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
Previous ArticleUS Agencies Publish Regulatory Updates in December 2021
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.