20 Apr 2020
Indonesia’s FSA Relaxes ‘Single Presence Policy’ in Banking Sector but Tightens Minimum Capital Requirements


A. Introduction


The Indonesian Financial Services Authority (Otoritas Jasa Keuangan / “OJK”) recently issued Regulation No. 12/POJK.03/2020 (“Reg. 12”, effective 17 March 2020),[1] which relaxes bank ownership rules under the OJK’s Single Presence Policy but simultaneously increases minimum capital requirements.


It is important to note that Reg. 12 was conceived prior to the Covid-19 crisis and the issuance of emergency economic legislation by the Government on 31 March 2020, which touches on some of the same ground as that covered by Reg. 12. Consequently, the big question now is whether Reg. 12 continues to be relevant, given the perfect storm facing the national economy and the Indonesian financial-services industry? We will return to this question in Section F below.


B. Definitions


A “Bank” is defined by Reg. 12 as a conventional or shariah-based commercial bank.


A “Banking Group” is two or more banks that form part of a single group based on common ownership and/or control.


A Controlling Shareholder (“CS”) is a legal entity, individual and/or business group that holds 25% or more of the issued shares with voting rights of a company or bank, or less than 25% of the issued shares with voting rights of a company or bank but which exerts direct or indirect control.


A Controlling Shareholder of a Bank (“Bank CS”) may be (i) a Bank; (ii) an incorporated non-bank financial institution; (iii) an incorporated entity that is not a financial institution; or (iv) an individual.


C. Banking Sector Consolidation Schemes under Reg. 12


Reg. 12 allows a Bank CS to own more than one Bank, provided that the prescribed requirements for banking sector consolidation are satisfied. Consolidation may be carried out in the following ways:


  1. Merger, amalgamation or integration. Such actions may be undertaken by a Bank CS in respect of Banks that it owns or between a Bank that it owns and a Bank owned by a different CS.

  3. Acquisition followed by merger, amalgamation, or integration. This may be undertaken by a party that:

    1. Is a Bank CS and which has acquired one or more Banks; or
    2. Will become a Bank CS and will acquire two or more Bank(s)


  5. Establishment of a Banking Group for Banks owned by a Bank CS. This may be undertaken by:

    1. A Bank CS that owns 1 or more banks;
    2. An incorporated non-bank financial institution, an incorporated entity that is not a financial institution, an individual or a CS domiciled outside Indonesia that owns 2 or more Banks.


  7. Establishment of a Banking Group following the spinning off of a sharia unit by a conventional Bank; and

  9. Establishment of a Banking Group following the acquisition of 1 or more Banks by a Bank CS.


D. Establishment of Banking Groups


As mentioned in Section C above, Reg. 12 provides for the establishment of Banking Groups (Kelompok Usaha Bank / KUB) and their formal recognition as such by the OJK. This is a new initiative that is intended to introduce greater flexibility into the application of the OJK’s ‘Single Presence Policy,’ which previously prohibited a party from being the CS of more than one bank.[2] As the OJK admits in its FAQ Sheet on Reg. 12, the previous policy resulted in a lack of flexibility as it required all the Banks owned by a single CS to be merged, amalgamated or integrated, thereby giving rise to a number of drawbacks in practice. For example, it would prevent the CS of one Bank from acquiring and then growing a smaller niche Bank (such as a Bank focused on a specific sector, like MSME lending) as the smaller Bank would have to be merged, amalgamated or integrated with the larger Bank, thus stripping the smaller Bank of its individual identity. By permitting the establishment of a Banking Group, Reg. 12 now allows Banks that are owned by a single CS to retain their individual characteristics and focuses.


In order for a Banking Group to be established under Reg. 12, the following criteria must be satisfied:


  1. there is (i) a CS, (ii) a legal entity that consolidates and directly controls the entire Banking Group’s operations (“Holding Company”), and/or (iii) an executor for the Holding Company, which is/are capable of fulfilling the capital and liquidity adequacy of the member Banks in the Banking Group; and
  2. the proposed merger, consolidation, or integration will not result in a significant increase in the business scale of the member Banks in the Banking Group, with due compliance with the requirement that the CS, Holding Company and/or executor of the Holding Company are capable of fulfilling the capitalization and liquidity requirements of the Banks that form part of the Banking Group.


As a Banking Group will consist of a number of banks, it should have the following structure:[3]


  1. Holding Company in the form of a Bank; and
  2. One or more Bank subsidiaries.


In relation to the above, if the CS is a Bank, then this Bank will serve as the Holding Company in the Banking Group structure. However, if the CS is an incorporated non-bank financial institution, an incorporated entity that is not a financial institution, an individual or is domiciled outside of Indonesia and owns 2 or more Banks, one of the Banks owned by such CS will be designated as the Holding Company. The Bank so designated will be the Bank with the greater total assets and/or better soundness level.


The proposal for the establishment of a Banking Group, along with its proposed structure and documents evidencing the designation of a Holding Company, must be submitted to OJK in accordance with the following timeline:


  1. Within 1 month of the issuance of  Reg. 12 in the case of the establishment of a Banking Group as referred to in Section C.3 above;
  2. Upon submission of an application for the spinning off of a sharia business unit in the case of the establishment of a Banking Group as referred to in Section C.4 above;
  3. Upon submission of an acquisition license in the case of the establishment of a Banking Group as referred to in Section C.5 above.


E. Minimum Core-Capital and Capital Equivalency-Maintained Asset Requirements


Reg. 12 prescribes significantly higher minimum core-capital requirements that must be satisfied on a phased basis by Banks, subject to exemptions for those undergoing consolidation processes. While minimum core capital was set at Rp 100 billion previously, Regulation 12 establishes the following new core-capital requirements:


Rp 1 trillion (approx. USD 63.5 mio)

By not later than 31 December 2020

Rp  2 trillion (approx. USD 127 mio)

By not later than 31 December 2021

Rp 3 trillion (approx. USD 190.5 mio)

By not later than 31 December 2022



In addition, the following minimum Capital Equivalency-Maintained Asset (CEMA) requirements must be fulfilled by the Indonesian branch offices of banks domiciled overseas:


Rp  2 trillion (approx. USD 127 mio)

By not later than 31 December 2021

Rp 3 trillion (approx. USD 190.5 mio)

By not later than 31 December 2022


It should be noted that a Bank whose core capital is less than Rp 1 trillion is required to submit an action plan to the OJK by 16 June 2020, explaining how it proposes to meet the minimum core-capital requirements going ahead. A failure to do so is subject to administrative sanctions ranging from written warnings up to business-license revocation.


F. ABNR Commentary


Reg. 12 provides for greater flexibility in the application of the OJK’s Indonesian Banking Architecture plan and related Single Presence Policy, which encourage banks to consolidate so as to strengthen the structure of the banking industry and promote healthy competition in the sector. Such greater flexibility is provided by, among other things, an exemption from the Single Presence Policy in the case of Banking Groups that satisfy the establishment and recognition criteria set out in Reg. 12.


Further, to ensure that Banks are adequately capitalized, Reg. 12 requires Banks to gradually increase their core capital in prescribed stages.


However, as we alluded to in Section A above, Reg. 12 was conceived prior to the eruption of the Covid-19 crisis, which represents nothing less than an existential threat to the global economy.


In response to the crisis, the Indonesian government has issued emergency legislation (effective 31 March 2020),[4] which provides a legal basis for the government and relevant agencies (including the OJK) to take prompt action to limit the fallout.


In the banking sector, the emergency legislation authorizes the OJK to directly instruct financial institutions to conduct various actions, including merger, amalgamation, acquisition, integration and/or conversion, and mandates it to issue ancillary / implementing regulations to give effect to these new powers.


In the light of all this, it remains to be seen how effective Reg. 12 will be in practice, particularly given that few will be interested in investing in the banking sector until such time as a clearer picture emerges as to what the future shape of the global economy will be after the pandemic recedes. Furthermore, the looming deep recession that is predicted by most economic forecasters will likely make it difficult for many Banks to satisfy the new capitalization requirements prescribed by Reg. 12.


Contact Us


Should you have any queries or require legal advice on how you can best protect your interests during this time of uncertainty, please contact any of the persons below, call us on +6221-2505125, or email us at


Mr. Emir Nurmansyah (

Mr. Nafis Adwani (

Mr. Agus Ahadi Deradjat (


This edition of ABNR News and the contents hereof are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained herein. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.


[1] OJK Regulation No. 12/POJK.03/2020 on Consolidation of Commercial Banks (Peraturan Otoritas Jasa Keuangan No. 12 /POJK.03/2020 Tentang Konsolidasi Bank Umum). 

[2] See OJK Regulation No. 39/POJK.03/2017

[3] Article 5 of OJK Reg. 12/2020.

[4] Government Regulation in Lieu of Law No. 1 of 2020 (Peraturan Pemerintah Pengganti Undang-undang Nomor 1 Tahun 2020)