Indonesian Legal Review: Banking

Legal Updates
Indonesian Legal Review: Banking
27 May 2016

The Financial Services Authority (the OJK) has had regulatory authority over Indonesian banks, except Bank Indonesia (BI), since December 31, 2013, as stipulated under Law No. 21 of 2011 regarding the Financial Services Authority. BI is Indonesia's central bank and maintains jurisdiction over the monetary supply.

Bank Acquisition Trends

The OJK changed its policy in 2015 for bank acquisitions involving more than 40 percent of the shares of the target bank. In the past, the acquiring bank could only initially acquire a maximum of 40 percent of the target bank's issued shares. If the acquirer wished to acquire a greater percentage, then it had to file a separate application for approval after the initial 40 percent acquisition. The application also required the acquirer and the target companies to satisfy more stringent requirements. Among others, both the acquirer and the target companies had to be public companies.

In 2015 the OJK informally changed its policy such that the acquirer is now allowed to obtain approval to acquire more than 40 percent of the shares in a target company at one time, provided the acquirer agrees to purchase more than one target company and then merges or consolidates the two subsidiaries after completion of the acquisition.

Branchless Banking

The OJK issued Circular Letter No.6/SEOJK.03/2015 regarding Non-Office Financial Services in the Framework of Inclusive Finance by Banks (OJKCL 6). OJKCL 6 implements OJK Regulation No. 19/POJK.03/2014 regarding Financial Services (POJK 19).

Among other matters, OJKCL 6 allows branchless banking. While this should be helpful for people in remote areas of Indonesia, where they have to travel far to get to the nearest bank branch, branchless banking is limited. For example, it only covers basic savings accounts.

The requirements for a basic savings account are: (i) it can only be registered under the individual name of an Indonesian citizen; (ii) it must be in Rupiah currency; (iii) there must be no minimum deposit or balance; (iv) the maximum balance in the account must not exceed Rp 20 million; and (v) the cumulative transactions in the bank account must not exceed Rp 5 million in one month.

This article is from SSEK's Indonesian Legal Review, which looks at recent legal and regulatory developments in almost 50 sectors, from Airports to Tourism. This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user's own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.

For More Information, Please Contact
Ira Andamara Eddymurthy
iraeddymurthy@ssek.com
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