Indonesia's banking market has been growing rapidly along with the use of information technology and digital transactions. According to the recent data, at least five digital banks are competing within the Indonesian market, including DigiBank, TMRW, and Bank Jago that were established within the last 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").
Given such tremendous growth in Indonesia's banking sector, OJK has issued OJK Regulation No. 12/POJK.03/2021 regarding Commercial Banks ("OJK Regulation 12/2021") that sets out provisions on the supervision and operation of commercial and digital banks.
In our previous publication, we have addressed the establishment and reporting obligations of commercial and digital banks. Thus, we will now focus our analysis on the share ownership, capitalization requirement, and exemption of the foreign manpower utilization.
Shares Ownership of Banks: Indonesian Entity Banks (Bank Berbadan Hukum Indonesia or "BHI") are required to comply with the following controlling shareholders requirements:
- Shares owned by the controlling shareholders cannot be secured in favour of any other parties, unless the relevant institutions with such authority allow that for the rescue and handling of certain issues (Art. 35 of OJK Regulation 12/2021);
- The controlling shareholders shall meet the relevant requirements set up by OJK by passing the fit-and-proper test conducted by OJK (Art. 36 and 37 of OJK Regulation 12/2021);
- The controlling shareholders are prohibited from involving in any decision making related to the BHI operations, unless such controlling shareholders are also the directors, commissioners, or bank employees;
In addition, Art 39 of OJK Regulation 12/2021 states that any change, replacement, and/or addition to the controlling shareholders shall be conducted in accordance with the provisions and requirements set out by OJK.
Failure to comply with the OJK requirements will result in gradual sanctions from: (i) written notices, (ii) fines, (iii) prohibition to expand business activities and/or freezing of certain business activities, to (iv) prohibition of business activities applied to the controlling shareholders, directors, commissioners, and/or executive officials of the digital bank's main party.
Changes on Capitalization: OJK requires a BHI to send a notification and/or information in relation to changes in the capitalization including:
- changes in the amount of paid-up capital due to dividend payment that is done through shares distribution; and
- changes in the structure of shares ownership affecting or not affecting the controlling position;
In this regard, the relevant bank shall submit the notification to OJK along with the: (i) minutes of shareholder meeting; and (ii) notarial deed restating such amendment in no later than 10 working days.
Failure to do so will result in gradual sanctions of from (i) written notices, (ii) administration fines, (iii) prohibition to expand business activities and/or suspension of certain business activities, to (iv) prohibition for the bank's executive officials to become the Main Party (Pihak Utama) pursuant to OJK prevailing regulations.
Employment of Foreign Workers by Digital Banks: OJK Regulation 12/2021 allows digital banks to employ foreign workers as their directors, executive officers, and/or experts or consultants regardless of their current shareholding composition as stipulated in OJK Regulation No. 37/POJK.03/2017 on Employment of Foreign Workers and the Transfer-of[1]Knowledge Program Within the Banking Sector ("OJK Regulation 37/2017") (Art. 28 (1) of OJK Regulation 12/2021).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
