Abstract
The formulation of corporate governance standards in People’s Credit Banks (PCBs) has taken a long time. In its development, after the 1997 Indonesian financial crisis, from 1998 to 2014, a number of acts and regulations that directly or indirectly govern corporate governance standards in PCBs were promulgated by Indonesian authorities. Nevertheless, the standards in PCBs are still poor. Just recently, in March and December 2015, the Indonesian Financial Services Authority (IFSA) issued two more main regulations concerning corporate governance standards in PCBs. As a result, the standards have become more complex and need to be further studied.
The paper is presented at the 3rd International Conference on CSR, Sustainability, Ethics & Governance Sustainable Management as a New Business Paradigm, held by Cologne Business School and Global Corporate Governance Institute in collaboration with Loyola University New Orleans, Murdoch University, London Metropolitan University and Nanjing University of Finance and Economics, Cologne Germany, 1–3 August 2016.
The author is a PhD Student at School of Law/Faculty of Law, Queensland University of Technology, Brisbane, Australia. The author teaches at Faculty of Law, Satya Wacana Christian University, Salatiga, Central Java, Indonesia.
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Notes
- 1.
The crises are marked by the closure of 16 banks in November 1997 by Bank Indonesia. The closures of banks continued in April 1998, and seven banks were closed. Still in April 1998 another seven banks were taken over by the Government but due to the poor financial performance,; three of them were liquidated. In September 1988 the Indonesian Government merged four state-owned banks into a new bank named Bank Mandiri. Meanwhile, at same year, another 128 private national banks were required to take part in a programme called bank restructuring conducted by the Indonesian Banks Restructuring Agency (IBRA). The result of the programme was 74 banks were permitted to continue their operation without recapitalization, 9 banks were agreed to continue their operation with recapitalization, 7 banks were taken over by IBRA, and 38 banks were liquidated (Kameyama et al. 2005).
- 2.
Other systemic problems are corruption and weaknesses of state-manage capitalism. See Radelet and Sachs (2000) and Claessens and Fan (2002). Meanwhile, Sadguna (2005) documents poor quality management, imbalance ownership structure, lack of effective control measures and consistency in law enforcement processes. Other disadvantages as pointed out by Clarke and Rama (2009) are the small amount of families who control national corporate asset.
- 3.
See Bank Indonesia Regulation Number 8/4/PBI/2006 concerning The Implementation of Good Corporate Governance for General Banks. See also Bank Indonesia Regulation Number 8/14/PBI/2006 concerning The Amendment of Bank Indonesia Regulation Number 8/4/PBI/2006 concerning The Implementation of Good Corporate Governance for General Banks. See also Bank Indonesia Circular Letter Number 15/15/DPNP dated 29 April 2013 concerning the Implementation of Good Corporate Governance for General Banks.
- 4.
For more details, see Coordinator Minister of Economic and Industrial Decree Number: KEP.31/M.EKUIN/06/2000 concerning The Establishment of National Policy Committee on Corporate Governance. See also Coordinator Minister of Economic and Industrial Decree number: KEP/31/M.EKUIN/08/1999 concerning The Establishment of National Policy Committee on Corporate Governance. See also Coordinator Minister of Economic Decree Number: KEP/49/M.Ekon/11/2004 concerning The Establishment of National Policy Committee on Governance.
- 5.
See The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 6.
See The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 7.
See Law Number 40 of 2007 concerning Limited Liability Companies.
- 8.
See Law Number 10 of 1998 concerning The Amendment of Law Number 2 of 1992 concerning Banking.
- 9.
See Law Number 5 of 1962 concerning Regional Enterprise.
- 10.
See Law Number 17 of 2012 concerning Cooperatives.
- 11.
See Minister of Home Affairs Regulation Number 22 of 2006 concerning The Managing of Local Government Owned People’s Credit Banks.
- 12.
See consideration letter b of Bank Indonesia Regulation Number 8/26/PBI/2006 concerning People’s Credit Banks. See also considerations of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks.
- 13.
See Articles 13 and 14 of Law Number 10 of 1998 concerning The Amendment of Law Number 2 of 1992 concerning Banking.
- 14.
See Article 2 of Bank Indonesia Regulation Number 8/26/PBI/2006 concerning People’s Credit Banks.
- 15.
See Bank Indonesia Regulation Number 11/23/PBI/2009 concerning Sariah People’s Financing Banks.
- 16.
See Law Number 10 of 1998 concerning the Amendment of Law Number 2 of 1992 concerning Banking. See also Law Number 40 of 2007 concerning Limited Liability Companies.
- 17.
PCBs’ licence revoked by Bank Indonesia per year as follows: 2006, 16 PCBs; 2007, 5 PCBs; 2008, 4 PCBs; 2009, 6 PCBs; 2010, 10 PCBs; 2011, 15 PCBs; 2012, 1 PCB; 2013, 9 PCBs; and by April 2014, 3 PCBs. The data has been processed by the author. See http://www.lps.go.id/web/guest/bank-yang-dilikuidasi, accessed 19 August 2014.
- 18.
See the explanation of Director of Litigation Group of the IDIC, Arif Budiman, Kontan online, 12 March 2015, LPS: 54 BPR terindikasi melakukan pidana, http://keuangan.kontan.co.id/news/lps-54-bpr-terindikasi-melakukan-pidana, accessed 19 February 2015. See also the explanation of Director Executive of Banks Claim and Resolution of the IDIC, Salusra Satria, Kontan online, 19 Oktober 2015, OJK: Banyak BPR tutup karena “ulah” pengurus, http://keuangan.kontan.co.id/news/ojk-banyak-bpr-tutup-karena-ulah-pengurus, accessed 25 October 2015.
- 19.
The current exchange rate is US$1 = Rp 13.300.
- 20.
See Law Number 3 of 2004 concerning The Amendment of Law of 1999 concerning Bank Indonesia (Indonesian Central Bank).
- 21.
See Article 1 (1) of Law Number 21 of 2011 concerning Financial Services Authority.
- 22.
See Law Number 21 of 2011 concerning Financial Services Authority.
- 23.
See Law Number 21 of 2011 concerning Financial Services Authority.
- 24.
See Articles 3, 4 (1) and 7 of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks.
- 25.
See Law Number 10 of 1998 concerning The Amendment of Law Number 2 of 1992 concerning Banking.
- 26.
See Bank Indonesia Director Decree Number 32/54/KEP/DIR, dated 14 May 1999 concerning License Revoking Procedures and Liquidation of People’s Credit Banks.
- 27.
The 2016 UK CGC is the latest version of the corporate governance code in the UK which is based mainly on the standards that have been constructed by several committees and task forces for corporate governance in the UK. The formulation of corporate governance standards in the UK started when a committee chaired by Sir Adrian Cadbury (the Cadbury Committee) was established in 1992. The Cadbury Committee later issued a report, known as the Cadbury Report 1992. See The Cadbury Committee (1992) Report on the committee on the financial aspect of corporate governance, http://www.ecgi.org/codes/documents/cadbury.pdf. Accessed 10 October 2015. The Cadbury Report was later followed up by the Rutteman Committee in 1994 specifically on the issue of internal control and revised by the Hampel Committee in 1998 with respect to the Cadbury Committee’s recommendations on corporate governance. Based on the Cadbury Report, the Greenbury Report, and the Hampel Report, the UK Combined Code was first issued in 1998 (The 1998 UK Combined Code). See The Greenbury Committee (1995). Directors’ remuneration: report of a study group, http://www.ecgi.org/codes/documents/greenbury.pdf. Accessed 12 April 2015. See also The Hampel Committee (1998). Committee on corporate governance, http://www.ecgi.org/codes/documents/hampel.pdf. Accessed 9 April 2015. In 1999, a committee chaired by Paul Turnbull (Turnbull Committee) was established to work on the internal control issue. The Turnbull Committee published a report (1999). See The Turnbull Committee (1999). Internal control: guidance for directors on the combined code, http://www.ecgi.org/codes/documents/turnbul.pdf. Accessed 12 April 2015. The report on the internal control produced by the Turnbull Committee later revised by Financial Reporting Council in 2005. See Financial Reporting Council (2005). Internal control revised guidance for directors on the combined code, https://www.frc.org.uk/getattachment/5e4d12e4-a94f-4186-9d6f-19e17aeb5351/Turnbull-guidance-October-2005.aspx. Accessed 19 April 2015. The 1998 Combined Code, with regard to the role and the effectiveness of non-executive director, later revised by the Higgs Committee 2002. The Higgs Committee produced a report in January 2003. See The Higgs Committee (2003). Review of the role and effectiveness of non-executive directors, http://www.ecgi.org/codes/documents/higgsreport.pdf. Accessed 20 April 2015. The 1998 Combined Code, in terms of audit committees, was also revised by the Smith Committee which published a report in January 2003. See The Smith Committee (2003). Audit committees combined code guidance, http://www.ecgi.org/codes/documents/ac_report.pdf. Accessed 18 April 2015. Still in 2003, Tyson Task Force reviewed the Higgs Report which resulted in the publication of the Tyson Report in June 2003. See The Tyson Committee (2003). The recruitment and development of non-executive directors, http://facultyresearch.london.edu/docs/TysonReport.pdf. Accessed 15 April 2015. After a series of reviews and consultations, the UK Financial Services Authority and the London Stock Exchange, in June 2008, finally produced a new combined code. See Financial Reporting Council (2008). The combined code on corporate governance, https://frc.org.uk/Our-Work/Publications/Corporate-Governance/The-Combined-Code-on-Corporate-Goverance.aspx, accessed 10 April 2015. The New Combined Code was revised in 2010. This was for the first time the new combined code renamed as the UK Corporate Governance Code. See Financial Reporting Council (2010). Revisions to the UK corporate governance code (formerly the combined code), https://frc.org.uk/getattachment/675640ed-23ff-42a5-a157-09dc4da7ef51/May-2010-Report-on-Code-Consultation.aspx, accessed 21 May 2015. The 2010 UK Corporate Governance was revised in 2014 with regard to information provided by companies which affect longer-term viability of companies. The document was just recently again corrected with regard to the audit issue in order to comply with the European Commission Audit Statutory in April 2016. See Financial Reporting Council (2014). The UK corporate governance code, https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/The-UK-Approach-to-Corporate-Governance-(1).pdf, accessed 17 April 2015. See also Financial Reporting Council (2016). The UK corporate governance code, http://finansial.bisnis.com/read/20151007/90/480102/ojk-lakukan-capacity-building-sdm-bpr-untuk-tekan-npl, accessed 15 November 2015.
- 28.
In the Netherlands, the discussion on corporate governance was initiated by the first Dutch Corporate Governance Committee (Peters Committee) in 1997. The Peters Committee produced a report entitled corporate governance in the Netherlands: recommendations for sound management, effective supervision, and accountability which contains of 40 recommendations. See Corporate Governance Committee (1997). Corporate governance in the Netherlands: recommendations for sound management, effective supervision, and accountability, http://www.ecgi.org/codes/documents/nl-peters_report.pdf, accessed 19 April 2015. As stated by J. Van Bekkum et al, “the 40 recommendations of the Peters Committee herald a fundamental overhaul of Dutch corporate law to restore the position of shareholders through the combination of changes in 2014 to Book 2 of the Dutch Civil Code (DCC), containing the companies act, a Corporate Governance Code issued by the Tabaksblat Committee in 2003, and case law of the enterprise Chamber of Amsterdam Court of Appeal (the Enterprise Chamber)”. See van Bekkum et al. (2010). Later, a Corporate Governance Committee chaired by Morris Tabaksblat (the Tabaksblat Committee) reviewed the Peters Committee report which resulted in issuing the Dutch Corporate Governance Code in 2003. See Corporate Governance Committee 2003b. The Dutch corporate governance code 2003, http://www.commissiecorporategovernance.nl/download/?id=647, accessed 27 April 2015. Five years later, in 2008, the 2003 Code was replaced by the Dutch Corporate Governance Code 2008. The 2008 Code was produced by a Corporate Governance Monitoring Committee led by Jean Frijns (the Frijns Committee). See Corporate Governance Code Monitoring Committee (2008). The Dutch corporate governance code: principles of good corporate governance and best practice provisions, http://www.commissiecorporategovernance.nl/download/?id=606, accessed 27 April 2015.
- 29.
The 2015 G20/OECD PCG is the newest version on principles of corporate governance issued by the OECD. For the first time, the OECD issued its principles on corporate governance in 1999. See OECD (1999). OECD principles on corporate governance, http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=C/MIN%2899%296&;docLanguage=En, accessed 11 April 2015. The 1999 document was revised in 2004. See OECD (2004). http://www.oecd.org/corporate/ca/corporategovernanceprinciples/31557724.pdf, accessed 11 April 2015. The 2004 document was revised again in 2015. See G20/OECD (2015). Principles of corporate governance, http://www.oecd.org/daf/ca/Corporate-Governance-Principles-ENG.pdf, accessed 10 October 2015. In the 2015 PCG, two chapters in the 2004 PCG, Chapter II and Chapter III, are unified into Chapter II of the 2015 PCG. However, there is a new chapter added to the 2015 PCG—Chapter III: Institutional investors, stock markets, and other intermediaries.
- 30.
Direksi literally means “direction”. There is no explanation on why the term direksi, not BODs, is used, in Indonesian current legal arrangements. It is only defined that the direksi is an organ of company which consists of directors.
- 31.
See Article 1 (10, 11) of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks. See also Article 18 of Law Number 5 of 1962 concerning Regional Enterprise and Articles 11 and 12 of Minister of Home Affairs Regulation Number 22 of 2006 concerning The Managing of Local Government Owned People’s Credit Banks.
- 32.
See Article 16 of Minister of Home Affairs Regulation Number 22 of 2006 concerning The Managing of Local Government Owned People’s Credit Banks.
- 33.
See Articles 1 (5, 6, 7) 32, 50, 52, 53, 58, 59, 60, and 61 of Law Number 17 of 2012 concerning Cooperatives.
- 34.
See Articles 24 (1, 2) and 31 (1) of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks, Article 7 (2) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks, and Article 4 of The Indonesian Financial Services Authority Regulation Number 44 /POJK.03/2015 concerning Work Competencies Certification for Members of Directors and BOCs of PCBs and Sariah Financing People’s Banks.
- 35.
See Articles 10, 11, and 12 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 36.
See Article 22 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 37.
See Article 23 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 38.
Law Number 40 of 2007 concerning Limited Liability Companies.
- 39.
See Article 29 (1, 3) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 40.
See Article 30 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 41.
See Article 31 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 42.
See Article 35 (1, 2) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 43.
The regulation does not use the terms large, medium, and small PCBs. The author intentionally uses these terms to differentiate PCBs based on their core capital in order to have minimum directors, commissioners, and independent commissioners.
- 44.
Their core capital is at least Rp 50.000.000.000 (fifty billion Rupiah) or US$3.759.398; see Articles 4 (1) and 24 (1) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 45.
Their core capital is less than Rp 50.000.000.000 (fifty billion Rupiah) or US$3.759.398. See Articles 4 (2) and 24 (2) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 46.
Their core capital is at least Rp 80.000.000.000 (eighty billion Rupiah) or US$6.015.038; see Article 25 (1) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 47.
Their core capital is from at least Rp 50.000.000.000 (fifty billion Rupiah) or US$3.759.398 to less than Rp 80.000.000.000 (eighty billion Rupiah) or US$6.015.038; see Article 25 (2) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 48.
See Articles 22 (1) and 28 (1) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 49.
See Kontan online, 19 Oktober 2015, OJK: Banyak BPR tutup karena “ulah” pengurus, http://keuangan.kontan.co.id/news/ojk-banyak-bpr-tutup-karena-ulah-pengurus, accessed 25 October 2015.
- 50.
See the general explanation of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 51.
See Article 25 (3) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 52.
See Article 1 (5) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 53.
See Article 78 of Law Number 40 of 2007 concerning Limited Liability Companies.
- 54.
See Law Number 40 of 2007 concerning Limited Liability Companies.
- 55.
See Law Number 40 of 2007 concerning Limited Liability Companies.
- 56.
See Articles 94 (1), 105 (1), 106 (1), 111 (1), and 64 (3) of Law Number 40 of 2007 concerning Limited Liability Companies.
- 57.
See Articles 1 (10) and 44 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 58.
Their core capital is at least Rp 50.000.000.000 (fifty billion Rupiah) or US$3.759.398. See Articles 4 (2) and 24 (2) The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 59.
Their core capital is at least Rp 50.000.000.000 (fifty billion Rupiah) or US$3.759.398; see Articles 13 (1 a) and 52 (2) and 59 (1) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 60.
The executive officials are those who are directly responsible to directors or those who influence The PCBs’ policies and operations: The chairpersons of branch offices, heads of divisions and departments, and managers; see Articles 1 (12) of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks.
- 61.
The core capital is less than Rp 50.000.000.000 (fifty billion Rupiah) or US$3.759.398; see Articles 13 (1 b) and 52 (3) and 59 (2) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 62.
The core capital is at least Rp 80.000.000.000 (eighty billion Rupiah) or US$6.015.038; see Article 32 (1) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 63.
See Article 32 (2) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 64.
See Article 1 (10) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 65.
See Article 44 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 66.
See Articles 1 (11), 32, 7, 42, and 47 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 67.
See Articles 51, 52, and 55 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 68.
Prior to the promulgation of new standards on internal audit by The IFSA in March 2015, an internal audit in PCBs focuses on an effort to prevent and eradicate money laundering and terrorism funding. The internal audit program is a must and is part of risk management for PCBs. The internal audit can be implemented through an active supervision by BOCs and directors, having written policies and procedures, internal control, and trained and skilled human resources on these issues. See Articles 1 (9), 2 (1), and 3 (1, 2) of Bank Indonesia Regulation Number 12/20/PBI/2010 concerning The Implementation of Internal Audit Function In Applying Anti-Money Laundering and Terrorism Funding Prevention Program for People’s Credit Banks and Sariah People’s Financing Banks.
- 69.
See Articles 58, 59, 60, and 61 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 70.
See Articles 70 (1) 71 (1) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 71.
See Article 62 (1, 2) of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 72.
See Article 65 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 73.
See also Bank Indonesia Director Decree Number 31/60/KEP/DIR/1998 concerning Business Plan and Its Implementation Report.
- 74.
One year after the 1997 Indonesian financial crisis.
- 75.
See Articles 2 (1) and 5 (5) Bank Indonesia Regulation Number 15/3/PBI/2013 concerning Financial Condition Transparency in People’s Credit Banks and Article 66 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks. See also Bank Indonesia Circular Number 11/37/DKBU dated 31 December 2009 concerning Financial Accountancy Standard for People’s Credit Banks.
- 76.
See Article 3 (1) of Bank Indonesia Regulation Number 15/3/PBI/2013 concerning Financial Condition Transparency of People’s Credit Banks.
- 77.
See Article 13 of Bank Indonesia Regulation Number 15/3/PBI/2013 concerning Financial Condition Transparency of People’s Credit Banks.
- 78.
See Article 67 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 79.
See Article 50 A of Law Number 10 of 1998 concerning The Amendment of Law Number 2 of 1992 concerning Banking. The fine is from US$769 to US$15.038.
- 80.
The related parties are:
-
(a)
A 10% shareholder or more towards paid-up capital
-
(b)
The directors
-
(c)
Parties who have family relationship up to the second degree, horizontally or vertically with the parties in letters a, b, and d
-
(d)
Executive officials
-
(e)
Non-bank companies owned by the parties in letters a, b, and c, for which the whole or individual ownership is more than or equal to 25% from companies paid-up capital
-
(f)
Other PCBs owned by parties in letters a–e, for which the individual ownership is more than or equal to 10% of paid-up capital to that PCBs
-
(g)
Other PCBs which (i) the member of BOCs are the member of the PCBs BOCs and (ii) this double membership is greater than or equal to 50% of the membership of BOCs and directors
-
(h)
Companies where 50% or more of the total members of BOCs and directors are member of PCBs’ BOCs and directors
-
(i)
Borrowers that are granted by the parties from letters a– i. See Article 7 of Bank Indonesia Regulation Number 11/13/PBI/2009 concerning Maximum Legal Lending Limits for People’s Credit Banks
-
(a)
- 81.
Since 1 January 2015, the minimum paid-up capital to establish a PCB is as follows: Rp. 14.000.000.000 (US$1.052.632) for zone 1; Rp 8.000.000.000 (US$615.345) for zone 2; Rp 6.000.000.000.00 (US$451.128) for zone 3; and Rp 4.000.000.000 (US$300.752) for zone 4. Zone 1 refers to regions that have high level of economic potential and high level of financial institution competition and zone 4 is vice versa. See Article 5 and its explanation of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks.
- 82.
See Articles 3, 4, and 5 of Bank Indonesia Regulation Number 11/13/PBI/2009 concerning Maximum Legal Lending Limits for People’s Credit Banks.
- 83.
Article 9 of Bank Indonesia Regulation Number 11/13/PBI/2009 concerning Maximum Legal Lending Limits for People’s Credit Banks.
- 84.
See Article 64 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 85.
See Article 11 of Bank Indonesia Regulation Number 11/13/PBI/2009 concerning Maximum Legal Lending Limits for People’s Credit Banks.
- 86.
See Bank Indonesia Circular Letter Number 14/26/DKBU, dated 19 September 2012 concerning Credit Procedures, Policies, and Guidelines in People’s Credit Banks.
- 87.
See Kontan online, 29 August 2014, LPS minta BPR merger untuk tekan fraud, http://keuangan.kontan.co.id/news/lps-minta-bpr-merger-untuk-tekan-fraud, accessed 15 October 2015.
- 88.
See Articles 1 (6), 2, and 3 of The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 89.
See Article 16 of The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 90.
See Articles 19 and 22 (1) of The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 91.
See Articles 22 (1, 2, 3) of The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 92.
NPL is a condition where debtors are not able to make their payment as scheduled. According to Bank Indonesia, NPL consists of substandard credit (kredit kurang lancar), doubtful credit (kredit meragukan), and loss credit (kredit macet). See Djohanputro and Kountur (2007).
- 93.
See Article 38 (2 d) of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks.
- 94.
See Articles 12 and 13 of The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 95.
The areas that are addressed by a comprehensive internal control system; see Article 14 (1) of The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 96.
See Infobank online, 14 April 2016, OJK: tanpa GCG, banyak bpr lakukan fraud, http://infobanknews.com/ojk-tanpa-gcg-banyak-bpr-lakukan-fraud/, accessed 16 April 2016.
- 97.
See Article 30 of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks and Article 69 and its explanation of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 98.
See the explanation of Article 30 of The Indonesian Financial Services Authority Regulation Number 20/PJOK.03/2014 concerning People’s Credit Banks.
- 99.
See Article 92 of The Indonesian Financial Services Authority Regulation Number 4/POJK.03/2015 concerning The Implementation of Corporate Governance in People’s Credit Banks.
- 100.
See Article 38 of The Indonesian Financial Services Authority Regulation Number 13/POJK.03/2015 concerning The Implementation of Risk Management in People’s Credit Banks.
- 101.
See Law Number 8 of 1995 concerning Capital Market. See also The Indonesian Financial Services Authority Regulation Number 33/PJOK.04/20014 concerning Directors and Commissioners in Public Companies.
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I am grateful for the helpful comments from my supervisors Associate Professor Colin Anderson and Dr. Danielle Bozin to the draft of the paper.
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Rissy, Y.Y.W. (2019). Corporate Governance in People’s Credit Banks in Indonesia: A Challenge for a Better Future. In: Schmidpeter, R., Capaldi, N., Idowu, S.O., Stürenberg Herrera, A. (eds) International Dimensions of Sustainable Management. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-030-04819-8_11
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