Utilization of Foreign Workers and Knowledge Transfer Programs in the Banking Sector

To:

1. The Board of Directors of Conventional Commercial Banks; and
2. The Board of Directors of Sharia Commercial Banks,
   At their respective locations.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 42 /SEOJK.03/2017 CONCERNING THE UTILIZATION OF FOREIGN WORKERS AND KNOWLEDGE TRANSFER PROGRAMS IN THE BANKING SECTOR

In light of the implementation of the Financial Services Authority Regulation Number 37/POJK.03/2017 concerning the Utilization of Foreign Workers and Knowledge Transfer Programs in the Banking Sector (State Gazette of the Republic of Indonesia Year 2017 Number 143, Supplement to the State Gazette of the Republic of Indonesia Number 6086), hereinafter referred to as the POJK on Foreign Worker Utilization, and in light of the transfer of functions, duties, and authorities for the regulation and supervision of financial services in the banking sector from Bank Indonesia to the Financial Services Authority, it is necessary to regulate again the implementation regarding the utilization of Foreign Workers and knowledge transfer programs in the banking sector in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

1. The utilization of Foreign Workers (TKA) by Banks is possible by considering the rapid development of knowledge and technology that affects products and services in the banking sector, thus requiring workforce with special expertise that cannot yet be met by the Indonesian Labor Market.

2. In the utilization of Foreign Workers by Banks, besides complying with Laws concerning banking or Sharia banking and implementation regulations issued by the Financial Services Authority, Banks must comply with labor regulations issued by the agency handling labor affairs and other related agencies.

3. Banks may utilize Foreign Workers in specific job duties and positions. These specific positions are adjusted based on the nature of the Bank's share ownership by foreign parties, which are classified into 4 (four) categories as referred to in Articles 12 through 15 of the POJK on Foreign Worker Utilization.

4. The utilization of Foreign Workers must be followed by efforts to improve the quality of human resources in the banking sector, including through knowledge transfer programs from Foreign Workers to companion staff.

5. Companion staff are Indonesian Workers appointed to accompany and/or assist Foreign Workers, receive knowledge transfer directly, and are prepared as potential replacements for Foreign Workers.

II. JOB DUTIES

1. The Financial Services Authority determines specific job duties that can be filled by Foreign Workers by considering the needs of the banking industry as well as the availability and capability of Indonesian Workers.

2. The job duties that can be filled by Foreign Workers are established as follows:

a. Treasury
The treasury job duty includes tasks related to, among others, the arrangement and management of the Bank's assets and liabilities to optimize profits, liquidity management, net foreign exchange position, and the sale of treasury products directly or indirectly.

b. Risk Management
The risk management job duty includes tasks related to, among others, risk management and mitigation.

c. Information Technology
The information technology job duty includes tasks related to, among others, the management of administrative processes for banking transactions, customer data management, network development, system development, planning and reengineering of banking operational processes, management of banking support facilities, and management of electronic banking products, using information technology facilities.

d. Credit or Financing
The credit or financing job duty includes tasks related to, among others, the disbursement of credit or financing by the Bank, especially for fields of credit or financing disbursement that are not yet widely mastered by Indonesian Workers.

e. Investor Relations or Customer Relations
The investor relations or customer relations job duty includes tasks related to, among others, strategies and efforts to obtain and cultivate quality relationships with customers in order to obtain business opportunities from existing customers or prospective customers through banking product services and sales.

f. Marketing
The marketing job duty includes tasks related to, among others, efforts to market banking products and services, both in terms of fund gathering and fund disbursement.

g. Finance
The finance job duty includes tasks related to, among others, financial accounting aspects, management accounting, financial reporting, taxation, financial planning, and financial strategy.

III. UTILIZATION OF FOREIGN WORKERS

1. In accordance with the POJK on Foreign Worker Utilization, Banks intending to utilize Foreign Workers in their business activities must submit their Foreign Worker utilization plan to the Financial Services Authority in the Bank's Business Plan.

2. The Foreign Worker utilization plan as referred to in item 1 is included in the Bank's Business Plan in the section on organizational and human resource development plans. Matters included in the human resource development plan include, among others:

a. reasons for utilizing Foreign Workers and reasons for not or not yet using Indonesian Workers; b. job duties and positions to be filled, including the scope of work and required competencies;
c. planned number of requirements;
d. duration of utilization; e. names of companion staff; and f. knowledge transfer program plans:

1. training plans for companion staff; and
2. training plans by Foreign Workers.

3. When the Bank intends to realize the utilization of Foreign Workers, the Bank follows the following procedures:

a. In the Event that the Foreign Worker is a Candidate Director, Candidate Commissioner, Candidate Branch Manager of a Bank Located Abroad, or Candidate Representative Office Leader

1. The Bank submits a request for approval of Foreign Worker utilization as a Director, Commissioner, Branch Manager of a Bank Located Abroad, or Representative Office Leader by following the methods or procedures and requirements as regulated in legislation concerning the assessment of competence and propriety and meeting requirements according to other related regulations.

2. The submission of document requirements for the Limited Stay Permit (KITAS) and Foreign Worker Employment Permit (IMTA) as regulated in administrative document requirements for candidate Directors, candidate Commissioners, Branch Managers of Banks Located Abroad, or Representative Office Leaders in related regulations, can be carried out at the time of submitting the report on the appointment of Foreign Workers to the Financial Services Authority.

b. In the Event that the Foreign Worker is a Candidate Executive Official

1. The Bank submits a request for approval of Foreign Worker utilization as an Executive Official to the Financial Services Authority, attached with the following administrative documents:

a) 1 (one) passport photo from the last 1 (one) month, size 4x6 cm; b) photocopy of passport; c) curriculum vitae; d) photocopy of work experience certificate from previous company and certificates of expertise, profession, education, or training; e) photocopy of draft employment contract or assignment letter from the Bank; and f) example of signature and initial.

2. The assessment procedure for candidate Executive Officials is conducted by the Financial Services Authority through research on the completeness and correctness of the administrative documents submitted by the Bank and other information. If deemed necessary, the Financial Services Authority conducts interviews to request confirmation and/or delve deeper into information.

3. In accordance with the POJK on Foreign Worker Utilization, the appointment of Executive Officials must be reported by the Bank to the Financial Services Authority within a maximum of 10 (ten) working days after the effective date of appointment, attached with:

a) photocopy of employment contract; and b) photocopy of KITAS and IMTA issued by the competent agency.

4. Requests and reports on the utilization of Foreign Workers as Executive Officials are submitted by the Bank to the Financial Services Authority at the address:

a) Department of Supervision of the Relevant Bank or Department of Sharia Banking, for Banks with headquarters or branch offices of banks located abroad in the Special Capital Region of Jakarta Province; or

b) Financial Services Authority Regional Office or Local Financial Services Authority Office according to the area where the Bank's headquarters is located.

c. Reporting on the Utilization of Candidate Experts or Consultants

1. The report on the utilization of Experts or Consultants is submitted to the Financial Services Authority within a maximum of 10 (ten) working days after the appointment of the Expert or Consultant by the Bank, stating the reasons for utilizing Foreign Workers, accompanied by the following administrative documents:

a) 1 (one) passport photo from the last 1 (one) month, size 4x6 cm; b) photocopy of passport; c) curriculum vitae; d) photocopy of employment contract; e) example of signature and initial; f) photocopy of proof or statement regarding Expertise Qualifications; g) photocopy of KITAS and IMTA issued by the competent agency; and h) letter of statement of no dual office holding.

2. The report on the utilization of Foreign Workers as Experts or Consultants as referred to in item 1) is submitted by the Bank to the Financial Services Authority at the address:

a) Department of Supervision of the Relevant Bank or Department of Sharia Banking, for Banks with headquarters or branch offices of banks located abroad in the Special Capital Region of Jakarta Province; or

b) Financial Services Authority Regional Office or Local Financial Services Authority Office according to the area where the Bank's headquarters is located.

3. The position of Expert or Consultant is a personal position, i.e., a position filled by a Foreign Worker individually due to technical or individual capabilities who receives an assignment from a consultancy company according to the required job duty. Thus, the position of Expert or Consultant is a position filled for a limited duration to help the Bank handle new operational problems or problems that the Bank cannot yet handle on its own temporarily. The position is outside the Bank's organizational structure, and the person concerned is only obligated to provide opinions and/or perform specific work according to the required technical capabilities. Experts or Consultants do not have the authority to establish policies that affect the Bank.

4. The Financial Services Authority may order the Bank to cancel and/or stop the appointment of Foreign Workers as Experts or Consultants if the person concerned does not meet the Financial Services Authority's regulations.

4. In accordance with the POJK on Foreign Worker Utilization, branch offices of banks located abroad that intend to utilize Foreign Workers as branch managers must meet requirements, one of which is that among the members of the Branch Management of the Bank Located Abroad, there is at least 1 (one) official with Indonesian citizenship. This obligation is fulfilled by the Bank if the Bank has appointed an Indonesian Worker as a management official of the Bank overseeing the personnel job duty and the compliance job duty.

5. Banks intending to extend the duration of Foreign Worker utilization must follow the following procedures:

a. Submit a request for extension of the duration of Foreign Worker utilization along with the reasons for extension to the Financial Services Authority addressed to:

1. Department of Supervision of the Relevant Bank or Department of Sharia Banking, for Banks with headquarters or branch offices of banks located abroad in the Special Capital Region of Jakarta Province; or

2. Financial Services Authority Regional Office or Local Financial Services Authority Office according to the area where the Bank's headquarters is located,

within a maximum of 30 (thirty) working days before the end of the Foreign Worker's contract period or employment period.

b. Submit the latest administrative documents, as follows:

1. photocopy of passport;
2. photocopy of employment contract or appointment letter;
3. photocopy of KITAS and IMTA from the competent agency; and
4. report on the realization of knowledge transfer implementation.

6. One of the requirements in the utilization of Foreign Workers as Executive Officials and Experts or Consultants by Banks is the ability to use the Indonesian language adequately within a maximum of 1 (one) year after the person concerned assumes the position. With adequate mastery of the Indonesian language, it is expected that the Foreign Worker can communicate well with Indonesian Workers, thereby facilitating the knowledge transfer process. The fulfillment of Indonesian language mastery is demonstrated, among other ways, by submitting to the Financial Services Authority a certificate of Indonesian language proficiency test according to the achievable proficiency level of each Foreign Worker, issued by the competent authority, or other proof of Indonesian language mastery issued by educational institutions or Indonesian language courses registered with the competent agency.

7. In accordance with the POJK on Foreign Worker Utilization, at the end of each year, the Bank is required to report on the realization of Foreign Worker utilization (Directors, Commissioners, Executive Officials and/or Experts or Consultants), as well as the realization of training and knowledge transfer that has been carried out (Executive Officials and/or Experts or Consultants) in the Business Plan Realization Report. In the report, at least the following matters must be stated:

a. name of Foreign Worker;

b. job duty of Foreign Worker;
c. position of Foreign Worker;
d. name of companion; e. evaluation results of the companion; f. education or training for companion staff; and g. institution organizing education or training.

8. The Financial Services Authority may cancel the approval of Foreign Worker utilization that has been granted, if it is later found that, among others:

a. information or documents provided by the Bank are incorrect or false; b. the person concerned is declared guilty of committing a criminal act that has obtained a final legal decision; or
c. Foreign Worker or Bank does not fulfill obligations as regulated in the POJK on Foreign Worker Utilization after approval is granted by the Financial Services Authority.

9. If necessary, the Bank may submit a request to the Financial Services Authority to request an exemption from the utilization of Foreign Workers outside the job duties established in this Financial Services Authority Circular and/or request an exemption from specific positions other than those established in the POJK on Foreign Worker Utilization.

10. The Financial Services Authority will consider the request as referred to in item 9 by considering, among others:

a. the Bank's needs; b. the availability and capability of Indonesian Workers;
c. fulfillment of criteria required in the POJK on Foreign Worker Utilization;
d. efforts made by the Bank to find Indonesian Workers to meet those needs; and/or e. the Bank's efforts to improve the capabilities and expertise of Indonesian Workers internally, including for example human resource capability improvement programs in the form of sending Indonesian Workers to be placed at the Bank's headquarters or branch offices or its business group abroad.

11. One of the criteria required in the POJK on Foreign Worker Utilization as referred to in item 10.c. is, among others, that if Foreign Workers are not utilized, the Bank will face significant loss risks or reduced profit potential, both financially and non-financially. This can occur, for example, in the use of Foreign Workers as Experts to overcome damage to the Bank's information system technology facilities because the Expert is not available in Indonesia. Meanwhile, if the damage is not addressed immediately, the Bank will face significant loss risks, both financially and non-financially, such as a decrease in the number of customers or loss of customer confidence due to frequent problems with information system technology.

12. The duration of utilization of Foreign Workers for specific positions other than those established in the POJK on Foreign Worker Utilization, as referred to in item 9, is a maximum of 1 (one) year. This duration can be extended at most 2 (two) times, each for a maximum of 1 (one) year. In this case, the Bank must submit a request first to the Financial Services Authority to obtain approval for the extension. If the Bank has planned from the beginning to utilize Foreign Workers for more than 1 (one) year, when the Bank submits a request for exemption from the specific position, it can be accompanied by a request for approval for the first extension for a maximum of 1 (one) year. These provisions do not negate the Bank's obligation to continue to fulfill the methods and procedures for licensing according to regulations regulated by the agency handling labor affairs and other related agencies.

13. Requests for exemption from Foreign Worker utilization according to job duties as referred to in item 9 and the duration of Foreign Worker utilization as referred to in item 12 are submitted by the Bank to the Financial Services Authority addressed to:

a. Department of Supervision of the Relevant Bank or Department of Sharia Banking, for Banks with headquarters or branch offices of banks located abroad in the Special Capital Region of Jakarta Province; or

b. Financial Services Authority Regional Office or Local Financial Services Authority Office according to the area where the Bank's headquarters is located.

14. Requests for exemption from Foreign Worker utilization according to job duties as referred to in item 9 are attached with the following administrative documents:

a. reasons for the exemption and/or extension request; b. for Executive Officials, documents as required in item 3.b.1); and/or
c. for Experts or Consultants, documents as required in item 3.c.1).

IV. IMPLEMENTATION OF KNOWLEDGE TRANSFER PROGRAMS

1. In accordance with the POJK on Foreign Worker Utilization, Banks using Foreign Workers as Executive Officials, Experts or Consultants, and/or other positions based on approval from the Financial Services Authority, are required to appoint at least 2 (two) Indonesian Workers as companion staff during the performance of duties, conduct education and work training for companion staff according to the job qualifications held by the Foreign Worker, and ensure the implementation of training or teaching by the Foreign Worker, especially to Bank employees. In addition to Bank employees, training and teaching can also be conducted for students, university students, and/or the general public.

2. Knowledge transfer is carried out through training or teaching by Foreign Workers, especially to Bank employees. The implementation of training or teaching can be conducted through seminars, training, short courses, lectures, or other knowledge transfer programs via direct face-to-face interaction with training or teaching participants. Training or teaching can be organized by internal parties or external parties of the Bank.

The implementation of training or teaching activities is reported in the Business Plan Realization Report, which must include at least:

a. name of Foreign Worker; b. time and location of activity implementation;
c. number of participants;
d. duration of activity; e. activity material; and f. photos of the activity.

For the purpose of examination by the Financial Services Authority, the Bank must account for documents related to the training, including hardcopy and softcopy of training materials, activity photos, participant attendance lists, and other information or supporting evidence regarding the realization of training activities.

3. Banks must comply with legislation concerning human resource development in the banking sector. Fulfillment of these provisions can be one of the considerations for the Financial Services Authority in granting approval as referred to in Article 4 and Article 16 of the POJK on Foreign Worker Utilization.

V. CLOSING

At the time this Financial Services Authority Circular Letter takes effect, Bank Indonesia Circular Letter Number 9/27/DPNP concerning the Implementation of Foreign Worker Utilization and Knowledge Transfer Programs in the Banking Sector is revoked and declared invalid.

This copy is consistent with the original

Legal Director 1
Legal Department signed

Yuliana

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

Established in Jakarta on July 19, 2017

EXECUTIVE HEAD OF BANKING SUPERVISOR
FINANCIAL SERVICES AUTHORITY, signed

NELSON TAMPUBOLON