POJK on Investment in Government Securities for Non-Bank Financial Service Institutions

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 1/POJK.05/2016

REGARDING
INVESTMENT IN GOVERNMENT SECURITIES
FOR NON-BANK FINANCIAL SERVICE INSTITUTIONS

BY THE GRACE OF GOD THE ALMIGHTY,

THE COMMISSIONERS' COUNCIL OF THE FINANCIAL SERVICES AUTHORITY,

Considering: that in order to encourage the placement of investments that are safe and consistent with the long-term liability characteristics of non-bank financial service institutions, and to encourage the role of domestic investors in financing national development, it is necessary to establish a Financial Services Authority Regulation regarding Investment in Government Securities for Non-Bank Financial Service Institutions;

Recalling: 1. Law Number 11 of 1992 concerning Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 37, Supplement to the State Gazette of the Republic of Indonesia Number 3477);
2. 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);
3. Law Number 24 of 2011 concerning Social Security Implementing Bodies (State Gazette of the Republic of Indonesia Year 2011 Number 116, Supplement to the State Gazette of the Republic of Indonesia Number 5256);
4. Law Number 40 of 2014 concerning Insurance (State Gazette of the Republic of Indonesia Year 2014 Number 337, Supplement to the State Gazette of the Republic of Indonesia Number 5618);

DECIDING:

To Establish: INVESTMENT IN GOVERNMENT SECURITIES FOR NON-BANK FINANCIAL SERVICE INSTITUTIONS.

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

1. Non-Bank Financial Service Institutions are:
   a. life insurance companies, general insurance companies, and reinsurance companies, including those conducting all or part of their business using Sharia principles, as referred to in legislation in the field of insurance; b. guarantee institutions, including those conducting all or part of their business using Sharia principles, as referred to in legislation in the field of guarantee institutions;
   c. employer pension funds as referred to in legislation in the field of pension funds;
   d. Labor Social Security Implementing Body, hereinafter referred to as BPJS Ketenagakerjaan, as referred to in legislation in the field of Social Security Implementing Bodies; and e. Health Social Security Implementing Body, hereinafter referred to as BPJS Kesehatan, as referred to in legislation in the field of Social Security Implementing Bodies.
2. Government Securities, hereinafter abbreviated as SBN, are securities issued by the Government of the Republic of Indonesia, including government debt securities as referred to in Law Number 24 of 2002 concerning Government Debt Securities and Sharia government securities as referred to in Law Number 19 of 2008 concerning Sharia Securities.
3. Social Security Funds are trust funds belonging to all participants, which constitute a collection of contributions along with the results of their development, managed by BPJS Ketenagakerjaan and BPJS Kesehatan for the payment of benefits to participants and the financing of operational activities for the implementation of social security programs.
4. Labor Social Security Funds are the Work Accident Social Security Fund, Death Social Security Fund, Old Age Social Security Fund, and Pension Social Security Fund.
5. Financial Services Authority, hereinafter abbreviated as OJK, is the Financial Services Authority as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

Article 2
(1) Non-Bank Financial Service Institutions are required to place investments in SBN:
a. for life insurance companies, including those conducting all or part of their business using Sharia principles, at least 30% (thirty percent) of the total investment amount of the company; b. for general insurance companies and reinsurance companies, including those conducting all or part of their business using Sharia principles, at least 20% (twenty percent) of the total investment amount of the company;
c. for guarantee institutions, including those conducting all or part of their business using Sharia principles, at least 20% (twenty percent) of the total investment amount of the guarantee institution;
d. for employer pension funds, at least 30% (thirty percent) of the total investment amount of the employer pension fund; e. for BPJS Ketenagakerjaan:

1. at least 50% (fifty percent) of the total investment amount of the Labor Social Security Funds; and
2. at least 30% (thirty percent) of the total investment amount of BPJS Ketenagakerjaan;
   f. for BPJS Kesehatan, at least 30% (thirty percent) of the total investment amount of BPJS Kesehatan.
   (2) The investment placement in SBN for life insurance companies as referred to in paragraph (1) letter a does not include investments sourced from insurance products linked to investments where the composition of the investment is determined by the policyholder or participant.

Article 3
The investment placement in SBN as referred to in Article 2 for Non-Bank Financial Service Institutions that have operated prior to the promulgation of this OJK Regulation must comply with the following phases:
a. for life insurance companies, including those conducting all or part of their business using Sharia principles, and employer pension funds:

1. at least 20% (twenty percent) of the total investment amount no later than December 31, 2016; and
2. at least 30% (thirty percent) of the total investment amount no later than December 31, 2017;
   b. for general insurance companies, reinsurance companies, and guarantee institutions, including those conducting all or part of their business using Sharia principles:
3. at least 10% (ten percent) of the total investment amount no later than December 31, 2016; and
4. at least 20% (twenty percent) of the total investment amount no later than December 31, 2017;
   c. for BPJS Ketenagakerjaan and BPJS Kesehatan no later than December 31, 2016.

Article 4
The calculation of investment placement in SBN as referred to in Article 2 and Article 3 includes the ownership of SBN by Non-Bank Financial Service Institutions through mutual funds.

Article 5
(1) Non-Bank Financial Service Institutions that do not meet the provisions of Article 2 and Article 3 in this OJK Regulation are subject to administrative sanctions in the form of:
a. written warnings; b. reassessment of the fitness and propriety of controllers, boards of directors, boards of commissioners, or equivalents thereof in Non-Bank Financial Service Institutions; and/or
c. prohibition from becoming shareholders, controllers, directors, boards of commissioners, Sharia supervisory boards, and/or executive positions below the board of directors, or equivalents thereof in Non-Bank Financial Service Institutions, for the Non-Bank Financial Service Institution, shareholders, controllers, directors, and/or boards of commissioners, or equivalents thereof.
(2) Warning sanctions as referred to in paragraph (1) letter a are given in writing at most 3 (three) consecutive times with a maximum duration of 60 (sixty) days each from the date the written warning letter is established.

Article 6
At the time this OJK Regulation comes into force, provisions regarding the minimum investment limit for SBN for Non-Bank Financial Service Institutions are subject to this OJK Regulation.

Article 7
This OJK Regulation comes into force on the date of its promulgation.

In order that everyone may know it, it is ordered to promulgate this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on January 11, 2016
CHAIRMAN OF THE COMMISSIONERS' COUNCIL
FINANCIAL SERVICES AUTHORITY,

signed
MULIAMAN D. HADAD

Promulgated in Jakarta on January 12, 2016
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2016 NUMBER 7

A copy consistent with the original
Director of Law 1
Department of Law

signed
Yuliana

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 1/POJK.05/2016
REGARDING
INVESTMENT IN GOVERNMENT SECURITIES
FOR NON-BANK FINANCIAL SERVICE INSTITUTIONS

I. GENERAL

The OJK is an independent agency formed with the objective that the financial services sector is organized in a regular, fair, transparent, and accountable manner, capable of realizing a financial system that grows sustainably and stably, and capable of protecting the interests of consumers and the public. With this objective, the OJK is expected to support the interests of the national financial services sector and must be able to safeguard national interests.

In order to support the interests of the national financial services sector and safeguard national interests, it is necessary to have alignment in formulating policies, particularly with the Government. The current slowing economic condition requires the Government to obtain funding sources to finance long-term development programs by issuing Government Securities (SBN). The availability of SBN and the liquidity of the SBN market are important factors in economic stability, and both factors are greatly influenced by the role of investors.

The Government's funding needs through SBN align with the characteristics of Non-Bank Financial Service Institutions, which are long-term investors.

In order to align the characteristics of Non-Bank Financial Service Institutions and encourage the role of domestic investors in financing national development, the OJK needs to encourage Non-Bank Financial Service Institutions to invest in SBN.

This OJK Regulation regulates the obligation of Non-Bank Financial Service Institutions to place investments in the form of SBN.

II. ARTICLE BY ARTICLE

Article 1
It is clear enough.

Article 2
For companies conducting part of their business based on Sharia principles, the obligation to place investments in SBN is applied separately for the Sharia unit and conventional business.

Article 3
The term "has operated" refers to having obtained a business license for life insurance companies, general insurance companies, reinsurance companies, and guarantee institutions, including those conducting all or part of their business using Sharia principles, or having obtained approval for employer pension funds.

Article 4
It is clear enough.

Article 5
It is clear enough.

Article 6
It is clear enough.

Article 7
It is clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5834