POJK on Guidelines for Repurchase Agreement Transactions for Financial Service Institutions

DECIDING...
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 9/POJK.04/2015
ABOUT
GUIDELINES FOR REPURCHASE AGREEMENT TRANSACTIONS FOR FINANCIAL SERVICE INSTITUTIONS BY THE GRACE OF GOD THE MOST HIGH, THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering: that in order to increase the effectiveness of regulation and supervision of repurchase agreement transactions conducted by Financial Service Institutions, it is necessary to establish a Financial Services Authority Regulation regarding Guidelines for Repurchase Agreement Transactions for Financial Service Institutions; Recalling: 1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
2. Law Number 24 of 2002 concerning Government Securities (State Gazette of the Republic of Indonesia Year 2002 Number 110, Supplement to the State Gazette of the Republic of Indonesia Number 4236);
3. Law Number 19 of 2008 concerning Government Securities Sharia (State Gazette of the Republic of Indonesia Year 2008 Number 70, Supplement to the State Gazette of the Republic of Indonesia Number 4852);
4. 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);

Law...
DECIDING:
Decree: FINANCIAL SERVICES AUTHORITY REGULATION REGARDING GUIDELINES FOR REPURCHASE AGREEMENT TRANSACTIONS FOR FINANCIAL SERVICE INSTITUTIONS.

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

1. Repurchase Agreement Transaction, hereinafter referred to as Repo Transaction, is a contract to sell or buy Securities with a promise to buy or sell back at a specified time and price.
2. Global Master Repurchase Agreement, hereinafter abbreviated as GMRA, is the standard agreement for Repo Transactions issued by the International Capital Market Association.
3. Financial Service Institution is an institution that carries out activities in the Banking, Capital Market, Insurance, Pension Fund, Financing Institution, and other Financial Service Institutions sectors as referred to in the Law of the Republic of Indonesia Number 21 of 2011 concerning the Financial Services Authority.
4. Depository and Clearing Institution is a Party that organizes Central Custodian activities for Custodian Banks, Securities Companies, and other Parties, as referred to in the Law of the Republic of Indonesia Number 8 of 1995 concerning the Capital Market.
5. Securities are negotiable instruments, namely debt instruments, commercial paper, shares, bonds, debt certificates, Participation Units of collective investment contracts, futures contracts over Securities, and every derivative of Securities, as referred to in

c. margin...
Law of the Republic of Indonesia Number 8 of 1995 concerning the Capital Market.

Article 2
(1) Financial Service Institutions conducting Repo Transactions must comply with the provisions of this Financial Services Authority Regulation.
(2) The provisions as referred to in paragraph (1) apply to Repo Transactions over Securities without physical certificates that are regulated and supervised by the Financial Services Authority and are registered with and settled through Bank Indonesia and/or the Depository and Clearing Institution.

Article 3
(1) Every Repo Transaction must result in a change of ownership of the Securities.
(2) Securities transferred as a substitute or for margin maintenance in a Repo Transaction must result in a change of ownership of those Securities.
(3) In the event of a default event in a Repo Transaction, the parties must settle their obligations according to the procedures for settling default events and the accompanying rights and obligations as contained in the Repo Transaction agreement.

CHAPTER II
AGREEMENTS
Article 4
(1) Every Repo Transaction must be based on a written agreement.
(2) The agreement as referred to in paragraph (1) must at least contain the following provisions:
a. transfer of ownership rights of Securities; b. obligation to adjust the value of Securities to fair market value (mark-to-market);

(3) The...
c. initial margin and/or haircut of Securities in the Repo Transaction;
d. margin maintenance including substitution of margin Securities; e. rights and obligations of the parties related to the ownership of Securities in the Repo Transaction, including the timing of implementation and tax obligations; f. default events; g. procedures for settling default events and the accompanying rights and obligations; h. the agreement is subject to Indonesian law;
i. the position of the Financial Service Institution in the Repo Transaction as an agent or acting for its own behalf; and
j. procedures for confirmation of the Repo Transaction and/or material changes related to the Repo Transaction.

Article 5
(1) Every written agreement as referred to in Article 4 paragraph (1) must apply the Indonesia GMRA issued by the Financial Services Authority or other parties recognized by the Financial Services Authority. (2) The Indonesia GMRA as referred to in paragraph (1) consists of:
a. Global Master Repurchase Agreement (GMRA); b. Indonesia Domestic Transaction Annex (Indonesia Annex);
c. Annex I Supplemental Terms & Condition (Annex I Supplemental Terms & Condition)
d. Annex II Confirmation Format (Annex II Confirmation); e. Buy/Sell Back Annex; f. Equity Annex; and g. Agency Annex.

(2) The...
(3) The parties may agree to changes in clauses in the Repo Transaction agreement made based on the Indonesia GMRA as long as they do not conflict with this Financial Services Authority Regulation. (4) In the event that a Financial Service Institution conducts a Repo Transaction with a state institution that implements fiscal or monetary policy, that Financial Service Institution is not required to apply the Indonesia GMRA. (5) Further provisions regarding the Indonesia GMRA as referred to in paragraph (2) are regulated by a Circular Letter of the Financial Services Authority.

CHAPTER III
OBLIGATIONS
Article 6
(1) Financial Service Institutions conducting Repo Transactions must first fulfill the following provisions:
a. have directors and/or employees authorized to conduct Repo Transactions; b. have employees with adequate knowledge and work experience in Repo Transactions and who understand regulations related to Repo Transactions;
c. ensure the existence of Securities and/or funds for the settlement of Repo Transactions;
d. ensure that every Repo Transaction is conducted by authorized directors or employees as referred to in letter a; e. have adequate policies, procedures, and internal controls; and f. have risk management to handle risks arising from Repo Transactions.

failure...
(2) Financial Service Institutions conducting Repo Transactions must:
a. conduct bookkeeping and recording and have adequate documentation of the Repo Transactions conducted by the Financial Service Institution; b. apply accounting treatment in the Financial Service Institution's financial reports in accordance with applicable Accounting Standards; and
c. correctly record the identities of the parties in the Repo Transaction.

Article 7
In order to handle risks arising from Repo Transactions as referred to in Article 6 paragraph (1) letter f, Financial Service Institutions must:
a. set initial margins and/or the size of haircuts on Securities in Repo Transactions in accordance with the credit risk of the counterparty to the Repo Transaction and the risk of the Securities; b. conduct margin maintenance in accordance with the Repo Transaction agreement whenever the value of the Securities based on their fair market price shows a material decrease in value as agreed;
c. ensure that written confirmations, physically or electronically, regarding the Repo Transaction agreement are issued;
d. monitor the net exposure of all Repo Transactions held and take specific actions to settle obligations to the counterparty to the Repo Transaction daily; e. minimize all settlement risks arising from Repo Transactions by using settlement systems provided by Bank Indonesia and/or the Depository and Clearing Institution; and f. have mechanisms that allow for rapid identification of conditions causing default

(2) The... events and/or mechanisms that provide notification of failure to fulfill Repo Transaction obligations to the counterparty to the Repo Transaction.

CHAPTER IV
FINANCIAL SERVICE INSTITUTIONS ACTING AS AGENTS
Article 8
Financial Service Institutions that can act as agents for Repo Transactions are only Financial Service Institutions that are participants in the Bank Indonesia and/or Depository and Clearing Institution settlement systems.

Article 9
In the event that a Financial Service Institution acts as an agent for Repo Transactions for its customers, the Financial Service Institution must:
a. obtain power of attorney from customers to conduct Repo Transactions for the benefit of the customers; b. record the identity of customers conducting Repo Transactions and submit it to the counterparty to the Repo Transaction;
c. record the identity of the counterparty to the Repo Transaction and submit it to its customers; and
d. make periodic reports as agreed in the agreement to customers containing information on Repo Transactions conducted on behalf of the customers.

CHAPTER V
REPORTING
Article 10
(1) Financial Service Institutions conducting Repo Transactions over debt-type Securities must report the aforementioned Repo Transactions to the Financial Services Authority through Securities Transaction Reporting Receivers.

with...
(2) The deadline and procedures for submitting reports as referred to in paragraph (1) are subject to legislation in the Capital Market sector regarding Reporting of Securities Transactions. (3) Financial Service Institutions conducting Repo Transactions over equity-type Securities must report to the Depository and Clearing Institution. (4) Reports as referred to in paragraph (3) must be submitted no later than the next business day after the Repo Transaction occurs.

CHAPTER VI
SANCTIONS
Article 11
(1) Without prejudice to criminal provisions in the Capital Market field, the Financial Services Authority has the authority to impose administrative sanctions on any party that violates the provisions of this Financial Services Authority Regulation, including parties who cause the occurrence of such violations, consisting of:
a. written warning; b. fines, namely the obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business licenses; f. cancellation of approvals; and g. cancellation of registration.
(2) Sanctions as referred to in paragraph (1) letter b, letter c, letter d, letter e, letter f, or letter g may be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (1) letter a. (3) Fine sanctions as referred to in paragraph (1) letter b may be imposed separately or together

28... with the imposition of sanctions as referred to in paragraph (1) letter c, letter d, letter e, letter f, or letter g.

Article 12
In addition to administrative sanctions as referred to in Article 11 paragraph (1), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 13
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 11 paragraph (1) and specific actions as referred to in Article 12 to the public.

CHAPTER VII
TRANSITIONAL PROVISIONS
Article 14
All Repo Transaction agreements that are ongoing and already exist before this Financial Services Authority Regulation comes into effect do not need to be adjusted to this Financial Services Authority Regulation.

CHAPTER VIII
CLOSING PROVISIONS
Article 15
In the event that a Financial Service Institution conducts Repo Transactions using Sharia principles, that Financial Service Institution is not subject to this Financial Services Authority Regulation.

Article 16
At the time this Financial Services Authority Regulation comes into effect, the Decision of the Head of the Capital Market Supervisory Board and Financial Institutions Number KEP-132/BL/2006 dated

28 November 2006 concerning Accounting Treatment of Repurchase Agreement (Repo) Using Master Repurchase Agreement (MRA), along with Regulation Number VIII.G.13 which is its attachment, is repealed and declared invalid.

Article 17
This Financial Services Authority Regulation comes into effect on January 1, 2016.

To ensure that everyone knows it, order the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Issued in Jakarta on June 25, 2015
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY,
Signed,
MULIAMAN D. HADAD

Promulgated in Jakarta on June 26, 2015
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Signed,
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 151 Copy in accordance with the original Director of Legal Affairs I Department of Law, Signed. Sudarmaji