OJK Regulation No. 50/POJK.03/2017 on the Net Stable Funding Ratio Obligation for Commercial Banks

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 50 /POJK.03/2017
ON
THE OBLIGATION TO FULFILL THE NET STABLE FUNDING RATIO FOR COMMERCIAL BANKS BY THE GRACE OF THE MOST HIGH GOD, THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering: a. that to create a healthy banking system capable of developing and competing nationally and internationally, banks need to manage liquidity in accordance with prudential principles; b. that to manage bank liquidity, it is necessary to maintain a stable funding profile based on the composition of assets and administrative account transactions in accordance with international standards;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on the Obligation to Fulfill the Net Stable Funding Ratio for Commercial Banks;
Recalling: 1. Law Number 7 of 1992 on 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 on Amendments to Law Number 7 of 1992 on 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 2011 on 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 ON THE OBLIGATION TO FULFILL THE NET STABLE FUNDING RATIO FOR COMMERCIAL BANKS.
CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Bank means a Commercial Bank as referred to in Law Number 7 of 1992 on Banking as amended by Law Number 10 of 1998 on Amendments to Law Number 7 of 1992 on Banking, including branch offices of banks located abroad, which conduct conventional business activities.
2. Available Stable Funding (ASF) is the amount of stable liabilities and equity over a 1 (one) year period to finance the Bank's activities.
3. Required Stable Funding (RSF) is the amount of assets and administrative account transactions that need to be financed by stable funding.
4. Net Stable Funding Ratio (NSFR) is the ratio between ASF and RSF.
5. NSFR Report is a report presenting quantitative information in the form of NSFR calculations and values, as well as qualitative information in the form of NSFR development analysis.
6. NSFR Working Paper is a report containing detailed NSFR calculations as data sources in compiling the NSFR Report.
7. NSFR Fulfillment Action Plan is a report containing at least improvement plans for NSFR adequacy fulfillment accompanied by a completion timeframe.
   Article 2
   (1) Banks are obligated to maintain adequate stable funding.
   (2) Fulfillment of stable funding as referred to in paragraph (1) is calculated using the NSFR.
   (3) The NSFR calculation as referred to in paragraph (2) is calculated in Rupiah denomination.
   (4) NSFR fulfillment as referred to in paragraph (2) is set at a minimum of 100% (one hundred percent).
   (5) The Financial Services Authority has the authority to set NSFR different from the NSFR fulfillment obligation as referred to in paragraph (4).
   Article 3
   In the event that a Bank owns and/or controls a subsidiary, the NSFR fulfillment obligation as referred to in Article 2 paragraph (4) applies to the Bank both individually and on a consolidated basis.
   Article 4
   NSFR fulfillment as referred to in Article 2 paragraph (4) applies to:
   a. Banks included in the Commercial Bank Business Group (BUKU) 4; b. Banks included in the BUKO 3 group; and
   c. Foreign banks.
   CHAPTER II
   CALCULATION OF THE NET STABLE FUNDING RATIO
   Article 5
   (1) For NSFR fulfillment as referred to in Article 2 paragraph (4), Banks are obligated to calculate the ASF and RSF values.
   (2) The ASF value considered in the NSFR calculation is the sum of the results of multiplying all carrying values of liabilities and equity on the financial position statement (balance sheet) with the ASF factor. (3) The RSF value considered in the NSFR calculation is the sum of the results of multiplying all carrying values of assets on the financial position statement (balance sheet) and all administrative account transaction values on the commitment and contingency statement with the RSF factor. (4) Provisions regarding the calculation of ASF and RSF values as referred to in paragraphs (2) and (3) refer to Appendix I which is an integral part of this Financial Services Authority Regulation.
   CHAPTER III
   MONITORING, REPORTING, AND PUBLICATION OF THE NET STABLE FUNDING RATIO First Section General
   Article 6
   Banks that fulfill the obligation to calculate NSFR as referred to in Article 4 are obligated to monitor NSFR fulfillment and submit NSFR calculation reports both individually and on a consolidated basis. Second Section Monitoring of the Net Stable Funding Ratio
   Article 7
   (1) Banks are obligated to monitor NSFR fulfillment on a monthly basis.
   (2) Monitoring as referred to in paragraph (1) is conducted by the Bank by compiling the NSFR Working Paper and NSFR Report based on the end-of-month reporting position. (3) The NSFR Report as referred to in paragraph (2) contains at least:
   a. NSFR calculation; and b. NSFR development analysis.
   (4) The NSFR development analysis as referred to in paragraph (3) letter b explains at least:
   a. main factors affecting the NSFR calculation; b. factors or conditions causing a decrease or increase in NSFR; and
   c. interdependent asset and liability composition and the relationship between assets and liabilities.
   (5) Banks are obligated to document the NSFR Working Paper and NSFR Report as referred to in paragraph (2).
   Article 8
   (1) The obligation to monitor monthly NSFR fulfillment as referred to in Article 7 paragraph (1) is first conducted for the end-of-month position of January 2018.
   (2) Provisions regarding the compilation of the NSFR Working Paper and NSFR Report as referred to in Article 7 paragraph (2) refer to Appendix I, Appendix II, and Appendix III which are integral parts of this Financial Services Authority Regulation.
   Article 9
   (1) In the event that a Bank is unable to meet the NSFR up to 100% (one hundred percent) based on the monitoring results in Article 7 paragraph (1), the Bank is obligated to compile an NSFR Fulfillment Action Plan both individually and on a consolidated basis. (2) Provisions regarding the format of the NSFR Fulfillment Action Plan as referred to in paragraph (1) refer to Appendix IV which is an integral part of this Financial Services Authority Regulation. Third Section Reporting of the Net Stable Funding Ratio
   Article 10
   (1) Banks are obligated to submit the NSFR Working Paper and NSFR Report based on the end-of-quarter reporting position to the Financial Services Authority.
   (2) The end-of-quarter reporting position as referred to in paragraph (1) is a report for the end-of-month positions of March, June, September, and December.
   Article 11
   (1) In the event of conditions as referred to in Article 9 paragraph (1), the Bank is obligated to submit to the Financial Services Authority:
   a. NSFR Working Paper and NSFR Report for the end-of-month reporting position as referred to in Article 7 paragraph (2); and b. NSFR Fulfillment Action Plan as referred to in Article 9. (2) The Financial Services Authority has the authority to request the Bank to make adjustments to the NSFR Fulfillment Action Plan as referred to in paragraph (1) letter b.
   Article 12
   (1) Banks are obligated to submit the NSFR Fulfillment Action Plan implementation report as referred to in Article 11 paragraph (1) letter b to the Financial Services Authority at the latest 10 (ten) working days after the completion target time of the NSFR Fulfillment Action Plan. (2) The NSFR Fulfillment Action Plan implementation report as referred to in paragraph (1) contains at least:
   a. improvement actions taken by the Bank; b. obstacles in implementing improvement actions; and
   c. implementation time for improvements.
   Article 13
   (1) Banks are obligated to submit the NSFR Working Paper and NSFR Report as referred to in Article 10 paragraph (1) and Article 11 paragraph (1) letter a at the latest:
   a. the 15th day after the end of the reporting month, for individual NSFR Working Papers and NSFR Reports; and b. the end of the month after the end of the reporting month, for consolidated NSFR Working Papers and NSFR Reports. (2) Banks are obligated to submit the NSFR Fulfillment Action Plan both individually and on a consolidated basis as referred to in Article 11 paragraph (1) letter (b) at the latest at the end of the following month since the Bank faced the conditions as referred to in Article 9 paragraph (1). (3) Banks are obligated to submit the NSFR Working Paper, NSFR Report, and NSFR Fulfillment Action Plan as referred to in paragraphs (1) and (2) online through the Financial Services Authority reporting system. (4) In the event that the Financial Services Authority reporting system as referred to in paragraph (3) is not yet available, Banks are obligated to submit the NSFR Working Paper, NSFR Report, and NSFR Fulfillment Action Plan offline. (5) If the submission deadline for the NSFR Working Paper, NSFR Report, and NSFR Fulfillment Action Plan as referred to in paragraphs (3) and (4) falls on a Saturday, Sunday, and/or holiday, the reports are submitted on the next working day. (6) Offline submission as referred to in paragraph (4) and submission of the NSFR Fulfillment Action Plan implementation report as referred to in Article 12 paragraph (1) are submitted to:
   a. the Department of Supervision of the relevant Bank for Banks with headquarters or branch offices of banks located abroad in the Special Capital Region of Jakarta Province; or b. the Regional Office or local Financial Services Authority Office for Banks with headquarters outside the Special Capital Region of Jakarta Province. Fourth Section Publication of the Net Stable Funding Ratio
   Article 14
   (1) Banks are obligated to publish and disclose the NSFR Report based on the end-of-quarter reporting position as referred to in Article 10 paragraph (1) for the end-of-month positions of March, June, September, and December. (2) Publication and disclosure of the NSFR Report for the end-of-quarter reporting position as referred to in paragraph (1) must be conducted through:
   a. the Bank's website for the NSFR Report for the end-of-quarter reporting position; and b. at least 1 (one) daily printed newspaper in Indonesian with wide circulation, the Bank's website, and online for the NSFR percentage value for the end-of-quarter reporting position included in the quarterly publication report. (3) The obligation to publish the NSFR Report for the end-of-quarter position as referred to in paragraph (2) letter a is conducted at the latest:
   a. the 15th day of the second month after the end of the reporting month, for reports for the end-of-month positions of March, June, and September; and b. the end of March of the following year after the end of the reporting month, for the end-of-December report. (4) The procedure, format, and timeframe for submitting quarterly publication reports for the quarterly NSFR percentage value as referred to in paragraph (2) letter b are conducted in accordance with the procedure, format, and timeframe for publication as regulated in Financial Services Authority regulations regarding transparency and publication of Bank reports. (5) Banks are obligated to maintain the announcement of the NSFR Report for the end-of-quarter reporting position on the Bank's website as referred to in paragraph (2) letter a for at least the last 5 (five) fiscal years.
   Article 15
   (1) The obligation to submit the NSFR Report for the end-of-quarter reporting position as referred to in Article 10 and the publication of the NSFR Report for the end-of-quarter reporting position as referred to in Article 14 paragraph (1) is first conducted for the end-of-March 2018 reporting position. (2) A Bank is deemed not to have published the NSFR value for the end-of-quarter position as referred to in paragraph (1) if the announced quarterly publication report does not include information regarding the NSFR percentage value for the end-of-quarter reporting position. Fifth Section Reports for Banks Changing Groups
   Article 16
   (1) Banks included in the BUKO 1 and BUKO 2 groups that were initially not required to fulfill NSFR provisions, and subsequently become Banks included in the BUKO 3, BUKO 4, or foreign bank groups as referred to in Article 4, are obligated to fulfill the provisions of this Financial Services Authority Regulation. (2) The obligation to monitor NSFR fulfillment as referred to in Article 7 is first conducted in the third month since being declared as a Bank included in the BUKO 3, BUKO 4, or foreign bank group. (3) The obligation to submit NSFR calculations and publication and disclosure of the NSFR Report as referred to in Article 10 and Article 14 is first conducted in the next quarterly period after implementing NSFR fulfillment monitoring as referred to in paragraph (2). (4) In the event that a Bank included in the BUKO 3, BUKO 4, or foreign bank group subsequently becomes a Bank not included in the group as referred to in Article 4, the Bank remains obligated to fulfill NSFR calculation and reporting provisions as regulated in this Financial Services Authority Regulation.
   CHAPTER IV
   SANCTIONS
   Article 17
   Banks that do not comply with this Financial Services Authority Regulation and violate provisions as referred to in Article 2 paragraph (1), Article 3, Article 5 paragraph (1), Article 6, Article 7 paragraph (1), Article 7 paragraph (5), Article 8 paragraph (1), Article 9 paragraph (1), Article 10 paragraph (1), Article 11 paragraph (1), Article 12 paragraph (1), Article 13 paragraph (1), Article 13 paragraph (2), Article 13 paragraph (3), Article 13 paragraph (4), Article 14 paragraph (1), Article 14 paragraph (2), Article 14 paragraph (3), Article 14 paragraph (5), Article 15 paragraph (1), and/or Article 16 are subject to administrative sanctions in the form of:
   a. written reprimand; b. prohibition of profit transfer for branch offices of banks located abroad;
   c. suspension of dividend distribution on all share ownership from shareholders who made capital deposits;
   d. suspension of certain business activities; e. prohibition of opening office networks; f. downgrade of the Bank's health level; and/or g. listing of management and/or shareholders of financial service institutions in the list of persons prohibited from becoming shareholders and management of financial service institutions in accordance with applicable legislation regarding fit and proper tests.
   Article 18
   Banks that are late in submitting the NSFR Working Paper and NSFR Report for the end-of-quarter reporting position as referred to in Article 13 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).
   Article 19
   Banks that do not include the NSFR percentage value for the end-of-quarter reporting position in the quarterly publication report as referred to in Article 14 paragraph (2) letter b are subject to sanctions in accordance with Financial Services Authority regulations regarding transparency and publication of Bank reports.
   CHAPTER VI
   CLOSING PROVISIONS
   Article 20
   This Financial Services Authority Regulation takes effect on the date of its enactment.

This copy is consistent with the original
Director of Law 1
Legal Department signed
Yuliana
To ensure everyone knows, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on July 13, 2017
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD
Enacted in Jakarta on July 17, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 159

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 50 /POJK.03/2017
ON
THE OBLIGATION TO FULFILL THE NET STABLE FUNDING RATIO FOR COMMERCIAL BANKS
I. GENERAL
The experience of financial and economic crises that occurred in various countries in 2008 showed that although Bank capital was adequate, if Banks did not pay attention to prudential principles in managing liquidity, it could disrupt the Bank's business continuity. Thus, just like capital, a standard for calculating liquidity ratios related to funding sources is needed to measure the minimum level of stable funding that must be maintained by Banks and adjusted to applicable international standards, namely Basel III: The Net Stable Funding Ratio. The establishment of NSFR aims to ensure that Banks maintain stable funding adjusted to the composition of assets and administrative accounts. Banks are expected to reduce liquidity risk related to funding sources for a longer period. Thus, Banks need to increase funding stability by limiting excessive dependence on short-term funding sources from corporations. In relation to this, regulations regarding the Obligation to Fulfill the Net Stable Funding Ratio for Commercial Banks are necessary.

II. ARTICLE BY ARTICLE
Article 1
Clear enough.
Article 2
Paragraph (1)
Clear enough.
Paragraph (2)
NSFR is calculated with the following formula: .
Paragraph (3)
Conversion of foreign currency to Rupiah is done using the closing middle exchange rate of Bank Indonesia on the reporting date.
Paragraph (4)
Clear enough.
Paragraph (5)
The establishment of different NSFR is based on, among other things, in the event that the Financial Services Authority assesses that the Bank faces higher potential liquidity risk related to funding, thus requiring NSFR fulfillment higher than the minimum NSFR fulfillment.
Article 3
The term "control" refers to control as referred to in financial accounting standards.
The term "subsidiary" refers to a subsidiary as referred to in Financial Services Authority regulations regarding the application of consolidated risk management for Banks that control subsidiaries.
Article 4
The term "Banks in the BUKO 3 and BUKO 4 groups" is as referred to in Financial Services Authority regulations regarding business activities and office networks based on Bank's core capital. The term "foreign bank" means:

1. branch offices of banks located abroad;
2. commercial banks in the form of Indonesian legal entities where more than 50% (fifty percent) of its shares are owned by foreign citizens and/or foreign legal entities, either individually or jointly; and/or
3. banks owned individually or jointly by foreign citizens and/or foreign legal entities less than or equal to 50% (fifty percent) but with control by foreign citizens and/or foreign legal entities.
   Article 5
   Paragraph (1)
   Clear enough.
   Paragraph (2)
   The carrying value considered is the carrying value before deduction factors based on regulatory deductions, or other adjustments.
   Example:
   Tier 1 capital and Tier 2 capital do not consider factors that are capital deductions as referred to in Financial Services Authority Regulations regarding Minimum Capital Requirements for Commercial Banks. Paragraph (3) The term "all carrying values of assets on the financial position statement (balance sheet)" in this provision includes minimum reserve requirements as regulated in applicable legislation regarding minimum reserve requirements, and Capital Equivalency Maintained Assets (CEMA) as in Financial Services Authority regulations regarding minimum capital requirements for commercial banks and CEMA. For assets on the financial position statement (balance sheet), the carrying value considered is the carrying value of assets after being reduced by Impairment Loss Reserves (CKPN) on assets calculated in accordance with financial accounting standards. Specifically for assets where impairment is calculated collectively, the CKPN that can be deducted is the CKPN on assets that have been identified as individually impaired. Paragraph (4) Clear enough.
   Article 6
   Clear enough.
   Article 7
   Paragraph (1)
   Clear enough.
   Paragraph (2)
   The NSFR Report format is compiled in accordance with that established by the Basel Committee on Banking Supervision (BCBS) in the document Basel III: The Net Stable Funding Ratio. Paragraph (3) Clear enough. Paragraph (4) Letter a Clear enough. Letter b Example: there is a change in strategy and funding structure. Letter c The term "interdependent" means certain assets and liabilities are interdependent based on contractual agreements so that liabilities will not mature as long as the related assets are still recorded on the balance sheet, principal payments from related assets can only be used to settle related liabilities, and related liabilities cannot be used to finance other assets. Paragraph (5) Clear enough.
   Article 8
   Clear enough.
   Article 9
   Paragraph (1)
   The NSFR Fulfillment Action Plan contains improvement steps to be implemented by the Bank to improve the Bank's liquidity conditions and completion targets, including:
   a. increasing the amount of available stable funding; b. limiting the Bank's exposure to liquidity risk through limiting long-term credit expansion; and/or
   c. strengthening the Bank's policies, processes, and procedures related to liquidity risk management.
   The NSFR Fulfillment Action Plan submitted by the Bank is the Bank's commitment to the Financial Services Authority.
   Paragraph (2)
   Clear enough.
   Article 10
   Clear enough.
   Article 11
   Clear enough.
   Article 12
   Paragraph (1)
   The completion target time for the NSFR Fulfillment Action Plan includes the completion target time for each stage of the NSFR Fulfillment Action Plan as well as overall completion. Paragraph (2) The NSFR Fulfillment Action Plan implementation report submitted by the Bank includes among other things an explanation

regarding the implementation of the NSFR Fulfillment Action Plan, accompanied by evidence of implementation and/or supporting documents.

Article 13
Paragraph (1)
In the event that a Bank is unable to meet the NSFR up to 100% (one hundred percent) in February 2018, the Bank is required to submit the NSFR Work Paper and NSFR Report no later than March 15, 2018 for individual NSFR Work Papers and NSFR Reports, and March 31, 2018 for consolidated NSFR Work Papers and NSFR Reports.

Paragraph (2)
In the event that a Bank is unable to meet the NSFR up to 100% (one hundred percent) in February 2018, the Bank is required to submit the NSFR Fulfillment Action Plan both individually and on a consolidated basis no later than March 31, 2018.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
The term "holiday" refers to national holidays established by the central government and/or local holidays established by the local government.

Paragraph (6)
Sufficiently clear.

Article 14
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Listing on the Bank's website is done in detail, including the NSFR calculation in the form of a comparison with the previous quarterly period's NSFR calculation.

The term "Bank's website" refers to a website with an Indonesia domain that is not part of the parent entity's or the Bank's business group's website.

Announcements of reports on the Bank's website are placed on easily accessible pages, for example, by providing a special link for NSFR publication reports on the front page of the Bank's website.

Letter b
Publication in printed daily newspapers in the Indonesian language is done by listing the NSFR value in the form of a comparison with the NSFR value from the same quarter of the previous year.

Printed daily newspapers in the Indonesian language that have wide circulation in the location of the Bank's headquarters or in the location of branches of banks located abroad.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Example: The NSFR Report as of the end of March 2018 is maintained on the Bank's website until March 2023.

Article 15
Sufficiently clear.

Article 16
Paragraph (1)
BUKU 1 and BUKU 2 bank groups can become BUKU 3 or BUKU 4 bank groups due to capital increases or becoming foreign banks.

Fulfillment of obligations according to this Financial Services Authority Regulation includes, among other things, monitoring NSFR compliance, submitting NSFR calculation reports, and conducting publications and disclosures of NSFR Reports.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Paragraph (4)
Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Sufficiently clear.

Article 19
Sufficiently clear.

Article 20
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6099