OJK ISSUED REGULATIONS REGARDING HANDLING OF COVID-19 IMPACT

Jakarta, 22 April 2020. The Financial Services Authority issued five OJK Regulations (POJK) as a follow-up to OJK's authority in implementing Perppu No. 1/2020 on State Financial Policy and Financial System Stability for Handling Coronavirus Disease 2019 (COVID-19) and/or In Order to Face Threats that Harm National Economy and/or Financial System Stability. This POJK is to support efforts to maintain financial system stability and encourage the movement of the national economy. The Financial Services Authority on April 21, 2020 determined five POJK, namely:

1. POJK Number 14/POJK.05/2020 Concerning Countercyclical Policies on the Spread of Coronavirus Disease 2019 for Nonbank Financial Services Institutions

This POJK is a follow-up provision for the Non-Bank Financial Industry (IKNB) in conducting relaxation policies that have previously been submitted through a letter of the Chief Executive of IKNB Supervision to IKNB business actors. The IKNB COVID-19 POJK includes, among others, the regulations concerning the provision of financing restructuring for debtors affected by COVID-19 and various other provisions such as:

a. Deadline for submitting periodic reports;

b. Implementation of a fit and proper test;

c. Determination of asset quality in the form of Financing and Financing restructuring;

d. Solvability calculation of insurance companies, sharia insurance companies, reinsurance companies, and sharia reinsurance companies;

e. Calculation of the quality of funding of pension funds that organizes a benefit pension program;

f. Implementation of asset management provisions according to the age group of participants (life cycle fund) for pension funds that carry out definite contribution pension plans.

2. POJK Number 15/POJK.04/2020 Concerning Plans and Implementation of General Meeting of Shareholders of Public Companies

This POJK is an amendment to the Financial Services Authority Regulation No. 32/POJK.04/2014 concerning Plans and Implementation of a Public Company Shareholders' Meeting. This POJK is issued to increase shareholder participation in the General Meeting of Shareholders of the Public Company, especially in the establishment of attendance quorums. Shareholders can electronically authorize third parties to represent them and to vote at the GMS.

The main points of regulation in this POJK are as follows:

a. Provisions regarding notification of agenda, announcement and summons of the GMS;

b. The obligation of the public company to provide an electronic authorization alternative for shareholders to attend and vote at the GMS;

c. Electronic authorization is carried out using the Electronic GMS Implementation System (e-GMS) provided by the e-GMS Provider or a system provided by a Public Company;

d. Parties who can receive authorization electronically include:

1) Participants administering the securities/securities sub-account of the shareholders;

2) Parties provided by public companies; or

3) Parties appointed by shareholders.

e. Activities of e-RUPS Providers can only be carried out by the Depository and Settlement Institution appointed by the Financial Services Authority or other parties approved by the Financial Services Authority.

3. POJK Number 16/POJK.04/2020 Concerning the Implementation of a General Meeting of Shareholders of a Public Company

This POJK regulates the process of making corporate business decisions quickly and precisely in the implementation of the GMS of a Public Company through teleconferencing media, video conferencing, or other electronic media. It is possible for a Public Company to hold a GMS electronically, so that the EMS can be carried out effectively and efficiently. In general, the technical implementation of the GMS electronically is as follows:

a. It still requires a limited physical GMS (a minimum of GMS chairman, 1 member of the board of directors and/or 1 member of the board of commissioners, and supporting professional);

b. Shareholders are given the opportunity to be physically present, as long as the Public Company provides a certain quota (not for all shareholders);

c. The presence of shareholders electronically at the electronic GMS can replace the physical presence of shareholders and is counted as meeting the attendance quorum;

d. Under certain conditions, a public company may not carry out a GMS physically or limit the presence of physical shareholders either partially or wholly in the implementation of an electronic GSM;

e. Certain conditions are determined by the Government or with the approval of the Financial Services Authority.

4. POJK Number 17/POJK.04/2020 Concerning Material Transactions and Changes in Business Activities

This POJK is issued to support the mandate in Article 23 paragraph (1) letter b of Perppu No. 1 of 2020 and is an amendment to Bapepam and LK Regulation Number IX.E.2 concerning Material Transactions and Changes in Main Business Activities.

This regulation amendment is needed to perfect the definition and procedure of the Material Transaction, clarify the substance of the regulation, and increase effectiveness of the regulation to improve the protection of public shareholders and the quality of information disclosure in Material Transactions and Changes in Business Activities.

All provisions in this POJK take effect six months after anectment except for regulations that provide exceptions for financial service institutions under certain conditions from the obligation to implement the principle of disclosure in the Capital Market field at the time this POJK is enacted.

The main points of regulation in the POJK are as follows:

a. Expansion of the scope of the definition of Material Transactions, that is, every transaction carried out by a public company or a controlled company that meets the value limits set in this POJK;

b. Expansion of the limit on the Material Transaction value, initially the transaction value is equal to 20% or more of the equity of the Public Company, to the transaction value equal to 20% or more of the equity of the Public Company and if the Public Company has negative equity, then the calculation of the transaction value is equal to 10% or more of the total assets of the public company;

c. Completion of the scope of the Material Transaction so that it includes:

1) Material Transactions that disrupt business continuity;

2) BUMN restructuring transactions;

3) Transactions conducted by financial service institutions under certain conditions; and

4) Dilution of material value;

5) Regulations in the POJK provide exceptions for financial services institutions conducting Material Transactions that are exempt from the obligation to disclose information to the public, but are still required to report to OJK.

5. POJK Number 18/POJK.03/2020 Concerning Written Orders for Handling Bank Problems

This OJK mandates OJK to take the steps needed to maintain financial system stability, especially in the banking sector amid the threat of economic slowdown as a result of the spread of the COVID-19 pandemic.

This POJK generally consists of:

a) The scope of regulation applies to Banks, namely Conventional Commercial Banks (BUK), Sharia Commercial Banks (BUS), People's Credit Banks (BPR), Sharia People Financing Banks (BPRS), and branch offices of banks domiciled overseas;

b) OJK's authority to give Written Orders to Banks to:

1. Conduct merger, consolidation, acquisition, and/or integration; and/or

2. Accept merger, consolidation, acquisition, and/or integration.

c) Written Orders are given to Banks that meet the criteria based on OJK assessments;

d) Obligations to Banks given Written Orders to draw up an action plan, and to carry out and maintain a smooth process of merger, consolidation, acquisition, and/or integration in accordance with the action plan;

e) In implementing Written Orders by the Bank to carry out or accept merger, consolidation, acquisition, and/or integration:

1) There are some adjustments to the process of merger, consolidation, acquisition, and/or integration;

2) BUK or BUS, based on OJK approval, can be excluded from the provisions regarding sole ownership in Indonesian banks, ownership of commercial bank shares, and/or deadline for fulfilling minimum core capital;

3) For BPR or BPRS, office network can still be maintained in accordance with the BPR or BPRS office network area that has been established.

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