OJK's Planned KBMI 1 Abolition: Implications for Banking Sector

New Capital Requirements on the Horizon

The Financial Services Authority (OJK) is planning to introduce new regulations that will effectively abolish the KBMI 1 category by raising the minimum core capital requirement for banks to above Rp6 trillion. This move is expected to significantly impact the banking landscape, particularly affecting the Sharia Business Units (UUS) within conventional banks.

Impact on Sharia Business Units (UUS)

The planned regulation change adds another layer of complexity to the existing UUS spin-off requirements. According to POJK No. 12/2023, UUS with assets of at least 50% of their parent company's total assets or valued at Rp50 trillion or more are required to spin off. With the new capital requirements, banks may need to consider various strategic options including mergers, acquisitions, or consolidation to meet both the capital and UUS spin-off requirements.

Potential Industry Responses

Industry experts, such as Moch Amin Nurdin from the Banking & Finance Development Center, suggest that this new rule will introduce a new variable for banks with UUS. Banks will need to carefully evaluate their capital strengthening strategies while navigating the existing UUS regulations. The combination of these requirements may lead to significant restructuring in the banking sector, particularly among banks currently classified under KBMI 1.

Way Forward

The upcoming regulation represents a significant shift in the Indonesian banking landscape. Banks will need to adapt their strategic planning to comply with both the new capital requirements and existing UUS regulations. The industry is likely to see increased M&A activity as banks seek to consolidate and strengthen their capital positions.