On January 26, 2016, the Financial Services Authority (Otoritas Jasa Keuangan – "OJK") issued Rule No. 5/POJK.03/2016 concerning Bank Business Plan (Rencana Bisnis Bank – "RBB") ("POJK 5"), which replaces Bank Indonesia (BI) Regulation No. 12/21/PBI/2010 concerning Bank Business Plan ("PBI 12"). After the enactment of POJK 5, the implementing regulations of PBI 12 will still be applicable for as long as they do not contravene POJK 5.
Generally, the provisions under POJK 5 are similar to PBI 12. Below we set out certain key provisions.
Formulation of RBB
Commercial banks must formulate RBBs annually, drafted by the Board of Directors (BOD) and approved by the Board of Commissioners (BOC).
The RBB shall consider the following:
- external and internal factors that might affect the business continuity of the bank;
- prudential principles
- implementation of risk management
- banking soundness principles
In the event a bank has a sharia business unit, the RBB should also include a specific business plan for the sharia unit, which forms an integral part of the RBB.
Substance of RBB
Under POJK 5, RBB should consist of the following:
- executive summary
- management strategy policy
- application of risk management and bank's recent performance
- financial statement forecast and assumptions used
- ratios forecast and other certain posts
- funding plan
- fund investment plan
- capital participation plan
- capitalization plan
- organization improvement and human resources
- product issuance plan and/or office network changes
- other information
The requirement for a capital participation plan is new under POJK 5. The capital participation plan shall consist of:
- business sector
- forecast of funds that will be injected
- percentage of ownership including controlling aspects
- any plan for sharia business unit spin-off
Submission and Reporting Obligations
Submission of RBB
The bank shall submit the RBB no later than end-November each year. The RBB is subject to comment from OJK.
Under certain conditions that may significantly affect the bank's performance, a bank may revise/amend the RBB. Such revision/amendment should be submitted to OJK no later than end-June of the current year.
The Bank shall submit quarterly RBB realization reports:
- at the latest 1 month after the quarter ends; or
- for banks lacking an online office delivery system with more than 100 hundred branches, at the latest 45 calendar days after the quarter
The bank shall submit RBB supervision reports once per semester at the latest 2 months after the semester ends.
Sanctions for Noncompliance with Reporting Obligations
If the bank is late in submitting the RBB, RBB realization report, or RBB supervision report, it shall be imposed with penalty of IDR 1 million per working day.
In the event the bank fails to submit the report(s) within a month after the end of the reporting period, the bank will be deemed not submitting and will be imposed with additional penalty of IDR 50 million.
Sanctions for Violation of POJK 5
For any violation of other provisions of POJK 5, the bank may be imposed with administrative sanctions: (i) warning letter, (ii) downgrading of bank's soundness level, (iii) freezing of certain business activity, (iv) inclusion of bank's management and/or shareholders on the list of parties who are automatically disqualified for the fit and proper test.
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.