OJK’s Circular Letter On The Conversion Of Rural Banks Into Islamic Rural Banks

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by Eivan Hadhy Prabowo

On January 3^rd 2017, the Financial Service Authority of Indonesia (Otoritas Jasa Keuangan or the “OJK”) promulgated the Circular Letter of OJK No. 3/SEOJK.03/2017 on Business Activity Conversion of Rural Banks into Islamic Rural Banks (the “Circular Letter No. 3/2017”). In respect of the issuance of the preceding OJK Regulation No. 64/POJK.03/2016 on Business Activity Conversion of Conventional Banks into Islamic Banks, it was deemed necessary to set the Circular Letter No. 3/2017 as the subordinate legislation on the Rural Bank conversions into an Islamic Rural Bank.

As stipulated in the Circular Letter No. 3/2017, the application for a business activity conversion permit must be filed by the director of the rural bank using the format of the application letter attached in Addendum I of the Circular Letter no. 3/2017. Such application letter must attach the following:

(a) Draft of articles of association amendment;

(b) Minutes of General Meeting of Shareholders;

(c) List of aspirant shareholders, along with the details of shares ownership;

(d) List of aspirant Board of Directors and Board of Commissioners emanating from the existing directors or commissioners or the newly proposed directors or commissioners;

(e) List of aspirant Sharia Supervisory Board (Dewan Pengawas Syariah or “DPS”);

(f) Statement letter from the shareholder, stating that the source of funds used in the ownership of the Islamic Rural Bank does not emanate from a loan in any way and is not for money laundering purposes;

(g) Organization structure plan, along with the names of executive officers;

(h) Potential and feasibility analysis on the incorporation of the Islamic Rural Bank;

(i) Business plan including 12 months business plan activity and monthly balance sheet and cumulative loss and profit report projection;

(j) Initial financial report;

(k) Corporate plan;

(l) Comprehensive work procedure systems;

(m) Operational readiness evidence; and

(n) Islamic Rural Bank office networks, including its principal office, branch office and cash office.

The performance of the business activity conversion must be reported using the format set out in Addendum II of the Circular Letter No. 3/2017, along with the proof of announcement of such conversion in local newspaper or the bulletin board within the domicile of the Islamic Rural Bank.

All of the abovementioned application must be submitted to the Islamic Banking Department of the OJK and copied to the principal office or the regional office of the OJK whichever the working area of such offices correlate with the principal office of the Rural Bank or the Islamic Rural Bank.

Furthermore, with the enactment of this Circular Letter No. 3/2017, the Circular Letter of Bank Indonesia No. 11/25/DPbS on Business Activity Conversion of Rural Banks into Islamic Rural Banks is revoked and no longer valid.

Article supplied by BUDIARTO Law Partnership