Written Order to Problematic Banks Due to the COVID-19 Outbreak
As part of its effort to stabilise the nation’s financial system amidst the COVID-19 outbreak, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan, “OJK”) has recently issued OJK Regulation No. 18/POJK.03/2020 concerning Written Order to Handle Bank Problems (“POJK 18/2020”). Effective as of 21 April 2020, this POJK 18/2020 gives OJK power to force banks to merge, consolidate, acquire and/or integrate by issuing a written order.
The written order can be issued by OJK to banks that meet the following criteria:
- banks that, based on OJK’s evaluation, deals with financial problems that may disrupt its business continuity or is considered incapable of dealing with its ongoing or incoming financial problems; and/or
- banks which the controlling shareholder is incapable of strengthening the Bank internally.
Other than the above criteria, OJK can also issue a written order to accept merger, consolidation, acquisition and/or integration for banks which health levels reach composite rating of 3 (peringkat komposit 3) or “quite healthy” as a result of accepting such merger, consolidation and/or acquisition.
Banks that are given written orders by OJK must prepare a follow-up plan to be submitted to OJK. The follow-up plan must at least set out a series of steps and schedules on the proposed merger, consolidation, acquisition and/or integration until it becomes effective in accordance with the relevant OJK regulation. Failure to submit the follow-up plan will result in the imposition of administrative sanctions by downgrading or limiting the bank’s business activities.
A written order can be issued by OJK to conventional banks (including sharia conventional banks), rural banks (including sharia rural banks) and branch of foreign banks. If the written order is issued to banks which is a public company, such bank may be exempted from the requirement for disclosure of information of public company with prior approval from OJK. Banks that are forced to carry out or accept the merger, consolidation, acquisition, and/or integration may also be exempted from the relevant OJK regulations regarding single presence policy, share ownership and/or time limit to fulfil the minimum core capital of banks.
If you have any questions or require additional information, please contact Sandro Mieda Panjaitan of Roosdiono & Partners (a member of ZICO Law).
This alert is for general information only and is not a substitute for legal advice.