Amendments to Capital Requirements for Islamic Rural Banks under OJK Board of Commissioners Regulation No. 12 of 2026

Introduction

On 16 October 2026, the Financial Services Authority (“OJK”) enacted Regulation of the Member of the Board of Commissioners of the Financial Services Authority Number 12 of 2026 concerning Minimum Capital Adequacy Requirements and Compliance with the Minimum Core Capital Requirement for Islamic Rural Banks (“PADK OJK 12/2026”). PADK OJK 12/2026 implements Financial Services Authority Regulation Number 66/POJK.03/2016 concerning Minimum Capital Adequacy Requirements and Compliance with the Minimum Core Capital Requirement for Islamic Rural Financing Banks, and is intended to serve as a guideline for Islamic Rural Banks (“BPR Syariah”) in calculating and meeting their minimum capital adequacy requirements (“KPMM”) and core capital ratios, including in determining the risk weight applicable to each type of asset.

The issuance of PADK OJK 12/2026 was prompted by the need to refine the capital requirements applicable to BPR Syariah in line with developments in the regulation of their business activities and asset management. These adjustments include rules governing holdings of securities issued by Bank Indonesia, the Government, and Regional Governments, as well as equity participations in institutions supporting BPR Syariah. In addition, PADK OJK 12/2026 addresses the capital implications of foreclosed collateral (“AYDA”) and abandoned properties; adjusts the treatment of allowance for impairment losses (“CKPN”) in accordance with financial accounting standards as provided under Financial Services Authority Regulation Number 24 of 2024 concerning Asset Quality of BPR Syariah; and aligns the mechanisms for capital contributions with Financial Services Authority Regulation Number 7 of 2024 concerning Rural Banks and Islamic Rural Banks. In connection with these adjustments, PADK OJK 12/2026 replaces the previous provisions set out in Financial Services Authority Circular Letter Number 1/SEOJK.03/2017, as amended by Financial Services Authority Circular Letter Number 7/SEOJK.03/2020.

Comparison

PADK OJK 12/2026 revokes and replaces Financial Services Authority Circular Letter Number 1/SEOJK.03/2017, as amended by Financial Services Authority Circular Letter Number 7/SEOJK.03/2020, as detailed below:

Key Provisions

Minimum Capital and Core Capital Thresholds

Article 2 requires BPR Syariah to maintain minimum capital with a KPMM ratio of at least 12% of Risk-Weighted Assets (ATMR). Article 3 adds the requirement to maintain core capital of at least 8% of ATMR. These two figures refer to Articles 2 and 4 of POJK 66/POJK.03/2016. In simple terms, ATMR is the total assets multiplied by a “weight” corresponding to their level of risk, as defined in Article 1 point 3. The greater the risk of an asset, the more capital must be set aside.

Self-Monitoring and Calculation Guidelines

Article 4 paragraph (1) requires BPR Syariah to monitor their capital position by calculating their own capital adequacy. Appendix I, letter A, point 5 further specifies that this calculation must be performed at least monthly. The calculation guidelines are set out in Appendix I, the capital calculation format in Appendix II, and the ATMR calculation format in Appendix III (Article 4 paragraphs (2) to (4)).

Minimum Core Capital of IDR 6 Billion

Article 5 paragraph (1) requires BPR Syariah to maintain core capital of at least IDR 6,000,000,000.00 after expiry of the compliance period stipulated in Article 13 of POJK 66/2016. If core capital falls below that amount, Article 5 paragraph (2) allows a maximum period of six months for it to be restored. That period is calculated from the date on which the monthly periodic report to OJK shows core capital below IDR 6 billion, or from the date of the minutes of OJK’s examination (whether a general or special examination) showing the same, whichever occurs.

Applications for Approval and Reporting

Article 6 paragraph (1) requires BPR Syariah to obtain OJK approval for four matters:

1. Additional capital contributions (including contributions in the form of fixed assets);

2. Additional core capital components;

3. Supplementary capital components; and

4. Donated capital.

Article 6 paragraph (2) requires reporting on the use of fixed assets or other assets originating from capital contributions or donated capital, accompanied by:

1. Evidence of the use of buildings, premises, and supporting infrastructure; and

2. Administrative documents demonstrating that the assets are used for operational purposes, such as a resolution of the Board of Directors.

Under Article 6 paragraph (3), this report must be submitted online through OJK’s online reporting application, via the BPR Syariah incidental reporting channel.

Capital Components

Capital consists of core capital and supplementary capital, as detailed below:

Deduction from Core Capital for AYDA and Abandoned Properties

PADK OJK 12/2026 adjusts the calculation of core capital by deducting the value of foreclosed collateral (“AYDA”) and abandoned properties based on the period for which they have been held. The longer AYDA or abandoned property is held, the greater the percentage of its carrying amount that is taken into account as a deduction from core capital. The applicable deductions are as follows:

AYDA consisting of land and/or buildings

• 15% after 1 to 3 years from the date of foreclosure;

• 50% after more than 3 to 5 years; and

• 100% after more than 5 years.

AYDA other than land and/or buildings

• 50% after more than 1 to 2 years from the date of foreclosure; and

• 100% after more than 2 years.

Abandoned properties

• 15% after 1 to 3 years;

• 50% after more than 3 to 5 years; and

• 100% after more than 5 years from the date on which the property is designated as abandoned.

The amount of the deduction is calculated based on the carrying amount of AYDA or the abandoned property in the statement of financial position. Appendix I, letter C, point 2(d) and (e), governs deductions from core capital for AYDA and abandoned properties held or controlled for more than one year.

Capital Contribution Funds

A new capital contribution is counted as core capital only once it has been recorded as a Capital Contribution Fund (DSM), namely funds that have been paid in full but do not yet satisfy the requirements to qualify as paid-up capital (for example, where the General Meeting of Shareholders or approval of the articles of association has not yet been completed). DSM must be placed in the form of a deposit with an Islamic commercial bank or an Islamic business unit, or with the relevant BPR Syariah, in the name of “Board of Commissioners of the Financial Services Authority q.q.” the BPR Syariah or the contributing shareholder. The deposit may be withdrawn only with OJK’s written approval. If the contribution results in a change of Controlling Shareholder, it is initially recorded as another liability (or a deposit), and is then reclassified as DSM after OJK approval. BPR Syariah must complete the DSM administrative requirements no later than 90 business days after OJK approval. Otherwise, DSM remains recorded but is not counted as core capital.

Closing

PADK OJK 12/2026 governs the capital requirements applicable to BPR Syariah, including the calculation of KPMM, capital components, deductions from core capital for AYDA and abandoned properties, and the calculation of ATMR. The regulation also establishes requirements for capital monitoring, compliance with the minimum core capital requirement, and approval and reporting to OJK.

BPR Syariah must adjust their capital calculations and capital monitoring in accordance with these provisions, particularly with regard to the effect of AYDA and abandoned properties on core capital and compliance with minimum capital thresholds.