Applicat ion of Risk M anagement f or Banks Conducting Activities Related to M utual Funds Short Term Funding Facility FPJP for Commercial Banks

9. Applicat ion of Risk M anagement f or Banks Conducting Activities Related to M utual Funds

In response t o t he st eadily expanding involvement of Banks in act ivit ies relat ed t o mut ual f unds, t here is grow ing aw areness t hat t hese act ivit ies not only yield benefits but also incur various potential risks for Banks. In this regard, Banks need to strengthen the effective ap p l i cat i o n o f r i sk m an ag em en t t h ro u g h t h e implementation of prudential principles and protection of cust om er int erest . The scope of Bank act ivit ies relat ed t o mut ual f unds covers act ivit ies of Banks as invest ors, Banks as m ut ual f und sales agent s, and Banks as Cust odian Banks. The most import ant t ask t hat a Bank is required t o perf orm in support of eff ect ive applicat ion of risk management is t o: ● Ensure t hat any invest m ent m anager act ing as part ner in act ivit ies relat ed t o m ut ual f unds is reg ist ered an d licen sed b y t h e cap it al m arket au t h o r it y in acco rd an ce w it h t h e ap p licab le regulatory provisions; ● Ensure that the mutual fund concerned has received a statement of effective registration form the capital market aut horit y in accordance w it h t he applicable regulatory provisions; ● Ident if y, measure, monit or, and cont rol risks arising from act ivit ies relat ed t o mut ual f unds. In t he implement at ion of prudent ial principles, Banks are prohibit ed f rom any act ion, w het her direct ly, t hat may cause a mut ual f und t o acquire charact erist ics resem bling t hose of Bank product s, f or exam ple, savings deposit s or t ime deposit s.

10. Risk M anagement Certification for M anagement and Officers of Commercial Banks

In t he applicat ion of Risk M anagement on an eff ect ive basis, t he Bank is required t o f ill t he posit ions on t he Bo ard o f Co m m issio n ers an d f o r t h e Ban k Risk M an ag er w i t h h u m an r eso u rces p o ssessi n g compet ence and expert ise in risk management . The requirement f or management and execut ive off icer of 103 Banks to hold Risk M anagement Certificates represent one aspect in assessment of t he compet ence f act or in f it and proper t est . Banks are required t o plan and implement a human resources development program in order t o build compet ence and expert ise in risk m an ag em en t . Five levels are st ip u lat ed f o r risk management cert if icat es, based on t he hierarchy and organizat ional st ruct ure of t he Banks as f ollow s: level 1 – level 5. Risk management cert if icat ion may only be organized and held by Prof essional Cert if icat ion Agency licensed by Nat ional Agency f or Prof essional Cert if icat ion BNSP. A risk management cert if icat e issued by an int ernat ional agency or ot her agency out side Indonesia may be considered f or recognit ion equivalent t o risk management cert if icat e issued by a prof essional cert if icat ion agency, if t he agency issuing t h e cert if icat e is in t er n at io n ally reco g n ized an d accept ed; cert if icat es have been issued during t he last 4 years.

F. Other Regulations

1. Short Term Funding Facility FPJP for Commercial Banks

A bank experiencing a short t erm f unding diff icult y ren d erin g it u n ab le t o set t le liab ilit ies, w h et h er generat ed t hrough t he clearing syst em andor due t o use of Int raday Liquidit y f acilit y at pre-cut t ime of BI- RTGS, may obtain an FPJP from Bank Indonesia. A Bank may use FPJP insof ar as it holds high qualit y, liquid collat eral w it h minimum value at t he amount of FPJP received. FPJP shall be guaranteed against high quality collateral ow ned by the bank consist of Bank Indonesia Cert if icat e SBIs andor Government Securit ies SUNs w it h condit ions: ● Selling value of t he SBIs andor SUNs at least equal as value of t he FPJP; ● SBIs w ith remaining maturity of not less than 3 w ork days ● SUNs w it h remaining mat urit y of not less t han 10 w ork days. 104 The t erm of each FPJP is 1 one day and m ay be ext ended on a consecut ive basis subject t o an overall maximum FPJP t erm of 90 ninet y days.

2. Short Term Funding Facilit y f or Sharia Banks FPJPS