New Provision on Foreign Financial Product Agency for Banks

The Financial Services Authority (Otoritas Jasa Keuangan–“OJK”) has issued Regulation No. 8/POJK.03/2016 on Prudentially Principles for the Undertaking of Foreign Financial-Product Agency Activity by Conventional Banks(“OJK Regulation”).The OJK Regulation stipulates a number of actions that must be taken by conventional banks (“Banks”) in order to reduce the potential of financial risk when acting as agents for foreign financial consumer products.To that end, the OJK Regulation sets out guidelines for Banks which are looking to become agents for foreign financial products, and covers: licensing procedures; foreign financial products; the implementation of risk management measures; consumer protection; and mandatory reporting to the OJK.Prior to issuance of the OJK Regulation, these matters were regulated under Bank Indonesia (“BI”) Regulation No. 12/9/PBI/2010 (“BI Regulation”).The OJK Regulation is of relevance to conventional banks and their customers.Foreign Financial ProductsBanks may act as agents in order to promote foreign financial products to their customers. These financial products can be in the form of: a) securities which have first been approved by the OJK; or b) structured non-securities products. [1] Non-securities investment products which fall under point (b) above must also satisfy the following additional requirements: [2]