Bank Indonesia Circular Letter on Bank Business Plans

Following the issuance of Bank Indonesia (‘BI’) Regulation No. 12/21/PBI/2010 on Bank Business Plans, BI recently issued Circular Letter No. 12/27/DPNP to all commercial banks in Indonesia on the subject of bank business plans (‘Circular Letter’). The rationale behind the issuance of the Circular Letter is to further elaborate on the previously set out requirements, such as format guidelines for the financial reports, which have to follow the prevailing accounting standards as well as BI’s specific requirements.

Commercial banks are obliged to create a business plan in order to formulate their policy and business development. The Circular Letter provides further details on the scope of the business plan, which consists of: an executive summary, policy and management strategy, risk management and bank performance implementation, financial report projection, projection of capital ratios and certain other items, funding plan, investment plan, capital plan, organization and human resources development, release of new product or new activities, development and/or network changes, as well as other information.

Section III of the Circular Letter sets out the scope of the realization and supervision reporting obligations that have to be submitted to BI. The format of the report is contained in an appendix.

Furthermore, elaborating on the sanctions imposed by BI Regulation No. 12/21/PBI/2010, the Circular Letter, in Section IV, provides details of the calculation method and sample cases illustrating late submission of the business plan and/or reporting obligation. A sample 2011 business plan is also provided in an appendix.

The Circular Letter repeals its predecessor, Circular Letter No. 6/44/DPNP, dated 22 October 2004, on Commercial Bank Business Plans. However, provisions contained in Section III, dealing with the realization and the supervision reporting obligations will remain valid until the end of the 2010 business plan reporting period.

For an overview of BI Regulation No. 12/21/PBI/2010 on Bank Business Plans see ILD Number 181 12 November 2010.

The Circular Letter has been in force since 25 October 2010.