POJK on Prudential Principles in Implementing Agency Activities for Foreign Financial Products by Commercial Banks

FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 8 /POJK.03/2016
CONCERNING
PRUDENTIAL PRINCIPLES IN IMPLEMENTING
AGENCY ACTIVITIES FOR FOREIGN FINANCIAL PRODUCTS BY COMMERCIAL BANKS BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that the rapid innovation of financial products has resulted in various investment instruments with high complexity in order to meet customer investment needs; b. that the increasing interconnection of global financial markets, supported by improved information technology, has increased customer access to foreign financial products;
c. that with the increasing involvement of banks in activities related to foreign financial products, it is realized that these activities, while providing benefits, also have the potential to cause various risks to banks and customers;
d. that the global financial market crisis has directly or indirectly impacted the Indonesian financial system; e. that with the increasing pressure of financial market risks, banks need to apply risk management, especially regarding risk management and control mechanisms; f. that the increasing complexity of foreign financial products must be accompanied by an increase in the quality of information transparency to the public in order to maintain public confidence in the financial system; g. that in relation to the considerations as referred to in letters a, b, c, d, e, and f, it is deemed necessary to establish a Financial Services Authority Regulation concerning Prudential Principles in Implementing Agency Activities for Foreign Financial Products by Commercial 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 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);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING PRUDENTIAL PRINCIPLES IN IMPLEMENTING AGENCY ACTIVITIES FOR FOREIGN FINANCIAL PRODUCTS BY COMMERCIAL BANKS.

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

1. Bank means a commercial bank as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998, including branches of banks located abroad, that conduct conventional business activities.
2. Foreign Financial Product means an investment instrument issued by a foreign issuer abroad, which includes foreign securities investment instruments and foreign non-securities investment instruments.
3. Foreign Securities Investment Instrument means securities issued by an individual or foreign legal entity in accordance with regulations established by the Financial Services Authority.
4. Foreign Non-Securities Investment Instrument means Foreign Financial Products other than securities issued by banks abroad that are structured products.
5. Securities means negotiable instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, units of participation in collective investment contracts, futures contracts over securities, and every derivative of securities.
6. Structured Product means Bank products as referred to in Financial Services Authority regulations concerning prudential principles in conducting Structured Product activities for Banks.
7. Agency Activity means all activities conducted by the Bank directly or indirectly, including:
   a. following up on requests from domestic customers for Foreign Financial Products; b. offering Foreign Financial Products to customers or prospective customers, whether through face-to-face offers or other offer methods, including providing information regarding financial markets and Foreign Financial Products that can influence customer decisions to purchase Foreign Financial Products;
   c. acting as a referral agent, namely offering Foreign Financial Products that are products of bank branches or bank headquarters abroad, including providing information regarding the availability of specific Foreign Financial Products at bank branches and/or bank headquarters abroad.
8. Customer means:
   a. an individual or entity that uses or receives Bank facilities in the form of products or services; b. an individual or entity that will use or be given facilities by the Bank in the form of products or services.
9. Board of Directors:
   a. for Banks in the form of a Limited Liability Company, means the board of directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for Banks in the form of legal entities:

1. State-Owned Enterprises or Regional State-Owned Enterprises means 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;
2. Regional Enterprises means the board of directors at Banks that have not yet changed their form into State-Owned Enterprises or Regional State-Owned Enterprises in accordance with Law Number 23 of 2014 concerning Regional Government as last amended by Law Number 9 of 2015;
   c. for Banks in the form of a Cooperative legal entity, means the management board as referred to in Law Number 25 of 1992 concerning Cooperatives;
   d. for Banks with the status of a branch of a bank located abroad, means the branch head and officials one level below the branch head.

10. Board of Commissioners:
    a. for Banks in the form of a Limited Liability Company, means the board of commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for Banks in the form of legal entities:

1. State-Owned Enterprises means the supervisory board as referred to in Law Number 23 of 2014 concerning Regional Government as last amended by Law Number 9 of 2015;
2. Regional State-Owned Enterprises means commissioners as referred to in Law Number 23 of 2014 concerning Regional Government as last amended by Law Number 9 of 2015;
3. Regional Enterprises means supervisors at Banks that have not yet changed their form into State-Owned Enterprises or Regional State-Owned Enterprises in accordance with Law Number 23 of 2014 concerning Regional Government as last amended by Law Number 9 of 2015;
   c. for Banks in the form of a Cooperative legal entity, means supervisors as referred to in Law Number 25 of 1992 concerning Cooperatives;
   d. for Banks with the status of a branch of a bank located abroad, means the party appointed to carry out supervisory functions.

CHAPTER II
SCOPE OF AGENCY ACTIVITIES FOR FOREIGN FINANCIAL PRODUCTS
Article 2
(1) Banks may only conduct Agency Activities for Foreign Financial Products after obtaining principle approval from the Financial Services Authority.
(2) To become an agent for Foreign Securities Investment Instruments, in addition to meeting the requirements as referred to in paragraph (1), Banks must meet the requirements as agents for Foreign Securities Investment Instruments in accordance with regulations established by the Financial Services Authority. (3) Banks are prohibited from acting as sub-agents in conducting Agency Activities for Foreign Financial Products.
Article 3
(1) Foreign Financial Products that can be acted as agents by Banks in Indonesia must at least meet the following requirements:
a. have been registered and/or meet the regulations of the competent authority in the country where the issuer is located; and b. have been reported by the Bank to the Financial Services Authority. (2) In addition to meeting the requirements as referred to in paragraph (1), Foreign Financial Products in the form of Foreign Non-Securities Investment Instruments that can be sold through agency must be Structured Products and must meet the following requirements:
a. issued by a bank abroad that has a branch in Indonesia; b. linked to underlying variables consisting of exchange rates and/or interest rates; and
c. not being a combination of various instruments with foreign currency derivative transactions against the rupiah for the purpose of speculative yield enhancement.
(3) In addition to meeting the requirements as referred to in paragraph (1), Foreign Financial Products in the form of Foreign Securities Investment Instruments that can be sold through agency by Banks in Indonesia must have been registered with the Financial Services Authority and obtained permission from the Financial Services Authority. (4) Foreign Financial Products as referred to in paragraph (1) are not included in the Government Insurance Program because they are not deposits at Banks.
Article 4
Issuers of Foreign Financial Products that can be used as cooperation partners with Banks in Agency Activities for Foreign Financial Products must meet the following criteria:
a. registered and have a business license from the competent authority in the country where the issuer is located; and b. are entities that are the object of supervision by the competent authority as referred to in letter a.
Article 5
(1) In conducting agency activities for Foreign Financial Products, Banks must establish Customer classification consisting of:
a. non-retail Customers; and b. retail Customers.
(2) Customers are classified as non-retail Customers as referred to in paragraph (1) letter a if the Customers have an understanding of the characteristics, features, and risks of Foreign Financial Products, consisting of:
a. Companies operating in the financial sector, consisting of:

1. banks;
2. securities companies;
3. financing companies;
4. futures traders;
5. pension funds; and
6. insurance companies.
   b. Companies other than those referred to in letter a, which at the start of investment in each Foreign Financial Product meet the following requirements:
7. have capital greater than Rp20,000,000,000.00 (twenty billion rupiah) or its equivalent in foreign currency; and
8. have conducted business activities for at least 36 (thirty-six) consecutive months.
   c. Individual Customers who at the start of investment in each Foreign Financial Product have a portfolio of assets in the form of cash, current accounts, savings, and/or deposits of at least Rp5,000,000,000.00 (five billion rupiah) or its equivalent in foreign currency.
   (3) Customers are classified as retail Customers as referred to in paragraph (1) letter b if the Customers do not meet the criteria as non-retail Customers as referred to in paragraph (2). (4) Banks must update the Customer classification as referred to in paragraph (1), paragraph (2), and paragraph (3) in the event of circumstances that may cause changes to the established classification of Customers.
   Article 6
   (1) Banks are prohibited from offering Foreign Financial Products to retail Customers.
   (2) Banks may only offer Foreign Financial Products to non-retail Customers as long as it does not conflict with banking, capital market, insurance, and pension fund regulations. (3) Banks may only offer Foreign Financial Products in the form of Foreign Securities Investment Instruments to non-retail Customers in accordance with regulations established by the Financial Services Authority.

CHAPTER III
RISK MANAGEMENT APPLICATION
Section One
General
Article 7
(1) Banks must apply effective risk management in conducting Agency Activities for Foreign Financial Products.
(2) The application of risk management as referred to in paragraph (1) must at least cover:
a. active supervision by the Board of Directors and Board of Commissioners; b. adequacy of policies, systems, and procedures;
c. adequacy of processes for identifying, measuring, monitoring, and controlling risks arising from activities related to Foreign Financial Products; and
d. internal control systems over Agency Activities for Foreign Financial Products.
Section Two
Active Supervision by the Board of Directors and Board of Commissioners
Article 8
Active supervision by the Board of Directors as referred to in Article 7 paragraph (2) letter a must at least cover:
a. establishing the Bank's plan for Agency Activities for Foreign Financial Products; b. establishing Bank policies and procedures for Agency Activities for Foreign Financial Products; and
c. monitoring and evaluating Agency Activities for Foreign Financial Products.
Article 9
Active supervision by the Board of Commissioners as referred to in Article 7 paragraph (2) letter a must at least cover:
a. Board of Commissioners' approval of the Bank's plan for Agency Activities for Foreign Financial Products; and b. evaluation of the implementation of the Bank's plan related to Agency Activities for Foreign Financial Products.
Section Three
Adequacy of Policies, Systems, and Procedures
Article 10
(1) Banks, in order to meet the adequacy of policies, systems, and procedures as referred to in Article 7 paragraph (2) letter b, must have and apply risk management policies, systems, and procedures in Agency Activities for Foreign Financial Products. (2) Risk management policies, systems, and procedures in Agency Activities for Foreign Financial Products as referred to in paragraph (1) must at least include:
a. policies regarding requirements and the suitability of the Foreign Financial Product profile to be acted as agents with the Customer risk profile; b. Customer risk profile assessment policies;
c. procedures for conducting Agency Activities for Foreign Financial Products, at least covering:

1. the implementation of cooperation for Agency Activities for Foreign Financial Products between the Bank and the Foreign Financial Product issuer;
2. the offering of Foreign Financial Products acted as agents to Customers, including the conditions for filling out forms regarding Customer risk profiles before the purchase of Foreign Financial Products; and
3. the execution of transactions for Foreign Financial Products acted as agents with Customers, including recording systems at the Bank;
   d. human resource policies governing the assignment of permanent Bank employees to handle Agency Activities for Foreign Financial Products; e. policies regarding the management of agency documents, including written cooperation agreements between the Bank and parties related to Agency Activities for Foreign Financial Products, including with issuers and/or custodians abroad; f. dispute resolution procedures related to Agency Activities for Foreign Financial Products; and g. procedures for identifying, measuring, monitoring, and controlling risks and information for Agency Activities for Foreign Financial Products. (3) Written cooperation agreements as referred to in paragraph (2) letter e must at least cover:
   a. clarity of rights and obligations of each party, including the time for implementing rights and obligations, and conditions that must be met before implementing rights and obligations; b. the determination of the cooperation agreement period;
   c. the determination of clauses containing conditions for the termination of the cooperation agreement, including clauses allowing the Bank to stop cooperation before the end of the agreement period; and
   d. clarity on the settlement of rights and obligations of each party in the event the cooperation agreement ends and in the event of cancellation of the cooperation agreement.
   Section Four
   Identification, Measurement, Monitoring, and Control of Risks
   Article 11
   Banks, in order to meet the adequacy of the process for identifying, measuring, monitoring, and controlling risks as regulated in Article 7 paragraph (2) letter c, must ensure that:
   a. the Bank or financial institutions that are parties related to Agency Activities for Foreign Financial Products have been registered and obtained permission from the competent authority in the country where such parties are located; b. the country where the parties related to Agency Activities for Foreign Financial Products are located has regulations regarding customer protection that are at least the same as regulations in Indonesia;
   c. all work units related to Agency Activities for Foreign Financial Products have understood and considered the risks of Foreign Financial Products in conducting Agency Activities;
   d. offering documents for Foreign Financial Products provided to Customers are separate documents for each product; and e. Foreign Financial Products in the form of Foreign Securities Investment Instruments acted as agents have been registered and obtained permission from the Financial Services Authority.
   Section Five
   Internal Control Systems
   Article 12
   (1) Banks, in order to meet the internal control system as regulated in Article 7 paragraph (2) letter d, must conduct evaluation and audit of Agency Activities for Foreign Financial Products at least once every 1 (one) year. (2) The results of evaluation and audit as referred to in paragraph (1) must be submitted to the Financial Services Authority at the latest 5 (five) working days after the audit result report is completed.
   Article 13
   The Financial Services Authority may conduct examinations regarding the effectiveness and compliance of the application of risk management for Agency Activities for Foreign Financial Products.

CHAPTER IV
CUSTOMER PROTECTION
Article 14
(1) Banks must conduct analysis regarding Foreign Financial Products to be offered, including regarding the status, performance, and reputation of the issuer, as well as the characteristics and risks of the offered Foreign Financial Products for the Bank and Customers. (2) In the context of offering, Banks must provide transparent information to Customers regarding the offered Foreign Financial Products, including emphasizing that Foreign Financial Products are not Bank products for which the Bank acts as a selling agent and are not classified as deposits at Banks, and therefore are not included in the Government Insurance Program. (3) Information as referred to in paragraph (2) must at least cover:
a. the issuer, name, type, specifications, characteristics, and features of the product; b. the function and suitability of the product to Customer needs;
c. the calculation of income or return from the product;
d. product risks offered, including the possibility of investment value loss due to fluctuations in investment value according to market conditions (market risk), the quality of underlying assets (credit risk), and operational risks, especially settlement risk; e. the calculation of estimated worst-case losses that may occur; f. product terms and conditions, including costs, duration, cooling-off period, settlement procedures, and early termination; and g. dispute resolution mechanisms. (4) In conducting Agency Activities for Foreign Financial Products, Banks must account for Foreign Financial Product offering documents in writing in the Indonesian language. (5) Banks must ensure that agreements or contracts between the Bank and Customers have legal force, contain information regarding the Foreign Financial Products to be purchased by Customers, and contain information regarding means that can be used by Customers to know the performance of Foreign Financial Product investments. (6) Banks must periodically submit investment performance information to Customers in a transparent manner, covering investment value, changes in investment value, and reasons for changes in investment value.

CHAPTER V
PRUDENTIAL PRINCIPLES
Article 15
(1) Banks are prohibited from taking actions, directly or indirectly, that may cause Customers to believe:
a. Foreign Financial Products are Bank products; b. the Bank provides guarantees for the liquidation of Foreign Financial Products;
c. the Bank provides certainty regarding the amount of return on Foreign Financial Products;
d. the Bank provides guarantees for the fulfillment of transaction contracts for Foreign Financial Products in the form of Foreign Non-Securities Investment Instruments, namely Structured Products that include combinations of derivative transactions with derivative transactions, for the benefit of Customers or Foreign Financial Product issuers; and/or e. the Bank provides commitments to be willing to buy (stand-by buyer) Foreign Financial Products at any time. (2) The Financial Services Authority has the authority to stop specific Agency Activities for Foreign Financial Products if, in the opinion of the Financial Services Authority, such Agency Activities for Foreign Financial Products become inconsistent with this Financial Services Authority Regulation and/or have an increased potential risk that can endanger the Bank. (3) In conducting Agency Activities for Foreign Financial Products, in order to minimize the risk of the Bank becoming a medium and/or target for money laundering criminal acts, Banks must apply customer due diligence procedures in accordance with regulations governing the implementation of anti-money laundering and counter-terrorism financing programs for commercial banks.

CHAPTER VI
REQUIREMENTS AND APPROVALS
Article 16
(1) Banks that can submit applications for approval as referred to in Article 2 must meet the following requirements:
a. the Bank is a commercial bank that conducts business activities in foreign currency; b. the Bank includes the plan for Agency Activities for Foreign Financial Products in the Bank's business plan; and
c. the Bank has an operational system and procedures supported by adequate information technology to be able to conduct risk management over Agency Activities for Foreign Financial Products.
(2) The plan for Agency Activities for Foreign Financial Products as referred to in paragraph (1) must at least include:
a. the type of Foreign Financial Products to be acted as agents; b. an explanation regarding the group of Customers that are the target for the Foreign Financial Products to be acted as agents; and
c. an estimate of the volume of Foreign Financial Products to be acted as agents.
Article 17
(1) Applications for principle approval as referred to in Article 2 must be submitted to the Financial Services Authority at the latest 60 (sixty) days before conducting the Agency Activity. (2) Applications for principle approval as referred to in paragraph (1) are submitted in writing and must at least contain:
a. the date of the planned implementation of the agency activity; b. documents of policies, systems, and procedures for conducting Agency Activities for Foreign Financial Products as referred to in Article 10;
c. organizational structure and division of authority and responsibilities of units or officials handling Agency Activities for Foreign Financial Products;
d. documents of the results of the Bank's identification and analysis of risks inherent in Agency Activities for Foreign Financial Products as referred to in Article 11, including legal risks; e. results of testing methods for measuring and monitoring inherent risks;

---

f. accounting information system; and

g. results of legal aspect analysis.

(3) In order to grant the principle approval as referred to in paragraph (1), the Financial Services Authority may request documents other than those referred to in paragraph (2).

(4) The Financial Services Authority grants principle approval or rejects the application for principle approval as referred to in paragraph (1) within a maximum of 60 (sixty) days since the complete documents are received.

CHAPTER VII
REPORTING

Article 18

(1) Banks must report to the Financial Services Authority every Foreign Financial Product that will be agencyed as:

a. Foreign Financial Products that are first offered by the Bank to Customers; and

b. New Foreign Financial Products,

at the latest 60 (sixty) days before the offering activity begins.

(2) The report on Foreign Financial Products to be agencyed as referred to in paragraph (1) must at least cover information:

a. Foreign Financial Products have been registered and/or meet the regulations of the competent authority in the country where the issuer is located; and

b. the issuer of Foreign Financial Products is a financial institution outside the country that has a license from the competent authority in the country where the issuer is located.

(3) Reporting of Foreign Financial Products as referred to in paragraph (1) letter a is submitted after

the Bank obtains principle approval to conduct Agency Activities for Foreign Financial Products as referred to in Article 2.

(4) Banks must submit reports on the realization of Agency Activities for Foreign Financial Products at the latest 7 (seven) working days after the product offering activity is conducted for the first time.

(5) The reporting obligations as referred to in paragraph (1) do not apply to Foreign Investment Instruments other than Securities in the form of derivative transactions that are pure hedging transactions.

Article 19

(1) Banks submit routine reports on Agency Activities for Foreign Financial Products every month online through the Financial Services Authority's reporting system.

(2) In the event that the submission of reports as referred to in paragraph (1) cannot be performed, Banks submit routine reports every month online through the General Bank Headquarters Office Reporting System (LKPBU).

(3) Submission of routine reports every month online through the LKPBU system as referred to in paragraph (2) is carried out in accordance with the procedures, formats, and timeframes as stipulated in regulations governing LKPBU.

Article 20

Applications for approval of Agency Activities for Foreign Financial Products, Reports on the Realization of Agency Activities for Foreign Financial Products, and Reports on Foreign Financial Products as referred to in Article 2 paragraph (1) and Article 18 paragraph (1) are submitted to:

a. the Department of Supervision of the Relevant Bank or Regional Office 1 of Greater Jakarta, Banten, Lampung, and Kalimantan, for Banks that have their headquarters or branch offices of banks located outside the country that are located in the Greater Jakarta (Jabodetabek) and Banten Province areas; or

b. Regional Offices of the Financial Services Authority or local Financial Services Authority Offices for Banks that have their headquarters outside the Greater Jakarta (Jabodetabek) and Banten Province areas.

CHAPTER VIII
OTHER PROVISIONS

Article 21

In the event that Banks will conduct Agency Activities for Foreign Financial Products in the form of Foreign Investment Securities, in addition to being subject to the provisions of this Financial Services Authority Regulation, Banks must meet regulations governing the sale of foreign investment securities.

CHAPTER IX
SANCTIONS

Article 22

(1) Banks that do not comply with the provisions as referred to in Article 2 paragraph (1), Article 2 paragraph (3), Article 3 paragraph (1), Article 3 paragraph (2), Article 3 paragraph (3), Article 4, Article 5 paragraph (1), Article 5 paragraph (4), Article 6, Article 7 paragraph (1), Article 12 paragraph (2), Article 14 paragraph (1), Article 14 paragraph (2), Article 14 paragraph (4), Article 14 paragraph (6), Article 15 paragraph (1), Article 15 paragraph (3), Article 18 paragraph (1), or Article 18 paragraph (4) are subject to administrative sanctions in the form of:

a. written reprimand;

b. reduction of the Bank's health level;

c. suspension and revocation of approval for certain business activities, either for specific branch offices or for the Bank as a whole;

d. dismissal of Bank management and subsequently appointing and appointing temporary replacements until the General Meeting of Shareholders or the Cooperative Members' Meeting appoints permanent replacements with the approval of the Financial Services Authority; and/or

e. listing of shareholders, management, or executive officials in the list of unqualified in the banking field.

(2) In addition to the sanctions as referred to in paragraph (1), Banks that do not comply with the provisions as referred to in Article 3 paragraph (2) letter c are subject to sanctions as regulated in regulations governing foreign exchange transactions against the Rupiah.

CHAPTER X
CLOSING PROVISIONS

Article 23

Upon the time this Financial Services Authority Regulation takes effect, Bank Indonesia Regulation Number 12/9/PBI/2010 dated June 29, 2010 concerning Prudential Principles in Implementing Foreign Financial Product Activities (State Gazette of the Republic of Indonesia Year 2010 Number 82, Supplement to the State Gazette of the Republic of Indonesia Number 5139) is revoked and declared invalid.

Article 24

This Financial Services Authority Regulation takes effect on the date of enactment.

To be known by everyone, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on January 26, 2016

CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY,

signed

MULIAMAN D. HADAD

Enacted in Jakarta on January 27, 2016

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

signed

YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2016 NUMBER 20

A copy in accordance with the original

Director of Law 1

Legal Department

signed

Yuliana

EXPLANATION

OF

FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 8 /POJK.03/2015

CONCERNING

PRUDENTIAL PRINCIPLES IN IMPLEMENTING

AGENCY ACTIVITIES FOR FOREIGN FINANCIAL PRODUCTS

BY GENERAL BANKS

I. GENERAL

In order to increase Bank business activities and maintain Bank Customers, Banks are required to improve Bank service operations to their Customers. Banks are required to change banking business strategies so as to make greater use of information technology advancements.

The purchase of Foreign Financial Products by Customers is considered a matter that needs to be serviced by Banks to increase Bank competitiveness and revenue from fee-based transactions. The application of information technology has improved Banks' capabilities in operational activities and the management of Banks' data that is global in nature, such as conducting offerings, settlements, and providing information on Foreign Financial Products to Customers more accurately and quickly.

In addition to the various benefits and advantages obtained from agency activities for Foreign Financial Products, there are also risks that can harm Banks and Customers, such as legal risks, reputational risks, and transaction settlement risks.

To overcome the risks faced by Banks and in order to provide protection to Customers, Banks are required to apply prudential principles in implementing operational activities related to the sale of Foreign Financial Products to Customers, including the application of risk management.

In relation to activities concerning Foreign Financial Products, Banks are also required to pay attention to regulations and legislation related to this Financial Services Authority Regulation, including Law Number 8 of 1995 concerning Capital Markets, Law Number 8 of 1999 concerning Consumer Protection, regulations governing derivative transactions, foreign exchange transactions against the Rupiah, transparency of banking product information and the use of customer personal data, the application of anti-money laundering programs and counter-terrorism financing for Banks, restrictions on Rupiah transactions and the granting of foreign exchange credit, and the resolution of customer complaints.

II. ARTICLE BY ARTICLE

Article 1

Sufficiently clear.

Article 2

Paragraph (1)

The principle approval as referred to in this paragraph aims to assess the Bank's readiness to conduct Agency Activities for Foreign Financial Products comprehensively and is not approval for every type of product agencyed. Thus, principle approval is not a guarantee in any form regarding the suitability, benefits, risks, and losses that may arise among the parties conducting transactions. On principle, the parties who need to ensure the suitability, benefits, risks, and losses that may arise from Agency Activities for Foreign Financial Products are the parties conducting the transactions, namely Banks, Customers, and related cooperation partners for Agency Activities for Foreign Financial Products. In this regard, the application for approval as referred to in this paragraph is submitted once (1) before the Bank conducts Agency Activities for Foreign Financial Products.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Article 3

Sufficiently clear.

Article 4

Sufficiently clear.

Article 5

Paragraph (1)

Sufficiently clear.

Paragraph (2)

To determine the level of customer understanding of the characteristics, features, and risks of Foreign Financial Products, this can be done through:

1. interviews, the results of which are documented in writing; and/or

2. questionnaires, the format of which can be determined by each respective Bank.

Letter a

Number 1

Sufficiently clear.

Number 2

The term "securities company" refers to securities companies as referred to in Law Number 8 of 1995 concerning Capital Markets.

Number 3

The term "financing company" refers to financing companies as referred to in regulations concerning financing institutions.

Number 4

The term "commodity futures trader" refers to commodity futures traders as referred to in Law Number 32 of 1997 concerning Commodity Futures Trading as amended by Law Number 10 of 2011.

Number 5

The term "pension fund" refers to pension funds as referred to in Law Number 11 of 1992 concerning Pension Funds.

Number 6

The term "insurance company" refers to insurance companies as referred to in Law Number 40 of 2014 concerning Insurance.

Letter b

Number 1

The term "capital" refers to equity as referred to in accounting standards statements in Indonesia.

Number 2

Sufficiently clear.

Letter c

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Article 6

Sufficiently clear.

Article 7

Paragraph (1)

Principles for the application of risk management refer to regulations concerning the application of risk management for Banks.

Paragraph (2)

Sufficiently clear.

Article 8

Letter a

The Bank's plan is stated in the Bank's business plan.

Letter b

Sufficiently clear.

Letter c

Sufficiently clear.

Article 9

Letter a

Approval of the Bank's plan regarding Agency Activities for Foreign Financial Products is considered to have been conducted if the Bank's business plan, signed by members of the Board of Commissioners, includes the Bank's plan regarding Agency Activities for Foreign Financial Products.

Letter b

Evaluations of the implementation of the Bank's plan regarding Agency Activities for Foreign Financial Products can be stated in Board of Commissioners meeting minutes or business plan supervision reports as regulated in regulations governing Bank business plans.

Article 10

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Letter a

Sufficiently clear.

Letter b

Forms regarding customer risk profiles contain at least the following information:

1. investment period;

2. investment objectives;

3. risk level that the Customer is willing to bear;

4. the Customer's financial condition related to the amount of investment conducted in Foreign Financial Products; and

5. the Customer's investment experience.

Letter c

Procedures for implementing Agency Activities for Foreign Financial Products aim to provide a formal framework for implementing Agency Activities for Foreign Financial Products, covering the establishment of implementation processes, establishment of authority and responsibilities, and interconnections between work units from the planning stage to commercialization.

Letter d

Human resource policies clearly include competency criteria that must be possessed by employees who can be assigned to offer Foreign Financial Products, at least:

1. having adequate understanding of Foreign Financial Products and related risks and being able to explain the nature and characteristics of Foreign Financial Products sold to Customers; and

2. receiving adequate and continuous training so as to have knowledge regarding the features and characteristics of Foreign Financial Products offered to Customers.

Letter e

Sufficiently clear.

Letter f

Sufficiently clear.

Letter g

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Article 11

Sufficiently clear.

Article 12

Sufficiently clear.

Article 13

Sufficiently clear.

Article 14

Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Letter a

Sufficiently clear.

Letter b

Sufficiently clear.

Letter c

Sufficiently clear.

Letter d

Sufficiently clear.

Letter e

Sufficiently clear.

Letter f

The term "cooling off period" refers to the interval between the time of the offering submission by the Bank and the time the Customer makes a decision to invest.

Letter g

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

Sufficiently clear.

Paragraph (6)

The submission of periodic investment performance information is adjusted to the characteristics of Foreign Financial Products and is conducted consistently.

Example:

For Foreign Investment Securities, investment performance is stated as Net Asset Value, presented at least monthly.

Article 15

Sufficiently clear.

Article 16

Paragraph (1)

Letter a

Requirements refer to regulations concerning requirements for general banks to conduct business activities in foreign exchange.

Letter b

Matters contained in the Bank's business plan must at least cover product development and new activities.

Letter c

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Article 17

Paragraph (1)

Applications for principle approval submitted less than 60 (sixty) days before the planned date for implementing Agency Activities are rejected by the Financial Services Authority.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Article 18

Paragraph (1)

Letter a

Sufficiently clear.

Letter b

New Foreign Financial Products include Foreign Financial Products with different features and/or underlying assets and/or issuers that cause changes in the risk level of Foreign Financial Products.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Paragraph (5)

Sufficiently clear.

Article 19

Sufficiently clear.

Article 20

Sufficiently clear.

Article 21

Sufficiently clear.

Article 22

Sufficiently clear.

Article 23

Sufficiently clear.

Article 24

Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5844