Commercial Banks’ Structured Products Framework Introduces Customer Classification

The Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) is currently drafting new regulations governing the provision of structured products by commercial banks. The draft regulation will replace OJK Regulation No. 7/POJK.03/2016 on Prudential Principles in the Implementation of Structured Product Activities by Commercial Banks, as amended by OJK Regulation No. 6/POJK.03/2018 (collectively referred to as “POJK 7/2016”).

The revision aims to provide greater opportunities for the development of banking products related to foreign exchange, interest rates, commodities, and equities, while strengthening customer protection governance.

“The development of structured products may expand customers’ choice of financial instruments and support deeper financial market development,” said Dian Ediana Rae, Chief Executive of Banking Supervision at OJK.

One of the key provisions under the draft OJK regulation (RPOJK) concerns customer classification. Under the proposed framework, banks will be required to classify customers into three categories: professional customers, accredited customers, and retail customers. Professional customers include, among others, financial institutions, government entities, central banks, multilateral development banks, as well as companies with capital exceeding IDR 30 billion that have been operating for at least 36 months.