OJK Regulates Risk-Management Measures for Banks Engaging in Mutual-Funds Activities

Consistent with its general commitment to enhancing risk management across the financial-services sector, the Financial Services Authority (Otoritas Jasa Keuangan ‘OJK’) has issued Circular Letter No. 4/SEOJK.03/2017 on the Implementation of Risk-Management Measures by Banks Engaging in Mutual-Funds Activities (“4/2017 Circular Letter”).
 
The 4/2017 Circular Letter offers a response to OJK Regulation No. 18/POJK.03/2016 on the Implementation of Risk-Management Measures by Conventional Banks,[1] as well as Regulation No. 65/POJK.03/2016 on the Implementation of Risk-Management Measures by Sharia Banks and Sharia Business Units. The letter sets out a number of requirements relating to general and specific measures that must be implemented by any banks offering mutual-funds services (“Banks”). Furthermore, the 4/2017 Circular Letter also sets out provisions relating to planning and reporting obligation for Banks, as well as auditing and evaluation, and also sanctions for non-compliance.
 
Prior to the issuance of the 4/2017 Circular Letter, these same matters were regulated under Bank Indonesia (“BI”) Circular Letter No. 7/19/DPNP dated 14 June 2005, which was subsequently amended by BI Circular Letter No. 11/36/DPNP dated 31 December 2009 (“BI Circular Letter”).
 
Risk-Management Measures
 
There are two types of risk-management measures that Banks are required to comply with. Firstly, general measures, which apply to all Banks, and secondly, specific measures, which are dependent upon the role of the Banks as regards mutual-funds services, i.e. banks acting as investors, as sales agents or as custodian banks. Details of these various measures are outlined in the table below: