OJK Issues LIBOR Transition Guide and Regulation on Fund Distribution
The Financial Services Authority of Indonesia (OJK) published a LIBOR transition guide and a Regulation (26/POJK.03/2021) on the maximum limit for fund distribution and large fund distribution for Islamic commercial banks, with the regulation coming into force on January 01, 2022. Maximum limit for distribution of funds has been defined as the maximum percentage of distribution of funds for related parties as well as for parties other than related parties. For related parties, maximum limit for distribution of funds has been set as 10% of bank's capital. For the parties other than related parties the maximum limit for distribution of funds is 25% of the core capital (tier 1) of a bank. Large fund distribution is the distribution of funds (10% or more of core capital of a bank) to individuals or groups other than related parties.
The recently published LIBOR transition guide, from the National Working Group on Benchmark Reform, is intended for market players in Indonesia. The guide:
- sets out information on the background to the occurrence of LIBOR discontinuity, the timeline for discontinuing LIBOR publication, the implications of the LIBOR transition, and the guidelines for preparation and recommendations for the LIBOR transition that can be used as a reference for market participants.
- offers information on alternative benchmark rate conventions and spread adjustments that market participants can consider in drafting new financial contracts and fallback on LIBOR contracts (legacy contracts).
- highlights that the working group recommends market participants with LIBOR exposure to use alternative reference rates on new financial contracts while considering the appropriate alternative reference rate convention options.
- notes that the working group recommends market participants to form a LIBOR transition team to ensure a smooth transition process, negotiate outstanding contracts with debtors or counterparties to agree on a fallback clause, use fallback clause language from market standards that apply globally, and keep abreast of developments in the LIBOR transition process.
Related Links (in Indonesian)
- Notification on Regulation on Distribution of Funds
- Regulation on Distribution of Funds (PDF)
- Press Release on LIBOR Transition Guide
- LIBOR Transition Guide (PDF)
Effective Date: January 01, 2022 (Regulation)
Keywords: Asia Pacific, Indonesia, Banking, Securities, LIBOR, LIBOR Transition, Interest Rate Benchmarks, Alternative Reference Rates, Regulatory Capital, Tier 1 Capital, Capital Distribution, Islamic Banking, OJK
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Nick Jessop
Scenario modeling expert; risk management specialist; quantitative financial modeler
Previous Article
DNB Consults on CCyB Framework, Publishes Several Reporting UpdatesRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.