PADK OJK Number 42 of 2025, OJK Can Compel Bank Mergers

Introduction

On 16 December 2025, the Financial Services Authority (“OJK”) issued Regulation of the Members of the Board of Commissioners Number 42/PADK.03/2025 on Written Orders for the Handling of Bank Problems through Merger, Consolidation, Acquisition, Integration, and/or Conversion (“PADK OJK 42/2025”). This Regulation serves as a technical implementation guideline for OJK in ordering banks to carry out strategic corporate actions, such as mergers or acquisitions, in order to resolve banking problems.

OJK issued PADK OJK 42/2025 to address legal and supervisory issues in the banking sector in an effective, transparent, and accountable manner. OJK considers it necessary to establish a strong legal basis to compel banks to undertake consolidation measures (such as mergers or consolidations) in order to uphold justice, ensure legal certainty, and safeguard the stability of the financial system from threats posed by distressed banks. This Regulation functions as a supervisory instrument to prevent losses to consumers and the public arising from bank failures.

 

Key Provisions

Authority to Order Corporate Actions (P3IK)

OJK is authorized to issue a “P3IK Written Order” to a bank to carry out or to accept corporate actions in the form of Merger, Consolidation, Acquisition, Integration, and/or Conversion. In Annex Roman Numeral I Point 1, this authority covers two aspects, namely that OJK may order a bank to carry out a corporate action (for example, a distressed bank that must merge) or order a bank to accept a corporate action (for example, a sound bank that must acquire a distressed bank). The definition of “Written Order” refers to a mandatory instruction from OJK to comply with prevailing laws and regulations and to prevent consumer losses.

Criteria for Banks Subject to Written Orders

OJK establishes standards for banks that may be subject to such orders. Pursuant to Annex Roman Numeral II, OJK classifies the targets of written orders into two categories:

1. Banks Ordered to Carry Out P3IK (Distressed Banks): OJK targets banks experiencing capital problems (Capital Adequacy Ratio below the required standard), liquidity problems (failure to meet LCR/NSFR requirements), or deteriorating business conditions. In addition, OJK also targets banks whose owners (Controlling Shareholders) are unable or unwilling to inject additional capital and maintain liquidity.
2. Banks Ordered to Accept P3IK (Rescue Banks): The criteria include banks with a Composite Rating of Soundness Level 1 or 2, and banks that have the capacity to maintain business continuity after the merger or acquisition.

Accelerated Procedures and Regulatory Relaxations

Based on Annex Roman Numeral V Point 2, OJK provides various procedural facilitation (relaxations) for banks implementing such Written Orders:

1. Simplified Announcement: Banks are not required to publish a complete summary of the draft merger plan in newspapers. Banks are sufficient to announce in newspapers that the complete documents are available on the bank’s website.
2. No New Licensing Requirement: Banks are not required to submit a new application for merger or acquisition approval; instead, they only need to submit the relevant documents, and OJK may simplify the required administrative documents.
3. Virtual General Meeting of Shareholders (GMS): Banks may convene a General Meeting of Shareholders through video conferencing or other electronic media.

Reporting Mechanism and Action Plan

As stipulated in Annex Roman Numeral IV, after receiving a written order, a bank must prepare and submit an “Action Plan” containing the implementation schedule of the merger or acquisition until it becomes effective. Furthermore, the bank is required to submit periodic progress reports containing the status of implementation, obstacles encountered, and supporting documents. Ultimately, the bank must submit a compliance report no later than 2 (two) working days after the Written Order has been fulfilled.

 

Sanctions

Referring to Annex Roman Numeral I Points 3 and 4, OJK emphasizes that any bank that deliberately ignores, fails to comply with, or obstructs the implementation of a P3IK Written Order will be subject to severe sanctions. Such sanctions are based on Article 53 and Article 54 of Law Number 21 of 2011 on the Financial Services Authority, as amended by Law Number 4 of 2023 on the Development and Strengthening of the Financial Sector, which may include criminal sanctions and administrative sanctions. It is important to note that the imposition of such sanctions does not eliminate the bank’s obligation to continue implementing the merger or acquisition order issued by OJK.

 

Closing

PADK OJK 42/2025 regulates in greater detail OJK’s authority to compel banks to undertake consolidation in the interest of maintaining the soundness of the financial system. Banking businesses no longer have the option to “refuse” a corporate action once OJK has issued a Written Order; both distressed banks and sound banks (as rescuers) are required to comply with instructions for merger, consolidation, or acquisition. Absolute compliance is essential, as negligence in implementing the action plan or fulfilling reporting obligations may result in severe criminal and administrative sanctions for the bank and its management.