Is there any legislation or proposed legislation in your jurisdiction under which financial institutions are prohibited from dealing in investments as a principal?
There is a restriction on proprietary trading by Indonesian banks in relation to equity investments.
Under Regulation of Bank Indonesia No. 15/11/PBI/2013, Indonesian banks require prior approval from Bank Indonesia to purchase equity instruments (including shares and convertible bonds) and they can only make equity investments in (i) other banks and (ii) other companies engaged in financial services. Note that such equity investments may only be carried out by Indonesian banks for long-term investments (i.e. investments for a term greater than 5 years).
To which financial institutions do the prohibitions relate?
Banks licensed in Indonesia (including foreign bank branches).
What exceptions to the ban on proprietary trading are contemplated by the legislation?
Banks (including foreign bank branch offices in Indonesia) are permitted to make temporary equity investments (in the form of shares) in the equity of a debtor for debt restructuring purposes for a maximum period of 5 years.
Can any other entity within the relevant financial institution’s group of companies carry on the prohibited activity?
If the other entity is a bank’s subsidiary, another financial institution (insurance company, pension fund or multi-finance company) or a securities company, it is also subject to certain restrictions on its equity investments.
When will the proposed legislation come into effect?
Not applicable. The Regulation of Bank Indonesia No. 15/11/PBI/2013 has been effective since 22 November 2013.
Links to the proposed legislation and any other relevant material
Please provide links to the proposed legislation and any other material.