15 May 2013

Bank Indonesia recently issued Bank Indonesia Regulation No. 14/15/PBI/2012 concerning Commercial Banks’ Assets Quality Rating (“Regulation No. 14/2012”), which obliges commercial banks (“Banks”) to rate their assets quality in the manner set forth in this regulation.  Regulation No. 14/2012 revokes all previous Bank Indonesia regulations on the same subject matter which were issued in the period of 2005 to 2009, and has been effective since 24 October 2012. 


The quality rating obligation applies to both productive assets and non productive assets. The productive assets consist of loans, securities, interbank placements, acceptances, claims on securities under reverse repurchase agreements, derivative claims, equity participations, off balance sheet items and other equivalent provisions of funds (point no. 3 of Article 1). The non-productive assets are assets other than the productive assets which have loss potential, namely, foreclosed collateral (Agunan yang Diambil Alih/AYDA), abandoned properties, interoffice accounts and suspense accounts (point no. 4 of Article 1).
The quality rating must be conducted in accordance with the provisions of Regulation No. 14/2012; for instance, the quality rating of a loan is to be assessed based on the business prospect, the performance of the debtor and the debtor’s ability to pay the loan.  The assets quality rating must be reported to Bank Indonesia in a report which is submitted at least quarterly, i.e. as per the end of March, June, September and December.


Regulation No. 14/2012 also provides sanctions for Banks’ non-compliance with the obligation to rate their assets in accordance with the provisions of Regulation No. 14/2012.  Among the sanctions are administrative sanctions in the form of written warnings, suspension of the Bank’s business activities, and/or inclusion of the Bank’s Board of Directors and/or shareholders in the list of bank officers who failed Bank Indonesia’s fit and proper test.  (by: Anny Yulia)