Indonesian banking regulations: Shareholding, capitalization and management of commercial banks on the basis of OJK regulation n ° 12 / POJK.03 / 2021 – Finance and Banking

The Indonesian banking market has grown rapidly alongside the use of information technology and digital transactions. According to recent data, at least five digital banks are competing in the Indonesian market, including DigiBank, TMRW and Bank Jago which were established in the past two years. In addition, several commercial banks are currently processing the establishment of their digital banks at the Financial Services Authority / Otoritas Jasa Keuangan(“OJK“).

In view of the enormous growth of the Indonesian banking sector, OJK has issued OJK Regulation No. 12 / POJK.03 / 2021 regarding commercial banks (“Regulation OJK 12/2021“) which sets out the provisions for the oversight and operation of commercial and digital banks.

In our previous post, we discussed the establishment and reporting obligations of commercial and digital banks. Thus, we will now focus our analysis on shareholding, the capitalization requirement and the exemption from the use of foreign labor.

Shares Owned by banks: Indonesian entity banks (Bank Berbadan Hukum Indonesia Where “BHI“) are required to comply with the following requirements relating to controlling shareholders:

1. Shares held by controlling shareholders cannot be guaranteed in favor of other parties, unless the competent institutions with such authority authorize it for the rescue and processing of certain issues (Art. 35 of OJK regulation 12/2021);
2. Controlling shareholders must meet the relevant requirements established by OJK by passing the suitability test conducted by OJK (Art. 36 and 37 of OJK regulation 12/2021);
3. Controlling shareholders are prohibited from participating in any decision-making relating to the operations of BHI, unless such controlling shareholders are also directors, auditors or employees of the bank;

In addition, Article 39 of OJK Regulation 12/2021 states that any change, replacement and / or addition to controlling shareholders must be made in accordance with the provisions and requirements set out by OJK.

Failure to comply with OJK requirements will result in progressive sanctions ranging from: (i) written notifications, (ii) fines, (iii) ban on expanding business activities and / or freezing of certain business activities, to (iv) ban on ‘business activities apply to controlling shareholders, directors, auditors and / or officers of the main part of the digital bank.

Funding changes: OJK requires an IHB to send notification and / or information regarding changes in funding, including:

1. variations in the amount of paid-up capital due to the payment of the dividend which is effected by distribution of shares; and
2. changes in the shareholding structure affecting or not affecting the controlling position;

In this regard, the bank concerned will submit the notification to OJK together with: (i) the minutes of the shareholders’ meeting; and (ii) a notarial deed reaffirming this modification within 10 working days at the latest.

Failure to comply with this obligation will result in progressive sanctions ranging from (i) written notices, (ii) administrative fines, (iii) the ban on expanding commercial activities and / or the suspension of certain commercial activities, to (iv) the prohibition for the directors of the bank to become the Main Party (Pihak Utama) in accordance with the regulations in force of the OJK.

Employment of foreign workers by digital banks: OJK Regulation 12/2021 allows digital banks to employ foreign workers as directors, managers and / or experts or consultants, regardless of the current composition of their shareholder base, as stipulated in OJK Regulation n ° 37 /POJK.03/2017 on the employment of foreigners Workers and the transfer of[1]Knowledge program within the banking sector (“Regulation OJK 37/2017“) (Art. 28 (1) of OJK Regulation 12/2021).

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.