New Provision on Outsourcing of Work by Banks

The Financial Services Authority (Otoritas Jasa Keuangan–“OJK”) has issued Regulation No. 9/POJK.03/2016 on Prudentially Principles for Banks that Outsource Services to Other Parties(“OJK Regulation”).In essence, the OJK Regulation sets out the types of activity which can be outsourced by banks (“Banks”) to third parties, as well as prudential measures which must be undertaken by Banks in order to ensure that such delegation will not result in any harm being caused to the Banks’ activities.Prior to the issuance of the OJK Regulation, this matter was regulated by Bank Indonesia Regulation No. 13/25/PBI/2011 (“BI Regulation”).The Regulation is of relevance to Banks, service-provider companies, and to the general public as customers.OutsourcingBanks may delegate elements of their activities to service-provider companies via two types of contracts, namely: a) job-chartering contracts (pemborongan pekerjaan) and/or; b) worker-provision contracts (penyediaan jasa tenaga kerja). [1] Job-chartering contract schemes refer to the delegation of certain work to a third party, with or without any direct orders being issued by Banks, and these is also commonly referred to as “sub-contractor schemes”. Meanwhile, worker-provision contract schemes refer to the delegation of certain work to workers supplied by service-provider companies. [2] The OJK Regulation does not stipulate any new provision on the types of outsourcing contracts which are available to Banks, when compared with the BI Regulation.Types of Outsourcing ActivitiesIn general, banking activities are classified into two main categories, namely: [3]