07 Jul 2014
REGULATION OF INDONESIA DEPOSIT INSURANCE CORPORATION ('LPS') ON PROCEDURES TO SELL SHARES OF FAILING BANKS

The LPS (Lembaga Penjamin Simpanan) has issued a new regulation, Number 1/PLPS/2014 of 2014, on Procedures to Sell Shares of Failing Banks (“Regulation 1/2014”), which replaces the older Regulation Number 2/PLPS/2011. The new regulation is set to provide clearer and more thorough information regarding procedures to sell shares of failing banks.

Regulation 1/2014 among others provides the following:

  • LPS must sell the entire shares of a Saved Bank. The sale of the shares may be conducted by way of (i) strategic sale; and/or (ii) other methods which are not in contradiction with the prevailing laws and regulations. The sale of the shares through the capital market as previously regulated under Regulation Number 2/PLPS/2011 is no longer permitted.
  • The sale of the shares must be conducted within the following time frame:
    1. For Failing Banks With No Systemic Impacts: 2 (two) years as of the commencement of the settlement by LPS;
    2. For Failing Banks With Systemic Impacts: 3 (three) years as of the date of the submission of their management by the Coordinating Committee to LPS.
It is interesting to note that the following former requirements are no longer in place:
  • The requirements for the prospective investors to (i) have experience in the banking industry and/or show capability to contribute to the progress of Indonesian banking industry; and (ii) not be listed in the banking industry negative list.
  • In the event the equity of a Failing Bank is positive, the former requirement for an agreement between LPS and the previous shareholders of the Bank regarding the use of the proceeds from the sale of the Bank’s shares. (by: Hafez Aditya Komar)

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07 Jul 2014
REGULATION OF INDONESIA DEPOSIT INSURANCE CORPORATION ('LPS') ON PROCEDURES TO SELL SHARES OF FAILING BANKS

The LPS (Lembaga Penjamin Simpanan) has issued a new regulation, Number 1/PLPS/2014 of 2014, on Procedures to Sell Shares of Failing Banks (“Regulation 1/2014”), which replaces the older Regulation Number 2/PLPS/2011. The new regulation is set to provide clearer and more thorough information regarding procedures to sell shares of failing banks.

Regulation 1/2014 among others provides the following:

  • LPS must sell the entire shares of a Saved Bank. The sale of the shares may be conducted by way of (i) strategic sale; and/or (ii) other methods which are not in contradiction with the prevailing laws and regulations. The sale of the shares through the capital market as previously regulated under Regulation Number 2/PLPS/2011 is no longer permitted.
  • The sale of the shares must be conducted within the following time frame:
    1. For Failing Banks With No Systemic Impacts: 2 (two) years as of the commencement of the settlement by LPS;
    2. For Failing Banks With Systemic Impacts: 3 (three) years as of the date of the submission of their management by the Coordinating Committee to LPS.
It is interesting to note that the following former requirements are no longer in place:
  • The requirements for the prospective investors to (i) have experience in the banking industry and/or show capability to contribute to the progress of Indonesian banking industry; and (ii) not be listed in the banking industry negative list.
  • In the event the equity of a Failing Bank is positive, the former requirement for an agreement between LPS and the previous shareholders of the Bank regarding the use of the proceeds from the sale of the Bank’s shares. (by: Hafez Aditya Komar)