SEOJK on the Implementation of Corporate Governance for Rural Banks

To:
The Board of Directors of Rural Banks

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 5/SEOJK.03/2016 CONCERNING THE IMPLEMENTATION OF CORPORATE GOVERNANCE FOR RURAL BANKS

In relation to the Financial Services Authority Regulation Number 4/POJK.03/2015 concerning the Implementation of Corporate Governance for Rural Banks (State Gazette of the Republic of Indonesia Year 2015 Number 72, Supplement to the State Gazette of the Republic of Indonesia Number 5685), hereinafter referred to as the POJK on Rural Bank Corporate Governance, it is necessary to regulate the implementation of the POJK on Rural Bank Corporate Governance in this Circular Letter of the Financial Services Authority as follows:

I. GENERAL PROVISIONS

Corporate governance is the corporate governance of Rural Banks (BPR) that applies the following principles:
a. Transparency, namely openness in expressing material and relevant information and openness in the decision-making process. b. Accountability, namely the clarity of functions and the implementation of accountability of the BPR organs so that management runs effectively.
c. Responsibility, namely the conformity of BPR management with laws and regulations and healthy BPR management principles.
d. Independence, namely the professional management of BPR without influence or pressure from any party. e. Fairness, namely justice and equality in fulfilling the rights of stakeholders arising...

...from agreements and laws and regulations.

In applying the transparency principle as referred to in item 1.a, in accordance with Article 76 of the POJK on Rural Bank Corporate Governance, BPRs are required to submit a Corporate Governance Implementation Report to the Financial Services Authority, BPR associations in Indonesia, and 1 (one) media office or economic and financial magazine.
In applying the independence principle as referred to in item 1.d, the existence of Independent Commissioners and Independent Parties is required. The existence of Independent Commissioners and Independent Parties is expected to create a condition of mutual control (check and balance), avoid conflicts of interest (conflict of interest) in the implementation of their duties, and protect stakeholders (stakeholders), particularly fund owners and minority shareholders. To support independence in the implementation of duties, clear regulations regarding the waiting period (cooling off) for parties who will become Independent Commissioners and Independent Parties are necessary.
In efforts to improve and increase the quality of Corporate Governance implementation in accordance with Article 77 of the POJK on Rural Bank Corporate Governance, BPRs are periodically required to conduct comprehensive self-assessments regarding the adequacy of Corporate Governance implementation so that if there are still deficiencies in its implementation, BPRs can immediately establish the necessary action plans.

II. BOARD OF DIRECTORS

The number of Board of Directors members is adjusted according to the amount of core capital owned by the BPR in accordance with the POJK on Rural Bank Corporate Governance, namely:
a. BPRs with core capital of at least Rp 50,000,000,000.00 (fifty billion rupiah) must have at least 3 (three) Board of Directors members. b. BPRs with core capital of less than Rp 50,000,000,000.00 (fifty billion rupiah) must have at least 2 (two) Board of Directors members.
The imposition of sanctions for fulfilling the organizational structure for the number of Directors as referred to in item 1 shall take effect on April 1, 2017.
In accordance with Article 16 of the POJK on Rural Bank Corporate Governance, the Board of Directors is required to disclose the BPR's strategic policies in the field of human resources to employees.

What is meant by strategic policies in the field of human resources includes, among others, policies regarding recruitment systems, promotion and demotion systems, remuneration systems, and employee development programs, as well as employee termination mechanisms. Such disclosure must be carried out through means known and easily accessible to employees.

What is meant by employees is permanent employees of the respective BPR.

In accordance with Article 9 of the POJK on Rural Bank Corporate Governance, Board of Directors members are prohibited from granting general powers, namely granting power to one or more employees or other persons resulting in the transfer of the duties, authority, and responsibilities of Board of Directors members entirely without limitations on scope and time.
All Board of Directors decisions are taken in accordance with binding guidelines and rules of work, which become the responsibility of all Board of Directors members. Copies of Board of Directors meeting minutes signed by all attending Board of Directors members are distributed to all Board of Directors members and documented properly.

III. BOARD OF COMMISSIONERS

The number of Board of Commissioners members is adjusted according to the amount of core capital owned by the BPR in accordance with the POJK on Rural Bank Corporate Governance, namely:
a. BPRs with core capital of at least Rp 50,000,000,000.00 (fifty billion rupiah) must have at least 3 (three) Board of Commissioners members. b. BPRs with core capital of less than Rp 50,000,000,000.00 (fifty billion rupiah) must have at least 2 (two) Board of Commissioners members.
The number of Board of Commissioners members is at most equal to the number of Board of Directors members.
The composition of Board of Commissioners members is adjusted according to the amount of core capital owned by the BPR in accordance with Article 25 of the POJK on Rural Bank Corporate Governance, namely:
a. BPRs with core capital of at least Rp 80,000,000,000.00 (eighty billion rupiah) must have at least 50% (fifty percent) Independent Commissioners of the total number of Board of Commissioners members. b. BPRs with core capital of at least Rp 50,000,000,000.00 (fifty billion rupiah) and less than Rp 80,000,000,000.00 (eighty billion rupiah) must have at least 1 (one) Independent Commissioner.
Independent Commissioners are Board of Commissioners members who do not have financial, managerial, shareholding, and/or family relationships with other Board of Commissioners members, the Board of Directors, and/or controlling shareholders, or other relationships that can influence their ability to act independently.
a. What is meant by having a financial relationship with other Board of Commissioners members, the Board of Directors, and/or controlling shareholders is if a person receives and/or provides income, financial assistance, loans, and/or becomes a guarantor or receives guarantees from:

other Board of Commissioners members and/or BPR Board of Directors members;
companies whose controlling shareholders are other Board of Commissioners members and/or BPR Board of Directors members, and/or the respective BPR shareholders;
and/or
controlling shareholders of the BPR.
b. What is meant by having a managerial relationship with other Board of Commissioners members, the Board of Directors, and/or controlling shareholders is if a person holds a position as:
Board of Commissioners or Board of Directors members in companies where other Board of Commissioners members serve as Board of Commissioners and/or Board of Directors members;
Board of Commissioners or Board of Directors members in companies whose controlling shareholders are other Board of Commissioners members and/or BPR Board of Directors members;
and/or
Board of Commissioners or Board of Directors members in controlling shareholder companies of the BPR.
c. What is meant by having a shareholding relationship with other Board of Commissioners members, the Board of Directors, and/or controlling shareholders is if a person is a shareholder/owner of:
the respective BPR;
companies owned by controlling shareholders of the BPR; and/or
companies jointly owned by other Board of Commissioners members, the Board of Directors, and/or controlling shareholders of the BPR so that together they become controlling shareholders in that company.
d. What is meant by having a family relationship with other Board of Commissioners members, the Board of Directors, and/or controlling shareholders is family or in-law relationships up to the second degree as regulated in the Financial Services Authority Regulation concerning Rural Banks. e. What is meant by having other relationships that can influence a person's ability to act independently is relationships other than those included in the definitions/criteria of financial, managerial, shareholding, and family relationships as referred to in letters a through d and proven to influence a person's independence.

The imposition of sanctions for fulfilling the organizational structure for the number of Commissioners, including Independent Commissioners, as referred to in items 1 and 3 shall take effect on April 1, 2017.
Controlling shareholders are controlling shareholders as referred to in the Financial Services Authority Regulation concerning Rural Banks.
In the event that the controlling shareholder of the BPR is a legal entity, family relationships between Independent Commissioners and the controlling shareholder of the BPR are viewed from family relationships with...

...individual controlling shareholders of the controlling legal entity up to the ultimate controlling shareholders of the BPR (ultimate shareholders).

Former Board of Directors members or Executive Officers of the BPR or other parties who have relationships with the BPR that can influence their ability to act independently cannot become Independent Commissioners of the respective BPR before serving a waiting period (cooling off) of 1 (one) year.

What is meant by waiting period (cooling off) is the interval between the effective end of the term of office of Board of Directors members or Executive Officers of the respective BPR or other parties in other companies and the date of their effective appointment as Independent Commissioners. The effective date of the end of the term for Board of Directors members is calculated from the date set in the General Meeting of Shareholders (GMS) or since the period regulated in the BPR's articles of association has been exceeded if the GMS cannot be held.

The effective date of the end of the term for Executive Officers or other parties is calculated from the issuance of a written decision ending their respective positions by the BPR or the relevant company.

In the event that candidates for Independent Commissioners come from Board of Directors members or Executive Officers who perform supervisory functions and previously served as Board of Directors members or Executive Officers or employees handling BPR operations, the waiting period (cooling off) is calculated 1 (one) year after the date of dismissal from the position as Board of Directors members or Executive Officers or employees handling BPR operations.

Applications to become Independent Commissioners for candidates for Independent Commissioners who must serve a waiting period are submitted at least 30 (thirty) days before the end of the waiting period (cooling off).
The appointment, dismissal, and/or resignation of Independent Commissioners refer to the Financial Services Authority Regulation concerning Rural Banks.
Changes in status from Commissioner to Independent Commissioner in the same BPR must receive approval from the Financial Services Authority.
To obtain approval from the Financial Services Authority, candidates for Independent Commissioners as referred to in items 10 and 11 must submit an independence declaration letter in the format as in Appendix I, which is an integral part of this Circular Letter of the Financial Services Authority.
Applications for status changes from Commissioner to Independent Commissioner are submitted by the BPR to the Financial Services Authority u.p. Regional Office or Local Financial Services Authority Office.
In accordance with Article 29 paragraph (4) of the POJK on Rural Bank Corporate Governance, the Board of Commissioners is prohibited from participating in decision-making on BPR operational activities, except for:
a. the provision of funds to related parties as per regulations governing maximum credit limits for BPRs; and b. other matters stipulated in laws and regulations.

Included in the exceptions is when the Board of Commissioners reviews a transaction in the course of supervision. The review results are formulated in the form of recommendations and documented properly, forming part of the decision-making documents. Supervisory duties by the Board of Commissioners are early supervision efforts.

Decision-making by the Board of Commissioners in such operational activities is part of supervisory duties, so operational decisions remain the responsibility of the Board of Directors for the implementation of management duties of the BPR.

Board of Commissioners meetings can be held with direct presence or conducted using teleconference technology, video conferencing, or other electronic media means that allow all meeting participants to see and hear each other directly and participate in the meeting.
Board of Commissioners meetings conducted using teleconference technology as referred to in item 15 must be supported by:
a. the basis for the decision to hold meetings using teleconference technology, such as internal BPR regulations and Board of Commissioners meeting minutes; b. proof of meeting recordings; and
c. meeting minutes signed by all Board of Commissioners members present physically or via teleconference technology.
Copies of Board of Commissioners meeting minutes signed by all Board of Commissioners members are distributed to all Board of Commissioners members.

IV. AUDIT COMMITTEE AND RISK MONITORING COMMITTEE

In accordance with Article 32 paragraph (1) of the POJK on Rural Bank Corporate Governance, the Board of Commissioners in BPRs with core capital of at least Rp 80,000,000,000.00 (eighty billion rupiah) must form at least 2 (two) Committees, namely the Audit Committee and the Risk Monitoring Committee.
Committee members as referred to in item 1 must consist of at least one Independent Commissioner and two Independent Parties according to competence as regulated in the POJK on Rural Bank Corporate Governance.
The imposition of sanctions for fulfilling the organizational structure for the formation of Committees as referred to in item 1 shall take effect on April 1, 2017.
Independent Parties in accordance with Article 1 item 6 of the POJK on Rural Bank Corporate Governance are parties outside the BPR who do not have financial, managerial, shareholding, and/or family relationships with the Board of Directors, Board of Commissioners, controlling shareholders, and/or do not have other relationships that can influence their ability to act independently.
What is meant by financial, managerial, shareholding, family relationships, and other relationships that can influence the ability to act independently for Independent Parties refers to section III item 4.
Audit Committee members from Independent Parties must have at least competence and/or experience in the fields of finance or accounting and in the fields of law or banking.
Risk Monitoring Committee members from Independent Parties must have at least competence and/or experience in the fields of finance and in the field of risk management.
What is meant by competence is knowledge and skill qualifications in specific fields proven by certificates or proof of graduation in such fields from formal education or training institutions.
What is meant by having experience is work experience of at least 1 (one) year proven by letters of work experience from relevant institutions.
BPRs must verify the truthfulness of all documents and/or supporting data fulfilling the requirements for Independent Parties.
The appointment of committee members from Independent Parties does not go through the Fit and Proper Test process by the Financial Services Authority.
Committee members from Independent Parties can hold concurrent positions as Independent Party members of other committees in the same BPR, other BPRs, and/or other financial service institutions, provided that the respective person:
a. meets all required competencies; b. meets independence criteria;
c. can maintain BPR confidentiality;
d. observes applicable codes of ethics; and e. does not interfere with the implementation of duties and responsibilities as members of the relevant BPR committees.

V. CONFLICT OF INTEREST

Conflict of interest is the difference between the economic interests of the BPR and the personal economic interests of owners, Board of Directors members, Board of Commissioners members, Executive Officers, and/or related parties with the BPR.
Board of Directors members, Board of Commissioners members, and Executive Officers must avoid making decisions in situations and conditions where conflicts of interest exist. However, if decisions must still be made, the concerned parties must prioritize the economic interests of the BPR and avoid losses that may arise or potential decreases in BPR profits, and disclose the conflict of interest condition in every decision.
Providing special treatment to certain parties as referred to in item 1 outside of applicable procedures and regulations is included in the category of conflicts of interest causing losses to the BPR or reducing BPR profits, including the provision of interest rates not in accordance with applicable procedures and regulations.
Disclosure of conflicts of interest in every decision must at least include the name and position of the party with the conflict of interest, the name and position of the decision-maker for transactions containing conflicts of interest, the type of transaction, the value of the transaction, and notes.
To avoid decision-making that has the potential to harm the BPR or reduce BPR profits, BPRs must have and apply internal policies, systems, and procedures for resolving conflicts of interest, including:
a. handling conflicts of interest binding every Board of Directors member, Board of Commissioners member, and BPR employee, including decision-making procedures; and b. administration, recording, documentation, and disclosure of conflicts of interest in meeting minutes.

VI. SELF-ASSESSMENT

BPRs are required to conduct self-assessments on the implementation of Corporate Governance as referred to in Article 77 of the POJK on Rural Bank Corporate Governance at least 1 (one) time per year. The results of self-assessments on the implementation of Corporate Governance are an integral part of the Corporate Governance Implementation Report.
Assessments of the implementation of Corporate Governance principles must at least be manifested and focused in 11 (eleven) Corporate Governance Implementation Assessment Factors, consisting of:
a. Implementation of Board of Directors duties and responsibilities; b. Implementation of Board of Commissioners duties and responsibilities;
c. Completeness and implementation of Committee duties or functions;
d. Handling conflicts of interest; e. Implementation of compliance functions; f. Implementation of internal audit functions; g. Implementation of external audit functions; h. Implementation of risk management, including internal control systems;
i. Maximum credit limits;
j. BPR business plans; and k. Transparency of financial and non-financial conditions.
In carrying out self-assessments, BPRs use the Corporate Governance Implementation Assessment Guidelines, consisting of:
a. General Explanation of the Corporate Governance Implementation Assessment Guidelines; b. Procedures for Filling out the Corporate Governance Implementation Assessment Worksheets;
c. Corporate Governance Implementation Assessment Worksheets; and
d. Conclusions, as in Appendix II, which is an integral part of this Circular Letter of the Financial Services Authority.
Filling out the Corporate Governance Implementation Assessment Worksheets is done using qualitative methods based on data and information that reflects the actual situation.
Data and information as referred to in item 4 include, among others, management data, ownership data, annual BPR reports, reports on the main points of duties of Board of Directors members overseeing compliance functions, reports related to internal audit functions in BPRs, risk profile reports, business plan documents and business plan realization reports, Board of Commissioners reports, and other reports related to other Corporate Governance Implementation Assessment Factors.
The final results of self-assessments on Corporate Governance implementation for BPRs are Composite Ratings with the following rating ranges.

Composite Value Composite Rating
1.0 ≤ Composite Value < 1.8 Very Good
1.8 ≤ Composite Value < 2.6 Good
2.6 ≤ Composite Value < 3.4 Fairly Good
3.4 ≤ Composite Value < 4.2 Poorly Good
4.2 ≤ Composite Value ≤ 5.0 Not Good

If any of the factors as referred to in item 2 have all criteria or indicators receiving a Not Good rating (5), the highest Composite Rating that a BPR can achieve is Fairly Good.
Corporate Governance Implementation Assessment Worksheets and supporting documents for Corporate Governance Implementation Assessment Worksheets must be documented properly to facilitate tracing by interested parties.
Based on the Corporate Governance Implementation Assessment Worksheets, BPRs create a General Conclusion of Corporate Governance Implementation Assessment Results on a separate sheet as in Appendix III, which is an integral part of this Circular Letter of the Financial Services Authority, which describes the fulfillment of adequacy of all Corporate Governance Implementation Assessment Factors, at least including:
a. Composite Value and Composite Rating; b. weaknesses and their causes, action plans which are corrective actions, and implementation time targets; and
c. strengths of Corporate Governance implementation.
The General Conclusion of Corporate Governance Implementation Assessment Results must be signed by the President Director and Chief Commissioner of the BPR.
The first self-assessment report on Corporate Governance implementation, namely the report position at the end of December 2016, is submitted to the Financial Services Authority, including Corporate Governance Implementation Assessment Worksheets as referred to in Appendix II and General Conclusions of Corporate Governance Implementation Assessment Results as referred to in Appendix III, which are...

is an integral part of this Financial Services Authority Circular.

The self-assessment report (self assessment) for the Implementation of Governance for the following year includes the reports referred to in number 11, and if based on the assessment or evaluation by the Financial Services Authority there is a request from the Financial Services Authority to implement an action plan, in the General Conclusion of the Governance Implementation Assessment Results, it is added with information regarding the realization of the achievement of the action plan implementation, the completion time, and the obstacles to its completion.

VII. GOVERNANCE IMPLEMENTATION REPORT

BPRs must submit the Governance Implementation Report annually in full to the Financial Services Authority, the BPR Association in Indonesia, namely the Central Executive Board of the Indonesian Rural Bank Association (PERBARINDO) or the Central Executive Board of the Indonesian Regional Government-Owned Rural Bank Association (PERBAMIDA), and 1 (one) media office or economic and financial magazine no later than 4 (four) months after the date of December 31.
The Governance Implementation Report referred to in number 1 is submitted to the Financial Services Authority for the first time for the report position at the end of December 2016.
The Governance Implementation Report referred to in number 1 is submitted to the relevant parties and uploaded on the homepage of the BPR website since the report position at the end of December 2017.
The imposition of sanctions for the submission of the Governance Implementation Report referred to in number 1 takes effect for the submission of reports for the position of December 31, 2017.
The Governance Implementation Report is approved and signed by the President Director and Senior Commissioner.
The Governance Implementation Report consists of at least:

a. Transparency of BPR Governance Implementation, covering matters as referred to in Article 75 paragraph (2) and paragraph (3) of the BPR Governance POJK; and

b. Results...

b. Self-assessment results (self assessment) of Governance Implementation as referred to in part VI number 11 and 12, covering the Governance Implementation Assessment Working Paper as referred to in Appendix II and the General Conclusion of the Governance Implementation Assessment Results as referred to in Appendix III, which are an integral part of this Financial Services Authority Circular.

Transparency of Governance Implementation, revealing all aspects of Governance Implementation at least includes:

a. disclosure of Governance Implementation, namely:

implementation of duties and responsibilities of the Board of Directors, including the number and composition of Board of Directors members and follow-up on the Board of Commissioners' recommendations;
implementation of duties and responsibilities of the Board of Commissioners, including the number and composition of Board of Commissioners members and the Board of Commissioners' recommendations to the Board of Directors;
completeness and implementation of committee duties (if any), including:

a) structure, membership, expertise, and independence of committee members;

b) committee work programs and their realization;

b. share ownership of Directors in:

the relevant BPR; and/or
other companies;

c. financial and/or family relationships of Directors with other Directors, Board of Commissioners, and/or BPR Shareholders;

d. share ownership of Commissioners in:

the relevant BPR;
other BPRs; and
other companies;

e. financial and/or family relationships of Commissioners with other Commissioners, Directors, and/or BPR Shareholders;

f. remuneration packages/policies and other facilities for Directors and Board of Commissioners established based on the General Meeting of Shareholders (GMS), including:

total gross salary;
allowances;
fees;
share-based compensation;
remuneration for BPR management established based on the GMS, taking into account the duties, authorities, responsibilities, and risks of each Director and Commissioner; and
other facilities received not in cash, including housing, transportation, and health insurance;

g. highest and lowest salary ratio, namely:

what is meant by salary is employee entitlements received and expressed in cash form as remuneration from the BPR to employees established and paid according to a work agreement, consensus, or applicable legislation, including allowances for employees and their families for work and/or services performed;
highest and lowest salary ratio, in comparison scale:

a) ratio of highest and lowest employee salaries;

b) ratio of highest and lowest Director salaries;

c) ratio of highest and lowest Commissioner salaries;

d) ratio of highest Director salary to highest Commissioner salary; and

e) ratio of highest Director salary to highest employee salary;

h. frequency of Board of Commissioners meetings, which must at least include:

number of meetings held in 1 (one) year;
number of meetings attended physically and/or via teleconference technology;
attendance of each member at each meeting; and
topics or meeting materials;

i. number of internal fraud incidents, namely deviations or fraud related to finances committed by Directors, Board of Commissioners, permanent employees, and non-permanent employees (honoraries and/or outsourcing), in the form of a comparison between the reporting year and the previous year, at least including:

number of internal fraud cases resolved;
number...
number of internal fraud cases currently being resolved internally by the BPR;
number of internal fraud cases not yet pursued for resolution; and
number of internal fraud cases followed up through legal processes,

as shown in the following table:

(unit)

Internal Fraud
Number of cases committed by
Directors
Board of Commissioners
Permanent Employees
Non-permanent Employees

in 1 year
Previous Year
Reporting Year
Previous Year
Reporting Year
Previous Year
Reporting Year
Previous Year
Reporting Year

Total Fraud
Resolved
Internal BPR Resolution Process
Not Yet Pursued for Resolution
Followed Up Through Legal Process

j. legal issues, both civil and criminal, faced by the BPR during the reporting period and have been submitted through legal processes, and resolution efforts, at least including:

number of civil and criminal legal issues faced and resolved (have acquired permanent legal force); and
number...
number of civil and criminal legal issues faced and still in the resolution process,

as shown in the following table:

(unit)

Legal Issues
Number
Civil
Criminal

Resolved (have acquired permanent legal force) In Resolution Process

Total

k. transactions containing conflicts of interest, at least covering the name and position of the party with the conflict of interest, name and position of the decision-maker for the transaction containing the conflict of interest, type of transaction, transaction value, and notes, as shown in the following table:

No
Name and Position
Party with Conflict of Interest
Name and Position
Decision Maker
Type of Transaction
Transaction Value
(million Rupiah)
Notes
*)

*) - not in accordance with applicable systems and procedures; and

explains the relationship between the name and position of the party with the conflict of interest and the name and position of the decision-maker.

l. provision of funds for social activities and political activities during the reporting period, at least including the recipients of funds and their nominal values.

In accordance with Article 78 paragraph (1) of the BPR Governance POJK, the Financial Services Authority conducts assessments or evaluations of the self-assessment results (self assessment) of governance implementation. In conducting assessments or evaluations of the self-assessment results (self assessment) of BPR Governance Implementation, the Financial Services Authority may request explanations and/or conduct special examinations.

Based on the assessment or evaluation results conducted by the Financial Services Authority, the Financial Services Authority may request the BPR to submit an action plan containing improvement steps that must be implemented by the BPR with specific target times.

The Financial Services Authority evaluates the action plans submitted by BPRs as referred to in number 8.

If necessary, the Financial Services Authority may request the BPR to adjust the action plan and resubmit the adjusted action plan to the Financial Services Authority for evaluation.

BPR Governance Implementation Reports that, based on the Financial Services Authority's assessment, are significantly incorrect and/or incomplete must be corrected by the BPR and resubmitted in accordance with the provisions referred to in Article 76 paragraph (1) and paragraph (2) of the BPR Governance POJK.
Included in the meaning of correcting the BPR Governance Implementation Report conducted by the BPR is the adjustment of the Composite Rating if there are differences between the BPR's Governance Implementation Assessment Results and the Financial Services Authority's results.
The BPR Governance Implementation Report along with its corrections as referred to in numbers 8 and 10 is submitted in full to the Financial Services Authority c/o Regional Office or the local Financial Services Authority Office.

VIII. CLOSING

The provisions in this Financial Services Authority Circular take effect on the date of determination.

Determined in Jakarta
On the date of March 10, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY,

signed

NELSON TAMPUBOLON

VIII. CLOSING...

Copy in accordance with the original
Legal Director 1
Legal Department

signed

Yuliana

APPENDIX I
FINANCIAL SERVICES AUTHORITY CIRCULAR
NUMBER 5 /SEOJK.03/2016
ON
THE IMPLEMENTATION OF GOVERNANCE FOR RURAL BANKS

INDEPENDENCE STATEMENT LETTER

PT/PD/Cooperative*) BPR ………………………………..

I, the undersigned below,

Name :
Place/Date of Birth :
Domicile Address (copy of ID Card/Driver's License attached) :
Home Phone Number :
Position :
Company Name :
Company Phone Number :

Hereby state that I :

Do not have financial, managerial, share ownership, and/or family relationships with other Independent Commissioners, Directors, and/or controlling shareholders, or other relationships that can influence my ability to act independently as regulated in the provisions on the Implementation of Governance for Rural Banks.
If it is later found that I have the relationships referred to in number 1 above, then I am willing to resign from my position as Independent Commissioner and am willing to be replaced.

Thus, my independence statement, which I have made truthfully.

(Place)...

Determined in Jakarta
On the date of March 10, 2016

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY,

signed

NELSON TAMPUBOLON

(Place), (Date) (Month) (Year)

Acknowledged : Stamp
Full Name Full Name
President Director of BPR ………

*) choose one.

Copy in accordance with the original
Legal Director 1
Legal Department

signed

Yuliana

APPENDIX II
FINANCIAL SERVICES AUTHORITY CIRCULAR
NUMBER 8 /SEOJK.03/2016
ON
THE IMPLEMENTATION OF GOVERNANCE FOR RURAL BANKS

GUIDELINES FOR ASSESSING THE IMPLEMENTATION OF GOVERNANCE FOR BPRs

General Explanation of the Guidelines for Assessing Governance Implementation

The assessment guidelines are divided into assessments of structure, process, and results of BPR Governance, covering 11 (eleven) Governance Implementation Assessment Factors, namely:

a. implementation of duties and responsibilities of the Board of Directors;

b. implementation of duties and responsibilities of the Board of Commissioners;

c. completeness and implementation of committee duties or functions;

d. handling conflicts of interest;

e. implementation of compliance functions;

f. implementation of internal audit functions;

g. implementation of external audit functions;

h. implementation of risk management, including internal control systems;

i. maximum credit granting limits;

j. BPR business plans; and

k. transparency of financial and non-financial conditions.

The assessment of Governance Implementation for BPRs is conducted to measure:

a. the adequacy of BPR Governance structure (governance structure) so that the implementation of Governance achieves results consistent with the expectations of BPR stakeholders. Included in the BPR Governance structure are the Board of Directors, Board of Commissioners, Committees, and relevant work units/units/employees at the BPR. As for the BPR Governance infrastructure, it includes policies and procedures, management information systems, and the main duties and functions of each organizational structure;

b. the effectiveness of the BPR Governance implementation process (governance process) in accordance with the adequacy of the required Governance structure and infrastructure for each BPR; and

c. the results of BPR Governance implementation.

The results of Governance Implementation assessment include among others:

a. adequacy of report transparency;

b. compliance with applicable laws and regulations;

c. improvement/decrease in compliance with regulations and resolution of problems faced by BPRs such as deviations...

deviations/misuse/fraud, violations of Maximum Credit Granting Limits (BMPK), violations of regulations related to BPR reports to the Financial Services Authority.

Governance...

Procedure for Filling Out the Governance Implementation Assessment Working Paper

Each BPR fills out the Governance Implementation Assessment Working Paper, which consists of 11 (eleven) Governance Implementation Assessment Factors, and each factor is divided based on Governance structure and infrastructure, Governance implementation process, and Governance implementation results.
The assessment of Governance implementation is conducted using the Implementation Scale, where the score range used as the Implementation Scale for each criterion/indicator is 1 to 5, with the following provisions:

a. Value 5 for a checkmark (√) in the TB (Not Good) column if the criterion/indicator is completely not implemented/fulfilled.

b. Value 4 for a checkmark (√) in the KB (Less Good) column if the criterion/indicator is mostly not implemented/fulfilled.

c. Value 3 for a checkmark (√) in the CB (Fairly Good) column if the criterion/indicator is partially implemented/fulfilled.

d. Value 2 for a checkmark (√) in the B (Good) column if the criterion/indicator is mostly implemented/fulfilled.

e. Value 1 for a checkmark (√) in the SB (Very Good) column if the criterion/indicator is fully implemented/fulfilled.

After filling out using the values referred to in number 2, the values for each criterion/indicator are summed and averaged based on Governance structure and infrastructure, Governance implementation process, and Governance implementation results for each factor.
The average value referred to in number 3 is multiplied by 50% for the weight of Governance structure and infrastructure; 40% for the weight of Governance implementation process; and 10% for the weight of Governance implementation results.
The multiplication results referred to in number 4 are summed to obtain the value of each factor.
The value of each factor referred to in number 5 is multiplied by the factor weight according to Table 1.

Table 1....

Table 1. Weight of BPR Governance Implementation Assessment Factors

No
Factor
Weight A
(%)
Weight B
(%)
Weight C
(%)
Weight D
(%)

Implementation of duties and responsibilities of Board of Directors 20

Implementation of duties and responsibilities of Board of Commissioners 15 12.5

Completeness and implementation of committee duties or functions 0 2.5

Handling conflicts of interest
10

Implementation of BPR compliance functions
10

Implementation of internal audit functions
10

Implementation of external audit functions
0
2.5

Implementation of risk management including internal control systems*) 10 7.5

Maximum credit granting limits
7.5

BPR business plans
10
7.5

Transparency of financial and non-financial conditions, and internal reporting 10 7.5

Total
100

*) calculated according to the phasing as referred to in regulations governing BPR risk management. Thus, the total denominator before phasing of risk management implementation is 90.

Notes...

Notes :

Weight A : BPRs with core capital less than
Rp50,000,000,000.00 (fifty billion rupiah) with total assets less than Rp10,000,000,000.00 (ten billion rupiah).

Weight B : BPRs with core capital less than
Rp50,000,000,000.00 (fifty billion rupiah) with total assets at least Rp10,000,000,000.00 (ten billion rupiah).

Weight C : BPRs with core capital at least
Rp50,000,000,000.00 (fifty billion rupiah) and less than Rp80,000,000,000.00 (eighty billion rupiah).

Weight D : BPRs with core capital at least
Rp80,000,000,000.00 (eighty billion rupiah).

The value of each factor after being multiplied by the weight as referred to in number 6 is summed up to obtain the Composite Value.
After obtaining the Composite Value as referred to in number 7, the BPR establishes the Composite Rating, as shown in Table 2.

Table 2. Composite Rating

Composite Value
Composite Rating

1.0 ≤ Composite Value < 1.8
Very Good

1.8 ≤ Composite Value < 2.6
Good

2.6 ≤ Composite Value < 3.4
Fairly Good

3.4 ≤ Composite Value < 4.2
Less Good

4.2 ≤ Composite Value ≤ 5.0
Not Good

If there is one factor where all criteria/indicators receive a Not Good value (5) as referred to in number 2, the highest Composite Rating that can be achieved by the BPR is Fairly Good as referred to in number 8.
In...
In the event that based on supervisory or examination results there is a factor assessed as significantly affecting BPR Governance and potentially having an impact on the condition and/or continuity of the BPR's business, the supervisor may adjust the BPR's Governance Composite Rating.
The notes column is filled with reasons, basis for application, or other notes.
For factor 8, risk management assessment is only conducted after risk management regulations are effectively implemented according to the phasing as per the Financial Services Authority Regulation regarding the implementation of risk management for BPRs.
For BPRs with total assets less than Rp10,000,000,000.00 (ten billion rupiah) but whose financial reports have been audited by a Public Accountant Office, they must still conduct assessments for factor 7 and are subject to a factor weight of 7 for factor 7 of 2.5% (two point five percent) so that the weight of factor 11 becomes 7.5% (seven point five percent) referring to Weight B in number 6 above.
For BPRs with core capital less than Rp80,000,000,000.00 (eighty billion rupiah) but forming an audit committee and/or risk monitoring committee, do not conduct assessments for factor 3, so the Governance implementation assessment refers to Weight C in number 6 above.
For BPRs with core capital less than Rp50,000,000,000.00 (fifty billion) that are not required to have an Independent Commissioner, the question for factor 2 number 5 is given the Implementation Scale Good (value 2).
For BPRs with core capital less than Rp50,000,000,000.00 (fifty billion) that are not required to conduct reviews and submit review reports to OJK, the questions for factor 6 numbers 7 and 12 are given the Implementation Scale Good (value 2).

WORKING PAPER...

WORKING PAPER FOR GOVERNANCE IMPLEMENTATION ASSESSMENT

No
Criteria/Indicator
Implementation Scale
Very Good
Notes
(1)
Good
(2)
Fairly Good
(3)
Less Good
(4)
Not Good
(5)

Implementation of Duties and Responsibilities of Board of Directors A. Governance Structure and Infrastructure (S)

BPRs with core capital at least
Rp50,000,000,000.00 (fifty billion rupiah):
Number of Board of Directors members at least 3 (three) people, and one of the Board of Directors members acts as a Director who oversees compliance functions.
BPRs with core capital less than
Rp50,000,000,000.00 (fifty billion rupiah):
Number of Board of Directors members at least 2 (two) people, and one of the Board of Directors members acts as a Director who oversees compliance functions.
All Board of Directors members reside in the same city/regency, or different cities/regencies in the same province, or cities/regencies in other provinces that border directly with the city/regency of the BPR Head Office location.
Board of Directors members do not hold concurrent positions in Banks, Non-Bank Companies, and/or other institutions (political parties or social organizations).
The majority of Board of Directors members do not have family or in-law relationships up to the second degree with other Board of Directors...

No
Criteria/Indicator
Implementation Scale
Very Good
Notes
(1)
Good
(2)
Fairly Good
(3)
Less Good
(4)
Not Good
(5)

Directors and/or Board of Commissioners members.

Directors do not use individual advisors and/or professional service providers as consultants unless they meet the requirements, namely for projects that are special in nature from the perspective of project characteristics requiring consultants; based on clear contracts covering the scope of work, responsibilities, products produced, and work duration, as well as costs; and individuals and/or professional service providers are independent parties with qualifications for the special projects in question.
All Board of Directors members have passed the Competency and Fit Test and have been appointed through the General Meeting of Shareholders (GMS), including the extension of the Board of Directors' term of office, which has been determined by the GMS before the expiration of their term.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Multiplication results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (S): 6 Multiplied by the weight of Governance Structure and Infrastructure (S): 50% B. Process...

No
Criteria/Indicator
Implementation Scale
Very Good
Notes
(1)
Good
(2)
Fairly Good
(3)
Less Good
(4)
Not Good
(5)

B. Governance Implementation Process (P)

Directors execute their duties and responsibilities independently and do not provide general powers of attorney that could result in unlimited transfer of duties and authorities.
Directors follow up on audit findings and recommendations from Executive Officials appointed as internal auditors, external auditors, and the results of supervision by the Financial Services Authority and/or the results of supervision by other authorities.
Directors provide complete, accurate, up-to-date, and timely data and information to the Board of Commissioners.
Strategic Board of Directors meeting decisions are made based on consensus, majority vote in case consensus cannot be reached, or according to applicable regulations, including dissenting opinions if there are differing opinions.
Directors do not use the BPR for personal, family, and/or third-party interests that can harm or reduce the BPR's profits, and do not take and/or receive personal benefits from the BPR, other than remuneration and other facilities established by the GMS.
Board of Directors members cultivate continuous learning in order to improve knowledge...

[End of Document]

No Criteria/Indicator | Implementation Scale | Description (1) | (2) | (3) | (4) | (5) SB | B | CB | KB | TB

knowledge of banking and recent developments related to the financial sector/others that support the implementation of duties and responsibilities at all levels or organizational tiers, including by increasing BPR employee participation in education/training to develop individual quality.

Board of Directors members are able to implement their competencies in the execution of their duties and responsibilities, including understanding of prudent banking principles.
The Board of Directors has and implements guidelines and work rules for Board of Directors members, which at least include work ethics, working hours, and meeting regulations.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (P): 8 Multiplied by the weight of the Process of Corporate Governance Implementation (P): 40%

C. Results of Corporate Governance Implementation (H)
15) The Board of Directors is accountable for the implementation of their duties to shareholders through the General Meeting of Shareholders (RUPS).
16) The Board of Directors communicates to all employees regarding the BPR's strategic policies in the human resources sector.
17) Results of Board of Directors meetings are recorded in meeting minutes and documented well, including clear disclosure of dissenting opinions that occurred in the Board of Directors meetings, and distributed to all Board of Directors members.
18) There is an increase in knowledge, expertise, and ability of Board of Directors members and all employees in managing the BPR, demonstrated among others by improved BPR performance, resolution of problems faced by the BPR, and achievement of results according to stakeholder expectations.
19) The Board of Directors submits reports on the implementation of Corporate Governance to the Financial Services Authority (OJK), the Indonesian BPR Association, and 1 (one) media office or economic and financial magazine according to regulations.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (H): 5 Multiplied by the weight of Results of Corporate Governance Implementation (H): 10%

Summation S + P + H
Total Assessment Factor 1
Multiplied by the weight of Factor 1: 20%

Execution of Duties and Responsibilities of the Board of Commissioners A. Structure and Infrastructure of Corporate Governance (S)

BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah):
Number of Board of Commissioners members at least 3 (three) people.
BPR with core capital less than Rp50,000,000,000.00 (fifty billion rupiah):
Number of Board of Commissioners members at least 2 (two) people.
The number of Board of Commissioners members does not exceed the number of Board of Directors members according to regulations.
All Board of Commissioners members have passed the Competency and Fit and Proper Test and have been appointed through RUPS. In the event that the BPR extends the term of office of Board of Commissioners members, the RUPS determining the extension of the term of office of Board of Commissioners members is conducted before the end of the term of office.
At least 1 (one) Board of Commissioners member resides in the same province or in a city/regency in another province that borders directly with the province where the BPR Head Office is located.
The BPR has an Independent Commissioner:
a. For BPR with core capital of at least Rp80,000,000,000.00 (eighty billion rupiah), at least 50% (fifty percent) of the number of Board of Commissioners members are Independent Commissioners. b. For BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah) and less than Rp80,000,000,000.00 (eighty billion rupiah), at least one Board of Commissioners member is an Independent Commissioner.
The Board of Commissioners has guidelines and work rules including regulation of work ethics, working hours, and meetings.
Board of Commissioners members do not hold concurrent positions as Board of Commissioners members in more than 2 (two) other BPRs or BPRSs, or as Directors or executive officials in BPRs, BPRSs, and/or Commercial Banks.
The majority of Board of Commissioners members do not have family or in-law relationships up to the second degree with other Board of Commissioners members or the Board of Directors.
All Independent Commissioners do not have financial, managerial, shareholding, and/or family relationships with other Board of Commissioners members, the Board of Directors, and/or controlling shareholders, or other relationships that could influence their ability to act independently.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (S): 9 Multiplied by the weight of Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
10) The Board of Commissioners has carried out supervision over the implementation of duties and responsibilities and provided advice to the Board of Directors, including providing written recommendations or advice related to the fulfillment of BPR regulations including prudent banking principles.
11) In carrying out supervisory duties, Commissioners direct, monitor, and evaluate the implementation of BPR strategic policies.
12) The Board of Commissioners is not involved in decision-making for BPR operational activities, except in the case of providing funds to related parties as regulated in regulations regarding the maximum limit for BPR credit provision and other matters established in legislation in the context of carrying out supervisory functions.
13) The Board of Commissioners ensures that the Board of Directors follows up on findings from internal audits, external audits, results of supervision by the Financial Services Authority, and/or results of supervision by other authorities, among others by requesting the Board of Directors to submit documents on the follow-up of findings.
14) The Board of Commissioners provides sufficient time to carry out duties and responsibilities optimally and holds Board of Commissioners Meetings at least 1 (one) time in 3 months attended by all Board of Commissioners members.
15) Strategic decision-making in Board of Commissioners meetings has been conducted based on consensus or majority vote in the event consensus cannot be reached, or according to applicable regulations by recording dissenting opinions if there are differences of opinion.
16) Board of Commissioners members do not utilize the BPR for personal, family, and/or other parties' interests that harm or reduce BPR profits, and do not take and/or receive personal benefits from the BPR, other than remuneration and other facilities established by RUPS.
17) Board of Commissioners members monitor reports on the implementation of duties and responsibilities of Board of Directors members who oversee the compliance function that require Board of Directors follow-up.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (P): 8 Multiplied by the weight of Process of Corporate Governance Implementation (P): 40%

C. Results of Corporate Governance Implementation (H)
18) Results of Board of Commissioners meetings are recorded in meeting minutes and documented well and clearly, including dissenting opinions that occur if there are differences of opinion, and distributed to all Board of Commissioners members.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (H): 1 Multiplied by the weight of Results of Corporate Governance Implementation (H): 10%

Summation S + P + H
Total Assessment Factor 2
Multiplied by the weight of Factor 2
BPR with Weight A, B, & C: 15%
BPR with Weight D: 12.5%

Completeness and Execution of Duties or Functions of Committees (for BPR with core capital of at least Rp80,000,000,000.00 (eighty billion rupiah)) A. Structure and Infrastructure of Corporate Governance (S)

The BPR has an Audit Committee and a Risk Monitoring Committee with committee members according to regulations.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (S): 1 Multiplied by the weight of Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
2) The Audit Committee evaluates the implementation of the internal audit function.
3) The Risk Monitoring Committee evaluates the implementation of the risk management function.
4) The Board of Commissioners ensures that formed committees carry out their duties effectively, including compliance with guidelines and work rules.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (P): 3 Multiplied by the weight of Process of Corporate Governance Implementation (P): 40%

C. Results of Corporate Governance Implementation (H)
5) The Committee provides recommendations regarding the implementation of internal audit and risk management functions to the Board of Commissioners for follow-up by the BPR Board of Directors.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (H): 1 Multiplied by the weight of Results of Corporate Governance Implementation (H): 10%

Summation S + P + H
Total Assessment Factor 3
Multiplied by the weight of Factor 3
BPR with Weight A, B, & C: 0%
BPR with Weight D: 2.5%

4 Handling of Conflicts of Interest
A. Structure and Infrastructure of Corporate Governance (S)

The BPR has policies, systems, and procedures for resolving conflicts of interest that bind every BPR official and employee, including administration, documentation, and disclosure of conflicts of interest as stated in the Meeting Minutes.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (S): 1 Multiplied by the weight of Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
2) In the event of a conflict of interest, Board of Commissioners members, Board of Directors members, and Executive Officials do not take actions that can harm or reduce BPR profits, or do not execute transactions involving such conflicts of interest.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (P): 1 Multiplied by the weight of Process of Corporate Governance Implementation (P): 40%

C. Results of Corporate Governance Implementation (H)
3) Conflicts of interest that can harm the BPR or reduce BPR profits are disclosed in every decision and have been well documented.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (H): 1 Multiplied by the weight of Results of Corporate Governance Implementation (H): 10%

Summation S + P + H
Total Assessment Factor 4
Multiplied by the weight of Factor 4: 10%

5 Implementation of Compliance Function
A. Structure and Infrastructure of Corporate Governance (S)

BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah):
Board of Directors members overseeing the compliance function meet at least the following requirements:
a. do not hold concurrent positions as the President Director; b. do not oversee the fundraising and fund disbursement sectors; and
c. are able to work independently.
BPR with core capital less than Rp50,000,000,000.00 (fifty billion rupiah):
Board of Directors members overseeing the compliance function do not handle fund disbursement.
Board of Directors members overseeing the compliance function understand Financial Services Authority regulations and other legislation related to banking.
BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah):
Implementation of the compliance function is carried out by forming an independent compliance work unit relative to operational work units or functions.
BPR with core capital less than Rp50,000,000,000.00 (fifty billion rupiah):
Implementation of the compliance function is carried out by appointing an Executive Official handling the compliance function independent of operational work units or functions.
The compliance work unit or Executive Official handling the compliance function compiles and/or updates work guidelines, systems, and compliance procedures.
The BPR has internal regulations regarding the duties, authorities, and responsibilities of the compliance work unit or Executive Official handling the compliance function.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (S): 5 Multiplied by the weight of Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
6) Board of Directors members overseeing the compliance function establish necessary steps to ensure the BPR has fulfilled all Financial Services Authority regulations and other legislation, including submission of reports to the Financial Services Authority and other authorities.
7) Board of Directors members overseeing the Compliance Function make efforts to foster a BPR compliance culture, among others through socialization and training on recent regulations.
8) Board of Directors members overseeing the compliance function monitor and maintain BPR compliance with all commitments made by the BPR to the Financial Services Authority, including taking preventive action if there are BPR Board of Directors policies and/or decisions that deviate from Financial Services Authority regulations and legislation.
9) The compliance work unit or Executive Official handling the compliance function ensures that all policies, regulations, systems, procedures, and business activities conducted by the BPR are in accordance with Financial Services Authority regulations and legislation.
10) The compliance work unit or Executive Official handling the compliance function conducts review and/or recommends updating and improving policies, regulations, systems, and procedures owned by the BPR to be in accordance with Financial Services Authority regulations and legislation.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (P): 5 Multiplied by the weight of Process of Corporate Governance Implementation (P): 40%

C. Results of Corporate Governance Implementation (H)
11) The BPR succeeds in lowering the level of violations against regulations.
12) Board of Directors members overseeing the compliance function submit reports on the implementation of duties and responsibilities periodically to the President Director with a copy to the Board of Commissioners. In the event that the Board of Directors member overseeing the compliance function is the President Director, the report is submitted to the Board of Commissioners.
13) Board of Directors members overseeing the Compliance Function submit special reports to the Financial Services Authority if there are Board of Directors policies or decisions that deviate from Financial Services Authority regulations and/or other legislation, according to Financial Services Authority regulations.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (H): 3 Multiplied by the weight of Results of Corporate Governance Implementation (H): 10%

Summation S + P + H
Total Assessment Factor 5
Multiplied by the weight of Factor 5: 10%

6 Implementation of Internal Audit Function
A. Structure and Infrastructure of Corporate Governance (S)

BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah):
The BPR has an Internal Audit Work Unit (SKAI).
BPR with core capital less than Rp50,000,000,000.00 (fifty billion rupiah):
The BPR has an Executive Official responsible for the implementation of the internal audit function.
The SKAI or Executive Official handling the compliance function has compiled and updated work guidelines as well as systems and procedures to carry out duties for internal auditors according to legislation and has been approved by the President Director and Board of Commissioners.
The SKAI or Executive Official handling the compliance function is independent of operational work units (work units related to fundraising and fund disbursement).
The SKAI or Executive Official handling the compliance function reports directly to the President Director.
The BPR has a recruitment and human resource development program for those executing the internal audit function.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (S): 5 Multiplied by the weight of Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
6) The BPR implements the internal audit function according to audit guidelines established by the BPR across all aspects and elements of activities that are directly estimated to affect the interests of the BPR and the public.
7) BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah):
The BPR assigns an external party to conduct a review at least 1 (one) time in 3 (three) years regarding compliance with internal audit function implementation standards, weaknesses in audit SOPs, and possible improvements.
8) The implementation of the internal audit function (audit activities) is carried out adequately and independently, covering audit preparation, audit program formulation, audit execution, audit result reporting, and follow-up on audit results.
9) The BPR implements periodic and continuous improvement of human resource skills related to the implementation of the internal audit function.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (P): 4 Multiplied by the weight of Process of Corporate Governance Implementation (P): 40%

C. Results of Corporate Governance Implementation (H)
10) The SKAI or Executive Official handling the compliance function has submitted internal audit implementation reports to the President Director and Board of Commissioners with a copy to Board of Directors members overseeing the compliance function.
11) The BPR has submitted reports on the implementation and main points of internal audit results and special reports (if there are deviations) to the Financial Services Authority according to Financial Services Authority regulations.
12) BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah):
The BPR submits reports on external party reviews to the Financial Services Authority according to Financial Services Authority regulations.
13) BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah):
The BPR submits reports on the appointment or dismissal of the Head of SKAI to the Financial Services Authority according to Financial Services Authority regulations. BPR with core capital less than Rp50,000,000,000.00 (fifty billion rupiah):
The BPR submits reports on the appointment or dismissal of the Executive Official responsible for the implementation of the internal audit function to the Financial Services Authority according to Financial Services Authority regulations.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (H): 4 Multiplied by the weight of Results of Corporate Governance Implementation (H): 10%

Summation S + P + H
Total Assessment Factor 6
Multiplied by the weight of Factor 6: 10%

Implementation of External Audit Function (for BPR with total assets of at least Rp10,000,000,000.00 (ten billion rupiah)) A. Structure and Infrastructure of Corporate Governance (S)

Assignment of audits to Public Accountants and Public Accounting Firms (KAP) meets aspects of legalities of work agreements, audit scope, professional standards for public accountants, and communication between the Financial Services Authority and the aforementioned KAP.

Number of answers on the Implementation Scale a x 1 b x 2 c x 3 d x 4 e x 5 Product result for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing by the number of questions (S): 1 Multiplied by the weight of Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
2) In the implementation of BPR financial statement audits, the BPR appoints Public Accountants and KAP registered with the Financial Services Authority as well as...

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

and obtain approval from the General Meeting of Shareholders (GMS) based on the proposal of the Board of Commissioners.
3) The BPR has reported the audit results of the Public Accountant Firm (KAP) and the Management Letter to the Financial Services Authority (OJK).

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (P): 2 Multiplied by the weight of the Corporate Governance Implementation Process (P): 40%

C. Results of Corporate Governance Implementation (H)
4) Audit results and the Management Letter have reflected the BPR's issues and were submitted to the BPR by the appointed KAP in a timely manner.
5) The scope of audit results is at least in accordance with the audit scope as regulated in the Financial Services Authority's provisions.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (H): 2 Multiplied by the weight of the Results of Corporate Governance Implementation (H): 10%

Summation of S + P + H
Total Assessment Factor 7
Multiplied by the weight of Factor 7:
BPR with Weight A: 0%
BPR with Weight B, C, & D: 2.5%

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

8 Implementation of Risk Management, Including Internal Control Systems A. Corporate Governance Structure and Infrastructure (S)

BPR with core capital of at least Rp80,000,000,000.00 (eighty billion rupiah):
The BPR has formed a Risk Management Committee and a Risk Management work unit; BPR with core capital of at least Rp50,000,000,000.00 (fifty billion rupiah) and less than Rp80,000,000,000.00 (eighty billion rupiah):
The BPR has formed a Risk Management work unit; BPR with core capital less than Rp50,000,000,000.00 (fifty billion rupiah):
The BPR has appointed one Executive Officer responsible for the implementation of the Risk Management function.
The BPR has Risk Management policies, Risk Management procedures, and the determination of Risk limits.
The BPR has written policies and procedures regarding the management of risks inherent in new products and activities in accordance with the provisions.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (S): 3 Multiplied by the weight of the Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
4) The Board of Directors:
a. formulates written policies and guidelines for the implementation of Risk Management, and b. evaluates and decides on transactions requiring Board of Directors' approval.
5) The Board of Commissioners:
a. approves and evaluates Risk Management policies, b. evaluates the Board of Directors' accountability regarding the implementation of Risk Management policies, and
c. evaluates and decides on Board of Directors' requests regarding transactions requiring the Board of Commissioners' approval.
6) The BPR conducts processes for the identification, measurement, monitoring, and control of Risks against all material Risk factors.
7) The BPR implements a comprehensive internal control system.
8) The BPR...

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

The BPR implements risk management for all risks mandated in accordance with the Financial Services Authority's provisions.
The BPR has adequate information systems, namely management information systems capable of providing complete, accurate, current, and integrated data and information.
The Board of Directors has developed a risk management culture at all organizational levels and improved human resource competence, including through training and/or socialization regarding risk management.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (P): 7 Multiplied by the weight of the Corporate Governance Implementation Process (P): 40%

C. Results of Corporate Governance Implementation (H)
11) The BPR prepares risk profile reports and other risk profiles (if any) reported to the Financial Services Authority in accordance with the Financial Services Authority's provisions.
12) The BPR prepares reports on new products and activities reported to the Financial Services Authority in accordance with the Financial Services Authority's provisions.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (H): 2 Multiplied by the weight of the Results of Corporate Governance Implementation (H): 10%

Summation of S + P + H
Total Assessment Factor 8
Multiplied by the weight of Factor 8:
10%

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

9 Maximum Credit Granting Limits (BMPK)
A. Corporate Governance Structure and Infrastructure (S)

The BPR has adequate written policies, systems, and procedures regarding BMPK, including credit grants to related parties, group debtors, and/or large debtors, including monitoring and problem resolution as part or a separate part of the BPR's credit policy guidelines.

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

Multiplied by the weight of the Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
2) The BPR periodically evaluates and updates BMPK policies, systems, and procedures to align with statutory regulations.
3) The process of credit granting by the BPR to related parties and/or large credit grants has met the Financial Services Authority's provisions on BMPK and considered prudential principles as well as statutory regulations.

C. Results of Corporate Governance Implementation (H)
4) Reports on credit grants by the BPR to related parties and/or credit grants that violate and/or exceed BMPK have been submitted periodically to the Financial Services Authority correctly and in a timely manner in accordance with the Financial Services Authority's provisions.
5) The BPR does not violate and/or exceed BMPK in accordance with the Financial Services Authority's provisions.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (H): 2 Multiplied by the weight of the Results of Corporate Governance Implementation (H): 10%

Summation of S + P + H
Total Assessment Factor 9
Multiplied by the weight of Factor 9:
7.5%

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

10 BPR Business Plan
A. Corporate Governance Structure and Infrastructure (S)

The BPR's business plan has been formulated by the Board of Directors and approved by the Board of Commissioners in accordance with the BPR's vision and mission.
The BPR's business plan describes long-term strategic plans and annual business plans, including plans to resolve significant BPR issues, with a scope in accordance with the Financial Services Authority's provisions.
The BPR's business plan is fully supported by shareholders to strengthen capital and infrastructure, including human resources, information technology, office networks...

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

office networks, policies, and procedures.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (S): 3 Multiplied by the weight of the Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
4) The BPR's business plan is formulated considering at least:
a. external and internal factors that can affect the BPR's business continuity; b. sound banking principles and prudential principles; and
c. the implementation of risk management.
5) The Board of Commissioners supervises the implementation of the BPR's business plan.

C. Results of Corporate Governance Implementation (H)
6) The business plan, including changes to the business plan, is submitted to the Financial Services Authority in accordance with the Financial Services Authority's provisions.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (H): 1 Multiplied by the weight of the Results of Corporate Governance Implementation (H): 10%

Summation of S + P + H
Total Assessment Factor 10
Multiplied by the weight of Factor 10:
7.5%

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

11 Transparency of Financial and Non-Financial Conditions A. Corporate Governance Structure and Infrastructure (S)

Availability of financial and non-financial reporting systems supported by adequate management information systems in accordance with provisions, including competent human resources to produce reports that are complete, accurate, current, and integrated.

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

Multiplied by the weight of the Structure and Infrastructure of Corporate Governance (S): 50%

B. Process of Corporate Governance Implementation (P)
2) The BPR prepares quarterly public financial reports with content including at least financial statements, other information, the composition of management, and the composition of shareholders in accordance with the Financial Services Authority's provisions.
3) The BPR prepares annual reports with content including at least general information, financial statements, opinions from public accountants on the BPR's annual financial statements (if any), all aspects of transparency and information, and all aspects of disclosure in accordance with the Financial Services Authority's provisions.
4) The BPR implements transparency regarding products, services, and/or the use of customer data, guided by requirements and procedures in accordance with the Financial Services Authority's provisions.
5) The BPR prepares and presents reports with procedures, types, and scopes as regulated in the Financial Services Authority's provisions.

Calculation of Implementation Scale Answers:
a x 1 b x 2 c x 3 d x 4 e x 5
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (P): 4 Multiplied by the weight of the Corporate Governance Implementation Process (P): 40%

C. Results...

No Criteria/Indicator | Implementation Scale | Notes --- | --- | --- SB (1) | B (2) | CB (3) | KB (4) | TB (5)

C. Results of Corporate Governance Implementation (H)
6) Annual reports and quarterly public financial reports are signed by at least 1 (one) member of the Board of Directors, clearly stating the name, and submitted completely and in a timely manner to the Financial Services Authority and/or published in accordance with the Financial Services Authority's provisions.
7) Reports on complaint handling and complaint resolution, and reports on complaint handling and follow-up services and complaint resolution are submitted in accordance with provisions in a timely manner.

Calculation of Implementation Scale Answers:
Product of results for each Implementation Scale Total value for all Implementation Scales Average calculation by dividing the number of questions (H): 2 Multiplied by the weight of the Results of Corporate Governance Implementation (H): 10%

Summation of S + P + H
Total Assessment Factor 11
Multiplied by the weight of Factor 11:
BPR with Weight A: 10%
BPR with Weight B, C, & D: 7.5%

Factor 1 2 3 4 5 6 7 8 9 10 11 Composite Value Total Assessment Factor Composite Predicate Notes...

Notes:
Factor 8 (Implementation of Risk Management) is calculated according to the phasing as referred to in provisions regulating BPR risk management. In cases where risk management implementation has not yet been applied, the denominator used when calculating the Total Assessment Factor for each factor is 90.

Determined in Jakarta
On the date of 10 March 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, sd
NELSON TAMPUBOLON

Conclusion
Contains the final conclusion per assessment factor of Corporate Governance Implementation, covering the weaknesses and strengths of each factor.
Copy in accordance with the original
Legal Director 1
Legal Department sd
Yuliana

APPENDIX III
FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER
NUMBER 8 /SEOJK.03/2016
ON
THE IMPLEMENTATION OF CORPORATE GOVERNANCE FOR RURAL CREDIT BANKS

OVERALL CONCLUSION OF BPR CORPORATE GOVERNANCE IMPLEMENTATION ASSESSMENT RESULTS Signature (Place), (Date) (Month) (Year) Signature
BPR Director .........
BPR Board of Commissioners
BPR .........
Determined in Jakarta
On the date of 10 March 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, sd
NELSON TAMPUBOLON
BPR Name :
Position :
Self-Assessment Results of Corporate Governance Implementation Composite Score Composite Rank Analysis Description of conclusions regarding the assessment of BPR Corporate Governance Implementation, considering the assessment factors of Corporate Governance comprehensively and structurally, covering both the structure and infrastructure of corporate governance, the process of corporate governance implementation, and the results of corporate governance implementation. In this description, it must at least explain the identification of issues in the form of weaknesses and their causes (root cause), the action plan which is a corrective action, along with its implementation target time, and the strengths of Corporate Governance implementation. Copy in accordance with the original Legal Director 1 Legal Department sd Yuliana

SEOJK on the Implementation of Corporate Governance for Rural Banks

Lineage: Superseded

Timeline