Do senior bank staff, including non-executive directors, have to be registered with your national regulatory authority?
Directors, commissioners, and executive officers of an Indonesian bank have to be registered with the Financial Services Authority (Otoritas Jasa Keuangan “OJK”, which has taken over regulatory supervision of the Indonesian banking sector from Bank Indonesia).
In Indonesia, executive officers are those officers of the bank who are directly responsible to the board of directors or who have significant influence over the bank’s policies and/or operations. In that regard, the executive officers of a bank include heads of divisions, regional offices, branch offices, the risk management unit, the compliance unit and the internal audit unit (or other equivalent positions).
If your national regulatory authority requires registration of senior bank staff what are the requirements?
Registration with the OJK requires the relevant candidates to pass a “fit and proper” test conducted by the OJK. The “fit and proper” test covers an assessment of an individual’s integrity, competence and financial soundness.
The OJK has a statutory obligation to issue a decision as to whether a particular candidate is “fit and proper” no later than 30 business days after its receipt of the complete application together with the relevant supporting documents.
Is there legislation specific to the banking sector that provides for penalties to be levied against senior staff for mis-managing a bank?
There are no specific regulations regarding mis-management. However, the Indonesian banking law (Law No. 7 of 1992 as amended Law No. 10 of 1998) provides that commissioners, directors or employees of a bank are subject to:
- imprisonment for a term of between three to eight years; and/or
- a fine of between Rp 5 billion (approximately USD 454,545 based on an exchange rate of USD 1 = Rp 11,000) to Rp 100 billion (approximately USD 9,090,909)
for their respective failures to implement any necessary measures to ensure the bank's legal compliance.
Note that the commissioners, directors ,and executive officers of a bank may also be subject to fit and proper re-evaluation if there is indication of problems relating to their integrity, competence and financial soundness (e.g. if such persons were involved in any acts which endanger the bank’s business, or if such persons are deemed to have management problems).
What is the maximum amount the regulator can fine an individual?
For legal compliance, as mentioned in No. 3 above, the maximum fine is Rp 100 billion (approximately USD 9,090,909).
In addition, Indonesian banking law also provides a maximum fine of Rp 200 billion (approximately USD 18,181,818) which can be imposed on any individuals (which can include the directors, commissioners and executive officers of a bank) for violation of a bank’s secrecy rules.
Is there legislation in place that requires banks to have in place remuneration policies and practices that are consistent with effective risk management?
Yes, the requirement is provided in OJK Regulation No. 45/POJK.03/2015 on the Implementation of Remuneration Governance in Banks.
The regulations aim to ensure that banks shall apply the principles of Good Corporate Governance through all of its business and management including remuneration practices that should be consistent with effective risk management.
Is there any legislation planned in your jurisdiction that will strengthen the accountability of senior bank staff?
Indonesia’s House of Representatives is currently considering a new draft banking bill (the Banking Bill) which, if passed into law in its current form, will provide an increase in the penalty to be imposed on directors, commissioners and executive officers to a maximum of Rp 500billion (approximately USD 45,454,545) for their unlawful actions for the purpose of their personal interest.