Overview of Indonesia’s Financial Conglomeration Regulation
The Financial Services Authority, known in Indonesian as Otoritas Jasa Keuangan (OJK), has officially launched the eagerly awaited regulatory framework governing financial conglomeration in Indonesia. The OJK Regulation No. 30 of 2024 (POJK 30) establishes guidelines for the creation and appointment of Financial Portfolio Companies (Perusahaan Induk Konglomerasi Keuangan, PIKK). These legal entities are tasked with overseeing, consolidating, and supervising all activities related to financial conglomerates. This significant regulation was enacted on December 23, 2024.
Transition from Previous Regulation
With the introduction of POJK 30, the previous OJK Regulation No. 45 / POJK.03 / 2020 (POJK 45), which outlined the earlier framework for financial conglomeration, has been formally revoked. This transition marks a pivotal moment in Indonesia’s effort to create a robust regulatory environment for its financial sector.
Key Provisions of POJK 30
POJK 30 aligns with the criteria for PIKK as detailed in Law No. 4 of 2023, aimed at developing and strengthening the financial sector (P2SK Law). The new regulation outlines the criteria needed for groups to be recognized as financial conglomerates. Entities that meet these criteria must file for PIKK establishment by June 23, 2025, ensuring compliance with the latest regulatory standards.
Defining Financial Conglomerates
To qualify as financial conglomerates under POJK 30, controlling shareholders of financial institutions within a group must adhere to specific asset thresholds. A conglomerate is defined as:
- Having consolidated assets of at least 100 trillion IDR with a minimum of two institutions across different financial sectors;
- Or possessing consolidated assets between 20 trillion IDR and 100 trillion IDR with at least three institutions in various financial sectors.
The categories of eligible financial services entities have also broadened to include venture capital firms, peer-to-peer lenders, and crowdfunding service providers, expanding the scope of participation in the financial sector.
Types of Financial Portfolio Companies (PIKK)
POJK 30 establishes two types of PIKK: operational and non-operational.
- Operational PIKK: A financial service institution managed and appointed by controlling shareholders.
- Non-operational PIKK: A non-financial service institution designated by the controlling shareholders.
The PIKK plays a critical role in integrating the financial activities of its conglomerate, overseeing strategic investments, providing management services, and enabling capital allocation among its members.
Control and Ownership Criteria
POJK 30 refines the definition of control compared to POJK 45 by detailing the elements that qualify an entity to exercise control over its conglomerate. A PIKK is considered as controlling its members if it:
- Holds over 50% of member shares;
- Possesses 50% or fewer shares but still exerts control;
- Is required by accounting standards to consolidate financial statements;
- Jointly controls a member with other parties holding between 20% and 50% of shares under a written agreement.
Implications and Next Steps
Entities planning to establish a PIKK must submit their applications by June 23, 2025, and any necessary restructurings to form a financial conglomerate should be completed within one year from the initial approval, unless otherwise authorized by the OJK.
In summary, POJK 30 represents a significant advance in integrating oversight within Indonesia’s financial services landscape, reinforcing the country’s commitment to a cohesive and resilient financial ecosystem. Institutions looking to comply with these new requirements should take proactive measures to align with the new standards. For more information regarding POJK 30 and its potential implications for your organization, please reach out to us for expert guidance.