SEOJK Regarding the Business Activities of Conventional Universal Banks Based on Core Capital

To:
Conventional Universal Bank Boards of Directors

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 27/SEOJK.03/2016

REGARDING
BUSINESS ACTIVITIES OF UNIVERSAL BANKS BASED ON CORE CAPITAL

In connection with the Financial Services Authority Regulation Number 6/POJK.03/2016 concerning Business Activities and Office Networks Based on Bank Core Capital (State Gazette of the Republic of Indonesia Year 2016 Number 18, Supplement to the State Gazette of the Republic of Indonesia Number 5842) and the Financial Services Authority Regulation Number 18/POJK.03/2016 concerning the Implementation of Risk Management for Universal Banks (State Gazette of the Republic of Indonesia Year 2016 Number 53, Supplement to the State Gazette Number 5861), it is necessary to regulate the implementation regarding Business Activities of Universal Banks Based on Core Capital in a Circular Letter of the Financial Services Authority as follows:

I. GENERAL PROVISIONS

1. Business Activities that can be performed by Universal Banks are grouped based on Core Capital, hereinafter referred to as Universal Banks based on Business Activities (BUKU). The grouping of Universal Banks based on Business Activities consists of 4 (four) BUKU. The higher the Core Capital of the Bank, the higher the BUKU of the Bank and the broader the scope of Business Activities that can be performed by the Bank.

2. The implementation of Business Activities of Universal Banks is carried out by issuing products and/or carrying out specific activities to meet customer needs.

3. In issuing products and/or carrying out activities, the Bank must have sufficient capital to support the issuance of products and/or the implementation of activities, and must apply adequate risk management to mitigate the risks arising from the products and/or activities.

II. BUSINESS ACTIVITIES OF UNIVERSAL BANKS

A. Business Activities of Universal Banks

1. Business Activities of Universal Banks include the issuance of products and/or the implementation of activities to meet customer needs.

2. Bank Products are financial instruments issued by the Bank. The products mentioned are products created, issued, and/or developed by the Bank related to fund collection and distribution activities.

3. Bank Activities are services provided by the Bank to customers.

4. Business Activities of Banks, including products and/or activities, are grouped as follows:

a. Fund collection, consisting of products and/or activities such as:

1. current accounts, savings, or deposits;
2. issuance of deposit certificates;
3. received loans;
4. issuance of debt instruments including debt instruments with equity features;
5. asset securitization; and
6. other fund collection products and/or activities that are commonly performed by Banks as long as they do not conflict with applicable laws and regulations;

b. Fund distribution, consisting of products and/or activities such as:

1. loans, including syndicated loans;
2. factoring;
3. purchase of securities in the form of corporate securities, Government Securities (SBN), or Bank Indonesia Certificates (SBI);
4. placement with Bank Indonesia;
5. placement with other Banks;
6. issuance of bank guarantees; and
7. other fund distribution products and/or activities that are commonly performed by Banks as long as they do not conflict with applicable laws and regulations;

c. Trade finance, consisting of activities such as:

1. domestic transaction financing with Domestic Documentary Letters of Credit (SKBDN);
2. export-import financing using Letters of Credit (L/C);
3. export-import financing without using Letters of Credit (L/C); and
4. other trade financing services or activities that are commonly performed by Universal Banks as long as they do not conflict with applicable laws and regulations;

d. Treasury activities, consisting of products and/or activities such as:

1. buying and selling Foreign Currency Notes (Bank Notes);
2. cash foreign exchange transactions including tod, tom, and spot transactions;
3. plain vanilla derivative transactions, including forward, swap, or option transactions with features, characteristics, and underlying assets that are considered simple;
4. complex derivative transactions, including complex forward, swap, or option transactions, structured products, and credit derivatives; and
5. other foreign exchange and derivative transactions that are commonly performed by Banks as long as they do not conflict with applicable laws and regulations;

e. Agency and cooperation activities, consisting of activities such as:

1. mutual fund sales agents;
2. Government Securities (SBN) sales agents;
3. bancassurance reference business model, distribution, and integration;
4. payment points; and
5. other agency or cooperation activities that are commonly performed by Banks as long as they do not conflict with applicable laws and regulations;

f. Payment system and electronic banking activities, consisting of products and/or activities such as:

1. clearing organizers;
2. final settlement organizers for inter-bank transactions (settlement);
3. fund transfer organizers;
4. organizers of payment instruments using cards;
5. organizers of electronic money (electronic money);
6. phone banking;
7. Short Message Services (SMS) banking;
8. mobile banking;
9. internet banking; and
10. other payment system and electronic banking products and/or activities that are commonly performed by Banks as long as they do not conflict with applicable laws and regulations;

g. Other services or facilities, consisting of activities such as:

1. provision of safe deposit boxes;
2. issuance of traveller’s cheques;
3. mass employee payroll payments (payroll);
4. cash management;
5. Prima Customer Service (LNP);
6. custody;
7. trusteeship;
8. trust with management (trust); and
9. other services or facilities that are commonly performed by Banks as long as they do not conflict with applicable laws and regulations.

5. Banks conducting business activities as mentioned in number 4 in foreign currency must first obtain approval from the Financial Services Authority to conduct activities in foreign currency.

6. In addition to being able to conduct business activities as mentioned in number 4, Banks may conduct:

a. equity participation activities, consisting of investing Bank funds in the form of shares in companies operating in the financial sector, including investments in the form of convertible bonds with equity options that are mandatory or certain types of transactions that result in the Bank having or will have shares in companies operating in the financial sector; and/or

b. temporary equity participation activities in the context of credit rescue consisting of equity participation by the Bank in debtor companies to overcome credit failures (debt to equity swap) as regulated in provisions concerning Bank equity participation.

7. Definitions or general characteristics of products and/or activities as mentioned in number 4 refer to Appendix I.

B. Scope of Business Activities of Universal Banks According to BUKU

1. The scope of Business Activities that can be performed by Banks in each BUKU:

a. BUKU 1 can conduct Business Activities in Rupiah consisting of fund collection and fund distribution activities in the form of basic products and/or activities, trade finance activities, agency and cooperation activities with limited scope, payment system and electronic banking activities with limited scope, and the provision of other services or facilities. Banks can also conduct temporary equity participation activities in the context of credit rescue and activities as Foreign Exchange Dealers (PVA).

b. BUKU 2 can conduct Business Activities in Rupiah and foreign currency including fund collection, fund distribution activities with a broader scope, trade finance activities, limited treasury activities, payment system and electronic banking activities with a broader scope, agency and cooperation activities with a broader scope, and the provision of other services or facilities. Banks can also conduct equity participation activities in financial institutions in Indonesia and temporary equity participation activities in the context of credit rescue.

c. BUKU 3 can conduct all Business Activities both in Rupiah and foreign currency and can conduct equity participation activities in financial institutions in Indonesia and/or abroad limited to the regional Asia area.

d. BUKU 4 can conduct all Business Activities both in Rupiah and foreign currency and can conduct equity participation activities in financial institutions with a larger amount than BUKU 3 in Indonesia and/or throughout areas outside the country.

2. The scope of Business Activities that can be performed by Banks according to BUKU refers to Appendix II.

III. ISSUANCE OF PRODUCTS AND/OR IMPLEMENTATION OF BANK ACTIVITIES

A. General Provisions

Banks can issue products and/or carry out activities as mentioned in Section II.A.4 as follows:

1. Issuance of products and/or implementation of activities that are products and/or activities permitted in each respective BUKU;

2. Plans to issue products that have never been issued and/or plans to implement activities that have never been implemented before must be included in the Bank's business plan for the same year as the plan to issue products and/or implement activities;

3. Issuance of products and/or implementation of activities that are basic products and/or activities do not require approval from the Financial Services Authority;

4. Issuance of new products and/or implementation of activities that are not basic products and/or activities and/or have high risk and complexity must first obtain approval from the Financial Services Authority; and

5. Banks apply adequate risk management to mitigate risks arising from the issuance of products and/or implementation of activities in accordance with Financial Services Authority Regulations regarding the implementation of risk management for universal banks.

Details regarding products and/or activities as mentioned in numbers 1, 3, and 4 refer to Appendix II.

B. New Products and/or Activities

1. New products and/or activities are Bank products and/or activities that meet the following criteria:

a. have never been issued or implemented before by the Bank; or

b. are developments, combinations, or variations of products and/or activities that have been issued or implemented before by the Bank that cause changes or increases in the risk profile of products and/or activities that have been issued before. Developments that cause changes or increases in the risk profile of products and/or activities that have been issued and/or implemented before include, among others:

1. developments, combinations, or variations of products that have been issued and/or implemented before by the Bank, for example:
   a) issuance of debt instruments with features different from previous debt instruments, such as the issuance of debt instruments with conversion options to shares; or b) issuance of structured products with structures, features, characteristics, yields, terms, and/or underlying assets different from previous products; and/or

2. developments of cooperation activities that have been implemented before by the Bank, for example, bancassurance reference business model activities developed into distribution or integration business models, resulting in changes to the risk profile of those activities.

2. New products and/or activities that do not require approval from the Financial Services Authority as mentioned in Section A.3 include, among others:

a. issuance of basic products and/or implementation of basic activities, consisting of:

1. fund collection in the form of current accounts, savings, deposits, deposit certificates, and received loans;
2. fund distribution in the form of loans, purchase of securities, placement with Bank Indonesia, and placement with other Banks; and
3. trade finance, plain vanilla derivative transactions, and fund transfer activities;

b. developments of basic products and/or activities that have been issued or implemented before by the Bank;

c. activities selling products issued by the Government of the Republic of Indonesia, for example, Government Securities (SBN) sales agent activities;

d. investing funds in the context of investment, for example, purchasing fixed-income mutual funds and purchasing securities; and

e. distribution and collection of funds in the context of liquidity management, including inter-bank placements and inter-bank loan receipts.

3. New products and/or activities that must first obtain approval from the Financial Services Authority as mentioned in Section A.4 are products and/or activities that are not within the scope of basic products and/or activities and/or have high risk and complexity, including, among others:

a. fund collection in the form of issuing debt instruments, debt instruments with equity features, and asset securitization;

b. treasury activities in the form of issuing complex derivatives, structured products, or credit derivatives;

c. agency and cooperation activities in the form of bancassurance and mutual fund activities;

d. payment system activities including, among others, clearing organizers, organizers of payment instruments using cards, and organizers of electronic money (electronic money), phone banking, SMS banking, mobile banking, and internet banking; and

e. other services or facilities such as custody, trusteeship, and trust.

4. Plans to issue products and/or implement new activities included in the Bank's business plan use the format as mentioned in Appendix III letter A, which must contain at least the following information and explanations:

a. type and general description of new products and/or activities;

b. time of issuance of products and/or implementation of new activities;

c. purpose of issuance of products and/or implementation of new activities;

d. relationship between new products and/or activities and the Bank's business strategy;

e. risks regarding the issuance of products and/or implementation of new activities; and

f. risk mitigation regarding the issuance of products and/or implementation of new activities.

5. In the context of issuing products and/or implementing activities that must first obtain approval from the Financial Services Authority, Banks submit letters requesting approval for the issuance of products and/or implementation of new activities to the Financial Services Authority accompanied by supporting documents containing at least the following information and explanations:

a. general information regarding new products and/or activities including, among others, product names and/or types of activities, planned time for issuance of products and/or implementation of activities, target markets and/or customers, planned or target transaction values in the first (1) year, information regarding product schemes or features to be issued or explanations regarding activities to be implemented;

b. benefits and costs for the Bank;

c. benefits and risks for customers;

d. implementation procedures (standard operating procedures), organization, and authority to issue products and/or implement new activities;

e. plans for policies and procedures related to the implementation of the Anti-Money Laundering and Counter-Financing of Terrorism (APU and PPT) program;

f. identification, measurement, monitoring, and control of risks inherent in new products and/or activities;

g. results of legal and compliance aspect analyses of new products and/or activities;

h. documents or draft documents regarding transparency to customers related to the issuance of products and/or implementation of activities including, among others, agreements between Banks and customers or other parties, brochures, leaflets, prospectuses, and/or application forms;

i. accounting information systems, including brief explanations regarding the relationship of such accounting information systems with the Bank's overall accounting information systems, and/or administrative recording systems;

j. documents stating that the Bank has obtained approval or permits from relevant authorities, in cases where Bank products and/or activities require approval from such authorities. In cases where such documents have not yet been issued, Banks may submit photocopies of proof of requests for approval or permits to relevant authorities. Subsequently, after the relevant authorities issue approvals or permits, Banks submit them to the Financial Services Authority as complete documents; and

k. Bank's readiness and test results (if any) for new products and/or activities.

Information and explanations in supporting documents for requests for approval of plans to issue products and/or implement new activities refer to Appendix III.B.

6. Requests for approval for the issuance of products and/or implementation of new activities as mentioned in number 5 must be submitted at least 60 (sixty) days before the issuance of products and/or implementation of new activities.

7. The Financial Services Authority provides approval or rejection for the issuance of products and/or implementation of new activities at the latest 60 (sixty) days after all requirements are met and application documents are received completely by the Financial Services Authority.

8. In cases where additional documents and/or explanations are still required regarding evaluations conducted by the Financial Services Authority in providing approval, the 60 (sixty) day time limit is calculated from the time the Bank completes the documents and/or provides explanations requested by the Financial Services Authority.

9. In cases where new products and/or activities must obtain approval or permits from relevant authorities as regulated in number 5.j, the issuance of products and/or implementation of new activities can be carried out if the Bank has obtained approval or permits from the Financial Services Authority and the relevant authorities.

10. Banks must issue products and/or implement new activities at the latest 6 (six) months after approval is granted by the Financial Services Authority. If within 6 (six) months after approval is granted by the Financial Services Authority, the Bank does not issue products and/or implement new activities, the Financial Services Authority's approval becomes invalid.

11. In cases where the Financial Services Authority's approval has become invalid as mentioned in number 10 but the Bank still intends to issue products and/or implement new activities, the Bank submits a new request for approval for the issuance of products and/or implementation of new activities to the Financial Services Authority.

12. Banks submit reports on the realization of the issuance of products and/or implementation of new activities at the latest 7 (seven) working days after products are issued and/or new activities are implemented.

13. Realization of the issuance of products and/or implementation of new activities is calculated from the date the products and/or activities can be purchased or utilized by customers. Reports on the realization of the issuance of products and/or implementation of new activities must contain at least the following information and explanations:

a. types and names of new products and/or activities;

b. dates of issuance of products and/or implementation of new activities; and

c. conformity of issued products or implemented new activities with products and/or activities approved by the Financial Services Authority.

IV. TREATMENT OF UNIVERSAL BANKS EXPERIENCING A DECLINE IN CORE CAPITAL

1. Banks experiencing a decline in Core Capital so that they no longer meet the Minimum Core Capital requirements according to BUKU for 3 (three) consecutive months must submit:

a. action plans to fulfill Core Capital requirements according to BUKU; or

b. action plans to adjust Business Activities that do not match BUKU.

2. Action plans to fulfill Core Capital according to BUKU must at least outline:

a. causes of the decline in Core Capital;

b. mechanisms and stages for fulfilling Core Capital; and

c. other matters that need to be informed to the Financial Services Authority.

3. Action plans to adjust Business Activities that do not match BUKU must at least outline:

a. products and/or activities that must be discontinued, along with nominal values (outstanding) and the longest remaining term for products and/or activities that must be discontinued;

b. plans for the final completion time of products and/or activities that do not match;

c. plans for communication or notifications to customers or stakeholders regarding the discontinuation of products and/or activities; and

d. other matters that need to be informed to the Financial Services Authority.

4. Action plans as mentioned in numbers 2 and 3 must be submitted to the Financial Services Authority at the latest in the fourth month since the decline in Core Capital causing non-compliance with Core Capital requirements according to BUKU, addressed to:

a. the Department of Supervision of the relevant Bank, for Banks headquartered or branch offices of banks located outside the country located in the DKI Jakarta region; or

b. Regional Offices of the Financial Services Authority or local Financial Services Authority Offices according to the region where the Bank's headquarters are located.

5. Banks must complete action plans to fulfill Core Capital as mentioned in number 2 at the latest 1 (one) year since the action plan is approved by the Financial Services Authority.

6. Banks unable to fulfill action plans to fulfill Core Capital within 1 (one) year since the action plan is approved by the Financial Services Authority must submit action plans to adjust Business Activities that do not match BUKU as mentioned in number 3.

7. Banks must complete action plans to adjust Business Activities as mentioned in number 3 until the end of the remaining term of agreements for products and/or activities that do not match BUKU. In cases where the remaining term of agreements for products and/or activities is more than 3 (three) years, Banks must...

must complete the cessation of the aforementioned products and/or activities no later than 3 (three) years from the date the action plan is approved by the Financial Services Authority.

8. Banks that have obtained approval for the action plan to meet Core Capital requirements as submitted to the Financial Services Authority according to the BUKU:

a. may continue to carry out business activities that have been conducted even if they do not match the scope of business activities permitted in the BUKU, including conducting new transactions with customers, as long as they meet the Core Capital fulfillment stages approved by the Financial Services Authority; or

b. are not permitted to conduct new transactions with customers until the minimum Core Capital according to the BUKU is met, in the event of a violation of the Core Capital fulfillment stages approved by the Financial Services Authority.

9. Banks submitting an action plan for adjusting Business Activities are not allowed to offer, sell, and/or enter into agreements or new transactions for products and/or activities that must be ceased starting from the fourth month following the decline in Core Capital that causes non-compliance with Core Capital requirements based on the BUKU.

10. The provisions in item 1 do not apply to Banks that have experienced a decline in Core Capital for 3 (three) consecutive months, including Banks under the handling or rescue by the Deposit Insurance Corporation (LPS), in the event of obtaining approval from the Financial Services Authority to conduct certain Business Activities with considerations of financial system stability and/or encouraging national economic development.

V. SUPERVISORY FOLLOW-UP

1. The Financial Services Authority may order Banks to cease the issuance of products and/or the execution of activities in the event that, based on the Financial Services Authority's evaluation:

a. the issued products or executed activities:

1. do not match the product issuance plan and/or activities submitted to the Financial Services Authority;

2. have the potential to cause significant losses to the Bank's financial condition;

3. have the potential to significantly increase the Bank's legal or reputational risk due to complaints or lawsuits from customers; and/or

4. do not match the applicable legislation; and/or

b. the Bank does not apply adequate risk management for the issued products and/or executed activities.

The cessation may be temporary or permanent based on the Financial Services Authority's assessment of the deviations that occurred.

2. Banks ordered to cease the issuance of products and/or the execution of activities as stated in item 1:

a. must immediately cease the offer, sale, and/or agreements or new transactions for products and/or activities that must be ceased; and

b. submit an action plan to the Financial Services Authority regarding the settlement of obligations to customers related to products that have been issued and/or activities that have been executed no later than 1 (one) month since the Bank was ordered to cease the issuance of products and/or the execution of activities.

VI. OTHER PROVISIONS

1. In granting approval or rejection for specific products and/or activities, the Financial Services Authority will consider national interests related to the impact of product issuance and/or activity execution, including to support financial system stability and/or encourage national economic development, including for the issuance of products and/or execution of activities by Banks under the handling or rescue by LPS.

2. Banks are not allowed to market products and/or execute activities that have not obtained approval from the Financial Services Authority and/or are not recorded in the Bank's books or administration.

3. In the event that the issuance of products and/or execution of Bank activities is specifically regulated in Financial Services Authority regulations and/or regulations issued by other relevant authorities, such as regulations regarding structured products, government securities sales agents, mutual fund sales agents, bancassurance activities, trust with management (trust), payment system operators, payment instruments using cards, and the application of risk management in the use of information technology, the issuance of products and/or execution of activities referred to also refers to Financial Services Authority regulations and/or other relevant authority regulations that specifically regulate such matters.

4. Appendix I to Appendix III are an integral part of this Financial Services Authority Circular Letter.

VII. TRANSITIONAL PROVISIONS

1. Banks that before March 8, 2013 had conducted Business Activities that did not match the BUKU but had obtained approval from relevant authorities for the action plan to meet Core Capital or the action plan for adjusting Business Activities submitted by the Bank, must increase capital and/or adjust Business Activities:

a. no later than the end of June 2016; or

b. no later than the end of June 2018 for Banks owned by Regional Governments.

2. Banks submitting an action plan to meet Core Capital as stated in item 1:

a. may continue to carry out business activities that have been conducted even if they do not match the scope of business activities permitted in the Bank's BUKU, including conducting new transactions with customers, as long as they meet the Core Capital fulfillment stages approved by the relevant authority;

b. are not permitted to conduct new transactions with customers until the minimum Core Capital according to the BUKU is met, in the event of a violation of the Core Capital fulfillment stages approved by the relevant authority.

c. Banks submitting an action plan for adjusting Business Activities are not allowed to offer, sell, and/or enter into agreements or new transactions for products and/or activities that must be ceased.

3. For Banks that have issued products and/or executed activities that, according to this Financial Services Authority Circular Letter, must obtain approval from the Financial Services Authority, may continue to conduct such products and/or activities without having to submit an application for approval to the Financial Services Authority, as long as they are within the scope of products and/or activities permitted according to the Bank's BUKU.

4. The obligation to submit an action plan to meet Core Capital or an action plan for adjusting Business Activities does not apply to Banks that at the end of December 2012 did not meet the minimum Core Capital requirements according to the BUKU but obtained approval from the relevant authority to continue conducting certain Business Activities based on considerations of financial system stability and/or encouraging national economic development, including Banks under the handling or rescue by LPS.

VIII. CLOSING PROVISIONS

With the implementation of this Financial Services Authority Circular Letter, Bank Indonesia Circular Letter Number 15/6/DPNP dated March 8, 2013 regarding Business Activities of Commercial Banks Based on Core Capital is revoked and declared invalid.

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

Determined in Jakarta on July 14, 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

Copy matches the original
Legal Director 1
Legal Department signed
Yuliana

APPENDIX I
FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER
NUMBER 27 /SEOJK.03/2016
REGARDING
BUSINESS ACTIVITIES OF COMMERCIAL BANKS BASED ON CORE CAPITAL

DEFINITIONS/GENERAL CHARACTERISTICS OF BANK PRODUCTS AND ACTIVITIES

1. Fund Collection

a. Demand Deposits Withdrawals can be made at any time using checks, giro slips, other payment order instruments, or through book transfers.

b. Savings Deposits Withdrawals can only be made according to specific agreed terms, but cannot be withdrawn using checks, giro slips, and/or other instruments equivalent to those.

c. Time Deposits Withdrawals can only be made at specific times based on an agreement between the depositor and the Bank.

d. Certificate of Deposits (Negotiable Certificate of Deposit/NCD) Deposits in the form of certificates where the proof of deposit certificate can be transferred. The interest rate for certificates of deposit is paid in advance by the Bank at the time of issuance of the Certificate of Deposit by deducting the nominal amount that should be deposited by the customer to the issuing Bank (discount).

e. Received Loans Loans received can come from within the country (domestic) or from abroad. For long-term foreign loans, the Bank must first obtain approval from the relevant authority.

f. Issuance of Debt Instruments including debt instruments with equity features Debt instruments issued by the Bank, such as Commercial Paper (CP), Medium Term Notes (MTN), and corporate bonds. Debt instruments that have equity features include, among others, convertible bonds, which are a type of bond that can be converted into shares of the bond issuer and usually at an exchange ratio determined in advance at the time of bond issuance.

g. Asset Securitization Issuance of securities by asset-backed securities issuers based on the transfer of financial assets from the original creditor followed by payment from the proceeds of the sale of asset-backed securities to investors.

2. Fund Disbursement

a. Credit Provision of money or claims that can be equated with it, based on a loan agreement or agreement between the Bank and other parties that obligates the borrower to repay their debt after a certain period with the provision of interest. This includes credit given to other Banks.

b. Syndicated Credit Provision of credit by a group of Banks to 1 (one) borrower, where the total amount of credit is too large to be given by 1 (one) Bank alone. In a syndicated credit agreement, the Bank can act as an arranger, underwriter, agent, or participant.

c. Factoring Financing in the form of purchase and/or transfer and management of short-term receivables or claims of a company for domestic or foreign trade transactions. The company conducting factoring is called a factoring company.

d. Purchase of Securities Bank claims or fund placements in the form of debt instruments, bills of exchange, bonds, or other forms traded in the money and capital markets but do not include shares, whether issued by the Government, Bank Indonesia, corporations, or Banks.

e. Placements at Bank Indonesia Bank claims or fund placements at Bank Indonesia in the form of giro, transactions in the framework of open market operations (Fine Tune Operation), placement facilities for participant Banks of the Interbank Money Market (PUAB) at Bank Indonesia, and other types of Bank claims or placements at Bank Indonesia besides the types mentioned.

f. Placements at Other Banks Bank fund investments in other banks in the form of giro, interbank call money, time deposits, certificates of deposit, and other similar fund investments.

g. Issuance of Bank Guarantees Written commitment given by the Bank to the guarantee recipient that the Bank will pay a certain amount of money to them at a certain time if the guaranteed party cannot fulfill their obligations.

3. Trade Finance

a. Domestic Transaction Financing with Domestic Letter of Credit (SKBDN) Written commitment based on the written request of the applicant (applicant) that binds the issuing Bank to:

1. make payment to the recipient or their order, or accept and pay bills of exchange drawn by the recipient;

2. authorize another Bank to make payment to the recipient or their order, or accept and pay bills of exchange drawn by the recipient; or

3. authorize another Bank to negotiate bills of exchange drawn by the recipient upon presentation of documents, as long as the SKBDN is fulfilled.
   SKBDN is also known as domestic L/C.

b. Export-Import Financing using Letter of Credit (L/C) Payment commitment from the issuing Bank to the recipient if the recipient presents documents to the issuing Bank that match the L/C requirements.

c. Export-Import Financing without using Letter of Credit (L/C)
Provision of financing facilities by the Bank to customers for export-import without L/C, among others, by advance payment, open account, collection, or consignment.

4. Treasury Activities

a. Sale and Purchase of Foreign Bank Notes
Activities of selling or purchasing Foreign Bank Notes. Foreign Bank Notes are paper currency in foreign exchange officially issued by a country outside Indonesia recognized as legal tender of the respective country.

b. Foreign Exchange Cash Transactions (tod, tom, and spot) Tod is an agreement for the cash sale and purchase of foreign exchange with delivery or settlement of the transaction on the same day. Tom is an agreement for the cash sale and purchase of foreign exchange with delivery or settlement of the transaction 1 (one) working day after the transaction date. Spot is an agreement for the cash sale and purchase of foreign exchange with delivery or settlement of the transaction not more than 2 (two) working days.

c. Plain Vanilla Derivative Transactions
Plain vanilla derivative transactions are financial instruments whose transactions are based on the value of underlying financial assets and are generally conducted for speculation, trading, or hedging. Derivatives included as plain vanilla are forward contracts, future contracts, options, and swaps that generally have only 1 (one) underlying asset and are issued with simple or standard maturity, strike-price, and/or payment (pay-off) features.

d. Complex Derivative Transactions
Complex derivative transactions generally have more than 1 (one) underlying asset and have more complex maturity, strike price, and/or payment (pay-off) features. Structured Product is a Bank product that is a combination of 2 (two) or more financial instruments, namely non-derivative financial instruments with derivatives or derivatives with derivatives, and has at least the following characteristics:

1. the value or cash flows arising from the product are linked to 1 (one) or a combination of basic variables such as interest rates, exchange rates, commodities, and/or equities; and

2. the pattern of change in the value or cash flows of the product is irregular if compared to the pattern of change of the basic variables as stated in letter a, resulting in changes in value or cash flows that do not reflect the entire linear change pattern of the basic variables (asymmetric pay-off), which is marked by the existence of:

a) optionality, such as caps, floors, collars, step up or step down, and/or call features or put features;

b) leverage;

c) barriers, such as knock in or knock out; and/or

d) binary or digital ranges.

Credit derivatives are financial instruments based on forward, swaps, options, or a combination of all three that can be conducted through an exchange or Over the Counter (OTC). In a credit derivative transaction, there is a contract between the buyer and seller where the seller (protection seller) sells protection to the buyer (protection buyer) over reference financial assets (underlying reference asset) in the form of securities, credit given, or other claims, against events that are estimated to occur (credit events) on the reference entity, among others bankruptcy, failure to pay, or restructuring of the reference entity's obligations.

5. Agency and Cooperation Activities

a. Mutual Fund Sales Agent
Bank activities to represent securities companies as investment managers to sell mutual fund securities, carried out by Bank employees who have licenses as mutual fund sales agent representatives to sell mutual fund securities. Banks acting as mutual fund sales agents must first obtain a license as a mutual fund sales agent.

b. Government Securities (SBN) Sales Agent
Bank activities as sales agents for SBN to their customers, among others, the sale of Government Bonds (SUN).

c. Bancassurance Reference Business Model
Cooperative marketing activities for insurance products with the Bank acting only to refer or recommend an insurance product to customers. The Bank's role in marketing is limited as an intermediary in forwarding insurance product information from the Bank's partner insurance company to customers or providing access to the insurance company to offer insurance products to customers.

d. Bancassurance Distribution Business Model
Cooperative marketing activities for insurance products with the Bank acting to market insurance products by providing explanations regarding the insurance products directly to customers. Explanations from the Bank can be done face-to-face with customers and/or using communication media (telemarketing), including through letters, electronic media, and the Bank's website.

e. Bancassurance Integration Business Model
Cooperative marketing activities for insurance products with the Bank acting to market insurance products to customers by modifying and/or combining insurance products with Bank products. This cooperative marketing activity is conducted by the Bank by offering or selling bundled products to customers through face-to-face interactions and/or using communication media (telemarketing), including through letters, electronic media, and the Bank's website. Thus, the Bank's role is not only to forward and provide explanations related to insurance products to customers, but also to follow up on customer applications for bundled products, including those related to insurance products to the partner insurance company.

f. Payment Point
Bank cooperation activities with third parties for the receipt of bills through cash and non-cash deposits, among others for the receipt of electricity, water, telephone, mobile phone, and internet service bill payments.

6. Payment System and Electronic Banking Activities

a. Clearing Organizer
A Clearing Organizer is a Local Clearing Organizer other than Bank Indonesia, namely a work unit at the Bank's office that has obtained approval from Bank Indonesia to manage and conduct the Bank Indonesia National Clearing System in a specific clearing area.

b. Final Settlement Organizer for Interbank Transactions (Settlement) Other parties who have obtained approval from Bank Indonesia to conduct local clearing for the debiting or crediting of participant giro accounts at Bank Indonesia based on the results of local clearing calculations.

c. Fund Transfer Organizer
Banks that conduct fund transfer activities, namely activities starting with an order from the originator with the aim of transferring a certain amount of funds to the recipient specified in the fund transfer order until the funds are received by the recipient.

d. Card Payment Instrument Organizer (APMK)
Banks that conduct APMK activities in the form of credit cards, Automated Teller Machine (ATM) cards, and/or debit cards.

e. Electronic Money (electronic money) Organizer Organizers of payment instruments that meet the following elements:

1. issued based on the value of money deposited in advance to the issuer;

2. the value of money is stored electronically in a medium such as a server or chip;

3. used as a payment instrument to merchants who are not the issuer of the electronic money; and

4. the value of electronic money managed by the issuer is not a deposit as referred to in the law governing banking.

f. Phone Banking
Services for banking transactions via telephone by contacting the service number at the Bank.

g. Short Message Services (SMS) Banking
Banking information or transaction services that can be accessed directly via mobile phones using SMS media.

h. Mobile Banking
Services for conducting banking transactions via mobile phones.

i. Internet Banking
Services for conducting banking transactions via the internet network.

7. Other Services or Services

a. Safe Deposit Box
Service for renting boxes for storing assets or securities in the Bank's vault.

b. Issuance of Traveller’s Cheques
Issuance of foreign currency travel cheques that can be used as a payment instrument.

c. Mass Employee Salary Payment (Payroll)
Service to customers to make mass salary payments to employees or staff.

d. Cash Management
Cash management services or services provided to customers who have deposits at the Bank, where every transaction is carried out based on customer orders.
In this case, the Bank is only permitted to act as the paying party (paying agent) based on customer orders and is not permitted to act as an investment agent (investment agent) for customer funds, either conventionally and/or based on Sharia principles. Examples of permitted cash management services or services include debiting or book transfers of customer accounts for the purpose of paying bills or obligations, transferring or book transferring funds from one account to another account owned by the customer, consolidation (pooling) or distribution of funds from branch offices or corporate operational networks, and mass employee salary payment services (payroll).

e. Premium Customer Services (LNP)
Services or services related to products and/or activities with certain privileges for premium customers.

f. Custodian
Custodial services or services for collective deposit of securities (equities) such as shares or bonds and carrying out administrative tasks such as collecting sales proceeds, receiving dividends, gathering information regarding reference companies such as annual general meetings of shareholders, settling sales and purchase transactions, conducting foreign exchange transactions if necessary, and presenting reports on all activities as a custodian to clients.

g. Trustee
Services or services provided to holders of debt securities (investors) to act as investor representatives in the issuance of such debt securities.
As investor representatives, Banks as trustees participate in the bond issuance process and monitor the issuer's obligations regarding the provisions in the trusteeship agreement until the bond is paid off.

h. Trust with Management

---

h. Custody with management (trust) Services or custody management services where in this activity there are 3 (three) parties involved, namely the Settlor as the depositor party who owns assets or funds and grants authority to manage the funds to the Trustee. Trustee, in this case the Bank, as the party granted authority by the Settlor or Depositor to manage assets or funds for the benefit of the beneficiary, namely the Beneficiary. Beneficiary is the party receiving the benefit from the assets or funds. Trust activities include, among others, as a paying agent, investment agent for funds, and/or borrowing agent.

Established in Jakarta on 14 July 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

A copy consistent with the original
Legal Director 1
Legal Department signed
Yuliana

APPENDIX II
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 27 /SEOJK.03/2016 CONCERNING BUSINESS ACTIVITIES OF COMMERCIAL BANKS BASED ON CORE CAPITAL

SCOPE OF PRODUCTS AND ACTIVITIES BASED ON BOOK

1. Foreign Currency Activities a) Approval
   (as PVA)
   Approval
2. Capital Participation Prohibited Approval
3. Fund Collection
   a. Third-Party Fund Collection (Current Accounts, Savings, and Deposits) Without approval Without approval Without approval Without approval b. Issuance of Certificates of Deposit Without approval Without approval Without approval Without approval
   c. Loans received b) Without
   approval
   Without approval
   Without approval
   Without approval d. Issuance of debt instruments including debt instruments with equity features Approval e. Asset Securitization Prohibited Prohibited Approval Approval f. Products ...

f. Other fund-raising products and/or activities Approval
4. Fund Disbursement
a. Loans Without approval c)
Without approval
Without approval
Without approval b. Factoring Without approval Without approval Without approval Without approval
c. Purchase of securities (Government Securities (SBN),
Bank Indonesia Certificates (SBI), corporate securities and other banks' securities) Without approval Without approval Without approval Without approval d. Placements with Bank Indonesia Without approval Without approval Without approval Without approval e. Placements with other banks Without approval Without approval Without approval Without approval f. Issuance of ...

f. Issuance of Bank Guarantees Without approval Without approval Without approval Without approval g. Other fund-disbursement products and/or activities Approval
5. Trade Finance
a. Domestic transaction financing with Domestic Documentary Letters of Credit (SKBDN) Without approval Without approval Without approval Without approval b. Export-import financing using Letters of Credit (L/C) Prohibited Without approval Without approval Without approval
c. Export-import financing without using Letters of Credit (L/C)
Prohibited Without approval
Without approval
Without approval d. Services ...

d. Other trade finance services or facilities
Prohibited
(except those related to
SKBDN)
Without approval
Without approval
Without approval
6. Treasury Activities
a. Sale and Purchase of Foreign Bank Notes
Approval
(as PVA)
Without approval
Without approval
Without approval b. Foreign currency cash transactions (TOD, TOM, and Spot) Prohibited Without approval Without approval Without approval
c. Plain vanilla derivative transactions d)
Prohibited Without approval
Without approval
Without approval d. Complex derivative transactions e) Prohibited Prohibited Approval Approval
7. Agency and Cooperation Activities
a. Mutual Fund Sales Agent Prohibited Approval b. Government Securities (SBN) Sales Agent Without approval Without approval Without approval Without approval
c. Bancassurance ...

c. Bancassurance reference business model
Approval d. Bancassurance distribution business model Prohibited Approval e. Bancassurance integrated business model Prohibited Prohibited Approval Approval f. Payment point Approval g. Other agency or cooperation activities Approval
8. Payment System and Electronic Banking Activities
a. Clearing Organizer Approval b. Inter-bank Transaction Settlement Organizer (settlement) Approval
c. Fund Transfer Organizer Without
approval
Without approval
Without approval
Without approval d. Organizer ...

d. Organizer of payment instruments using cards, other than credit cards Approval e. Organizer of payment instruments using credit cards Prohibited Approval f. Organizer of electronic money (electronic money) Approval g. Phone banking Approval h. Short Message Services (SMS) banking Approval
i. Mobile banking Approval f) Approval
j. Internet banking Prohibited g) Approval k. Other payment system and electronic banking products and/or activities Approval
9. Services ...

9. Other Services or Facilities
   a. Safe deposit box Without approval
   Without approval
   Without approval
   Without approval b. Traveller’s cheque Prohibited Without approval Without approval Without approval
   c. Payroll Without
   approval
   Without approval
   Without approval
   Without approval d. Cash management Prohibited h) Approval e. Prime Customer Services Approval f. Custodian Prohibited Prohibited Approval Approval g. Trustee Prohibited Prohibited Approval Approval h. Custody with management (trust) Prohibited Prohibited Approval Approval
   i. Other services or facilities Approval

Notes:
a) Banks conducting foreign currency business activities must first obtain approval from the Financial Services Authority to conduct foreign currency activities. b) Long-term foreign loans must obtain permits from the relevant authorities. c) Specifically for syndicated loans, Banks may only act as participants. d) Bank as issuer. e) Bank as issuer/protection seller. f) For BOOK 1, mobile banking does not use an internet network. g) Unless conducted through cooperation with other banks or used for Officeless Financial Services in the context of Inclusive Finance (Laku Pandai) as regulated in provisions governing Laku Pandai. h) Except for cash management consisting of mass payroll payment services or facilities.

Established in Jakarta on 14 July 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

A copy consistent with the original
Legal Director 1
Legal Department signed
Yuliana

APPENDIX III
APPENDIX III
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 27 /SEOJK.03/2016 CONCERNING BUSINESS ACTIVITIES OF COMMERCIAL BANKS BASED ON CORE CAPITAL

A. APPLICATION FOR APPROVAL OF ISSUANCE OF PRODUCTS AND/OR IMPLEMENTATION OF NEW ACTIVITIES BANK :
YEAR :
No.
Type of Product and/or
New Activity a)
Planned Time for Issuance of Product and/or Implementation of New Activity Purpose of Issuance of Product and/or Implementation of New Activity Linkage of Product and/or New Activity to Bank Strategy b) General Description of Product and/or New Activity b) Risks that May Arise from Issuance of Product and/or New Activity b) Risk Mitigation Plan For Bank For Customers Notes:
a) for example credit cards, electronic money, derivatives, custodian, bancassurance or mutual funds. b) more detailed explanations may be included in a separate sheet. B. INFORMATION...

B. INFORMATION AND EXPLANATIONS OF PLANNED ISSUANCE OF PRODUCTS OR IMPLEMENTATION OF NEW ACTIVITIES*) BANK :
YEAR :
a. General Information

1. Name of New Product and/or Activity:
2. Type of New Product and/or Activity a)
   :
3. Launch time of New Product and/or Activity:
4. Target Market:
5. Planned/target Transaction Value in the first 1 (one) year:
6. Information regarding product schemes or features or explanations regarding activities:
   b. Benefits and costs for the Bank:
   c. Benefits and risks for Customers:
   d. Implementation procedures (Standard Operating Procedures) of the organization and authority to issue products and/or implement new activities:
   e. Plans for policies and procedures related to the implementation of Anti-Money Laundering and Counter-Terrorism Financing (APU and PPT) programs:
   f. Identification, measurement, monitoring, and control of risks inherent in new products and/or activities:
   g. Results of legal and compliance aspect analysis of new products and/or activities:
   h. Accounting Information Systems (AIS) including accounting records and explanations regarding the linkage of said AIS to the Bank's overall AIS and/or accounting record systems:
   i. Bank's readiness and test results (if any) for new products and/or activities:
   j. Supporting documents (attached) b)
   1....
   2....
   3....
   Etc.

Notes:
a) the number of pages is not binding, Banks may elaborate in more detail according to product or activity characteristics. b) supporting documents include documents for transparency to customers, agreements, approvals from relevant authorities or photocopies of proof of approval applications or permits to relevant authorities.

Established in Jakarta on 14 July 2016
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed
NELSON TAMPUBOLON

A copy consistent with the original
Legal Director 1
Legal Department signed
Yuliana