In October 2020, the Indonesia Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) issued OJK Regulation No. 45/POJK.03/2020 (“POJK 45/2020”) on Financial Conglomerates. By this regulation, the government expects to monitor in more detail the condition of financial conglomerates, the condition of which if problematic could create potential risks to the financial services sector. This regulation replaces the previous OJK regulations regarding the implementation of integrated risk management for financial conglomerates and the implementation of integrated corporate governance for financial conglomerates, respectively.
The following are some of the key provisions set out in POJK 45/2020:
The criteria for a Financial Conglomerate
A “Financial Conglomerate” has the following criteria:
- the total group assets are greater than or equal to IDR100,000,000,000,000 (one hundred trillion rupiah). OJK calculates the total asset value of financial conglomerates based on both the audited and the unaudited financial statements as per the end of June and the end of December; and
- the business activities of the group are in more than one type of Financial Services Institutions (“LJK”). The types of LJK covered in this regulation include banks, insurance and reinsurance companies, finance companies and/or securities companies.
Nevertheless, OJK may also designate two or more LJKs in one group as a Financial Conglomerate even though they do not meet the criteria set out above.
Further, note that the connection between LJKs which are directly owned and controlled by the central government is exempted from the definition of a Financial Conglomerate under this regulation.
Corporate Charter (Piagam Korporasi)
A Corporate Charter is defined as an agreement between the “Main Entity” (being the principal LJK within a Financial Conglomerate or the LJK designated by the controlling shareholder of a Financial Conglomerate) and the LJK members of the Financial Conglomerate, and POJK 45/2020 requires such Main Entity to compose and have a Corporate Charter.
The Corporate Charter must be executed by the board of directors of the Main Entity and the board of directors of the LJK members of the Financial Conglomerate, and it must cover at least the following matters: (a) the purpose, basis of creation, and scope; (b) the Financial Conglomerate’s structure; and (c) the duties and responsibilities of the board of directors of the Main Entity and the LJK members of the Financial Conglomerate.
For the first time, the relevant Main Entity must submit the Corporate Charter to OJK by 31 December 2020. Any failure to comply with this obligation will be subject a fine of maximum of IDR 30,000,000 (thirty million rupiah).