Ownership of Shares in Commercial Banks

To:

1. The Board of Directors of Conventional Commercial Banks; and
2. The Board of Directors of Islamic Commercial Banks,
   At their respective locations.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 12 /SEOJK.03/2017

CONCERNING

OWNERSHIP OF SHARES IN COMMERCIAL BANKS

In light of the implementation of the Financial Services Authority Regulation Number 56/POJK.03/2016 concerning Ownership of Shares in Commercial Banks (State Gazette of the Republic of Indonesia Year 2016 Number 287, Supplement to the State Gazette of the Republic of Indonesia Number 5981), hereinafter referred to as the POJK on Ownership of Shares in Commercial Banks, it is necessary to regulate implementation provisions regarding Ownership of Shares in Commercial Banks in this Financial Services Authority Circular, as follows:

I. GENERAL PROVISIONS

Dominant ownership of a Bank by one party often hinders the Bank in implementing Good Corporate Governance. Past crisis experiences have proven that Banks affected by the crisis are those dominantly owned by specific shareholders. Therefore, it is necessary to spread Bank share ownership by applying a maximum ownership limit so that the Bank can implement Good Corporate Governance.

II. IMPLEMENTATION OF MAXIMUM SHARE OWNERSHIP LIMITS FOR BANKS

A. Prospective Shareholders of Banks

1. Prospective shareholders may hold Bank shares up to the maximum ownership limit at the time of becoming a Bank shareholder.

2. The maximum ownership limit for prospective shareholders of Banks in the form of Regional Governments is equated to the maximum ownership limit for non-financial legal entities, namely 30% (thirty percent) of the Bank's Capital for each Regional Government.

3. Parent Companies in the Banking Sector (Bank Holding Companies), formed to fulfill obligations regarding single ownership provisions in Indonesian banking, if they will acquire another Bank, their maximum ownership limit is equal to the highest ownership limit from the shareholder categories of the Parent Company in the Banking Sector (Bank Holding Company).

4. In the event that a prospective shareholder is a legal entity located abroad will become a Controlling Shareholder (PSP), it must possess an investment grade rating as referred to in Article 5 paragraph (2) letter c of the POJK on Ownership of Shares in Commercial Banks. The investment grade rating position of the prospective shareholder used is for at least the last 1 (one) year prior to becoming a Bank PSP.

B. Shareholders of Banks

1. Shareholders who hold Bank shares less than the maximum ownership limit of the Bank may increase their ownership up to the maximum ownership limit of the Bank.

2. Shareholders who hold Bank shares more than the maximum ownership limit of the Bank may increase their share ownership as long as it does not increase the percentage of their ownership.

3. Shareholders who sell their owned shares on their own initiative must adjust their share ownership in accordance with the maximum ownership limit of the Bank within a maximum period of 5 (five) years calculated from the sale of their owned shares, as regulated in the POJK on Ownership of Shares in Commercial Banks.

What is meant by shareholders who sell their owned shares on their own initiative are direct Bank shareholders and/or ultimate shareholders who sell their shares directly or indirectly resulting in:
a. a change in direct Bank shareholders or a change in ultimate shareholders; and/or b. a change in the percentage of Bank share ownership by direct shareholders or a change in the percentage of ultimate shareholder ownership in the Bank which indirectly affects the amount of control in the Bank.

4. In the event of a share sale by shareholders as referred to in item 3, the direct Bank shareholder must adjust to the maximum ownership limit in accordance with the POJK on Ownership of Shares in Commercial Banks.

III. SPECIAL REQUIREMENTS FOR OWNERSHIP OF SHARES IN COMMERCIAL BANKS

A. Ownership of Bank Shares More Than 40% (Forty Percent)

1. Requirements to be able to hold Bank shares more than 40% (forty percent) include obtaining a Bank Health Rating with Composite Rating 1 or Composite Rating 2 or an equivalent Bank Health Rating for banking financial institutions located abroad, fulfilling the Financial Services Authority provisions regarding Minimum Capital Requirements for Conventional Commercial Banks and Minimum Capital Requirements for Islamic Commercial Banks according to risk profile, and having core capital (tier 1) of at least 6% (six percent).

2. The rating positions used for these three requirements are rating positions for the last maximum 1 (one) year.

B. Investment Grade Rating Requirements

Investment grade rating requirements for prospective PSPs in the form of legal entities located abroad as referred to in Article 5 paragraph (2) letter c of the POJK on Ownership of Shares in Commercial Banks are investment grade rating positions for the last maximum 1 (one) year before the relevant party becomes a Bank PSP.

IV. ASSESSMENT OF HEALTH LEVEL AND/OR CORPORATE GOVERNANCE FOR 3 (THREE) CONSECUTIVE ASSESSMENT PERIODS

What is meant by 3 (three) consecutive assessment periods regarding the assessment of Bank Health Level and/or the assessment of Corporate Governance implementation is an assessment conducted periodically as regulated in the Financial Services Authority provisions regarding Assessment of Health Levels of Conventional Commercial Banks and Assessment of Health Levels of Islamic Commercial Banks and Sharia Business Units.

V. PHASED OWNERSHIP OF BANK SHARES MORE THAN 40% (FORTY PERCENT)

1. The maximum ownership limit for banking financial institution legal entities is at most 40% (forty percent) of the Bank's Capital.

2. Banking financial institution legal entities may only hold Bank shares more than 40% (forty percent) of the Bank's Capital by fulfilling the following provisions:
   a. for prospective Bank shareholders, they may only initially hold Bank shares at 40% (forty percent); and b. subsequently, Bank shareholders may increase share ownership to more than 40% (forty percent) as long as they obtain approval from the Financial Services Authority as referred to in Article 6 paragraph (1) of the POJK on Ownership of Shares in Commercial Banks.

3. Ownership of Bank shares by banking financial institution legal entities of more than 40% (forty percent) is carried out through the following mechanism:
   a. Prospective shareholders submit a request to the Financial Services Authority through the Bank to be owned by attaching administrative documents as in Appendix I which is an integral part of this Financial Services Authority Circular. b. The Financial Services Authority assesses the fulfillment of requirements as referred to in Article 6 paragraph (2) of the POJK on Ownership of Shares in Commercial Banks.
   c. The Financial Services Authority, based on the assessment as referred to in letter b, will provide approval for prospective shareholders who will own Bank shares of more than 40% (forty percent), namely:

1. approval to own Bank shares at 40% (forty percent) of the Bank's Capital; and
2. approval to increase the amount of share ownership with the obligation to resubmit a request for approval to increase the amount of share ownership. The request may be resubmitted in the event that the owned Bank obtains a Bank Health Rating with Composite Rating 1 or Composite Rating 2 and a Governance Rating with Rating 1 (one) or Rating 2 (two) for 3 (three) consecutive assessment periods within a 5 (five) year period since the approval of Bank share ownership at 40% (forty percent).
   d. For PSPs in the form of banking financial institutions that already hold Bank shares of less than 40% (forty percent) and will increase their ownership to more than 40% (forty percent) may submit a request in the event that the owned Bank obtains a Bank Health Rating with Composite Rating 1 or Composite Rating 2, and a Governance Rating with Rating 1 (one) or Rating 2 (two) for 3 (three) consecutive assessment periods within a 5 (five) year period before the request for Bank share ownership of more than 40% (forty percent) is submitted.

Requests to the Financial Services Authority to increase share ownership to more than 40% (forty percent) are submitted by the PSP through the owned Bank by attaching administrative documents as referred to in Appendix II which is an integral part of this Financial Services Authority Circular.

VI. COMMITMENT TO SUPPORT THE DEVELOPMENT OF THE INDONESIAN ECONOMY

For prospective PSPs that are:

1. foreign citizens;
2. legal entities located abroad; or
3. banking financial institution legal entities located abroad that will own Bank shares of more than 40% (forty percent) of the Bank's Capital,
   they must fulfill requirements including having a commitment to support the development of the Indonesian economy through the Bank to be owned, in the form of:
   a. Written commitment, which at least contains:

1. the economic sector to be prioritized; and
2. the region in Indonesia to be prioritized.
   b. The prospective PSP's activity plan for the development of the Bank to be owned for at least the next 5 (five) years, which at least contains:
3. Plan for credit disbursement or productive financing to the economic sector and region in Indonesia to be prioritized. The economic sector and region in Indonesia that are prioritized refer to the Medium-Term National Development Plan of the National Development Planning Agency.
   The amount of credit disbursement or financing to productive businesses refers to the obligation for credit disbursement or financing to productive businesses according to Financial Services Authority provisions regulating Business Activities and Office Networks Based on Core Capital.
4. Summary of the business strategy to be implemented.
   c. Written commitments as in letter a and activity plans as in letter b are submitted at the time of the license application as a prospective PSP or when a banking financial institution shareholder submits a request to increase Bank share ownership to more than 40% (forty percent).
   d. In the event that the prospective shareholder's request is approved by the Financial Services Authority, the prospective shareholder's activity plan as in letter b must be included in the Bank's business plan.

VII. RECOMMENDATION FROM THE HOME COUNTRY SUPERVISORY AUTHORITY

For prospective PSPs that are:

1. financial institution legal entities located abroad, or
2. banking financial institution legal entities located abroad that will own Bank shares of more than 40% (forty percent) of the Bank's Capital,
   they must also fulfill requirements including obtaining a recommendation from the supervisory authority of the home country of the financial institution which at least contains:
   a. Information on the prospective PSP regarding:

1. good reputation; and
2. never having committed disgraceful acts in the banking field; and
   b. The home country supervisory authority of the Bank PSP supports the Financial Services Authority's policies in the supervision field which among other things aim to improve Bank performance and/or maintain financial system stability in the place where the Bank is located.

VIII. EQUITY-LIKE DEBT INSTRUMENTS

In accordance with Article 6 and Article 7 of the POJK on Ownership of Shares in Commercial Banks, prospective Bank shareholders who will own Bank shares of more than 40% (forty percent) must have a commitment to purchase equity-like debt instruments issued by the Bank to be owned, and the Bank to be owned must have approval to issue equity-like debt instruments, with the following provisions:

1. Commitment of Prospective Shareholders in the Form of Banking Financial Institutions
   a. Prospective shareholders in the form of banking financial institutions that will own Bank shares of more than 40% (forty percent) must have a written commitment to fulfill the obligation to purchase equity-like debt instruments issued by the owned Bank, which at least contains:

1. the willingness of the prospective shareholder in the form of a banking financial institution to purchase equity-like debt instruments issued by the owned Bank, in the event that the owned Bank is estimated to experience difficulties in the future in fulfilling the Minimum Capital Requirements (KPMM) ratio according to risk profile, as regulated in Financial Services Authority provisions regarding minimum capital requirements for conventional commercial banks and minimum capital requirements for Islamic commercial banks; and
2. the amount of equity-like debt instruments to be purchased is at least proportional to the percentage of share ownership.
   Such shareholders in the form of banking financial institutions must purchase the remaining equity-like debt instruments in the event that, after being offered, other shareholders are unwilling to purchase the said debt instruments. b. The commitment is signed by the authorized party representing the prospective shareholder according to the articles of association.
   c. The commitment is submitted when the PSP in the form of a banking financial institution submits a request to increase Bank share ownership to more than 40% (forty percent).

2. Approval for the Issuance of Equity-Like Debt Instruments by the Owned Bank
   a. The Bank owned by the shareholder as in item 1 must have approval to issue equity-like debt instruments after the shareholder as in item 1 realizes the purchase of shares of more than 40% (forty percent). b. Equity-like debt instruments must at least meet the following provisions:

1. fulfill requirements as referred to in Financial Services Authority provisions regarding minimum capital requirements for conventional commercial banks and minimum capital requirements for Islamic commercial banks; and
2. are debt instruments that can be converted into shares or contain option rights to obtain shares.
   c. The approval as referred to in letter a must at least contain:
3. the Bank will issue equity-like debt instruments in the event that the Bank is estimated to experience difficulties in the future in fulfilling the KPMM ratio according to risk profile as regulated in Financial Services Authority provisions regarding minimum capital requirements for conventional commercial banks and minimum capital requirements for Islamic commercial banks;
4. the amount of equity-like debt instruments to be issued is equal to the amount of additional capital needed to overcome potential shortfalls in fulfilling the KPMM ratio according to risk profile; and
5. the said equity-like debt instruments must be converted into shares in the event that the KPMM ratio according to risk profile is less than the applicable provisions.
   d. The form of approval as in letter a is adjusted to the Bank's articles of association. e. The approval as in letter a is submitted to the Financial Services Authority at the latest 6 (six) months since the shareholder as in letter a realizes the increase in ownership amount to more than 40% (forty percent).

IX. OBLIGATION TO ADJUST MAXIMUM SHARE OWNERSHIP LIMITS FOR SHAREHOLDERS IN ISLAMIC COMMERCIAL BANKS RESULTING FROM SPIN-OFF OF SHARIA BUSINESS UNITS

1. Shareholders in Islamic Commercial Banks resulting from the spin-off of Sharia Business Units conducted before and after the issuance of the POJK on Ownership of Shares in Commercial Banks must adjust to the maximum ownership limit by the end of December 2028 as referred to in Article 13 of the POJK on Ownership of Shares in Commercial Banks.

2. Islamic Commercial Banks resulting from spin-offs refer to provisions regulating Sharia Business Units.

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

X. CLOSING

At the time this Financial Services Authority Circular takes effect, Bank Indonesia Circular Number 15/4/DPNP dated March 6, 2013 concerning Ownership of Shares in Commercial Banks is revoked and declared invalid.

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

Determined in Jakarta on March 17, 2017

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

APPENDIX I
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 12 /SEOJK.03/2017 CONCERNING OWNERSHIP OF SHARES IN COMMERCIAL BANKS

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

ADMINISTRATIVE DOCUMENTS RELATED TO OWNERSHIP OF BANK SHARES BY LEGAL ENTITIES OF BANKING FINANCIAL INSTITUTIONS AT THE TIME OF SUBMITTING A REQUEST TO OWN BANK SHARES OF MORE THAN 40% (FORTY PERCENT)

Doc. No.*)
1 Letter of Certificate from the bank supervisory authority (for prospective PSPs in the form of banking financial institutions located abroad), regarding:
a. Results of bank health level assessment, assessment position for the last 1 (one) year; b. Results of assessment of fulfillment of minimum capital obligations for the Bank according to risk profile, assessment position for the last 1 (one) year; and
c. Amount of Bank core capital (tier 1), assessment position for the last 1 (one) year.
2 Letter of statement that the prospective PSP commits to purchase equity-like debt instruments issued by the Bank to be owned at the time of increasing its share ownership to above 40% (forty percent).
3 Letter of certificate from the capital market supervisory authority (for prospective PSPs in the form of banking financial institutions located abroad), that the prospective PSP is a public company.
*) Submitted at the time of the request to own bank shares at 40% (forty percent) of the Bank's capital.

Determined in Jakarta on March 17, 2017

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

APPENDIX II
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 12 /SEOJK.03/2017 CONCERNING OWNERSHIP OF SHARES IN COMMERCIAL BANKS

ADMINISTRATIVE DOCUMENTS RELATED TO OWNERSHIP OF BANK SHARES BY LEGAL ENTITIES OF BANKING FINANCIAL INSTITUTIONS AT THE TIME OF INCREASING SHARE OWNERSHIP TO MORE THAN 40% (FORTY PERCENT)

Doc. No.*)
1 Letter of Certificate from the bank supervisory authority (for PSPs in the form of banking financial institutions located abroad) regarding:
a. Results of health level assessment, assessment position for the last 1 (one) year; b. Results of assessment of fulfillment of minimum capital obligations according to risk profile, assessment position for the last 1 (one) year; and
c. Amount of core capital (tier 1), assessment position for the last 1 (one) year.
2 Letter of Recommendation from the bank supervisory authority (for PSPs in the form of banking financial institutions located abroad), at least containing:
a. information regarding the PSP namely:

1. having a good reputation; and
2. never having committed disgraceful acts in the banking field; and
   b. a statement that the home country supervisory authority of the Bank PSP supports the supervisory authority's policies in the place where the Bank is located in the supervision field which among other things aim to improve Bank performance and/or maintain financial system stability in the place where the Bank is located. 3 Letter of statement to fulfill the obligation to purchase equity-like debt instruments issued by the Bank to be owned, at least containing:
   a. willingness to purchase equity-like debt instruments issued by the owned Bank; and b. amount of equity-like debt instruments to be purchased.
   4 Letter of statement to own the Bank for a minimum specific period.
   5 Letter of statement to support the Indonesian economy through the owned Bank, which at least contains information:
   a. economic sector and economic region to be prioritized;

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

and b. activity plan for the development of the Indonesian economy through the owned Bank.
6 Letter of statement that the owned Bank has approval to issue equity-like debt instruments, at least containing:
a. the Bank will issue equity-like debt instruments; b. amount of equity-like debt instruments to be issued; and
c. obligation to convert equity-like debt instruments into shares in the event that the Minimum Capital Requirements (KPMM) ratio based on risk profile is less than applicable provisions.
*) Submitted at the time of the request to own Bank shares of more than 40% (forty percent) of the Bank's capital, except for item 6 which is submitted at the latest 6 (six) months after the realization of the increase in ownership amount to more than 40% (forty percent).

Determined in Jakarta on March 17, 2017

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