Based on Article 16A paragraph (1) Law Number 9 of 2016 on the Prevention and Control of Financial System Crisis as amended by Law Number 4 of 2023 on Development and Strengthening of the Financial Sector, Otoritas Jasa Keuangan has the authority to regulate and determine the supervisory status of a Bank. The determination of status of supervision based on certain criteria and shall consist of:
Bank under normal supervision;
Bank under restructuring; and
Bank under resolution.
As a follow-up to the regulatory mandate in Law Number 4 of 2023 on Development and Strengthening of the Financial Sector and also pay attention to the current condition, Otoritas Jasa Keuangan has issued 2 (two) regulations:
OJK Regulation (POJK) Number 5 of 2024 on the Determination of the Status of Supervision and Handling of Problems of Commercial Banks; and
OJK Regulation (POJK) Number 28 of 2023 on the Determination of the Status and Follow-up of Supervision of Rural Bank and Sharia Rural Bank.
Supervisory Approach by Otoritas Jasa Keuangan
Based on Article 29 paragraph (3) Law Number 7 of 1992 on Banking as amended several times most recently by Law Number 4 of 2023 on Development and Strengthening of the Financial Sector, supervision conducted by Otoritas Jasa Keuangan shall be conducted either directly (on site examination) or indirectly (off site supervision).
Bank Under Normal Supervision
Bank under normal supervision is the supervisory status of a Bank that does not meet the criteria as a Bank in restructuring and does not meet the criteria as a Bank under resolution. In terms of a Bank does not meet the criteria as a Bank in restructuring, however bank under normal supervision experience difficulties that endanger their business continuity, Otoritas Jasa Keuangan has the authority to do a supervisory-actions with the aim of restoring the condition of the Bank. A bank experiences difficulties that endanger its business continuity if the bank's business conditions worsen, including, among other things, marked by a decline in capital, asset quality, liquidity, and profitability, as well as bank management that is not carried out based on the principle of prudence and sound banking principles.
Bank Under Restructuring
Bank under restructuring is an increase in the supervisory status of a Bank that was previously under normal supervision with the aim of restoring the condition of the Bank. The Determination of the status of supervision as a Bank under restructuring shall be carried out in the event that the Bank is deemed to have potential difficulties that endanger business continuity. The Bank shall be assessed as having potential difficulties that endanger business continuity in the event that the Bank does not fulfill the provisions set by the Otoritas Jasa Keuangan regarding soundness level, liquidity level and/or capital level taking into account risk. The determination of Bank under restructuring criteria has regulated in OJK Regulations. Kriteria penetapan Bank dalam Penyehatan diatur dalam POJK SSK. When a Bank was appointed were as Bank under restructuring, Supervisory Actions by Otoritas Jasa Keuangan to restore the Bank's condition are carried out by establishing supervisory actions that are appropriate to the Bank's problems.
Bank Under Resolution
Bank in the resolution is a Bank declared by the Financial Services Authority as a Bank that is experiencing financial difficulties and endangering its business continuity and cannot be restructured in accordance with the authority of Otoritas Jasa Keuangan. The implementation of the authority of Otoritas Jasa Keuangan towards Bank Under Resolution shall be carried out in coordination with Lembaga Penjamin Simpanan.
