26 Jan 2018
New Rules on Employment of Expatriates in Banking Sector

The Financial Services Authority (“OJK”) has issued Regulation No. 37/POJK.03/2017 (“OJK Reg. 37”), which sets out new rules on the employment of expatriates and the transfer of knowledge in the banking sector. OJK Reg. 37 revokes Bank Indonesia (“BI”) Regulation No. 9/8/PBI/2007 (“BI Reg. 9”).

The following provisions of OJK Reg. 37 are of particular note:

• The supervisory role previously performed by BI is now vested in the OJK. In order to employ an expatriate, a bank is required to obtain the approval of the OJK and to also submit reports on its expatriate staff to the OJK. Article 10.2 of OJK Reg. 37 establishes a 10-day time limit for the submission of such reports, which time limit was not provided for under BI Reg. 9.
• Under Article 4(3) of OJK Reg. 37, the approval of the OJK serves as the basis for the processing of the expatriate’s work permit by the Ministry of Manpower (“MOM”).

OJK Reg. 37 maintains the rules set out in BI Reg. 9 on positions that may be filled by expatriates, and the prohibition on expatriates being employed in functions related to human resources.

The key provisions of OJK Reg. 37 may be summarized as follows:

1. A bank with a minimum of 25% foreign ownership may employ expatriates as directors, commissioners, executive officers, and/or expert advisors or consultants.
2. A bank with less than 25% foreign ownership may only employ expatriates as expert advisors or consultants. However, if a foreign shareholder of such bank is also a controlling shareholder, the bank may employ expatriates as directors and commissioners.
3. A branch office may only employ an expatriate as the head of the branch office or as an expert advisor or consultant.
4. A representative office may only employ an expatriate as the head of the representative office or as an expert advisor or consultant.

In certain circumstances, banks in the categories referred to in points b) to d) may employ expatriates in positions other than the permitted positions for a maximum period of up to one year (Article 16(2)), based on a recommendation from the OJK.

One week after the issuance of OJK Reg, 37, the OJK issued Circular Letter No. 42/SEOJK.03/2017 (“Circular 42”), which sets out in greater detail the requirements and mechanisms for the employment of expatriates and the transfer of knowledge in the banking sector.

Circular 42 also provides that expatriates may be employed in banking-sector positions related to the treasury, risk management, information technology, lending and financing, investor and customer relations, marketing, and finance functions.

In conclusion, the OJK is helping to promote foreign investment by allowing expatriates to occupy key positions in the banking sector, while at the same time encouraging them to share their skills and knowledge with their Indonesian colleagues. (By: Rully Hidayat & Priscilla Rotua Manurung)