POJK on Fulfillment of Village Credit Bank Regulations and Transformation of Village Credit Institutions Granted Status as Village Credit Banks

FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 10 /POJK.03/2016
CONCERNING
FULFILLMENT OF VILLAGE CREDIT BANK REGULATIONS AND TRANSFORMATION OF VILLAGE CREDIT INSTITUTIONS GRANTED STATUS AS VILLAGE CREDIT BANKS BY THE GRACE OF GOD THE MOST HIGH, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in 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 (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790), Village Credit Institutions are granted status as Village Credit Banks by fulfilling requirements and procedures established by Government Regulation; b. that the function and role of Village Credit Institutions are still needed by village communities in creating an inclusive financial system;
c. that the current economic development is filled with increasingly large challenges, thus requiring strengthening of the institutional framework and supervision of Village Credit Institutions;
d. that Financial Services Authority Regulation Number 20/POJK.03/2014 concerning Village Credit Banks has mandated the OJK to regulate Village Credit Institutions granted status as Village Credit Banks; e. that based on considerations as referred to in letters a, b, c, and d, it is necessary to establish a Financial Services Authority Regulation concerning the fulfillment of Village Credit Bank regulations and the transformation of Village Credit Institutions granted status as Village Credit Banks.

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 (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 25 of 1992 concerning Cooperatives (State Gazette of the Republic of Indonesia Year 1992 Number 116, Supplement to the State Gazette of the Republic of Indonesia Number 3502);
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);
4. Law Number 1 of 2013 concerning Microfinance Institutions (State Gazette of the Republic of Indonesia Year 2013 Number 12, Supplement to the State Gazette of the Republic of Indonesia Number 5394);
5. Law Number 6 of 2014 concerning Villages (State Gazette of the Republic of Indonesia Year 2014 Number 7, Supplement to the State Gazette of the Republic of Indonesia Number 5495);
6. Financial Services Authority Regulation Number 20/POJK.03/2014 concerning Village Credit Banks (State Gazette of the Republic of Indonesia Year 2014 Number 351, Supplement to the State Gazette of the Republic of Indonesia Number 5629).

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING FULFILLMENT OF VILLAGE CREDIT BANK REGULATIONS AND TRANSFORMATION OF VILLAGE CREDIT INSTITUTIONS GRANTED STATUS AS VILLAGE CREDIT BANKS.

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

1. Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution having the functions, duties, and authorities of regulation, supervision, examination, and investigation as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

2. Village Credit Institution, hereinafter abbreviated as BKD, is a Village Bank, Village Granary, or Village Credit Institution that has received a business license from the Minister of Finance and has been granted status as a Village Credit Bank by Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998.

3. Village Credit Bank, hereinafter abbreviated as BPR, is a bank conducting conventional business activities that does not provide payment circulation services in its activities as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998.

4. Microfinance Institution, hereinafter abbreviated as LKM, is a financial institution specifically established to provide business development services and community empowerment, either through loans or financing in micro-scale businesses to members and the public, savings management, or providing business development consulting services that are not solely profit-driven, as referred to in Law Number 1 of 2013 concerning Microfinance Institutions.

5. Village is a village and customary village or called by other names, hereinafter referred to as Village, is a community legal unit having territorial boundaries authorized to regulate and manage government affairs, local community interests based on community initiative, original rights, and/or traditional rights that are recognized and honored in the governance system of the Unitary State of the Republic of Indonesia as referred to in Law Number 6 of 2014 concerning Villages.

6. Village-Owned Enterprise, hereinafter referred to as BUMDesa, is an enterprise whose capital is wholly or mostly owned by the Village through direct participation originating from separated Village assets, aimed at managing assets, service facilities, and other businesses for the greatest welfare of the Village community as referred to in Law Number 6 of 2014 concerning Villages.

7. Credit is the provision of money or IOUs that can be equated with it, based on a loan agreement or consensus between the BKD and another party obligating the borrower to repay their debt after a certain period with interest.

8. Debtor Customer is a customer who obtains credit facilities or equivalents based on an agreement between the BKD and the customer concerned.

9. Savings are funds entrusted by the public to the BKD based on a fund storage agreement in the form of savings accounts.

10. Depositor Customer is a customer who places funds in the BKD in the form of savings based on an agreement between the BKD and the customer concerned.

11. BKD Consolidation is:
    a. the process of merging 1 (one) or more BKDs into a BPR owned by the Local Government, resulting in the transfer of BKD assets and liabilities with the dissolution of the BKD(s) conducting the merger; or b. the process of merging 2 (two) or more BKDs into 1 (one) BPR, without a settlement process.

12. BKD Transfer is the takeover of assets and liabilities of 1 (one) or more BKDs by a Local Government that does not yet have a BPR, followed by the dissolution of the taken-over BKD without a settlement process and continued with the establishment of a new BPR.

13. BKD Settlement is the resolution of rights and obligations of a BKD whose business license is revoked, by the Settlement Team.

14. Settlement Team is a team formed by the BKD owner to conduct BKD Settlement.

15. Board of Directors:
    a. for a BPR with Limited Liability Company legal status is the board of directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for a BPR with Regional Public Enterprise or Regional State-Owned Enterprise legal status is the board of directors as referred to in Law Number 23 of 2014 concerning Regional Government as last amended by Law Number 9 of 2015;
    c. for a BPR with Cooperative legal status is the management as referred to in Law Number 25 of 1992 concerning Cooperatives.

16. Board of Commissioners:
    a. for a BPR with Limited Liability Company legal status is the board of commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for a BPR with Regional Public Enterprise legal status is the supervisory board as referred to in Law Number 23 of 2014 concerning Regional Government as last amended by Law Number 9 of 2015;
    c. for a BPR with Regional State-Owned Enterprise legal status is the commissioner as referred to in Law Number 23 of 2014 concerning Regional Government as last amended by Law Number 9 of 2015;
    d. for a BPR with Cooperative legal status is the supervisor as referred to in Law Number 25 of 1992 concerning Cooperatives.

17. Operational Executor is a BKD employee appointed by the BKD owner and tasked with executing BKD operational activities.

18. Supervisory Board is a BKD employee appointed by the BKD owner and tasked with supervising the implementation of BKD operational activities.

19. Transition Period is the time period for BKDs to fulfill all BPR regulations or transform BKDs, ending on December 31, 2019.

CHAPTER II
FULFILLMENT OF BPR REGULATIONS
Article 2
(1) BKDs are required to fulfill BPR regulations including, among others, institutional framework, prudential principles, financial reporting and transparency, and the application of accounting standards for BPRs no later than December 31, 2019. (2) The BPR institutional framework regulations as referred to in paragraph (1) include, among others:
a. the BPR legal entity form being a Limited Liability Company, Cooperative, Regional Public Enterprise, or Regional State-Owned Enterprise; and b. the BPR obligation to have members of the Board of Directors and members of the Board of Commissioners, according to applicable legislation. (3) The BPR prudential principle regulations as referred to in paragraph (1) include, among others:
a. application of governance; b. application of risk management;
c. fulfillment of minimum capital provision obligations and core capital fulfillment;
d. productive asset quality; and e. application of maximum credit granting limits.
(4) The financial reporting and transparency regulations as referred to in paragraph (1) include, among others, the preparation and submission of:
a. monthly reports; b. work plan and work plan realization reports;
c. supervision implementation reports by the Board of Commissioners;
d. publicized financial reports; and e. annual financial reports.

Article 3
(1) In order to fulfill all BPR regulations as referred to in Article 2, BKDs are required to submit an action plan to the OJK no later than December 31, 2016. (2) The action plan as referred to in paragraph (1) contains at least plans for:
a. formation of a Limited Liability Company, Cooperative, Regional Public Enterprise, or Regional State-Owned Enterprise legal entity; b. appointment of Board of Directors members and Board of Commissioners members;
c. fulfillment of BPR core capital;
d. fulfillment of infrastructure including information technology to support operational activities and reporting; and e. operational working days.
(3) In the event the OJK deems it necessary, the OJK may request the BKD to revise the action plan submitted by the BKD as referred to in paragraph (1).
(4) BKDs are required to submit the action plan revision as referred to in paragraph (3) no later than 30 (thirty) days after the OJK submits the request for action plan revision. (5) The deadline for realization of all action plans as referred to in paragraph (1) and/or paragraph (4) is no later than December 31, 2019. (6) BKDs are required to implement the action plan as referred to in paragraph (1) and/or paragraph (4) and report the progress of action plan realization to the OJK every 6 (six) months for periods ending on June 30 and December 31. (7) The submission of reports as referred to in paragraph (6) is done no later than the end of the following month. (8) The progress report of action plan realization as referred to in paragraph (6) is done for the first time no later than July 31, 2017. (9) BKDs on their own initiative may only revise the action plan as referred to in paragraph (1) once and submit it to the OJK no later than December 31, 2017. (10) The progress report of action plan realization as referred to in paragraph (9) is done for the first time no later than July 31, 2018.

Article 4
(1) In order to implement the action plan as referred to in Article 3 paragraph (2) letter a, BKDs must form a legal entity according to regulations governing BPR institutional framework and other applicable legislation. (2) In order to implement the action plan as referred to in Article 3 paragraph (2) letter b, BKDs must appoint Board of Directors members and Board of Commissioners members according to regulations governing BPR institutional framework and other applicable legislation. (3) In order to implement the action plan as referred to in Article 3 paragraph (2) letter c, BKDs must fulfill the minimum BPR core capital of IDR 6,000,000,000.00 (six billion rupiah) with the following provisions:
a. BKDs with core capital less than IDR 3,000,000,000.00 (three billion rupiah) are required to fulfill a minimum core capital of IDR 3,000,000,000.00 (three billion rupiah) no later than December 31, 2019. b. BKDs as referred to in letter a are required to fulfill a minimum core capital of IDR 6,000,000,000.00 (six billion rupiah) no later than December 31, 2024.
c. BKDs with core capital of at least IDR 3,000,000,000.00 (three billion rupiah) but less than IDR 6,000,000,000.00 (six billion rupiah) are required to fulfill a minimum core capital of IDR 6,000,000,000.00 (six billion rupiah) no later than December 31, 2019.

Article 5
(1) In order to fulfill BPR regulations as referred to in Article 2:
a. 1 (one) or more BKDs may conduct BKD Consolidation through the BKD merger process. b. 2 (two) or more BKDs may conduct BKD Consolidation through the BKD merger process. (2) BKD Consolidation as referred to in paragraph (1) letter b must involve the Local Government. (3) BKD Consolidation as referred to in paragraph (1) must obtain prior approval from the OJK. (4) Rights and obligations arising after BKD Consolidation become the responsibility of the BPR resulting from the BKD Consolidation.

Article 6
(1) To obtain approval for BKD Consolidation through the merger process as referred to in Article 5 paragraph (1) letter a, the Operational Executive Chairman of the BKD or one of the BKDs conducting the BKD Consolidation must submit an application to the OJK according to the format to be further regulated in a Financial Services Authority Circular. (2) To obtain approval for BKD Consolidation through the merger process as referred to in Article 5 paragraph (1) letter b, the Operational Executive Chairman of one of the BKDs conducting the BKD Consolidation must submit an application to the OJK according to the format to be further regulated in a Financial Services Authority Circular. (3) The application as referred to in paragraph (1) and paragraph (2) must be accompanied by:
a. a draft of BKD Consolidation containing at least:

1. name and domicile of the BKD(s) conducting the BKD Consolidation;
2. name and domicile of the BPR resulting from the BKD Consolidation; and
3. name of shareholders or owners, prospective Board of Directors members, and Board of Commissioners members resulting from the BKD Consolidation;
   b. approval from the owners of the BKDs conducting the BKD Consolidation according to applicable legislation; and
   c. a draft balance sheet and profit and loss report after BKD Consolidation according to the format to be further regulated in a Financial Services Authority Circular.
   (4) The OJK provides written approval or rejection of the application as referred to in paragraph (1) within a maximum period of 30 (thirty) working days since the application is received completely.

Article 7
(1) The BPR resulting from BKD Consolidation is required to report the implementation of BKD Consolidation to the OJK accompanied by documents containing at least:
a. photocopy of the articles of association of the BPR resulting from BKD Consolidation approved by the competent authority; b. organizational structure and management of the BPR resulting from BKD Consolidation, data on Board of Directors and Board of Commissioners, and data on shareholders or owners of the BPR resulting from BKD Consolidation;
c. balance sheet and profit and loss report of the BPR resulting from BKD Consolidation; and
d. full address of the BPR resulting from BKD Consolidation.
(2) The report on the implementation of BKD Consolidation as referred to in paragraph (1) must be submitted no later than 20 (twenty) working days after the date of receiving the approval of the articles of association from the competent authority. (3) Based on the report as referred to in paragraph (1):
a. the OJK revokes the business license of the BKD(s) conducting BKD Consolidation through the BKD merger process; or b. the OJK revokes the business license of the BKD and issues a new business license for the BPR resulting from BKD Consolidation through the BKD merger process. (4) The report on the implementation of BKD Consolidation as referred to in paragraph (1) refers to the format to be further regulated in a Financial Services Authority Circular.

Article 8
(1) The Local Government may submit a BKD Transfer plan according to this Financial Services Authority Regulation and applicable legislation.
(2) The submission of the BKD Transfer plan as referred to in paragraph (1) is accompanied by:
a. a draft of BKD Transfer containing at least:

1. name and domicile of the Local Government that will take over the BKD;
2. number and nominal value of assets and liabilities to be taken over along with the composition of shareholders or owners after BKD Transfer; and
3. plan for the status of BKD offices resulting from BKD Transfer;
   b. approval from the owners of the BKDs conducting BKD Transfer according to applicable legislation;
   c. a draft balance sheet and profit and loss report after BKD Transfer; and
   d. a draft announcement of BKD Transfer.
   (3) The OJK provides written approval or rejection of the BKD Transfer plan as referred to in paragraph (2) within a maximum period of 20 (twenty) working days since the submission of the BKD Transfer plan is received completely. (4) In the event the BKD Transfer plan is approved by the OJK, the Local Government implements the BKD Transfer process followed by the submission of a BPR business license application accompanied by proof of fulfillment of minimum core capital as referred to in Article 4 paragraph (3) and:
   a. deed of establishment of the legal entity containing the articles of association approved by the competent authority; b. Regional Regulation concerning the establishment of the BPR;
   c. proof of operational readiness;
   d. ownership data including a list of shareholders with details of each share ownership; e. prospective Board of Directors and Board of Commissioners members; f. organizational structure and work systems and procedures, including personnel structure; and g. decision letter of the Regional Head stating that the capital deposit fund sources have been budgeted in the Regional Budget (APBD) and approved by the local Regional House of Representatives (DPRD), as referred to in the regulations concerning BPR institutional framework. (5) The submission of the BKD Transfer plan as referred to in paragraph (2) refers to the format to be further regulated in a Financial Services Authority Circular. (6) The OJK provides written approval or rejection of the BPR business license application as referred to in paragraph (4) within a maximum period of 30 (thirty) working days since the application is received completely. (7) In the approval of the BPR business license application as referred to in paragraph (4), it is followed by the revocation of the business license of the taken-over BKD.

Article 9
In the event BKDs cannot fulfill BPR regulations after the deadline as referred to in Article 2 paragraph (1), the OJK revokes the BKD business license.

Article 10
(1) BKDs that, based on their considerations, cannot fulfill BPR regulations may choose to change:
a. business activities to become an LKM; or b. legal entity to become a BUMDesa or BUMDesa business unit.
(2) BKDs choosing to change business activities or legal entity as referred to in paragraph (1) are required to submit an action plan to the OJK no later than December 31, 2016. (3) In the event BKDs choose to change their business activities to become an LKM, the action plan as referred to in paragraph (2) contains at least:
a. choice of business activities or legal entity; b. formation of a legal entity suitable for the business activities;
c. appointment of management;
d. submission of application for business license as an LKM, in the event the BKD chooses to become an LKM; and e. submission of application for revocation of business license as a BPR. (4) In the event BKDs choose to change their legal entity to become a BUMDesa or BUMDesa business unit, the action plan as referred to in paragraph (2) contains at least the plan for establishing a BUMDesa or BUMDesa business unit according to applicable legislation. (5) The change of business activities or legal entity as referred to in paragraph (1) is implemented by the BKD no later than December 31, 2019. (6) In the event the OJK deems it necessary, the OJK may request the BKD to revise the action plan submitted by the BKD as referred to in paragraph (2). (7) BKDs on their own initiative may only revise the action plan as referred to in paragraph (2) once and submit it to the OJK no later than December 31, 2017. (8) BKDs are required to implement the action plan as referred to in paragraph (2) and/or paragraphs (6) and (7) no later than December 31, 2019.

Article 11
(1) BKDs are required to submit progress reports on action plan realization as referred to in Article 10 paragraph (2) to the OJK every 6 (six) months for periods ending on June 30 and December 31. (2) The progress report of action plan realization as referred to in Article 10 paragraph (2) is done for the first time no later than July 31, 2017. (3) The progress report of action plan realization as referred to in Article 10 paragraph (7) is done for the first time no later than July 31, 2018.

Article 12
(1) BKDs are required to submit to the OJK:
a. information regarding BKD activity status accompanied by evidence; and b. BKD financial reports quarterly for 1 (one) year for periods ending on March 31, 2016, June 30, 2016, September 30, 2016, and December 31, 2016, no later than 1 (one) year after this Financial Services Authority Regulation comes into force. (2) BKDs that do not submit information as referred to in paragraph (1) letter a or reports as referred to in paragraph (1) letter b are declared as inactive BKDs. (3) The OJK revokes the business license of BKDs declared as inactive BKDs as referred to in paragraph (2). (4) The license revocation for BKDs as referred to in paragraph (3) is conducted without a settlement process. (5) In the event there are rights and obligations of BKDs whose business licenses are revoked as referred to in paragraph (3), the rights and obligations of the BKD become the responsibility of the BKD owner.

Article 13
(1) BKDs choosing to become a BUMDesa or BUMDesa business unit are required to submit an application for revocation of business license as a BPR to the OJK. (2) In the event the application for revocation of business license as a BPR as referred to in paragraph (1) is approved, the OJK revokes the BKD business license and all rights and obligations of the BKD transfer to the BUMDesa or BUMDesa business unit.

(3) In the event that OJK has revoked the business license of a BKD as referred to in paragraph (2), but the BUMDesa or the business unit of the BUMDesa has not yet been formed, all rights and obligations of the BKD become the responsibility of the BKD owner.

(4) A BKD that chooses to become an LKM must submit an application for the revocation of its business license as a BPR to OJK simultaneously with the application for a business activity license as an LKM.

(5) In the event that OJK approves the application as referred to in paragraph (4):

a. OJK revokes the business license of the BKD; b. OJK grants a business activity license as an LKM; and
c. all rights and obligations of the BKD transfer to the LKM.

Article 14

A BKD that cannot fulfill the BPR provisions or cannot implement the action plan no later than December 31, 2019, as referred to in Article 2 and Article 10 paragraph (8), shall have its business license revoked by OJK, followed by the liquidation of the BKD.

Article 15

(1) A BKD may submit an application for the revocation of its business license to OJK at the initiative of the BKD.

(2) In the event that the application for the revocation of the business license as referred to in paragraph (1) is approved, OJK revokes the business license of the BKD, followed by the liquidation of the BKD.

Article 16

(1) A BKD whose business license has been revoked as referred to in Article 14 and Article 15 paragraph (2) is referred to as a “BKD in Liquidation” and must append the phrase “(In Liquidation)” after the writing of the BKD’s name.

(2) Since the date of revocation of the business license as referred to in Article 9, Article 14, and Article 15 paragraph (2), the BKD is not permitted to perform legal acts concerning BKD assets, except for:

a. payment of unpaid salaries to employees, the Operational Executive, and the Supervisory Board; b. payment of office expenses;
c. payment of BKD obligations to Depositor Customers and/or third parties; and/or
d. other matters with the approval of OJK.

(3) A BKD whose business license has been revoked as referred to in Article 9, Article 14, and Article 15 paragraph (2) is also not permitted to make salary payments to the Ex-Officio Supervisory Board of the Village Head.

Article 17

(1) A BKD whose business license has been revoked as referred to in Article 9, Article 14, and Article 15 paragraph (2) must form a Liquidation Team no later than 3 (three) months from the date of revocation of the business license.

(2) If the Liquidation Team as referred to in paragraph (1) cannot be formed, the liquidation of the BKD becomes the responsibility of the BKD owner.

Article 18

(1) The implementation of BKD liquidation is carried out by the Liquidation Team.

(2) With the formation of the Liquidation Team, the authority and responsibility for managing the BKD in Liquidation become the authority and responsibility of the Liquidation Team.

(3) In exercising its authority and responsibility, the Liquidation Team represents the BKD in Liquidation.

(4) Since the formation of the Liquidation Team, the Operational Executive and the Supervisory Board of the BKD become inactive, and are obligated to provide data and information required by the Liquidation Team at all times.

Article 19

(1) The implementation of BKD liquidation must be completed within a maximum period of 6 (six) months calculated from the date the Liquidation Team is formed.

(2) In the event that BKD liquidation cannot be completed within the period as referred to in paragraph (1), the BKD liquidation is established as the responsibility of the BKD owner.

Article 20

(1) In exercising its authority and responsibility, the Liquidation Team is not permitted to obtain profit for itself.

(2) The Liquidation Team is personally responsible if, in carrying out its duties, it violates the provisions as referred to in paragraph (1).

Article 21

BKD liquidation is carried out by:

a. liquidation of BKD assets; b. collection of receivables from BKD Debtor Customers; and/or
c. payment of BKD obligations to depositors and/or other creditors from the proceeds of the liquidation and/or collection.

Article 22

All costs related to BKD liquidation and listed in the Liquidation Cost List become the burden of the assets of the BKD in Liquidation and are paid out first from each proceeds of liquidation.

Article 23

(1) The Liquidation Team prepares the final balance sheet of BKD liquidation to be reported to the BKD owner no later than 1 (one) month after the implementation of liquidation as referred to in Article 19 paragraph (1).

(2) In the event that the final balance sheet of BKD liquidation as referred to in paragraph (1) has been approved by the BKD owner and the owner has received the accountability of the Liquidation Team, the BKD owner dissolves the Liquidation Team.

(3) The final balance sheet of BKD liquidation as referred to in paragraph (1) is also reported to OJK.

(4) In the event that the final balance sheet of BKD liquidation cannot be completed within a maximum period of 6 (six) months calculated from the date the Liquidation Team is formed, all rights and obligations of the BKD are established as the responsibility of the BKD owner.

CHAPTER III
REGULATION OF BKD IN THE TRANSITION PERIOD

First Section
Capital

Article 24

(1) During the Transition Period, a BKD may obtain additional capital from:

a. participation by the Village originating from separated Village assets; b. donations from Village residents; and/or
c. other sources in accordance with the provisions of legislation.

(2) Additional capital of the BKD as referred to in paragraph (1) must meet the following conditions:

a. it does not originate from loans or financing facilities in any form from banks and/or other parties; and/or b. it does not originate from and is not for money laundering.

Second Section
Management

Article 25

(1) During the Transition Period, the management of the BKD consists of the Operational Executive and the Supervisory Board.

(2) The BKD is required to form the organizational structure of the BKD as referred to in paragraph (1) which is separate from the organizational structure of the Village Government.

(3) The BKD is required to report the composition of the management and the organizational structure of the BKD as referred to in paragraph (1) and paragraph (2) to OJK no later than December 31, 2016, accompanied by photocopies of the management’s identity cards.

(4) The BKD is required to report any changes in the composition of the BKD management no later than 30 (thirty) days after the effective date of the management change, accompanied by photocopies of documents of appointment, dismissal, and/or change of management, and photocopies of the identity cards of the new management.

(5) The Operational Executive and the Supervisory Board as referred to in paragraph (1) are appointed and dismissed by the BKD owner.

Article 26

(1) Operational activities, financial management, and all legal acts of the BKD are carried out by the Operational Executive.

(2) The Operational Executive as referred to in paragraph (1) must consist of at least 2 (two) persons, one of whom serves as the Chairman of the Operational Executive.

(3) The Chairman of the Operational Executive as referred to in paragraph (2) is designated by the BKD owner with reference to the applicable provisions.

(4) The Operational Executive as referred to in paragraph (2) acts on behalf of and for the name of the BKD both inside and outside of court.

Article 27

(1) The Operational Executive has duties and responsibilities at least to:

a. carry out BKD business activities including preparing and implementing the action plan as referred to in Article 3 paragraph (1) and Article 10 paragraph (2); b. maintain and preserve all BKD assets;
c. create an annual work plan for the BKD;
d. keep books for all BKD transaction activities; e. create BKD financial reports; f. together with the Supervisory Board resolve every problem and fraud occurring in the BKD; g. provide protection for BKD Depositor Customers; h. bear all losses of the BKD that could reasonably have been prevented by the Operational Executive or losses caused by the Operational Executive violating legislation provisions including provisions in this Financial Services Authority Regulation;
i. prevent fraud from occurring in the BKD; and
j. submit BKD financial reports to the BKD owner at least 1 (one) time in 1 (one) year.

(2) The Operational Executive has authority at least to:

a. grant approval or rejection for the provision of credit to local Village residents; b. grant extension of maturity dates for Debtor Customers who apply for an extension of the maturity date;
c. determine the interest rates for Credit and Savings;
d. grant approval to withdraw Savings; and e. appoint and dismiss BKD employees.

Article 28

(1) The BKD is required to have a Supervisory Board consisting of at least 2 (two) persons and at most equal to the number of Operational Executives.

(2) The Supervisory Board as referred to in paragraph (1) consists of:

a. Ex-Officio Village Head; and/or b. other parties appointed and dismissed by the BKD owner.

Article 29

(1) The Supervisory Board has duties and responsibilities at least to:

a. provide guidance to the Operational Executive in carrying out BKD management; b. provide suggestions and opinions regarding matters considered important for BKD management;
c. hold Supervisory Board meetings to evaluate the performance of the Operational Executive at least 1 (one) time in 6 (six) months;
d. supervise the performance of the Operational Executive to prevent fraud in the implementation of BKD operations; e. resolve every problem and fraud occurring in the BKD; and f. bear all losses of the BKD that could reasonably have been prevented by the Supervisory Board or losses caused by the Supervisory Board violating legislation provisions including provisions in this Financial Services Authority Regulation.

(2) The Supervisory Board has authority at least to:

a. hold Supervisory Board meetings to evaluate BKD performance; b. examine BKD books;
c. conduct direct examinations of BKD operations;
d. request the Operational Executive to submit BKD financial reports; and e. request the Operational Executive to plan and implement BKD development and transformation programs.

Article 30

Remuneration for the Operational Executive and the Supervisory Board is determined through a meeting of the BKD owners, adjusted to the capacity of each BKD.

Article 31

(1) Requirements to be appointed as an Operational Executive and Supervisory Board include:

a. having good integrity; b. having knowledge in the field of fund mobilization and distribution; and
c. being competent to perform legal acts.

(2) The BKD must have at least 1 (one) Operational Executive who is experienced in handling BKD operations.

Article 32

The Operational Executive may be assisted by employees as needed, and this must be accompanied by a description of duties related to responsibilities, division of roles, and other work divisions.

Article 33

The Operational Executive and/or Supervisory Board may be dismissed for the following reasons:

a. death; b. completion of the term of office as regulated in the appointment document as Operational Executive or Supervisory Board;
c. resignation;
d. failure to perform duties well, which can hinder BKD performance; and/or e. committing deviations that harm the BKD’s finances.

Article 34

(1) The Operational Executive is permitted to hold concurrent positions as an Operational Executive at another BKD, provided it does not interfere with duties and responsibilities as an Operational Executive at each respective BKD and has obtained approval from the respective BKD owner.

(2) In the event that the Operational Executive of the BKD is a Village official where the BKD is located, the Operational Executive in question cannot hold concurrent positions as an Operational Executive at another BKD.

(3) The Operational Executive of the BKD is prohibited from holding concurrent positions as a Supervisory Board member.

Article 35

(1) The Supervisory Board is permitted to hold concurrent positions as a Supervisory Board member at another BKD, provided it does not interfere with duties and responsibilities as a Supervisory Board member at each respective BKD and has obtained approval from the respective BKD owner.

(2) The Supervisory Board cannot hold concurrent positions as an Operational Executive.

(3) The Ex-Officio Supervisory Board member who is the Village Head cannot hold concurrent positions as a Supervisory Board member at another BKD.

Third Section
Reports

Article 36

(1) The BKD is required to submit periodic financial reports to OJK every 3 (three) months for periods ending on March 31, June 30, September 30, and December 31.

(2) The submission of financial reports as referred to in paragraph (1) is carried out no later than 1 (one) month after the end of the reporting month.

(3) In the event that the deadline for submission of financial reports as referred to in paragraph (2) falls on a holiday, the deadline for submission of reports is the next working day.

Article 37

(1) In order to implement the principle of openness, the BKD is required to announce financial reports for each end-of-year period on a bulletin board that is easily accessible to the public at the BKD office and/or the Village office where the BKD is located.

(2) The announcement of financial reports as referred to in paragraph (1) is carried out no later than February 1 of the following year.

Article 38

Provisions regarding the implementation of BKD financial reports as referred to in Article 36 paragraph (1) and Article 37 are regulated in a Financial Services Authority Circular Letter.

Fourth Section
Supervision

Article 39

(1) Supervision of the BKD is carried out by OJK.

(2) In order to carry out supervision as referred to in paragraph (1), OJK has the authority to conduct examinations of the BKD.

(3) In carrying out supervision, OJK may coordinate with relevant agencies, including the Ministry of Villages, Development of Disadvantaged Regions, and Transmigration, and the Ministry of Home Affairs.

Article 40

In the context of examinations as referred to in Article 39 paragraph (2), the BKD is required to provide:

a. explanations and data requested; b. opportunity to view all books, documents, and physical facilities related to its business activities; and
c. other necessary matters.

Article 41

(1) OJK may assign other parties to carry out examinations on behalf of and for the name of OJK as referred to in Article 39.

(2) Other parties carrying out examinations as referred to in paragraph (1) are required to keep confidential the explanations and data obtained.

(3) Other parties assigned to carry out examinations as referred to in paragraph (1) must meet at least the following requirements:

a. willing to carry out BKD examinations in accordance with this Financial Services Authority Regulation; and b. having knowledge and understanding of BKD operations.

(4) Examinations by other parties as referred to in paragraph (1) may be carried out independently or jointly with examiners from OJK.

(5) Provisions regarding the assignment of examinations as referred to in paragraph (1) are further regulated in a Financial Services Authority Circular Letter.

Article 42

(1) Other parties carrying out BKD examinations as referred to in Article 41 paragraph (1) are required to report the results of BKD examinations to OJK no later than 15 (fifteen) working days after all examinations have been completed.

(2) OJK conducts an evaluation of the implementation of BKD examinations carried out by other assigned parties.

CHAPTER IV
SANCTIONS

Article 43

(1) A BKD that does not fulfill the provisions in Article 3 paragraph (1), Article 3 paragraph (4), Article 3 paragraph (6), Article 10 paragraph (2), Article 10 paragraph (5), and/or Article 10 paragraph (8), shall be subject to administrative sanctions in the form of revocation of business license after being given 3 (three) written warnings.

(2) Written warnings as referred to in paragraph (1) are given with a time interval of 1 (one) month for each written warning.

Article 44

(1) A BKD that does not fulfill the provisions in Article 40 of this Financial Services Authority Regulation shall be subject to administrative sanctions in the form of written warnings.

(2) Written warning sanctions as referred to in paragraph (1) are given 3 (three) times, each with a validity period of 15 (fifteen) working days.

(3) In the event that the validity period of the third written warning as referred to in paragraph (2) expires and the BKD still does not fulfill the provisions as referred to in paragraph (1), the BKD owner is required to replace the Operational Executive and/or Supervisory Board within a maximum period of 3 (three) months from the notification from OJK.

(4) A BKD that does not fulfill the provisions in paragraph (3) shall be subject to administrative sanctions in the form of written reprimands.

(5) Written reprimand sanctions as referred to in paragraph (4) are given 3 (three) times, each with a validity period of 15 (fifteen) working days.

(6) A BKD that does not comply with the provisions as referred to in paragraphs (1) to (5) shall be subject to administrative sanctions in the form of revocation of business license.

Article 45

(1) A BKD that does not fulfill the provisions in Article 3 paragraph (7), Article 7 paragraph (1), Article 7 paragraph (2), Article 11 paragraph (1), Article 16 paragraph (1), Article 25 paragraph (3), Article 25 paragraph (4), and/or Article 36 paragraph (1) of this Financial Services Authority Regulation, shall be subject to sanctions in the form of a payment obligation in the form of a fine.

(2) The imposition of sanctions in the form of a payment obligation in the form of a fine as referred to in paragraph (1) is imposed at the rate of Rp10,000.00 (ten thousand rupiah) for each day of delay and at most Rp500,000.00 (five hundred thousand rupiah).

(3) In the context of imposing sanctions in the form of a payment obligation in the form of a fine as referred to in paragraph (1), the date of report submission is:

a. the date of receipt by OJK or other parties designated by OJK, if the report is submitted directly; or b. the date of sending with proof of sending via post office or courier/delivery company, if the report is not submitted directly.

(4) Fines as referred to in paragraph (1) must be deposited into the OJK account.

(5) In the event that the BKD has not paid the fine as referred to in paragraph (1), the fine is declared as a debt of the BKD to OJK and must be included in the financial reports of the respective BKD.

Article 46

A BKD that does not fulfill the provisions in Article 25 paragraph (2), Article 26 paragraph (2), Article 28 paragraph (1), and/or Article 37 paragraph (1) shall be subject to administrative sanctions in the form of written reprimands.

Article 47

Other parties that do not fulfill the provisions in Article 41 paragraph (2) and/or Article 42 paragraph (1) of this Financial Services Authority Regulation shall be subject to sanctions in accordance with the cooperation agreement.

CHAPTER V
TRANSITIONAL PROVISIONS

Article 48

BKDs that have had legal entity status before this Financial Services Authority Regulation comes into force, but do not comply with this Financial Services Authority Regulation and/or other legislation provisions, must adjust to this Financial Services Authority Regulation and/or other legislation provisions no later than December 31, 2019.

CHAPTER VI
CLOSING PROVISIONS

Article 49

Further provisions from this Financial Services Authority Regulation are regulated in a Financial Services Authority Circular Letter.

Article 50

Upon the commencement of this Financial Services Authority Regulation, Bank Indonesia Regulation Number 6/27/PBI/2004 dated December 13, 2004 regarding the Implementation of Supervision of Village Credit Institutions (State Gazette of the Republic of Indonesia Year 2004 Number 161, Supplement to the State Gazette of the Republic of Indonesia Year 2004 Number 4460) is revoked and declared invalid;

Article 51

Provisions in Bank Indonesia Regulations and Director’s Decisions of Bank Indonesia regarding BPRs and their implementing regulations that regulate exemptions of BKDs from the aforementioned legislation are revoked and declared invalid as of December 31, 2019.

Article 52

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

To ensure that everyone knows it, 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 January 27, 2016
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Promulgated in Jakarta
On February 2, 2016
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2016 NUMBER 24

A copy in accordance with the original
Director of Law 1
Department of Law signed
Yuliana

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 10 /POJK.03/2016
REGARDING
FULFILLMENT OF VILLAGE CREDIT BANK PROVISIONS AND TRANSFORMATION OF VILLAGE CREDIT INSTITUTIONS GRANTED STATUS AS VILLAGE CREDIT BANKS

I. GENERAL

In order to create a strong and resilient inclusive financial system, financial institutions capable of serving the public, including rural communities, are needed. Village Credit Institutions (Badan Kredit Desa or BKD), as one type of financial institution in villages that still exists to this day, plays a very important role in helping the village economy. The important role of Village Credit Institutions needs to be strengthened through institutional arrangement and supervision in a legislative regulation.

In Article 58 of Law Number 7 of 1992 regarding Banking as amended by Law Number 10 of 1998, it is stated that Village Banks, Village Granaries, Market Banks, Employee Banks, Pitih Nagari Granaries (LPN), Village Credit Institutions (LPD), Village Credit Institutions (BKD), Sub-district Credit Institutions (BKK), Small Business Credit (KURK), Sub-district Credit Institutions (LPK), Village Production Banks (BKPD), and/or other institutions deemed equivalent are granted the status of Rural Credit Banks (BPR) by fulfilling the requirements and procedures established by Government Regulation. Subsequently, in Article 19 paragraph (1) of Government Regulation Number 71 of 1992 regarding Rural Credit Banks, it is stated that Village Banks, Village Granaries, Market Banks, Employee Banks, LPN, LPD, BKD, BKK, KURK, LPK, BKPD, and/or other institutions deemed equivalent, which have obtained business licenses from the Minister of Finance, are declared to become Rural Credit Banks (BPR). Thus, currently there are BKDs with business licenses from the Minister of Finance granted the status of BPR. However, due to the unique operational characteristics of BKDs which are not the same as general BPRs, BKDs granted the status of BPR are exempted from every applicable legislation regulation for BPRs.

With the implementation of this Financial Services Authority Regulation, BKDs granted the status of BPR will not be exempted from every provision applicable to BPRs in general. However, to maintain the operational continuity of BKDs which play an important role in the village economy, this Financial Services Authority Regulation provides options as a solution for BKDs that are unable to fulfill all BPR provisions by changing their business activities or business entities into non-BPR business activities or entities, namely by transforming into Micro Finance Institutions (LKM), becoming Village-Owned Enterprises (BUMDesa) or business units of existing BUMDesas in the Village where the BKD is located and conducts its operational activities.

The scope of this Financial Services Authority Regulation is limited to BKDs that have obtained licenses from the Minister of Finance and are thus granted the status of BPR by Law Number 7 of 1992 regarding Banking as amended by Law Number 10 of 1998.

II. ARTICLE BY ARTICLE

Article 1

Is clear enough.

Article 2

Is clear enough.

Article 3

Paragraph (1)

Is clear enough.

Paragraph (2)

Letter a

Is clear enough.

Letter b

Is clear enough.

Letter c

Is clear enough.

Letter d

Is clear enough.

Letter e

The term “operational working days” refers to BKDs operating or carrying out their activities every working day.

Paragraph (3)

Is clear enough.

Paragraph (4)

Is clear enough.

Paragraph (5)

Is clear enough.

Paragraph (6)

Is clear enough.

Paragraph (7)

Is clear enough.

Paragraph (8)

Is clear enough.

Paragraph (9)

Is clear enough.

Paragraph (10)

Is clear enough.

Article 4

Paragraph (1)

Is clear enough.

Paragraph (2)
What is meant by “in accordance with regulations governing BPR institutions” includes:
a. the Board of Directors consists of at least 2 (two) members, one of whom serves as the President Director; b. Board of Directors members must hold a valid graduation certificate issued by a professional certification body;
c. the Board of Commissioners consists of at least 2 (two) members and at most equal to the number of Board of Directors members, and one of them serves as the President Commissioner;
d. Board of Commissioners members must hold a valid graduation certificate issued by a professional certification body; e. candidates for Board of Directors and Board of Commissioners members must obtain approval from OJK before carrying out their duties and functions in their positions; and f. candidates for Board of Directors and Board of Commissioners members must meet competency, integrity, and financial reputation requirements as regulated in the provisions regarding the fit and proper test for BPR.

Paragraph (3)
Clearly stated.

Article 5
Paragraph (1)
Clearly stated.

Paragraph (2)
What is meant by “Local Government” is the Regency/City Government or Provincial Government.
What is meant by “involving Local Government” includes, among others, the Local Government making capital participation in the BPR resulting from the merger.

Paragraph (3)
Clearly stated.

Paragraph (4)
Clearly stated.

Article 6
Clearly stated.

Article 7
Paragraph (1)
Clearly stated.

Paragraph (2)
Clearly stated.

Paragraph (3)
Clearly stated.

Paragraph (4)
Clearly stated.

Article 8
Clearly stated.

Article 9
Clearly stated.

Article 10
Paragraph (1)
Clearly stated.

Paragraph (2)
Village Credit Institutions (BKD) that have chosen to become Local Capital Companies (LKM) or Village-Owned Enterprises (BUMDesa) do not need to create an action plan to comply with BPR regulations.

Paragraph (3)
Clearly stated.

Paragraph (4)
Clearly stated.

Paragraph (5)
Clearly stated.

Paragraph (6)
Clearly stated.

Paragraph (7)
Clearly stated.

Paragraph (8)
Clearly stated.

Article 11
Clearly stated.

Article 12
Paragraph (1)
Letter a
What is meant by “evidence” in this paragraph includes at least:
a. Accounting records; b. List of Debtor Customers and Depositor Customers; and
c. Photos or documentation of operational activities during the last 3 (three) months.

Letter b
The financial report of the BKD consists of a balance sheet and an income statement.

Paragraph (2)
Clearly stated.

Paragraph (3)
Clearly stated.

Paragraph (4)
Clearly stated.

Paragraph (5)
Clearly stated.

Article 13
Paragraph (1)
What is meant by “Village-Owned Enterprise (BUMDesa) or BUMDesa business unit” in this paragraph is a BUMDesa or BUMDesa business unit that already exists or has been established to accommodate the transformation of the BKD.

Paragraph (2)
Clearly stated.

Paragraph (3)
Clearly stated.

Paragraph (4)
Clearly stated.

Paragraph (5)
Clearly stated.

Article 14
Clearly stated.

Article 15
Clearly stated.

Article 16
Paragraph (1)
Clearly stated.

Paragraph (2)
One example of the legal act referred to in this paragraph is receiving Deposits, providing Loans, and transferring rights over the assets of the BKD.

Paragraph (3)
Clearly stated.

Article 17
Paragraph (1)
The BKD in this case is represented by the owner of the BKD.

Paragraph (2)
Clearly stated.

Article 18
Clearly stated.

Article 19
Clearly stated.

Article 20
Paragraph (1)
One form of exercising authority and responsibility to obtain profit for oneself is purchasing the assets of the BKD in Liquidation for one's own interest, that of one's family, and/or one's group. In the understanding of obtaining profit for oneself, it also includes if members of the Liquidation Team conduct transactions that contain a conflict of interest between the BKD in Liquidation and the respective Liquidation Team member.

Paragraph (2)
Clearly stated.

Article 21
Clearly stated.

Article 22
Clearly stated.

Article 23
Clearly stated.

Article 24
Clearly stated.

Article 25
Paragraph (1)
Clearly stated.

Paragraph (2)
Clearly stated.

Paragraph (3)
Clearly stated.

Paragraph (4)
Clearly stated.

Paragraph (5)
The appointment and dismissal of Operational Executives and the Supervisory Board are carried out in accordance with the provisions of legislation.
Operational Executives or the Supervisory Board appointed by the owner of the BKD may come from the Village or from outside the Village where the BKD is located.

Article 26
Clearly stated.

Article 27
Clearly stated.

Article 28
Paragraph (1)
Clearly stated.

Paragraph (2)
Letter a.
What is meant by “Ex-Officio” is the position of a person in a certain institution due to their duties and authority in another institution.

Letter b.
What is meant by “other party” is a party other than the Village Head or an individual who does not serve as the Operational Executive of the BKD.

Article 29
Clearly stated.

Article 30
Clearly stated.

Article 31
Paragraph (1)
The determination of the Village Head as an Ex-Officio member of the Supervisory Board is based on their position. Thus, the requirements referred to in this paragraph do not apply to the Ex-Officio Village Head members of the Supervisory Board.

Paragraph (2)
Clearly stated.

Article 32
Clearly stated.

Article 33
Clearly stated.

Article 34
Clearly stated.

Article 35
Clearly stated.

Article 36
Clearly stated.

Article 37
Clearly stated.

Article 38
Clearly stated.

Article 39
Clearly stated.

Article 40
Clearly stated.

Article 41
Paragraph (1)
What is meant by “other party” in this paragraph includes, among others:
a. an accountant at a public accounting firm; or b. an individual who has competence in auditing BKD, BPR, and/or Commercial Banks.

Paragraph (2)
Clearly stated.

Paragraph (3)
Clearly stated.

Paragraph (4)
Clearly stated.

Paragraph (5)
Clearly stated.

Article 42
Clearly stated.

Article 43
Clearly stated.

Article 44
Clearly stated.

Article 45
Clearly stated.

Article 46
Clearly stated.

Article 47
Clearly stated.

Article 48
Clearly stated.

Article 49
Clearly stated.

Article 50
Clearly stated.

Article 51
Clearly stated.

Article 52
Clearly stated.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5847