Regulation of the Financial Services Authority Number 43/POJK.03/2017 on Follow-up Implementation of Bank Supervision

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 43 /POJK.03/2017
CONCERNING
FOLLOW-UP IMPLEMENTATION OF BANK SUPERVISION
BY THE GRACE OF THE MOST HIGH GOD,
THE COMMISSIONERS BOARD OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that the health of a bank is the interest of all parties involved, so that banks must believe and fully understand what must be done or not done in carrying out banking business activities; b. that in carrying out the regulatory and supervisory tasks regarding activities in the banking sector, the Financial Services Authority has the authority to determine what should be done or not done by banks in carrying out business activities;
c. that in connection with the transfer of functions, duties, and authorities for the regulation and supervision of financial services in the banking sector from Bank Indonesia to the Financial Services Authority, it is necessary to regulate again the follow-up implementation of bank supervision;
d. that based on considerations as referred to in letters a through c, it is necessary to establish a Financial Services Authority Regulation concerning the Follow-up Implementation of Bank Supervision; 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 concerning Amendments to Law Number 7 of 1992 concerning Banking (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 2008 concerning Islamic Banking (State Gazette of the Republic of Indonesia Year 2008 Number 94, Supplement to the State Gazette of the Republic of Indonesia Number 4867);
3. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING FOLLOW-UP IMPLEMENTATION OF BANK SUPERVISION.

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

1. Bank means Commercial Banks and Rural Banks as referred to in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking, including branch offices of banks located outside the country, and Islamic Banks as well as Sharia Business Units as referred to in Law Number 21 of 2008 concerning Islamic Banking.
2. Order or Cease and Desist Order (CDO), hereinafter referred to as Order or CDO, is an order to carry out or not carry out certain activities to comply with statutory regulations in the banking sector and/or to prevent and reduce losses to consumers, the public, and the banking sector.
3. Board of Directors means:
   a. for Banks in the form of a Limited Liability Company, the Board of Directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for Banks in the form of legal entities:
   1) State-Owned Enterprises or Regional-Owned Enterprises, the Board of Directors as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   2) Regional Enterprises, the Board of Directors in Banks that have not yet changed their form into State-Owned Enterprises or Regional-Owned Enterprises as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   c. for Banks in the form of a Cooperative legal entity, the management as referred to in Law Number 25 of 1992 concerning Cooperatives;
   d. for branch offices of banks located outside the country, the head of the branch office of the bank located outside the country, namely the branch office head and one level below the branch office head.
4. Board of Commissioners means:
   a. for Banks in the form of a Limited Liability Company, the Commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies; b. for Banks in the form of legal entities:
   1) State-Owned Enterprises, the Supervisory Board as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   2) Regional-Owned Enterprises, the Commissioners as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   3) Regional Enterprises, the Supervisors in Banks that have not yet changed their form into State-Owned Enterprises or Regional-Owned Enterprises as referred to in Law Number 23 of 2014 concerning Regional Government as amended several times, lastly by Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 of 2014 concerning Regional Government;
   c. for Banks in the form of a Cooperative legal entity, the Supervisors as referred to in Law Number 25 of 1992 concerning Cooperatives.
5. Controlling Shareholder for Banks, hereinafter abbreviated as PSP, means a legal entity, individual, and/or business group that:
   a. owns shares of the company or Bank amounting to 25% (twenty-five percent) or more of the issued shares and has voting rights; or b. owns shares of the company or Bank less than 25% (twenty-five percent) of the issued shares and has voting rights but can be proven to have controlled the company or Bank, either directly or indirectly.

Article 2
In carrying out business activities, Banks are required to be based on the principle of prudence and the principle of healthy banking and to comply with statutory regulations.

Article 3
(1) In the event of deviations from the principle of prudence and the principle of healthy banking and violations of statutory regulations, the Financial Services Authority may issue an Order or CDO regarding what should be done or not done by the Bank. (2) To fulfill the Order or CDO from the Financial Services Authority as referred to in paragraph (1), the Bank submits commitments from:
a. the Board of Directors and/or the Board of Commissioners of the Bank, to carry out or not carry out certain activities so that corrections to the deviations can be resolved; and/or b. the PSP, to address issues that are the obligations of the PSP. (3) The commitments of the Board of Directors, Board of Commissioners, and/or PSP are binding and must be implemented.

Article 4
Banks, Boards of Directors, Boards of Commissioners, and/or PSPs that do not fulfill the provisions as referred to in Article 2 and Article 3 paragraph (3) are subject to administrative sanctions as referred to in Article 52 of Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 concerning Amendments to Law Number 7 of 1992 concerning Banking or Article 58 of Law Number 21 of 2008 concerning Islamic Banking.

Article 5
Upon the implementation of this Financial Services Authority Regulation:
a. Board of Directors Decision Number 23/82/KEP/DIR concerning Follow-up Implementation of Bank Supervision and Guidance; and b. Bank Indonesia Circular Letter Number 23/22/BPPP concerning Follow-up Implementation of Bank Supervision and Guidance, are repealed and declared invalid.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana

Article 6
This Financial Services Authority Regulation comes into force on the date of its promulgation.
To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on July 12, 2017
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD
Promulgated in Jakarta on July 12, 2017
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2017 NUMBER 149

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 43 /POJK.03/2017
CONCERNING
FOLLOW-UP IMPLEMENTATION OF BANK SUPERVISION

I. GENERAL
Law Number 21 of 2011 concerning the Financial Services Authority mandates that the supervisory and regulatory functions regarding all activities in the financial services sector operating in Indonesia are carried out by the Financial Services Authority. The Financial Services Authority was formed with the aim that all financial services activities are conducted in an orderly, fair, transparent, and accountable manner, and are able to realize a financial system that grows sustainably and stably, as well as protect the interests of consumers and the public. To provide protection to consumers, the public, and the financial services sector, the Financial Services Authority has the authority to take necessary actions, including issuing Orders or CDOs to the banking sector. Orders or CDOs are implemented in the form of requests for commitments from Banks to carry out or not carry out certain things in carrying out Bank business activities. Orders or CDOs are issued in the event of deviations from the principle of prudence and the principle of healthy banking and violations of statutory regulations. In principle, this Financial Services Authority Regulation contains the authority of the Financial Services Authority in issuing Orders or CDOs. For this authority to be carried out in accordance with good governance, Orders or CDOs in Bank supervision need to be formulated in a Financial Services Authority Regulation.

II. ARTICLE BY ARTICLE
Article 1
Clearly sufficient.
Article 2
Regarding the principle of prudence and the principle of healthy banking, Banks need to understand their function as institutions of public trust, so that Banks must avoid practices or activities that are estimated or can endanger the continuity of the Bank's business or harm the interests of the public.
Article 3
Paragraph (1)
Examples of Orders or CDOs include, among others:
a. temporary suspension of the opening of office networks; b. temporary suspension of carrying out certain business activities;
c. replacement of the Board of Directors or Board of Commissioners;
d. capital increase and/or transfer of Bank ownership; e. merger or consolidation of business with other banks; and/or f. write-off of non-performing loans or financing and calculating Bank losses with Bank capital.
Paragraph (2)
Clearly sufficient.
Paragraph (3)
Clearly sufficient.
Article 4
Clearly sufficient.
Article 5
Clearly sufficient.
Article 6
Clearly sufficient.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6092