OJK Reg 30/2024: OJK Strengthening the Governance of Financial Holding Companies for Financial Institutions

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Authors

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In response to the enactment of Law No. 4 of 2023 regarding Financial Sector Development and Strengthening (known as “P2SK Law”) and to fulfil its mandates, the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) issued OJK Regulation No. 30 of 2024 regarding Financial Conglomerates and Financial Holding Companies on 23 December 2024 (“OJK Reg 30/2024”). This regulation supersedes and revokes OJK Regulation No. 45/POJK.03/2020 regarding Financial Conglomerate.

Under OJK Reg 30/2024, a Financial Conglomerate is defined as financial services institutions (Lembaga Jasa Keuangan – “LJK”) that belong to a single group or cluster due to ownership and/or control linkages. The LJKs in question include institutions (conventional and/or sharia) operates in the banking, capital markets, insurance, pension funds, venture capital, microfinance, financing institutions, and other financial services sectors.

The regulation introduces several important provisions, including the following highlights:

Obligation to Establish a PIKK

The controlling shareholder (Pemegang Saham Pengendali – “PSP”) and/or ultimate shareholder (Pemegang Saham Pengendali Terakhir – “PSPT”) of a Financial Conglomerate is required to establish a Financial Holding Company (Perusahaan Induk Konglomerasi Keuangan – “PIKK”) with prior approval from OJK,^[1] if they fulfil one of the following criteria:^[2]

1. The Financial Conglomerate has total assets at least Rp100 trillion and includes at least 2 LJKs operating in 2 different sectors; or
2. The Financial Conglomerate has total assets between Rp20 trillion and Rp100 trillion and includes as least 3 LJKs operating in 3 different sectors.

The total asset value of Financial Conglomerate is calculated based on its assets recorded over 6 consecutive months, excluding pension fund assets. This calculation, which includes the combined assets of all LJKs within the conglomerate, will initially be assessed using financial statements as of the end of June 2024.

If a Financial Conglomerate’s total assets fall below the required threshold but the LJKs still meets the minimum criteria, the provisions of OJK Reg 30/2024 will continue to apply.^[3]

Additionally, OJK has the authority to classify LJKs under common ownership or control as a Financial Conglomerate required to establish a PIKK, even if they do not meet the specified criteria, based on certain considerations.^[4]

Types of PIKK

OJK Reg 30/2024 classifies PIKK into 2 types: Operational PIKK and Non-Operational PIKK.^[5]

An Operational PIKK is a legal entity owned by the PSP and/or PSPT that serves as both a PIKK and an LJK. In addition to its LJK business activities, it must oversee, consolidate, and manage the Financial Conglomerate, participate in capital activities, provide management services to enhance strategic effectiveness, and optimize the financial performance of the conglomerate.^[6]

In contrast, a Non-Operational PIKK is a legal entity owned by the PSP and/or PSPT that exclusively functions as a PIKK without engaging in activities as LJK.^[7] Its responsibilities include controlling and consolidating the Financial Conglomerate, managing capital participation, enhancing business strategies through management services, optimizing financial performance, and undertaking other approved activities within the financial services sector, provided they comply with regulations.^[8]

Financial Conglomerates Member

The definition of Financial Conglomerate members, under OJK Reg 30/2024 introduces slight differences compared to OJK Reg 45/2020. Below is summary of the key distinctions:

OJK Reg 45/2020[9]	OJK Reg 30/2024 [10]
Banks	Banks
Insurance Companies and Reinsurance Companies	Insurance Companies
Financing Companies	Financing Companies
Securities Companies	Securities Companies
	Infrastructure Financing Companies
	Guarantee Institutions
	Pension Funds
	Venture Capital Companies
	Operators of Information Technology-based Peer-to-peer Lending Services
	Operators of Securities Offerings through Crowdfunding Services based on Information Technology
	Other LJK

Restrictions and Prohibitions

Members of a Financial Conglomerate are generally prohibited from owning shares in an Operational or Non-Operational PIKK and/or in other members within the same Financial Conglomerate (cross holding). However, exceptions to the prohibition include:^[11]

a. Minority Shareholding: a member may hold a minority shareholding in another member of the Financial Conglomerate; and/or

b. Parent-Subsidiary Relationship: a member may hold shares in another member within the Financial Conglomerate under a parent-subsidiary arrangement, provided this ownership complies with relevant laws and regulations.

The PSP and/or PSPT of a PIKK is prohibited from pledging or encumbering its shares to third parties, except in the following circumstances:

a. To institutions or agencies authorized to conduct rescue or resolution measures for banks, insurance companies, and sharia insurance companies; or

b. To other institutions or agencies designated by the relevant authority.

Establishment of PIKK

To establish a PIKK, the PSP and/or PSPT must provide key information to OJK, including:

Key points	Details
Ownership Structure	Details of ownership and share transfers, including the plan and/or draft shares transfers deed, if any.
Corporate Governance	1.    Articles of Association, or its drafts/amendments. 2.    Management structure, including directors and reporting lines. 3.    Administrative documents required by OJK regarding fit and proper assessment.
Corporate Plan	A strategic plan for managing the Financial Conglomerate, along with business units within the PIKK.
Approvals	Necessary licensing or approvals from relevant authorities.

In addition, a Non-Operational PIKK must be established as an Indonesian limited liability company,^[12] that meets the requirements for capital, ownership, and licensing.^[13] The paid-up capital must be at least equal the total investment in its Financial Conglomerate members.^[14] Ownership can include Indonesian entities or partnerships with foreign entities, with foreign ownership capped at maximum 99% of the paid-up capital.^[15]

Termination of PIKK

The termination of a PIKK’s status is determined by OJK. In this case, a PIKK may request the termination of its status if the Financial Conglomerate no longer meets the following criteria:^[16]

1. The PIKK submits a request for termination of its status as a PIKK; and/or
2. Based on an assessment by the OJK.

Sanctions

The regulations specifically outline the sanctions applicable to each violation committed by PSP, PSPT, or PIKK. However, in general, violations of the provisions stipulated in OJK Reg 30/2024 are subject to administrative sanctions, which include:

1. written warnings;
2. prohibition from conducting certain business activities; or
3. prohibition from serving as a primary party, in accordance with the financial services authority regulation regarding reassessment of primary parties in financial services institutions.

OJK Reg 30/2024 provides flexibility regarding the timeline for establishing the PIKK, as it does not specify a strict deadline. The obligation to establish a PIKK will be assessed based on financial statements as of the end of June 2024. Additionally, the regulation does not outline explicit sanctions for non-compliance.

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1. Article 4 of OJK Reg 30/2024. ↩︎

2. Article 2 paragraph (1) of the OJK Reg 30/2024. ↩︎

3. Article 5 of OJK Reg 30/2024. ↩︎

4. Article 3 of OJK Reg 30/2024. ↩︎

5. Article 8 of OJK Reg 30/2024. ↩︎

6. Article 29 of OJK Reg 30/2024. ↩︎

7. Article 1 paragraph (7) of OJK Reg 30/2024. ↩︎

8. Article 32 of OJK Reg 30/2024. ↩︎

9. Article 4 paragraph (2) of OJK Reg 45/2020. ↩︎

10. Article 11 paragraph (1) of OJK Reg 30/2024. ↩︎

11. Article 83 of OJK Reg 30/2024. ↩︎

12. Article 18 of OJK Reg 30/2024. ↩︎

13. Article 19 of OJK Reg 30/2024. ↩︎

14. Article 20 of OJK Reg 30/2024. ↩︎

15. Article 21 of OJK Reg 30/2024. ↩︎

16. Article 92 of OJK Reg 30/2024. ↩︎

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Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. Obligation to Establish a PIKK
2. Types of PIKK
3. Financial Conglomerates Member
4. Restrictions and Prohibitions
5. Establishment of PIKK
6. Termination of PIKK
7. Sanctions

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