POJK on the Liquidity Coverage Ratio Obligation for General Banks

FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 42 /POJK.03/2015
ON
THE OBLIGATION TO FULFILL THE LIQUIDITY COVERAGE RATIO (LIQUIDITY COVERAGE RATIO) FOR GENERAL BANKS BY THE GRACE OF THE ALMIGHTY GOD THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in order to create a healthy banking system capable of developing and competing nationally and internationally, banks need to have adequate liquidity to anticipate crisis conditions; b. that in order to increase bank liquidity adequacy, it is necessary to increase the quantity of high-quality financial assets to anticipate net cash outflows in accordance with international standards;
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 Obligation to Fulfill the Liquidity Coverage Ratio (Liquidity Coverage Ratio) for General Banks;

Recalling:

1. Law Number 7 of 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION ON THE OBLIGATION TO FULFILL THE LIQUIDITY COVERAGE RATIO (LIQUIDITY COVERAGE RATIO) FOR GENERAL BANKS.

CHAPTER I
GENERAL PROVISIONS

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

1. Bank means General Bank as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998, including branches of banks located abroad, which conduct conventional business activities.
2. Liquidity Coverage Ratio, hereinafter abbreviated as LCR, is the ratio between High Quality Liquid Asset and total net cash outflow over the next 30 (thirty) days in a stress scenario.
3. High Quality Liquid Asset, hereinafter abbreviated as HQLA, means cash and/or financial assets that can be easily converted into cash with little or no reduction in value to meet the Bank's liquidity needs during the next 30 (thirty) days in a stress scenario.
4. Total Net Cash Outflow, hereinafter referred to as Net Cash Outflow, is the total estimated cash outflow minus the total estimated cash inflow expected to occur during the next 30 (thirty) days in a stress scenario.
5. Deposit means Deposit as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998.
6. Funding means the receipt of funds from third parties that creates obligations for the Bank in the form of Deposits, debt securities, issued securities, received loans, and other forms of obligations that are equivalent to them.

Article 2
(1) Banks are obligated to maintain adequate liquidity.
(2) The fulfillment of liquidity adequacy as referred to in paragraph (1) is calculated using the LCR.
(3) The LCR calculation as referred to in paragraph (2) is calculated in Rupiah denomination.
(4) The LCR fulfillment as referred to in paragraph (2) is set at a minimum of 100% (one hundred percent) continuously.
(5) The Financial Services Authority has the authority to set a higher LCR than the LCR fulfillment obligation as referred to in paragraph (4) if the Financial Services Authority assesses that a Bank requires greater liquidity.

Article 3
(1) Banks are obligated to inform the Financial Services Authority of the Bank's liquidity condition in the event that:
a. it is unable to meet the LCR up to 100% (one hundred percent); or b. it is potentially unable to meet the LCR up to 100% (one hundred percent). (2) In the event of conditions as referred to in paragraph (1), the Bank is obligated to:
a. analyze the Bank's liquidity condition, including:

1. reasons or factors that potentially or cause the Bank's failure to meet the LCR requirements as referred to in Article 2 paragraph (4);
2. steps that have been and will be taken to improve the liquidity condition; and
3. the estimated liquidity stress period by the Bank;
   b. submit a report analyzing the Bank's liquidity condition as referred to in letter a and further information regarding the Bank's liquidity condition to the Financial Services Authority; and
   c. take necessary steps to improve the liquidity condition, including:
4. reducing the Bank's exposure to liquidity risk;
5. strengthening the Bank's liquidity risk management policies, processes, and procedures; and/or
6. refining the Bank's contingency funding plan.
   (3) Banks may use HQLA that causes the Bank's LCR to be less than 100% (one hundred percent) with the approval of the Financial Services Authority, in the event that the Bank's liquidity condition as referred to in paragraph (1) potentially disrupts the Bank's going concern.

Article 4
In the event that a Bank owns and/or controls subsidiaries, the LCR fulfillment obligation as referred to in Article 2 applies to the Bank both individually and on a consolidated basis.

Article 5
The LCR fulfillment as referred to in Article 2 applies to:
a. Banks included in the General Bank Business Activity Group (BUKU) 3; b. Banks included in the General Bank Business Activity Group (BUKU) 4; and
c. foreign banks.

CHAPTER II
HIGH QUALITY LIQUID ASSET

Part One
General

Article 6
(1) Banks are obligated to have HQLA in order to fulfill the LCR.
(2) Banks are obligated to have policies regarding HQLA at least for:
a. identifying legal entities, geographical locations, currency types, and/or account types where HQLA is placed; and b. excluding certain assets from HQLA based on operational reasons. (3) The value of HQLA considered in the LCR calculation is the market value of the HQLA.

Article 7
(1) HQLA components considered in LCR fulfillment as referred to in Article 2 consist of:
a. HQLA Level 1; and b. HQLA Level 2, which includes:

1. HQLA Level 2A; and
2. HQLA Level 2B.
   (2) HQLA Level 1 that can be considered in LCR fulfillment is not limited in quantity.
   (3) HQLA Level 2 that can be considered in LCR fulfillment is at most 40% (forty percent) of total HQLA.
   (4) HQLA Level 2B that can be considered in LCR fulfillment is at most 15% (fifteen percent) of total HQLA.
   (5) The calculation of the maximum limit for HQLA Level 2 and HQLA Level 2B uses the formula as referred to in Appendix I, which is an integral part of this Financial Services Authority Regulation.

Part Two
HQLA Requirements

Article 8
HQLA as referred to in Article 6 paragraph (1) must meet:
a. fundamental requirements; b. market characteristic requirements;
c. operational requirements; and
d. diversified requirements.

Article 9
(1) The fundamental HQLA requirements as referred to in Article 8 letter a are:
a. having low risk; b. having an easy and certain valuation method;
c. having low correlation with risky assets; and
d. being listed on a recognized exchange.
(2) The HQLA requirements related to market characteristics as referred to in Article 8 letter b are:
a. having an active and adequate market; b. having low market volatility; and
c. historically being assets desired by market participants in the event of a crisis (flight to quality).
(3) The operational requirements as referred to in Article 8 letter c are:
a. free from any claims, except assets stored or agreed with Bank Indonesia but not yet used to generate liquidity; b. not designated for the purpose of covering operational costs;
c. can be used legally and contractually by the Bank in the event of stress conditions;
d. assets received as collateral in non-segregated derivative transactions that can be legally re-hypothecated can be included in the HQLA group if the Bank considers the outflow related to the re-hypothecated assets; e. available and liquidatable under stress conditions, with adequate procedures and systems; f. financial assets are under the control of a specialized function responsible for managing the Bank's liquidity, which has the authority to liquidate assets; g. periodically liquidatable in certain amounts through repo or sales to test market accessibility, effectiveness of the asset liquidation process, and/or asset availability; h. Banks cannot include assets with the right to re-hypothecate in the HQLA group if the original asset owner has a contractual right to withdraw the assets during the 30 (thirty) day stress period; and
i. financial assets of subsidiaries that meet HQLA criteria used to meet liquidity requirements can only be considered in the LCR on a consolidated basis, as long as the risks reflected in the Net Cash Outflow from the subsidiary are considered in the consolidated LCR calculation.
(4) The diversified requirements as referred to in Article 8 letter d are:
a. distributed across various types of financial assets, issuers, and currency types; and b. having policies and limits regarding specific types of financial assets, issuers, and currency types. (5) The diversified requirements as referred to in paragraph (4) are exempted for HQLA in the form of:
a. cash; b. debt securities issued by the Central Government;
c. securities issued by Bank Indonesia; and
d. placements at Bank Indonesia.

Part Three
HQLA Components

Article 10
(1) HQLA Level 1 as referred to in Article 7 paragraph (1) letter a includes:
a. cash and cash equivalents; b. placements at Bank Indonesia;
c. securities issued or guaranteed by other countries' governments, other countries' central banks, public sector entities, multilateral development banks, and/or international institutions as referred to in regulations concerning guidelines for calculating risk-weighted assets for credit risk using the standard approach, meeting the following requirements:

1. subject to a 0% (zero percent) risk weight in the calculation of Risk-Weighted Assets (RWA) for credit risk using the standard approach;
2. traded in an active market;
3. tested as a reliable source of liquidity in the market in both normal and stress conditions; and
4. not being the obligation of financial service institutions and/or entities affiliated with financial service institutions;
   d. securities issued by the Central Government and Bank Indonesia in Rupiah and foreign currencies; and e. securities issued by other countries' governments and central banks with a risk weight greater than 0% (zero percent) in foreign currencies, provided that:
5. the Bank has subsidiaries or branches in the aforementioned countries; and
6. at most equal to the outflow requirements in the currency of the country issuing the aforementioned foreign currency securities.
   (2) In order to fulfill the LCR, HQLA Level 1 as referred to in paragraph (1) is not subject to haircuts.

Article 11
(1) HQLA Level 2A as referred to in Article 7 paragraph (1) letter b number 1 includes:
a. securities issued or guaranteed by other countries' governments, other countries' central banks, public sector entities, and/or multilateral development banks meeting the following requirements:

1. subject to a 20% (twenty percent) risk weight in the calculation of Risk-Weighted Assets (RWA) for credit risk using the standard approach;
2. traded in an active market;
3. tested as a reliable source of liquidity in the market, both in normal and stress conditions, with criteria being:
   a) price decline of at most 10% (ten percent); or b) increase in haircut of at most 10% (ten percent), during the 30 (thirty) day stress period; and
4. not being the obligation of financial service institutions and/or entities affiliated with financial service institutions;
   b. securities in the form of debt securities issued by corporations, including commercial paper, and covered bonds but excluding subordinated bonds, meeting the following requirements:
5. cannot be issued by financial service institutions and/or entities affiliated with financial service institutions;
6. in the event that securities are in the form of covered bonds, they may be issued by financial service institutions and/or entities affiliated with financial service institutions but cannot be issued by the reporting Bank and entities affiliated with the reporting Bank;
7. having a long-term credit rating of at least AA- or a short-term credit rating equivalent in the event that no long-term rating is available from a recognized rating agency, or having a probability of default equivalent to a credit rating of at least AA-;
8. traded in an active market; and
9. tested as a reliable source of liquidity in the market, both in normal and stress conditions, with criteria being:
   a) price decline of at most 10% (ten percent); or b) increase in haircut of at most 10% (ten percent), during the 30 (thirty) day stress period. (2) In order to fulfill the LCR, HQLA Level 2A as referred to in paragraph (1) is subject to a 15% (fifteen percent) haircut from the market price.

Article 12
(1) HQLA Level 2B as referred to in Article 7 paragraph (1) letter b number 2 includes:
a. asset-backed securities in the form of residential mortgages meeting the following requirements:

1. not issued by the reporting Bank or entities affiliated with the reporting Bank;
2. underlying assets do not originate from the reporting Bank or entities affiliated with the reporting Bank;
3. having a long-term rating of at least AA or a short-term rating equivalent if no long-term rating is available from a recognized rating agency;
4. traded in an active market;
5. tested as a reliable source of liquidity in the market, both in normal and stress conditions, with criteria being:
   a) price decline of at most 20% (twenty percent); or b) increase in haircut of at most 20% (twenty percent), during the 30 (thirty) day stress period;
6. underlying assets consist only of residential mortgage loans;
7. collateral used is a loan classified as full recourse with a loan-to-value ratio of at most 80% (eighty percent); and
8. securitization must involve risk retention;
   b. securities in the form of debt securities issued by corporations, including commercial paper, meeting the following requirements:
9. not issued by financial service institutions and/or entities affiliated with financial service institutions;
10. having a long-term credit rating of at most A+ and at least BBB- or a short-term credit rating equivalent in the event that no long-term rating is available from a recognized rating agency, or having a probability of default equivalent to a credit rating of at most A+ and at least BBB-;
11. traded in an active market; and
12. tested as a reliable source of liquidity in the market, both in normal and stress conditions, with criteria being:
    a) price decline of at most 20% (twenty percent); or b) increase in haircut of at most 20% (twenty percent), during the 30 (thirty) day stress period;
    c. ordinary shares owned by non-bank subsidiaries meeting the following requirements:
13. not issued by financial service institutions and/or entities affiliated with financial service institutions;
14. listed on a recognized exchange;
15. denominated in Rupiah;
16. traded in an active market; and
17. tested as a reliable source of liquidity in the market, both in normal and stress conditions, with criteria being:
    a) price decline of at most 40% (forty percent); or b) increase in haircut of at most 40% (forty percent), during the 30 (thirty) day stress period. (2) In order to fulfill the LCR, HQLA Level 2B as referred to in paragraph (1) is subject to haircuts:
    a. 25% (twenty-five percent) of market price for asset-backed securities in the form of residential mortgages as referred to in paragraph (1) letter a; or b. 50% (fifty percent) of market price for securities in the form of debt securities issued by corporations as referred to in paragraph (1) letter b and ordinary shares owned by non-bank subsidiaries as referred to in paragraph (1) letter c.

CHAPTER III
CASH OUTFLOW

Part One
General

Article 13
(1) In order to fulfill the LCR, Banks are obligated to calculate cash outflow over the next 30 (thirty) days originating from:
a. Retail deposits; b. Funding originating from Micro and Small Business customers;
c. Funding originating from corporate customers;
d. Secured funding; and e. Other cash outflows (additional requirement).
(2) The value of cash outflow considered in LCR fulfillment is the outstanding liability value on the balance sheet and commitments on the administrative account multiplied by the runoff rate.

Part Two
Retail Deposits and Funding Originating from Micro and Small Business Customers

Article 14
Retail deposits as referred to in Article 13 paragraph (1) letter a and Funding originating from Micro and Small Business customers as referred to in Article 13 paragraph (1) letter b, which are considered in the LCR, are:
a. having a maturity of up to 30 (thirty) days; or b. having a maturity of more than 30 (thirty) days but can be withdrawn at any time by customers without significant penalties; and
c. Deposits are not currently pledged for up to 30 (thirty) days ahead.

Article 15
(1) Funding originating from Micro and Small Business customers considered in the LCR, in addition to meeting the criteria as referred to in Article 14, must also meet the following criteria:
a. customers are classified as Micro and Small Businesses as referred to in the Law regulating micro, small, and medium enterprises; and b. total Funding from each customer is at most Rp5,000,000,000.00 (five billion Rupiah). (2) In the event that customers are not classified as Micro and Small Businesses as referred to in the Law regulating micro, small, and medium enterprises, but the total customer Funding amount is up to Rp5,000,000,000.00 (five billion Rupiah) and is treated like individual customers, they can be categorized as Micro and Small Business customers.

Article 16
In order to calculate cash outflow, Banks are obligated to classify Retail deposits as referred to in Article 13 paragraph (1) letter a into:
a. Stable Deposits; and b. Less Stable Deposits.

Article 17
(1) Stable Deposits as referred to in Article 16 letter a are Deposits that meet the deposit insurance requirements by the Deposit Insurance Agency and meet the following requirements:
a. customers have a relationship or affiliation with the Bank so that the likelihood of withdrawing Deposits is very small; or b. Deposit accounts are used for routine customer transactions. (2) The magnitude of the runoff rate for Retail deposits included in Stable Deposits as referred to in paragraph (1) is set at 5% (five percent) of the value of Stable Deposits.

Article 18
(1) Less Stable Deposits as referred to in Article 16 letter b are Retail deposits that do not meet the requirements as referred to in Article 17 paragraph (1). (2) The magnitude of the runoff rate for Retail deposits included in Less Stable Deposits as referred to in paragraph (1) is set at 10% (ten percent) of the value of Less Stable Deposits. (3) The Financial Services Authority has the authority to set a higher runoff rate for Retail deposits included in Less Stable Deposits as referred to in paragraph (1) if the Financial Services Authority assesses that the runoff rate for certain types of Deposits is higher compared to other types of Deposits.

Article 19
In order to calculate cash outflow, Banks are obligated to classify Funding originating from Micro and Small Business customers as referred to in Article 13 paragraph (1) letter b into:
a. Stable Funding; and b. Less Stable Funding.

Article 20
(1) The requirements for Stable Funding as referred to in Article 19 letter a refer to the requirements for Stable Deposits as referred to in Article 17 paragraph (1). (2) The magnitude of the runoff rate for Funding originating from Micro and Small Business customers included in Stable Funding as referred to in paragraph (1) is set at 5% (five percent) of the value of Stable Funding.

Article 21
(1) Less Stable Funding as referred to in Article 19 letter b is Funding originating from Micro and Small Business customers that do not meet the requirements as referred to in Article 20 paragraph (1). (2) The magnitude of the runoff rate for Funding originating from Micro and Small Business customers included in Less Stable Funding as referred to in paragraph (1) is set at 10% (ten percent) of the value of Less Stable Funding.

Part Three
Funding Originating from Corporate Customers

Article 22
(1) Funding originating from corporate customers as referred to in Article 13 paragraph (1) letter

c taken into account in the LCR is Funding that meets the requirements:
a. having a maturity or remaining maturity of up to 30 (thirty) days or less, including Funding without a maturity; or b. Funding with option features that can be withdrawn by corporate customers within 30 (thirty) days or less. (2) In the event that there is a clear and binding agreement that corporate customers can only withdraw Funding after notifying the Bank in advance more than 30 (thirty) days before withdrawal, Funding from corporate customers may be excluded from the calculation of cash outflows (cash outflow).

Article 23
In order to calculate cash outflows, the Bank must classify Funding from corporate customers as referred to in Article 13 paragraph (1) letter c into:
a. Operational Deposits; or b. Non-operational Deposits and/or other non-operational liabilities.

Article 24
(1) Operational Deposits as referred to in Article 23 letter a are Deposits that meet the requirements:
a. used by corporate customers for clearing, custodian, or cash management activities that meet the criteria:

1. are Deposits that must be placed by corporate customers at the Bank to use other Bank services or products;
2. corporate customers rely significantly on the Bank to be able to provide clearing, custodian, or cash management facilities for the next 30 (thirty) days;
3. are Deposits used as a prerequisite for corporate customers to conduct clearing, custodian, or cash management activities;
4. there is a legally binding agreement with corporate customers; and
5. if the agreement is to be terminated before 30 (thirty) days, corporate customers must:
   (i) notify the Bank at least 30 days in advance; or (ii) be subject to significant penalties; and b. placed in a separate account that does not provide economic incentives to customers who place funds in excess of the transactional purpose of this account. (2) The Bank must have a method to determine the value of Deposits that can be classified as Operational Deposits. (3) In the event that the Bank cannot determine the value of Deposits classified as Operational Deposits, all Deposits are classified as Non-operational Deposits and/or other non-operational liabilities. (4) The withdrawal rate for Operational Deposits as referred to in paragraph (1) is established:
   a. 5% (five percent) of the value of Operational Deposits if they meet the deposit insurance criteria of the Deposit Insurance Agency; or b. 25% (twenty-five percent) of the value of Operational Deposits if they do not meet the deposit insurance criteria of the Deposit Insurance Agency.

Article 25
(1) Deposits from corporate customers that do not meet the requirements for Operational Deposits as referred to in Article 24 paragraph (1) are classified as Non-operational Deposits and/or other non-operational liabilities as referred to in Article 23 letter b. (2) The withdrawal rate for Non-operational Deposits and/or other non-operational liabilities as referred to in paragraph (1) is established:
a. Non-operational Deposits and/or other non-operational liabilities originating from non-financial companies, the Central Government, Bank Indonesia, foreign governments, foreign central banks, multilateral development banks, and/or public sector entities, established:

1. 20% (twenty percent) of the value of Non-operational Deposits and/or other non-operational liabilities if they meet the deposit insurance criteria of the Deposit Insurance Agency; or
2. 40% (forty percent) of the value of Non-operational Deposits and/or other non-operational liabilities if they do not meet the deposit insurance criteria of the Deposit Insurance Agency;
   b. Non-operational Deposits and/or other non-operational liabilities originating from other entities are established at 100% (one hundred percent) of the value of Non-operational Deposits and/or other non-operational liabilities; and/or
   c. securities in the form of debt securities issued by the Bank are subject to a withdrawal rate of 100% (one hundred percent) regardless of the holder of the securities.

Fourth Part
Secured Funding

Article 26
(1) The Bank must calculate the withdrawal rate for Secured Funding as referred to in Article 13 paragraph (1) letter d that will mature within 30 (thirty) days. (2) The withdrawal rate for Secured Funding as referred to in paragraph (1) is established:
a. 0% (zero percent) of Funding in the event that the collateral is HQLA Level 1 or the transaction counterparty is Bank Indonesia; b. 15% (fifteen percent) of Funding in the event that the collateral is HQLA Level 2A;
c. 25% (twenty-five percent) of Funding in the event that:

1. the transaction counterparty is the Central Government, public sector entities, or multilateral development banks with collateral other than HQLA Level 1 or Level 2A; or
2. the collateral is asset-backed securities in the form of residential housing that meets the HQLA Level 2B criteria;
   d. 50% (fifty percent) of Funding in the event that the collateral is HQLA Level 2B other than collateral as referred to in paragraph (2) letter c number 2; or e. 100% (one hundred percent) of Funding for Secured Funding that does not meet the criteria in letter a, letter b, letter c, and letter d.

Fifth Part
Other Cash Outflows (Additional Requirement)

Article 27
In calculating the LCR, the Bank must calculate other cash outflows (additional requirement) as referred to in Article 13 paragraph (1) letter e, which include:
a. derivative transactions; b. increased liquidity needs;
c. loss of Funding;
d. withdrawal of credit facility and liquidity facility commitments; e. other contractual obligations related to fund disbursement; f. other contingent funding obligations; and g. other contractual cash outflows.

Article 28
(1) The Bank must take into account the estimated cash outflow in the next 30 (thirty) days for derivative transactions as referred to in Article 27 letter a based on the valuation methods applicable to each Bank. (2) Cash inflows and cash outflows from derivative transactions can be calculated as a net difference (net) based on the counterparty in the event that there is a valid master netting agreement. (3) Cash inflows and cash outflows from foreign currency derivative transactions can be calculated as a net difference (net) even without a valid master netting agreement in the event that the derivative transaction is a full and simultaneous transfer of principal funds or on the same day. (4) The calculation of other cash outflows (additional requirement) related to the settlement of derivative transactions as referred to in paragraph (1) can be reduced by cash inflows from the use of collateral received by the Bank as long as it meets the requirements:
a. meets the criteria as HQLA; b. is not calculated as part of HQLA in meeting the LCR; and
c. the Bank legally has the right and operational ability to use the collateral to generate new funds.
(5) The withdrawal rate for derivative transactions as referred to in paragraph (1) is established at 100% (one hundred percent) of the value of derivative transactions.

Article 29
The Bank must take into account the estimated cash outflow in the next 30 (thirty) days for increased liquidity needs as referred to in Article 27 letter b related to:
a. downgrade (rating) of the Bank in Funding, derivative, and other agreements; b. mark-to-market changes over derivative or other transactions;
c. potential changes in collateral value for derivatives and other transactions;
d. excess non-segregated collateral held by the Bank that can be withdrawn at any time by the counterparty; e. obligations to provide collateral to the counterparty for a specific transaction but the counterparty has not yet requested such collateral; and f. potential exchange of collateral in the form of HQLA into non-HQLA.

Article 30
The withdrawal rate for increased liquidity needs related to the downgrade (rating) of the Bank in Funding, derivative, and other agreements as referred to in Article 29 letter a is established at 100% (one hundred percent) of the amount of collateral that must be provided or cash outflows according to agreements related to long-term downgrades of up to or equal to 3 (three) rating levels (notches).

Article 31
The withdrawal rate for increased liquidity needs related to mark-to-market changes over derivative or other transactions as referred to in Article 29 letter b is established at the largest absolute net collateral flow during 30 (thirty) days realized in 24 (twenty-four) months.

Article 32
The withdrawal rate for increased liquidity needs related to potential changes in collateral value for derivatives and other transactions as referred to in Article 29 letter c is established at 20% (twenty percent) of the value of non-HQLA Level 1 collateral after deduction (haircut) from the value of all collateral after deducting collateral received from the counterparty as long as the received collateral can be re-hypothecated.

Article 33
The withdrawal rate for increased liquidity needs related to excess non-segregated collateral held by the Bank that can be withdrawn at any time by the counterparty as referred to in Article 29 letter d is established at 100% (one hundred percent) of the value of non-segregated collateral that can be contractually withdrawn by the counterparty because the collateral value exceeds what is required.

Article 34
The withdrawal rate for increased liquidity needs related to obligations to provide collateral to the counterparty for a specific transaction but the counterparty has not yet requested collateral as referred to in Article 29 letter e is established at 100% (one hundred percent) of the value of collateral that must be contractually fulfilled.

Article 35
The withdrawal rate for increased liquidity needs related to the potential exchange of collateral in the form of HQLA into non-HQLA as referred to in Article 29 letter f is established at 100% (one hundred percent) of the value of HQLA that can be exchanged for non-HQLA assets.

Article 36
(1) The Bank must take into account the estimated cash outflow in the next 30 (thirty) days for the risk of loss of Funding as referred to in Article 27 letter c related to:
a. loss of Funding originating from asset-backed securities, covered bonds, and other structured financing instruments issued by the Bank; or b. loss of Funding originating from asset-backed commercial paper, conduits, securities investment vehicles, and other similar financing facilities. (2) The withdrawal rate for loss of Funding originating from asset-backed securities, covered bonds, and other structured financing instruments issued by the Bank as referred to in paragraph (1) letter a is established at 100% (one hundred percent) of the Funding transactions maturing within 30 (thirty) days. (3) The withdrawal rate for loss of Funding originating from asset-backed commercial paper, conduits, securities investment vehicles, and other similar financing facilities as referred to in paragraph (1) letter b is established at 100% (one hundred percent) of:
a. Funding that will mature in the next 30 (thirty) days; and b. assets that have the potential to be paid off in the next 30 (thirty) days even if not yet mature. (4) In the event that the Bank's structured Funding activities are conducted through special purpose entities, in determining HQLA requirements, the Bank must take into account:
a. debt instruments issued by entities that mature within 30 (thirty) days are subject to a withdrawal rate of 100% (one hundred percent); or b. embedded options in financing that have the potential to trigger asset recovery or liquidity needs, subject to a withdrawal rate of 100% (one hundred percent) of the value of assets that have the potential to be recovered.

Article 37
(1) The withdrawal rate for other cash outflows (additional requirement) related to commitment obligations in the form of credit facilities as referred to in Article 27 letter d is established:
a. 5% (five percent) of undrawn credit facilities in the event that facilities are provided to individuals or Micro and Small Enterprises; b. 10% (ten percent) of undrawn credit facilities in the event that facilities are provided to non-financial corporations, the Central Government, Bank Indonesia, foreign governments, foreign central banks, public sector entities, and/or multilateral development banks;
c. 40% (forty percent) of undrawn credit facilities in the event that facilities are provided to Banks and/or financial service institutions; and/or
d. 100% (one hundred percent) of undrawn credit facilities in the event that facilities are provided to entities other than those referred to in letter a, letter b, and letter c. (2) The withdrawal rate for other cash outflows (additional requirement) related to commitment obligations in the form of liquidity facilities as referred to in Article 27 letter d is established:
a. 5% (five percent) of undrawn liquidity facilities in the event that facilities are provided to individuals or Micro and Small Enterprises; b. 30% (thirty percent) of undrawn liquidity facilities in the event that facilities are provided to non-financial corporations, the Central Government, Bank Indonesia, foreign governments, foreign central banks, public sector entities, and/or multilateral development banks;
c. 40% (forty percent) of undrawn liquidity facilities in the event that facilities are provided to Banks; and/or
d. 100% (one hundred percent) of undrawn liquidity facilities in the event that facilities are provided to financial service institutions and/or entities other than those referred to in letter a, letter b, and letter c. (3) In the event that credit facility and/or liquidity facility commitments have collateral in the form of HQLA, the collateral can be calculated as a reduction in cash outflows as long as it has not been calculated as HQLA and meets the requirements:
a. HQLA has been used as collateral by third parties to guarantee facilities or is contractually required to be included when third parties will withdraw facilities; b. the Bank has the right to reuse the collateral to obtain new funds when facilities have been withdrawn; and
c. there is no correlation between the likelihood of facility withdrawal and the market value of the collateral.

Article 38
(1) The withdrawal rate for other contractual obligations related to fund disbursement as referred to in Article 27 letter e is established at 100% (one hundred percent) of contractual obligations related to fund disbursement to financial service institutions within 30 (thirty) days. (2) If the total of all contractual obligations related to fund disbursement to individual and non-financial corporate customers within the next 30 (thirty) days not covered in other categories exceeds 50% (fifty percent) of the total contractual inflows within 30 (thirty) days, the withdrawal rate is established at 100% (one hundred percent) of the excess value between:
a. contractual obligations to disburse funds; with b. 50% (fifty percent) of total cash inflows (cash inflow).

Article 39
(1) Other cash outflows (additional requirement) related to other contingent funding obligations as referred to in Article 27 letter f include:
a. obligations originating from trade finance instruments; b. obligations originating from credit facilities and liquidity facilities that are unconditionally revocable uncommitted;
c. obligations originating from letters of credit (L/C) and guarantees not related to trade finance obligations;
d. obligations originating from potential requests to repurchase Bank debt or related to securities investment vehicles and other financing facilities; e. obligations originating from structured products anticipated by customers through ready marketability; f. obligations originating from managed funds sold with the aim of maintaining value stability; g. obligations to cover potential repurchase of debt securities, with or without collateral, having a maturity of more than 30 (thirty) days for issuers affiliated with dealers or market makers; and/or h. non-contractual obligations for customer short positions protected by other customers' collateral.

(2) The withdrawal rate from other contingent funding obligations as referred to in paragraph (1) is established:
a. 3% (three percent) for obligations originating from trade finance instruments; b. 0% (zero percent) for obligations originating from credit facilities and liquidity facilities that are unconditionally revocable uncommitted;
c. 5% (five percent) for obligations originating from letters of credit (L/C) and guarantees not related to trade finance obligations;
d. 5% (five percent) for obligations originating from potential requests to repurchase Bank debt or related to securities investment vehicles and other financing facilities; e. 5% (five percent) for obligations originating from structured products anticipated by customers through ready marketability; f. 5% (five percent) for obligations originating from managed funds sold with the aim of maintaining value stability; g. 5% (five percent) for obligations to cover potential repurchase of debt securities, with or without collateral, having a maturity of more than 30 (thirty) days for issuers affiliated with dealers or market makers; and/or h. 50% for non-contractual obligations for customer short positions protected by other customers' collateral.

Article 40
The withdrawal rate for other contractual cash outflows as referred to in Article 27 letter g is established at 100% (one hundred percent) of other contractual obligations within 30 (thirty) days.

CHAPTER IV
CASH INFLOW
First Part
General

Article 41
(1) In order to meet the LCR as referred to in Article 2, the Bank must calculate cash inflows (cash inflow) during the next 30 (thirty) days originating from:
a. secured lending; b. receivables based on counterparties; and/or
c. other cash inflows.
(2) The Bank is prohibited from calculating committed facility receivables for credit and liquidity facilities as a source of cash inflow. (3) The value of cash inflows that can be calculated in the LCR is at most 75% (seventy-five percent) of the total cash outflows as referred to in Article 13. (4) In calculating cash inflows as referred to in paragraph (1), the Bank can only take into account contractual cash inflows that meet the requirements:
a. originate from receivables with Good Quality; and b. are not expected to default within the next 30 (thirty) days.
(5) The value of cash inflows that can be calculated in meeting the LCR is the value of contractual receivables multiplied by the inflow rate.

Second Part
Secured Lending

Article 42
(1) The inflow rate from secured lending as referred to in Article 41 paragraph (1) letter a is established based on the type of underlying collateral, namely:
a. 0% (zero percent) of the contractual value in the event that the collateral is HQLA Level 1; b. 15% (fifteen percent) of the contractual value in the event that the collateral is HQLA Level 2A;
c. 25% (twenty-five percent) of the contractual value in the event that the collateral is asset-backed securities that meet the criteria as HQLA Level 2B;
d. 50% (fifty percent) of the contractual value in the event that the collateral is HQLA Level 2B other than asset-backed securities; e. 50% (fifty percent) of the contractual value in the event that the transaction is margin lending with collateral that does not meet the criteria as HQLA; and/or f. 100% (one hundred percent) of the contractual value in the event that the collateral does not meet the criteria as referred to in letter a to letter e. (2) In the event that collateral received by the Bank in secured lending transactions is re-hypothecated and used to cover the Bank's short position, the inflow rate from secured lending transactions is established at 0% (zero percent).

Third Part
Receivables Based on Counterparties

Article 43
(1) The Bank must calculate cash inflows based on counterparties as referred to in Article 41 paragraph (1) letter b:
a. individual customers and Micro and Small Enterprises; b. other customers consisting of:

1. financial service institutions and Bank Indonesia; and
2. others.
   (2) Cash inflows originating from loans without a specific maturity are prohibited from being calculated as cash inflows in the LCR calculation. (3) In the event that cash inflows originate from minimum principal payments, fees, or interest on loans without a specific maturity as referred to in paragraph (2) that are contractually due within 30 (thirty) days, cash inflows can be calculated as cash inflows in the LCR calculation. (4) Credit facilities agreed to be extended (revolving credit facilities) cannot be calculated as cash inflows in the LCR calculation.

Article 44
The inflow rate for receivables from individual customers and receivables from Micro and Small Enterprises as referred to in Article 43 paragraph (1) letter a originating from principal and interest payments on loans with Good Quality is established at 50% (fifty percent) of the contractual value.

Article 45
(1) The acceptance rates for claims from financial service institutions and Bank Indonesia as referred to in Article 43 paragraph (1) letter b number 1 are established as follows:
a. the acceptance rate originating from principal and interest payments on loans with a "Clear" quality is set at 100% (one hundred percent) of the contractual value; b. the acceptance rate originating from securities not counted as HQLA with a remaining maturity of less than 30 (thirty) days is set at 100% (one hundred percent) of the contractual value; (2) The acceptance rate for fund placements in other banks for operational activities is established at 0% (zero percent) of the contractual value.

Article 46
The acceptance rates for claims from non-financial corporate customers, the Central Government, foreign governments, public sector entities, and multilateral development banks as referred to in Article 43 paragraph (1) letter b number 2 are established as follows:
a. the acceptance rate originating from principal and interest payments on loans with a "Clear" quality is set at 50% (fifty percent) of the contractual value; and/or b. the acceptance rate originating from securities not counted as HQLA with a remaining maturity of less than 30 (thirty) days is set at 100% (one hundred percent) of the contractual value.

Fourth Section
Other Cash Inflows

Article 47
Banks are required to calculate other cash inflows as referred to in Article 41 paragraph (1) letter c, which originate from:
a. derivative transaction claims; and b. other contractual claims.

Article 48
(1) The acceptance rates as referred to in Article 47 letter a are established at 100% (one hundred percent) of the value of derivative transaction claims. (2) In the event that a Bank provides collateral in the form of HQLA in derivative transactions, the calculation of cash inflows from derivative transaction claims must be reduced by the value of the collateral provided.

Article 49
The acceptance rates for other contractual claims as referred to in Article 47 letter b are established at 50% (fifty percent) of the claim value.

Article 50
(1) In the preparation of consolidation reports for banks operating cross-border (cross border), it is established that:
a. the withdrawal rate used for corporate customers follows the home country of the bank; and b. the withdrawal rate used for individual customers or Micro and Small Enterprises follows the host country where the bank branch operates. (2) The withdrawal rate used for individual customers or Micro and Small Enterprises as referred to in paragraph (1) letter b may use the withdrawal rate based on the home country, if it meets the following criteria:
a. there are no requirements for Individual, Micro, and Small Enterprise Deposits in the host country where the bank branch operates; b. the bank branch operates in a country that has not yet implemented LCR; and/or
c. discretion by the home country banking supervisory authority to apply the withdrawal rate in the home country if the withdrawal rate is stricter than the requirements in the host country where the Bank operates.

Article 51
In addition to the obligation to calculate LCR as referred to in Article 2, Banks monitor liquidity conditions and adequacy using specific indicators.

CHAPTER V
LCR CALCULATION AND REPORTING

First Section
General

Article 52
Banks are required to perform LCR calculations and reporting, both individually and on a consolidated basis, on:
a. a daily basis; b. a monthly basis; and
c. a quarterly basis.

Second Section
Daily LCR Calculation and Reporting

Article 53
(1) The obligation for daily LCR calculation as referred to in Article 52 letter a takes effect starting from:
a. 1 April 2017, for Banks included in the BUKU 4 group and branches of banks located outside the country; and b. 1 October 2017, for Banks included in the BUKU 3 group and foreign banks other than branches of banks located outside the country. (2) Banks are required to submit daily LCR reports as referred to in Article 52 letter a online through the Financial Services Authority reporting system. (3) The procedure for online daily LCR reporting as referred to in paragraph (2) is further regulated by a circular letter from the Financial Services Authority. (4) In the event that the online daily LCR reporting system as referred to in paragraph (2) is not yet available and/or there are specific conditions, the Financial Services Authority may request Banks to submit daily reports offline.

Third Section
Monthly LCR Calculation and Reporting

Article 54
(1) Banks are required to prepare monthly LCR reports as referred to in Article 52 letter b based on daily average reports.
(2) In the event that Banks are not yet required to perform daily LCR calculations as referred to in Article 53 paragraph (1), Banks may calculate the monthly LCR value based on the end-of-reporting-month position.

Article 55
(1) Banks are required to submit monthly LCR reports as referred to in Article 52 letter b online through the Financial Services Authority reporting system. (2) In the event that the Financial Services Authority reporting system as referred to in paragraph (1) is not yet available, Banks are required to submit monthly LCR reports offline. (3) Banks are required to submit monthly LCR reports as referred to in paragraph (1) and paragraph (2) no later than:
a. 15 (fifteen) days after the end of the reporting month, for individual monthly LCR reports; and b. 30 (thirty) days after the end of the reporting month, for consolidated monthly LCR reports. (4) Submission of monthly LCR reports offline as referred to in paragraph (2) is submitted to:
a. the Relevant Bank Supervision Department or Regional Office 1 for Jabodetabek, Banten, Lampung, and Kalimantan, for Banks with headquarters or branches of banks located outside the country operating in the Jakarta, Bogor, Depok, Tangerang, and Bekasi (Jabodetabek) area and Banten Province; or b. Regional Office or local Financial Services Authority Office for Banks with headquarters located outside the Jakarta, Bogor, Depok, Tangerang, and Bekasi (Jabodetabek) area and Banten Province. (5) In the event that the final submission deadline as referred to in paragraph (3) falls on a Saturday, Sunday, and/or holiday, the report is submitted on the next working day.

Article 56
(1) The obligation to submit monthly LCR reports as referred to in Article 52 letter b is first conducted for the following report positions:
a. 31 December 2015, for Banks included in the BUKU 4 group and branches of banks located outside the country; and b. 30 June 2016, for Banks included in the BUKU 3 group and foreign banks other than branches of banks located outside the country. (2) The preparation of monthly LCR reports uses the format as specified in Appendix II, which is an integral part of this Financial Services Authority Regulation.

Fourth Section
Quarterly LCR Calculation and Reporting

Article 57
(1) Banks are required to calculate and publish quarterly LCR reports as referred to in Article 52 letter c based on daily average reports. (2) In the event that Banks are not yet required to perform daily LCR calculations as referred to in Article 53 paragraph (1), Banks may calculate the quarterly LCR value based on the average of the end-of-reporting-month positions. (3) Banks are required to publish the calculations and/or quarterly LCR values as referred to in paragraph (1) for the positions of March, June, September, and December. (4) Banks are required to publish the calculations and/or quarterly LCR values as referred to in Article 52 letter c through:
a. the Bank's website for quarterly calculations and LCR values; and b. at least 1 (one) daily printed newspaper in Indonesian with wide circulation and online simultaneously with the quarterly publication report. (5) The obligation to publish quarterly LCR calculations and values as referred to in paragraph (4) letter a is conducted no later than:
a. 15 of the second month after the end of the reporting month, for end-of-month positions for March, June, and September; b. the end of March of the year following the end of the reporting month, for end-of-month positions for December. (6) The procedures, formats, and timeframes for publishing quarterly LCR values as referred to in paragraph (4) letter b are carried out in accordance with the procedures, formats, and timeframes for publication as regulated in Financial Services Authority Regulations regarding transparency and publication of Bank reports. (7) Banks are required to maintain announcements of quarterly LCR reports on the Bank's website as referred to in paragraph (4) letter a for at least 5 (five) recent fiscal years.

Article 58
(1) The obligation to publish quarterly LCR calculations and values through the Bank's website as referred to in Article 57 paragraph (4) letter a is first conducted for the following report positions:
a. March 2016, for Banks included in the BUKU 4 group and branches of banks located outside the country; and b. September 2016, for Banks included in the BUKU 3 group and foreign banks other than branches of banks located outside the country. (2) The preparation of quarterly LCR calculation reports uses the format in Appendix III, which is an integral part of this Financial Services Authority Regulation.

Article 59
(1) The obligation to publish quarterly LCR values through newspapers as referred to in Article 57 paragraph (4) letter b is first conducted for the report position of March 2019. (2) Banks are deemed not to have published quarterly LCR values through newspapers as referred to in paragraph (1) if the quarterly publication report announced does not include information regarding LCR values.

Fifth Section
Reporting for Banks Changing Groups

Article 60
(1) Banks included in the BUKU 1 and BUKU 2 groups, which were initially not required to meet LCR regulations, subsequently becoming Banks included in the BUKU 3, BUKU 4, or foreign banks as referred to in Article 4, are required to calculate and submit LCR reports. (2) The obligation to submit LCR reports as referred to in paragraph (1) is established as follows:
a. monthly LCR reports are conducted for the first time in the third month since being declared as Banks included in the BUKU 3, BUKU 4, or foreign banks groups; b. quarterly LCR reports are conducted for the first time in the subsequent quarterly period after submitting monthly reports as referred to in letter a. (3) In the event that there are Banks included in the BUKU 3, BUKU 4, or foreign banks groups that subsequently become Banks not included in the groups as referred to in Article 4, Banks remain obligated to meet the LCR calculation and reporting regulations as regulated in this Financial Services Authority Regulation.

CHAPTER VI
LCR COMPLIANCE STAGES

Article 61
(1) LCR compliance obligations are carried out in stages.
(2) The LCR compliance stages as referred to in paragraph (1) are established at least as follows:

1. for Banks included in the BUKU 4 group and branches of banks located outside the country:
   a. 70% (seventy percent) starting from 31 December 2015; b. 80% (eighty percent) starting from 31 December 2016;
   c. 90% (ninety percent) starting from 31 December 2017; and
   d. 100% (one hundred percent) starting from 31 December 2018;
2. for Banks included in the BUKU 3 group and foreign banks other than branches of banks located outside the country:
   a. 70% (seventy percent) starting from 30 June 2016; b. 80% (eighty percent) starting from 30 June 2017;
   c. 90% (ninety percent) starting from 31 December 2017; and
   d. 100% (one hundred percent) starting from 31 December 2018.
   (3) Banks are required to meet LCR as per the stages referred to in paragraph (2).

Article 62
Banks are required to inform the Financial Services Authority and take steps as referred to in Article 3 regarding the Bank's liquidity conditions in the event of inability and/or potential failure to meet LCR according to the stages as referred to in Article 61 paragraph (2).

CHAPTER VII
SANCTIONS

Article 63
Banks that do not comply with this Financial Services Authority Regulation and violate regulations as regulated in Article 2 paragraph (1), Article 3 paragraph (1), Article 3 paragraph (2), Article 6 paragraph (1), Article 6 paragraph (2), Article 13 paragraph (1), Article 15 paragraph (1), Article 16, Article 19, Article 23, Article 26 paragraph (1), Article 27, Article 28 paragraph (1), Article 29, Article 36 paragraph (1), Article 36 paragraph (4), Article 41 paragraph (1), Article 41 paragraph (2), Article 43 paragraph (1), Article 43 paragraph (2), Article 47, Article 52, Article 53 paragraph (2), Article 54 paragraph (1), Article 55 paragraph (1), Article 55 paragraph (2), Article 55 paragraph (3), Article 57 paragraph (1), Article 57 paragraph (3), Article 57 paragraph (4), Article 57 paragraph (7), Article 60 paragraph (1), Article 60 paragraph (3), Article 61 paragraph (3), or Article 62, are subject to administrative sanctions in the form of:
a. written warnings; b. prohibition of profit transfers for branches of banks located outside the country;
c. suspension of dividend distribution on all share ownership from shareholders who made capital contributions;
d. suspension of certain business activities; e. prohibition on opening office networks; f. downgrade of Bank health levels; and/or g. listing of Bank management and/or shareholders in the list of persons prohibited from becoming shareholders and management of Banks in accordance with regulations governing the fit and proper test.

Article 64
In addition to sanctions as referred to in Article 63, Banks that are late in submitting monthly LCR reports as referred to in Article 55 paragraph (3) are subject to sanctions in the form of fines of Rp1,000,000.00 (one million rupiah) per working day of delay or a maximum of Rp50,000,000.00 (fifty million rupiah).

Article 65
Banks that do not include LCR values in quarterly publication reports are subject to sanctions in accordance with Financial Services Authority Regulations regarding transparency and publication of Bank reports.

CHAPTER VIII
CLOSING PROVISIONS

Article 66
This Financial Services Authority Regulation takes effect on the date of enactment.

In order that everyone knows it, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta
On 23 December 2015
CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, sd
MULIAMAN D. HADAD

Enacted in Jakarta
On 23 December 2015
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, sd
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 369 Copy in accordance with the original Director of Legal Affairs 1 Legal Department sd Sudarmaji

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 42/POJK.03/2015
ON
LIQUIDITY COVERAGE RATIO COMPLIANCE OBLIGATIONS FOR GENERAL BANKS

I. GENERAL

The experience of financial and economic crises that occurred in various countries in 2008 showed that although Bank capital adequacy was sufficient, if there was insufficient liquidity to face pressure or stress, it could disrupt the continuity of the Bank's business.

Adequate liquidity adequacy can be met by maintaining sufficient unencumbered High Quality Liquid Assets (HQLA). Liquid assets are classified as high quality if the asset's ability to generate liquidity remains intact both through sales and repos, even under stress conditions occurring in the Bank individually (idiosyncratic) or widespread stress conditions occurring in the financial market as a whole, which can be domestic or international (market-wide shock). The liquidity level of an asset depends on the underlying stress scenario, the nominal value to be liquidated, and the asset maturity period.

Thus, similar to capital adequacy, a standard for calculating the liquidity ratio is needed to measure the minimum liquidity level that must be maintained by Banks and adjusted to international standards, namely Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools.

The establishment of LCR aims to ensure that Banks have sufficient unencumbered HQLA consisting of cash and/or assets that can be easily and immediately converted into cash with little or no reduction in value to meet the Bank's liquidity needs in a 30 (thirty) day stress scenario.

The unencumbered HQLA held by Banks must at least enable the Bank to survive for 30 (thirty) days in a stress scenario, because it is assumed that after 30 (thirty) days the Bank can take corrective actions or the Bank has ceased business operations according to applicable mechanisms. The 30 (thirty) day period is also expected to provide time for the Financial Services Authority to take certain actions deemed necessary.

Furthermore, Banks must also be aware of potential mismatches that may occur in the next 30 (thirty) days and ensure that the Bank has sufficient HQLA to cover the cash flow gap occurring during that time period due to uncertainty in the timing of cash inflows and outflows.

The LCR calculation scenario is a combination of idiosyncratic and market-wide shocks, which will cause:
a. withdrawal of a portion of retail deposits; b. loss of a portion of funding capacity from corporate customers (unsecured wholesale funding);
c. loss of a portion of short-term secured funding sources and certain counterparties;
d. additional contractual cash outflows due to the Bank's downgrade by up to 3 (three) rating levels (notches), including collateral requirements; e. increased market volatility affecting collateral quality or potential future risks for derivative products requiring larger collateral haircuts; f. additional collateral or other liquidity needs; g. withdrawal of unscheduled credit commitments and liquidity facilities provided by the Bank to third parties; and h. potential need for the Bank to repurchase debt or non-contractual liabilities for reputational risk mitigation.

In light of these matters, regulations regarding Liquidity Coverage Ratio (LCR) compliance obligations for General Banks are required.

II. ARTICLE BY ARTICLE

Article 1
Sufficiently clear.

Article 2
Paragraph (1)
Sufficiently clear.

Paragraph (2)
LCR is calculated with the following formula:
HQLA ≥ 100%
Total Net Cash Outflow in the next 30 days

In addition to calculating LCR, Banks conduct stress tests based on specific scenarios regarding matters that can disrupt the Bank's business activities, using a time horizon longer than the LCR time horizon. If necessary, stress test results can be submitted to the Financial Services Authority to assess the liquidity capacity of the respective Bank.

Paragraph (3)
Conversion of foreign currency into Rupiah is conducted using the Bank Indonesia middle exchange rate.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Sufficiently clear.

Article 3
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Required steps include steps as referred to in letter a number 2.

Paragraph (3)
In granting approval, the Financial Services Authority will consider various factors, such as current economic conditions, future economic and financial conditions, their impact on financial system stability, and the availability of contingency funding. The Financial Services Authority will assess the Bank's health condition and risk profile as well as the liquidity condition analysis reports as required in paragraph (2) letter a.

Article 4
The term "control" refers to control as referred to in Financial Services Authority regulations regarding transparency and publication of Bank reports.

The term "subsidiary company" refers to a legal entity or company owned and/or controlled by a Bank directly or indirectly, both domestically and abroad, which conducts business activities in the financial sector, consisting of:
a. subsidiary company, i.e., a subsidiary company with Bank ownership of more than 50% (fifty percent); b. participation company, i.e., a subsidiary company with Bank ownership of 50% (fifty percent) or less but where the Bank has control over the company;
c. companies with Bank ownership of more than 20% (twenty percent) to 50% (fifty percent) that meet the requirements, namely:

1. Bank ownership and other parties' ownership in the subsidiary company are equal; and
2. each owner exercises joint control over the subsidiary company; and
   d. other entities that must be consolidated based on financial accounting standards, but excluding insurance companies and companies owned for the purpose of credit restructuring.

Article 5
The term "Banks in the BUKU 3 and BUKU 4 groups" is as contained in regulations governing business activities and office networks based on Core Capital.

The term "foreign banks" refers to:

1. branches of banks located outside the country;
2. general banks in the form of Indonesian legal entities where more than 50% (fifty percent) of shares are owned by foreign citizens and/or foreign legal entities, either individually or jointly; and/or
3. banks owned individually or jointly by foreign citizens and/or foreign legal entities of less than 50% (fifty percent) but controlled by such foreign citizens and/or foreign legal entities.

Article 6
Paragraph (1)
Assets that can be counted as High-Quality Liquid Assets (HQLA) are assets owned by the Bank at the time of the LCR calculation, regardless of the remaining maturity of the assets counted. For assets counted as HQLA, hedging is permitted, but the Bank must account for the cash outflow resulting from the cancellation of agreements due to the sale of such assets. Paragraph (2) The formulation of policies regarding HQLA aims to enable the Bank to determine the daily composition of HQLA supplies. Paragraph (3) Sufficiently clear.

Article 7
Paragraph (1)
HQLA Level 1 and HQLA Level 2A ideally meet the central bank eligible requirements to obtain intraday liquidity facilities and overnight liquidity facilities. Examples of assets meeting central bank eligible requirements include securities issued by Bank Indonesia or the Central Government; however, meeting central bank eligibility requirements does not automatically serve as the basis for categorizing assets as HQLA. Paragraph (2) Sufficiently clear. Paragraph (3) The maximum limit calculation for HQLA Level 2 and HQLA Level 2B is determined after applying haircuts according to asset type and incorporating the impact of short-term Securities Financing Transaction (SFT) unwinds and collateral swap transactions maturing within 30 (thirty) days involving the exchange of HQLA. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 8
Assets that initially fall into the HQLA category but subsequently no longer meet HQLA requirements, such as due to a rating downgrade, are granted an additional 30 (thirty) days to adjust the HQLA amount or replace such assets with other assets meeting HQLA criteria. During this period, the Bank is permitted to continue counting such assets as HQLA.

Article 9
Paragraph (1)
Letter a
Financial assets with low risk tend to have higher liquidity levels, reflected, among others, by high issuer ratings, low subordination levels, low duration, low legal risk, low inflation risk, and low exchange rate risk. Letter b Easy and certain valuation is reflected in the ease of calculating HQLA prices, which do not depend on specific assumptions, and the data used must be publicly available. Generally, these are assets with standard, homogeneous, and simple structures because they tend to be easily exchangeable. Therefore, structured products and exotic products are not counted as HQLA. Letter c Examples of risky assets are assets issued by financial institutions. Such assets tend to become illiquid when liquidity stress occurs in the banking sector. Letter d Sufficiently clear. Paragraph (2) Letter a The term "active and adequate market" means that the asset must have an active repo or outright sale market at all times, indicated, among others, by:

1. historical evidence of market breadth and market depth, including:
   a) low spreads between bid and ask prices; b) high trading volumes; c) numerous and diverse market participants; and/or
2. reliable market infrastructure.
   Letter b
   Low market volatility is reflected through price and trading spread volatility, indicated, among others, by prices that tend to be stable and do not experience significant price drops, as seen in historical data regarding market stability, i.e., prices, haircuts, and trading volumes during stress periods. Letter c One approach that can be used to assess flight to quality is by evaluating the correlation between market liquidity and stress conditions in the banking system. Paragraph (3) Operational requirements are designed to ensure that HQLA supplies are managed well so that the Bank can liquidate such assets into cash, either through repos or sales, to meet the gap between cash inflows and cash outflows during a 30 (thirty) day stress period without hindering liquidity sufficiency. Letter a The term "free from any claims" includes, among others, not being underlying repos, free from legal claims, regulatory restrictions, and agreements, as well as other restrictions limiting the Bank's ability to liquidate, sell, transfer, use, or encumber an asset. Examples of assets stored or agreed with Bank Indonesia but not yet used to generate liquidity include secondary reserve requirements. Letter b Operational costs include, among others, rental costs and employee salary costs. Letter c Examples of assets that can be used legally and contractually by the Bank during stress conditions include assets received in reverse repos and securities financing transactions (SFT) held by the Bank, not re-encumbered, and which can legally and contractually be used by the Bank to generate cash flows during stress conditions, can be counted as HQLA. Letter d Sufficiently clear. Letter e Adequate procedures and systems in this context include the existence of a special function or department with access to all information needed to liquidate assets at any time. Asset liquidation processes must be operationally feasible with a reasonable settlement time for the type of asset. Letter f The special function responsible for managing the Bank's liquidity referred to in this letter includes, among others, the treasury unit. The Bank must have standard operating procedures regarding such controls, and the existence of controls must be proven by:
   (i) separate asset management aimed solely as a source of contingency funding plan (CFP) funds; or (ii) asset liquidation processes that can be performed at any time during 30 (thirty) days of stress conditions without directly conflicting with business or risk management strategies. Letter g Sufficiently clear. Letter h Sufficiently clear. Letter i HQLA surplus from minimum liquidity requirements held by subsidiaries can only be included in the consolidated LCR calculation if such assets can be used by the parent entity without any hindrance during stress conditions. Such hindrances may stem from regulatory, legal, tax, accounting, or other aspects such as foreign exchange controls or domestic currency non-convertibility. Subsidiary assets that have no market access can only be included in HQLA if they can be freely transferred to the parent entity. In conditions where there is no active and adequate repo market for an asset, the Bank must not categorize the asset as HQLA if there are hindrances in the outright sale process, such as experiencing very large price drops. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Article 10
Sufficiently clear.

Article 11
Paragraph (1)
Letter a
Number 1
The calculation of Risk-Weighted Assets (RWA) for credit risk using the standard approach refers to regulations governing the calculation of RWA for credit risk using the standard approach. Number 2 The term "market" includes, among others, the money market and repo market. Number 3 Example:
If the haircut is 17% (seventeen percent), the maximum increase in haircut is:
17% + 10% = 27%.
Number 4
Sufficiently clear.
Letter b
Number 1
Sufficiently clear.
Number 2
Sufficiently clear.
Number 3
The use of ratings refers to regulations governing rating agencies and ratings recognized by the Financial Services Authority (OJK).
Number 4
Sufficiently clear.
Number 5
Example:
If the haircut is 17% (seventeen percent), the maximum increase in haircut is:
17% + 10% = 27%.
Paragraph (2)
Sufficiently clear.

Article 12
Paragraph (1)
Letter a
Number 1
Sufficiently clear.
Number 2
Sufficiently clear.
Number 3
The use of ratings refers to regulations governing rating agencies and ratings recognized by the Financial Services Authority (OJK).
Number 4
The term "market" includes, among others, the money market and repo market.
Number 5
Example:
If the haircut is 17% (seventeen percent), the maximum increase in haircut is:
17% + 20% = 37%.
Number 6
The definition of residential mortgage credit refers to regulations governing the calculation of Risk-Weighted Assets (RWA) for credit risk using the standard approach. Number 7 Examples of loans classified as full recourse include cases where the Bank forecloses on assets because the debtor defaults, and upon the sale of such assets, the debtor remains responsible for any shortfall between the asset sale proceeds and the debtor's debt. Number 8 Risk retention is performed, among others, by the issuer of asset-backed securities retaining ownership of the securitized assets. Letter b Number 1 Sufficiently clear. Number 2 The use of ratings refers to regulations governing rating agencies and ratings recognized by the Financial Services Authority (OJK). Number 3 Sufficiently clear. Number 4 Example:
If the haircut is 17% (seventeen percent), the maximum increase in haircut is:
17% + 20% = 37%.
Letter c
Sufficiently clear.
Paragraph (2)
Sufficiently clear.

Article 13
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
The term "Micro and Small Enterprises" refers to that defined in the Law governing micro, small, and medium enterprises.
Letter c
The term "Funding from Corporate Customers" refers to liabilities and commitments of the Bank to legal entity corporations, including sole proprietorships and partnerships, which are not secured by a legal right over specific assets owned by the Bank in the event of bankruptcy, insolvency, liquidation, or resolution. Letter d The term "Secured Funding" refers to liabilities secured by a legal right over specific assets owned by the Bank in the event of bankruptcy, insolvency, liquidation, or resolution. Letter e Sufficiently clear. Paragraph (2) The term "run-off rate" refers to the predicted rate of withdrawal of Bank liabilities based on specific scenarios.

Article 14
Letter a
Sufficiently clear.
Letter b
Penalties are considered significant if the penalty in question is greater than the Savings interest, thereby reducing the principal of the Savings. Letter c Sufficiently clear.

Article 15
Sufficiently clear.

Article 16
Sufficiently clear.

Article 17
Paragraph (1)
The term "Deposit Insurance Agency" refers to that defined in the Law regarding the Deposit Insurance Agency.
Insurance schemes from the Deposit Insurance Agency are recognized if they meet the following requirements:
(i) have the ability to make immediate payments; (ii) insurance criteria can be clearly defined; and (iii) public awareness of the insurance program is high. Deposit criteria meeting insurance requirements refer to the regulations of the Deposit Insurance Agency. Letter a The term "relationship or affiliation with the Bank" includes, among others:

1. the customer has at least 1 (one) additional active product other than credit facilities with the Bank;
2. the customer obtains credit facilities from the Bank with a term longer than 3 (three) months; and/or
3. the customer is an affiliated party of the Bank.
   The term "affiliated party of the Bank" refers to affiliated parties as regulated in the provisions governing the maximum limit of credit provision by Universal Banks. Letter b Examples of Savings accounts used for routine transactions include accounts for receiving income, whether in the form of salaries or business results. Paragraph (2) Sufficiently clear.

Article 18
Paragraph (1)
If the Bank cannot identify individual customer Savings that fall within the stable criteria, all such individual customer Savings must be classified as less stable Savings. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear.

Article 19
Sufficiently clear.

Article 20
Sufficiently clear.

Article 21
Sufficiently clear.

Article 22
Sufficiently clear.

Article 23
Sufficiently clear.

Article 24
Paragraph (1)
Letter a
The term "clearing activities" in these provisions refers to a form of service provision that enables customers to transfer funds or securities indirectly through clearing agents in the national clearing system to the desired recipient. Services provided in clearing activities are limited to:
a. fund transmission, reconciliation, and confirmation of payment orders; b. intraday overdrafts, overnight funding facilities, and post-settlement balance maintenance; and
c. intraday position determination and final transaction settlement.
The term "custodian activities" in these provisions refers to the provision of services involving storage, reporting, asset management, and other operational and administrative matters on behalf of customers for financial asset transactions. Services provided in custodian activities are limited to:
a. settlement of securities sales and purchase transactions; b. transfer of contractual payments;
c. processing of collateral;
d. receipt of fees for cash management services; e. receipt of dividends and other income; f. client subscriptions and redemptions; g. trustee services for assets and corporations; h. asset management (treasury);
i. escrow account services;
j. fund transfers, stock transfers, and agency services, including payment and settlement services (excluding correspondent banking activities); and k. depository receipts. The term "cash management activities" in these provisions refers to services provided to customers in managing cash flows, assets, liabilities, and financial transactions required for customer operations. Services provided in cash management activities are limited to:
a. customer debiting or transfer for bill or liability payments (payment remittance); b. consolidation (pooling) or distribution of funds from branch/operational network offices (collection and aggregation of funds);
c. mass employee payroll payment services (payroll); and
d. control over fund disbursement.
Number 1
Examples of Savings that customers are required to place with the Bank to use Bank services or products include margin deposits in custodian activities, minimum balance liabilities in cash management and clearing activities. Number 2 The term "significantly dependent" means the customer uses the account in the Bank as the main account for conducting clearing, custodian, and/or cash management activities. The Financial Services Authority may conduct examinations of the determination of the main account at any time. Number 3 Sufficiently clear. Number 4 Sufficiently clear. Number 5 Sufficiently clear. Letter b Sufficiently clear. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear. Paragraph (4) Sufficiently clear.

Article 25
Paragraph (1)
Examples of non-operational Savings and/or other non-operational liabilities include correspondent banking activities or prime brokerage services. The term "correspondent banking activities" refers to activities of a Bank (correspondent) acting as a deposit holder for deposits owned by another Bank (respondent) and providing payment services for transaction settlement in foreign currencies, namely nostro and vostro accounts used to settle transactions in foreign currencies from respondent Banks for clearing and settlement. The term "prime brokerage" refers to a package of services offered to large investors, particularly hedge fund companies. Services offered typically include clearing, settlement, custodian, consolidated reporting, financing, securities lending, and risk analysis. Paragraph (2) Letter a Sufficiently clear. Letter b Examples of other entities include Banks, securities companies, insurance companies, and other financial service institutions. Letter c In the case where securities are sold exclusively in the retail market, managed in retail accounts, purchased and owned by individual customers (including Micro and Small Enterprise customers treated as individual customers), they can be treated the same as individual customers or Micro and Small Enterprise customers.

Article 26
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Number 1
Public sector entities in this case have a maximum risk weight of 20% (twenty percent) as per regulations governing the calculation of Risk-Weighted Assets (RWA) for credit risk using the standard approach. Number 2 Sufficiently clear. Letter d Sufficiently clear. Letter e Sufficiently clear.

Article 27
Sufficiently clear.

Article 28
Paragraph (1)
Derivative transactions in the form of options are assumed to be exercised only when "in the money" for the option buyer.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.

Article 29
Letter a
To anticipate rating downgrades by recognized rating agencies, agreements related to derivatives and other transactions generally include clauses requiring the provision of additional collateral, contingency withdrawal facilities, or accelerated payment of existing liabilities. Rating downgrades impact all collateral, including the right to re-encumber. Letter b In the event that derivative transactions or other transactions require collateral for mark-to-market exposure, the Bank has the potential for increased liquidity needs due to such mark-to-market adjustments. Letter c In the event that there are requirements for each party in a derivative transaction to maintain the mark-to-market valuation of transaction positions using specific collateral, the Bank must calculate the increased liquidity needs related to potential changes in collateral value. In the event that the collateral is HQLA Level 1, the Bank does not need to calculate increased liquidity needs related to changes in collateral value. Letter d The term "non-segregated collateral" refers to collateral received by the Bank but not recorded separately from the Bank's balance sheet. Letter e Sufficiently clear. Letter f Sufficiently clear.

Article 30
Sufficiently clear.

Article 31
Net absolute collateral flows are based on the realization of outflows and inflows.

Article 32
Haircuts applied refer to haircuts according to agreements with the counterparty.
Additional cash outflow requirements in this classification are calculated only if the collateral provided to the counterparty is non-HQLA Level 1.

Article 33
Sufficiently clear.

Article 34
Sufficiently clear.

Article 35
Sufficiently clear.

Article 36
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
The risk of loss of funding from asset-backed commercial paper, conduits, securities investment vehicles, and similar financing facilities includes, but is not limited to:

1. the inability to finance maturing debts; and
2. the existence of derivatives or derivative-like components contractually written in documentation related to the structure that would allow the return of assets in financing, or that require the original asset transferor to provide liquidity, effectively ending financing (liquidity puts) within 30 (thirty) days.
   Paragraph (2)
   Sufficiently clear.
   Paragraph (3)
   Letter a
   Sufficiently clear.
   Letter b
   Assets that have the potential to be paid off are caused, among others, by options for investors to sell back to the issuer.
   Paragraph (4)
   The term "special purpose entities" includes, for example, special purpose vehicles (SPV), conduits, or structured investment vehicles (SIV).

Article 37
Paragraph (1)
The term "commitment liabilities in the form of credit facilities" refers to agreements to provide future funds in the form of credit to individuals or businesses, which are either irrevocable or conditionally revocable. Paragraph (2) The term "commitment liabilities in the form of liquidity facilities" refers to undrawn facilities used to refinance customer debts to third parties when the customer cannot roll over their debts in the financial market. Commitment liabilities in the form of liquidity facilities counted in the LCR calculation are commitment liabilities in the form of liquidity facilities related to customer debts to third parties that will mature within 30 (thirty) days ahead. In the event that customer debts to third parties will mature more than 30 (thirty) days ahead, such facilities are categorized as commitment liabilities in the form of credit facilities. Examples of commitment liabilities in the form of credit facilities include working capital loans. All forms of commitment facility liabilities provided to hedge funds, money market funds, special purpose vehicles (SPV), or other special purpose entities for financing the Bank's own assets must be included in the category of liquidity facilities to other entities. Commitment liabilities other than liquidity facilities are categorized as commitment liabilities in the form of credit facilities. Paragraph (3) Collateral in the form of HQLA that has been used as a deduction for cash outflows must be excluded from the HQLA calculation. This treatment is intended to avoid double counting. Letter a Examples of HQLA used as collateral to guarantee facilities include liquidity facilities as repo facilities. Letter b Conditions for the Bank's right to reuse collateral for obtaining new funds must be supported by legal aspects and operational capabilities. Letter c Sufficiently clear.

Article 38
Sufficiently clear.

Article 39
Paragraph (1)
Letter a
Loan commitments such as direct financing for import and export for non-financial companies are excluded from this calculation, and the Bank applies run-off rates similar to those for credit facility commitments. Examples of trade finance instruments include:

1. trade documents using L/C, clean collection, documentary collection, import bills, and export bills; and
2. guarantees directly related to trade finance liabilities such as shipping guarantees.
   Letter b
   Sufficiently clear.
   Letter c
   Sufficiently clear.
   Letter d
   Sufficiently clear.

Letter e
Anticipations made by customers through ready marketability include adjustable rate notes and variable rate demand notes (VRDNs).

Letter f
Liabilities arising from managed funds sold with the aim of maintaining value stability include money market mutual funds or other investment funds that have stable value.

Letter g
Clearly sufficient.

Letter h
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Article 40
Other examples of contractual cash outflows in the next 30 (thirty) days are outflows to cover unsecured collateral borrowing, unfilled short positions, contractual dividends, or interest payments. Cash outflows related to operational costs are not included in the calculation.

Article 41
Paragraph (1)
Assets that have been included as HQLA cannot be counted again as cash inflows. This treatment is intended to avoid double counting.

Letter a
Examples of secured lending transactions include reverse repo.

Letter b
Clearly sufficient.

Letter c
Clearly sufficient.

Paragraph (2)
Included in committed facilities are credit facilities, liquidity facilities, and/or other contingency facilities from other entities, whether Banks or non-Banks. The LCR does not include cash inflows sourced from committed facilities, credit facilities, and liquidity facilities to reduce the impact of liquidity shortage contagion risk from one Bank to another Bank. In addition, there is a risk that the Bank providing the aforementioned credit and/or liquidity facilities will not provide the promised facilities even though it would cause legal and reputational risks, in order to protect the Bank's liquidity or reduce exposure to the Bank.

Paragraph (3)
Clearly sufficient.

Paragraph (4)
Examples of contractual cash inflows include interest receipts or loan repayments from debtors.
Contingent nature cash inflows are not included in the cash inflow calculation.

Letter a
The determination of "Performing" quality refers to regulations governing the assessment of asset quality for commercial banks.

Letter b
Clearly sufficient.

Paragraph (5)
The term "inflow rate" refers to the predicted rate of receipt of the Bank's claims based on a specific scenario.

Article 42
Paragraph (1)
The higher the type of collateral underlying, the smaller the inflow rate because it is assumed that the Bank will roll over secured lending facilities provided. Even with the roll-over assumption, the Bank must still manage collateral well so as to meet the obligation to return collateral if the counterparty decides not to roll over. Especially if the collateral is non-HQLA, given that estimated cash outflows are not included in the LCR calculation.

Paragraph (2)
Clearly sufficient.

Article 43
Paragraph (1)
Letter a
Clearly sufficient.

Letter b
The term "other customers" besides financial service institutions and Bank Indonesia refers to non-financial corporations, the Central Government, foreign governments, public sector entities, and multilateral development banks.

Paragraph (2)
The term "loans with no specific maturity" refers to loans that have no maturity (open maturity), assumed that existing loans will be rolled over, and treated as committed facilities. Examples of loans with no specific maturity include credit card loans.

Paragraph (3)
Clearly sufficient.

Paragraph (4)
Clearly sufficient

Article 44
The determination of "Performing" quality refers to regulations governing the assessment of asset quality for commercial banks.

Article 45
Paragraph (1)
Clearly sufficient.

Paragraph (2)
The term "operational activities" refers to clearing, custodian, and cash management activities.

Article 46
Letter a
The determination of "Performing" quality refers to regulations governing the assessment of asset quality for commercial banks.

Letter b
Clearly sufficient.

Article 47
Letter a
Clearly sufficient.

Letter b
The term "other contractual claims" refers to all cash inflow receipts not covered by secured lending and counterparty-based claims.
Cash inflows related to non-financial income cannot be included in the inflow calculation.

Article 48
Paragraph (1)
Cash inflows and cash outflows originating from derivative transactions can be calculated on a net basis per counterparty in the event of a valid master netting agreement. The calculation of cash inflows and cash outflows from derivative transactions refers to the valuation methods applicable to each Bank.

Paragraph (2)
If in derivative transactions the Bank provides collateral in the form of HQLA, in the calculation of estimated cash inflows for derivative transactions, the contractual obligation to provide cash or the aforementioned collateral must be subtracted. This is in accordance with the principle that Banks must not perform double counting, whether in inflow or outflow calculations.

Article 49
Cash inflows related to non-financial income cannot be included in the cash inflow calculation.

Article 50
Banks operating cross-border must be able to identify potential obstacles in liquidity transfers and monitor regulations in the host country where the bank's branches operate, as well as test the implications of liquidity transfer obstacles and host country regulations on the Bank's overall liquidity condition.

Article 51
The term monitoring of liquidity conditions and sufficiency using specific indicators includes:

1. contractual maturity mismatch, which is monitoring using the contractual maturity mismatch indicator aimed at identifying the gap between contractual inflows and outflows within a certain period. The gap based on such maturity indicates the Bank's potential liquidity needs within a certain period if outflows occur;

2. Funding concentration, which is monitoring to identify significant corporate funding sources that, if withdrawn, would cause liquidity problems.
   Funding concentration indicators are conducted through monitoring:
   a. the percentage of funding sources from significant counterparties against total Bank liabilities; Funding sources from each significant counterparty are calculated based on the aggregation of the total of all types of liabilities to a specific counterparty or business group or its affiliates, as well as all direct loans, whether secured or unsecured. Significant counterparties refer to a counterparty, business group, or affiliate that is recorded in aggregate with Deposits exceeding 1% (one percent) of the Bank's balance sheet; b. the percentage of funding sources from each significant product or instrument against total liabilities; Funding sources from products or instruments are calculated for each significant product or instrument of Funding and collectively for similar product or instrument types. Significant products or instruments are defined as a product or instrument, or a group of similar products or instruments, that in aggregate amounts to more than 1% (one percent) of the Bank's balance sheet;
   c. a list of asset and liability amounts by significant currency;
   To determine the amount of significant currency mismatch in the Bank's assets and liabilities, the Bank must have a list of asset and liability amounts for each significant currency. A currency is considered significant if the aggregate denomination in that currency amounts to 5% (five percent) or more of the Bank's total liabilities;

3. available unencumbered assets, which is monitoring through the available unencumbered asset indicator.
   Available unencumbered asset indicators are conducted through monitoring:
   (i) available unencumbered assets that can be used as collateral in the secondary market; and (ii) available unencumbered assets that meet the requirements to obtain Funding facilities from the central bank (central bank eligible). These assets have the potential to be used as collateral so they can be counted as HQLA or to obtain Funding from the secondary market or central bank;

4. LCR by significant currency type, which is monitoring through the LCR indicator by significant currency type to obtain a picture of potential mismatch originating from specific currencies.
   The definition and calculation of LCR for a specific currency uses LCR calculation but there are no minimum international requirements. A currency is considered significant if the aggregate amount of liabilities in that currency reaches 5% (five percent) or more of the Bank's total liabilities;

5. monitoring tools related to the market are conducted through monitoring:
   a. market information; b. financial sector information; and
   c. Bank-specific information.

Article 52
Clearly sufficient.

Article 53
Paragraph (1)
Letter a
The term "Banks in the BUKU 3 and BUKU 4 group" is as stated in regulations governing business activities and office networks based on the Bank's core capital.

Letter b
The term "foreign bank" refers to:

1. branches of banks located abroad;
2. commercial banks in the form of Indonesian legal entities where more than 50% (fifty percent) of their shares are owned by foreign citizens and/or foreign legal entities, either individually or jointly; and/or
3. banks owned individually or jointly by foreign citizens and/or foreign legal entities less than 50% (fifty percent) but there is control by such foreign citizens and/or foreign legal entities.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Clearly sufficient.

Paragraph (4)
The term "specific conditions" includes, among others, when the Bank is in a stressed condition.

Article 54
Clearly sufficient.

Article 55
Clearly sufficient.

Article 56
Paragraph (1)
Letter a
The term "Banks in the BUKU 3 and BUKU 4 group" is as stated in regulations governing business activities and office networks based on the Bank's core capital.

Letter b
The term "foreign bank" refers to:

1. branches of banks located abroad;
2. commercial banks in the form of Indonesian legal entities where more than 50% (fifty percent) of their shares are owned by foreign citizens and/or foreign legal entities, either individually or jointly; and/or
3. banks owned individually or jointly by foreign citizens and/or foreign legal entities less than 50% (fifty percent) but there is control by such foreign citizens and/or foreign legal entities.

Paragraph (2)
Clearly sufficient.

Article 57
Paragraph (1)
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Clearly sufficient.

Paragraph (4)
Letter a
Posting on the Bank's website is done in detail, including the LCR calculation.

Letter b
Posting in printed daily newspapers in the Indonesian language is done by stating the LCR value in comparison with the previous quarterly LCR value. Printed daily newspapers in the Indonesian language that have wide circulation in the location of the Bank's headquarters or in the location of the branches of banks located abroad.

Paragraph (5)
Clearly sufficient.

Paragraph (6)
Clearly sufficient.

Paragraph (7)
Example:
The quarterly LCR report as of the end of March 2016 must be kept on the Bank's website until March 2021.

Article 58
Paragraph (1)
Letter a
The term "Banks in the BUKU 3 and BUKU 4 group" is as stated in regulations governing business activities and office networks based on the Bank's core capital.

Letter b
The term "foreign bank" refers to:

1. branches of banks located abroad;
2. commercial banks in the form of Indonesian legal entities where more than 50% (fifty percent) of their shares are owned by foreign citizens and/or foreign legal entities, either individually or jointly; and/or
3. banks owned individually or jointly by foreign citizens and/or foreign legal entities less than 50% (fifty percent) but there is control by such foreign citizens and/or foreign legal entities.

Paragraph (2)
Clearly sufficient.

Article 59
Clearly sufficient.

Article 60
Paragraph (1)
BUKU 1 and BUKU 2 group Banks can become BUKU 3 or BUKU 4 group Banks due to capital increase or becoming a foreign bank.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Clearly sufficient.

Article 61
Paragraph (1)
Clearly sufficient.

Paragraph (2)
Number 1
Clearly sufficient.

Number 2
The term "foreign bank" refers to:

1. branches of banks located abroad;
2. foreign subsidiary banks, which are Indonesian legal entity commercial banks with foreign citizen and/or foreign legal entity ownership exceeding 50% (fifty percent) by one party or jointly; and/or
3. banks owned individually or jointly by foreign citizens and/or foreign legal entities less than 50% (fifty percent) but there is control by such foreign citizens and/or foreign legal entities.

Paragraph (3)
Clearly sufficient.

Article 62
Example:
A BUKU 3 Bank on June 30, 2016 should have met an LCR of 70% (seventy percent) but the Bank only had an LCR of 65% (sixty-five percent). Thus, the Bank is required to inform the Financial Services Authority and take steps as referred to in Article 3.

Article 63
Clearly sufficient.

Article 64
Clearly sufficient.

Article 65
Clearly sufficient.

Article 66
Clearly sufficient.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5809

APPENDIX I
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 42 /POJK.03/2015
ON
THE LIQUIDITY COVERAGE RATIO OBLIGATION FOR COMMERCIAL BANKS CALCULATION OF MAXIMUM LIMITS FOR HQLA LEVEL 2 AND HQLA LEVEL 2B

Formula Components
HQLA Calculation
HQLA is calculated by:
(HQLA Level 1 + HQLA Level 2A + HQLA Level 2B) minus (adjustment for maximum limit 15% HQLA Level 2 + adjustment for maximum limit 40% HQLA Level 2B);

Adjustment for maximum
HQLA Level 2 limit
The highest value between:
a. adjusted HQLA Level 2B – 15/85 (adjusted HQLA Level 1 + adjusted HQLA Level 2A); which is 15%. b. adjusted HQLA Level 2B – (15/60 x HQLA Level1); or
c. 0 (zero).

Adjustment for maximum
HQLA Level 2B limit which is 40%.
The highest value between:
a. adjusted HQLA Level 2A + adjusted HQLA Level 2B – adjustment for maximum limit 15% HQLA Level 2 – (2/3 x adjusted HQLA Level 1); or b. 0 (zero).

Notes:

1. Adjusted HQLA Level 1 is the value of HQLA Level 1 in the event of an unwind of short-term Securities Financing Transactions (SFT) or collateral swap transactions involving the exchange of HQLA for HQLA Level 1 (including cash) that meet, or will meet, the HQLA criteria if the asset is unencumbered, which is an operational requirement for HQLA.
2. Adjusted HQLA Level 2A is the value of HQLA Level 2A in the event of an unwind of short-term SFT and collateral swap transactions involving the exchange of HQLA for HQLA Level 2A that meet, or will meet, the HQLA criteria if the asset is unencumbered, as an operational requirement for HQLA.
3. Adjusted HQLA Level 2B is the value of HQLA Level 2B in the event of an unwind of short-term SFT and collateral swap transactions involving the exchange of HQLA for HQLA Level 2B assets that meet, or will meet, the HQLA criteria if the asset is unencumbered, as an operational requirement for HQLA.
4. In this context, short-term transactions are transactions with a maturity date up to 30 calendar days.
5. Appropriate haircuts for each HQLA are applied before the maximum limit calculation.

CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

A copy in accordance with the original
Director of Law 1
Department of Law signed
Sudarmaji

APPENDIX II
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 42 /POJK.03/2015
ON
THE LIQUIDITY COVERAGE RATIO OBLIGATION FOR COMMERCIAL BANKS MONTHLY LIQUIDITY COVERAGE RATIO CALCULATION REPORT

Bank Name :
Report Month :
(in million Rp)

No. Component Haircut or Run-off
Rate or Inflow Rate
Outstanding
Value or Market
Value
Value after
Haircut or
Run-off Rate or Inflow
Rate

A. HQLA

1. HQLA Level 1
   1.1 Cash and cash equivalents 0%
   1.2 Total deposits at Bank Indonesia, namely:
   portion of deposits at Bank Indonesia that can be withdrawn under stress conditions 0%

No. Component Haircut or Run-off
Rate or Inflow Rate
Outstanding
Value or Market
Value
Value after
Haircut or
Run-off Rate or Inflow
Rate
1.3 Securities meeting the criteria of Article 10 paragraph (1) letter c
issued or guaranteed by other countries' governments 0% issued or guaranteed by other countries' central banks 0% issued or guaranteed by public sector entities 0% issued or guaranteed by multilateral development banks 0% issued or guaranteed by international institutions (e.g. BIS, IMF, ECB and European Community) 0%
1.4 Securities issued by the Central Government and Bank Indonesia
in rupiah and foreign currency 0%
1.5
Securities issued by other countries' governments and central banks in foreign currency with a risk weight greater than 0% that meet the criteria of Article 10 paragraph (1) letter e 0% Total HQLA Level 1 A
2. HQLA Level 2A
2.1 Securities meeting the criteria of Article 11 paragraph (1) letter a:
issued or guaranteed by other countries' governments 15% issued or guaranteed by other countries' central banks 15% issued or guaranteed by public sector entities 15% issued or guaranteed by multilateral development banks 15%
2.2 Securities in the form of debt securities issued by non-financial
corporations meeting the criteria of Article 11 paragraph (1) letter b 15% 2.3 Securities in the form of covered bonds not issued by the reporting Bank or entities affiliated with the reporting Bank that meet the criteria of Article 11 paragraph (1) letter b 15% Total HQLA Level 2A B

No. Component Haircut or Run-off
Rate or Inflow Rate
Outstanding
Value or Market
Value
Value after
Haircut or
Run-off Rate or Inflow
Rate
3. HQLA Level 2B
3.1 Asset-backed securities (ABS) in the form of residential properties meeting the criteria
of Article 12 paragraph (1) letter a 25%
3.2 Securities in the form of debt securities issued by corporations
meeting the criteria of Article 12 paragraph (1) letter b 50%
3.3 Ordinary shares owned by non-Bank subsidiaries meeting the criteria
of Article 12 paragraph (1) letter c 50%
3.4 Securities of other countries' governments or central banks with
a rating of highest BBB+ and lowest BBB 50%
Total HQLA Level 2B C
Total HQLA before adjustment A + B + C = D
Adjustment for Maximum Limit of HQLA Level 2B E Adjustment for Maximum Limit of HQLA Level 2 F Total HQLA D – (E + F)

B. Net Cash Outflow (Net Cash Outflow)

1. Cash Outflows
   1.1 Withdrawal of Individual Customer Deposits
   Total Individual Customer Deposits:
   Stable deposits 5%
   Stable deposits meeting the criteria of Article 50 paragraph (2) Total Stable Individual Customer Deposits

No. Component Haircut or Run-off
Rate or Inflow Rate
Outstanding
Value or Market
Value
Value after
Haircut or
Run-off Rate or Inflow
Rate
Less stable deposits 10%
Less stable deposits meeting the criteria of Article 50 paragraph (2) Additional category of Deposits with higher withdrawal rates set by the supervisor Category 1 Category 2 Category 3 Total Less Stable Individual Customer Deposits Total Withdrawal of Individual Customer Deposits
1.2 Withdrawal of Funding from Micro and Small Business Customers
Total Micro and Small Business Customer Funding:
Stable funding from customers meeting the criteria of Article 15 paragraph (1) 5% Stable funding from customers meeting the criteria of Article 15 paragraph (2) 5% Stable funding from customers meeting the criteria of Article 50 paragraph (2) Total Stable Micro and Small Business Customer Funding Less stable funding from customers meeting the criteria of Article 21 paragraph (1) 10% Less stable funding meeting the criteria of Article 50 paragraph (2) Additional category of Deposits with higher withdrawal rates set by the supervisor Category 1 Category 2

No. Component Haircut or Run-off
Rate or Inflow Rate
Outstanding
Value or Market
Value
Value after
Haircut or
Run-off Rate or Inflow
Rate
Category 3
Total Less Stable Micro and Small Business Funding Total Withdrawal of Micro and Small Business Funding
1.3 Withdrawal of Corporate Customer Funding
Total Corporate Customer Funding:
Operational deposits:
guaranteed by LPS 5% not guaranteed by LPS 25% Operational deposits meeting the criteria of Article 50 paragraph (1):
guaranteed by guarantee institution not guaranteed by guarantee institution Total Corporate Customer Operational Deposits Non-operational deposits and/or non-operational liabilities guaranteed by LPS 20% not guaranteed by LPS 40% Non-operational deposits and/or non-operational liabilities meeting the criteria of Article 50 paragraph (1):
guaranteed by guarantee institution not guaranteed by guarantee institution Securities in the form of debt securities issued by the Bank 100% Total Non-operational Deposits and/or Non-operational Liabilities Total Withdrawal of Funding from Corporate Customers

No. Component Haircut or Run-off
Rate or Inflow Rate
Outstanding
Value or Market
Value
Value after
Haircut or
Run-off Rate or Inflow
Rate
1.4 Withdrawal of Secured Funding
Transactions conducted with Bank Indonesia 0%
Transactions conducted with HQLA Level 1 collateral 0% Transactions conducted with HQLA Level 2A collateral 15% Transactions conducted with the Central Government or public sector entities with the highest risk weight 20% or multilateral development banks, with collateral other than HQLA Level 1 or HQLA Level 2A 25% Transactions with HQLA Level 2B collateral in the form of ABS 25% Transactions with HQLA Level 2B collateral other than ABS 50% Transactions conducted with collateral other than HQLA 100% Total Withdrawal of Secured Funding
1.5 Other Cash Outflows (Additional Requirement)
Other cash outflows related to derivative transactions 100% Other cash outflows related to increased liquidity needs related to the Bank's downgrade in rating in Funding, derivative, and other agreements 100% related to mark-to-market changes over derivative transactions or other transactions Largest net collateral flow absolute largest over 30 days realized in 24 months related to potential changes in collateral value for derivatives and other transactions 20% related to excess non-segregated collateral held by the Bank that 100%

No. Component Haircut or Run-off
Rate or Inflow Rate
Outstanding
Value or Market
Value
Value after
Haircut or
Run-off Rate or Inflow
Rate is not segregated 100%

Total Other Cash Outflows

2. Cash Inflows
   2.1 Inflows from Secured Lending
   Transactions conducted with HQLA Level 1 collateral 0% Transactions conducted with HQLA Level 2A collateral 15% Transactions conducted with HQLA Level 2B collateral 50% Transactions conducted with collateral other than HQLA 100% Total Inflows from Secured Lending

2.2 Inflows from Committed Facilities
Credit facilities 100%
Liquidity facilities 100%
Other contingency facilities 100%
Total Inflows from Committed Facilities

2.3 Other Inflows
Interest receipts 100%
Loan repayments from debtors 100%
Other contingent inflows 0%
Total Other Inflows

Total Cash Inflows

C. Net Cash Outflow Calculation
Total Cash Outflows (B.1)
Minus Total Cash Inflows (B.2)
Net Cash Outflow

D. LCR Calculation
Total HQLA (A)
Divided by
Net Cash Outflow (C)
LCR (%)

Note:

1. The LCR must be at least 100%.
2. The calculation is done monthly.
3. The report must be submitted to the Financial Services Authority.

CHAIRMAN OF THE COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

No. Component Haircut or Run-off Rate or Inflow Rate Outstanding Value or Market Value Value after Haircut or Run-off Rate or Inflow Rate

contractual obligations that can be withdrawn at any time by the counterparty related to the obligation to provide collateral to the counterparty for a specific transaction, but the counterparty has not yet requested such collateral 100% related to the potential exchange of collateral in the form of HQLA into non-HQLA 100% Other cash outflows related to loss of funding from asset-backed securities, covered bonds, and other structured financing instruments issued by the Bank 100% from asset-backed commercial paper, conduits, securities investment vehicles 100% from funding maturing within 30 days ahead and assets that are potentially repayable within 30 days ahead Other cash outflows related to commitment obligations in the form of credit facilities facilities provided to individuals or Micro and Small Enterprises 5% facilities provided to non-financial corporations, Central Government, Bank Indonesia, foreign governments, foreign central banks, public sector entities, and/or multilateral development banks 10% facilities provided to Banks and/or financial service institutions 40% facilities provided to other entities 100%

No. Component Haircut or Run-off Rate or Inflow Rate Outstanding Value or Market Value Value after Haircut or Run-off Rate or Inflow Rate

Other cash outflows related to commitment obligations in the form of liquidity facilities facilities provided to individuals or Micro and Small Enterprises 5% facilities provided to non-financial corporations, Central Government, Bank Indonesia, foreign governments, foreign central banks, public sector entities, and/or multilateral development banks 30% facilities provided to Banks 40% facilities provided to financial service institutions and/or other entities 100% Other contractual obligations to provide funds to:
financial service institutions 100% individual customers 100% of the excess value between contractual obligations to disburse funds with 50% of total cash inflows non-financial corporations 100% of the excess value between contractual obligations to disburse funds with 50% of total cash inflows

No. Component Haircut or Run-off Rate or Inflow Rate Outstanding Value or Market Value Value after Haircut or Run-off Rate or Inflow Rate

Other contingent funding obligations from trade finance instruments 3% from credit facilities and liquidity facilities that are unconditionally revocable uncommitted 0% from letters of credit (L/C) and guarantees not related to trade finance obligations 5% from potential requests to repurchase bank debt or related to securities investment vehicles and other financing facilities 5% from structured products anticipated by customers through ready marketability 5% from managed funds sold with the purpose of maintaining value stability 5% obligation to cover potential repurchase of securities, with or without collateral, having a maturity of more than 30 (thirty) days for issuers having affiliation with dealers or market makers 5% non-contractual obligation for customer short positions protected by other customer collateral 50% Other contractual cash outflows 100% Total Withdrawals related to Other Cash Outflows (Additional Requirement) Total Cash Outflows

2. Cash Inflows
   2.1 Secured Lending
   Collateral is not reused to cover customer short positions

No. Component Haircut or Run-off Rate or Inflow Rate Outstanding Value or Market Value Value after Haircut or Run-off Rate or Inflow Rate

Collateral in the form of HQLA Level 1 0%
Collateral in the form of HQLA Level 2A 15%
Collateral in the form of EBA meeting HQLA Level 2B requirements 25% Collateral in the form of HQLA Level 2B other than EBA 50% Transactions in the form of margin lending but collateral is other than HQLA 50% Collateral does not meet the requirements as stated above 100% Collateral is reused to cover customer short positions 0% Total Cash Inflows from Secured Lending
2.2 Receivables from Counterparties
individual customers 50%
Micro and Small Enterprise customers 50% financial service institutions 100% Bank Indonesia 100% others (non-financial corporate customers, Central Government, foreign governments, public sector entities and multilateral development banks) 50% of the contractual value and/or 100% of contractual value in the event the level of receipt comes from non-HQLA securities with remaining maturity of less than 30 days. Total cash inflows based on counterparties

No. Component Haircut or Run-off Rate or Inflow Rate Outstanding Value or Market Value Value after Haircut or Run-off Rate or Inflow Rate

2.3 Other Cash Inflows
from derivative transactions 100% from other contractual receivables 50% Total Other Cash Inflows Total Cash Inflows Total Cash Inflows that can be Offset in LCR Calculation (maximum 75% of Total Cash Outflows) Net Cash Out Flow

C. LCR
Total HQLA
Net Cash Out Flow
LCR Value

QUALITATIVE ASSESSMENT OF LIQUIDITY CONDITIONS Bank Name :
Report Month :
Analysis
Filled with the results of the analysis of the Bank's liquidity conditions.
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY,
MULIAMAN D. HADAD

APPENDIX III
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER /POJK.03/2015
ABOUT
LIQUIDITY COVERAGE RATIO COMPLIANCE REQUIREMENT FOR COMMERCIAL BANKS QUARTERLY LIQUIDITY COVERAGE RATIO COMPLIANCE CALCULATION REPORT Bank Name :
Report Position :
(in million Rp)
Outstanding value of liabilities and commitments/contractual receivable value HQLA value after haircut, outstanding liabilities and commitments multiplied by run-off rate or contractual receivables multiplied by inflow rate. HIGH QUALITY LIQUID ASSET (HQLA) 1 Total High Quality Liquid Asset (HQLA)

CASH OUTFLOW
Individual customer deposits and
Funding from
Micro and Small Enterprise customers, consisting of:
a. Stable deposits/funding b. Unstable deposits/funding Funding from corporate customers, consisting of:
a. Operational deposits b. Non-operational deposits and/or other non-operational liabilities Secured funding Other cash outflows (additional requirement), consisting of:
a. cash outflows from derivative transactions b. cash outflows from increased liquidity needs

c. cash outflows from loss of
funding d. cash outflows from withdrawal of credit facilities and liquidity facilities commitments e. cash outflows from other contractual obligations related to fund disbursement f. cash outflows from other contingent funding obligations g. other contractual cash outflows TOTAL CASH OUTFLOW CASH INFLOW 6 Secured lending Receivables from counterparties 8 Other cash inflows TOTAL CASH INFLOW

TOTAL ADJUSTED VALUE 1
TOTAL HQLA
TOTAL NET CASH OUTFLOWS
LCR (%)
Notes:
1Adjusted values are calculated after applying haircuts, run-off rates, and inflow rates as well as maximum limits for HQLA components, for example, maximum limits for HQLA Level 2B and HQLA Level 2 and maximum limits for cash inflows that can be offset in LCR. CHAIRMAN OF THE BOARD OF COMMISSIONERS FINANCIAL SERVICES AUTHORITY, ttd MULIAMAN D. HADAD Copy matches the original Legal Director 1 Legal Department ttd Sudarmaji