The Indonesian Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) just enacted OJK Regulation No. 30/2024 on Financial Conglomeration and Financial Conglomerations Holding Companies (Perusahaan Induk Konglomerasi Keuangan – “PIKK”) (“OJKR 30/2024”), replacing OJK Regulation No. 45/POJK.03/2020 (“OJKR 45/2020”) on the same matter.
As elaborated below, OJKR 30/2024 introduces stricter compliance requirements for financial conglomerates and a broader scope of financial institutions subjected to the new regulation.
Expanded Scope of Financial Conglomerates
Under this new framework, the definition of financial conglomerates now includes all types of financial institutions including pension funds, venture capital firms, and peer-to-peer lending companies on top of banks, multi-finance companies, insurance firms, and securities companies as previously stipulated under OJKR 45/2020.
PIKK
The regulation requires the establishment of a PIKK by a controlling or ultimate shareholder of financial institutions in the same group, if the financial group meets one of the following criteria:
- Total consolidated assets of the Indonesian financial institutions within the same financial group: at least IDR 100 trillion and consist of at least two financial institutions in different financial sectors; or
- Total consolidated assets of the Indonesian financial institutions within the same financial group: between IDR 20 trillion and IDR 100 trillion and consist of at least three financial institutions in different financial sectors.
The financial assessment for these thresholds must be conducted based on financial statements as of June 2024, whether audited or unaudited.
Financial groups that qualify as financial conglomerates must submit their PIKK applications by June 23, 2025. OJK retains the authority to designate a group as a financial conglomerate even if it does not meet the specified criteria above, particularly if the group’s business activities have a significant impact on the financial sector. This allows OJK to maintain a higher level of scrutiny over financial groups with diverse products, high transaction volumes, or substantial public influence.
Types of PIKK
The regulation recognizes two types of PIKK:
- Operational PIKK: Functions both as a holding company and a financial services company.
- Non-operational PIKK: Serves exclusively as a holding company.
Board members of PIKK must undergo a fit-and-proper to ensure compliance with governance standards.
Exemptions and Prohibitions
Certain institutions are exempted from the requirement to establish a PIKK, including, rural banks (both conventional and sharia), foreign bank branch offices, and state-owned or local government-owned financial institutions.
Additionally, as a measure to prevent conflict of interest and to strengthen the transparency within the financial conglomerates, the regulation strictly prohibits cross-shareholding, preventing any financial institution within the same conglomerate from owning shares in the PIKK or owning shares in other member of a financial conglomerate (in reciprocal manner). As an illustration: PT Bank ABC and PT Asuransi DEF’s are owned by PIKK X. In this structure: (i) each of PT Bank ABC and PT Asuransi DEF are not allowed to own shares in PIKK X and (ii) PT Bank ABC and PT Asuransi DEF cannot reciprocally holding shares in each other, although, for instance, PT Bank ABC may hold shares in PT Asuransi DEF (or the other way around).
Key Takeaways
Given the increased regulatory requirements, financial institutions should:
- Conduct an internal assessment of their corporate structure and asset volume to determine the applicability of the requirements under OJKR 30/2024 to their groups.
- If applicable, begin preparations for PIKK formation and regulatory approvals (including conducting corporate restructuring, as necessary).
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