COVID-19: KPPU and OJK Address Mergers Between Problematic Banks in Indonesia

By Ira A. Eddymurthy and Indrawan D. Yuriutomo

In response to the COVID-19 pandemic and its possible effect on the banking and financial sectors, Indonesia\'s Financial Services Authority (Otoritas Jasa Keuangan or \"OJK‚Äù) has issued a regulation to encourage mergers between problematic banks.

OJK Regulation No. 18/POJK/03/2020 regarding Written Order to Handle Problematic Banks ("POJK 18/2020") is an implementing regulation for Article 23 of Government Regulation in Lieu of Law No. 1/2020, which authorizes the OJK to issue a written order to financial services providers to conduct a merger, consolidation, acquisition, integration and/or conversion. Please see our earlier discussion of this matter here.

Indonesia\'s Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or \"KPPU‚Äù), which oversees mergers in Indonesia, on June 5, 2020, issued a press release on POJK 18/2020 (\"KPPU Press Release‚Äù). In its release, the KPPU requested that the OJK remind all banks of the obligation to notify the KPPU of a merger, consolidation or acquisition when submitting its written order to the banks.

According to the KPPU Press Release, notification to the KPPU during the COVID-19 pandemic is continuing as usual, even though most KPPU employees are working from home. It noted that between March 2020 and June 5, 2020, the KPPU had received 56 notifications of various types of transactions including mergers, share acquisitions, and transfers of productive assets. This indicates that the KPPU notification process has not been hampered by the pandemic.

It is important to note that the KPPU must be notified in writing of a merger and/or consolidation of business entities or the acquisition of the shares of other companies with an asset value and/or sale value exceeding a certain threshold. Written notification must be given no later than 30 business days from the date on which the merger and/or consolidation of business entities or the share acquisition takes legal effect. The notification thresholds as intended above are:

1. asset value of at least IDR2.5 trillion; and/or

2. sale value of at least IDR5 trillion.

For business entities in the banking sector, the obligation to provide written notice to the KPPU shall be applicable in the event that the asset value exceeds IDR20 trillion.

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