Core-Capital Requirements for the Establishment of New Commercial-Bank Offices

The Financial Services Authority (Otoritas Jasa Keuangan–“OJK”) has issued Circular Letter No. 14/SEOJK.03/2016 on the Establishment of Commercial-Bank Networks Based on Core Capital(“OJK Circular Letter”).The OJK Circular Letter sets out detailed procedures and requirements for commercial banks (“Banks”) which are looking to establish new office networks [1] in Indonesia or overseas according to their core-capital levels, categories and the banking zoning system designed by the OJK.Previously, these matters were regulated under BI Circular Letter No. 15/7/DPNP on the Establishment of Commercial-Bank Networks Based on Core Capital(“BI Circular Letter”).The OJK Circular Letter is of relevance to commercial banks which are wishing to open new office networks.Zoning and Coefficient ValueThe OJK Circular Letter stipulates six banking zones, and each of these zones is made up of several areas. The OJK determines these zones by evaluating the number of existing banks in an area, with Zone 1 being reserved for the most saturated banking areas and Zone 6 being for the least saturated areas. In addition, each zone has a different coefficient number, which is to be used when calculating the minimum core capital requirements for Banks which are looking to establish new offices. [2] The zones and coefficient numbers are as follows: [3]