Summary Of Bank Indonesia Laws And Regulations
| Regulation : | Bank Indonesia Regulation Number 9/1/PBI/2007 concerning the Rating System for Commercial Banks Based on Sharia Principles | | Effective : | 24 January 2007 |
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Summary :
1. Sharia Commercial Banks and Sharia Division (UUS) are required to conduct Bank Rating on a quarterly basis for the positions at end of March, June, September and December.
2. The scope of Rating of Sharia Commercial Banks and Sharia Divisions encompasses assessment of the following factors:
a. capital;
b. asset quality;
c. management;
d. earnings;
e. liquidity; and
f. sensitivity to market risk.
3. Rating of the determinant components or financial ratios for capital, asset quality, earnings, liquidity and sensitivity to market risk shall be calculated on a quantitative basis.
4. Rating of the determinant components for management shall be performed by analysis that takes into account supporting indicators and judgement.
5. The rating scale for each of the determinant components of financial ratios (capital, asset quality, earnings, liquidity and sensitivity to market risk) consists of rating 1, rating 2, rating 3, rating 4 and rating 5.
6. The rating scale for each of the determinant components for management factor consists of rating A, rating B, rating C, and rating D.
7. The Financial Factor Rating process shall operate using weightings of rating scores for capital, asset quality, earnings, liquidity and sensitivity to market risk.
8. Composite Rating (final result of the Bank Rating) shall be determined on the basis of the Financial Factor Ratings and Rating of Management Factor.
9. The assessment process for the Composite Rating shall take place by aggregation of the Financial Factor Ratings and the Rating of Management Factor, using a conversion table that also takes account of supporting indicators and judgement.
10. Composite Rating is defined as follows:
a. Composite Rating 1, indicating that the Bank or Sharia Division is in excellent condition and able to withstand the effect of negative changes in economic conditions and the financial industry.
b. Composite Rating 2, indicating that the Bank or Sharia Division is in sound condition and able to withstand the effect of negative changes in economic conditions and the financial industry, notwithstanding the Bank or Sharia Division still has minor weaknesses that can be quickly resolved through routine measures.
c. Composite Rating 3, indicating that the Bank or Sharia Division is in fairly sound condition but has weaknesses that may lead to deterioration in composite rating if the Bank or Sharia Division does not take immediate corrective actions.
d. Composite Rating 4, indicating that the Bank or Sharia Division is in poor condition and sensitive to impact from negative changes in economic conditions and the financial industry, or that the Bank or Sharia Division has serious financial weaknesses or a combination of unsatisfactory factors that if not addressed with effective corrective actions could potentially lead to difficulties endangering its survival.
e. Composite Rating 5, indicating that the Bank or Sharia Division is highly sensitive to impact from negative changes in economic conditions and the financial industry and experiencing difficulties endangering its survival.
11. Bank Indonesia may order the Board of Directors, Board of Commissioners and/or shareholders to submit an action plan stating the corrective actions that must be implemented by the bank in regard to any significant problems, including timeframes for resolution over specific period.
12. When rating a Sharia Division of a Branch Office of a Foreign Bank, Bank Indonesia may request data or information on the rating of the head office of the foreign bank.
