COVID-19 Pandemic: Countercyclical Policies introduced by the OJK to Preserve Indonesia Economic Stability

In order to maintain national economic stability, the Indonesia Financial Service Authority/Otoritas Jasa Keuangan (“OJK”) has issued a new provision that specifically addressed for Non-Bank Financial Services Institutions/Lembaga Jasa Keuangan Non-Bank (“LJKNB”). The new provision aims to enhance the financial system in Indonesia for the sake of supporting the economic growth amidst the unfolding COVID-19. 

Legal Frameworks: Our below executive summary refers to the OJK Regulation No. 14/POJK.05/2020 on the Countercyclical Policy to Mitigate the Impact of the Coronavirus Disease 2019 Pandemic upon the Non-Bank Financial Service Institutions. (“OJK Regulation 14/2020”)

Main Keys on the Countercyclical Policies: We provide the following main keys to the OJK countercyclical policies for LJKNB.

Scope of LJKNB: We note from Article 2 of OJK Regulation 14/2020, the LJKNB includes the following institutions:

  1. Insurance companies which include: (i) the insurance and  reinsurance company (both sharia and conventional), (ii) insurance and reinsurance broker company, and (iii) insurance loss appraisal company;
  2. Pension fund;
  3. Financing institution which includes: (i) financing company, (ii) venture capital company, and (iii) infrastructure financing company; and
  4. Other financial services institutions which include, among others, (i) pawnshop, (ii) guarantee institutions, and (iii) social security agency(Collectively referred to as “LJKNB”)

Deadlines for Periodic Reporting: We note that during the emergency status period of COVID-19 outbreak, OJK has extended the deadline for the submission of periodic reports that shall be submitted by the LJKNB to the following timespan:

  1. 14 (fourteen) working days from the due date of the monthly or quarterly report;
  2. 1 (one) month from the due date of the biannual report; and
  3. 2 (two) months from the due date of the annual report. (Art. 4 (1) of OJK Regulation 14/2020)

Note: The biannual or annual report shall be submitted on the next working days provided that the submission due date befall on Saturday, Sunday, or national holidays.

Determination of Financing Assets Quality: We note that OJK has reclined the determination of financing assets quality of debtors that are affected by COVID-19 with the financing plafond up to IDR10,000,000,000 (ten billion Rupiahs) may be assessed based on the consistency of the payment of any principal amount and/or interest or margin/profit sharing/ujrah for 1 (one) debtor or project. (Art. 8 (1) and (3) of OJK Regulation 14/2020)

Financing Restructuring:  From the Art. 9 (2) of OJK Regulation 14/2020 we can infer that the financing restructuring can be undertaken by considering at least the following:

  1. The availability of restructuring procedures and policies from the fund owners, that is signed by authorized officials if the relevant financing provision is done through joint-financing/pembiayaan bersama and joint-channeling/pembiayaan penerusan;
  2. There is a request for restructuring made by the relevant debtor; and/or
  3. Assessments of restructuring feasibility that are undertaken by the LJKNB.

Granting of New Financing: The LJKNB is allowed to grant new financing to debtors based on adequate financing analyses in order to ensure the debtor’s good faith and capabilities to pay off such financing. However, the determinations of new financing shall be conducted separately from other previous financings with requirements as follows (Art. 10 (4) OJK Regulation 14/2020):

  1. The determination of financing assets quality as regulated under the Art. 8 (1) of OJK Regulation 14/2020 is applicable for any new financing with a plafond of up to IDR 10,000,000,000 (ten billion Rupiahs);
  2. For any new financing with a plafond exceeding to IDR 10,000,000,000 (ten billion Rupiahs), the determination of the quality of assets should be undertaken in accordance to OJK relevant regulations.

Implementation Period of Relevant OJK Provisions: We note that implementation of the OJK provision on (i) the financing assets determination, (ii) financing restructuring, and (iii) granting of new financing for the Debtor impacted by the COVID-19 (collectively referred to as “Financing Provisions”) shall only prevail for 1 (one) year period. 

Mandatory Reporting on the Implementation of OJK Financing Provisions: We note that OJK requires LJKNB to submit periodic reports on the implementation of OJK Financing Provisions at the end of June 2020, September 2020, December 2020, and March 2021 through OJK communication networks system.

The article above was prepared by Marshall S. Situmorang (Partner) and Aniendita Rahmawati (Associate). 

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances. For more information, please contact us at mail@nusantaralegal.com.