POJK on the Guidance and Supervision of the Indonesian Export Financing Institution

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 40 /POJK.05/2015
CONCERNING
GUIDANCE AND SUPERVISION
OF THE INDONESIAN EXPORT FINANCING INSTITUTION BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering: that in order to implement the provisions of Article 40 paragraph (2) of Law Number 2 of 2009 concerning the Indonesian Export Financing Institution, it is necessary to establish a Financial Services Authority Regulation concerning the Guidance and Supervision of the Indonesian Export Financing Institution;

Recalling: 1. Law Number 2 of 2009 concerning the Indonesian Export Financing Institution (State Gazette of the Republic of Indonesia Year 2009 Number 2, Supplement to the State Gazette of the Republic of Indonesia Number 4957);
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:

To establish: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING GUIDANCE AND SUPERVISION OF THE INDONESIAN EXPORT FINANCING INSTITUTION.

COPY

CHAPTER I
GENERAL PROVISIONS

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

1. Indonesian Export Financing Institution, hereinafter abbreviated as LPEI, is the Indonesian Export Financing Institution as referred to in Law Number 2 of 2009 concerning the Indonesian Export Financing Institution.
2. Government is the government of the Republic of Indonesia.
3. Financing is credit and/or financing based on Sharia principles provided by LPEI.
4. Guarantee is the provision of guarantee facilities to cover the payment of financial obligations of the guaranteed party in the event the guaranteed party cannot fulfill contractual obligations to its creditors.
5. Insurance is the provision of facilities in the form of compensation for losses arising as a result of an uncertain event.
6. Sharia Principles are the core rules based on Islamic law that serve as the foundation in the making of agreements between LPEI and other parties in carrying out national export financing activities.
7. Derivative Transaction is a contract or payment agreement whose value is derived from the value of underlying instruments, such as interest rates, commodity exchange rates, equities, and indices, whether with or without movement of funds/instruments, conducted for hedging purposes.
8. Maximum Limit of Derivative Transactions, hereinafter abbreviated as BMTD, is the maximum percentage of derivative transactions permitted against LPEI's Equity.
9. Equity is LPEI's equity as reported in the financial position report.
10. Derivative Receivable is a receivable due to potential profit from a Derivative Transaction agreement/contract (positive difference between the contract value and the fair value of the Derivative Transaction on the reporting date), including potential profit from mark-to-market of ongoing spot transactions.
11. Assets are productive and non-productive assets implemented on a conventional basis or based on Sharia Principles.
12. Productive Assets are the investment of LPEI funds to generate income.
13. Non-Productive Assets are LPEI assets other than Productive Assets that have potential losses, including in the form of foreclosed collateral, inter-office accounts, and suspense accounts.
14. Acceptance Receivable is a receivable arising from acceptance of time drafts.
15. Administrative Account Transaction is commitment and contingency liabilities including, among others, the issuance of guarantees, letters of credit, standby letters of credit, undrawn financing facilities, and/or other commitment and contingency liabilities.
16. Bank Indonesia Certificates, hereinafter abbreviated as SBI, are negotiable instruments in Rupiah currency issued by Bank Indonesia as acknowledgment of short-term debt.
17. Foreclosed Collateral, hereinafter abbreviated as AYDA, are assets acquired by LPEI, either through auction or outside of auction based on voluntary surrender by the collateral owner in the event the borrower fails to fulfill obligations to LPEI.
18. Inter-office Account is a receivable arising from inter-office transactions that have not been settled within a certain period.
19. Suspense Account is an account whose recording purpose has not been identified, so it cannot be reclassified into the appropriate account.
20. Asset Impairment Provision, hereinafter abbreviated as PPA, is a reserve that must be formed at a certain percentage based on Asset quality.
21. Maximum Limit of Financing Provision, hereinafter abbreviated as BMPP, is the maximum percentage of fund investment in the form of financing, placements, and acceptance receivables permitted against LPEI's Equity.
22. BMPP Excess is the surplus difference between the permitted BMPP percentage and the percentage of fund investment against LPEI's Equity at the reporting date, and does not include BMPP violations.
23. BMPP Violation is the surplus difference between the permitted BMPP percentage and the percentage of fund investment against LPEI's Equity at the time of fund investment.
24. Self-Retention is the portion of the compensation amount for losses or guarantee facilities for each risk borne by itself without reinsurance or retrocession.
25. 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.

CHAPTER II
BUSINESS ACTIVITIES

Article 2
(1) LPEI's business activities include:
a. Financing; b. Guarantee;
c. Insurance; and
d. Consulting services.
(2) Business activities as referred to in paragraph (1) letters a, b, and c may be conducted based on Sharia Principles.
(3) Business activities based on Sharia Principles as referred to in paragraph (2) are:
a. Profit-sharing financing with mudharabah agreement, musyarakah agreement, or other agreements not contrary to Sharia Principles; b. Financing with murabahah agreement, salam agreement, istishna’ agreement, or other agreements not contrary to Sharia Principles;
c. Financing with qardh agreement or other agreements not contrary to Sharia Principles;
d. Leasing financing with ijarah agreement, ijarah muntahiyah bit tamlik agreement, or other agreements not contrary to Sharia Principles; e. acceptance of power of attorney in the context of debt and receivable takeover or other activities with hawalah agreement, wakalah agreement, or other agreements not contrary to Sharia Principles; and/or f. Guarantee with kafalah agreement or other agreements not contrary to Sharia Principles. (4) In conducting business activities based on Sharia Principles, LPEI is required to:
a. open a special work unit; b. allocate separate capital;
c. conduct separate bookkeeping;
d. appoint a Sharia supervisory board; and e. adhere to fatwas issued by the National Sharia Council of the Indonesian Ulema Council.

Article 3
LPEI is required to apply good corporate governance principles, risk management implementation, and customer due diligence principles in all its activities.

CHAPTER III
FUNDING SOURCES

Article 4
(1) To finance its activities, LPEI may obtain funds from:
a. issuance of negotiable instruments; b. short-term, medium-term, and/or long-term loans sourced from:

1. foreign governments;
2. multilateral institutions;
3. banks and financial and financing institutions, both domestic and foreign; and/or
4. the Government; and/or
   c. grants.
   (2) In addition to obtaining funds from sources as referred to in paragraph (1), LPEI may finance its activities with funding sources from fund placements by Bank Indonesia.

Article 5
(1) Funding as referred to in Article 4 may be obtained based on Sharia Principles.
(2) Agreements used in Sharia-based funding as referred to in paragraph (1) may include mudharabah agreement, mudharabah musytarakah agreement, ijarah agreement, murabahah agreement, qardh agreement, jualah agreement, or other agreements as determined by OJK.

Article 6
(1) LPEI is required to meet a maximum gearing ratio of 20 (twenty) times.
(2) The gearing ratio as referred to in paragraph (1) is the ratio between the total loans received and negotiable instruments issued against Equity.

CHAPTER IV
DERIVATIVE TRANSACTIONS

Article 7
(1) LPEI is required to apply prudent principles in managing receivables and/or obligations arising from Derivative Transactions. (2) Derivative Transactions as referred to in paragraph (1) are prohibited unless conducted for hedging purposes.

Article 8
(1) BMTD for each counterparty is set at 10% (ten percent) of Equity.
(2) BMTD is calculated based on Derivative Transaction risk consisting of Derivative Receivables plus potential future credit exposure.

CHAPTER V
ASSET QUALITY

First Section
General

Article 9
(1) LPEI is required to assess, monitor, and take necessary steps to ensure Asset quality remains good.
(2) Asset quality assessment is conducted against Productive Assets and Non-Productive Assets.

Second Section
Productive Assets

Paragraph 1
General

Article 10
(1) LPEI is required to set the same quality for:
a. 1 (one) borrower with several different accounts; and/or b. 1 (one) borrower financed by several creditors to finance the same project. (2) In the event of differences in Productive Asset quality, the Productive Asset quality used is the lowest one. (3) LPEI may set different Productive Asset qualities in the event:
a. Productive Asset quality determination uses the country risk factor of the Republic of Indonesia; b. the lowest Productive Asset quality has been written off;
c. Financing up to the amount of Rp10,000,000,000.00 (ten billion Rupiah); and/or
d. the borrower has several different projects with clear cash flow separation for each project.
(4) LPEI is required to adjust Productive Asset quality at least every 3 (three) months, namely for the end positions of March, June, September, and December.

Article 11
(1) LPEI is required to set criteria for borrowers who must submit audited financial reports by a public accountant, including rules regarding the deadline for submission of such financial reports. (2) LPEI is required to include the borrower's obligation to submit financial reports as referred to in paragraph (1) in the agreement between LPEI and the borrower. (3) The Productive Asset quality of a borrower who fails to submit financial reports as referred to in paragraph (1) is downgraded by one level and assessed at best as Substandard.

Paragraph 2
Financing

Article 12
(1) Financing quality is set based on assessment factors:
a. business prospects; b. borrower performance; and/or
c. repayment ability.
(2) Assessment of business prospects includes components:
a. business growth potential; b. market conditions and the borrower's position in competition;
c. management quality and labor issues;
d. support from the group or affiliates; and e. efforts made by the borrower to maintain the environment.
(3) Assessment of borrower performance includes components:
a. profit acquisition; b. capital structure;
c. cash flow; and
d. sensitivity to market risk.
(4) Assessment of repayment ability includes components:
a. punctuality of principal and interest payments, or margin/profit-sharing/fee for Sharia-based activities; b. availability and accuracy of borrower financial information;
c. completeness of Financing documentation;
d. compliance with Financing agreements; e. suitability of fund usage; and f. fairness of the source of obligation payment.
(5) Financing quality assessment is set as:
a. Good; b. Special Attention;
c. Substandard;
d. Doubtful; or e. Loss.
(6) Financing quality assessment is conducted in accordance with guidelines as contained in the Appendix which is an integral part of this Financial Services Authority Regulation.

Article 13
(1) Assessment of the repayment ability factor as referred to in Article 12 paragraph (4) letter a for Financing with mudharabah and musyarakah agreements refers to the punctuality of principal installment payments and/or achievement of the ratio between Realized Income (RI) and Projected Income (PI). (2) Calculation of RI and PI as referred to in paragraph (1) is calculated based on the accumulated average during the Financing period based on business feasibility analysis and customer cash inflow. (3) LPEI may change PI based on agreement with the customer in the event of changes in macroeconomic, business, market, and political conditions affecting the customer's business. (4) RI and PI are an integral part of the Financing agreement with mudharabah and musyarakah agreements.

Paragraph 3
Problematic Financing

Article 14
(1) Financing quality categorized as Problematic Financing (non-performing financing) consists of Financing with Substandard, Doubtful, and Loss quality. (2) LPEI is prohibited from having Financing with Problematic Financing quality category as referred to in paragraph (1) after deducting financing impairment provisions, exceeding 5% (five percent) of total Financing.

Paragraph 4
Negotiable Instruments

Article 15
(1) Quality of fund placement in the form of negotiable instruments, including Sharia-based negotiable instruments, issued by:
a. Government; b. Bank Indonesia;
c. donor country governments; or
d. multilateral financial institutions; is set as Good.
(2) Quality of fund placement in the form of negotiable instruments other than as referred to in paragraph (1) recognized based on market value is set as Good provided it meets the requirements:
a. actively traded on the stock exchange; b. transparent market value information exists;
c. coupons, returns, or similar obligations are paid in the correct amount and time, according to the agreement; and
d. not yet due.
(3) Quality of fund placement in the form of negotiable instruments, including Sharia-based negotiable instruments, that do not meet the requirements as referred to in paragraph (1) and paragraph (2) letters a and/or b, or negotiable instruments recognized based on acquisition cost, is set:
a. Good, if:
1. included in the investment grade category;
2. coupons or similar obligations are paid in the correct amount and time, according to the agreement; and
3. not yet due;
b. Substandard, if:
1. included in the investment grade category;
2. there is a delay in coupon or similar obligation, profit-sharing/margin/fee payments; and
3. not yet due,
or
1. has a rating at least 1 (one) level below the investment grade category;
2. there is no delay in coupon or similar obligation payments; and
3. not yet due; or
c. Loss, if the negotiable instrument does not meet the criteria as referred to in letters a and b.

Paragraph 5
Placements in the Form of Deposits

Article 16
(1) Quality of placements in the form of Rupiah or foreign currency deposits at Bank Indonesia is set as Good.
(2) Quality of placements in the form of deposits in domestic and/or foreign banks is set:
a. Good, if:
1. the receiving bank has a Minimum Capital Adequacy Ratio (KPMM) at least equal to the applicable regulations; and
2. there are no outstanding principal and/or interest payments;
b. Substandard, if:
1. the receiving bank has a KPMM at least equal to the applicable regulations; and
2. there are outstanding principal and/or interest payments up to 5 (five) working days;
c. Loss, if:
1. the receiving bank has a KPMM less than the applicable regulations;
2. the receiving bank has been designated and announced as a bank under special surveillance status or the bank has been subject to sanctions suspending all business activities;
3. the receiving bank is designated as a bank in liquidation; and/or
4. there are outstanding principal and/or interest payments for more than 5 (five) working days.

Article 17
(1) Placements in the form of Sharia-based deposits consist of:
a. Sharia money market negotiable instruments; and b. placements in other forms.
(2) Quality of Sharia money market negotiable instrument placements is set:
a. Good, if it meets the requirements:
1. transparent information about the negotiable instrument exists;
2. returns have been received in the correct amount and time, according to the agreement; and
3. not yet due;
b. Loss, if it does not meet the requirements as referred to in letter a.
(3) Quality of placements in other forms as referred to in paragraph (1) letter b is set:
a. Good, if:
1. the bank receiving the placement has a KPMM at least equal to the applicable regulations; and
2. meets the requirements:
a) there are no outstanding principal payments for qardh agreements; b) withdrawable at any time for current accounts based on wadiah agreements; or c) there are no outstanding investment nominal and/or profit-sharing payments for deposits based on mudharabah or murabahah agreements; b. Substandard, if:
1. the bank receiving the placement has a KPMM at least equal to the applicable regulations; and
2. meets the requirements:
a) there are outstanding principal payments up to 5 (five) working days for qardh agreements; b) not withdrawable up to 5 (five) working days for current accounts based on wadiah agreements; or c) there are outstanding investment nominal and/or profit-sharing payments up to 5 (five) working days for deposits with mudharabah or murabahah agreements;
c. Loss, if:
1. the bank receiving the placement has a KPMM less than the applicable regulations;
2. the bank receiving the placement has been designated and announced as a bank under special surveillance status or the bank has been subject to sanctions suspending all business activities;
3. the bank receiving the placement is designated as a bank in liquidation; and/or
4. meets the requirements:
a) there are outstanding principal payments for qardh agreements for more than 5 (five) working days; b) not withdrawable at the time the term is more than 5 (five) working days for current accounts based on wadiah agreements; or c) there are outstanding investment nominal and/or profit-sharing payments for more than 5 (five) working days for deposits based on mudharabah or murabahah agreements.

Paragraph 6
Acceptance Receivables and Derivative Receivables

Article 18
Acceptance Receivable quality is set based on:
a. the quality determination rules for placements in the form of bank deposits as referred to in Article 16 paragraph (2), if the party obligated to settle the receivable is a bank; or b. the Financing quality determination rules as referred to in Article 12, if the party obligated to settle the receivable is a borrower.

Article 19
Derivative Receivable quality for hedging purposes is set based on:
a. the quality determination rules for placements in the form of bank deposits as referred to in Article 16 paragraph (2), if the transaction counterparty is a bank; or b. the Financing quality determination rules as referred to in Article 12, if the transaction counterparty is not a bank.

Paragraph 7
Equity Participation

Article 20
(1) Equity participation quality assessed using the cost method is set:
a. Good, if the equity participation recipient (investee) earns profit and has not experienced cumulative losses; b. Substandard, if the equity participation recipient (investee) experiences cumulative losses up to 25% (twenty-five percent) of the equity participation recipient's (investee) capital;
c. Doubtful, if the equity participation recipient (investee) experiences cumulative losses more than 25% (twenty-five percent) up to 50% (fifty percent) of the equity participation recipient's (investee) capital; or
d. Loss, if the equity participation recipient (investee) experiences cumulative losses more than 50% (fifty percent) of the equity participation recipient's (investee) capital. (2) Cumulative losses as referred to in paragraph (1) are based on the last fiscal year's audited financial reports. (3) Equity participation quality assessed using the equity method is set as Good.

Paragraph 8
Temporary Equity Participation

Article 21
Temporary equity participation quality is set:
a. Good, if it has not exceeded a period of 1 (one) year; b. Substandard, if it has exceeded a period of 1 (one) year but has not exceeded a period of 3 (three) years;
c. Doubtful, if it has exceeded a period of 3 (three) years but has not exceeded a period of 5 (five) years; or
d. Loss, if it has exceeded a period of 5 (five) years or has not been withdrawn even though the borrowing company has cumulative profits.

Paragraph 9
Administrative Account Transactions

Article 22
Administrative Account Transaction quality is set based on:
a. the quality determination rules for placements in the form of bank deposits as referred to in Article 16 paragraph (2), if the transaction counterparty is a bank; b. the Financing quality determination rules as referred to in Article 12, if the transaction counterparty is a borrower.

Paragraph 10
Productive Assets Secured by Cash Collateral

Article 23
(1) Productive Assets secured by cash collateral are set to have Good quality.
(2) Cash collateral as referred to in paragraph (1) consists of:
a. bank deposits, guarantee deposits, and/or gold; b. SBI, Sharia SBI, government bonds, sukuk, and/or other negotiable instruments issued by the Government or Bank Indonesia;
c. Government guarantees and/or foreign government guarantees included in the investment grade category; and/or
d. standby letters of credit in accordance with the Uniform Customs and Practice for Documentary Credits (UCP) or International Standby Practices (ISP) issued by banks rated up to 200 Banker’s Almanac or Export Credit Agency (ECA) included in the investment grade category.

[End of provided text]

categories eligible for investment (investment grade).
(3) Cash collateral as referred to in paragraph (2) letters a and b must meet the following requirements:
a. be blocked and accompanied by a power of attorney; b. the blocking period must be at least equal to the productive asset term;
c. have strong legal binding (legally enforceable); and
d. be stored at LPEI and/or Government banks.
(4) Cash collateral as referred to in paragraph (2) letters c and d must meet the following requirements:
a. be unconditional and irrevocable; b. must be liquidatable within a maximum of 5 (five) working days from the submission of the claim, including partial liquidation to pay principal or interest arrears; and
c. have a term of at least equal to the productive asset term.

Article 24
LPEI must submit a claim for the liquidation of cash collateral as referred to in Article 23 within a maximum of 5 (five) working days after the borrower defaults (event of default) based on LPEI's determination.

Paragraph 11
Financing and Fund Placement for Micro, Small, and Medium Enterprises and Specific Regions

Article 25
(1) LPEI is required to have a value of new Financing to micro, small, and medium enterprise debtors of at least 5% (five percent) of total Financing. (2) Provisions regarding new Financing to micro, small, and medium enterprise debtors as referred to in paragraph (1) apply to positions at the end of each fiscal year and apply for the first time to the position at the end of 2016. (3) Reports on the realization of new Financing as referred to in paragraph (1) are submitted to OJK monthly, concurrently with the submission of monthly reports.

Article 26
Quality determination is based solely on the timeliness of principal and/or interest payments for:
a. Micro, small, and medium enterprise Financing; and b. Financing and fund placement to borrowers whose business activity locations are in specific regions designated by OJK.

Paragraph 12
Financing Ratio Against Total Assets

Article 27
LPEI is required to have a financing receivables to total assets ratio of at least 75% (seventy-five percent).

Part Three
Non-Productive Assets

Paragraph 1
General

Article 28
Non-Productive Assets include AYDA, Inter-Office Accounts, and Suspense Accounts.

Paragraph 2
AYDA

Article 29
(1) LPEI must undertake resolution efforts for AYDA.
(2) LPEI must document resolution efforts for AYDA.
(3) Upon taking over collateral, LPEI must re-evaluate AYDA to determine net realizable value.
(4) The determination of net realizable value as referred to in paragraph (3) is conducted by an external appraiser.
(5) The external appraiser as referred to in paragraph (4) is an appraiser who meets the following requirements:
a. is not a related party to the LPEI borrower; b. conducts appraisal activities based on professional ethical codes and regulations established by the competent institution;
c. uses appraisal methods based on professional appraisal standards issued by the competent institution;
d. holds a business license from the competent institution to operate as an appraisal company; and e. is registered as a member of an association recognized by the competent institution.

Article 30
(1) The quality of AYDA undergoing resolution efforts as referred to in Article 29 paragraph (1) is determined as:
a. performing, if AYDA is held for up to 1 (one) year; b. less performing, if AYDA is held for more than 1 (one) year up to 3 (three) years;
c. doubtful, if AYDA is held for more than 3 (three) years up to 5 (five) years; or
d. non-performing, if AYDA is held for more than 5 (five) years.
(2) AYDA not undergoing resolution efforts as referred to in Article 29 paragraph (1) is determined to have a quality one level lower than the provisions in paragraph (1).

Paragraph 3
Inter-Office Accounts and Suspense Accounts

Article 31
(1) LPEI must undertake resolution efforts for Inter-Office Accounts and Suspense Accounts.
(2) The quality of Inter-Office Accounts and Suspense Accounts is determined as:
a. performing, if Inter-Office Accounts and Suspense Accounts are recorded in LPEI's books for up to 90 (ninety) days; or b. non-performing, if Inter-Office Accounts and Suspense Accounts are recorded in LPEI's books for more than 90 (ninety) days.

Part Four
Provision for Asset Write-Offs

Paragraph 1
General

Article 32
(1) LPEI is required to form PPA (Provision for Asset Write-Offs) against Productive Assets and Non-Productive Assets.
(2) PPA consists of:
a. general reserves and special reserves for Productive Assets; and b. special reserves for Non-Productive Assets.
(3) General reserves are set at a minimum of 1% (one percent) of Productive Assets with performing quality.
(4) The formation of general reserves is exempted for Productive Assets in the form of:
a. securities issued by the Government; b. SBI (Treasury Bills);
c. securities issued by donor country governments; and
d. securities issued by multilateral financial institutions; and e. portions of Productive Assets secured by cash collateral.
(5) Special reserves are set at a minimum of:
a. 5% (five percent) of Assets with special attention quality after deducting collateral value; b. 15% (fifteen percent) of Assets with less performing quality after deducting collateral value;
c. 50% (fifty percent) of Assets with doubtful quality after deducting collateral value; and/or
d. 100% (one hundred percent) of Assets with non-performing quality after deducting collateral value.
(6) The obligation to form PPA does not apply to Productive Assets for lease transactions involving Financing with ijarah contracts or lease transactions with ownership transfer involving Financing with ijarah muntahiyah bit tamlik contracts. (7) LPEI must form depreciation/amortization for lease transactions, with the following provisions:
a. Financing with ijarah contracts is depreciated/amortized according to LPEI's depreciation policy for similar assets; or b. Financing with ijarah muntahiyah bit tamlik contracts is depreciated according to the lease term. (8) The use of collateral value as a reduction factor in PPA calculation as referred to in paragraph (5) may only be done for Productive Assets. (9) The formation of PPA for Productive Assets in the form of Financing with murabahah, salam, and istishna’ contracts uses the acquisition price balance or principal price balance.

Paragraph 2
Collateral Requirements and Calculation of Collateral as a PPA Reduction Factor

Article 33
Collateral that can be counted as a reduction in PPA formation is determined as:
a. actively traded securities and shares on the stock exchange or included in the investment grade category established by rating agencies and pledged; b. motor vehicles and inventory pledged via fidusia;
c. warehouse receipts pledged with warehouse receipt security rights;
d. machinery that is an integral part of the land and pledged with land mortgage rights; e. aircraft or sea vessels with a size above 20 (twenty) cubic meters pledged with a mortgage; and/or f. land, residential houses, and buildings pledged with land mortgage rights.

Article 34
(1) Collateral as referred to in Article 33, except letter a, must:
a. be accompanied by valid legal documents; b. be pledged in accordance with applicable legislation to grant preferential rights to LPEI; and
c. be insured with clauses granting LPEI the right to receive insurance payouts in the event of a claim payment.
(2) Insurance companies providing insurance coverage for collateral as referred to in paragraph (1) letter c must meet the following requirements:
a. meet the health level standards established by the competent institution; and b. are not related parties to LPEI or the borrower group, unless reinsured to an insurance and/or reinsurance company that is not a related party to LPEI or the borrower group.

Article 35
(1) The value of collateral that can be counted as a reduction in PPA formation is determined as:
a. actively traded securities and shares on the stock exchange or included in the investment grade category, set at a maximum of 50% (fifty percent) of the value recorded on the stock exchange at the end of the month; b. land, buildings, residential houses, machinery considered an integral part of the land, aircraft, sea vessels, motor vehicles, inventory, and warehouse receipts, set at a maximum of:

1. 70% (seventy percent) of the appraisal value, if the appraisal was conducted within the last 18 (eighteen) months;
2. 50% (fifty percent) of the appraisal value, if the appraisal conducted has exceeded 18 (eighteen) months but not exceeded 24 (twenty-four) months;
3. 30% (thirty percent) of the appraisal value, if the appraisal conducted has exceeded 24 (twenty-four) months but not exceeded 30 (thirty) months; or
4. 0% (zero percent) of the appraisal value, if the appraisal conducted has exceeded 30 (thirty) months.
   (2) The appraisal as referred to in paragraph (1) is conducted by an external appraiser.

Part Five
Reporting

Article 36
LPEI is required to submit asset quality reports in accordance with OJK Regulations regarding monthly reports of non-bank financial service institutions.

CHAPTER VI
PROVISION FOR DECREASE IN VALUE OF FINANCING RECEIVABLES

Article 37
(1) LPEI is required to form a provision for decrease in value of Financing receivables in accordance with applicable financial accounting standards. (2) The formation of the provision for decrease in value of Financing receivables as referred to in paragraph (1) is conducted in the context of preparing financial reports.

CHAPTER VII
BMPP (Maximum Exposure Limits)

Part One
General

Article 38
(1) In providing Financing and fund placement, LPEI is required to observe BMPP.
(2) LPEI is prohibited from making agreements or covenants or setting requirements that obligate LPEI to provide Financing that would result in a BMPP Violation. (3) BMPP for the Sharia work unit refers to LPEI's BMPP.

Part Two
BMPP to Related Parties

Article 39
LPEI is required to meet BMPP to related parties of a maximum of 10% (ten percent) of Equity.

Article 40
(1) LPEI is prohibited from providing different treatment in fund placement to related parties.
(2) Fund placement to non-related parties, for the benefit of related parties, is classified as fund placement to related parties.

Article 41
Related parties include:
a. members of the Board of Directors and Executive Directors of LPEI; b. companies/entities where LPEI acts as the controller;
c. parties having family relationships up to the second degree, both horizontal and vertical, from members of the Board of Directors and Executive Directors of LPEI; and
d. companies/entities where the Board of Directors and/or Executive Directors of LPEI act as controllers.

Part Three
BMPP to Non-Related Parties

Article 42
(1) LPEI is required to meet BMPP to 1 (one) borrower of a maximum of 20% (twenty percent) of Equity.
(2) LPEI is required to meet BMPP to borrower groups of a maximum of 25% (twenty-five percent) of Equity.

Part Four
BMPP Calculation

Paragraph 1
Financing

Article 43
(1) BMPP for Financing is calculated based on the debit balance.
(2) The borrower for the takeover of receivables in the context of factoring or purchasing financing with no recourse conditions is the party obligated to settle the receivable. (3) The borrower for the takeover in the context of factoring or purchasing financing with recourse conditions is the party selling the receivable/financing. (4) The debit balance for the takeover in the context of factoring or purchasing financing is calculated based on the purchase price.

Paragraph 2
Securities

Article 44
BMPP for placements in the form of securities is calculated based on the purchase price.

Paragraph 3
Acceptance Receivables

Article 45
BMPP for Acceptance Receivables is calculated at the value of the accepted bill of exchange.

Paragraph 4
Administrative Account Transactions

Article 46
(1) Administrative Account transactions in the form of guarantees, letters of credit (L/C), standby letters of credit (SBLC), or similar other instruments are established as Financing to the applicant. (2) BMPP for Administrative Account Transactions is calculated at the outstanding value. (3) Guarantees received by LPEI from banks and/or other parties for borrowers and/or borrower groups are not counted as a reduction in Financing.

Part Five
BMPP Exceedance

Article 47
(1) BMPP exceedance can be caused by:
a. a decrease in Equity; b. exchange rate changes;
c. fair value changes;
d. business mergers and/or changes in management structure causing changes in related parties or borrower groups; and/or e. changes in regulations. (2) BMPP exceedance is calculated based on the value recorded on the report date.

Article 48
Provisions regarding BMPP exceedance as referred to in Article 47 also apply to BMTD.

Part Six
BMPP Exemptions

Article 49
(1) BMPP provisions do not apply to:
a. Financing conducted after obtaining OJK approval; b. the purchase of securities issued by the Government, SBI, securities issued by donor country governments, and/or securities issued by multilateral financial institutions;
c. Financing guaranteed by the Government in accordance with applicable legislation;
d. Financing secured by:
1. cash collateral in the form of current accounts, deposits, savings, guarantee deposits, and/or gold; or
2. collateral in the form of securities issued by the Government, Bank Indonesia, donor country governments, or multilateral financial institutions;
e. Financing to borrowers guaranteed by:
1. banks ranked up to 200 in the Banker’s Almanac; or
2. Export Credit Agencies (ECA) included in the investment grade category.
(2) Donor country governments and/or multilateral financial institutions as referred to in paragraph (1) letter b must be included in the investment grade category. (3) Collateral as referred to in paragraph (1) letter d must meet the following requirements:
a. be blocked and accompanied by a liquidation power of attorney from the collateral owner; b. be unconditional and irrevocable;
c. the blocking period must be at least equal to the Financing or fund placement term; and
d. have strong legal binding (legally enforceable).
(4) Guarantees as referred to in paragraph (1) letter e must meet the following requirements:
a. be in the form of standby letters of credit in accordance with the Uniform Customs and Practice for Documentary Credits (UCP) or International Standby Practices (ISP) in effect; b. be unconditional and irrevocable;
c. must be liquidatable within a maximum of 5 (five) working days from the submission of the claim, including partial liquidation; and
d. have a term of at least equal to the Financing term.

Article 50
The takeover (negotiation) of term export bills is exempted from BMPP calculation provided they meet the following requirements:
a. term export bills issued based on Usance Letters of Credit in accordance with the applicable Uniform Customs and Practice for Documentary Credits (UCP) and issued or confirmed by banks ranked up to 200 in the Banker’s Almanac; and b. have been accepted by a bank.

Article 51
Exemptions from BMPP calculation as referred to in Article 49 paragraph (1) letter d number 2 and letter e are set at a maximum of:
a. 90% (ninety percent) of Equity for Financing to related parties; b. 80% (eighty percent) of Equity for Financing to borrowers who are non-related parties; and
c. 75% (seventy-five percent) of Equity for Financing to borrower groups who are non-related parties.

Article 52
(1) Temporary equity participation to overcome Financing failure is exempted from BMPP calculation.
(2) In the event new Financing is provided to a company where LPEI makes temporary equity participation, such new Financing is counted in BMPP.

Article 53
The provision of Financing with a core-plasma partnership pattern, where the core company guarantees Financing provided to the plasma, is exempted from the definition of borrower groups provided that:
a. Financing is provided with a partnership pattern; b. the core company is not a related party to LPEI;
c. the plasma is not a subsidiary or branch owned, controlled, or affiliated with the core;
d. the plasma produces components required by the core company as part of the core company's production; and e. the Financing agreement with the plasma is conducted directly by LPEI with the plasma.

Article 54
(1) LPEI is required to meet BMPP to 1 (one) State-Owned Enterprise (BUMN) or Regional-Owned Enterprise (BUMD) of a maximum of 25% (twenty-five percent) of Equity. (2) BUMN and BUMD are not treated as borrower groups. (3) BMPP for BUMN in holding form and including BUMN subsidiaries are not treated as borrower groups.

Part Seven
Reporting

Article 55
LPEI is required to submit BMPP reports monthly, correctly and completely, to OJK by the 15th (fifteenth) of the following month.

Article 56
Provisions regarding BMPP reporting as referred to in Article 55 also apply to BMTD.

CHAPTER VIII
NET FOREIGN EXCHANGE POSITION

Article 57
(1) LPEI is required to manage and maintain the overall net foreign exchange position of a maximum of 20% (twenty percent) of Equity. (2) The overall net foreign exchange position is the figure resulting from the sum of the absolute values of:
a. the net difference between assets and liabilities in the balance sheet for each foreign currency; plus b. the net difference between receivables and liabilities, both commitments and contingencies, in administrative accounts for each foreign currency, all expressed in Rupiah.

Article 58
(1) The calculation of the net foreign exchange position is conducted at the end of each day using the Reuters exchange rate at 16:00 WIB on the relevant day. (2) In the event the Reuters exchange rate for a specific foreign currency is not available, LPEI may only use the closing rate at the same time as the Reuters rate.

Article 59
The net foreign exchange position is calculated jointly, covering all LPEI branches both domestically and abroad.

Article 60
(1) LPEI must compile a net foreign exchange position report at the end of each working day of every month.
(2) In the event of a violation or exceedance of the net foreign exchange position, LPEI is required to submit a report to OJK within a maximum of 3 (three) working days following. (3) The report as referred to in paragraph (1) must be submitted to OJK within a maximum of 5 (five) working days after the end of the reporting period.

CHAPTER IX
INSURANCE AND GUARANTEES

Part One
Self-Retention

Article 61
(1) In conducting Insurance and Guarantee activities, LPEI must have self-retention for each Insurance and Guarantee closing.
(2) LPEI is required to meet self-retention for each Insurance closing as referred to in paragraph (1) of a maximum of 10% (ten percent) of Equity for each:
a. investor for Insurance on investments conducted abroad; or b. counterparty of the insured party.
(3) LPEI is required to meet self-retention for each Guarantee closing as referred to in paragraph (1) of a maximum of 10% (ten percent) of Equity for each insured. (4) The total self-retention for all Insurance and Guarantee closings of LPEI is set at a maximum of 2 (two) times Equity.

Article 62
(1) The maximum limit of self-retention for Insurance and Guarantee closings for each investor or each counterparty of the insured party as referred to in Article 61 paragraph (2) and/or each insured as referred to in Article 61 paragraph (3) must follow the following provisions:
a. a maximum of 10% (ten percent) of Equity if the counterparty of the insured party, investor, and/or insured is a related party; b. a maximum of 20% (twenty percent) of Equity if the counterparty of the insured party, investor, and/or insured is an individual non-related party; or
c. a maximum of 25% (twenty-five percent) of Equity if the counterparty of the insured party, investor, and/or insured is 1 (one) group of non-related parties, BUMN, or BUMD.
(2) The maximum limit of self-retention for Insurance and Guarantee closings as referred to in paragraph (1) is calculated based on the outstanding self-retention value. (3) In the event the insured or counterparty of the insured party also receives Financing facilities from LPEI, the maximum limit of self-retention for Insurance and Guarantee closings as referred to in paragraph (1) takes into account the outstanding Financing amount provided to such insured or counterparty of the insured party. (4) LPEI is required to submit monthly reports on self-retention for Insurance and Guarantee closings to OJK in accordance with OJK Regulations regarding monthly reports of non-bank financial service institutions.

Part Two
Technical Reserves

Article 63
(1) LPEI is required to form reserves consisting of:
a. reserves for Insurance premiums and Guarantee fees that are not yet income; and b. estimates of self-retention claims.
(2) The size of reserves for Insurance premiums and Guarantee fees that are not yet income as referred to in paragraph (1) letter a is calculated proportionally during the term of the Insurance or Guarantee coverage. (3) The formation of estimates of self-retention claims as referred to in paragraph (1) letter b must meet the following provisions:
a. for estimates on claims still in the settlement process, calculated based on reasonable estimates of incurred and reported claims still in the settlement process, including loss adjuster fees, minus claim burdens that will become part of the reinsurer; and b. for estimates on claims that have occurred but are not reported (Incurred But Not Reported or IBNR), calculated based on reasonable estimates of incurred but not reported claims using claim ratio methods, including loss adjuster fees, minus claim burdens that will become part of the reinsurer.

Part Three
Implementation of Insurance and Guarantee Activities

Article 64
(1) In conducting Insurance and Guarantee activities, LPEI must have:
a. policies, manuals, and standard operating procedures (SOP) for each Insurance and Guarantee product; and b. an accounting information system for Insurance and Guarantee activities.

(2) In the event that the domicile of the insured, the counterparty of the insured party, investors, the guaranteed party, or the location of the subject matter of insurance or guarantee is outside the territory of Indonesia, LPEI may cooperate with international or domestic partners who have experience in the field of Insurance and/or Guarantee. (3) In carrying out Guarantee and Insurance activities, LPEI may conduct re-guarantee and/or reinsurance.

CHAPTER X
REPORTING

Article 65
(1) LPEI submits to OJK:
a. monthly reports; b. semi-annual business activity reports;
c. annual financial reports audited by a public accounting firm; and
d. other matters that may affect business activities or the financial condition of LPEI.
(2) Provisions regarding monthly reports as referred to in paragraph (1) letter a are regulated in the OJK Regulation regarding monthly reports of non-bank financial service institutions. (3) Semi-annual business activity reports as referred to in paragraph (1) letter b must be submitted at the latest 1 (one) month after the end of the semester period. (4) Annual financial reports as referred to in paragraph (1) letter c must be submitted at the latest 4 (four) months since the end of the fiscal year. (5) Other matters as referred to in paragraph (1) letter d must be submitted at the latest 5 (five) working days since such other matters are discovered. (6) Sharia work units must submit reports as referred to in paragraph (1) letters a, b, and d separately. (7) Reports as referred to in paragraph (6) are prepared based on applicable Sharia financial accounting standards.

Article 66
(1) In order to increase transparency, LPEI is required to create an annual report.
(2) The annual report as referred to in paragraph (1) is required to be made for 1 (one) fiscal year and presented with a comparison of at least 1 (one) previous fiscal year.

Article 67
(1) The annual report as referred to in Article 66 paragraph (1) must be submitted to OJK at the latest 5 (five) months after the end of the fiscal year. (2) LPEI must inform the annual report as referred to in paragraph (1) on the LPEI website at the latest within the period as referred to in paragraph (1). (3) The annual report as referred to in paragraph (1) is also submitted to stakeholders.

Article 68
(1) LPEI is required to announce audited financial reports and other financial information through electronic mass media and at least 2 (two) mass media print outlets with national circulation, at the latest by April 30 of the following year. (2) Proof of announcement of financial reports as referred to in paragraph (1) must be submitted to OJK at the latest 3 (three) working days since the date of publication.

CHAPTER XI
EXAMINATION

Article 69
(1) OJK conducts supervision and oversight of LPEI.
(2) In order to carry out supervision and oversight as referred to in paragraph (1), OJK conducts examinations.

Article 70
(1) Examinations as referred to in Article 69 paragraph (2) are conducted:
a. periodically at least once in 3 (three) years; and/or b. at any time when necessary.
(2) Periodic examinations as referred to in paragraph (1) letter a are comprehensive, covering the truthfulness of the substance aspects of periodic reports and compliance with laws and regulations governing LPEI and its implementing regulations. (3) Ad-hoc examinations as referred to in paragraph (1) letter b are conducted when:
a. based on the analysis of periodic reports, it is suspected that the implementation of LPEI activities deviates from the laws and regulations governing LPEI and its implementing regulations, as well as other applicable legislation; and/or b. based on research on information obtained or complaint letters received by OJK, it is suspected that the implementation of LPEI activities deviates from the laws and regulations governing LPEI and its implementing regulations, as well as other applicable legislation.

CHAPTER XII
COMPLIANCE PLAN

Article 71
(1) In the event that LPEI does not meet the provisions as referred to in Article 6 paragraph (1), Article 14 paragraph (2), Article 25 paragraph (1), Article 27, Article 39, Article 42, Article 54 paragraph (1), Article 61 paragraph (2) and (3), and Article 62 paragraph (1), it is required to submit a compliance plan at the latest 1 (one) month since the date of the determination of the violation by OJK. (2) The compliance plan as referred to in paragraph (1) must at least contain the plan to be carried out by LPEI to meet the provisions, accompanied by a specific time period required to meet the provisions as referred to in paragraph (1). (3) The compliance plan as referred to in paragraph (1) must obtain a statement of no objection from OJK. (4) In the event that the compliance plan as referred to in paragraph (1) is assessed by OJK as insufficient to overcome the problems, LPEI is required to improve the compliance plan. (5) OJK provides a statement of no objection for the compliance plan submitted by LPEI by considering the problem conditions faced by LPEI at the latest 14 (fourteen) days calculated from the receipt of the complete compliance plan. (6) LPEI is required to implement the compliance plan as referred to in paragraph (1).

CHAPTER XIII
SANCTIONS

Article 72
(1) Executive directors who cause LPEI to be unable to meet the provisions:
a. Article 55 after the date of the 15 (fifteenth) until the end of the following month; b. Article 60 paragraph (3);
c. Article 65 paragraph (3) after 1 (one) month until the end of the second month after the end of the semester period;
d. Article 65 paragraph (4) after 4 (four) months until the end of the fifth month after the end of the fiscal year; e. Article 67 paragraph (1) after 5 (five) months until the end of the sixth month after the end of the fiscal year; f. Article 68 paragraph (1) after the date of April 30 until the end of the fifth month after the end of the fiscal year, are subject to administrative sanctions in the form of oral reprimands. (2) Board of Directors members, executive directors, and managing directors who cause LPEI to be unable to meet the provisions of Article 2 paragraph (4), Article 3, Article 7, Article 9 paragraph (1), Article 10 paragraph (1) and (4), Article 11 paragraph (1) and (2), Article 32 paragraph (1), Article 37 paragraph (1), Article 38 paragraph (1) and (2), Article 40 paragraph (1), Article 57 paragraph (1), Article 60 paragraph (2), Article 63 paragraph (1), Article 66, Article 68 paragraph (2), Article 71 paragraph (1), (4), and (6) of this OJK Regulation are subject to administrative sanctions in the form of written reprimands. (3) Administrative sanctions in the form of written reprimands as referred to in paragraph (2) can be given in the form of:
a. first warning letter, with a time period of 1 (one) month; b. second warning letter, with a time period of 1 (one) month; and
c. third warning letter, with a time period of 1 (one) month.
(4) Administrative sanctions as referred to in paragraph (2) are imposed on board of directors members, executive directors, and managing directors who commit violations. (5) In the event that the time period of the third warning letter expires and the respective board of directors member, executive director, and managing director has not met the provisions as referred to in paragraph (2), OJK informs the Government regarding the imposition of the said warning sanction. (6) Executive directors who cause LPEI to be unable to meet the provisions:
a. Article 55 after the end of the following month; b. Article 65 paragraph (3) after the end of the second month after the end of the semester period;
c. Article 65 paragraph (4) after the end of the fifth month after the end of the fiscal year;
d. Article 65 paragraph (5); e. Article 65 paragraph (6); f. Article 67 paragraph (1) after the end of the sixth month after the end of the fiscal year; g. Article 68 paragraph (1) after the end of the fifth month after the end of the fiscal year, are subject to administrative sanctions as referred to in paragraph (2).

Article 73
(1) LPEI employees who cause LPEI to be unable to meet the provisions of Article 2 paragraph (4), Article 3, Article 7, Article 9 paragraph (1), Article 10 paragraph (1) and (4), Article 11 paragraph (1) and (2), Article 32 paragraph (1), Article 37 paragraph (1), Article 38 paragraph (1) and (2), Article 40 paragraph (1), Article 57 paragraph (1), Article 60 paragraph (2), Article 63 paragraph (1), Article 66, Article 68 paragraph (2), Article 71 paragraph (1), (4), and (6) of this OJK Regulation are subject to administrative sanctions in the form of oral reprimands or written reprimands. (2) Administrative sanctions in the form of oral reprimands as referred to in paragraph (1) are given in the form of oral warnings that are developmental in nature. (3) Administrative sanctions in the form of written reprimands as referred to in paragraph (1) are given in the form of:
a. first warning letter, with a time period of 1 (one) month; b. second warning letter, with a time period of 1 (one) month; and
c. third warning letter, with a time period of 1 (one) month.
(4) In the event that the time period of the third warning letter expires and the respective employee has not met the provisions as referred to in paragraph (1), OJK informs the Government regarding the imposition of the said warning sanction.

CHAPTER XIV
OTHER PROVISIONS

Article 74
Unless otherwise regulated, the provisions in this OJK Regulation also apply to all business activities or transactions based on Sharia Principles.

CHAPTER XV
CLOSING PROVISIONS

Article 75
At the time this OJK Regulation comes into force, provisions regarding the supervision and oversight of LPEI are subject to this OJK Regulation.

Article 76
This OJK Regulation comes into force on the date of its promulgation.
To ensure that everyone knows it, it is ordered to promulgate this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta on December 21, 2015
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Promulgated in Jakarta on December 28, 2015
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 321 Copy in accordance with the original Legal Director Department of Law signed Sudarmaji

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 40 /POJK.05/2015
ABOUT
SUPERVISION AND OVERSIGHT OF
THE INDONESIAN EXPORT FINANCING INSTITUTION

I. GENERAL
Good export performance can improve the trade balance, which will subsequently have a positive impact on foreign exchange reserves, exchange rates, and drive economic growth. In efforts to promote exports, particularly in export financing, the Indonesian Government established the Indonesian Export Financing Institution (LPEI) based on Law Number 2 of 2009. LPEI officially operated on September 1, 2009. With the existence of LPEI, Indonesia has an Eximbank or commonly known as Export Credit Agency (ECA) as possessed by many developed and developing countries such as Thailand Exim Bank, Indian Exim Bank, Korean Exim Bank, and Export Finance and Insurance Corporation (EFIC) in Australia. In order to optimize the role of LPEI, regulations are needed that are able to optimally support the role of LPEI as a government policy instrument in promoting national export growth. In this regard, improvements are needed in the provisions governing the supervision and oversight of LPEI. With the ratification of Law Number 21 of 2011 concerning the Financial Services Authority on November 22, 2011, the supervision task over LPEI shifted to the Financial Services Authority since December 31, 2012. Therefore, a legal basis is needed for the Financial Services Authority to carry out the functions and authorities of supervision and oversight over LPEI. In relation to this, the Financial Services Authority establishes the Financial Services Authority Regulation on Supervision and Oversight of the Indonesian Export Financing Institution.

II. ARTICLE BY ARTICLE
Article 1
Clear enough.

Article 2
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
Letter a
The term "mudharabah contract" refers to a business cooperation agreement between the first party (malik, shahibul mal) who provides all the capital and the second party ('amil, mudharib, or customer) who acts as the fund manager by sharing business profits according to agreements set out in the contract, while losses are fully borne by the first party unless the second party commits intentional fault, negligence, or breaches the agreement. The term "musyarakah contract" refers to a cooperation agreement between two or more parties for a specific business where each party provides a portion of funds with the provision that profits will be shared according to agreement, while losses are borne according to each party's portion of funds.

Letter b
The term "murabahah contract" refers to a financing contract for goods by stating the purchase price to the buyer and the buyer pays it with a higher price as agreed profit. The term "salam contract" refers to a financing contract for goods by way of ordering and payment of price made in advance with certain agreed conditions. The term "istishna' contract" refers to a financing contract for goods in the form of ordering the manufacture of specific goods with agreed criteria and requirements between the orderer or buyer (mustashni') and the seller or maker (shani').

Letter c
The term "qardh contract" refers to a loan contract to customers with the provision that customers are required to return the funds received at an agreed time.

Letter d
The term "ijarah contract" refers to a fund provision contract in the context of transferring the right to use or benefit from a good or service based on a lease transaction, without being followed by the transfer of ownership of the good itself. The term "ijarah muntahiyah bit tamlik contract" refers to a fund provision contract in the context of transferring the right to use or benefit from a good or service based on a lease transaction with an option to transfer ownership of the good.

Letter e
The term "hawalah contract" refers to a contract for the transfer of debt from the debtor to another party who is required to bear or pay. The term "wakalah contract" refers to a contract granting power of attorney to the recipient of power to carry out a task on behalf of the grantor of power.

Letter f
The term "kafalah contract" refers to a guarantee contract given by one party to another, where the guarantor (kafil) is responsible for the repayment of debt that is the right of the guarantee recipient (makful).

Paragraph (4)
Clear enough.

Article 3
In applying good corporate governance principles, risk management implementation, and customer due diligence principles, LPEI is subject to applicable legislation.

Article 4
Clear enough.

Article 5
Paragraph (1)
Clear enough.
Paragraph (2)
The term "mudharabah musytarakah contract" refers to a form of mudharabah contract where the fund manager (mudharib) includes capital or funds in the business cooperation. The term "jualah contract" refers to a contract where the first party promises a specific remuneration to the second party for the implementation of a fund procurement task carried out by the second party for the interest of the first party.

Article 6
Clear enough.

Article 7
Clear enough.

Article 8
Paragraph (1)
Clear enough.
Paragraph (2)
In calculating the risk value of Derivative Transactions, LPEI may perform set-off as long as it meets the following requirements:
a. is a similar instrument; b. has a similar underlying transaction;
c. has the same currency;
d. is conducted with the same counterparty; e. has the same duration; and f. is regulated in an agreement between the parties (netting agreement) based on applicable legislation.

Article 9
Paragraph (1)
One of the criteria that asset quality is assessed as good is the maintenance of problematic financing values at a controlled level. Paragraph (2) Clear enough.

Article 10
Clear enough.

Article 11
Clear enough.

Article 12
Clear enough.

Article 13
Clear enough.

Article 14
Clear enough.

Article 15
Paragraph (1)
The donor country's government and multilateral financial institutions must be included in the investment grade category.
Paragraph (2)
Clear enough.
Paragraph (3)
The investment grade category is based on the rating of securities issued by rating agencies in the last 1 (one) year.

Article 16
Clear enough.

Article 17
Clear enough.

Article 18
Clear enough.

Article 19
Clear enough.

Article 20
Clear enough.

Article 21
Clear enough.

Article 22
Clear enough.

Article 23
Clear enough.

Article 24
Clear enough.

Article 25
Paragraph (1)
The term "micro, small, and medium enterprises" refers to micro, small, and medium enterprises based on laws regarding micro, small, and medium enterprises. Paragraph (2) Clear enough. Paragraph (3) Clear enough.

Article 26
Clear enough.

Article 27
The term total assets used for the calculation of the ratio of Financing Receivables to total assets refers to productive assets included in the financial position report accounts.

Article 28
Clear enough.

Article 29
Clear enough.

Article 30
Clear enough.

Article 31
Clear enough.

Article 32
Clear enough.

Article 33
Clear enough.

Article 34
Clear enough.

Article 35
Clear enough.

Article 36
Clear enough.

Article 37
Clear enough.

Article 38
Clear enough.

Article 39
Clear enough.

Article 40
Clear enough.

Article 41
The term "controller" refers to LPEI, the board of directors and/or managing director, or a company/body directly or indirectly:
a. owns 10% (ten percent) or more of the shares of another company or body and that ownership portion is the largest portion; b. owns alone or together 25% (twenty-five percent) or more of the shares of another company/body;
c. has option rights or other rights to own shares which, if exercised, would cause the party to own and/or control shares of another company/body as referred to in letter a or letter b;
d. conducts cooperation or actions in concert to achieve common goals in controlling a company/body (acting in concert), with or without a written agreement with other parties, so that together they own and/or control shares of another company as referred to in letter a or letter b; e. conducts cooperation or actions in concert to achieve common goals in controlling a company/body (acting in concert), with or without a written agreement with other parties, so that together they have option rights or other rights to own shares, the exercise of which rights would cause the parties to jointly own or control shares of another company/body as referred to in letter a or letter b; f. has the authority and/or ability to approve, appoint, and/or dismiss members of commissioners and/or directors of another company/body; g. has the ability to determine (controlling influence) the operational policies or strategic policies of another company/body.

Article 42
Paragraph (1)
Clear enough.
Paragraph (2)
Borrowers are classified as a group of borrowers if:
a. the borrower is a controller of another borrower; b. one same party is a controller of several borrowers (common ownership);
c. the borrower has financial interdependence with another borrower;
d. the borrower issues a guarantee to take over and/or repay part or all of the obligations of another borrower in the event that the other borrower fails to meet its obligations (default) to LPEI; and/or e. the directors, commissioners, and/or executive officials of the borrower become directors and/or commissioners at another borrower.

Article 43
Clear enough.

Article 44
Clear enough.

Article 45
Clear enough.

Article 46
Clear enough.

Article 47
Clear enough.

Article 48
Clear enough.

Article 49
Clear enough.

Article 50
Clear enough.

Article 51
Clear enough.

Article 52
Clear enough.

Article 53
Clear enough.

Article 54
Clear enough.

Article 55
Clear enough.

Article 56
Clear enough.

Article 57
Clear enough.

Article 58
Clear enough.

Article 59
Clear enough.

Article 60
Clear enough.

Article 61
Clear enough.

Article 62
Paragraph (1)
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
The counterparty of the insured party, investor, or guaranteed party is classified as 1 (one) group of unaffiliated parties if:
a. is a controller of the counterparty of another insured party, investor, or guaranteed party; b. one same party is a controller of several counterparties of the insured party, investor, or guaranteed party;
c. has financial interdependence with the counterparty of another insured party, investor, or guaranteed party; or
d. has directors, commissioners, and/or executive officials who become directors and/or commissioners at the counterparty of another insured party, investor, or guaranteed party. Paragraph (2) Clear enough. Paragraph (3) Clear enough. Paragraph (4) Clear enough.

Article 63
Clear enough.

Article 64
Clear enough.

Article 65
Clear enough.

Article 66
Paragraph (1)
The annual report at least covers:
a. general information, including among others:
1. LPEI organs;
2. LPEI business development;
3. Board of Directors' strategy and policies; and
4. Board of Directors' report,
b. annual financial reports audited by a public accounting firm consisting of:
1. financial position report;
2. income statement;
3. statement of changes in equity;
4. cash flow statement; and
5. notes to the financial statements, including information on commitments and contingencies,
c. opinion from the public accounting firm;
d. all aspects of disclosure as required in applicable Financial Accounting Standards; e. types of risks and potential losses (risk exposure) faced by LPEI and risk management practices applied by LPEI; and f. other information. Paragraph (2) Clear enough.

Article 67
Paragraph (1)
Clear enough.
Paragraph (2)
Clear enough.
Paragraph (3)
The term "stakeholders" includes among others:
a. Minister of Finance; b. minister in charge of trade;
c. minister in charge of industry;
d. minister in charge of agriculture; and e. Bank Indonesia.

Article 68
Clear enough.

Article 69
Paragraph (1)
Clear enough.
Paragraph (2)
The term "examination" refers to a series of activities collecting, searching, processing, and evaluating data and information regarding LPEI activities, aimed at obtaining assurance over the truthfulness of periodic reports, assessing compliance with applicable provisions, and ensuring that periodic reports correspond to the actual situation.

Article 70
Clear enough.

Article 71
Clear enough.

Article 72
Clear enough.

Article 73
Clear enough.

Article 74
Clear enough.

Article 75
Clear enough.

Article 76
Clear enough.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5791