH NETWORKS BASED ON CORE CAPITAL

ADDITIONAL INCENTIVE FOR THE NUMBER OF BRANCH NETWORK OPENINGS IF THE BANK CHANNELS CREDIT TO MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) AND/OR MICRO AND SMALL ENTERPRISES (MSEs)

MSME Credit Share against Total Credit | Additional Number of Branch Networks*) >80% | 25% >65% to <80% | 20% >50% to <65% | 15% >35% to <50% | 10% >20% to <35% | 5%

MSE Credit Share against Total Credit | Additional Number of Branch Networks*) >70% | 25% >55% to <70% | 20% >40% to <55% | 15% >25% to <40% | 10% >10% to <25% | 5%

*) from the number of planned branch network openings supported by sufficient Core Capital allocation

Determined in Jakarta, on April 29, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY,

signed

NELSON TAMPUBOLON

Copy in accordance with the original

Legal Director 1
Legal Department

signed

Yuliana

APPENDIX V
CIRCULAR OF THE FINANCIAL SERVICES AUTHORITY
NUMBER 14 /SEOJK.03/2016
REGARDING
THE OPENING OF CONVENTIONAL COMMERCIAL BANK BRANCH NETWORKS BASED ON CORE CAPITAL

EXAMPLE CALCULATION OF SUFFICIENCY OF CORE CAPITAL ALLOCATION (CCA) AVAILABILITY AND DETERMINATION OF THE NUMBER OF BRANCH NETWORKS THAT CAN BE OPENED

EXAMPLE 1:
Based on data as of the end of September 2016, Bank A:
a. Core Capital Rp409,500,000,000.00 (BUKU 1) b. PK TKS 2 in the last 1 year
c. Already has the following Branch Networks:
13 KCs (8 in DKI Jakarta and 5 in Central Java), 10 KCPs (5 in DKI Jakarta and 5 in Central Java), and 10 Kks (4 in DKI Jakarta and 6 in Central Java). d. BOPO and NIM are 76% and 4.1% respectively. e. MSME credit achievement is 70% of total credit.

If Bank A plans to open 5 KCs in East Java, the calculation of Core Capital Allocation availability is as follows:

• The Bank obtains a reduction in Core Capital Allocation due to efficiency achievement of 50% with a Coefficient Multiplier (KF) of 0.5.

Type of Office | Zone | Province | Investment Cost for Opening Branch Network (B) | Zone Coefficient (KZ) | Efficiency Achievement Coefficient (KF) | Number of Offices (Existing/Planned) | Total Core Capital Allocation (TC) (1) | (2) | (3) | (4) | (5 = 1 x 2 x 3 x 4)

Existing Branch Networks
KC | 1 | DKI Jakarta | 8,000 | 5 | 0.5 | 8 | 160,000 KC | 2 | Central Java | 8,000 | 4 | 0.5 | 5 | 80,000 KCP | 1 | DKI Jakarta | 3,000 | 5 | 0.5 | 5 | 37,500 KCP | 2 | Central Java | 3,000 | 4 | 0.5 | 5 | 30,000 KK | 1 | DKI Jakarta | 1,000 | 5 | 0.5 | 4 | 10,000 KK | 2 | Central Java | 1,000 | 4 | 0.5 | 6 | 12,000

Total Core Capital Allocation for existing offices | | | | | | | 329,500

Core Capital | | | | | | | 409,500
Availability of Core Capital Allocation (ETC) | | | | | | | 80,000

Planned Branch Network Openings
KC | 2 | East Java | 8,000 | 4 | 0.5 | 5 | 80,000

Core Capital Allocation Requirement for Planned Branch Network Openings | | | | | | | 80,000 Remaining Core Capital Allocation | | | | | | | 0

Based on...

Based on the Core Capital allocation calculation, Bank A has sufficient Core Capital allocation availability (ETC) to open 5 (five) Branch Offices (KC) in East Java as planned. Furthermore, because Bank A's SME credit disbursement is 70% of total credit, Bank A will receive an additional number of branch offices that can be opened equal to 20% of the number of offices planned that have met the Core Capital allocation availability, namely:

Branch Office Type	Zone	Planned Number of Branch Office Openings	Core Capital Allocation Sufficiency	Additional Incentive	Additional Branch Offices
(1)	(2)	(3)=(1) X (2)
KC	2	5	20%	1

Conclusion:
Bank A can open a branch network of 5 KC in East Java as planned. In addition, even though Bank A no longer has remaining Core Capital allocation, Bank A obtains an additional 1 KC or below the KC that can be opened in the same zone or a zone with lower Core Capital allocation requirements than the zone in the planned branch network opening. EXAMPLE...

EXAMPLE 2:
Based on the position data as of the end of September 2016, Bank B:
a. Core Capital Rp6,400,000,000,000.00 (BOOK 3) b. PK TKS 2 in the last 1 year
c. Already has a Branch Network as follows:
45 KC (20 in DKI Jakarta, 15 in Central Java and 10 in North Sumatra), 140 KCP (60 in DKI Jakarta, 50 in Central Java and 30 in North Sumatra) and 150 KK (50 in DKI Jakarta, 50 in Central Java and 50 in North Sumatra). d. BOPO and NIM are 85% and 5.1% respectively. e. SME credit achievement is 70% of total credit. If Bank B plans to open 20 KC in Zone 2 (10 KC in East Java and 10 KC in West Java), the calculation of Core Capital allocation availability is as follows:

• The Bank does not receive a reduction in Core Capital allocation due to efficiency achievement, but the Bank may be subject to supervisory actions by OJK.
  Type...

In millions of Rp

Branch Office Type	Zone	Province	Investment Cost for Branch Office Opening (B)	Zone Coefficient (KZ)	Efficiency Achievement Coefficient (KF)	Number of Offices (Existing/Planned)	Total Core Capital Allocation (TC)
(1)	(2)	(3)	(4)	(5 = 1 x 2 x 4)
Existing branch offices
KC	1	DKI Jakarta	10,000	5	-	20	1,000,000
	2	Central Java	10,000	4	-	15	600,000
---	---	---	---	---	---	---	---
	3	North Sumatra	10,000	3	-	10	300,000
KCP	1	DKI Jakarta	4,000	5	-	60	1,200,000
	2	Central Java	4,000	4	-	50	800,000
---	---	---	---	---	---	---	---
	3	North Sumatra	4,000	3	-	30	360,000
KK	1	DKI Jakarta	2,000	5	-	50	500,000
	2	Central Java	2,000	4	-	50	400,000
---	---	---	---	---	---	---	---
	3	North Sumatra	2,000	3	-	50	300,000
Total Core Capital allocation for existing offices 5,460,000 Core Capital 6,400,000 Core Capital allocation availability (ETC) 940,000 Planned branch office opening KC	2	East Java	10,000	4	-	10	400,000
	2	West Java	10,000	4	-	10	400,000
Core Capital allocation requirement for planned branch office opening 800,000 Remaining Core Capital allocation 140,000 Based on...

Based on the Core Capital allocation availability calculation, Bank B has sufficient Core Capital allocation availability (ETC) to open 20 KC in East Java and West Java as planned. Furthermore, because Bank B's SME credit disbursement is 70% of total credit, Bank B will receive an additional number of branch offices that can be opened equal to 20% of the number of offices planned that have met the Core Capital allocation availability, namely:

Branch Office Type	Zone	Planned Number of Branch Office Openings	Core Capital Allocation Sufficiency	Additional Incentive	Additional Branch Offices
(1)	(2)	(3)=(1) X (2)
KC	2	20	20%	4

Branch Offices allowed to be opened with SME/UMK incentive = 20+4=24 KC in Zone 2 Conclusion:
Based on the Core Capital allocation availability calculation and SME credit disbursement achievement, Bank B can open a branch network of 20 KC in East Java and West Java as planned and obtain an additional 4 KC or below the KC that can be opened in the same zone or a zone with lower Core Capital allocation requirements than the zone in the planned branch network opening. However, OJK may carry out supervisory actions in the form of reducing the number of offices that can be opened by the Bank. EXAMPLE...

EXAMPLE 3:
Based on the position data as of the end of September 2016, Bank C:
a. Core Capital Rp2,000,000,000,000.00 (BOOK 2) b. TKS PK 2 in the last 1 year
c. Already has a Branch Network as follows:
20 KC (10 in DKI Jakarta, and 10 in Central Java), 60 KCP (30 in DKI Jakarta and 30 in Central Java) and 120 KK (60 in DKI Jakarta and 60 in Central Java). d. BOPO and NIM are 80% and 4.9% respectively. e. SME credit achievement is 85% of total credit. Based on Bank C's Business Plan for 2017 that has been submitted, it is obtained that Bank C plans to open 2 KC and 5 KCP in Zone 2 (East Java). The Bank estimates it will obtain a profit in 2017 of Rp75 Billion. The calculation of Core Capital allocation availability is as follows:

• The Bank does not receive a reduction in Core Capital allocation due to efficiency achievement.
  Type...

In millions of Rp

Branch Office Type	Zone	Province	Investment Cost for Branch Office Opening (B)	Zone Coefficient (Kz)	Efficiency Achievement Coefficient (KF)	Number of Offices (Existing)	Total Core Capital Allocation (TC)
(1)	(2)	(3)	(4)	(5 = 1 x 2 x 4)
Existing branch offices
KC	1	DKI Jakarta	8,000	5	-	10	400,000
	2	Central Java	8,000	4	-	10	320,000
KCP	1	DKI Jakarta	3,000	5	-	30	450,000
	2	Central Java	3,000	4	-	30	360,000
KK	1	DKI Jakarta	1,000	5	-	60	300,000
	2	Central Java	1,000	4	-	60	240,000
Total Core Capital allocation for Existing Offices 2,070,000 Core Capital 2,000,000 Core Capital allocation availability (ETC) (70,000) Based on the Core Capital allocation calculation, Bank C does not have sufficient Core Capital allocation availability (ETC), so essentially Bank C cannot open a branch network. However, considering that Bank C has disbursed credit to SMEs of more than 20% of total credit, Bank C becomes able to open a branch network. The amount of core capital used for branch network opening uses the planned capital raising plan to be carried out by Bank C in 2017 with the following calculation:

• Requirement...

• Core Capital allocation requirement for the planned opening of 7 branch offices
  In millions of Rp
  | Zone | Province | Investment Cost for Branch Office Opening (B) | Zone Coefficient (Kz) | Efficiency Achievement Coefficient (KF) | Planned Number of Branch Office Openings | Total Core Capital Allocation (TC) | Branch Office Type |
  | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
  | (1) | (2) | (3) | (4) | (5 = 1 x 2 x 4) | | | |
  KC | 2 | East Java | 8,000 | 4 | - | 2 | 64,000 | KCP | 2 | East Java | 3,000 | 4 | - | 5 | 60,000 | Core Capital Allocation Requirement for Planned Branch Office Opening 124,000 Planned capital raising 75,000 Planned capital raising is Rp75 Billion which will be allocated by 75% (Rp56.25 Billion) to cover the shortage of Core Capital allocation for existing/existing branch offices, and the remainder of 25% (Rp18.75 Billion) can be used to open new branch offices. Conclusion:
  The capital raising allocation for opening new branch offices is only sufficient to open 1 KCP in East Java.
  Determined...

Determined in Jakarta on 29 April 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON
Copy in accordance with the original
Director of Law 1
Law Department signed
Yuliana