On 30 July 2021, the Financial Services Authority (“OJK”) has issued OJK Regulation No. 12/POJK.03/2021 on Commercial Banks (“POJK 12/2021”). POJK 12/2021 was issued to anticipate, amongst other things, a business development and banking trend including the development and innovation of information technology. One of the interesting topics of POJK 12/2021 is the introduction of provisions on digital banks.

Under POJK 12/2021, a digital bank is defined as an Indonesian legal entity bank (“Bank”) which provides services and engages in its business activities mainly through electronic channels without a physical office other than a head office or using a limited physical office.

In engaging in its business activities, a digital bank must comply with all the regulations which apply to Banks. Further, Banks which operate as digital banks can also implement ‘banking synergy’, through cooperation between banks within a bank business group, with a Bank as the controlling shareholder (ie which holds (i) at least 25% of shares with voting rights in the issued capital of the Bank or (ii) less than 25%, but it can be proved that it has direct or indirect control over the Bank, or a subsidiary of a non-bank financial services institution, for the optimization of efficiency and resources by providing support and value-added contributions to the business, services and operational activities of the relevant parties.

Each of the prospective members of the Board of Directors or the Board of Commissioners must pass a fit and proper test conducted by the OJK. Once he/she has been approved by the OJK, he/she must be appointed as a Director or Commissioner (as relevant) by the General Meeting of Shareholders of the Bank within 6 months of the issuance of the OJK approval.

Digital banks are allowed to employ foreign citizens as directors, executive officers, and experts or consultants without considering the foreign shareholdings in them, but still subject to the utilization of foreign manpower requirements under OJK Regulation No. 37/POJK.03/2017 on The Employment of Foreign Manpower and Transfer of Knowledge Programs in the Banking Sector.

There are main aspects of POJK 12/2021 which a Bank which intends to engage in the digital banking business must consider.

You may read a full article about it here.