OJK Reregulates Health-Level Assessments for Conventional Banks

The Financial Services Authority (Otoritas Jasa Keuangan–“OJK”) has issued Regulation No. 4/POJK.03/2016 (“2016 Regulation”)on Health-LevelAssessments for Conventional Banks.The 2016 Regulation reregulates the framework through which the health levels of conventional banks are assessed, including the assessment mechanism itself and deadlines for the submission of assessment results, as well as mandatory follow up actions by banks.Prior to the 2016Regulation,these matters were addressed in Bank Indonesia Regulation No. 13/1/PBI/2011 on Financial-Health Assessments for Conventional Banks(“2011 Regulation”). [1] The Amendment is of relevance to all conventional banks and their subsidiaries.Self-AssessmentThe 2016 Regulation mandates that conventional banks(“Banks”)should conduct individual and consolidated self-assessments of their financial health. [2] Individual self-assessment refers to an assessment of the performance of a bank itself, while consolidated self-assessment refers to an assessment of a bank and its subsidiaries.Both individual and consolidated self-assessment is undertaken through arisk-based bank-ratings approach. This approach requires banks to assess the following factors: