JAKARTA (TheInsiderStories) - Indonesia’s Financial Services Authority (OJK) has issued ruling on criteria for systemic bank which will help the authority in undertaking steps to prevent and resolving crisis in the financial system. The ruling is an implementation of the Law No.9, 2016 on the Prevention and Mitigation of Financial System Crisis (PPKSK)
Chairman of OJK Muliaman Hadad said the launch of the ruling is part of the mandate given to OJK in order to implement the aforementioned law. As mandated by the law, OJK has set 19 action plans, 21 rules on the status of banks.
Under the new ruling (POJK No. 14/POJK.03/2017 on the declaration of status and follow up supervision on commercial banks, a bank will be declared under intensive supervision, if:
- Its capital adequacy ratio CAR) is higher than 8 percent, core capital ratio (tier-1) less than certain percent, set by OJK.
- Ratio of Minimum Statutory Reserves (GWM) in rupiah is the same or higher than the level set by OJK, in which the bank is considered to have basic liquidity problem.
- Net Non-performing loan (NPL) ratio is more than 5 percent of total credit
- Banks healthiness level stands at 4 or 5.
A bank is under intensive supervision for up to one year and can be extended for one year if its NPL net is still above 5% of total loan and its healthiness level is at composite 4 or 5.
A bank under intensive supervision is required to increase its capital and meet the minimum GWM level. The bank is also required to implement the recovery plan to address its financial problem. Under this condition, OJK will ask the Committee for Financial System Stability (KKSK) to determine steps to address the problems of a systemic bank which is under the intensive supervision.
The recovery plans are set out based on the OJK ruling (POJK) No 15/POJK.03/2017 about recovery plan for systemic bank.
One option to resolve solvency problems of banks is setting up a bridge bank, established by Deposit Insurance Corporation or Lembaga Penjaminan Simpanan (LPS) as set out in the OJK ruling , POJK No 16/POJK.03/2017 on Bridge Bank. Based on the ruling, part or all assets of the problem bank is transferred to the bridge bank, which can be in the form of conventional or syariah bank. The formation of a bridge bank has to be approved by OJK.
Chairman of OJK Muliaman Hadad said so far 12 banks have met the criteria as systemic bank. (*)
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