Knowledge Highlights 19 March 2025
Indonesia Financial Services Authority streamlines regulation of financial conglomerates
Indonesia Financial Services Authority or Otoritas Jasa Keuangan (“OJK”) Regulation No. 30 of 2024 on Financial Conglomerates and Financial Conglomerate Holding Companies (“Regulation No. 30”) came into effect on 23 December 2024. Regulation No. 30 regulates and provides for the supervision of financial services institutions (“FSI”) with ownership and/or control relationships across various financial services sectors. Regulation No. 30 replaces OJK Regulation No. 45/POJK.03/2020 on the same subject (“Previous Regulation”).
A financial conglomerate (“FC”) is defined in Regulation No. 30 as a group of FSIs that are connected through ownership and/or control and that operate in certain specified sectors such as banking, capital markets, insurance, pension funds, and venture capital.
Establishment of holding companies
An FC holding company is defined in Regulation No. 30 as a legal entity owned by a controlling shareholder and/or an ultimate shareholder which controls, consolidates, and is responsible for all activities of the FC (“Holding Company”). The Previous Regulation did not address Holding Companies.
A controlling shareholder and/or an ultimate shareholder of an FC are required to establish a Holding Company (that must be in the form of an Indonesian limited liability company) if the FC meets the following criteria:
(a) The total assets of the FSIs in the FC are at least IDR100 trillion and include at least two FSIs operating in two different sectors within the FC; or
(b) The total assets of FSIs in the FC range from at least IDR20 trillion to less than IDR100 trillion, with at least three FSIs operating in three different sectors within the FC.
The Previous Regulation did not address the criteria set out in (b) above.
The total assets of an FC is calculated by adding the assets of each FSI within the FC for a period of six consecutive months. The total assets and the number of FSIs used to assess compliance with the FC criteria for the first time from the entry into force of Regulation No. 30 will be calculated based on the FSIs’ financial reports as of the end of June 2024.
Under certain conditions, OJK can designate an FSI under common ownership and/or control as an FC required to establish a Holding Company, even if the total asset criteria is not met.
Overview of holding companies
A Holding Company may take the form of either an operating Holding Company or a non-operating Holding Company.
|
Criteria |
Operating Holding Company |
Non-operating Holding Company |
|
Definition |
A legal entity owned by a controlling and/or ultimate shareholder in the form of an FSI. Performs both Holding Company functions and FSI activities. |
An Indonesian limited liability company (not an FSI) owned by a controlling and/or ultimate shareholder, appointed only to act as a Holding Company. |
|
Ownership |
Owned by a controlling and/or ultimate shareholder, which is an FSI. |
Owned by a controlling and/or ultimate shareholder. Foreign investors are able to own up to 99% of its total paid-up capital. |
|
OJK approval requirement |
Must obtain prior approval from OJK to be appointed as a Holding Company. |
Must obtain prior approval from OJK to be appointed as a Holding Company. |
|
FSI status |
Already qualified as an FSI. |
Becomes qualified as an FSI upon OJK approval; assets will be included in determining if the FC meets the criteria for a Holding Company. |
|
Activities |
Conducts both Holding Company functions and FSI activities. Specifically, it must:
|
Conducts only Holding Company functions. Specifically, it must:
|
Duties and responsibilities of Holding Companies
The duties and responsibilities of a Holding Company include:
- developing and establishing a consistent strategy and risk appetite for the FC and its members;
- creating and implementing a framework to monitor compliance with the FC’s strategy and risk appetite across all its members;
- assessing the strategy and risk appetite of all FC members to ensure alignment with the FC’s overall strategy and risk appetite;
- applying prudential principles to the FC as a whole;
- managing the FC’s relationship with the wider group in line with the integrated governance framework specified in the relevant provisions, particularly when the Holding Company is part of the larger group structure; and
- strengthening, managing, and/or resolving the financial issues among FC members while ensuring their business continuity.
Criteria for ownership and control of FCs
A Holding Company must control the members of an FC if the Holding Company either owns more than 50% of the shares in its FC members or owns 50% or less but retains control over them.
If any party owns more than 20% but not more than 50% of the shares in the members of an FC, the control over those members must meet the following requirements:
- The ownership of the Holding Company and other parties in the FC must be equal; and
- The Holding Company and other parties must exercise joint control over the members of the FC, which must be based on a written agreement and evidenced by a written agreement or commitment by the owners to provide both financial and non-financial support in proportion to their respective ownership interests.
Prohibitions on cross-ownership
Members of an FC are prohibited from:
- becoming shareholders in either an operating FC Holding Company or a non-Operating FC Holding Company; and/or
- holding shares in another member of the same FC.
A member of an FC is not prohibited from holding shares in another member of the same FC under the following conditions:
- A member of an FC may hold a minority interest in another member of an FC. For example, if Holding Company X has two subsidiaries, Bank ABC and Insurance Company CDE, Bank ABC may own a minority interest in Insurance Company CDE, or vice versa. However, Bank ABC and Insurance Company CDE may not hold shares in each other, even as minority shareholders; and/or
- A member of an FC may hold shares in another member of the same FC if they are in a parent/subsidiary relationship. For example, if Bank ABC (a subsidiary of Holding Company X) has a subsidiary, Small Business Bank FGH, Holding Company X may own shares in Small Business Bank FGH. However, Small Business Bank FGH may not become a shareholder in Bank ABC and/or the Holding Company.
These exceptions are subject to compliance with the provisions of the Limited Liability Company Law.
Transitional policies
The fit and proper test assessment and the reassessment of key stakeholders in relation to non-operating Holding Companies shall be conducted in accordance with the relevant OJK regulation as applicable to the banking sector, until specific OJK regulations for such companies are issued.
