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
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