Transparency of Prime Lending Rate Information

To:
Directors of General Banks

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 34/SEOJK.03/2017 CONCERNING TRANSPARENCY OF PRIME LENDING RATE INFORMATION

In light of the implementation of the Financial Services Authority Regulation Number 6/POJK.03/2015 concerning Transparency and Publication of Bank Reports (State Gazette of the Republic of Indonesia Year 2015 Number 74, Supplement to the State Gazette of the Republic of Indonesia Number 5687) as amended by the Financial Services Authority Regulation Number 32/POJK.03/2016 concerning Amendments to the Financial Services Authority Regulation Number 6/POJK.03/2015 concerning Transparency and Publication of Bank Reports (State Gazette of the Republic of Indonesia Year 2016 Number 170, Supplement to the State Gazette of the Republic of Indonesia Number 5917) and relevant statutory regulations regarding transparency of bank product information and the use of customer personal data, as well as the transfer of regulatory and supervisory functions, duties, and authority for financial services in the banking sector from Bank Indonesia to the Financial Services Authority, it is necessary to regulate the implementation regarding transparency of prime lending rate information in a Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

1. The selection of Bank products by customers is generally based on considerations regarding the benefits, costs, and risks of the products offered by the Bank. This is particularly relevant for Bank products in the form of credit, given that credit is one of the main banking products utilized by the general public. Therefore, transparency of information regarding the Prime Lending Rate (SBDK), hereinafter abbreviated as SBDK, is necessary to provide clarity to customers and facilitate their assessment of the benefits and costs of the credit offered by the Bank.

2. The application of transparency regarding SBDK is also one of the efforts to improve governance and encourage healthy competition in the banking industry, including through the creation of better market discipline.

3. SBDK is necessary as an indicator of the credit interest rate amount to be charged to customers applying for credit to the Bank. Therefore, SBDK must cover all credit segments offered by the Bank to customers, namely corporate credit segments, retail credit, micro credit, and consumer credit (Home Ownership Credit/KPR and non-KPR).

II. PRIME LENDING RATE

1. SBDK is the lowest interest rate reflecting the fairness of costs incurred by the Bank, including expected profits to be obtained. Subsequently, SBDK is used as the basis for Banks in setting the credit interest rates to be charged to customers.

2. SBDK is calculated annually in percentage (%) form, based on 3 (three) components, namely:
   a. Credit Funding Cost (HPDK) arising from fund-gathering activities; b. overhead costs incurred by the Bank in the form of non-interest operational expenses incurred for fund-gathering and credit disbursement activities, including taxes payable; and
   c. profit margin set by the Bank in credit disbursement activities.

3. The calculation of SBDK as referred to in paragraph 2 applies to the following types of credit:
   a. corporate credit; b. retail credit;
   c. micro credit; and
   d. consumer credit (KPR and non-KPR).

4. The classification of corporate credit, retail credit, and consumer credit (KPR and non-KPR) is based on criteria established by the Bank, while the classification of micro credit refers to the definition of micro enterprises as referred to in the Law concerning micro, small, and medium enterprises.

5. The calculation of SBDK in this Financial Services Authority Circular applies only to credit granted in Rupiah currency.

6. The calculation of SBDK as referred to in paragraph 2 does not include the risk premium estimation component, which is the Bank's assessment of the credit repayment prospects by prospective debtors, whether individual debtors or groups of debtors, which among other things considers financial conditions, credit tenure, and business prospects.

7. The credit interest rate as referred to in paragraph 1 is the sum of SBDK and the estimated risk premium.

III. REPORTING AND PUBLICATION OF SBDK

A. SBDK Reporting

1. SBDK reports are submitted to the Financial Services Authority monthly for end-of-month positions.

2. SBDK reports contain:
   a. details of the calculation of each SBDK component as referred to in item II.2; b. types of credit as referred to in item II.3;
   c. risk premium estimation components as referred to in item II.6; and
   d. credit interest rates as referred to in item II.7.

3. SBDK reporting is submitted online through the Financial Services Authority reporting system. In the event that submission through the Financial Services Authority reporting system cannot yet be performed, Banks submit reports online by referring to relevant statutory regulations regarding periodic reports of general banks.

B. SBDK Report Publication

1. SBDK report publication is conducted through:
   a. announcement boards in every Bank branch; b. the Bank's website homepage; and
   c. daily printed newspapers in the Indonesian language with wide circulation.

2. SBDK publication as referred to in item 1.a and item 1.b is conducted at all times, while SBDK publication as referred to in item 1.c is conducted no later than 7 (seven) working days after the end of March, June, September, and December months for the end-of-month SBDK positions for those respective months.

3. SBDK published by the Banks as referred to in item 1.a and item 1.b is the SBDK applicable at the time of publication.

4. In publishing SBDK, Banks must include the following statements:
   a. “Prime Lending Rate (SBDK) is used as the basis for setting credit interest rates to be charged by the Bank to customers. SBDK does not yet take into account the risk premium estimation component, the magnitude of which depends on the Bank's assessment of risk for each debtor or group of debtors. Thus, the credit interest rate charged to debtors is not necessarily equal to SBDK”; and b. “In non-KPR consumer credit, fund disbursement through credit cards and Unsecured Credit (KTA) is not included.”

5. In addition to including the statements as referred to in paragraph 4, for publications conducted through newspapers as referred to in item 1.c, Banks must include the following statement:
   “Information on applicable SBDK at all times can be viewed in publications at every Bank branch and/or Bank website.”

6. SBDK is published to the public in the form of the final number resulting from the calculation of SBDK components as referred to in item A.2.a and item A.2.b, with a publication format based on the Appendix, which is an integral part of this Financial Services Authority Circular.

Banks must provide information regarding SBDK and credit interest rates in the credit approval notification letter (offering letter) or other documents to prospective debtors before the signing of the credit agreement.

IV. CLOSING

At the time this Financial Services Authority Circular takes effect, Bank Indonesia Circular Letter Number 15/1/DPNP concerning Transparency of Prime Lending Rate Information is revoked and declared invalid.

Provisions in this Financial Services Authority Circular take effect on the date of issuance.

Established in Jakarta on 7 July 2017
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, sd
NELSON TAMPUBOLON

APPENDIX
FINANCIAL SERVICES AUTHORITY CIRCULAR LETTER
NUMBER 34/SEOJK.03/2017
CONCERNING
TRANSPARENCY OF PRIME LENDING RATE INFORMATION

This copy is identical to the original
Legal Director 1
Legal Department sd
Yuliana

FORMAT FOR PUBLICATION OF PRIME LENDING RATE (PRIME LENDING RATE) IN NEWSPAPERS, WEBSITES, AND BANK BRANCHES

Rupiah Prime Lending Rate (Prime Lending Rate) Bank XYZ Period...
(effective % per year)

Rupiah Prime Lending Rate (Prime Lending Rate) Based on Credit Segments

Credit
Corporate
Retail
Micro
Consumer Credit
KPR Non-KPR

Prime Lending Rate (SBDK)

Notes:
a. Prime Lending Rate (SBDK) is used as the basis for setting credit interest rates to be charged by the Bank to customers. SBDK does not yet take into account the risk premium estimation component, the magnitude of which depends on the Bank's assessment of risk for each debtor or group of debtors. Thus, the credit interest rate charged to debtors is not necessarily equal to SBDK (this statement is included for publications conducted through announcement boards in every Bank branch, Bank website homepage, and newspapers). b. In non-KPR consumer credit, fund disbursement through credit cards and Unsecured Credit (KTA) is not included (this statement is included for publications conducted through announcement boards in every Bank branch, Bank website homepage, and newspapers).
c. Information on applicable SBDK at all times can be viewed in publications at every Bank branch and/or Bank website (this statement is included only for publications conducted through newspapers).

Established in Jakarta on 7 July 2017
EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, sd
NELSON TAMPUBOLON