Financing Company Financial-Soundness Levels Regulated in Detail

The Financial Services Authority (Otoritas Jasa Keuangan ­– “OJK”) has issued Circular Letter No.1/SEOJK.05/2016 on Financial Soundness Levels for Financing Companies (“Circular Letter”), which sets out four factors which must be assessed by financing companies when undertaking self-assessments of their soundness levels. These factors are: capital ratios, financing quality, profitability, and liquidity. [1] The Circular Letter is of relevance to all financing companies, be they in the form of limited liability companies or cooperatives.Capital RatiosAll financing companies must maintain a minimum capital ratio of 10%, based on a comparison of a given company’s total adjusted-capital level against its risk-weighted assets. [2] The adjusted-capital figure comprises of the total of a number of components, as follows: [3]