OJK Circular No. 28/SEOJK.03/2016 on Opening Branch Networks of Islamic Commercial Banks and Sharia Business Units Based on Core Capital

To:

1. Board of Directors of Islamic Commercial Banks;
2. Board of Directors of Conventional Commercial Banks with Sharia Business Units,
   At their respective locations.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2016

REGARDING

OPENING OF BRANCH NETWORKS OF ISLAMIC COMMERCIAL BANKS AND SHARIA BUSINESS UNITS 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 Branch Networks of Islamic Commercial Banks and Sharia Business Units Based on Core Capital in a Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

1. Bank means Islamic Commercial Banks and Sharia Business Units (UUS).
2. The opening of Bank branch networks must be supported by adequate financial capacity, among others reflected in the availability of Core Capital allocation according to location and type of Bank branch (Theoretical Capital), while still considering the future development of Islamic banking.
3. The Financial Services Authority provides facilitation for the Opening of Branch Networks for Banks that can increase efficiency in Bank management and channel financing to Micro, Small and Medium Enterprises (MSMEs)/Micro and Small Enterprises (MSEs) in certain quantities.
4. Furthermore, in order to balance the distribution of Branch Networks, Banks are encouraged to expand into areas that are less served by Islamic banking services, in support of national development efforts.

II. SCOPE

1. Bank Branch Networks in this Financial Services Authority Circular are:
   a. domestic Bank branches including Branch Offices, Regional Offices conducting operational activities, Sub-Branch Offices, Functional Offices conducting operational activities, or Cash Offices; b. foreign Bank branches including Branch Offices or other types of operational offices abroad, as referred to in regulations governing Islamic Commercial Banks or Sharia Business Units.
2. Opening of Branch Networks in this Financial Services Authority Circular means the opening of Bank branches, including the opening of Bank branches resulting from address relocation or change of status of Bank branches.
3. Relocation of Bank branch addresses as referred to in item 2 does not include relocation of Bank branch addresses in:
   a. the same zone; or b. a zone with lower Core Capital allocation requirements; and there is no increase in the status of the Bank branch.
4. Sharia Services of the Bank and Sharia Services as referred to in regulations governing Islamic Commercial Banks or Sharia Business Units are not counted as Opening of Bank Branch Networks.

III. DETERMINATION OF ZONES AND COEFFICIENTS FOR EACH ZONE

1. In order to Open Branch Networks domestically, the Financial Services Authority groups all provincial territories in Indonesia into 6 (six) zones, namely Zone 1 to Zone 6.
2. The zone division as referred to in item 1 is determined based on an analysis of bank saturation levels and balanced development in each zone, among others using parameters of gross domestic product growth, regional gross domestic product growth, disbursement performance, and fund collection 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 determined, 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. Opening of Branch Networks of Banks abroad 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 origin province before expansion as long as the Financial Services Authority has not determined a zone for the new province.
7. The list of zones and coefficients of each zone is as stated in Appendix I.

IV. DETERMINATION OF INVESTMENT COSTS FOR OPENING BANK BRANCH NETWORKS

1. The Financial Services Authority determines the investment costs for Opening Branch Networks based on the type of Bank branch for each Bank based on Business Activities (BUKU). The details of investment costs for Opening Branch Networks are as stated in Appendix II.
2. The grouping of BUKU for UUS is based on the Core Capital of the Conventional Commercial Bank that is its parent.
3. Investment costs for Opening Branch Networks can be evaluated and revised.

V. CONSIDERATIONS FOR ACHIEVING EFFICIENCY LEVELS IN OPENING BRANCH NETWORKS

1. The calculation of available Core Capital allocation considers the achievement of the Bank's efficiency level, which among others is measured through the Operating Cost to Operating Income ratio (BOPO) and the Net Operating Margin (NOM) ratio.
   Specifically for UUS, the assessment of efficiency level achievement is calculated using the efficiency level achievement applicable to the Conventional Commercial Bank that is its parent on a consolidated basis, namely the BOPO ratio 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 Openings even if the Bank has sufficient Core Capital allocation.
4. The Financial Services Authority determines coefficients related to efficiency achievement for each BUKU as stated in Appendix III.

VI. CALCULATION OF CORE CAPITAL ALLOCATION FOR BANKS

1. Banks calculate Core Capital allocation according to location and type of branch against existing branch networks and against plans for new Opening of Branch Networks.
2. Existing Bank branches as referred to in item 1 are branches that have been established for less than or equal to 2 (two) years.
3. The calculation of Core Capital allocation is obtained from the multiplication of the zone coefficient for the location of the Bank Branch Network with the investment costs for Opening Branch Networks according to the type of branch for each BUKU and the coefficient related to efficiency achievement, with the calculation as follows:

TC = Kz x B x KF

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

4. The calculation of Core Capital allocation for UUS uses the Core Capital of the Conventional Commercial Bank that is its parent.

VII. CALCULATION OF AVAILABILITY OF CORE CAPITAL ALLOCATION FOR BANKS

1. Banks submitting plans for Opening Branch Networks must include the calculation of available Core Capital allocation in the Bank Business Plan (RBB).
2. Availability of Core Capital allocation is calculated as follows:

ETC = M - (TCp x JKEp)

ETC = Availability of Core Capital allocation
M = Core Capital
TCp = Total Core Capital allocation in a zone
JKEp = Total Existing Bank Branch Networks in a zone

3. Based on the calculation results as referred to in item 2:
   a. Banks with a positive value for available Core Capital allocation have excess Core Capital capacity that can be allocated to open Branch Networks. b. Banks with a zero or negative value for available Core Capital allocation do not have excess Core Capital capacity that can be allocated to open Branch Networks.

4. The availability of Core Capital allocation requirements do not apply to:
   a. opening Functional Offices conducting specific operational activities for financing disbursement to MSEs; or b. Opening of Branch Networks for Banks owned by Regional Governments in 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 majority shares in the Bank with its head office in the province resulting from regional expansion.

5. The calculation of available Core Capital allocation for UUS is calculated in the availability of Core Capital allocation of the Conventional Commercial Bank that is its parent, referring to the determination of investment costs as referred to in item IV.1 and the determination of existing Bank branches as referred to in item VI.2.

VIII. DETERMINATION OF THE NUMBER OF BANK BRANCH NETWORK OPENINGS

1. Banks that meet health level requirements and have available Core Capital allocation according to location and type of branch can perform Opening of Branch Networks in quantities corresponding to the available Core Capital allocation.
   The aforementioned Bank can obtain additional incentives for the number of Branch Network Openings if the Bank channels financing to:
   a. MSMEs at least 20% (twenty percent) of total financing portfolio; and/or b. MSEs at least 10% (ten percent) of total financing portfolio. Health level fulfillment requirements for UUS are based on the assessment of the health level of the Conventional Commercial Bank that is its parent. The assessment of financing disbursement achievement to MSMEs or MSEs for UUS is calculated using the total financing and credit disbursement to MSMEs or MSEs conducted by the UUS and the Conventional Commercial Bank that is its parent on a consolidated basis. 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 available Core Capital allocation according to location and type of branch can perform Opening of Branch Networks if:
   a. The Bank channels financing to:
   1. MSMEs at least 20% (twenty percent) of total financing portfolio; or
   2. MSEs at least 10% (ten percent) of total financing portfolio;
      and b. The Bank conducts capital raising originating from profit allocation and/or additional capital contributions.
      Capital raising conducted by the Bank must mostly be allocated to cover the shortage of Core Capital allocation for existing Branch Networks, at most equal to the shortage of Core Capital allocation for existing Branch Networks, and the remainder to support plans for Opening Branch Networks.
3. The Financial Services Authority may reduce the number of planned Bank Branch Openings even if the Bank has sufficient Core Capital allocation.
   Example of calculation for determining the number of Branch Network Openings is as stated in Appendix V.

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

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

1. 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. Opening of 3 (three) Sub-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 for Conventional Commercial Banks with UUS with the provisions:
   a. In the event that the opening of 3 (three) KC or KCP in Zone 1 or Zone 2 are conventional branches, the obligation as referred to in items 1 and 2 must be followed by the opening of 1 (one) KC or KCP that is a conventional or Sharia KC or KCP. b. In the event that the opening of 3 (three) KC or KCP in Zone 1 or Zone 2 are Sharia branches, the obligation as referred to in items 1 and 2 must be followed by the opening of 1 (one) Sharia KC or KCP.
4. The obligation to open KC or KCP in Zone 5 or Zone 6 as referred to in items 1, 2, and 3 must still consider the adequacy 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 2015 opened 2 (two) KC in Zone 1 and in 2016 Bank A opened 4 (four) KC in Zone 1. Thus, Bank A must open 2 (two) KC in Zone 5 and/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 perform the opening of KC or KCP in Zone 1, Zone 2, Zone 3, and Zone 4.
7. The obligation to Open Branch Networks as referred to in items 1 and 2 does not apply to Banks owned by Regional Governments and performing the opening of KC or KCP in Zone 1 or Zone 2 which are the provincial areas 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 included in BUKU 3, if it will open 3 (three) KC in DKI Jakarta Province, the Bank is not required to open 1 (one) KC in Zone 5 or Zone 6.
8. The provincial area 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 majority shares 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 will open 3 (three) KC in Province X1, Bank A is not required to open 1 (one) KC in Zone 5 or Zone 6, as long as the Regional Government of Province X1 does not hold majority shares 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 financing disbursement achievement to MSMEs and/or MSEs used in the plan for Opening Branch Networks in the RBB uses end-of-September position data.
2. The Financial Services Authority assesses Core Capital, efficiency achievement, and financing disbursement achievement to MSMEs and/or MSEs, both at the time of assessing the plan for Opening Branch Networks in the RBB and at the time the Bank submits a request for the plan for Opening Branch Networks to the Financial Services Authority.
3. Procedures, methods, and other requirements to obtain permission or confirmation for Opening Branch Networks of Banks must also meet regulations governing:
   a. Islamic Commercial Banks; or b. Sharia Business Units.
4. Appendix I, Appendix II, Appendix III, Appendix IV, and Appendix V are an integral part of this Financial Services Authority Circular.

XI. TRANSITIONAL PROVISIONS

Adjustment of the 2016 plan for Opening Branch Networks must be included in the 2016 revision of the RBB, referring to regulations governing the RBB and submitted to the Financial Services Authority, at the following addresses:

1. Sharia Banking Department, for Banks with head offices in the DKI Jakarta Province area; or
2. Regional Office or local Financial Services Authority Office for Banks with head offices outside the DKI Jakarta Province area.

XII. CLOSING PROVISIONS

1. With the implementation of this Financial Services Authority Circular, Bank Indonesia Circular Letter Number 15/8/DPBS dated March 27, 2013 regarding Opening of Branch Networks of Islamic Commercial Banks and Sharia Business Units Based on Core Capital is revoked and declared invalid.
2. This Financial Services Authority Circular comes into force on the date of determination.

Determined in Jakarta on July 21, 2016

HEAD OF EXECUTIVE SUPERVISOR OF BANKING
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy matches the original
Director of Law 1
Law Department signed
Yuliana

APPENDIX I
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2016 REGARDING OPENING OF BRANCH NETWORKS OF ISLAMIC COMMERCIAL BANKS AND SHARIA BUSINESS UNITS BASED ON CORE CAPITAL

ZONES AND COEFFICIENTS FOR EACH ZONE

Zone 1: Coefficient = 5
DKI Jakarta
Foreign Countries

Zone 2: Coefficient = 4
West Java
Banten
Central Java
DI Yogyakarta
East Java
Bali
East Kalimantan
Riau Islands
North Sumatra
Riau
South Sumatra

Zone 3: Coefficient = 3
Central Kalimantan
South Kalimantan
North Sulawesi
South Sulawesi
Papua
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 July 21, 2016

HEAD OF EXECUTIVE SUPERVISOR OF BANKING
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy matches the original
Director of Law 1
Law Department signed
Yuliana

APPENDIX II
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2016 REGARDING OPENING OF BRANCH NETWORKS OF ISLAMIC COMMERCIAL BANKS AND SHARIA BUSINESS UNITS BASED ON CORE CAPITAL

INVESTMENT COSTS FOR OPENING BANK BRANCH NETWORKS

Type of Branch | Investment Costs for Opening Branch Networks for BUKU 1 and BUKU 2 | Investment Costs for Opening Branch Networks for BUKU 3 and BUKU 4 --- | --- | --- Branch Office (KC) | Rp3,000,000,000.00 | Rp5,000,000,000.00 Operational Regional Office | Rp3,000,000,000.00 | Rp5,000,000,000.00 Sub-Branch Office (KCP) | Rp1,500,000,000.00 | Rp2,000,000,000.00 Functional Office Conducting Operational Activities | Rp1,500,000,000.00 | Rp2,000,000,000.00 Cash Office (KK) | Rp500,000,000.00 | Rp1,000,000,000.00 Other Operational Offices Abroad | Rp500,000,000.00 | Rp1,000,000,000.00

Determined in Jakarta on July 21, 2016

HEAD OF EXECUTIVE SUPERVISOR OF BANKING
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy matches the original
Director of Law 1
Law Department signed
Yuliana

APPENDIX III
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2016 REGARDING OPENING OF BRANCH NETWORKS OF ISLAMIC COMMERCIAL BANKS AND SHARIA BUSINESS UNITS BASED ON CORE CAPITAL

REDUCTION OF CORE CAPITAL ALLOCATION (AMI) AND COEFFICIENTS RELATED TO ACHIEVEMENT OF BANK EFFICIENCY

1. BUKU 1

BUKU 1 | BOPO (%) | <80 | ≥80 - <85 | ≥85 - <90 | ≥90 - <95 | ≥95 --- | --- | --- | --- | --- | --- | --- NOM (%) | ≥4 | Reduction AMI 100% | Reduction AMI 80% | Reduction AMI 0% | Reduction AMI 0% |

	KF = 0	KF = 0.2	KF = 1	KF = 1
≥3.5-<4	Reduction AMI 80%	Reduction AMI 60%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.2	KF = 0.4	KF = 1	KF = 1
≥3-<3.5	Reduction AMI 60%	Reduction AMI 50%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.4	KF = 0.5	KF = 1	KF = 1
≥2.5-<3	Reduction AMI 50%	Reduction AMI 40%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.5	KF = 0.6	KF = 1	KF = 1
≥2-<2.5	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%
	KF = 1	KF = 1	KF = 1	KF = 1
<2	Supervisory Action

2. BUKU 2

BUKU 2 | BOPO (%) | <80 | ≥80 - <85 | ≥85 - <90 | ≥90 - <95 | ≥95 --- | --- | --- | --- | --- | --- | --- NOM (%) | ≥4 | Reduction AMI 100% | Reduction AMI 80% | Reduction AMI 0% | Reduction AMI 0% |

	KF = 0	KF = 0.2	KF = 1	KF = 1
≥3.5-<4	Reduction AMI 80%	Reduction AMI 60%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.2	KF = 0.4	KF = 1	KF = 1
≥3-<3.5	Reduction AMI 60%	Reduction AMI 50%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.4	KF = 0.5	KF = 1	KF = 1
≥2.5-<3	Reduction AMI 50%	Reduction AMI 40%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.5	KF = 0.6	KF = 1	KF = 1
≥2-<2.5	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%
	KF = 1	KF = 1	KF = 1	KF = 1
<2	Supervisory Action

3. BUKU 3

BUKU 3 | BOPO (%) | <70 | ≥70 - <75 | ≥75 - <80 | ≥80 - <85 | ≥85 --- | --- | --- | --- | --- | --- | --- NOM (%) | ≥4 | Reduction AMI 100% | Reduction AMI 80% | Reduction AMI 0% | Reduction AMI 0% |

	KF = 0	KF = 0.2	KF = 1	KF = 1
≥3.5-<4	Reduction AMI 80%	Reduction AMI 60%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.2	KF = 0.4	KF = 1	KF = 1
≥3-<3.5	Reduction AMI 60%	Reduction AMI 50%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.4	KF = 0.5	KF = 1	KF = 1
≥2.5-<3	Reduction AMI 50%	Reduction AMI 40%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.5	KF = 0.6	KF = 1	KF = 1
≥2-<2.5	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%
	KF = 1	KF = 1	KF = 1	KF = 1
<2	Supervisory Action

4. BUKU 4

BUKU 4 | BOPO (%) | <70 | ≥70 - <75 | ≥75 - <80 | ≥80 - <85 | ≥85 --- | --- | --- | --- | --- | --- | --- NOM (%) | ≥4 | Reduction AMI 100% | Reduction AMI 80% | Reduction AMI 0% | Reduction AMI 0% |

	KF = 0	KF = 0.2	KF = 1	KF = 1
≥3.5-<4	Reduction AMI 80%	Reduction AMI 60%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.2	KF = 0.4	KF = 1	KF = 1
≥3-<3.5	Reduction AMI 60%	Reduction AMI 50%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.4	KF = 0.5	KF = 1	KF = 1
≥2.5-<3	Reduction AMI 50%	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%
	KF = 0.5	KF = 1	KF = 1	KF = 1
≥2-<2.5	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%	Reduction AMI 0%
	KF = 1	KF = 1	KF = 1	KF = 1
<2	Supervisory Action

Determined in Jakarta on July 21, 2016

HEAD OF EXECUTIVE SUPERVISOR OF BANKING
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy matches the original
Director of Law 1
Law Department signed
Yuliana

APPENDIX IV
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2016 REGARDING OPENING OF BRANCH NETWORKS OF ISLAMIC COMMERCIAL BANKS AND SHARIA BUSINESS UNITS BASED ON CORE CAPITAL

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

MSME Financing Share against Total Financing | Additional Number of Branch Networks*) --- | --- >80% | 35% >65% to <80% | 30% >50% to <65% | 25% >35% to <50% | 20% >20% to <35% | 15%

MSE Financing Share against Total Financing | Additional Number of Branch Networks*) --- | --- >70% | 35% >55% to <70% | 30% >40% to <55% | 25% >25% to <40% | 20% >10% to <25% | 15%

*) from the number of planned Branch Network Openings supported by adequate Core Capital allocation

Determined in Jakarta on July 21, 2016

HEAD OF EXECUTIVE SUPERVISOR OF BANKING
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy matches the original
Director of Law 1
Law Department signed
Yuliana

APPENDIX V
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 28 /SEOJK.03/2016 REGARDING OPENING OF BRANCH NETWORKS OF ISLAMIC COMMERCIAL BANKS AND SHARIA BUSINESS UNITS BASED ON CORE CAPITAL

EXAMPLE CALCULATION FOR DETERMINING THE NUMBER OF BRANCH NETWORKS THAT CAN BE OPENED

EXAMPLE 1:
Based on end-of-September 2016 position data, Bank A:
a. Core Capital Rp300,000,000,000.00 (BUKU 1). b. Composite Health Level Rating (PK TKS) 2 in the last 1 (one) year.
c. Has had Branch Networks in the last 2 (two) years as follows:
13 KC (8 in DKI Jakarta and 5 in Central Java), 10 KCP (5 in DKI Jakarta and 5 in Central Java), and 10 KK (4 in DKI Jakarta and 6 in Central Java). d. BOPO and NOM are 84% and 3.2% respectively. e. MSME financing achievement is 45% of total financing. If Bank A plans to open 8 KC in DI Yogyakarta, the calculation of available Core Capital allocation is as follows:

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

In millions of Rp

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

Existing Branch Network
KC 1 DKI Jakarta 3,000 5 0.5 8 60,000
2 Central Java 3,000 4 0.5 5 30,000
KCP 1 DKI Jakarta 1,500 5 0.5 5 18,750
2 Central Java 1,500 4 0.5 5 15,000
KK 1 DKI Jakarta 500 5 0.5 4 5,000
2 Central Java 500 4 0.5 6 6,000
Total Core Capital Allocation for existing branches 134,750 Core Capital 300,000 Available Core Capital Allocation (ETC) 165,250

Planned Branch Opening
KC 2 DI Yogyakarta 3,000 4 0.5 8 48,000
Core Capital Allocation Requirement for Planned Branch Opening 48,000 Remaining Core Capital Allocation 117,250

Based on the Core Capital Allocation calculation, Bank A has sufficient Available Core Capital Allocation (ETC) to open 8 (eight) KCs in DI Yogyakarta as planned.

• Subsequently, because Bank A's SME financing disbursement is 45% of total financing, Bank A will receive an additional number of branches that can be opened equal to 20% of the number of branches planned that have met the Core Capital sufficiency allocation, namely:

Branch Type	Zone	Planned Number of Openings	Branch Network According to Core Capital Sufficiency	Additional Incentive	Additional Branch Network
(1)	(2)	(3)=(1) x (2)
KC 2		8	20%	1

Conclusion:
Bank A can open a branch network of 8 KCs in DI Yogyakarta as planned and obtain an additional 1 KC or below KCs that can be opened in the same zone or a zone with lower Core Capital allocation requirements than the zone in the planned branch opening network.

EXAMPLE...

EXAMPLE 2:
Based on data as of the end of September 2016, Bank B:
a. Core Capital Rp7,000,000,000,000.00 (BOOK 3) b. Composite Health Level Rating (PK TKS) 2 in the last 1 (one) year
c. Already has the following Branch Network:
50 KCs (20 in DKI Jakarta, 15 in Central Java and 15 in North Sumatra), 150 KCPs (60 in DKI Jakarta, 55 in Central Java and 35 in North Sumatra) and 160 KPs (60 in DKI Jakarta, 50 in Central Java and 50 in North Sumatra). d. BOPO and NOM are 86% and 0.7% respectively. e. SME Achievement is 55% of total financing. If Bank B plans to open 30 KCs in Zone 2 (5 KCs in East Java, 10 KCs in West Java and 15 KCs in Central Java) and 15 KCPs in Zone 3 (North Sumatra), the calculation of the availability of Core Capital allocation is as follows:

• The Bank does not receive a reduction in Core Capital allocation due to not achieving a certain efficiency range and the Bank may be subject to supervisory actions by OJK.

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

Existing Branch Network
KC
1 DKI Jakarta 5,000 5 - 20 500,000
2 Central Java 5,000 4 - 15 300,000
North Sumatra 5,000 3 - 15 225,000
KCP
1 DKI Jakarta 2,000 5 - 60 600,000
2 Central Java 2,000 4 - 55 440,000
North Sumatra 2,000 3 - 35 210,000
KK
1 DKI Jakarta 1,000 5 - 60 300,000
2 Central Java 1,000 4 - 50 200,000
North Sumatra 1,000 3 - 50 150,000
Total Core Capital Allocation for existing branches 2,925,000 Core Capital 7,000,000 Available Core Capital Allocation (ETC) 4,075,000

Planned...

Planned Branch Opening

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

KC
2 East Java 5,000 4 - 5 100,000
2 West Java 5,000 4 - 10 200,000
2 Central Java 5,000 4 - 15 300,000
KCP 3
North Sumatra 2,000 3 - 15 90,000
Core Capital Allocation Requirement for Planned Branch Opening 690,000 Remaining Core Capital Allocation 3,385,000

Based on the Core Capital Allocation calculation, Bank B has sufficient Available Core Capital Allocation (ETC) to open 30 KCs in East Java, West Java, and Central Java as well as 15 KCPs in North Sumatra as planned.

• Subsequently, because Bank B's SME financing disbursement is 55% of total financing, Bank B will receive an additional number of branches that can be opened equal to 25% of the number of branches planned that have met the Core Capital sufficiency allocation, namely:

Branch Type	Zone	Planned Number of Openings	Branch Network According to Core Capital Sufficiency	Additional Incentive	Additional Branch Network
(1)	(2)	(3)=(1) x (2)
KC 2		30	25%	7
KCP 3		15	25%	3

Conclusion:
Based on the Core Capital Allocation sufficiency calculation and SME financing disbursement achievement, Bank B can open a branch network of 30 KCs in East Java, West Java, and Central Java as well as 15 KCPs in North Sumatra as planned and obtain additional:
a. 7 KCs and/or below KCs that can be opened in the same zone or a zone with lower Core Capital allocation requirements than the zone in the planned branch opening network. b. 3 KCPs and/or below KCs that can be opened in the same zone or a zone with lower Core Capital allocation requirements than the zone in the planned branch opening network. However, considering that the Bank's efficiency range is within the supervisory action range, OJK may reduce the number of Planned Branch Openings that the Bank can open.

EXAMPLE 3:
Based on data as of the end of September 2016, Bank C:
a. Core Capital Rp1,500,000,000,000.00 (BOOK 2) b. Composite Health Level Rating (PK TKS) 2 in the last 1 (one) year
c. Already has the following Branch Network:
40...

40 KCs (20 in DKI Jakarta and 20 in Central Java), 100 KCPs (50 in DKI Jakarta and 50 in Central Java) and 150 KPs (75 in DKI Jakarta and 75 in Central Java). d. BOPO and NOM are 83% and 2.3% respectively. e. SME Achievement is 85% of total financing.

• Bank C plans to open 2 KCs and 5 KCPs in Zone 2 (East Java). The Bank estimates it will earn a profit in 2017 of Rp80 Billion. The calculation of the availability of Core Capital allocation is as follows:

Province Zone	Investment Cost for Branch Opening (B)	Zone Coefficient (KZ)	Efficiency Achievement Coefficient (KF)	Number of Existing Branches	Total Core Capital Allocation (TC)
(1)	(2)	(3)	(4)	(5 = 1 x 2 x 3 x 4)

Existing Branch Network
KC 1 DKI Jakarta 3,000 5 1 20 300,000
2 Central Java 3,000 4 1 20 240,000
KCP 1 DKI Jakarta 1,500 5 1 50 375,000
2 Central Java 1,500 4 1 50 300,000
KK 1 DKI Jakarta 500 5 1 75 187,500
2 Central Java 500 4 1 75 150,000
Total Core Capital Allocation for existing branches 1,552,500 Core Capital 1,500,000 Available Core Capital Allocation (ETC) (52,500)

Based on...

Based on the Core Capital Allocation calculation, Bank C does not have sufficient Available Core Capital Allocation (ETC), so essentially Bank C cannot open a branch network. However, considering that Bank C has disbursed financing to SMEs of more than 20% of total financing, Bank C is able to open a branch network. The amount of Core Capital used for the branch opening network uses the planned capital increase that will be carried out by Bank C in 2017 with the following calculation:

• Core Capital Allocation Requirement for Planned Opening of 7 Branch Networks

Province Zone	Investment Cost for Branch Opening (B)	Zone Coefficient (KZ)	Efficiency Achievement Coefficient (KF)	Planned Number of Branch Openings	Total Core Capital Allocation (TC)
(1)	(2)	(3)	(4)	(5 = 1 x 2 x 3 x 4)

KC 2 East Java 3,000 4 1 2 24,000
KCP 2 East Java 1,500 4 1 5 30,000
Core Capital Allocation Requirement for Planned Branch Opening 54,000 Planned Capital Increase 80,000

Planned...

The planned capital increase is Rp80 Billion which will be allocated by 60% (Rp48 Billion) to cover the shortage of Core Capital allocation for existing/existing branch networks, and the remaining 40% (Rp32 Billion) can be used to open new branch networks.

• Thus, the capital increase allocation for opening new branch networks is only sufficient to open 2 KCs and 1 KCP in East Java.

Determined in Jakarta on July 21, 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, ttd
NELSON TAMPUBOLON
Copy in accordance with the original
Legal Director 1
Legal Department ttd
Yuliana