OJK Tightens Supervision of Financial Groups

The Financial Services Authority (“OJK”) is finalizing regulations on integrated supervision through the Draft Regulation of OJK (“RPOJK”) on Financial Groups. One of the requirements stipulated is the designation of a Parent Entity, aimed at strengthening the stability of the financial system amid the increasing complexity of ownership structures among financial services institutions.

“It is still under discussion,” said Executive Director of Banking Supervision of OJK, Dian Ediana Rae. “Control is not only based on share ownership but also on the ability to determine the management and policies of Financial Services Entities (EJK),” she added.

This regulation is designed to detect potential risks that could spread from one entity to another within a group. With this rule in place, the OJK has a stronger mandate to view the risk landscape holistically, rather than merely through sector-by-sector or silo-based supervision.