POJK on the Implementation of Corporate Governance for Rural Banks

EXCERPT
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 4/POJK.03/2015
CONCERNING
THE IMPLEMENTATION OF CORPORATE GOVERNANCE FOR RURAL BANKS BY THE GRACE OF GOD THE ALMIGHTY, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that with the expanding services accompanied by an increase in the business volume of Rural Banks, the risks of Rural Banks are also increasing, thereby driving the need for the implementation of corporate governance by Rural Banks; b. that in order to improve the performance of Rural Banks, protect stakeholders, increase compliance with legislation, and uphold ethical values generally applicable in banking, Rural Banks need to promptly implement corporate governance;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on the Implementation of Corporate Governance for Rural Banks;

Recalling:

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);
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: FINANCIAL SERVICES AUTHORITY REGULATION ON THE IMPLEMENTATION OF CORPORATE GOVERNANCE FOR RURAL BANKS.

CHAPTER I
GENERAL PROVISIONS

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

Rural Bank, hereinafter abbreviated as BPR, is a bank that conducts conventional business activities and does not provide payment circulation services as referred to in the Banking Law.
Bank is a business entity that collects funds from the public in the form of deposits and channels them to the public in the form of loans and/or other forms to improve the living standards of the many people, as referred to in the laws governing banking and sharia banking.
Board of Directors:
a. for a BPR with the legal status of a Limited Liability Company is the Board of Directors as referred to in the Law concerning Limited Liability Companies; b. for a BPR with the legal status of a Regional-Owned Enterprise is the Board of Directors as referred to in the Law governing regional-owned business entities;
c. for a BPR with the legal status of a Cooperative is the Management Board as referred to in the Law concerning cooperatives.
Board of Commissioners:
a. for a BPR with the legal status of a Limited Liability Company is the Commissioners as referred to in the Law concerning Limited Liability Companies; b. for a BPR with the legal status of a Regional-Owned Enterprise is the Supervisors as referred to in the Law governing regional-owned business entities;
c. for a BPR with the legal status of a Cooperative is the Supervisors as referred to in the Law concerning cooperatives.
Independent Commissioner is a member of the Board of Commissioners who does not have financial, managerial, shareholding, and/or family relationships with other members of the Board of Commissioners, the Board of Directors, and/or controlling shareholders, or other relationships that may affect their ability to act independently.
Independent Party is a party outside the BPR that does not have financial, managerial, shareholding, and/or family relationships with the Board of Directors, Board of Commissioners, controlling shareholders, and/or does not have other relationships that may affect their ability to act independently.
Corporate Governance is the governance of the BPR that applies principles of transparency, accountability, responsibility, independence, and fairness.
Stakeholders are all parties who have direct or indirect interests in the business activities of the BPR.
Executive Officer is an officer who is directly responsible to the Board of Directors or has influence over the policies and operations of the BPR, including branch managers, division heads, section heads, heads of internal audit work units, or officers designated to be responsible for the implementation of internal audit functions, managers, and/or other equivalent officers.
Audit Committee is a committee that assists in the implementation of the duties and responsibilities of the Board of Commissioners related to internal and external audits.
Risk Monitoring Committee is a committee that assists in the implementation of the duties and responsibilities of the Board of Commissioners related to the implementation of risk management.
Remuneration and Nomination Committee is a committee that assists in the implementation of the duties and responsibilities of the Board of Commissioners related to remuneration and nomination.

Article 2
(1) BPRs are required to implement Corporate Governance in all their business activities at all levels or organizational tiers.
(2) The implementation of Corporate Governance as referred to in paragraph (1) must at least be manifested in the following forms:
a. the execution of duties and responsibilities of the Board of Directors; b. the execution of duties and responsibilities of the Board of Commissioners;
c. the completeness and execution of duties or functions of committees;
d. the handling of conflicts of interest; e. the implementation of compliance, internal audit, and external audit functions; f. the implementation of risk management, including the internal control system; g. maximum credit limits; h. the BPR business plan;
i. transparency of financial and non-financial conditions.

Article 3
The Financial Services Authority conducts an assessment of the implementation of BPR Corporate Governance.

CHAPTER II
BOARD OF DIRECTORS
Section One
Number, Composition, Criteria, and Independence of the Board of Directors

Article 4
(1) BPRs with core capital of at least IDR 50,000,000,000.00 (fifty billion rupiah) are required to have at least 3 (three) members of the Board of Directors.
(2) BPRs with core capital of less than IDR 50,000,000,000.00 (fifty billion rupiah) are required to have at least 2 (two) members of the Board of Directors.

Article 5
All members of the Board of Directors must reside in the same city/regency or different cities/regencies within the same province or cities/regencies in another province that directly border the province where the BPR's head office is located.

Article 6
(1) The majority of Board of Directors members are prohibited from having family or in-law relationships up to the second degree with:
a. fellow Board of Directors members; and/or b. Board of Commissioners members.
(2) Board of Directors members, individually or collectively, are prohibited from holding 25% (twenty-five percent) or more of the paid-up capital in the Bank and/or being majority shareholders in non-bank financial service institutions.

Article 7
(1) BPRs that form a Remuneration and Nomination Committee must consider the recommendations of the Remuneration and Nomination Committee in every proposal for the replacement and/or appointment of Board of Directors members to the General Meeting of Shareholders. (2) Board of Directors members must possess knowledge, experience, expertise, and abilities as regulated in the Financial Services Authority Regulation concerning BPRs. (3) Board of Directors members must pass the competency and propriety test (fit and proper test) according to regulations applicable to BPRs.

Article 8
Board of Directors members are prohibited from holding concurrent positions in Banks and/or other companies, except as managers of BPR industry associations and/or educational institutions for the purpose of improving BPR human resource competence, provided that it does not interfere with the execution of their duties as BPR Board of Directors members.

Article 9
Board of Directors members are prohibited from granting general powers of attorney that result in the unlimited transfer of duties and authorities.

Section Two
Duties and Responsibilities of the Board of Directors

Article 10
(1) The Board of Directors is fully responsible for the management of the BPR.
(2) The Board of Directors is required to manage the BPR in accordance with the authorities and responsibilities as regulated in the BPR Articles of Association and legislation.

Article 11
The Board of Directors is required to implement Corporate Governance as referred to in Article 2 paragraph (1) in every business activity of the BPR at all levels or organizational tiers.

Article 12
The Board of Directors is required to follow up on audit findings and recommendations from the work unit or officer responsible for the implementation of internal audit of the BPR, external auditors, results of supervision by the Board of Commissioners, the Financial Services Authority, and/or other authorities.

Article 13
(1) In order to implement Corporate Governance as referred to in Article 11:
a. The Board of Directors in BPRs with core capital of at least IDR 50,000,000,000.00 (fifty billion rupiah) is required to form at least:

Internal Audit Work Unit;
Risk Management Work Unit and Risk Management Committee; and
Compliance Work Unit.
b. The Board of Directors in BPRs with core capital of less than IDR 50,000,000,000.00 (fifty billion rupiah) is required to appoint Executive Officers to execute:
Internal audit function;
Risk management function; and
Compliance function.
(2) The implementation of the risk management function, including the formation of the Risk Management Work Unit and Risk Management Committee, refers to regulations governing the implementation of risk management for BPRs.

Article 14
In order to support the implementation of Corporate Governance, the Board of Directors is required to ensure the availability of adequate human resources, including:
a. the separation of duties and responsibilities between units or work units handling bookkeeping, operations, and operational support activities; and b. the appointment of officers responsible for the implementation of internal audit, who are independent from other work units.

Article 15
The Board of Directors is required to account for the execution of their duties to shareholders in the General Meeting of Shareholders in accordance with legislation.

Article 16
The Board of Directors is required to disclose strategic BPR policies in the field of human resources to employees.

Article 17
The Board of Directors is prohibited from using individual advisors and/or professional service providers as consultants unless the following requirements are met:
a. for special projects that, based on their characteristics, require the presence of a consultant; b. based on a clear agreement, which at least covers the scope of work, responsibilities, products produced, duration of work, and costs;
c. the individual and/or professional service provider is an Independent Party and has the qualifications to handle special projects as referred to in letter a.

Article 18
The Board of Directors is required to provide accurate, relevant, and timely data and information to the Board of Commissioners.

Article 19
(1) The Board of Directors is required to have and implement guidelines and code of conduct for Board of Directors members.
(2) The guidelines and code of conduct as referred to in paragraph (1) must at least include:
a. work ethics; b. working hours; and
c. meeting regulations.

Article 20
All actions taken by Board of Directors members in accordance with the guidelines and code of conduct or the BPR Articles of Association are binding and become the responsibility of the respective Board of Directors member and/or other Board of Directors members in accordance with the BPR Articles of Association and/or legislation.

Section Three
Board of Directors Meetings

Article 21
(1) Every strategic policy and decision must be decided in a Board of Directors meeting, taking into account the provisions as regulated in Article 29 paragraph (4).
(2) Decision-making in Board of Directors meetings as referred to in paragraph (1) is conducted through deliberation to reach consensus.
(3) In the event that consensus as referred to in paragraph (2) is not reached, decision-making in the meeting is conducted based on the majority vote.
(4) The results of the Board of Directors meeting as referred to in paragraph (1) must be recorded in the meeting minutes and documented properly.
(5) Differences of opinion occurring in decision-making by majority vote as referred to in paragraph (3) must be clearly stated in the meeting minutes along with the reasons for the difference of opinion.

Section Four
Transparency Aspects of the Board of Directors

Article 22
In order to implement Corporate Governance, Board of Directors members are required to disclose:
a. their shareholdings in the respective BPR and other companies; b. financial and/or family relationships with Board of Commissioners members, other Board of Directors members, and/or BPR shareholders.

Article 23
(1) Board of Directors members are prohibited from using the BPR for personal, family, and/or other parties' interests that can harm or reduce the profits of the BPR.
(2) Board of Directors members are prohibited from taking and/or receiving personal benefits from the BPR, other than remuneration and other facilities determined by the General Meeting of Shareholders, considering fairness and/or compliance with legislation. (3) Board of Directors members are required to disclose remuneration and facilities as referred to in paragraph (2) in the Corporate Governance implementation report.

CHAPTER III
BOARD OF COMMISSIONERS
Section One
Number, Composition, Criteria, and Independence of the Board of Commissioners

Article 24
(1) BPRs with core capital of at least IDR 50,000,000,000.00 (fifty billion rupiah) are required to have at least 3 (three) members of the Board of Commissioners and no more than the number of Board of Directors members. (2) BPRs with core capital of less than IDR 50,000,000,000.00 (fifty billion rupiah) are required to have at least 2 (two) members of the Board of Commissioners and no more than the number of Board of Directors members. (3) All members of the Board of Commissioners must reside in Indonesia, and at least 1 (one) member of the Board of Commissioners must reside in the same province or in a city/regency in another province that directly borders the province where the BPR's head office is located.

Article 25
(1) BPRs with core capital of at least IDR 80,000,000,000.00 (eighty billion rupiah) are required to have Independent Commissioners of at least 50% (fifty percent) of the number of Board of Commissioners members. (2) BPRs with core capital of at least IDR 50,000,000,000.00 (fifty billion rupiah) and less than IDR 80,000,000,000.00 (eighty billion rupiah) are required to have at least 1 (one) Independent Commissioner. (3) Former Board of Directors members or Executive Officers of the BPR or parties having relationships with the BPR that can influence their ability to act independently cannot become Independent Commissioners in the respective BPR before undergoing a waiting period (cooling off) of 1 (one) year. (4) The provisions as referred to in paragraph (3) do not apply to former Board of Directors members or Executive Officers who perform supervisory functions.

Article 26
(1) BPRs that form a Remuneration and Nomination Committee must consider the recommendations of the Remuneration and Nomination Committee in every proposal for the replacement and/or appointment of Board of Commissioners members to the General Meeting of Shareholders. (2) Board of Commissioners members must pass the competency and propriety test (fit and proper test) according to regulations applicable to BPRs.

Article 27
(1) Board of Commissioners members may only hold a maximum of 2 (two) concurrent positions as Board of Commissioners members in BPRs and/or Sharia Rural Financing Banks.
(2) Board of Commissioners members are prohibited from holding concurrent positions as Board of Directors members or Executive Officers in BPRs, Sharia Rural Financing Banks, and/or Commercial Banks. (3) The majority of Board of Commissioners members are prohibited from having family or in-law relationships up to the second degree with:
a. fellow Board of Commissioners members; or b. Board of Directors members.

Section Two
Duties and Responsibilities of the Board of Commissioners

Article 28
The Board of Commissioners is required to execute duties and responsibilities independently.

Article 29
(1) The Board of Commissioners is required to ensure the implementation of Corporate Governance as referred to in Article 2 in every business activity of the BPR at all levels or organizational tiers. (2) The Board of Commissioners is required to supervise the execution of duties and responsibilities of the Board of Directors and provide advice to the Board of Directors. (3) In executing supervision as referred to in paragraph (2), the Board of Commissioners is required to direct, monitor, and evaluate the implementation of BPR strategic policies. (4) In executing supervision as referred to in paragraph (2), the Board of Commissioners is prohibited from participating in decision-making regarding BPR operational activities, except related to:
a. the provision of funds to related parties as per regulations governing the maximum credit limits for BPRs; and b. other matters established in legislation.
(5) Decision-making by the Board of Commissioners as referred to in paragraph (4) is part of the supervisory task and thus remains the responsibility of the Board of Directors for the execution of management duties of the BPR.

Article 30
The Board of Commissioners is required to ensure that the Board of Directors follows up on audit findings and recommendations from the work unit or officer responsible for the implementation of internal audit of the BPR, external auditors, results of supervision by the Board of Commissioners, the Financial Services Authority, and/or other authorities.

Article 31
The Board of Commissioners is required to notify:
a. violations of legislation in the field of finance and banking; and/or b. conditions or estimated conditions that may endanger the continuity of the BPR's business; to the Financial Services Authority no later than 10 (ten) working days from the discovery of the violation, condition, or estimated condition.

Article 32
(1) In order to assist in the execution of their duties and responsibilities, the Board of Commissioners in BPRs with core capital of at least IDR 80,000,000,000.00 (eighty billion rupiah) is required to form at least:
a. Audit Committee; and b. Risk Monitoring Committee.
(2) The Board of Commissioners may form a Remuneration and Nomination Committee to assist in the execution of their duties and responsibilities.
(3) The appointment of committee members as referred to in paragraph (1) and paragraph (2) is conducted by the Board of Directors based on the decision of the Board of Commissioners meeting. (4) The Board of Commissioners is required to ensure that the committees as referred to in paragraph (1) and paragraph (2) that have been formed execute their duties effectively.

Article 33
(1) The Board of Commissioners is required to have and implement guidelines and code of conduct for Board of Commissioners members.
(2) The guidelines and code of conduct as referred to in paragraph (1) must at least include:
a. work ethics; b. working hours; and
c. meeting regulations.

Article 34
The Board of Commissioners is required to provide sufficient time to execute their duties and responsibilities optimally.

Section Three
Board of Commissioners Meetings

Article 35
(1) Board of Commissioners meetings must be held at least 1 (one) time every 3 (three) months and attended by all members of the Board of Commissioners.
(2) The agenda of the meeting as referred to in paragraph (1) includes among others:
a. BPR business plan; b. strategic issues of the BPR;
c. evaluation/establishment of strategic policies; and/or
d. evaluation of the realization of the BPR business plan.
(3) Board of Commissioners meetings as referred to in paragraph (1) are held with direct presence or conducted using teleconference, video conference, or other electronic media facilities that allow all participants to see and hear each other directly and participate in the meeting. (4) The Board of Commissioners is required to hold meetings with the agenda of establishing the BPR business plan as referred to in paragraph (2) letter a at least 1 (one) time every 1 (one) year. (5) Board of Commissioners meetings as referred to in paragraph (4) must be held with direct presence.

Article 36
(1) Decision-making in Board of Commissioners meetings is conducted through deliberation to reach consensus.
(2) In the event that consensus as referred to in paragraph (1) is not reached, decision-making in the meeting is conducted based on the majority vote.
(3) The results of the Board of Commissioners meeting must be recorded in the meeting minutes and documented properly.
(4) Differences of opinion occurring in the meeting as referred to in paragraph (2) must be clearly stated in the meeting minutes along with the reasons for the difference of opinion.

Article 37
(1) In order to execute supervision, the Board of Commissioners may request the Board of Directors to provide explanations regarding among others problems, performance, and operational policies of the BPR. (2) Requests for explanations as referred to in paragraph (1) can be conducted in meetings between the Board of Commissioners and the Board of Directors. (3) If the request for explanations is conducted in the form of a meeting as referred to in paragraph (2), the meeting decision must be recorded in the meeting minutes and documented properly.

Article 38
(1) Board of Commissioners members are prohibited from using the BPR for personal, family, and/or other parties' interests that can harm or reduce the profits of the BPR. (2) Board of Commissioners members are prohibited from taking and/or receiving personal benefits from the BPR other than remuneration and other facilities determined by the General Meeting of Shareholders, considering fairness and/or compliance with legislation.

Article 39
In order to implement Corporate Governance, Board of Commissioners members are required to disclose:
a. their shareholdings, both in the respective BPR and other companies; b. financial and/or family relationships with other Board of Commissioners members, Board of Directors members, and/or BPR shareholders; and
c. remuneration and other facilities received.

CHAPTER IV
COMMITTEES
Section One
Structure and Membership of Committees

Article 40
(1) Members of the Audit Committee as referred to in Article 32 paragraph (1) letter a must consist of at least:
a. one Independent Commissioner; b. one...

b. an Independent Party who has competence and/or experience in the field of finance or accounting; and

c. an Independent Party who has competence and/or experience in the field of law or banking.

(2) The Audit Committee as referred to in paragraph (1) shall be chaired by an Independent Commissioner.

(3) Members of the Board of Directors are prohibited from becoming members of the Audit Committee as referred to in paragraph (1).

(4) The majority of members of the Audit Committee as referred to in paragraph (1) shall consist of Independent Commissioners and Independent Parties.

(5) Members of the Audit Committee as referred to in paragraph (1) letters b and c must have good integrity.

Article 41

(1) Members of the Risk Monitoring Committee as referred to in Article 32 paragraph (1) letter b shall consist of at least:

a. an Independent Commissioner;

b. an Independent Party who has competence and/or experience in the field of finance; and

c. an Independent Party who has competence and/or experience in the field of risk management.

(2) The Risk Monitoring Committee as referred to in paragraph (1) shall be chaired by an Independent Commissioner.

(3) Members of the Board of Directors are prohibited from becoming members of the Risk Monitoring Committee as referred to in paragraph (1).

(4) The majority of members of the Risk Monitoring Committee as referred to in paragraph (1) shall consist of Independent Commissioners and Independent Parties.

(5) Members of the Risk Monitoring Committee as referred to in paragraph (1) letters b and c must have good integrity.

Article 42

(1) In the event that a Rural Bank forms a Remuneration and Nomination Committee, the members of the Remuneration and Nomination Committee as referred to in Article 32 paragraph (2) shall consist of at least 1 (one) person:

a. an Independent Commissioner;

b. a Commissioner; and

c. an Executive Officer.

(2) The Chairman of the Remuneration and Nomination Committee as referred to in paragraph (1) shall be an Independent Commissioner.

(3) Members of the Board of Directors are prohibited from becoming members of the Remuneration and Nomination Committee as referred to in paragraph (1).

Second Section

Concurrent Position as Chairman of the Committee

Article 43

The Chairman of the committee as referred to in Article 32 paragraph (1) and paragraph (2) may only hold a concurrent position as the chairman of the committee in 1 (one) other committee.

Third Section

Tasks and Responsibilities of the Committee

Article 44

(1) In order to assess the adequacy of internal controls, including the adequacy of the financial reporting process, the Audit Committee conducts monitoring and evaluation of the planning and implementation of audits and monitors the follow-up on audit results.

(2) In order to carry out the tasks as referred to in paragraph (1), in order to provide recommendations to the Board of Commissioners, the Audit Committee shall conduct at least monitoring and evaluation against:

a. the implementation of duties by the Internal Audit Unit;

b. the compliance of audit implementation by public accounting firms with audit standards;

c. the compliance of financial reports with applicable accounting standards for Rural Banks;

d. the implementation of follow-up by the Board of Directors on the findings of the internal audit unit or officials handling internal audit, public accountants, and the supervision results of the Board of Commissioners, the Financial Services Authority, and/or other authorities.

(3) The Audit Committee is required to provide recommendations regarding the appointment of Public Accountants and Public Accounting Firms to the Board of Commissioners to be submitted to the General Meeting of Shareholders.

Article 45

(1) The Risk Monitoring Committee provides recommendations to the Board of Commissioners.

(2) In order to provide recommendations as referred to in paragraph (1), the Risk Monitoring Committee shall conduct at least:

a. evaluation regarding the compliance between risk management policies and the implementation of such policies;

b. monitoring and evaluation of the implementation of duties by the Risk Management Committee and the Risk Management Unit.

Article 46

The Remuneration and Nomination Committee as referred to in Article 32 paragraph (2) has tasks and responsibilities at least covering:

a. evaluation and recommendations related to remuneration policies; and

b. preparation and provision of recommendations related to nomination policies.

Article 47

In order to carry out the tasks and responsibilities as referred to in Article 46 letter a, in order to conduct evaluation and provide recommendations to the Board of Commissioners, the Remuneration and Nomination Committee shall conduct at least monitoring and evaluation against:

a. financial performance and reserve fulfillment as regulated in statutory regulations;

b. individual work performance;

c. fairness with peer groups; and

d. consideration of the Rural Bank's long-term goals and strategies.

Article 48

(1) Rural Banks are required to have guidelines and rules of procedure for each committee member.

(2) The guidelines and rules of procedure as referred to in paragraph (1) shall at least include:

a. work ethics;

b. working hours; and

c. meeting regulations.

Fourth Section

Committee Meetings

Article 49

(1) Committee meetings shall be held in accordance with the established guidelines and rules of procedure.

(2) Meetings of the Audit Committee or Risk Monitoring Committee shall be held if attended by the majority of Committee members, including an Independent Commissioner and an Independent Party.

(3) In the event that a Rural Bank forms a Remuneration and Nomination Committee as referred to in Article 32 paragraph (2), the Remuneration and Nomination Committee meeting must be attended by the majority of the Remuneration and Nomination Committee members, including an Independent Commissioner and an Executive Officer.

Article 50

(1) Decision-making in committee meetings shall be conducted through deliberation to reach consensus.

(2) In the event that consensus as referred to in paragraph (1) is not reached, decision-making in the meeting shall be conducted based on the majority vote.

(3) The results of the committee meeting must be recorded in the meeting minutes and documented properly.

(4) Differences of opinion that occur in the committee meeting as referred to in paragraph (2) must be clearly stated in the meeting minutes along with the reasons for the differences of opinion.

CHAPTER V

COMPLIANCE FUNCTION, INTERNAL AUDIT, AND EXTERNAL AUDIT

First Section

Compliance Function and Assignment of Directors Who Oversee the Compliance Function of Rural Banks

Article 51

Rural Banks are required to ensure compliance with Financial Services Authority regulations and other statutory regulations.

Article 52

(1) In order to ensure compliance as referred to in Article 51, Rural Banks are required to have a Director who oversees the compliance function.

(2) In order to assist in the implementation of the duties of the Director who oversees the compliance function, Rural Banks with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah) are required to form an independent compliance unit (compliance unit) from the operational units.

(3) In order to assist in the implementation of the duties of the Director who oversees the compliance function, Rural Banks with core capital of less than Rp50,000,000,000.00 (fifty billion rupiah) are required to appoint an Executive Officer who is independent from the Rural Bank's operations to carry out the compliance function.

(4) The compliance unit as referred to in paragraph (2) and the Executive Officer as referred to in paragraph (3) are directly responsible to the Director who oversees the compliance function as referred to in paragraph (1).

(5) The compliance unit or Executive Officer handling the compliance function as referred to in paragraph (2) and paragraph (3) is required to prepare and/or update work guidelines, systems, and compliance procedures.

Article 53

(1) The Director who oversees the compliance function in a Rural Bank with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah) must be independent and meet at least the following requirements:

a. not holding a concurrent position as the President Director;

b. not overseeing the operational fields of fund mobilization and disbursement;

c. understanding Financial Services Authority regulations and other statutory regulations related to banking; and

d. able to work independently.

(2) The Director of a Rural Bank who oversees the compliance function in a Rural Bank with core capital of less than Rp50,000,000,000.00 (fifty billion rupiah) must be independent and meet at least the following requirements:

a. not handling fund disbursement; and

b. understanding Financial Services Authority regulations and other statutory regulations related to banking.

Article 54

(1) The appointment, dismissal, and/or resignation of the Director who oversees the compliance function as referred to in Article 52 paragraph (1) shall refer to regulations governing the appointment, dismissal, and/or resignation of Directors as referred to in Financial Services Authority Regulations regarding Rural Banks.

(2) In the event that the Director who oversees the compliance function is temporarily unable to perform their duties for more than 10 (ten) consecutive working days, the duties must be temporarily replaced by another Director until the Director who oversees the compliance function can resume their duties.

(3) In the event that the Director who oversees the compliance function is permanently unable, resigns, or their term of office has expired, the Rural Bank is required to appoint a replacement for the Director who oversees the compliance function.

(4) During the replacement process of the Director who oversees the compliance function as referred to in paragraph (3), the Rural Bank is required to appoint another Director to temporarily perform the duties of the Director who oversees the compliance function.

(5) The Director performing temporary duties to oversee the compliance function, whether due to temporary inability as referred to in paragraph (2) or permanent inability as referred to in paragraph (3), must meet the provisions as referred to in Article 53.

(6) In the event that there is no other Director as referred to in paragraph (5), the Director who oversees the compliance function may be temporarily held concurrently by another Director who oversees the function as referred to in Article 53.

(7) The Rural Bank is required to report the temporary replacement of the position of the Director who oversees the compliance function as referred to in paragraph (2) and paragraph (4) to the Financial Services Authority.

Article 55

The Director who oversees the compliance function is tasked and responsible at least to:

a. determine the necessary steps to ensure that the Rural Bank has met all Financial Services Authority regulations and other statutory regulations in the implementation of prudential principles;

b. monitor and ensure that the business activities of the Rural Bank do not deviate from statutory regulations; and

c. monitor and ensure the Rural Bank's compliance with all commitments made by the Rural Bank to the Financial Services Authority.

Article 56

(1) In carrying out their duties as referred to in Article 55, the Director who oversees the compliance function is required to prevent the Rural Bank's Board of Directors from establishing policies and/or decisions that deviate from Financial Services Authority regulations and other statutory regulations.

(2) In the event that the Director who oversees the compliance function is proven to have carried out optimal prevention but deviations still occur, responsibility for the deviations that occur is the responsibility of the Rural Bank's Board of Directors, considering the scope of prevention efforts carried out by the Director who oversees the compliance function, with reference to statutory regulations.

Article 57

(1) The Director who oversees the compliance function as referred to in Article 53 paragraph (1) is required to report the implementation of their duties and responsibilities periodically to the President Director, with a copy to the Board of Commissioners.

(2) In the event that the Director who oversees the compliance function as referred to in Article 53 paragraph (2) is the President Director, the Director who oversees the compliance function is required to report the implementation of their duties and responsibilities periodically to the Board of Commissioners.

Second Section

Internal Audit Function

Article 58

Rural Banks are required to implement the internal audit function effectively.

Article 59

(1) Rural Banks with core capital of Rp50,000,000,000.00 (fifty billion rupiah) or more are required to form an Internal Audit Unit that is independent from the operational function.

(2) Rural Banks with core capital of less than Rp50,000,000,000.00 (fifty billion rupiah) are required to appoint 1 (one) Executive Officer who is responsible for the implementation of the internal audit function that is independent from the operational function.

Article 60

The Internal Audit Unit or Executive Officer as referred to in Article 59 is tasked and responsible to:

a. assist the President Director and Board of Commissioners in carrying out operational supervision of the Rural Bank, including planning, implementation, and monitoring of audit results;

b. conduct analysis and assessment in the fields of finance, accounting, operations, and other activities at least through direct examination and document analysis;

c. identify all possibilities to improve and increase the efficiency of resource and fund utilization; and

d. provide improvement suggestions and objective information about inspected activities at all levels of management.

Article 61

(1) The Internal Audit Unit or Executive Officer responsible for the implementation of the internal audit function is directly responsible to the President Director.

(2) In carrying out their duties, the Internal Audit Unit or Executive Officer responsible for the implementation of the internal audit function is required to submit reports to the President Director and Board of Commissioners, with a copy to the Director who oversees the compliance function.

(3) The Head of the Internal Audit Unit or Executive Officer responsible for the implementation of the internal audit function is appointed and dismissed by the President Director, considering the opinion of the Board of Commissioners.

Third Section

External Audit Function

Article 62

(1) In the implementation of the external audit function, Rural Banks are required to appoint Public Accountants and Public Accounting Firms registered with the Financial Services Authority to conduct audits of the Rural Bank's annual financial reports.

(2) In the event that the Rural Bank already has an Audit Committee, the appointment of Public Accountants and Public Accounting Firms as referred to in paragraph (1) must first obtain approval from the General Meeting of Shareholders based on candidates proposed by the Board of Commissioners in accordance with the recommendation of the Audit Committee.

(3) The implementation of the Audit as referred to in paragraph (1) and the appointment of Public Accountants and Public Accounting Firms as referred to in paragraph (2) must meet regulations governing the transparency of the Rural Bank's financial conditions.

CHAPTER VI

IMPLEMENTATION OF RISK MANAGEMENT

Article 63

Rural Banks are required to implement risk management effectively, which is adjusted to the objectives, business policies, size, and complexity of the business as well as the capabilities of the Rural Bank, with reference to requirements and procedures as established in regulations governing the implementation of risk management for Rural Banks.

CHAPTER VII

MAXIMUM LIMITS ON CREDIT GRANTING

Article 64

Rural Banks are required to apply prudential principles in the provision of funds with reference to regulations governing the maximum limits on credit granting for Rural Banks.

CHAPTER VIII

RURAL BANK BUSINESS PLAN

Article 65

(1) Rural Banks are required to prepare a business plan covering long-term strategic plans and annual business plans.

(2) Rural Banks submit the business plan as referred to in paragraph (1) and its amendments to the Financial Services Authority with reference to regulations governing Rural Bank business plans.

CHAPTER IX

ASPECTS OF TRANSPARENCY OF RURAL BANK CONDITIONS

Article 66

(1) Rural Banks are required to implement transparency of financial and non-financial conditions as regulated in regulations governing the transparency of Rural Bank financial conditions.

(2) In the implementation of transparency of financial and non-financial conditions as referred to in paragraph (1), Rural Banks are required to prepare and submit reports with procedures, types, and scope as regulated in regulations governing the transparency of Rural Bank financial conditions.

Article 67

Rural Banks are required to implement transparency of information regarding products and/or services and the use of Rural Bank customer data with reference to requirements and procedures as regulated in Financial Services Authority regulations governing consumer protection in the financial services sector and regulations governing the transparency of bank product information and the use of customer personal data.

CHAPTER X

INTERNAL REPORTING AND CONFLICT OF INTEREST

First Section

Internal Reporting

Article 68

In order to improve the quality of decision-making processes by the Board of Directors and the quality of supervision processes by the Board of Commissioners, Rural Banks are required to ensure the availability and adequacy of internal reporting supported by adequate management information systems.

Second Section

Handling Conflicts of Interest

Article 69

In the event of a conflict of interest, Directors, Commissioners, and Executive Officers are prohibited from taking actions that can harm the Rural Bank or reduce the Rural Bank's profits and are required to disclose the conflict of interest in question in every decision.

CHAPTER XI

REPORTING AND ASSESSMENT OF CORPORATE GOVERNANCE IMPLEMENTATION

First Section

Reports Related to Corporate Governance Implementation

Article 70

In the implementation of the duties of the Director who oversees the compliance function, Rural Banks are required to submit reports to the Financial Services Authority, namely:

a. a report on the main points of the implementation of the duties of the Director who oversees the compliance function as referred to in Article 55;

b. a special report regarding policies and/or decisions of the Board of Directors that, in the opinion of the Director who oversees the compliance function, have deviated from Financial Services Authority regulations and/or other statutory regulations, as referred to in Article 56.

Article 71

(1) The report as referred to in Article 70 letter a must be signed by the Director who oversees the compliance function and the President Director.

(2) In the event that the President Director performs the function as the Director who oversees the compliance function, the report as referred to in Article 70 letter a is signed by the President Director.

(3) The report as referred to in paragraph (1) must be prepared by the Rural Bank at the end of December each year and submitted to the Financial Services Authority, at the latest 3 (three) months after the end of the reporting month.

Article 72

(1) The report as referred to in Article 70 letter b must be signed by the Director who oversees the compliance function.

(2) The report as referred to in paragraph (1) must be submitted to the Financial Services Authority at the latest 10 (ten) working days from the discovery of the deviation.

Article 73

(1) In the implementation of the internal audit function as referred to in Article 58, Rural Banks are required to submit to the Financial Services Authority:

a. a report on the appointment or dismissal of the Head of the Internal Audit Unit or Executive Officer responsible for the implementation of the internal audit function, accompanied by considerations and reasons for the appointment or dismissal;

b. a report on the implementation and main points of internal audit results, including confidential audit information; and

c. a special report regarding each internal audit finding that is estimated to disrupt the continuity of the Rural Bank's business.

(2) Rural Banks with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah) are required to submit a report on the review results by external parties containing opinions on the work results of the Internal Audit Unit or Executive Officer responsible for the implementation of the internal audit function and their compliance with the standards for the implementation of the internal audit function of Rural Banks, as well as possible improvements.

Article 74

(1) The report as referred to in Article 73 paragraph (1) letter a must be signed by the President Director and the Lead Commissioner and must be submitted to the Financial Services Authority at the latest 10 (ten) working days after the date of appointment or dismissal of the Head of the Internal Audit Unit or Executive Officer responsible for the implementation of the internal audit function.

(2) The report as referred to in Article 73 paragraph (1) letter b must be signed by the President Director and the Lead Commissioner and must be submitted to the Financial Services Authority at the end of each year, at the latest 1 (one) month after the reporting month.

(3) The report as referred to in Article 73 paragraph (1) letter c must be signed by the President Director and the Lead Commissioner and must be submitted to the Financial Services Authority at the latest 10 (ten) working days from the time the audit finding is known.

(4) The report as referred to in paragraph (2) must be submitted to the Financial Services Authority at least once every 3 (three) years after the external party review results as referred to in Article 73 paragraph (2) are received by the Rural Bank.

(5) The report as referred to in paragraph (4) must be submitted to the Financial Services Authority at the latest 1 (one) month after the external party review results as referred to in Article 70 are received by the Rural Bank.

Article 75

(1) Rural Banks are required to prepare a Corporate Governance Implementation Report at the end of each year.

(2) The Corporate Governance Implementation Report as referred to in paragraph (1) shall at least include:

a. the scope of Corporate Governance as referred to in Article 2 paragraph (2) and the results of the self-assessment of the implementation of Corporate Governance by the Rural Bank;

b. share ownership by Directors and financial and/or family relationships between Directors and other Commissioners, other Directors, and/or shareholders of the Rural Bank as referred to in Article 22;

c. share ownership by Commissioners and financial and/or family relationships between Commissioners and other Commissioners, other Directors, and/or shareholders of the Rural Bank as referred to in Article 39 letters a and b;

d. remuneration packages/other policies and facilities for Directors and Commissioners as referred to in Article 23 paragraph (3) and Article 39 letter c;

e. the ratio of the highest salary to the lowest salary;

f. the frequency of Board of Commissioners meetings as referred to in Article 35 paragraph (1);

g. the number of internal deviations that occurred and the resolution efforts by the Rural Bank;

h. the number of legal issues and resolution efforts by the Rural Bank;

i. transactions containing conflicts of interest; and

j. the provision of funds for social and political activities, both in nominal amounts and recipients of funds.

(3) The disclosure of remuneration packages/other policies and facilities for Directors and Commissioners as referred to in paragraph (2) letter d shall at least cover the number of Directors, the number of Commissioners, and the total amount of salaries, allowances, bonuses, share-based compensation, other forms of remuneration, and facilities established based on the decision of the General Meeting of Shareholders.

Article 76

(1) Rural Banks are required to submit the Corporate Governance Implementation Report as referred to in Article 75 at the latest 4 (four) months after December 31 to shareholders and at least to:

a. the Financial Services Authority;

b. the Rural Bank Association in Indonesia; and

c. 1 (one) media office or economic and financial magazine.

(2) For Rural Banks that have a website, the Corporate Governance Implementation Report as referred to in paragraph (1) must be informed on the Rural Bank's homepage at the latest 4 (four) months after December 31.

(3) Rural Banks...

(3) A BPR is considered to have submitted the Corporate Governance implementation report late if the BPR submits the said report to the Financial Services Authority beyond the final submission deadline as referred to in paragraph (1) but has not exceeded 1 (one) month since the final submission deadline.

(4) A BPR is considered to have not submitted the Corporate Governance report if the BPR has not submitted the said report within the delay period as referred to in paragraph (3).

(5) A BPR that has not submitted the Corporate Governance report as referred to in paragraph (4) remains obligated to submit the Corporate Governance report before the end of the following year.

Second Section
Self-Assessment of Corporate Governance Implementation

Article 77
(1) A BPR is required to conduct a self-assessment of the implementation of BPR Corporate Governance with the scope as regulated in Article 2 paragraph (2) at least 1 (one) time per year.

(2) The results of the self-assessment of Corporate Governance implementation as referred to in paragraph (1) constitute an inseparable part of the Corporate Governance implementation report as referred to in Article 75.

Article 78
(1) In order to conduct an assessment of the implementation of Corporate Governance as referred to in Article 3, the Financial Services Authority conducts an assessment or evaluation of the results of the self-assessment of Corporate Governance implementation as referred to in Article 77 paragraph (1).

(2) Based on the results of the assessment or evaluation as referred to in paragraph (1), the Financial Services Authority may request the BPR to submit an action plan containing improvement steps that must be implemented by the BPR with specific time targets.

(3) In cases where necessary, the Financial Services Authority may request the BPR to adjust the action plan as referred to in paragraph (2).

(4) The Financial Services Authority conducts an evaluation of the adjustment of the action plan as referred to in paragraph (3) and may conduct special examinations of the results of the Corporate Governance implementation improvements that have been carried out by the BPR.

CHAPTER XII
SANCTIONS
First Section
Sanctions for Corporate Governance Implementation

Article 79
A BPR that does not comply with the provisions as referred to in Article 2 paragraph (1), Article 10 paragraph (2), Article 11, Article 12, Article 13 paragraph (1), Article 14, Article 15, Article 16, Article 18, Article 19, Article 21 paragraph (1), paragraph (4) and paragraph (5), Article 22, Article 25 paragraph (1) and paragraph (2), Article 28, Article 29 paragraph (1), paragraph (2), paragraph (3) and paragraph (4), Article 30, Article 31, Article 32 paragraph (4), Article 33 paragraph (1), Article 34, Article 35 paragraph (1), paragraph (4), and paragraph (5), Article 36 paragraph (3) and paragraph (4), Article 37 paragraph (3), Article 39, Article 40 paragraph (3), Article 41 paragraph (3), Article 42 paragraph (3), Article 44 paragraph (3), Article 48 paragraph (1), Article 50 paragraph (3) and paragraph (4), Article 51, Article 52 paragraph (1), paragraph (2), paragraph (3) and paragraph (5), Article 53, Article 54 paragraph (2), paragraph (3), paragraph (4) and paragraph (7), Article 56 paragraph (1), Article 57, Article 58, Article 59, Article 61 paragraph (2), Article 68, Article 69, Article 76 paragraph (2), Article 77 paragraph (1), and/or Article 78 paragraph (2) shall be subject to administrative sanctions in the form of:
a. written reprimand; b. downgrade of health level; and/or
c. temporary suspension of BPR operational activities.

Article 80
A BPR that does not comply with the provisions as referred to in Article 4 paragraph (1) and/or Article 24 paragraph (1) shall be subject to administrative sanctions in the form of:
a. written reprimand; b. downgrade of health level;
c. prohibition on opening office networks and Foreign Exchange Business Activities; and/or
d. temporary suspension of BPR operational activities.

Article 81
The Board of Directors, members of the Board of Directors, and/or members of the Board of Commissioners who do not comply with the provisions as referred to in Article 17, Article 23, Article 32 paragraph (1), and Article 38 shall be subject to administrative sanctions in the form of:
a. written reprimand; and/or b. listing in the list of parties who receive a "fail" rating.

Article 82
A BPR that does not comply with Article 4 paragraph (2), Article 5, Article 6, Article 8, Article 9, Article 24 paragraph (2) and paragraph (3), Article 27 paragraph (2) and paragraph (3) shall be subject to sanctions as regulated in the Financial Services Authority Regulation governing Rural Banks.

Article 83
A BPR that does not comply with Article 63 shall be subject to sanctions as in the regulations governing the implementation of risk management for BPRs.

Article 84
A BPR that does not comply with Article 64 shall be subject to sanctions as in the regulations governing the maximum limit of BPR credit provision.

Article 85
A BPR that does not comply with Article 65 shall be subject to sanctions as in the regulations governing the BPR business plan.

Article 86
A BPR that does not comply with Article 62 and Article 66 shall be subject to sanctions as in the regulations governing the transparency of BPR financial conditions.

Article 87
A BPR that does not comply with Article 67 shall be subject to sanctions as in the Financial Services Authority Regulation governing Consumer Protection in the Financial Services Sector and regulations governing the transparency of bank product information and the use of customer personal data.

Second Section
Reporting Sanctions

Article 88
(1) A BPR that is late in submitting the report as referred to in Article 76 paragraph (3) shall be subject to a sanction of paying a fine of Rp100,000.00 (one hundred thousand rupiah) per day of delay.

(2) A BPR that does not submit the report as referred to in Article 76 paragraph (4) shall be subject to administrative sanctions in the form of a written reprimand and a sanction of paying a fine of Rp5,000,000.00 (five million rupiah).

(3) A BPR that does not submit the report as referred to in Article 76 paragraph (4) until the next reporting period shall be subject to administrative sanctions in the form of a written reprimand, a sanction of paying a fine of Rp10,000,000.00 (ten million rupiah), and a downgrade of the BPR's health level.

(4) A BPR that submits the report as regulated in Article 76 which is assessed as not true and/or not complete significantly shall be subject to administrative sanctions in the form of a written reprimand and a sanction of paying a fine of Rp10,000,000.00 (ten million rupiah) as well as; a. downgrade of BPR health level; and/or b. listing in the list of parties who receive a "fail" rating.

(5) The imposition of fines as referred to in paragraph (3) and paragraph (4) is carried out after the BPR has been given 2 (two) written reprimands by the Financial Services Authority with a grace period of 10 (ten) working days for each reprimand and the BPR does not submit or correct the report within a period of 10 (ten) working days after the last written reprimand.

Article 89
A BPR that is late in submitting the report as referred to in Article 70, Article 71 paragraph (3), Article 72 paragraph (2), Article 73 paragraph (1) and (2), Article 74, and/or Article 75 paragraph (1) shall be subject to administrative sanctions in the form of:
a. written reprimand; b. downgrade of health level; and/or
c. temporary suspension of BPR operational activities.

CHAPTER XIII
TRANSITIONAL PROVISIONS

Article 90
Provisions regarding sanctions for violations of organizational structure completeness obligations as referred to in Article 4, Article 13 paragraph (1), Article 24 paragraph (1), Article 25 paragraph (1) and paragraph (2), Article 32 paragraph (1) shall begin to apply 2 (two) years after this regulation is established.

Article 91
(1) The Corporate Governance implementation report as referred to in Article 75 for the reporting position at the end of December 2016 shall be submitted to the Financial Services Authority.

(2) The Corporate Governance implementation report as referred to in Article 75 shall be submitted to the parties as regulated in Article 76 paragraph (1) and uploaded on the BPR homepage as regulated in Article 76 paragraph (2) since the reporting position at the end of December 2017.

(3) The imposition of sanctions for the submission of Corporate Governance implementation reports as referred to in Article 70 shall begin to be applied for the submission of reports with a position of December 31, 2017.

CHAPTER XIV
CLOSING PROVISIONS

Article 92
Further implementation provisions of this Financial Services Authority Regulation shall be regulated by a Circular Letter of the Financial Services Authority.

Article 93
This Financial Services Authority Regulation shall come into force on the date of its promulgation.

To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta
On the date of March 31, 2015
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY,
Signed,
MULIAMAN D. HADAD

Promulgated in Jakarta
On the date of April 1, 2015
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
Signed,
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 72 A copy in accordance with the original Director of Legal Affairs I Ministry of Law, Signed, Sudarmaji

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 4/POJK.03/2015
ABOUT
IMPLEMENTATION OF CORPORATE GOVERNANCE FOR RURAL BANKS

I. GENERAL
The implementation of Corporate Governance is important because the risks and challenges faced by BPRs, both internal and external, are increasing and becoming more complex. Internally, members as well as the Board of Directors and members of the Board of Commissioners are expected to be able to act as role models and drivers so that the BPR as a whole implements Corporate Governance principles optimally. Large BPRs that have large business volumes and sufficiently complex organizational structures should implement Corporate Governance fully, including the fulfillment and completeness of organizational structure. As for small BPRs, the implementation of Corporate Governance focuses more on the good implementation of Corporate Governance functions. The Board of Directors and Board of Commissioners structure for large BPRs consists of Independent Parties and parties affiliated with controlling shareholders. The existence of Independent Parties is expected to increase balance in the implementation of supervision and ultimately optimize the implementation of Corporate Governance.

As Independent Commissioners and Independent Parties, committee members must be free from conflicts of interest. To prevent such conflicts of interest, it is deemed necessary for former managers and other parties who have relationships with the BPR to undergo a waiting period (cooling off) before taking office as Independent Commissioners or Independent Party committee members.

In order to support the implementation of Corporate Governance, BPR shareholders may appoint representatives to sit as members of the Board of Commissioners to carry out supervisory duties against the BPR. The implementation of Corporate Governance must ultimately become a culture for all BPR employees in every execution of operational activities and be transparent to all Stakeholders.

II. ARTICLE BY ARTICLE

Article 1
It is clear enough.

Article 2
Paragraph (1)
The implementation of Corporate Governance in all its business activities, including during the formulation of vision, mission, business plan, implementation of policies, and internal supervision steps at all levels or tiers of the organization.

Paragraph (2)
Letter a
The implementation of the duties and responsibilities of the Board of Directors refers to the BPR's Articles of Association and legislation, including Financial Services Authority regulations governing the implementation of such duties and responsibilities. The duties and responsibilities of the Board of Directors stated in the Articles of Association must be guided by legislation, including OJK regulations regarding banks.

Letter b
The implementation of the duties and responsibilities of the Board of Commissioners refers to the BPR's Articles of Association and legislation, including Financial Services Authority regulations governing the implementation of such duties and responsibilities. The duties and responsibilities of the Board of Commissioners stated in the Articles of Association are guided by legislation, including OJK regulations.

Letter c
The implementation of committee duties is intended, among other things, to facilitate the smooth execution of supervisory duties by the Board of Commissioners. For BPRs not required to form committees, the committee function is carried out by members of the Board of Commissioners.

Letter d
It is clear enough.

Letter e
It is clear enough.

Letter f
It is clear enough.

Letter g
It is clear enough.

Letter h
The BPR business plan must at least include a long-term strategic plan and an annual business plan.

Letter i
Transparency includes the aspect of disclosure of BPR information, both qualitative and quantitative, to Stakeholders.

Article 3
It is clear enough.

Article 4
The definition of core capital refers to regulations governing the obligation to provide minimum capital for BPRs.

Article 5
The principle of the regulation regarding residence is so that Board of Directors members reside close to the BPR's head office location, enabling them to manage the BPR well. The residence of Board of Directors members is proven by an identity card or a residence certificate from the village head, sub-district head, or local district head.

Article 6
Paragraph (1)
What is meant by "family relationship up to the second degree" is kinship up to the second degree, both vertical and horizontal, as regulated in the regulations regarding Rural Banks.

Paragraph (2)
It is clear enough.

Article 7
Paragraph (1)
Does not include the replacement of Board of Directors members that is temporary as referred to in the Law governing Limited Liability Companies.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Article 8
What is meant by other institutions includes, among others, political parties and/or social organizations.

Article 9
It is clear enough.

Article 10
It is clear enough.

Article 11
It is clear enough.

Article 12
What is meant by other authorities is but not limited to:
a. Bank Indonesia; b. Financial Transaction Reports and Analysis Center (PPATK); and/or
c. Deposit Insurance Corporation (LPS).

Article 13
Paragraph (1)
Letter a

Internal Audit Work Unit is directly responsible to the Chief Executive Director.
Risk Management Work Unit is directly responsible to one of the Board of Directors members.
Compliance Work Unit is a work unit tasked with assisting the implementation of the duties of the Board of Directors member who oversees the compliance function and is directly responsible to the Board of Directors member who oversees the compliance function.

The Risk Management Work Unit and Compliance Work Unit can be merged into one work unit handling risk management and compliance.

Letter b

The official appointed to carry out the internal audit function cannot hold other tasks concurrently and must be independent and directly responsible to the Chief Executive Director of the BPR.
The official appointed to carry out the risk management function is directly responsible to one of the BPR Board of Directors members responsible for the risk management function.
The official appointed to carry out the compliance function is directly responsible to one of the BPR Board of Directors members responsible for the compliance function.

The official appointed to carry out the risk management function can concurrently hold the position of the official carrying out the compliance function.

Paragraph (2)
It is clear enough.

Article 14
Letter a
The separation of duties is intended to ensure that there are no overlapping positions and conflicts of interest between bookkeeping, operational, and operational support activities. Whereas what is meant by operational activities are activities related to credit provision, fund collection, and fund disbursement.

Letter b
It is clear enough.

Article 15
For BPRs with the legal form of a Limited Liability Company, it is the General Meeting of Shareholders as referred to in the Law regarding Limited Liability Companies; for BPRs with the legal form of a Regional Enterprise, it is the Capital Owners' Meeting or General Meeting of Shareholders as referred to in the Law governing regional-owned enterprises; whereas for BPRs with the legal form of a Cooperative, it is the Members' Meeting as referred to in the Law regarding cooperatives.

Article 16
It is clear enough.

Article 17
Letter a
Included in the category of special projects are, among others, information technology projects with specific criteria such as having specific time targets.

Letter b
It is clear enough.

Letter c
Consultant qualifications are proven, among others, by competence and/or experience according to the assigned project.

Article 18
The data and information mentioned are needed in connection with the duties and responsibilities of the Board of Commissioners to supervise the implementation of duties and responsibilities carried out by the Board of Directors and to control the implementation of BPR policies.

Article 19
Paragraph (1)
It is clear enough.

Paragraph (2)
Letter a
It is clear enough.

Letter b
It is clear enough.

Letter c
Regulations regarding meetings include, among others, regulations on meeting agendas, quorum requirements, decision-making, members' rights in case of differing opinions in decision-making, and meeting minutes.

Article 20
It is clear enough.

Article 21
Paragraph (1)
What is meant by strategic policies and decisions are BPR decisions that can significantly affect the BPR's finances and/or have a continuous impact on budgets, human resources, organizational structure, and/or third parties.

Paragraph (2)
It is clear enough.

Paragraph (3)
Decision-making based on majority vote can only be carried out by BPRs that have more than 2 (two) Board of Directors members and an odd number.

Paragraph (4)
It is clear enough.

Paragraph (5)
It is clear enough.

Article 22
It is clear enough.

Article 23
Paragraph (1)
It is clear enough.

Paragraph (2)
What is meant by personal profit includes, among others, unreasonable asset rental income and commissions or remuneration in the context of fund collection and/or disbursement. Not included in the definition of personal profit is, among others, in the case where a Board of Directors member as a BPR customer receives reasonable interest/yield.

Whereas what is meant by considering fairness and/or compliance with legislation is to avoid the General Meeting of Shareholders setting things contrary to the prudence principle and legislation, for example, increasing remuneration costs and facilities for the Board of Directors when the Bank is under Special Supervision.

Paragraph (3)
What is meant by remuneration is salary, allowances, stock-based compensation, and other remuneration for the Board of Directors regulated in legislation.

Article 24
Paragraph (1)
The definition of core capital refers to regulations governing the obligation to provide minimum capital for BPRs.

Paragraph (2)
It is clear enough.

Paragraph (3)
The residence of Board of Commissioners members is proven by an identity card or a residence certificate from the village head, sub-district head, or local district head.

Article 25
Paragraph (1)
The existence of Independent Commissioners is intended to encourage the creation of a more objective work climate and environment and place fairness and equality among various interests, including minority shareholders' interests and other stakeholders.

Paragraph (2)
It is clear enough.

Paragraph (3)
What is meant by the waiting period (cooling off) is the interval between the effective end of the relevant position as a Board of Directors member or Executive Officer or other relationship with the BPR, and the effective appointment of the relevant person as an Independent Commissioner.

Paragraph (4)
What is meant by Board of Directors members or Executive Officers who in their last position performed supervisory functions include, among others, directors or Executive Officers handling the internal audit, compliance, and/or risk management functions at the relevant BPR.

Article 26
Paragraph (1)
What is meant by General Meeting of Shareholders is:
a. for BPRs with the legal form of a Limited Liability Company, it is the General Meeting of Shareholders as referred to in the Law governing limited liability companies; b. for BPRs with the legal form of a Cooperative, it is the Members' Meeting as referred to in the Law governing cooperatives;
c. for BPRs with the legal form of a Regional Enterprise, it is the Capital Owners' Meeting or General Meeting of Shareholders as referred to in the Law governing regional-owned enterprises.

Paragraph (2)
It is clear enough.

Article 27
Paragraph (1)
What is meant by "Board of Commissioners members can only concurrently hold positions as Commissioners at most at 2 (two) other BPRs or Sharia Rural Financing Banks" is that a person can only serve as a Commissioner at most at 3 (three) BPRs; or at 2 (two) BPRs and 1 (one) Sharia Rural Financing Bank; or 1 (one) BPR and 2 (two) Sharia Rural Financing Banks.

Sharia Rural Financing Bank is a Sharia bank that in its activities does not provide payment circulation service facilities as referred to in the Law governing Sharia banking.

Paragraph (2)
Commercial Banks are banks that carry out conventional business activities and/or based on Sharia principles that in their activities provide payment circulation service facilities as referred to in the Law regarding banking.

Paragraph (3)
What is meant by "majority" is more than 50% (fifty percent) of the total number of Board of Commissioners members.

Article 28
What is meant by independent is objective and free from pressure and interests of certain parties that are not in accordance with legislation, and carries out duties for the benefit of the BPR comprehensively and in accordance with the purpose and objectives of the BPR.

Article 29
Paragraph (1)
It is clear enough.

Paragraph (2)
It is clear enough.

Paragraph (3)
It is clear enough.

Paragraph (4)
What is meant by operational activities are credit provision, fund collection, and other operational activities.

Letter a
It is clear enough.

Letter b
The duties and responsibilities of the Board of Commissioners stated in the Articles of Association are guided by legislation, including Financial Services Authority regulations.

Paragraph (5)
It is clear enough.

Article 30
What is meant by ensuring is making efforts that the Board of Directors has carried out corrective actions or at least reminded the Board of Directors. Whereas what is meant by other authorities, among others, includes but is not limited to:
a. Bank Indonesia; b. Financial Transaction Reports and Analysis Center (PPATK); and/or;
c. Deposit Insurance Corporation (LPS).

Article 31
Letter a
It is clear enough.

Letter b
What is meant by conditions or estimated conditions that can endanger the continuity of the BPR's business are events or estimated conditions that can cause the BPR to be placed under special supervision, taken over by LPS, and/or have its business license revoked.

Article 32
Paragraph (1)
It is clear enough.

Paragraph (2)
BPRs are not required to form Remuneration and Nomination Committees.

Paragraph (3)
It is clear enough.

Paragraph (4)
It is clear enough.

Article 33
Paragraph (1)
It is clear enough.

Paragraph (2)
Letter a
It is clear enough.

Letter b
It is clear enough.

Article 34
The indicator of providing sufficient time is reflected, among others, through the attendance of the relevant Board of Commissioners members according to working hours.

which has been established in the guidelines and working regulations for the Board of Commissioners and the respective attendance level in Board of Commissioners meetings.

Article 35
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3)
What is meant by teleconference technology is long-distance conversation using video and audio technology that can be proven with recording evidence.
Paragraph (4)
Clearly stated.
Paragraph (5)
Clearly stated.

Article 36
Paragraph (1)
Clearly stated.
Paragraph (2)
Decision-making based on majority vote can only be carried out by BPRs that have more than 2 (two) members of the Board of Commissioners and an odd number.
Paragraph (3)
Meeting minutes must clearly reveal the issues discussed and the agreements reached, including performance, BPR strategic policies, and decisions taken.
Paragraph (4)
Clearly stated.

Article 37
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3) ...

Paragraph (3)
Meeting minutes must clearly reveal the issues discussed, conclusions, and decisions of the meeting.

Article 38
Paragraph (1)
Clearly stated.
Paragraph (2)
Personal profit includes, among others, unreasonable asset rental income and commissions or remuneration in the context of fund collection and/or disbursement. Not included in the definition of personal profit includes, among others, members of the Board of Commissioners as BPR customers receiving reasonable interest/yield.

Article 39
Letter a
What is meant by other companies is Financial Service Institutions or non-financial service institutions within and outside the country.
Letter b
Clearly stated.
Letter c
Clearly stated.

Article 40
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3)
Clearly stated.
Paragraph (4)
What is meant by "majority" is more than 50% (fifty percent) of the total number of Audit Committee members.
Paragraph (5)
What is meant by having integrity includes, among others, having good ethics and morals demonstrated by an attitude of complying with applicable regulations, including never being punished for being proven to have committed certain criminal acts as referred to in the Law regulating the Eradication...

Eradication and Prevention of Money Laundering Crimes within the last 20 (twenty) years prior to nomination, as well as not being included in the Disqualified List by the competent Authority and the Non-Performing Credit List (DKM), supported by a personal statement letter.

Article 41
Paragraph (1)
Clearly stated.
Paragraph (2)
Clearly stated.
Paragraph (3)
Clearly stated.
Paragraph (4)
What is meant by "majority" is more than 50% (fifty percent) of the total number of Risk Monitoring Committee members.
Paragraph (5)
What is meant by having integrity includes, among others, having good ethics and morals demonstrated by an attitude of complying with applicable regulations, including never being punished for being proven to have committed certain criminal acts as referred to in the Law regulating the Eradication and Prevention of Money Laundering Crimes within the last 20 (twenty) years prior to nomination, as well as not being included in the Disqualified List by the competent Authority and the Non-Performing Credit List (DKM), supported by a personal statement letter.

Article 42
Paragraph (1)
Letter a
Clearly stated.
Letter b
Clearly stated.
Letter c ...

Letter c
Executive Officials who can become the Remuneration and Nomination Committee are executive officials handling the human resources field.
Paragraph (2)
Clearly stated.
Paragraph (3)
Clearly stated.

Article 43
Clearly stated.

Article 44
Clearly stated.

Article 45
Clearly stated.

Article 46
Letter a
Recommendations regarding remuneration policies for the Board of Directors and Board of Commissioners are submitted to the General Meeting of Shareholders. Meanwhile, recommendations regarding remuneration policies for Executive Officials and employees as a whole are submitted to the Board of Directors. Letter b The preparation and provision of recommendations regarding nomination policies include:

preparing systems and procedures for the selection and/or replacement of Board of Directors and Board of Commissioners members to the Board of Commissioners to be submitted in the General Meeting of Shareholders;
providing recommendations regarding candidates for Board of Directors and/or Board of Commissioners members to the Board of Commissioners to be submitted in the General Meeting of Shareholders; and
providing recommendations regarding Independent Parties who will become members of the Audit Committee and Risk Management Committee.

Article 47 ...

Article 47
Letter a
What is meant by reserves is reserves as referred to in the Law regulating limited liability companies.
Letter b
Remuneration linked to individual performance is intended to achieve equality between individual work results and the remuneration received by the individual concerned.
Letter c
What is meant by peer group is job equality within the BPR and among several BPRs or similar financial service institutions, among others in terms of assets and characteristics. Letter d Clearly stated.

Article 48
Paragraph (1)
Clearly stated.
Paragraph (2)
Letter a
Clearly stated.
Letter b
Clearly stated.
Letter c
Regulations regarding meetings include regulations regarding meeting agendas, quorum requirements, decision-making recommendations, members' rights in the event of differing opinions in decision-making, and meeting minutes.

Article 49
Paragraph (1)
Clearly stated.
Paragraph (2)
What is meant by "majority" is more than 50% (fifty percent) of the total number of Committee members.
Paragraph (3)...

Paragraph (3)
What is meant by "majority" is more than 50% (fifty percent) of the total number of Remuneration and Nomination Committee members.

Article 50
Clearly stated.

Article 51
Clearly stated.

Article 52
Paragraph (1)
Clearly stated.
Paragraph (2)
What is meant by operational work units are work units that carry out credit granting activities, fund collection, and other operational activities.
Paragraph (3)
BPRs are not required to form a compliance unit.
What is meant by independent of BPR operations is not handling activities directly related to credit granting and fund collection.
Paragraph (4)
Clearly stated.
Paragraph (5)
Clearly stated.

Article 53
Clearly stated.

Article 54
Paragraph (1)
Clearly stated
Paragraph (2)
What is meant by unable to perform their duties is absent due to temporary matters such as leave, illness, and official duties.
Paragraph (3)...

Paragraph (3)
What is meant by permanent absence includes, among others, death, physical disability, and/or mental disability or other conditions that do not allow the individual to perform their duties well. Paragraph (4) Clearly stated Paragraph (5) Clearly stated Paragraph (6) Clearly stated Paragraph (7) Clearly stated

Article 55
Letter a
What is meant by taking the necessary steps to ensure that the BPR has met all regulations of the Financial Services Authority and other legislation in the implementation of prudential principles includes preparing compliance procedures in every work unit, adjusting internal BPR guidelines against changes in legislation, and preparing decision-making processes by management. What is meant by regulations of the Financial Services Authority and other legislation in the implementation of prudential principles, among others, are provisions regulating capital, Maximum Limit for Credit Granting, Asset Quality, and Asset Impairment Provisions. Letter b Monitoring and ensuring that BPR business activities do not deviate from legislation includes, among others, monitoring the application of compliance procedures in every work unit used as a tool in every decision made, and conducting compliance training and socialization regarding legislation. Letter c ...

Letter c
Commitments made by the BPR are the BPR's willingness to fulfill orders and/or prohibitions from the Financial Services Authority to carry out certain activities.

Article 56
Clearly stated.

Article 57
Clearly stated.

Article 58
Clearly stated.

Article 59
Paragraph (1)
What is meant by operational functions are functions related to credit granting, fund collection, and other operational activities.
Paragraph (2)
Clearly stated.

Article 60
Clearly stated

Article 61
Clearly stated.

Article 62
Paragraph (1)
The implementation of annual financial report audits of BPRs by public accountants is intended to improve reporting quality and the accuracy of the presentation of the BPR's financial condition. Paragraph (2) Clearly stated. Paragraph (3) Clearly stated.

Article 63
Clearly stated.

Article 64
Clearly stated.

Article 65...

Article 65
Paragraph (1)
What is meant by long-term strategic plans is a business plan for a minimum period of 5 (five) years ahead.
Paragraph (2)
Clearly stated.

Article 66
Paragraph (1)
What is meant by non-financial conditions includes, among others, management, ownership, development of BPR business and BPR business groups, management strategies and policies, and management reports. Paragraph (2) Clearly stated.

Article 67
Clearly stated.

Article 68
What is meant by adequate management information systems is information systems capable of providing complete, accurate, current, and integrated data and information for decision-making.

Article 69
What is meant by conflict of interest includes, among others, the difference between the economic interests of the BPR and the personal economic interests of owners, members of the Board of Directors, members of the Board of Commissioners, Executive Officials, and/or related parties with the BPR. Provisions in this Article are essentially intended to ensure that members of the Board of Directors, members of the Board of Commissioners, and Executive Officials avoid making decisions in situations and conditions where there is a conflict of interest. However, if decisions must still be made, the aforementioned parties must prioritize the economic interests of the BPR and avoid losses that may arise or the possibility of reduced BPR profits, and disclose the conflict of interest condition in every decision. In ...

In this regard, granting special treatment to certain parties outside applicable procedures and regulations is included in the category of conflicts of interest causing losses to the BPR or reducing BPR profits, including granting interest rates that do not comply with applicable procedures and regulations.

Article 70
Clearly stated.

Article 71
Clearly stated.

Article 72
Clearly stated.

Article 73
Paragraph (1)
Clearly stated.
Paragraph (2)
What is meant by external parties are public accountants and/or public accounting firms that do not audit the financial reports of the respective BPR in the last 3 (three) years.

Article 74
Clearly stated.

Article 75
Paragraph (1)
Clearly stated.
Paragraph (2)
Letter a
Clearly stated.
Letter b
Clearly stated.
Letter c
Clearly stated.
Letter d
The disclosure of remuneration packages/policies becomes a benchmark for Stakeholders in assessing the suitability of remuneration with...

with the performance results of the BPR managed by the BPR's Board of Directors and Board of Commissioners.
What is meant by other facilities are facilities received not in financial form, including housing facilities, transportation facilities, and health insurance facilities. Letter e Clearly stated. Letter f Clearly stated. Letter g Internal deviations in these regulations are limited to deviations related to BPR operations that significantly affect the BPR's financial condition. Letter h Legal issues in these regulations include civil and criminal legal issues. Letter i Clearly stated. Letter j Clearly stated. Paragraph (3) Clearly stated.

Article 76
Paragraph (1)
The submission of governance implementation reports to shareholders prioritizes controlling shareholders, while for other shareholders it is based on considerations of efficiency levels and the level of interest of each BPR. Letter a. Clearly stated. Letter b What is meant by BPR associations is the Central Board of Directors of the Indonesian Rural Bank Association (PERBARINDO) or the Central Board of Directors of the Association of Government-Owned Rural Banks throughout Indonesia (PERBAMIDA). Letter c Clearly stated. Paragraph (2) Clearly stated. Paragraph (3) Clearly stated. Paragraph (4) Clearly stated. Paragraph (5) Clearly stated.

Article 77
Clearly stated.

Article 78
Clearly stated.

Article 79
Clearly stated.

Article 80
Clearly stated.

Article 81
Listing officials in the list of parties receiving a "failed" rating is done through a fit and proper test process to the parties as regulated in the provisions regarding the fit and proper test for BPRs, which are assessed as causing the submission of reports that are significantly incorrect and/or incomplete.

Article 82
Clearly stated.

Article 83
Clearly stated.

Article 84
Clearly stated.

Article 85 ...

Article 85
Clearly stated.

Article 86
Clearly stated.

Article 87
Clearly stated.

Article 88
Paragraph (1)
What is meant by days is working days.
Paragraph (2)
BPRs that have been subject to fines in this paragraph are not subject to late sanctions as referred to in paragraph (1).
Paragraph (3)
Clearly stated.
Paragraph (4)
Letter a
Clearly stated
Letter b
Listing officials in the list of parties receiving a "failed" rating is done through a fit and proper test process to the parties as regulated in the provisions regarding the fit and proper test for BPRs, which are assessed as causing the submission of reports that are significantly incorrect and/or incomplete. Paragraph (5) Clearly stated.

Article 89
Clearly stated.

Article 90
Clearly stated.

Article 91
Clearly stated.

Article 92
Clearly stated.

Article 93 ...

Article 93
Clearly stated.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5685 ---

POJK on the Implementation of Corporate Governance for Rural Banks

Lineage: In force