Second Amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHABILITY REGULATION
NUMBER 30 /POJK.05/2020
ON
THE SECOND AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 11/POJK.05/2014 ON DIRECT EXAMINATION OF NON-BANK FINANCIAL SERVICE INSTITUTIONS BY THE GRACE OF THE ALMIGHTY GOD THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in order to increase the effectiveness and quality of supervision over non-bank financial service institutions, it is necessary to regulate direct examination of non-bank financial service institutions with an assessment of the health level of non-bank financial service institutions; b. that direct examination of non-bank financial service institutions as regulated in Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions as amended by Financial Services Authority Regulation Number 63/POJK.05/2016 on Amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions has not met the needs and legal developments, so it needs to be adjusted;

c. that based on the considerations as referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on the Second Amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions;

Considering:

1. Law Number 11 of 1992 concerning Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 37, Supplement to the State Gazette of the Republic of Indonesia Number 3477);
2. Law Number 2 of 2009 concerning the Indonesia Export Financing Institution (State Gazette of the Republic of Indonesia Year 2009 Number 2, Supplement to the State Gazette of the Republic of Indonesia Number 4957);
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);
4. Law Number 40 of 2014 concerning Insurance (State Gazette of the Republic of Indonesia Year 2014 Number 337, Supplement to the State Gazette of the Republic of Indonesia Number 5618);
5. Law Number 1 of 2016 concerning Guarantees (State Gazette of the Republic of Indonesia Year 2016 Number 9, Supplement to the State Gazette of the Republic of Indonesia Number 5835);
6. Government Regulation Number 76 of 1992 concerning Employer Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 126, Supplement to the State Gazette of the Republic of Indonesia Number 3507);
7. Government Regulation Number 77 of 1992 concerning Financial Institution Pension Funds (State Gazette of the Republic of Indonesia Year 1992 Number 127, Supplement to the State Gazette of the Republic of Indonesia Number 3508);
8. Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2014 Number 198, Supplement to the State Gazette of the Republic of Indonesia Number 5576) as amended by Financial Services Authority Regulation Number 63/POJK.05/2016 on Amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2016 Number 294, Supplement to the State Gazette of the Republic of Indonesia Number 5984);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION ON THE SECOND AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 11/POJK.05/2014 ON DIRECT EXAMINATION OF NON-BANK FINANCIAL SERVICE INSTITUTIONS.

Article I
Several provisions in Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2014 Number 198, Supplement to the State Gazette of the Republic of Indonesia Number 5576) as amended by Financial Services Authority Regulation Number 63/POJK.05/2016 on Amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2016 Number 294, Supplement to the State Gazette of the Republic of Indonesia Number 5984), are amended as follows:

1. Provisions of point 1 and point 2 of Article 1 are amended, so that they read as follows:

Article 1
In this Financial Services Authority Regulation:

1. Non-Bank Financial Service Institutions are:
   a. insurance companies, sharia insurance companies, reinsurance companies, and sharia reinsurance companies as referred to in legislation concerning insurance, including those conducting part of their business with sharia principles; b. financing companies as referred to in legislation concerning financing companies, including those conducting all or part of their business with sharia principles;
   c. pension funds as referred to in legislation concerning pension funds, including those conducting all or part of their business with sharia principles;
   d. insurance brokerage companies, reinsurance brokerage companies, and insurance loss assessors as referred to in legislation concerning insurance; e. guarantee institutions as referred to in legislation concerning guarantees, including those conducting part of their business with sharia principles; f. venture capital companies as referred to in legislation concerning venture capital companies, including those conducting all or part of their business with sharia principles; g. Indonesia Export Financing Institutions as referred to in legislation concerning Indonesia Export Financing Institutions; h. secondary housing financing companies as referred to in legislation concerning secondary housing financing companies;
   i. digital lending service providers as referred to in legislation concerning digital lending services, including those conducting all or part of their business with sharia principles;
   j. infrastructure financing companies as referred to in legislation concerning infrastructure financing companies, including those conducting all or part of their business with sharia principles; k. PT Permodalan Nasional Madani (Persero) as referred to in legislation concerning PT Permodalan Nasional Madani (Persero); and
   l. pawnshop companies as referred to in legislation concerning pawnshop businesses, including those conducting all or part of their business with sharia principles.

2. Direct Examination is a series of activities to search for, collect, process, and evaluate data and/or information regarding Non-Bank Financial Service Institutions conducted at the offices of Non-Bank Financial Service Institutions and/or at other places directly or indirectly related to the activities of Non-Bank Financial Service Institutions.

3. Examiners are parties appointed by the Financial Services Authority to conduct Direct Examination.

4. Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution having the functions, duties, and authorities of regulation, supervision, examination, and investigation, as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

5. Provisions of paragraph (3) of Article 2 are amended, so that they read as follows:

Article 2
(1) The OJK may conduct Direct Examination against Non-Bank Financial Service Institutions.
(2) In conducting Direct Examination as referred to in paragraph (1), the OJK may conduct Direct Examination against:
a. shareholders or equivalents of Non-Bank Financial Service Institutions; b. subsidiaries of Non-Bank Financial Service Institutions; and/or
c. other parties conducting transactions with Non-Bank Financial Service Institutions.

(3) Direct Examination against the parties as referred to in paragraph (2) is conducted if such parties are indicated to affect the health level of Non-Bank Financial Service Institutions or cause violations of applicable legislation.

3. Provisions of letter b of Article 3 are amended, so that they read as follows:

Article 3
Direct Examination aims to:
a. obtain an overview of the condition of Non-Bank Financial Service Institutions; b. obtain adequate assurance regarding the health level of Non-Bank Financial Service Institutions; and/or
c. assess the compliance of Non-Bank Financial Service Institutions with legislation in the field of Non-Bank Financial Service Institutions.

4. Provisions of Article 4 are amended so that they read as follows:

Article 4
(1) The Financial Services Authority conducts Direct Examination against Non-Bank Financial Service Institutions periodically or at any time.
(2) The Financial Services Authority may establish periodic Direct Examination as referred to in paragraph (1) with a frequency of 1 (one) time in 1 (one) year.
(3) The frequency of periodic Direct Examination as referred to in paragraph (2) is determined based on the supervisor's assessment of the health level condition or factors impacting the business activities of Non-Bank Financial Service Institutions. (4) The scope of Direct Examination covers all aspects or specific aspects of the business activities of Non-Bank Financial Service Institutions. (5) The determination of the scope of Direct Examination as referred to in paragraph (4) is established by the Financial Services Authority based on:
a. risk-based supervision for Non-Bank Financial Service Institutions that have implemented risk-based supervision; or b. Direct Examination plans for Non-Bank Financial Service Institutions that have not yet implemented risk-based supervision.

5. Provisions of Article 9 are amended so that they read as follows:

Article 9
(1) In the Direct Examination process, Examiners conduct confirmation to Non-Bank Financial Service Institutions and/or other related parties regarding findings from the Direct Examination.
(2) Before the Direct Examination ends, Examiners conduct preliminary discussions with Non-Bank Financial Service Institutions and/or other related parties regarding findings from the Direct Examination.
(3) At the time the Direct Examination ends, Examiners hold a meeting with the management of Non-Bank Financial Service Institutions and/or the management of parties as referred to in Article 2 paragraph (2) regarding the results of the Direct Examination and follow-up actions from the results of the Direct Examination.

(4) The results of the meeting as referred to in paragraph (3) are documented in minutes containing the results of the Direct Examination and recommendations or follow-up actions, signed by the Examiner team and the management of Non-Bank Financial Service Institutions. (5) The Direct Examination period may be extended as needed or based on the complexity of the Direct Examination of Non-Bank Financial Service Institutions.

6. Provisions of Article 10 are amended so that they read as follows:

Article 10
(1) After the examination process ends, Examiners compile a report on the results of the Direct Examination.
(2) The Financial Services Authority submits the report on the results of the Direct Examination as referred to in paragraph (1) to the Board of Directors and Board of Commissioners or equivalents of Non-Bank Financial Service Institutions. (3) The report on the results of the Direct Examination as referred to in paragraph (1) is confidential. (4) The use of the report on the results of the Direct Examination as referred to in paragraph (1) by parties outside the examined Non-Bank Financial Service Institution must be consulted and obtain prior approval from the Financial Services Authority.

Article II
At the time this Financial Services Authority Regulation takes effect:
a. Direct Examination activities of Non-Bank Financial Service Institutions that are still ongoing are completed based on the previously applicable provisions. b. Financial Services Authority Regulation Number 37/POJK.05/2015 on Direct Examination of Venture Capital Companies (State Gazette of the Republic of Indonesia Year 2015 Number 2015, Supplement to the State Gazette of the Republic of Indonesia Number 5789) is revoked and declared invalid;
c. Article 69 paragraph (2) and Article 70 of Financial Services Authority Regulation Number 40/POJK.05/2015 concerning Guidance and Supervision of Indonesia Export Financing Institutions (State Gazette of the Republic of Indonesia Year 2015 Number 321, Supplement to the State Gazette of the Republic of Indonesia Number 5791) are revoked and declared invalid;
d. Article 42, Article 43, Article 44, Article 45, Article 46, Article 47, and Article 48 of Financial Services Authority Regulation Number 31/POJK.05/2016 concerning Pawnshop Businesses (State Gazette of the Republic of Indonesia Year 2016 Number 152, Supplement to the State Gazette of the Republic of Indonesia Number 5913) are revoked and declared invalid; e. Article 38 of Financial Services Authority Regulation Number 4/POJK.05/2018 concerning Secondary Housing Financing Companies (State Gazette of the Republic of Indonesia Year 2018 Number 40, Supplement to the State Gazette of the Republic of Indonesia Number 6192) is revoked and declared invalid; f. Article 35 of Financial Services Authority Regulation Number 16/POJK.05/2019 concerning Supervision of PT Permodalan Nasional Madani (Persero) (State Gazette of the Republic of Indonesia Year 2019 Number 107, Supplement to the State Gazette of the Republic of Indonesia Number 6357) is revoked and declared invalid; and g. This Financial Services Authority Regulation takes effect on the date of enactment.

This copy is consistent with the original
Deputy Director of Legal Consultation and Harmonization of Banking Regulations 1 Legal Directorate 1 Legal Department signed Wiwit Puspasari

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

Established in Jakarta on 22 April 2020
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Enacted in Jakarta on 29 April 2020
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 122

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 30 /POJK.05/2020
ON
THE SECOND AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 11/POJK.05/2014 ON DIRECT EXAMINATION OF NON-BANK FINANCIAL SERVICE INSTITUTIONS

I. GENERAL
Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions as amended by Financial Services Authority Regulation Number 63/POJK.05/2016 on Amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions is the legal basis for the Financial Services Authority in conducting Direct Examination to Non-Bank Financial Service Institutions.

Such Direct Examination aims to know the factual condition of Non-Bank Financial Service Institutions. In line with this objective, regulations regarding direct examination of Non-Bank Financial Service Institutions, particularly concerning the direct examination process, need to be aligned with the examination process of other financial service institutions, so that Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions needs to be perfected.

In this regard, the Financial Services Authority establishes this Financial Services Authority Regulation, which is the second amendment to Financial Services Authority Regulation Number 11/POJK.05/2014 on Direct Examination of Non-Bank Financial Service Institutions.

II. ARTICLE BY ARTICLE
Article I
Point 1
Article 1
Sufficiently clear.
Point 2
Article 2
Paragraph (1)
Sufficiently clear.
Paragraph (2) letter a
What is meant by "shareholders or equivalents" in this paragraph is shareholders for Non-Bank Financial Service Institutions in the form of limited liability companies, and founders for Non-Bank Financial Service Institutions in the form of cooperatives or pension funds. letter b Sufficiently clear. letter c What is meant by "other parties" is parties other than shareholders or equivalents or subsidiaries of Non-Bank Financial Service Institutions. What is meant by "other parties conducting transactions with Non-Bank Financial Service Institutions" includes parties cooperating with Non-Bank Financial Service Institutions to market their products. Paragraph (3) Sufficiently clear. Point 3
Article 3
Sufficiently clear.

Point 4
Article 4
Paragraph (1)
Ad hoc Direct Examination is conducted among others to deepen the results of indirect supervision and/or indications of deviations from healthy practices of Non-Bank Financial Service Institutions.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
What is meant by "supervisor's assessment of health level conditions" is an assessment of good corporate governance, risk profiles, profitability, and/or capital/funding, conducted periodically by supervisors for Non-Bank Financial Service Institutions that have implemented risk-based supervision. What is meant by "supervisor's assessment of factors impacting business activities" is the supervisor's assessment of institutional factors, financial factors, operational factors, and/or other factors obtained by supervisors from periodic reports for Non-Bank Financial Service Institutions that have not yet implemented risk-based supervision. Paragraph (4) What is meant by "specific aspects of the business activities of Non-Bank Financial Service Institutions" includes aspects of good corporate governance, risk profiles, profitability, and capital. When Direct Examination is conducted on specific aspects of the business activities of Non-Bank Financial Service Institutions, Examiners may assess one or more aspects of the business activities of Non-Bank Financial Service Institutions. Paragraph (5) Sufficiently clear.

Point 5
Article 9
Paragraph (1)
Examiners conduct confirmation to Non-Bank Financial Service Institutions and/or other related parties to request additional explanations regarding the Examiners' findings or to request additional evidence or facts regarding such findings. Paragraph (2) Preliminary discussion or pre-exit meeting to ensure that the results of the Direct Examination by Examiners are consistent with evidence or facts and can be accepted by Non-Bank Financial Service Institutions or other related parties. Preliminary discussion or pre-exit meeting is conducted between the Examiner team and Non-Bank Financial Service Institutions and/or other related parties. Paragraph (3) Examiners hold a meeting or exit meeting to present the results of the Direct Examination along with evidence or facts, and recommendations or follow-up actions after the Direct Examination to the management of Non-Bank Financial Service Institutions. In the meeting or exit meeting, there are no more differences of opinion between Examiners and Non-Bank Financial Service Institutions. What is meant by "management" is the Board of Directors or equivalents for headquarters or branch management for branch offices. Paragraph (4) Sufficiently clear. Paragraph (5) Sufficiently clear.

Point 6
Article 10
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
The report on the results of the Direct Examination is intended as a guidance tool to improve the performance of Non-Bank Financial Service Institutions. Therefore, the Board of Directors and Board of Commissioners of Non-Bank Financial Service Institutions are not permitted to disseminate data and/or information contained in the report on the results of the Direct Examination. Paragraph (4) Sufficiently clear.
Article II
Sufficiently clear.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6506