Indonesia’s Financial Services Authority (OJK) has introduced a regulatory framework for digital banks in its updated commercial banking regulations.
According to Regulation Asia, the new regulations are aimed at accelerating digital transformation in the banking sector by promoting innovation in banking products and allowing banks to be more competitive, efficient and adaptive to economic needs.
Under the new regulations, digital banks will be able to operate with only one physical office as a head office with physical locations for customers.
The OJK has established six requirements for digital banks. These include having a business model that uses innovative and safe technology to serve customer needs, having the ability to manage a prudent and sustainable digital banking business model and having adequate risk management.
Furthermore, digital banks must fulfil governance aspects including a requirement for the board of directors to have IT competence, protect customer data security and contribute to the development of the digital financial ecosystem and/or financial inclusion.
The OJK regulations state that a digital bank can be established either through the direct establishment of a new bank or through the conversion of a commercial bank.
Digital banks are required a minimum paid-up capital of IDR 10trn, however, under a special regulation, the capital deposit required at the time of application is IDR 3trn.
OJK executive head of banking supervision Heru Kristiyana said, “The pandemic has pushed digital transformation in the banking sector into a necessity. Such conditions require banks to place digital transformation as a priority and as one of the strategies in efforts to increase bank competitiveness.”
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