Indonesia has recognized for some time that it has a unique opportunity to maximize its involvement in the Syariah based global economy, particularly in the provision of Syariah financial and banking products and services. However, with this recognition also came the understanding that there is a need for the implementation of best practices in the sector. This includes the implementation of Good Corporate Governance (GCG) principles, in particular Syariah compliance. To this end, Bank Indonesia (BI) has issued Regulation No. 11/33/PBI/2009 with a view to facilitating the implementation of GCG for General Syariah Banks (Bank Umum Syariah / BUS) and (Unit Usaha Syariah / UUS) Syariah Business Units.
The basic premise of the regulation is to ensure that GCG principles are implemented as a means of protecting stakeholder interests while simultaneously raising the level of compliance and codifying the ethical values encompassed in the Syariah banking sector. The principles of GCG that the regulation seeks to implement are: transparency, accountability, responsibility, professionalism, and fairness.
Generally, the implementation requirements are the same for both BUS and UUS. In essence, GCG must be implemented for all duties and functions of directors and commissioners, internal control mechanisms, duties and functions of the Syariah Supervisory Council, internal and external audits, and transparency of the financial situation of the BUS and UUS. BI is tasked with evaluating the implementation of GCG.
Each of the above requirements is then further enumerated in the succeeding articles of the regulation. For example, a former director of a BUS cannot become an independent commissioner of a related BUS without having first undertaken a cooling off period of at least six months. The regulation also deals with matters such as the business and family relationships between commissioners, directors, and other executives of a BUS or UUS and the business of the relevant BUS and UUS.
The regulation sets out in explicit detail the structure and composition of the relevant committees. The committees include a Risk Monitoring Committee, a Remuneration and Nomination Committee, and an Audit Committee. For example, the Risk Monitoring Committee must include an Independent Commissioner, an independent expert with knowledge of the Syariah banking sector, and an independent expert with knowledge of risk management.
Article 62 stipulates that BUS must submit a GCG Implementation Report annually at the end of the financial year. The report must include at a minimum a list of 15 components. These include, among others, results of a self-assessment on the outcomes of GCG implementation, remuneration package policy, list of consultants used, and the frequency that commissioners and directors meetings were held.
The regulation was issued on 7 December 2009 but comes into force on 1 January 2010.
Indonesia has recognized for some time that it has a unique opportunity to maximize its involvement in the Syariah based global economy, particularly in the provision of Syariah financial and banking products and services. However, with this recognition also came the understanding that there is a need for the implementation of best practices in the sector. This includes the implementation of Good Corporate Governance (GCG) principles, in particular Syariah compliance. To this end, Bank Indonesia (BI) has issued Regulation No. 11/33/PBI/2009 with a view to facilitating the implementation of GCG for General Syariah Banks (Bank Umum Syariah / BUS) and (Unit Usaha Syariah / UUS) Syariah Business Units.
The basic premise of the regulation is to ensure that GCG principles are implemented as a means of protecting stakeholder interests while simultaneously raising the level of compliance and codifying the ethical values encompassed in the Syariah banking sector. The principles of GCG that the regulation seeks to implement are: transparency, accountability, responsibility, professionalism, and fairness.
Generally, the implementation requirements are the same for both BUS and UUS. In essence, GCG must be implemented for all duties and functions of directors and commissioners, internal control mechanisms, duties and functions of the Syariah Supervisory Council, internal and external audits, and transparency of the financial situation of the BUS and UUS. BI is tasked with evaluating the implementation of GCG.
Each of the above requirements is then further enumerated in the succeeding articles of the regulation. For example, a former director of a BUS cannot become an independent commissioner of a related BUS without having first undertaken a cooling off period of at least six months. The regulation also deals with matters such as the business and family relationships between commissioners, directors, and other executives of a BUS or UUS and the business of the relevant BUS and UUS.
The regulation sets out in explicit detail the structure and composition of the relevant committees. The committees include a Risk Monitoring Committee, a Remuneration and Nomination Committee, and an Audit Committee. For example, the Risk Monitoring Committee must include an Independent Commissioner, an independent expert with knowledge of the Syariah banking sector, and an independent expert with knowledge of risk management.
Article 62 stipulates that BUS must submit a GCG Implementation Report annually at the end of the financial year. The report must include at a minimum a list of 15 components. These include, among others, results of a self-assessment on the outcomes of GCG implementation, remuneration package policy, list of consultants used, and the frequency that commissioners and directors meetings were held.
The regulation was issued on 7 December 2009 but comes into force on 1 January 2010.
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