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Maintaining Financial System Stability In Amidst COVID-19 Pandemic: Regulation of OJK Number 18/POJK.03/2020

“The purpose of POJK 18/2020 is to regulate the mechanism and procedure of written orders given to the banks. A written request contains some of the corporate actions which are conducting and receiving the consolidation, merger, acquisition, and/or integration.”

As further implementation of the authority that given by Regulation of The Government in Lieu of Law Number 1 Of 2020 on State Financial And The Stability Of The Financial System Policies To Handling  Of The COVID-19 Pandemic And/Or Threats That Are Potentially Harmful To The National Economy And/Or The Stability Of The Financial System (“Peraturan Pemerintah Pengganti Undang-Undang” or “Perppu 1/2020”), Financial Services Authority (“Otoritas Jasa Keuangan” or “OJK”) has stipulated Regulation Number 18/POJK.03/2020 on Written Order to Handle Banks Problems (“POJK 18/2020”). 

The purpose of POJK 18/2020 is to regulate the mechanism and procedure of written orders given to the banks. A written request contains some of the corporate actions which are conducting and receiving the consolidation, merger, acquisition, and/or integration with highlighted purposes on:

  1. maintaining financial system stability in amidst COVID-19 pandemic; and/or

b.    encountering menaces of economic crisis and/or financial system stability.

Criteria of Banks

Criteria of banks that receive a written order from OJK to conduct consolidation, merger, acquisition, and/or integration as follows:

  1. banks that have financial problems that can disrupt business continuity or deemed incapable with dealing pressures that occur or will be happened in the future based on OJK’s assessment; and/or
  2. banks with controlling shareholders that cannot reinforce the banks.

Moreover, the criteria of banks that receive consolidation, merger, acquisition, and/or integration as follows:

  1. Conventional or sharia commercial banks’ health levels after receive all the aforementioned corporate actions are at the lowest Composite Rating 3 (PK-3).
  2. After receiving consolidation or mergers, rural banks’ health level is at the lowest, quite healthy (cukup sehat) or Composite Rating 3 (PK-3).
Further Actions of Written Order

As being stipulated in POJK 18/2020, banks that give a written order by OJK must arrange an action plan which at least contains processes and schedules for the merger, consolidation, acquisition, and/or integration until it is useful. The procedures, tables, and effectiveness must refer to OJK’s regulation on consolidation, merger, acquisition, integration, and commercial banks conversion or OJK’s regulation on consolidation, merger, and acquisition of rural banks and sharia rural banks (“regulation of banks corporate actions”).

Furthermore, POJK 18/2020 has stipulated that banks must maintain the continuity process based on an action plan and convey the information on the progress of the action plan implementation to OJK.

Prerequisites and Procedures

Prerequisites and procedures of corporate actions that stated in written order must be by regulation of banks corporate activities with some following additional matters:

  1. Banks could announce the summary of the action plan in the Indonesian newspaper and the bank’s website.
  2. Banks could perform General Meeting Shareholders and/or other meetings related to the processes online and must be located in the Republic of Indonesia territory.
  3. Clarification for fit and proper test towards main parties candidates of banks resulted from consolidation, merger, acquisition, and/or integration could be performed online.
  4. Documents submission and/or administrative requirements of the permission process and/or implementation report could be performed by OJK’s official email or online.
  5. Documents, as mentioned in the regulation of banks’ corporate actions, must be conveyed to OJK without accompanied by permission application.
  6. Conventional or sharia commercial banks could be exempted from the provisions regarding sole ownership in Bank Indonesia, ownership of commercial bank shares, and/or time limit of minimum core capital fulfillment.
  7. The Office network of rural banks or sharia rural banks could still be maintained by the office network that established.
Sanctions

POJK 18/2020 has stipulated administrative sanctions for those who violate the provisions in this regulation. Administrative sanctions are in the form as follows:

  1. Written warning/caution.
  2. administrative sanctions, which are (i) stipulation of conventional commercial banks as rural banks or sharia rural banks or sharia commercial banks as sharia rural banks (ii) temporary suspension of some business activities of rural banks or sharia rural banks.
  3. A further administrative sanction is the interdiction of the bank’s main parties as to the main party.

Author: Kristalia Andiani Puteri

Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include capital market and financial services.

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+62- 21 50806536  | +62 – 811 877 216 |  info@gaffarcolaw.com | www.gaffarcolaw.com

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