OJK Governs Foreign Workers and Knowledge Transfer in the Banking Sector under Financial Services Authority Regulation Number 1 of 2026

Introduction

On February 23, 2026, the Financial Services Authority (Otoritas Jasa Keuangan, "OJK") issued Financial Services Authority Regulation Number 1 of 2026 on the Utilization of Foreign Workers and Knowledge Transfer Programs by Commercial Banks ("OJK Regulation 1/2026"). OJK Regulation 1/2026 governs the procedures for Banks to employ Foreign Workers (Tenaga Kerja Asing, "TKA") as well as the implementation of knowledge transfer programs to support human resources development in the banking sector.

According to the recitals, OJK replaces Financial Services Authority Regulation Number 37/POJK.03/2017 as the previous provisions are deemed no longer aligned with national employment policies and the needs of the banking industry. OJK Regulation 1/2026 also encourages the assignment of Bank employees who are Indonesian workers abroad through employee exchange schemes or intra-corporate transferees.

Comparison

OJK Regulation 1/2026 repeals the provisions of Financial Services Authority Regulation Number 37/POJK.03/2017 on the Utilization of Foreign Workers and Knowledge Transfer Programs in the Banking Sector ("OJK Regulation 37/2017"). The following is a comparison between OJK Regulation 1/2026 and OJK Regulation 37/2017:

Key Provisions

Position Requirements Based on Foreign Ownership Structure

Article 3 paragraph (1) stipulates that Banks may employ TKA based on the portion of foreign share ownership. Banks with foreign share ownership of at least 25% may appoint TKA as members of the Board of Directors, Board of Commissioners, Executive Officers, in positions requiring specific competencies, as well as Experts or Consultants. Conversely, Article 4 paragraph (1) prohibits Banks with foreign share ownership below 25% from employing TKA other than as Experts or Consultants. Article 4 paragraph (2) and paragraph (3) provide an exemption if the foreign party is a Controlling Shareholder (Pemegang Saham Pengendali, "PSP") or holds an element of control over the Bank, thereby allowing the foreign party to place TKA as members of the Board of Directors and Board of Commissioners. Article 5 requires Banks to ensure that the majority of the members of the Board of Directors and Executive Officers are Indonesian Citizens (Warga Negara Indonesia, "WNI"), and that at least 50% of the members of the Board of Commissioners hold WNI status. Furthermore, Article 7 paragraph (2) requires Branch Offices of Foreign-Domiciled Banks (Kantor Cabang dari Bank yang Berkedudukan di Luar Negeri, "KCBLN") to appoint at least one KCBLN Head who is a WNI.

Mapping of Job Functions and Calculation of Cumulative Tenure

The placement of TKA in Banks is restricted only to specific job functions as stipulated in Article 8 paragraph (1). These job functions involve:

1. risk management;

2. information technology;

3. credit or financing;

4. treasury;

5. investor relations;

6. marketing;

7. finance; and

8. internal audit.

TKA are also prohibited from performing human resources and compliance functions as stipulated in Article 8 paragraph (2). In addition to the restriction of job functions, the employment period of TKA for such positions is limited to a maximum of 5 (five) years and is calculated cumulatively as stipulated in Article 10 paragraph (3). The employment period remains calculated if the TKA resigns and subsequently returns to work at the same Bank or KCBLN in the same or equivalent position. The cumulative calculation restarts if the TKA does not work at the respective Bank for a minimum of 3 (three) years as stipulated in Article 10 paragraph (4).

Bank Business Plan (RBB) Planning Mechanism, Approvals, and Document Reporting

The utilization of TKA must first be included in the Bank Business Plan (Rencana Bisnis Bank, "RBB") or the KPBLN Work Plan, which sets forth the position, planned employment period, and companion program as stipulated in Article 12 paragraph (1) and paragraph (3). If a Bank employs TKA outside of the said plan, the Bank must obtain prior OJK approval in accordance with Article 13 paragraph (2). The application to OJK is submitted prior to the ratification of the Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing, "RPTKA") by the ministry administering government affairs in the manpower sector as stipulated in Article 16 paragraph (5). The application must be complemented with documents including:

1. photograph;

2. passport;

3. qualification or work experience documents; and

4. draft employment contract as stipulated in Article 16 paragraph (2).

After the TKA commences work, the Bank must report the appointment of Executive Officers and specific competency positions to the Financial Services Authority no later than 10 (ten) working days. The reporting obligation within the same time limit also applies to KPBLN for the appointment of Experts or Consultants. Specifically for the appointment of Experts or Consultants by Banks, the reporting is submitted as part of the Bank's business plan realization report. This reporting must be accompanied by supporting documents in the form of a copy of the employment contract, a limited stay permit (izin tinggal terbatas, "ITAS"), and the ratification of the RPTKA as stipulated in Article 19 through Article 21.

Knowledge Transfer Obligations and International Talent Exchange

Banks and KPBLN that employ TKA must implement a knowledge transfer program in accordance with Article 22 paragraph (1). The implementation of the program involves several obligations as follows:

1. appointing companion workers from the Indonesian workforce at a ratio of at least 2 (two) persons for every 1 (one) TKA in the Bank, or 1 (one) person for every 1 (one) TKA in the KPBLN;

2. organizing and financing education and job training for companion workers to ensure that they possess competencies corresponding to the TKA's position; and

3. involving the TKA in training activities, seminars, or short courses for Bank employees, either offline or online.

These provisions are set forth in Article 22 paragraph (2). In addition to the knowledge transfer program, Banks also encourage the assignment of employees who are Indonesian workers abroad through employee exchange schemes (intra-corporate transferees) or temporary assignments (secondments) as stipulated in Article 23 and the Elucidation of Article 23.

Q4 Reporting, Discretionary Authority of OJK, and Termination of TKA

Banks and KPBLN must submit a realization report on the utilization of TKA to OJK once a year based on the data position of quarter IV in accordance with Article 24 paragraph (1) and Article 26 paragraph (3). In accordance with Article 25 paragraph (2), the report must include, among others:

1. the achievement of the TKA's KPI;

2. the evaluation of the companion worker's competency; and

3. the succession plan for Indonesian workers.

Banks may apply for an extension of the TKA's employment period beyond 5 (five) years if certain competencies are still required in accordance with Article 29. OJK may also establish different policies under certain conditions as stipulated in Article 34. Furthermore, OJK may request Banks to terminate TKA if certain violations are found in accordance with Article 31 paragraph (1).

Transitional Provisions

Article 35 stipulates that Banks that have employed TKA based on OJK approval prior to the enactment of OJK Regulation 1/2026 may continue the employment period of the TKA until the expiration of the granted approval. Applications for the utilization of TKA that have been submitted to OJK but have not yet received a decision when OJK Regulation 1/2026 takes effect will continue to be processed based on OJK Regulation 37/2017. Furthermore, TKA serving as Executive Officers and Experts or Consultants whose employment period has not reached 5 (five) years when OJK Regulation 1/2026 takes effect may apply for an extension of their employment period up to the maximum limit of 5 (five) years. Violations of the provisions on the utilization of TKA may be subject to administrative sanctions in accordance with Article 11 and Article 33, including:

1. written reprimands;

2. a downgrade in the assessment of the governance factor (Good Corporate Governance) within the Bank's soundness rating;

3. restrictions and/or prohibitions on conducting activities for KPBLN;

4. fines for Banks in the amount of Rp500,000,000.00 up to Rp2,000,000,000.00;

5. fines for Representative Offices of Foreign-Domiciled Banks in the amount of Rp10,000,000.00 up to Rp100,000,000.00; and

6. prohibitions from becoming primary parties for members of the Board of Directors, Board of Commissioners, KCBLN Heads, or KPBLN Heads.
   

Closing

OJK Regulation 1/2026 re-governs the utilization of foreign workers in the banking sector while simultaneously strengthening the obligations of knowledge transfer programs and the competency development of the Indonesian workforce, among others through the restriction of positions and job functions for TKA, the cumulative calculation of employment periods, the mandatory inclusion of the TKA utilization plan in the Bank Business Plan, as well as the implementation of companion programs and the assignment of Bank employees abroad. During the transitional period, Banks that have employed TKA based on Financial Services Authority approval prior to the enactment of OJK Regulation 1/2026 may continue the employment period of the TKA until the expiration of the said approval, while applications for the utilization of TKA that are still in process remain processed based on OJK Regulation 37/2017, and TKA whose employment period has not reached 5 (five) years may apply for an extension up to the maximum employment period limit in accordance with the new provisions. Banks must ensure that the utilization of TKA aligns with the Bank Business Plan, satisfies the ratio of companion workers, and refrains from placing TKA in human resources and compliance functions, as non-compliance with these obligations may be subject to administrative sanctions in the form of written reprimands, a downgrade in the governance assessment within the Bank's soundness rating, fines for Banks up to Rp2,000,000,000.00 and for Representative Offices of Foreign-Domiciled Banks up to Rp100,000,000.00, along with the authority of the Financial Services Authority to request the termination of TKA under certain conditions.