OJK Regulation No. 40/POJK.03/2017 on Credit or Financing to Securities Companies and Credit or Financing with Stock Collateral

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 40 /POJK.03/2017
CONCERNING
CREDIT OR FINANCING TO SECURITIES COMPANIES AND CREDIT OR FINANCING WITH STOCK COLLATERAL BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that deregulation in the financial and banking sectors has provided opportunities and ease for banks to develop their business based on the principles of healthy banking; b. that to enable the healthy development of the capital market, the participation of the banking sector in financing capital market activities is required, while still observing prudent principles;
c. that guarantees in the provision of credit or financing that need to be considered are the certainty regarding the debtor's ability and willingness to repay the credit or financing as agreed;
d. that in supporting the development of the capital market, banks are permitted to request additional collateral in the form of stocks to obtain certainty regarding the availability of guarantees for the provision of credit or financing; e. that in connection with the transfer of functions, duties, and authorities for the regulation and supervision of financial services in the banking sector from Bank Indonesia to the Financial Services Authority, it is necessary to re-regulate credit or financing to securities companies and credit or financing with stock collateral; f. that based on the considerations as referred to in letters a through e, it is necessary to establish a Financial Services Authority Regulation concerning Credit or Financing to Securities Companies and Credit or Financing with Stock Collateral;

Recalling:

1. 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 Amendment 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);
2. Law Number 21 of 2008 concerning Islamic Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
3. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING CREDIT OR FINANCING TO SECURITIES COMPANIES AND CREDIT OR FINANCING WITH STOCK COLLATERAL.

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

1. Bank means Commercial Banks and Rural Banks as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendment to Law Number 7 of 1992 concerning Banking, including branch offices of banks located outside the country, and Sharia Banks and Sharia Business Units as referred to in Law Number 21 of 2008 concerning Islamic Banking.
2. Securities Company means a securities company as referred to in the Law concerning the capital market.
3. Additional Credit or Financing Collateral means goods, securities, or guarantees that are not directly related to the financed object, added as collateral, if in the credit or financing assessment the Bank has not obtained certainty regarding the debtor's ability and willingness to repay the credit or financing as agreed.

Article 2
(1) Banks may only provide credit or financing to a Securities Company, each up to a maximum amount equal to the smaller of 25% (twenty-five percent) of the capital of the relevant Securities Company or 15% (fifteen percent) of the Bank's capital. (2) All credit or financing as referred to in paragraph (1) that can be provided by a Bank to all Securities Companies shall be at most 30% (thirty percent) of the Bank's capital. (3) Banks are prohibited from providing credit or financing for the purchase and sale of stocks to individuals or companies that are not Securities Companies.

Article 3
(1) Banks are permitted to provide credit or financing with additional collateral in the form of stocks that are listed on a stock exchange.
(2) Stocks listed on a stock exchange as referred to in paragraph (1) do not include:
a. stocks that have not experienced transactions for 3 (three) consecutive months prior to the signing of the credit or financing agreement; and b. stocks with a market price below the nominal value at the time the credit or financing agreement is signed.

Article 4
The value of stocks used as Additional Credit or Financing Collateral shall be at most 50% (fifty percent) of the market price or exchange rate of the relevant stocks on the stock exchange at the time the credit or financing agreement is signed.

Article 5
(1) For the provision of credit or financing for expansion or acquisition, Banks are permitted to accept additional collateral in the form of stocks that are listed or not listed on a stock exchange. (2) In the event that the stocks used as additional collateral as referred to in paragraph (1) are unlisted stocks, the limit is only stocks issued by the recipient company of the credit or financing. (3) The value of unlisted stocks used as Additional Credit or Financing Collateral as referred to in paragraph (2) shall be at most the nominal value of the stocks stated in the articles of association or bylaws of the recipient company of the credit or financing.

Article 6
Violations of the provisions as referred to in Article 2 shall be subject to administrative sanctions in the supervision and development of Banks in accordance with applicable laws and regulations.

Article 7
At the time this Financial Services Authority Regulation comes into force:

1. Director's Decision of Bank Indonesia Number 24/32/KEP/DIR concerning Credit to Securities Companies and Credit with Stock Collateral;
2. Director's Decision of Bank Indonesia Number 26/68/KEP/DIR concerning Stocks as Additional Credit Collateral;
3. Circular Letter of Bank Indonesia Number 24/1/UKU concerning Credit to Securities Companies and Credit with Stock Collateral; and
4. Circular Letter of Bank Indonesia Number 26/1/UKU concerning Stocks as Additional Credit Collateral,
   are repealed and declared invalid.

Article 8
This Financial Services Authority Regulation comes into force on the date of its promulgation.

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

In order that everyone may be aware thereof, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia. Established in Jakarta on 12 July 2017 CHAIRMAN OF THE COMMISSIONERS COUNCIL FINANCIAL SERVICES AUTHORITY, signed MULIAMAN D. HADAD

Promulgated in Jakarta on 12 July 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 146

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 40 /POJK.03/2017
CONCERNING
CREDIT OR FINANCING TO SECURITIES COMPANIES AND CREDIT OR FINANCING WITH STOCK COLLATERAL

I. GENERAL
The capital market sector plays an important role in supporting Indonesia's sustainable economic growth. Thus, the banking sector's role is needed to support the healthy development of the capital market. One form of banking support for the capital market sector is by providing credit or financing to Securities Companies while still observing prudent principles. Banks, as financial institutions carrying out intermediary functions, are required to conduct lending or financing business in accordance with the principles of healthy lending or financing. In the implementation of the principles of healthy lending or financing, Banks must have certainty regarding the debtor's ability to repay credit or financing by assessing the business, project, or receivables financed as collateral in the provision of credit or financing. To increase the Bank's certainty regarding the debtor's ability, the Bank may request additional collateral, one of which is in the form of stocks, while still observing prudent principles. With the permission of additional collateral in the form of stocks, it is also expected to support the development of the capital market in Indonesia. Based on the above, the Financial Services Authority needs to regulate the provision of credit or financing to Securities Companies and credit or financing with stock collateral.

II. ARTICLE BY ARTICLE
Article 1
Sufficiently clear.
Article 2
Paragraph (1)
Credit or financing provided to Securities Companies may include investment credit or financing, working capital credit or financing, and credit or financing for the purpose of guaranteeing the issuance of securities. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear.
Article 3
Sufficiently clear.
Article 4
Sufficiently clear.
Article 5
Sufficiently clear.
Article 6
Sufficiently clear.
Article 7
Sufficiently clear.
Article 8
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6089