BANKS’ CAPITAL REQUIREMENTS AND CUSTOMER PROTECTION: WHAT YOU NEED TO KNOW
New Regulations in Indonesia
The Indonesian Financial Services Authority (OJK) has implemented new regulations to ensure banks maintain a minimum capital requirement and provide better customer protection. These regulations aim to promote financial stability and consumer trust in the Indonesian banking industry.
Minimum Capital Requirements for Commercial Banks
According to OJK Regulation No. 11/POJK.03/2016, commercial banks are categorized based on their core capital:
- KBMI 2: Core capital exceeding IDR 6 trillion up to IDR 14 trillion
- KBMI 3: Core capital exceeding IDR 14 trillion up to IDR 70 trillion
- KBMI 4: Core capital exceeding IDR 70 trillion
The minimum capital requirement for commercial banks is set at the lowest of:
- 8% of risk-weighted assets for Commercial Banks with risk profile rating 1
- 9% to less than 10% of risk-weighted assets for Commercial Banks with risk profile rating 2
- 10% to less than 11% of risk-weighted assets for Commercial Banks with risk profile rating 3
- 11% to 14% of risk-weighted assets for Commercial Banks with risk profile rating 4 or 5
Strengthening Risk Management and International Standards
The OJK has issued OJK Regulation No. 27/2022, which aims to strengthen risk management and align with international standards, specifically Basel III: Finalising post-crisis reforms. The amendment requires banks to calculate market risk-weighted assets for all banks, effective January 1, 2024.
Outsourcing Supporting Tasks
OJK Regulation No. 9/POJK.03/2016 permits banks to outsource supporting tasks within banking business activities and activities supporting banking business, as long as certain criteria are met.
Customer Protection Regulations
The OJK has emphasized the importance of customer protection through OJK Regulation No. 22/2023 concerning Consumer and Public Protection in the Financial Services Sector. The regulation aims to ensure legal certainty and provide protection to consumers by promoting:
- Adequate education
- Openness and transparency
- Fair treatment
- Responsible business conduct
Commercial banks are required to provide a 24-hour consumer complaint service, which includes:
- Receiving complaints
- Handling complaints
- Resolving complaints
If an agreement cannot be reached regarding the resolution undertaken by the bank, consumers may submit complaints to OJK or seek dispute resolution through alternative settlement institutions approved by OJK or the court.
Compensation Schemes for Bank Customers
Banks are required to provide evidence to defend themselves and prove whether there is an element of error if a claim for compensation is made. The OJK has emphasized the importance of compensation schemes that cover bank customers in the event of unlawful acts.
Conclusion
These regulations aim to ensure that commercial banks maintain a minimum capital requirement and prioritize customer protection, promoting financial stability and consumer trust in the Indonesian banking industry. By providing better protection for consumers and strengthening risk management, these regulations will help to build confidence in the Indonesian banking system.