Undang-Undang Republik Indonesia Nomor 21 Tahun 2008 tentang Perbankan Syariah (Law No. 21 of 2008 concerning Sharia Banking)

English translation of the Indonesian text from ojk.go.id (the Indonesian text is the official one). Retrieved 2026-10-26.

LAW OF THE REPUBLIC OF INDONESIA NUMBER 21 YEAR 2008 CONCERNING SHARIA BANKING BY THE GRACE OF GOD THE ALMIGHTY PRESIDENT OF THE REPUBLIC OF INDONESIA, Considering: a. that in line with the objectives of Indonesia's national development to achieve the creation of a just and prosperous society based on economic democracy, an economic system is developed that is based on the values of justice, togetherness, equality, and benefit in accordance with sharia principles;

b. that the need of the Indonesian people for sharia banking services is increasing;

c. that sharia banking has special characteristics compared to conventional banking;

d. that the regulation regarding sharia banking in Law Number 7 Year 1992 concerning Banking as amended by Law Number 10 Year 1998 is not yet specific so it needs to be regulated specifically in a separate law;

e. that based on the considerations as referred to in letter a, letter b, letter c, and letter d it is necessary to establish a Law concerning Sharia Banking;

Recalling: 1. Article 20 and Article 33 of the Constitution of the Republic of Indonesia Year 1945;

2. Law Number 7 Year 1992 concerning Banking (State Gazette of the Republic of Indonesia Year 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472)

as amended by Law Number 10 Year 1998 (State Gazette of the Republic of Indonesia Year 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790);

3. Law ...

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3. Law Number 23 Year 1999 concerning Bank Indonesia (State Gazette of the Republic of Indonesia Year 1999 Number 66, Supplement to the State Gazette of the Republic of Indonesia Number 3843) as amended by Law Number 3 Year 2004 (State Gazette of the Republic of Indonesia Year 2004 Number 7, Supplement to the State Gazette of the Republic of Indonesia Number 4357);

4. Law Number 24 Year 2004 concerning the Deposit Insurance Agency (State Gazette of the Republic of Indonesia Year 2004 Number 96, Supplement to the State Gazette of the Republic of Indonesia Number 4420);

5. Law Number 40 Year 2007 concerning Limited Liability Companies (State Gazette of the Republic of Indonesia Year 2007 Number 106, Supplement to the State Gazette of the Republic of Indonesia Number 4756);

With the Joint Approval of THE HOUSE OF REPRESENTATIVES OF THE REPUBLIC OF INDONESIA and THE PRESIDENT OF THE REPUBLIC OF INDONESIA DECIDES:

To enact: LAW CONCERNING SHARIA BANKING.

CHAPTER I GENERAL PROVISIONS

Article 1 In this Law what is meant by:

1. Sharia Banking is everything relating to Sharia Banks and Sharia Business Units, covering institutional aspects, business activities, as well as the methods and processes in carrying out their business activities.

2. Bank is a business entity that collects funds from the public in the form of Deposits and distributes them to the public in the form of credit and/or other forms in order to improve the standard of living of the people.

3. Bank ...

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3. Bank Indonesia is the Central Bank of the Republic of Indonesia as referred to in the Constitution of the Republic of Indonesia Year 1945.

4. Conventional Bank is a Bank that carries out its business activities conventionally and based on its type consists of Conventional Commercial Banks and Rural Credit Banks.

5. Conventional Commercial Bank is a Conventional Bank that in its activities provides services in payment traffic.

6. Rural Credit Bank is a Conventional Bank that in its activities does not provide services in payment traffic.

7. Sharia Bank is a Bank that carries out its business activities based on Sharia Principles and according to its type consists of Sharia Commercial Banks and Sharia Rural Financing Banks.

8. Sharia Commercial Bank is a Sharia Bank that in its activities provides services in payment traffic.

9. Sharia Rural Financing Bank is a Sharia Bank that in its activities does not provide services in payment traffic.

10. Sharia Business Unit, hereinafter referred to as UUS, is a work unit of the head office of a Conventional Commercial Bank that functions as the parent office of an office or unit that carries out business activities based on Sharia Principles, or a work unit at a branch office of a Bank domiciled abroad that carries out business activities conventionally that functions as the parent office of a sharia sub-branch office and/or sharia unit.

11. Branch Office is a branch office of a Sharia Bank that is responsible to the head office of the Bank concerned with a clear business address in accordance with the location of the branch office conducting its business.

12. Sharia Principles are principles of Islamic law in banking activities based on fatwas issued by institutions that have authority in determining fatwas in the field of sharia.

13. Akad ...

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13. Akad is a written agreement between a Sharia Bank or UUS and another party that contains rights and obligations for each party in accordance with Sharia Principles.

14. Bank Secrecy is everything related to information regarding Depositor Customers and their Deposits as well as Investor Customers and their Investments.

15. Affiliated Party is:

a. commissioners, directors or their proxies, officials, and employees of a Sharia Bank or Conventional Commercial Bank that has a UUS;

b. parties that provide services to a Sharia Bank or UUS, among others the Sharia Supervisory Board, public accountants, appraisers, and legal consultants; and/or

c. parties that in the assessment of Bank Indonesia participate in influencing the management of a Sharia Bank or UUS, either directly or indirectly, among others bank controllers, shareholders and their families, families of commissioners, and families of directors.

16. Customer is a party that uses the services of a Sharia Bank and/or UUS.

17. Depositor Customer is a Customer who places their funds in a Sharia Bank and/or UUS in the form of Deposits based on an Akad between the Sharia Bank or UUS and the Customer concerned.

18. Investor Customer is a Customer who places their funds in a Sharia Bank and/or UUS in the form of Investment based on an Agreement between the Sharia Bank or UUS and the Customer concerned.

19. Facility Recipient Customer is a Customer who obtains funding facilities or the equivalent thereof, based on Sharia Principles.

20. Deposits are funds entrusted by a Customer to a Sharia Bank and/or UUS based on a wadi'ah Agreement or another Agreement that does not conflict with Sharia Principles in the form of Current Accounts, Savings, or other forms equivalent thereto.

21. Tabungan ...

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21. Savings are Deposits based on a wadi'ah Agreement or fund investments based on a mudharabah Agreement or another Agreement that does not conflict with Sharia Principles, the withdrawal of which can only be made according to certain agreed terms and conditions, but cannot be withdrawn by check, giro slip, and/or other equivalent instruments.

22. Time Deposits are fund investments based on a mudharabah Agreement or another Agreement that does not conflict with Sharia Principles, the withdrawal of which can only be made at a certain time based on an Agreement between the Depositing Customer and the Sharia Bank and/or UUS.

23. Current Accounts are Deposits based on a wadi'ah Agreement or another Agreement that does not conflict with Sharia Principles, the withdrawal of which can be made at any time by using a check, giro slip, other means of payment order, or by a transfer order.

24. Investment is funds entrusted by a Customer to a Sharia Bank and/or UUS based on a mudharabah Agreement or another Agreement that does not conflict with Sharia Principles in the form of Time Deposits, Savings, or other forms equivalent thereto.

25. Financing is the provision of funds or receivables equivalent thereto in the form of:

a. profit-sharing transactions in the form of mudharabah and musyarakah;

b. lease transactions in the form of ijarah or hire purchase in the form of ijarah muntahiya bittamlik;

c. sale and purchase transactions in the form of murabahah receivables, salam, and istishna’;

d. lending and borrowing transactions in the form of qardh receivables; and e. service lease transactions in the form of ijarah for multi-service transactions based on the approval or agreement between the Sharia Bank and/or UUS and other parties that obligates the financed and/or fund-facilitated party to return the funds after a certain period of time in the form of ujrah compensation, without compensation, or profit sharing.

26. Agunan . . .

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26. Collateral is additional security, in the form of movable or immovable property, submitted by the owner of the Collateral to the Sharia Bank and/or UUS, to guarantee the settlement of the obligations of the Facility Recipient Customer.

27. Custody is the storage of assets based on an Agreement between a Sharia Commercial Bank or UUS and the depositor, with the provision that the relevant Sharia Commercial Bank or UUS does not have ownership rights over the assets.

28. Trustee is the Sharia Commercial Bank that represents the interests of the holders of securities based on a wakalah Agreement between the relevant Sharia Commercial Bank and the holders of such securities.

29. Merger is a legal act carried out by one or more Banks to merge with another existing Bank, resulting in the assets and liabilities of the merging Bank legally transferring to the receiving Bank, and subsequently the legal entity status of the merging Bank legally ceases to exist.

30. Consolidation is a legal act carried out by two or more Banks to consolidate by establishing a new Bank that legally obtains the assets and liabilities of the consolidating Banks, and the legal entity status of the consolidating Banks legally ceases to exist.

31. Acquisition is a legal act carried out by a legal entity or individual to take over Bank shares resulting in the transfer of control over the Bank.

32. Separation is the separation of a business from one Bank into two or more business entities, in accordance with the provisions of laws and regulations.

BAB II ASAS, TUJUAN, DAN FUNGSI

Article 2 Sharia Banking in conducting its business activities is based on Sharia Principles, economic democracy, and the precautionary principle. Pasal 3 . . .

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Article 3 Sharia Banking aims to support the implementation of national development in order to improve justice, togetherness, and equitable distribution of people's welfare.

Pasal 4

(1) Sharia Banks and UUS are required to carry out the function of collecting and distributing public funds.

(2) Sharia Banks and UUS may carry out social functions in the form of a baitul mal institution, namely receiving funds originating from zakat, infak, sedekah, grants, or other social funds and distributing them to zakat management organizations.

(3) Sharia Banks and UUS may collect social funds originating from cash waqf and distribute them to waqf managers (nazhir) in accordance with the wishes of the waqf giver (wakif).

(4) The implementation of social functions as referred to in paragraph

(2) and paragraph (3) in accordance with the provisions of laws and regulations.

CHAPTER III LICENSING, FORM OF LEGAL ENTITY, ARTICLES OF ASSOCIATION, AND OWNERSHIP Part One Licensing

Pasal 5

(1) Every party that will conduct business activities of a Sharia Bank or UUS must first obtain a business license as a Sharia Bank or UUS from Bank Indonesia.

(2) To obtain a Sharia Bank business license, it must meet requirements at least regarding:

a. organizational structure and management;

b. permodalan;

c. kepemilikan;

d. expertise in the field of Sharia Banking; and e. business feasibility.

(3) Persyaratan .. .

.

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(3) Requirements for obtaining a UUS business license are further regulated by Bank Indonesia Regulation.

(4) A Sharia Bank that has obtained a business license as referred to in paragraph (1) must clearly include the word “syariah” in the writing of its bank name.

(5) A Conventional Commercial Bank that has obtained a UUS business license as referred to in paragraph (1) must clearly include the phrase "Sharia Business Unit" after the Bank's name at the relevant UUS office.

(6) A Conventional Bank may only change its business activities based on Sharia Principles with the approval of Bank Indonesia.

(7) A Sharia Commercial Bank cannot be converted into a Conventional Commercial Bank.

(8) A Sharia People's Financing Bank cannot be converted into a People's Credit Bank.

(9) A Conventional Commercial Bank that will conduct business activities based on Sharia Principles must open a UUS at the Bank's head office with the approval of Bank Indonesia.

Pasal 6

(1) The opening of a Sharia Bank Branch Office and UUS may only be carried out with the approval of Bank Indonesia.

(2) The opening of a Branch Office, representative office, and other types of offices abroad by a Sharia Commercial Bank and a Conventional Commercial Bank that has a UUS may only be carried out with the approval of Bank Indonesia.

(3) The opening of an office below a Branch Office must be reported and may only be carried out after obtaining a confirmation letter from Bank Indonesia.

(4) A Sharia People's Financing Bank is not permitted to open a Branch Office, representative office, and other types of offices abroad.

Part Two Legal Entity Form

Article 7 The legal entity form of a Sharia Bank is a limited liability company.

Bagian ...

• 9 - Part Three Articles of Association

Article 8 In the articles of association of a Sharia Bank, in addition to fulfilling the requirements for articles of association as stipulated in the provisions of laws and regulations, it also contains provisions:

a. the appointment of members of the board of directors and board of commissioners must obtain the approval of Bank Indonesia;

b. The General Meeting of Shareholders of a Sharia Bank must determine management duties, remuneration of the board of commissioners and board of directors, annual accountability reports, appointment and fees for public accountant services, use of profits, and other matters stipulated in Bank Indonesia Regulations.

Part Four Establishment and Ownership of Sharia Banks

Pasal 9

(1) A Sharia Commercial Bank may only be established and/or owned by:

a. Indonesian citizens and/or Indonesian legal entities;

b. Indonesian citizens and/or Indonesian legal entities with foreign citizens and/or foreign legal entities in a partnership; or

c. pemerintah daerah.

(2) A Sharia People's Financing Bank may only be established and/or owned by:

a. Indonesian citizens and/or Indonesian legal entities all of whose owners are Indonesian citizens;

b. regional government; or

c. two or more parties as referred to in letter a and letter b.

(3) The maximum ownership of a Sharia Commercial Bank by foreign citizens and/or foreign legal entities is stipulated in Bank Indonesia Regulations.

Pasal 10 ...

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Article 10 Further provisions regarding licensing, legal entity form, articles of association, as well as the establishment and ownership of Sharia Banks as referred to in Article 5 through

Article 9 shall be regulated by a Bank Indonesia Regulation.

Article 11 The minimum amount of paid-up capital for establishing a Sharia Bank shall be stipulated in a Bank Indonesia Regulation.

Article 12 Shares of a Sharia Bank may only be issued in the form of registered shares.

Article 13 A Sharia Commercial Bank may conduct a public offering of securities through the capital market as long as it does not conflict with Sharia Principles and the provisions of laws and regulations in the capital market sector.

Pasal 14

(1) Indonesian citizens, foreign citizens, Indonesian legal entities, or foreign legal entities may own or purchase shares of a Sharia Commercial Bank directly or through the stock exchange.

(2) The provisions as referred to in paragraph (1)

shall be implemented in accordance with the provisions of laws and regulations.

Article 15 Changes in ownership of a Sharia Bank must comply with the provisions as referred to in Article 9 through Article 14.

Pasal 16

(1) A UUS may become a separate Sharia Commercial Bank after obtaining a license from Bank Indonesia.

(2) The license for the conversion of a UUS into a Sharia Commercial Bank as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

Pasal 17 . . .

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Pasal 17

(1) Merger, Consolidation, and Acquisition of Sharia Banks must first obtain a license from Bank Indonesia.

(2) In the event of a Merger or Consolidation of a Sharia Bank with another Bank, the Bank resulting from such Merger or Consolidation must become a Sharia Bank.

(3) The provisions regarding Merger, Consolidation, and Acquisition of Sharia Banks shall be carried out in accordance with the provisions of laws and regulations.

CHAPTER IV TYPES AND BUSINESS ACTIVITIES, FEASIBILITY OF FUND DISBURSEMENT, AND PROHIBITIONS FOR SHARIA BANKS AND UUS Part One Types and Business Activities

Article 18 Sharia Banks consist of Sharia Commercial Banks and Sharia People's Financing Banks.

Pasal 19

(1) The business activities of a Sharia Commercial Bank include:

a. collecting funds in the form of Savings in the form of Demand Deposits, Savings, or other equivalent forms based on a wadi'ah contract or other contracts that do not conflict with Sharia Principles;

b. collecting funds in the form of Investments in the form of Time Deposits, Savings, or other equivalent forms based on a mudharabah contract or other contracts that do not conflict with Sharia Principles;

c. channeling profit-sharing Financing based on a mudharabah contract, musyarakah contract, or other contracts that do not conflict with Sharia Principles;

d. channeling Financing based on a murabahah contract, salam contract, istishna' contract, or other contracts that do not conflict with Sharia Principles;

e. menyalurkan .. .

• 12 e. channeling Financing based on a qardh contract or other contracts that do not conflict with Sharia Principles;

f. channeling Financing for the lease of movable or immovable goods to Customers based on an ijarah contract and/or lease purchase in the form of ijarah muntahiya bittamlik or other contracts that do not conflict with Sharia Principles;

g. undertake debt takeover based on a hawalah contract or other contract that does not conflict with Sharia Principles;

h. conduct debit card and/or financing card business based on Sharia Principles;

i. buy, sell, or guarantee at its own risk third-party securities issued on the basis of real transactions based on Sharia Principles, among others, such as ijarah, musyarakah, mudharabah, murabahah, kafalah, or hawalah contracts;

j. buy securities based on Sharia Principles issued by the government and/or Bank Indonesia;

k. receive payment from claims on securities and perform calculations with third parties or among third parties based on Sharia Principles;

l. conduct Custody for the benefit of other parties based on a contract based on Sharia Principles;

m. provide a place to store goods and securities based on Sharia Principles;

n. transfer funds, both for its own benefit and for the benefit of Customers based on Sharia Principles;

o. perform the function as Trustee based on a wakalah contract;

p. provide letter of credit or bank guarantee facilities based on Sharia Principles; and q. conduct other activities commonly conducted in the banking sector and in the social sector as long as they do not conflict with Sharia Principles and are in accordance with the provisions of laws and regulations.

(2) Activities ...

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(2) The business activities of UUS include:

a. collect funds in the form of Savings in the form of Demand Deposits, Savings, or other forms equivalent thereto based on a wadi'ah contract or other contract that does not conflict with Sharia Principles;

b. collect funds in the form of Investment in the form of Deposits, Savings, or other forms equivalent thereto based on a mudharabah contract or other contract that does not conflict with Sharia Principles;

c. channel profit-sharing Financing based on a mudharabah contract, musyarakah contract, or other contract that does not conflict with Sharia Principles;

d. channel Financing based on a murabahah contract, salam contract, istishna' contract, or other contract that does not conflict with Sharia Principles;

e. channel Financing based on a qardh contract or other contract that does not conflict with Sharia Principles;

f. channel Financing for the lease of movable or immovable goods to Customers based on an ijarah contract and/or lease purchase in the form of ijarah muntahiya bittamlik or other contract that does not conflict with Sharia Principles;

g. undertake debt takeover based on a hawalah contract or other contract that does not conflict with Sharia Principles;

h. conduct debit card and/or financing card business based on Sharia Principles;

i. buy and sell third-party securities issued on the basis of real transactions based on Sharia Principles, among others, such as ijarah, musyarakah, mudharabah, murabahah, kafalah, or hawalah contracts;

j. buy securities based on Sharia Principles issued by the government and/or Bank Indonesia;

k. receive payment from claims on securities and perform calculations with third parties or among third parties based on Sharia Principles;

l. provide ...

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l. provide a place to store goods and securities based on Sharia Principles;

m. transfer funds, both for its own benefit and for the benefit of Customers based on Sharia Principles;

n. provide letter of credit or bank guarantee facilities based on Sharia Principles; and o. conduct other activities commonly conducted in the banking sector and in the social sector as long as they do not conflict with Sharia Principles and are in accordance with the provisions of laws and regulations.

Article 20

(1) In addition to conducting business activities as referred to in Article 19 paragraph (1), a Sharia Commercial Bank may also:

a. conduct foreign exchange activities based on Sharia Principles;

b. conduct equity participation activities in a Sharia Commercial Bank or financial institution conducting business activities based on Sharia Principles;

c. conduct temporary equity participation activities to overcome the consequences of Financing failure based on Sharia Principles, provided that it must withdraw its participation;

d. act as founder and administrator of a pension fund based on Sharia Principles;

e. conduct activities in the capital market as long as they do not conflict with Sharia Principles and the provisions of laws and regulations in the capital market sector;

f. organize bank activities or products based on Sharia Principles using electronic means;

g. issue, offer, and trade short-term securities based on Sharia Principles, either directly or indirectly through the money market;

h. issue, offer, and trade long-term securities based on Sharia Principles, either directly or indirectly through the capital market; and

i. provide ...

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i. provide products or conduct other Sharia Commercial Bank business activities based on Sharia Principles.

(2) In addition to conducting business activities as referred to in Article 19 paragraph (2), UUS may also:

a. conduct foreign exchange activities based on Sharia Principles;

b. conduct activities in the capital market as long as they do not conflict with Sharia Principles and the provisions of laws and regulations in the capital market sector;

c. conduct temporary equity participation activities to overcome the consequences of Financing failure based on Sharia Principles, provided that it must withdraw its participation;

d. organize bank activities or products based on Sharia Principles using electronic means;

e. issue, offer, and trade short-term securities based on Sharia Principles either directly or indirectly through the money market; and f. provide products or conduct other Sharia Commercial Bank business activities based on Sharia Principles.

(3) Activities as referred to in paragraph (1) and paragraph (2)

must comply with the provisions stipulated by Bank Indonesia and the provisions of laws and regulations.

Article 21 Business activities of a Sharia People's Financing Bank include:

a. collecting funds from the public in the form of:

1. Savings in the form of Savings or equivalent thereto based on a wadi'ah contract or other contract that does not conflict with Sharia Principles; and

2. Investment in the form of Deposits or Savings or other equivalent forms based on a mudharabah contract or other contract that does not conflict with Sharia Principles;

b. channeling funds to the public in the form of:

1. Profit-sharing financing based on a mudharabah or musyarakah contract;

2. Financing .. .

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2. Financing based on a murabahah, salam, or istishna' contract;

3. Financing based on a qardh contract;

4. Financing for the lease of movable or immovable goods to Customers based on an ijarah contract or lease purchase in the form of ijarah muntahiya bittamlik; and

5. takeover of debt based on a hawalah contract;

c. placing funds at another Sharia Bank in the form of deposits based on a wadi'ah contract or Investment based on a mudharabah contract and/or other contract that does not conflict with Sharia Principles;

d. transferring money, both for its own interests and for the interests of Customers through a Sharia People's Financing Bank account at a Sharia Commercial Bank, Conventional Commercial Bank, and UUS; and e. providing products or conducting other Sharia Bank business activities in accordance with Sharia Principles based on the approval of Bank Indonesia.

Article 22 Every party is prohibited from conducting fund collection activities in the form of Savings or Investment based on Sharia Principles without prior permission from Bank Indonesia, unless otherwise regulated in other laws.

Part Two Feasibility of Fund Distribution

Article 23

(1) Sharia Banks and/or UUS must have confidence in the willingness and ability of prospective Facility Recipient Customers to repay all obligations on time, before the Sharia Bank and/or UUS distributes funds to the Facility Recipient Customer.

(2) To obtain confidence as referred to in paragraph (1), Sharia Banks and/or UUS must conduct a careful assessment of the character, ability, capital, Collateral, and business prospects of the prospective Facility Recipient Customer.

Part ...

• 17 - Part Three Prohibitions for Sharia Banks and UUS

Article 24

(1) Sharia Commercial Banks are prohibited from:

a. conducting business activities that conflict with Sharia Principles;

b. conducting direct buying and selling of shares on the capital market;

c. making equity participation, except as referred to in Article 20 paragraph (1) letter b and letter c;

and d. conducting insurance business activities, except as a marketing agent for sharia insurance products.

(2) UUS are prohibited from:

a. conducting business activities that conflict with Sharia Principles;

b. conducting direct buying and selling of shares on the capital market;

c. making equity participation, except as referred to in Article 20 paragraph (2) letter c; and d. conducting insurance business activities, except as a marketing agent for sharia insurance products.

Article 25 Sharia People's Financing Banks are prohibited from:

a. conducting business activities that conflict with Sharia Principles;

b. receiving Savings in the form of Demand Deposits and participating in payment traffic;

c. conducting business activities in foreign currency, except foreign currency exchange with the permission of Bank Indonesia;

d. conducting insurance business activities, except as a marketing agent for sharia insurance products;

e. making equity participation, except in institutions established to overcome liquidity difficulties of Sharia People's Financing Banks; and f. conducting other businesses outside the business activities referred to in Article 21.

Article 26 . . .

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Article 26

(1) Business activities as referred to in Article 19,

Article 20, and Article 21 and/or sharia products and services, must comply with Sharia Principles.

(2) Sharia Principles as referred to in paragraph (1)

are fatwaed by the Indonesian Ulema Council.

(3) Fatwa as referred to in paragraph (2) is set forth in a Bank Indonesia Regulation.

(4) In the context of drafting the Bank Indonesia Regulation as referred to in paragraph (3), Bank Indonesia establishes a sharia banking committee.

(5) Further provisions regarding the procedures for the establishment, membership, and duties of the sharia banking committee as referred to in paragraph (4) are regulated by a Bank Indonesia Regulation.

CHAPTER V CONTROLLING SHAREHOLDERS, BOARD OF COMMISSIONERS, SHARIA SUPERVISORY BOARD, BOARD OF DIRECTORS, AND FOREIGN WORKERS Part One Controlling Shareholders

Article 27

(1) Prospective controlling shareholders of Sharia Banks must pass a fit and proper test conducted by Bank Indonesia.

(2) Controlling shareholders who do not pass the fit and proper test must reduce their share ownership to at most 10% (ten percent).

(3) In the event that the controlling shareholder does not reduce its share ownership as referred to in paragraph (2)

then:

a. the voting rights of the controlling shareholder are not taken into account in the General Meeting of Shareholders;

b. the voting rights of the controlling shareholder are not taken into account as a calculation of whether or not the General Meeting of Shareholders is quorate;

c. dividends . . .

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c. dividends that can be paid to the controlling shareholder are at most 10% (ten percent)

and the remainder is paid after the controlling shareholder transfers its ownership as referred to in paragraph (1); and d. the name of the controlling shareholder concerned is announced to the public through 2 (two) mass media with wide circulation.

(4) Further provisions regarding the fit and proper test shall be regulated by a Bank Indonesia Regulation.

Part Two Board of Commissioners and Board of Directors

Article 28 Provisions regarding the requirements, number, duties, authority, responsibilities, as well as other matters concerning the board of commissioners and board of directors of a Sharia Bank shall be regulated in the articles of association of the Sharia Bank in accordance with the provisions of laws and regulations.

Article 29

(1) In the board of directors of a Sharia Bank as referred to in Article 28, there must be 1 (one) director whose duty is to ensure the Sharia Bank's compliance with the implementation of Bank Indonesia provisions and other laws and regulations.

(2) Further provisions regarding the duty to ensure the Sharia Bank's compliance with the implementation of Bank Indonesia provisions and other laws and regulations as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

Article 30

(1) Candidates for the board of commissioners and candidates for the board of directors must pass a fit and proper test conducted by Bank Indonesia.

(2) The fit and proper test for commissioners and directors who violate integrity and do not meet competence shall be conducted by Bank Indonesia.

(3) Commissioners . . .

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(3) Commissioners and directors who do not pass the fit and proper test must relinquish their positions.

(4) Further provisions regarding the fit and proper test as referred to in paragraph (1) and paragraph (2)

shall be regulated by a Bank Indonesia Regulation.

Article 31

(1) In carrying out the activities of a Sharia Bank, the board of directors may appoint executive officers.

(2) Further provisions regarding the appointment of executive officers as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

Part Three Sharia Supervisory Board

Article 32

(1) A Sharia Supervisory Board must be established at a Sharia Bank and a Conventional Commercial Bank that has a UUS.

(2) The Sharia Supervisory Board as referred to in paragraph

(1) shall be appointed by the General Meeting of Shareholders upon the recommendation of the Indonesian Ulema Council.

(3) The Sharia Supervisory Board as referred to in paragraph

(1) shall have the duty to provide advice and suggestions to the board of directors and supervise the Bank's activities so that they comply with Sharia Principles.

(4) Further provisions regarding the establishment of the Sharia Supervisory Board as referred to in paragraph (1)

shall be regulated by a Bank Indonesia Regulation.

Part Four Use of Foreign Workers

Article 33

(1) In carrying out its activities, a Sharia Bank may use foreign workers.

(2) The procedures for the use of foreign workers as referred to in paragraph (1) shall be carried out in accordance with the provisions of laws and regulations.

CHAPTER VI . . .

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CHAPTER VI GOVERNANCE, PRUDENTIAL PRINCIPLES, AND RISK MANAGEMENT OF SHARIA BANKING Part One Governance of Sharia Banking

Article 34

(1) Sharia Banks and UUS must implement good governance that includes the principles of transparency, accountability, responsibility, professionalism, and fairness in carrying out their business activities.

(2) Sharia Banks and UUS must prepare internal procedures regarding the implementation of the principles as referred to in paragraph (1).

(3) Further provisions regarding good governance as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

Part Two Prudential Principles

Article 35

(1) Sharia Banks and UUS in conducting their business activities must apply prudential principles.

(2) Sharia Banks and UUS must submit to Bank Indonesia financial reports in the form of annual balance sheets and annual profit and loss calculations along with their explanations prepared based on generally accepted sharia accounting principles, as well as other periodic reports, within the time and form regulated by a Bank Indonesia Regulation.

(3) The balance sheet and annual profit and loss calculation as referred to in paragraph (2) must first be audited by a public accounting firm.

(4) Bank Indonesia may determine exceptions to the obligation as referred to in paragraph (3) for Sharia People's Financing Banks.

(5) Sharia Banks must announce the balance sheet and profit and loss report to the public within the time and form determined by Bank Indonesia.

Article 36 . . .

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Article 36 In channeling Financing and conducting other business activities, Sharia Banks and UUS must take measures that do not harm the Sharia Bank and/or UUS and the interests of Customers who entrust their funds.

Article 37

(1) Bank Indonesia shall stipulate provisions regarding the maximum limit for channeling funds based on Sharia Principles, providing guarantees, placement of investments in sharia-based securities, or other similar matters, which may be carried out by Sharia Banks and UUS to Facility Recipient Customers or a group of related Facility Recipient Customers, including to companies within the same group as the Sharia Bank and UUS concerned.

(2) The maximum limit as referred to in paragraph (1) must not exceed 30% (thirty percent) of the Sharia Bank's capital in accordance with the provisions stipulated by Bank Indonesia.

(3) Bank Indonesia shall stipulate provisions regarding the maximum limit for channeling funds based on Sharia Principles, providing guarantees, placement of investments in securities, or other similar matters that may be carried out by a Sharia Bank to:

a. shareholders who own 10% (ten percent)

or more of the paid-up capital of the Sharia Bank;

b. members of the board of commissioners;

c. members of the board of directors;

d. family members of the parties as referred to in letter a, letter b, and letter c;

e. other bank officials; and f. companies in which there is an interest of the parties as referred to in letter a through letter e.

(4) The maximum limit as referred to in paragraph (3) must not exceed 20% (twenty percent) of the Sharia Bank's capital in accordance with the provisions stipulated by Bank Indonesia.

(5) Implementation ...

• 23 -

(5) The implementation of the provisions as referred to in paragraph (1)

and paragraph (3) must be reported in accordance with the provisions stipulated by Bank Indonesia.

Part Three Risk Management Obligation

Article 38

(1) Sharia Banks and UUS must implement risk management, know your customer principles, and customer protection.

(2) The provisions as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

Article 39 Sharia Banks and UUS must explain to Customers regarding the possibility of risk of loss in connection with Customer transactions conducted through Sharia Banks and/or UUS.

Article 40

(1) In the event that a Customer Receiving a Facility does not fulfill its obligations, the Sharia Bank and UUS may purchase part or all of the Collateral, either through or outside an auction, based on voluntary submission by the owner of the Collateral or based on the granting of power to sell from the owner of the Collateral, provided that the purchased Collateral must be liquidated no later than within a period of 1 (one) year.

(2) Sharia Banks and UUS must take into account the purchase price of the Collateral as referred to in paragraph (1)

with the Customer's obligations to the Sharia Bank and UUS concerned.

(3) In the event that the purchase price of the Collateral as referred to in paragraph (1) exceeds the amount of the Customer's obligations to the Sharia Bank and UUS, the excess difference in such amount must be returned to the Customer after deducting the auction costs and other costs directly related to the process of purchasing the Collateral.

(4) Further provisions regarding the purchase of Collateral as referred to in paragraph (1), paragraph (2), and paragraph (3)

shall be regulated by a Bank Indonesia Regulation.

CHAPTER VII . . .

• 24 -

CHAPTER VII BANK SECRECY Part One Scope of Bank Secrecy

Article 41 Banks and Affiliated Parties must keep confidential information regarding Depositor Customers and their Deposits as well as Investor Customers and their Investments.

Part Two Exceptions to Bank Secrecy

Article 42

(1) For the purpose of criminal tax investigation, the leadership of Bank Indonesia at the request of the Minister of Finance is authorized to issue a written order to a Bank to provide information and show written evidence and letters regarding the financial condition of a particular Depositor Customer or Investor Customer to tax officials.

(2) The written order as referred to in paragraph (1) must state the name of the tax official, the name of the taxpayer customer, and the case for which the information is desired.

Article 43

(1) For the purpose of judicial proceedings in criminal cases, the leadership of Bank Indonesia may grant permission to police, prosecutors, judges, or other investigators authorized by law to obtain information from a Bank regarding the Deposits or Investments of a suspect or defendant at the Bank.

(2) The permission as referred to in paragraph (1) shall be given in writing upon a written request from the Head of the National Police of the Republic of Indonesia, the Attorney General, the Chief Justice of the Supreme Court, or the leadership of an agency authorized to conduct investigations.

(3) Request . . .

• 25 -

(3) The request as referred to in paragraph (2) must state the name and position of the investigator, prosecutor, or judge, the name of the suspect or defendant, the reason why the information is needed, and the connection of the criminal case concerned with the information required.

Article 44 Banks must provide information as referred to in Article 42 and Article 43.

Article 45 In a civil case between a Bank and its Customer, the board of directors of the Bank concerned may inform the court about the financial condition of the Customer concerned and provide other information relevant to the case.

Article 46

(1) In the context of exchange of information between banks, the board of directors of a Bank may notify the financial condition of its Customer to another Bank.

(2) Provisions regarding the exchange of information as referred to in paragraph (1) shall be regulated in a Bank Indonesia Regulation.

Article 47 Upon the request, approval, or power of attorney from a Depositor Customer or Investor Customer made in writing, a Bank must provide information regarding the Deposits of the Depositor Customer or Investor Customer at the Bank concerned to the party appointed by the Depositor Customer or Investor Customer.

Article 48 In the event that a Depositor Customer or Investor Customer has died, the legal heirs of the Depositor Customer or Investor Customer concerned are entitled to obtain information regarding the Deposits of the Depositor Customer or Investor Customer.

Article 49 ...

• 26 -

Article 49 A party who feels aggrieved by information provided by a Bank as referred to in Article 42, Article 43, Article 45, and Article 46, has the right to know the contents of such information and request correction if there is an error in the information provided.

CHAPTER VIII SUPERVISION AND OVERSIGHT

Article 50 Supervision and oversight of Sharia Banks and UUS shall be carried out by Bank Indonesia.

Article 51

(1) Sharia Banks and UUS must maintain a soundness level covering at least capital adequacy, asset quality, liquidity, profitability, solvency, management quality that reflects capability in financial aspects, compliance with Sharia Principles and Islamic management principles, as well as other aspects related to the business of Sharia Banks and UUS.

(2) The criteria for soundness level and provisions that must be fulfilled by Sharia Banks and UUS as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

Article 52

(1) Sharia Banks and UUS must submit all information and explanations regarding their business to Bank Indonesia according to the procedures stipulated by a Bank Indonesia Regulation.

(2) Sharia Banks and UUS, upon the request of Bank Indonesia, must provide the opportunity for examination of the books and files available to them, and must provide the necessary assistance in order to obtain the truth of all information, documents, and explanations reported by the Sharia Bank and UUS concerned.

(3) In the context of carrying out the supervisory duties as referred to in paragraph (1) and paragraph (2), Bank Indonesia is authorized:

a. to examine . . .

• 27 a. to examine and take data/documents from any place related to the Bank;

b. to examine and take data/documents and information from any party that in the assessment of Bank Indonesia has influence over the Bank; and

c. to order the Bank to block certain accounts, both Savings accounts and Financing accounts.

(4) Information and examination reports on Sharia Banks and UUS obtained based on the provisions as referred to in paragraph (1), paragraph (2), and paragraph (3)

shall not be announced and are confidential.

Article 53

(1) Bank Indonesia may assign a public accounting firm or other party to, for and on behalf of Bank Indonesia, carry out examinations as referred to in

Article 52 paragraph (2).

(2) The requirements and procedures for examination as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

Article 54

(1) In the event that a Sharia Bank experiences difficulties that endanger the continuity of its business, Bank Indonesia is authorized to take actions in the context of follow-up supervision, among others:

a. to limit the authority of the General Meeting of Shareholders, commissioners, directors, and shareholders;

b. to request shareholders to increase capital;

c. to request shareholders to replace members of the board of commissioners and/or directors of the Sharia Bank;

d. to request the Sharia Bank to write off non-performing fund disbursements and to calculate the losses of the Sharia Bank against its capital;

e. to request the Sharia Bank to merge or consolidate with another Sharia Bank;

f. to request the Sharia Bank to be sold to a buyer willing to take over all of its obligations;

g. to request . . .

• 28 g. to request the Sharia Bank to surrender the management of all or part of the Sharia Bank's activities to another party; and/or h. to request the Sharia Bank to sell part or all of the assets and/or obligations of the Sharia Bank to another party.

(2) If the actions as referred to in paragraph (1) are not sufficient to overcome the difficulties experienced by the Sharia Bank, Bank Indonesia shall declare that the Sharia Bank cannot be restored to health and shall submit its handling to the Deposit Insurance Corporation to be rescued or not rescued.

(3) In the event that the Deposit Insurance Corporation declares that the Sharia Bank as referred to in paragraph (2) is not rescued, Bank Indonesia, at the request of the Deposit Insurance Corporation, shall revoke the business license of the Sharia Bank and further handling shall be carried out by the Deposit Insurance Corporation in accordance with the provisions of laws and regulations.

(4) At the request of the Sharia Bank, Bank Indonesia may revoke the business license of the Sharia Bank after the said Sharia Bank has settled all of its obligations.

(5) Further provisions regarding the requirements and procedures for revoking the business license of a Sharia Bank as referred to in paragraph (4) shall be regulated by a Bank Indonesia Regulation.

CHAPTER IX DISPUTE RESOLUTION

Article 55

(1) Dispute resolution in Sharia Banking shall be carried out by a court within the Religious Courts environment.

(2) In the event that the parties have agreed to dispute resolution other than as referred to in paragraph (1), dispute resolution shall be carried out in accordance with the contents of the Contract.

(3) Dispute resolution as referred to in paragraph (2)

must not conflict with Sharia Principles.

CHAPTER X ...

• 29 -

CHAPTER X ADMINISTRATIVE SANCTIONS

Article 56 Bank Indonesia shall impose administrative sanctions on a Sharia Bank or UUS, members of the board of commissioners, members of the Sharia Supervisory Board, directors, and/or employees of a Sharia Bank or Conventional Commercial Bank that has a UUS, who obstruct and/or do not implement Sharia Principles in carrying out their business or duties or do not fulfill their obligations as stipulated in this Law.

Article 57

(1) Bank Indonesia shall impose administrative sanctions on a Sharia Bank or UUS, members of the board of commissioners, members of the Sharia Supervisory Board, directors, and/or employees of a Sharia Bank or Conventional Commercial Bank that has a UUS who violate Article 41 and Article 44.

(2) The imposition of administrative sanctions as referred to in paragraph (1) shall not reduce criminal provisions as a result of violations of bank secrecy.

Article 58

(1) Administrative sanctions as referred to in this Law are:

a. monetary fine;

b. written warning;

c. downgrading of the soundness level of the Sharia Bank and UUS;

d. prohibition from participating in clearing activities;

e. freezing of certain business activities, both for certain branch offices and for the Sharia Bank and UUS as a whole;

f. dismissal of the management of the Sharia Bank and Conventional Commercial Bank that has a UUS, and subsequently appointing and engaging a temporary replacement until the General Meeting of Shareholders appoints a permanent replacement with the approval of Bank Indonesia;

g. inclusion ...

• 30 g. inclusion of members of the management, employees, and shareholders of the Sharia Bank and Conventional Commercial Bank that has a UUS in the list of persons discredited in the banking sector; and/or h. revocation of business license.

(2) Further provisions regarding the implementation of administrative sanctions as referred to in paragraph (1) shall be regulated in a Bank Indonesia Regulation.

CHAPTER XI CRIMINAL PROVISIONS

Article 59

(1) Any person who carries out business activities of a Sharia Bank, UUS, or activities of collecting funds in the form of Savings or Investment based on Sharia Principles without a business license from Bank Indonesia as referred to in Article 5 paragraph (1) and Article 22 shall be punished with imprisonment for a minimum of 5 (five) years and a maximum of 15 (fifteen) years and a fine of at least Rp10.000.000.000,00 (ten billion rupiah) and at most Rp200.000.000.000,00 (two hundred billion rupiah).

(2) In the event that the activities as referred to in paragraph (1)

are carried out by a legal entity, prosecution against the said legal entity shall be carried out against those who gave the order to commit the act and/or those who acted as leaders in the act.

Article 60

(1) Any person who intentionally, without carrying a written order or permit from Bank Indonesia as referred to in Article 42 and Article 43, forces a Sharia Bank, UUS, or affiliated party to provide information shall be punished with imprisonment for a minimum of 2 (two) years and a maximum of 4 (four) years and a fine of at least Rp10.000.000.000,00 (ten billion rupiah) and at most Rp200.000.000.000,00 (two hundred billion rupiah).

(2) Members ...

• 31 -

(2) Members of the board of directors, board of commissioners, employees of a Sharia Bank or Conventional Commercial Bank that has a UUS, or other Affiliated Parties who intentionally provide information that must be kept confidential as referred to in Article 41 shall be punished with imprisonment for a minimum of 2 (two) years and a maximum of 4 (four) years and a fine of at least Rp4.000.000.000,00 (four billion rupiah) and at most Rp8.000.000.000,00 (eight billion rupiah).

Article 61 Members of the board of commissioners, board of directors, or employees of a Sharia Bank or Conventional Commercial Bank that has a UUS who intentionally do not provide information that must be fulfilled as referred to in Article 44, Article 47, and Article 48 shall be punished with imprisonment for a minimum of 2 (two) years and a maximum of 7 (seven) years and a fine of at least Rp4.000.000.000,00 (four billion rupiah) and at most Rp15.000.000.000,00 (fifteen billion rupiah).

Article 62

(1) Members of the board of commissioners, board of directors, or employees of a Sharia Bank or Conventional Commercial Bank that has a UUS who intentionally:

a. do not submit financial reports as referred to in Article 35 paragraph (2); and/or b. do not provide information or do not carry out orders that must be fulfilled as referred to in Article 52 shall be punished with imprisonment for a minimum of 2 (two) years and a maximum of 10 (ten) years and a fine of at least Rp5.000.000.000,00 (five billion rupiah) and at most Rp100.000.000.000,00 (one hundred billion rupiah).

(2) Members of the board of commissioners, board of directors, or employees of a Sharia Bank or Conventional Commercial Bank that has a UUS who negligently:

a. do not submit financial reports as referred to in Article 35 paragraph (2); and/or b. do not provide information or do not carry out orders that must be fulfilled as referred to in Article 52 shall be punished . . .

• 32 shall be punished with imprisonment for a minimum of 1 (one)

year and a maximum of 2 (two) years and a fine of at least Rp1.000.000.000,00 (one billion rupiah) and at most Rp2.000.000.000,00 (two billion rupiah).

Article 63

(1) Members of the board of commissioners, board of directors, or employees of a Sharia Bank or Conventional Commercial Bank that has a UUS who intentionally:

a. make or cause the existence of false records in the books or in reports, documents or reports of business activities, and/or reports of transactions or accounts of a Sharia Bank or UUS;

b. eliminate or fail to include or cause the non-recording in the books or in reports, documents or reports of business activities, and/or reports of transactions or accounts of a Sharia Bank or UUS; and/or

c. alter, obscure, conceal, erase, or eliminate the existence of a record in the books or in reports, documents or reports of business activities, and/or reports of transactions or accounts of a Sharia Bank or UUS, or intentionally alter, obscure, eliminate, conceal, or destroy such bookkeeping records shall be punished with imprisonment for a minimum of 5 (five) years and a maximum of 15 (fifteen) years and a fine of at least Rp10.000.000.000,00 (ten billion rupiah)

and at most Rp200.000.000.000,00 (two hundred billion rupiah).

(2) Members of the board of commissioners, board of directors, or employees of a Sharia Bank or Conventional Commercial Bank that has a UUS who intentionally:

a. request or receive, permit or approve the receipt of a reward, commission, additional money, services, money, or valuable goods for personal benefit or for the benefit of their family, in order to:

1. obtain ...

• 33 -

1. obtain or attempt to obtain for another person in acquiring advance payments, bank guarantees, or fund distribution facilities from a Sharia Bank or UUS;

2. conduct purchases by a Sharia Bank or UUS of bills of exchange, promissory notes, checks and trade papers, or other evidence of obligations;

3. give approval for another person to carry out fund withdrawals exceeding the limit of their fund distribution at a Sharia Bank or UUS;

and/or b. do not carry out the steps necessary to ensure the compliance of a Sharia Bank or UUS with the provisions in this Law shall be punished with imprisonment for a minimum of 3 (three) years and a maximum of 8 (eight) years and a fine of at least Rp5.000.000.000,00 (five billion rupiah) and at most Rp100.000.000.000,00 (one hundred billion rupiah).

Article 64 Affiliated Parties who intentionally do not carry out the steps necessary to ensure the compliance of a Sharia Bank or Conventional Commercial Bank that has a UUS with the provisions in this Law shall be punished with imprisonment for a minimum of 3 (three) years and a maximum of 8 (eight) years and a fine of at least Rp5.000.000.000,00 (five billion rupiah) and at most Rp100.000.000.000,00 (one hundred billion rupiah).

Article 65 A shareholder who intentionally orders a member of the board of commissioners, board of directors, or employee of a Sharia Bank or a Conventional Commercial Bank that has a UUS to perform or not perform an action that results in the Sharia Bank or UUS failing to carry out the steps necessary to ensure the Sharia Bank's or UUS's compliance with the provisions of this Law shall be punished with imprisonment for a minimum of 7 (seven) years and a maximum of 15 (fifteen) years and a fine of at least Rp10.000.000.000,00 (ten billion rupiah) and at most Rp200.000.000.000,00 (two hundred billion rupiah).

Article 66 . . .

• 34 -

Article 66

(1) A member of the board of directors or an employee of a Sharia Bank or a Conventional Commercial Bank that has a UUS who intentionally:

a. performs an act contrary to this Law and such act has resulted in a loss for the Sharia Bank or UUS or caused the financial condition of the Sharia Bank or UUS to be unsound;

b. obstructs an examination or does not assist an examination conducted by the board of commissioners or a public accounting firm assigned by the board of commissioners;

c. provides fund disbursement or guarantee facilities in violation of the applicable provisions required of the Sharia Bank or UUS, which results in a loss thereby endangering the business continuity of the Sharia Bank or UUS; and/or d. does not carry out the steps necessary to ensure the Sharia Bank's or UUS's compliance with the provisions on the Maximum Limit of Fund Disbursement as stipulated in this Law and/or the applicable provisions shall be punished with imprisonment for a minimum of 1 (one) year and a maximum of 5 (five) years and a fine of at least Rp1.000.000.000,00 (one billion rupiah) and at most Rp2.000.000.000,00 (two billion rupiah).

(2) A member of the board of directors and an employee of a Sharia Bank or a Conventional Commercial Bank that has a UUS who intentionally misappropriates the funds of a Customer, Sharia Bank or UUS shall be punished with imprisonment for a minimum of 2 (two) years and a maximum of 8 (eight) years and a fine of at least Rp2.000.000.000,00 (two billion rupiah)

and at most Rp4.000.000.000,00 (four billion rupiah).

CHAPTER XII ...

• 35 -

CHAPTER XII TRANSITIONAL PROVISIONS

Article 67

(1) A Sharia Bank or UUS that has obtained a business license at the time this Law comes into force is declared to have obtained a business license based on this Law.

(2) A Sharia Bank or UUS as referred to in paragraph (1)

must comply with the provisions of this Law within a maximum of 1 (one) year from the entry into force of this Law.

Article 68

(1) In the event that a Conventional Commercial Bank has a UUS whose asset value has reached at least 50% (fifty percent) of the total asset value of its parent bank or 15 (fifteen) years from the entry into force of this Law, then the said Conventional Commercial Bank must separate the UUS into a Sharia Commercial Bank.

(2) Further provisions regarding the Separation and sanctions for a Conventional Commercial Bank that does not carry out the Separation as referred to in paragraph (1) shall be regulated by a Bank Indonesia Regulation.

CHAPTER XIII CLOSING PROVISIONS

Article 69 At the time this Law comes into force, all provisions regarding Sharia Banking regulated in Law Number 7 of 1992 on Banking (State Gazette of the Republic of Indonesia of 1992 Number 31, Supplement to the State Gazette of the Republic of Indonesia Number 3472) as amended by Law Number 10 of 1998 (State Gazette of the Republic of Indonesia of 1998 Number 182, Supplement to the State Gazette of the Republic of Indonesia Number 3790)

along with their implementing regulations are declared to remain in force insofar as they do not conflict with this Law.

Article 70 This Law comes into force on the date of its promulgation.

In order . . .

• 36 - In order that every person may know it, it is ordered to promulgate this Law by placing it in the State Gazette of the Republic of Indonesia.

Enacted in Jakarta on 16 July 2008 PRESIDENT OF THE REPUBLIC OF INDONESIA, ttd DR. H. SUSILO BAMBANG YUDHOYONO Promulgated in Jakarta on 16 July 2008 MINISTER OF LAW AND HUMAN RIGHTS OF THE REPUBLIC OF INDONESIA, ttd ANDI MATTALATTA STATE GAZETTE OF THE REPUBLIC OF INDONESIA OF 2008 NUMBER 94 Copy in accordance with the original SECRETARIAT OF STATE OF THE REPUBLIC OF INDONESIA Head of the Bureau of Legislation in the Economic and Industrial Sector, Setio Sapto Nugroho

ELUCIDATION OF LAW OF THE REPUBLIC OF INDONESIA NUMBER 21 OF 2008 ON SHARIA BANKING

I. GENERAL As mandated by Pancasila and the Constitution of the Republic of Indonesia of 1945, the goal of national development is the creation of a just and prosperous society, based on economic democracy, by developing an economic system that relies on a fair market mechanism. In order to realize that goal, the implementation of national economic development is directed towards an economy that sides with the people's economy, is equitable, independent, reliable, just, and able to compete in the international economic arena.

In order to achieve the goals of national development and to be able to play an active role in healthy global competition, the participation and contribution of all elements of society are needed to explore the various potentials that exist in society to support the process of economic acceleration in an effort to realize the goals of national development. One form of exploring the potential and manifestation of society's contribution to the national economy is the development of an economic system based on Islamic values (Sharia) by elevating its principles into the National Legal System. Sharia principles are based on the values of justice, benefit, balance, and universality (rahmatan lil 'alamin).

These values are applied in banking regulations based on Sharia Principles, which is called Sharia Banking.

Sharia Banking principles are part of Islamic teachings related to economics. One of the principles in Islamic economics is the prohibition of riba in all its forms, and the use of systems including the profit-sharing principle. With the profit-sharing principle, Sharia Banks can create a healthy and fair investment climate because all parties can share both profits and potential risks that arise, thereby creating a balanced position between the bank and its customers. In the long term, this will encourage national economic equity because the profits are not only enjoyed by the capital owners, but also by the capital managers.

Banking . . .

• 38 - Sharia Banking as one of the national banking systems requires various supporting facilities in order to provide maximum contribution to national economic development. One of the vital supporting facilities is the existence of adequate regulations that are in accordance with its characteristics. These regulations are among others set forth in the Sharia Banking Law. The establishment of the Sharia Banking Law is a necessity for the development of these institutions. The regulation regarding Sharia Banking in Law Number 7 of 1992 concerning Banking as amended by Law Number 10 of 1998 is not yet specific and does not sufficiently accommodate the operational characteristics of Sharia Banking, whereas, on the other hand, the growth and business volume of Sharia Banks have developed quite rapidly.

In order to guarantee legal certainty for stakeholders and at the same time provide confidence to the public in using the products and services of Sharia Banks, this Sharia Banking Law regulates the types of business, provisions for sharia implementation, business feasibility, fund distribution, and prohibitions for Sharia Banks as well as UUS which are part of Conventional Commercial Banks. Meanwhile, to provide confidence to the public who still doubt the sharia compliance of Sharia Banking operations so far, it is also regulated that business activities that do not conflict with Sharia Principles include business activities that do not contain elements of riba, maisir, gharar, haram, and zalim.

As a law specifically regulating sharia banking, this Law regulates the issue of sharia compliance (syariah compliance) whose authority lies with the Indonesian Ulema Council (MUI) which is represented through the Sharia Supervisory Board (DPS) which must be established at each Sharia Bank and UUS. To follow up on the implementation of fatwas issued by the MUI into Bank Indonesia Regulations, within Bank Indonesia internally a sharia banking committee is formed, whose membership consists of representatives from Bank Indonesia, the Department of Religious Affairs, and community elements with a balanced composition.

Meanwhile, the resolution of disputes that may arise in sharia banking will be carried out through the courts within the Religious Courts environment. In addition, the possibility of dispute resolution through deliberation, banking mediation, arbitration institutions, or through the courts within the General Courts environment is also opened as long as agreed upon in the Akad by the parties.

For . . .

• 39 - To implement the substance of this sharia banking law, the regulation of UUS which corporately is still within one entity with a Conventional Commercial Bank, in the future, if it has been in a certain condition and period of time is required to separate UUS into a Sharia Commercial Bank by fulfilling the procedures and requirements stipulated by Bank Indonesia Regulation.

In connection with this, separate regulation for Sharia Banking is an urgent matter to be carried out, to guarantee the fulfillment of Sharia principles, the principle of Bank soundness for Sharia Banks, and no less important is expected to mobilize funds from other countries that require regulation of Sharia Banks in a separate law.

II. ARTICLE BY ARTICLE

Article 1 Sufficiently clear.

Article 2 Business activities based on Sharia Principles, among others, are business activities that do not contain elements of:

a. riba, namely the addition of income unlawfully (batil)

among others in exchange transactions of similar goods that are not the same in quality, quantity, and time of delivery (fadhl), or in lending-borrowing transactions that require the Customer Receiving the Facility to return the funds received exceeding the principal loan due to the passage of time (nasi'ah);

b. maisir, namely transactions that depend on an uncertain situation and are speculative in nature;

c. gharar, namely transactions whose object is unclear, not owned, unknown in existence, or cannot be delivered at the time the transaction is carried out unless otherwise regulated in sharia;

d. haram, namely transactions whose object is prohibited in sharia;

or e. zalim, namely transactions that cause injustice to other parties.

What is meant by "economic democracy" is sharia economic activity that contains the values of justice, togetherness, equity, and benefit.

What . . .

• 40 - What is meant by "prudential principle" is a guideline for Bank management that must be adhered to in order to realize a healthy, strong, and efficient banking system in accordance with the provisions of laws and regulations.

Article 3 In achieving the goal of supporting the implementation of national development, Sharia Banking remains committed to Sharia Principles comprehensively (kaffah) and consistently (istiqamah).

Article 4 Paragraph (1)

Sufficiently clear.

Paragraph (2)

What is meant by "other social funds", among others, is Bank revenue derived from the imposition of sanctions on Customers (ta'zir).

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Article 5 Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

The requirements stipulated in Bank Indonesia Regulation at least contain:

a. organizational structure and management;

b. working capital;

c. expertise in the field of Sharia Banking; and d. business feasibility.

Paragraph (4)

Only Sharia Banks that obtain a license after the enactment of this Law are required to include the word "syariah".

The writing of the word “syariah” is placed after the word “bank” or after the bank's name.

Paragraph (5)

Clear enough.

Paragraph (6) . . .

• 41 - Paragraph (6)

Clear enough.

Paragraph (7)

Clear enough.

Paragraph (8)

Clear enough.

Paragraph (9)

Clear enough.

Article 6 Paragraph (1)

Clear enough.

Paragraph (2)

Clear enough.

Paragraph (3)

What is meant by “office under a Branch Office” is a sub-branch office or cash office whose business activities assist its parent office.

Paragraph (4)

Clear enough.

Article 7 Clear enough.

Article 8 Letter a Clear enough.

Letter b Matters that may be regulated in a Bank Indonesia Regulation include, among others:

a. dismissal of members of the board of directors and board of commissioners who do not pass the fit and proper test;

b. transfer of ownership of the bank's controlling shares which must obtain Bank Indonesia's approval;

c. transfer . . .

. . .

• 42 -

c. transfer of business license from the old name to the new name, change of authorized capital, and change of status to become an open Bank must obtain Bank Indonesia's approval;

d. changes in the Bank's paid-up capital which include additions, reductions, and composition must obtain Bank Indonesia's approval;

e. prohibition of guaranteeing shares owned by the controlling shareholder.

Article 9 Paragraph (1)

Letter a Clear enough.

Letter b In the event that one of the parties that will establish a Sharia Commercial Bank is a foreign legal entity, the party concerned must first obtain a recommendation from the banking authority of its country of origin.

The said recommendation shall at least contain a statement that the foreign legal entity concerned has a good reputation and has never committed disgraceful acts in the banking sector.

Letter c Clear enough.

Paragraph (2)

Clear enough.

Paragraph (3)

Clear enough.

Article 10 Clear enough.

Article 11 Clear enough.

Article 12 Clear enough.

Article 13 . . .

• 43 -

Article 13 Clear enough.

Article 14 Clear enough.

Article 15 Changes in ownership of a Sharia Bank that do not result in a change of the controlling shareholder are sufficient to be reported in writing to Bank Indonesia.

Article 16 Paragraph (1)

Clear enough.

Paragraph (2)

The main points of regulation in a Bank Indonesia Regulation include, among others:

a. minimum capital adequacy;

b. preparation of human resources;

c. organizational structure and management; and d. business feasibility.

Article 17 Clear enough.

Article 18 Clear enough.

Article 19 Paragraph (1)

Letter a What is meant by “wadi'ah contract” is a contract for the safekeeping of goods or money between a party that has goods or money and a party that is entrusted with the aim of maintaining the safety, security, and integrity of the goods or money.

Letter b . . .

• 44 - Letter b What is meant by “Akad mudharabah” in collecting funds is a cooperation agreement between the first party (malik, shahibul mal, or Customer)

as the owner of funds and the second party (‘amil, mudharib, or Sharia Bank) acting as the fund manager by sharing business profits in accordance with the agreement set forth in the Akad.

Letter c What is meant by “Akad mudharabah” in Financing is a cooperation agreement for a business between the first party (malik, shahibul mal, or Sharia Bank) that provides all the capital and the second party (‘amil, mudharib, or Customer) acting as the fund manager by sharing business profits in accordance with the agreement set forth in the Akad, while losses are borne entirely by the Sharia Bank unless the second party commits an intentional error, negligence or breach of the agreement.

What is meant by “Akad musyarakah” is a cooperation agreement between two parties or more for a particular business in which each party provides a portion of funds with the provision that profits will be shared in accordance with the agreement, while losses are borne in accordance with the portion of funds of each party.

Letter d What is meant by “Akad murabahah” is a Financing agreement for an item by stating its purchase price to the buyer and the buyer pays it at a higher price as the agreed profit.

What is meant by “Akad salam” is a Financing agreement for an item by way of ordering and payment of the price made in advance with certain conditions agreed upon.

What is meant by “Akad istishna’ ” is a Financing agreement for goods in the form of ordering the manufacture of certain goods with certain criteria and requirements agreed upon between the orderer or buyer (mustashni’) and the seller or manufacturer (shani’).

Letter e . . .

• 45 - Letter e What is meant by “Akad qardh” is a fund loan agreement to a Customer with the provision that the Customer is obliged to return the funds received at the agreed time.

Letter f What is meant by “Akad ijarah” is a fund provision agreement in order to transfer the right of use or benefit of an item or service based on a lease transaction, without being followed by the transfer of ownership of the item itself.

What is meant by “Akad ijarah muntahiya bittamlik” is a fund provision agreement in order to transfer the right of use or benefit of an item or service based on a lease transaction with an option to transfer ownership of the item.

Letter g What is meant by “Akad hawalah” is an agreement for the transfer of debt from the party owing the debt to another party that is obliged to bear or pay.

Letter h Clear enough.

Letter i What is meant by “transaksi nyata” is a transaction based on tangible assets.

What is meant by “Akad kafalah” is a guarantee agreement provided by one party to another party, in which the guarantor (kafil)

is responsible for the repayment of the debt that is the right of the guarantee recipient (makful).

Letter j Clear enough.

Letter k Clear enough.

Letter l Clear enough.

Letter m Clear enough.

Letter n . . .

• 46 - Letter n Clear enough.

Letter o What is meant by “Akad wakalah” is an agreement to grant authority to the recipient of authority to carry out a task on behalf of the grantor of authority.

Letter p Clear enough.

Letter q What is meant by “kegiatan lain” is, among others, carrying out social functions in the form of receiving and distributing zakat, infak, sedekah funds, as well as benevolent funds.

Paragraph (2)

Clear enough.

Article 20 Paragraph (1)

Letter a Clear enough.

Letter b What is meant by “penyertaan modal” is the investment of funds of a Sharia Commercial Bank in the form of shares in a company engaged in the field of sharia finance, including investment of funds in the form of securities convertible into shares (convertible bonds) or certain types of transactions based on Sharia Principles that result in the Sharia Commercial Bank owning or going to own shares in a company engaged in the field of sharia finance.

Letter c What is meant by “penyertaan modal sementara” is the investment of funds of a Sharia Commercial Bank, among others, in the form of purchasing shares and/or conversion of financing into shares in a Customer company to overcome the failure of fund distribution and/or receivables within a certain period of time as referred to in Bank Indonesia provisions.

Letter d . . .

• 47 - Letter d Clear enough.

Letter e Clear enough.

Letter f Clear enough.

Letter g Clear enough.

Letter h Clear enough.

Letter i Clear enough.

Paragraph (2)

Clear enough.

Paragraph (3)

Clear enough.

Article 21 Clear enough.

Article 22 Clear enough.

Article 23 Paragraph (1)

Willingness relates to the good faith of the Customer Recipient of Facilities to repay the use of funds channeled by the Sharia Bank and/or UUS.

Ability relates to the condition and/or assets of the Customer Recipient of Facilities so as to be able to repay the use of funds channeled by the Sharia Bank and/or UUS.

Paragraph (2) . . .

• 48 - Paragraph (2)

The assessment of the character of the prospective Customer Recipient of Facilities is mainly based on the relationship that has been established between the Sharia Bank and/or UUS and the Customer or prospective Customer concerned or information obtained from other parties that can be trusted so that the Sharia Bank and/or UUS can conclude that the prospective Customer Recipient of Facilities concerned is honest, has good faith, and will not make difficulties for the Sharia Bank and/or UUS in the future.

The assessment of the ability of the prospective Customer Recipient of Facilities mainly requires the Bank to examine the expertise of the Customer Recipient of Facilities in its business field and/or the management capability of the prospective Customer so that the Sharia Bank and/or UUS feels confident that the business to be financed is managed by the right person.

The assessment of the capital owned by the prospective Customer Recipient of the Facility, especially a Sharia Bank and/or UUS, must conduct an analysis of the overall financial position, both for the past period and projections for the future so that the capital capability of the prospective Customer Recipient of the Facility can be known in supporting the financing of the project or business of the prospective Customer concerned.

In assessing the Collateral, the Sharia Bank and/or UUS must assess the goods, project or receivables financed by the relevant Financing facility and other goods, securities or risk guarantees added as additional Collateral, whether they are sufficiently adequate so that if the Customer Recipient of the Facility is later unable to settle its obligations, the Collateral can be used to cover the repayment of the Financing from the Sharia Bank and/or UUS concerned.

In assessing the business project of the prospective Customer Recipient of the Facility, the Sharia Bank must especially conduct an analysis of the market conditions, both domestic and foreign, both for the past and future periods so that the marketing prospects of the results of the project or business of the prospective Customer to be financed with the Financing facility can be known.

Article 24 . . .

• 49 -

Article 24 Paragraph (1)

Letter a Sufficiently clear.

Letter b Sufficiently clear.

Letter c Sufficiently clear.

Letter d A Sharia Commercial Bank may market insurance products through cooperation with an insurance company that conducts business activities based on Sharia Principles. All actions of the Sharia Commercial Bank relating to insurance transactions marketed through the said cooperation shall be the responsibility of the sharia insurance company.

Paragraph (2)

Letter a Sufficiently clear.

Letter b Sufficiently clear.

Letter c Sufficiently clear.

Letter d UUS may market insurance products through cooperation with an insurance company that conducts business activities based on Sharia Principles. All actions of the UUS relating to insurance transactions marketed through the said cooperation shall be the responsibility of the sharia insurance company.

Article 25 Letter a Business that is contrary to Sharia Principles includes, among others, business considered riba, maisir, gharar, haram, and zalim.

Letter b Sufficiently clear.

Letter c . . .

• 50 - Letter c Sufficiently clear.

Letter d A Sharia People's Financing Bank may market insurance products through cooperation with a sharia insurance company. All actions of the Bank relating to insurance transactions marketed through the said cooperation shall be the responsibility of the sharia insurance company.

Letter e Sufficiently clear.

Letter f Sufficiently clear.

Article 26 Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

The sharia banking committee shall consist of elements from Bank Indonesia, the Department of Religious Affairs, and community elements with a balanced composition, possess expertise in the sharia field and number at most 11 (eleven)

persons.

Paragraph (5)

Sufficiently clear.

Article 27 Paragraph (1)

What is meant by "controlling shareholder" is a legal entity, individual, and/or business group that:

a. owns shares of a Sharia Bank amounting to 25% (twenty-five percent) or more of the total issued shares and obtains voting rights; or b. owns . . .

• 51 b. owns shares of a company or Bank less than 25% (twenty-five percent) of the total issued shares and has voting rights, but the person concerned can be proven to have exercised control over the company or bank, either directly or indirectly.

Control is an action aimed at influencing the management and/or policy of a company, including a bank, in any way, either directly or indirectly.

Control over a Sharia Bank may be exercised in ways, among others, as follows:

a. owning individually or jointly 25% (twenty-five percent) or more of the Bank's shares;

b. directly running the management and/or influencing the policy of the Sharia Bank;

c. having an option right or other rights to own shares which if exercised would cause the party to own and/or control individually or jointly 25% (twenty-five percent) or more of the Bank's shares;

d. conducting cooperation or actions in line to achieve a common goal in controlling the Bank (acting in concert) with or without a written agreement with another party so that jointly they own and/or control 25% (twenty-five percent) or more of the Sharia Bank's shares, either directly or indirectly with or without a written agreement;

e. conducting cooperation or actions in line to achieve a common goal in controlling the Bank (acting in concert) with or without a written agreement with another party so that jointly they have an option right or other rights to own shares, which if such rights are exercised would cause those parties to own and/or control 25% (twenty-five percent) or more of the Sharia Bank's shares;

f. controlling one or more other companies that in total own and/or jointly control 25% (twenty-five percent) or more of the Bank's shares;

g. having . . .

• 52 g. having the authority to approve and/or dismiss the management of the Sharia Bank;

h. indirectly influencing or running the management and/or policy of the Sharia Bank;

i. exercising control over the parent company or the financial sector parent company of the Sharia Bank; and/or j. exercising control over the party that exercises control as referred to in letter a through letter i.

The fit and proper test is fully the authority of Bank Indonesia to assess the competence, integrity, and financial capability of the controlling shareholder and/or the bank's management. Considering that the purpose of the fit and proper test is to obtain controlling shareholders and bank management who can maintain public trust in banking, the assessment in the context of the fit and proper test by Bank Indonesia does not need to be accounted for.

Paragraph (2)

The obligation to reduce share ownership for a Bank Owner who does not pass the fit and proper test is within a period of 6 (six) months from being declared as not passing the fit and proper test.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Article 28 The definition of laws and regulations includes Bank Indonesia Regulations.

The main points of regulation of the duties of the board of directors of a Sharia Bank in the articles of association include:

a. duties and responsibilities;

b. reporting; and

c. protection in the performance of duties.

Article 29 . . .

• 53 -

Article 29 Paragraph (1)

Sufficiently clear.

Paragraph (2)

The main points of regulation of the duties of directors are:

a. duties and responsibilities;

b. reporting; and

c. protection in the performance of duties.

Article 30 Paragraph (1)

The fit and proper test aims to ensure the competence, credibility, integrity, and implementation of good corporate governance of the owners, bank management, and sharia supervisory board.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

Sufficiently clear.

Article 31 Paragraph (1)

What is meant by "executive officer" is an officer who is directly responsible to the board of directors and/or has influence on the policies and operations of the Sharia Bank such as the head of division, branch office head, or head of internal audit work unit.

Paragraph (2)

Sufficiently clear.

Article 32 Paragraph (1)

Sufficiently clear.

Paragraph (2)

Sufficiently clear.

Paragraph (3) . . .

• 54 - Paragraph (3)

Sufficiently clear.

Paragraph (4)

What is regulated in the Bank Indonesia Regulation at least includes:

a. the scope, duties, and functions of the sharia supervisory board;

b. the number of members of the sharia supervisory board;

c. term of service;

d. composition of expertise;

e. maximum concurrent positions; and f. reporting of the sharia supervisory board.

Article 33 Sufficiently clear.

Article 34 Sufficiently clear.

Article 35 Paragraph (1)

In order to ensure the implementation of decision-making in bank management in accordance with the precautionary principle, the Bank has and implements, among others, an internal control system.

Paragraph (2)

What is meant by "generally accepted sharia accounting principles" is sharia accounting standards established by the competent authority.

Paragraph (3)

The public accounting firm referred to is a public accounting firm that has accountants with expertise in the field of sharia accounting.

Paragraph (4)

In granting exceptions, Bank Indonesia takes into account the capabilities of the Sharia People's Financing Bank concerned.

Paragraph (5)

Sufficiently clear.

Article 36 . . .

• 55 -

Article 36 Sufficiently clear.

Article 37 Paragraph (1)

The distribution of funds based on Sharia Principles by Sharia Banks and UUS contains the risk of failure or default in repayment so that it can affect the soundness of Sharia Banks and UUS. Given that the said distribution of funds originates from public funds deposited at Sharia Banks and UUS, the risks faced by Sharia Banks and UUS can also affect the security of those public funds.

Therefore, to maintain soundness and increase resilience, banks are required to spread risk by regulating the distribution of credit or provision of financing based on Sharia Principles, provision of guarantees or other facilities in such a way that it is not concentrated on a debtor Customer or a certain group of debtor Customers.

Paragraph (2)

The meaning of “capital of Sharia Banks in accordance with the provisions stipulated by Bank Indonesia” corresponds to the meaning used in the assessment of bank soundness.

The said maximum limit is intended for each Customer Recipient of Facilities or a group of Customers Recipient of Facilities including companies within the same group.

Paragraph (3)

Letter a Sufficiently clear.

Letter b Sufficiently clear.

Letter c Sufficiently clear.

Letter d . . .

• 56 - Letter d What is meant by “family” is a relationship up to the second degree, whether in a direct or collateral line of descent including parents-in-law, sons/daughters-in-law, and brothers/sisters-in-law.

Letter e Sufficiently clear.

Letter f Sufficiently clear.

Paragraph (4)

The meaning of “capital of Sharia Banks in accordance with the provisions stipulated by Bank Indonesia” corresponds to the meaning used in the assessment of bank soundness.

Paragraph (5)

Sufficiently clear.

Article 38 Paragraph (1)

What is meant by “risk management” is a series of procedures and methodologies used by banking to identify, measure, monitor, and control risks arising from the bank's business activities.

The principle of knowing the Customer (know your customer principle)

is a principle that must be applied by banking which at least covers the activities of receiving and identifying Customers as well as monitoring Customer transaction activities, including reporting suspicious transactions.

Customer protection is carried out, among other things, by means of a Customer complaint mechanism, increasing product transparency, and educating Customers.

Paragraph (2)

Sufficiently clear.

Article 39 The explanation provided to Customers regarding the possibility of incurring losses for Customers is intended to guarantee transparency of the Bank's products and services.

If such information has been provided, the Bank is considered to have implemented this provision.

Article 40 . . .

• 57 -

Article 40 Paragraph (1)

The purchase of Collateral by the Bank through auction is intended to help the Bank accelerate the settlement of the obligations of its Customer Recipient of Facilities. In the case that the bank is the buyer of the Collateral of its Customer Recipient of Facilities, the status of the Bank is the same as that of a non-Bank buyer.

The Bank is allowed to purchase Collateral outside of auction, intended to accelerate the settlement of the obligations of its Customer Recipient of Facilities.

The time limit of 1 (one) year takes into account the recovery of the Bank's liquidity condition and this time limit constitutes a reasonable period to sell the Bank's assets.

Collateral that can be purchased by the Bank is Collateral whose financing has been categorized as non-performing for a certain period of time.

Paragraph (2)

Sufficiently clear.

Paragraph (3)

Sufficiently clear.

Paragraph (4)

The main points of the provisions further regulated by Bank Indonesia Regulations include, among others:

a. Collateral that can be purchased by Sharia Banks and UUS is Collateral whose financing has been categorized as non-performing for a certain period of time;

b. The time period for the liquidation of Collateral that has been purchased.

Article 41 Sufficiently clear.

Article 42 Paragraph (1)

What is meant by “show written evidence” includes submitting statements or photocopies.

Paragraph (2) . . .

• 58 - Paragraph (2)

Sufficiently clear.

Article 43 Paragraph (1)

Sufficiently clear.

Paragraph (2)

What is meant by “the head of the agency authorized to conduct investigations” is the head of a department or non-departmental government institution at the ministerial level.

Paragraph (3)

Sufficiently clear.

Article 44 Sufficiently clear.

Article 45 Sufficiently clear.

Article 46 Clear enough.

Article 47 Clear enough.

Article 48 Clear enough.

Article 49 Clear enough.

Article 50 The guidance carried out by Bank Indonesia includes, among other things, institutional aspects, ownership and management (including fit and proper testing), business activities, reporting, and other aspects related to the operational activities of Sharia Banks and UUS.

Supervision . . .

• 59 - Bank supervision includes indirect supervision (off-site supervision) based on Bank reports and direct supervision (on-site supervision) in the form of examinations at the office of the bank concerned.

Article 51 Paragraph (1)

Sharia Banks and UUS need to maintain their soundness level in order to maintain public trust.

Paragraph (2)

Clear enough.

Article 52 Paragraph (1)

Clear enough.

Paragraph (2)

Clear enough.

Paragraph (3)

Letter a What is meant by "data/document" is all types of data or documents, whether written or electronic, related to the object of Bank Indonesia supervision.

What is meant by "every place related to the Bank" is every part of the room of the bank office and other places outside the bank related to the object of Bank Indonesia supervision.

Letter b What is meant by "data/document" is all types of data or documents, whether written or electronic, related to the object of Bank Indonesia supervision.

What is meant by "every party" is a person or legal entity that has influence over the decision-making and operations of the Bank, whether directly or indirectly, including, among others, the ultimate shareholder or certain parties whose names are not listed as employees, management or shareholders of the bank but can influence the operational activities of the bank or the decisions of the bank's management.

Letter c . . .

• 60 - Letter c What is meant by "Simpanan account or Pembiayaan account" are accounts, whether existing at the Bank being supervised/examined or at another Bank, related to the object of Bank Indonesia supervision/examination.

Paragraph (4)

Clear enough.

Article 53 Paragraph (1)

What is meant by "other party" is a party that in the assessment of Bank Indonesia has the competence to carry out an examination.

Paragraph (2)

Clear enough.

Article 54 Paragraph (1)

The condition of a Bank is said to be experiencing difficulties that endanger the continuity of its business if based on the assessment of Bank Indonesia, the business condition of the Bank is increasingly deteriorating, among others, characterized by a decline in capital, asset quality, liquidity, and profitability, as well as the management of the Bank not being carried out based on the precautionary principle and sound banking principles.

Letter a What is meant by "limiting authority" includes, among others, restrictions on decisions to grant bonuses (tantiem), granting dividends to the Bank's owners, or salary increases for employees and management.

Letter b Clear enough.

Letter c Clear enough.

Letter d Clear enough.

Letter e . . .

• 61 - Letter e Clear enough.

Letter f Clear enough.

Letter g Clear enough.

Letter h What is meant by "other party" is a party outside the Bank concerned, whether another Bank, another business entity, or an individual who meets the requirements.

Paragraph (2)

Clear enough.

Paragraph (3)

Clear enough.

Paragraph (4)

Clear enough.

Paragraph (5)

Clear enough.

Article 55 Paragraph (1)

Clear enough.

Paragraph (2)

What is meant by "dispute resolution is carried out in accordance with the contents of the Akad" is the following efforts:

a. deliberation;

b. banking mediation;

c. through the National Sharia Arbitration Board (Basyarnas)

or another arbitration institution; and/or d. through a court within the General Courts environment.

Paragraph (3)

Clear enough.

Article 56 . . .

• 62 -

Article 56 Basically administrative sanctions are imposed on members of the board of commissioners or members of the board of directors personally who commit errors, but it does not rule out the possibility that administrative sanctions are imposed collectively if the errors are committed collectively.

Article 57 Sufficiently clear.

Article 58 Sufficiently clear.

Article 59 Sufficiently clear.

Article 60 Sufficiently clear.

Article 61 Sufficiently clear.

Article 62 Sufficiently clear.

Article 63 Sufficiently clear.

Article 64 Sufficiently clear.

Article 65 Sufficiently clear.

Article 66 Sufficiently clear.

Article 67 . . .

• 63 -

Article 67 Paragraph (1)

UUS that has obtained a business license in this provision is an existing UUS based on a license to open a Sharia Branch Office at a Conventional Commercial Bank.

Paragraph (2)

Sufficiently clear.

Article 68 Sufficiently clear.

Article 69 Sufficiently clear.

Article 70 Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 4867