Steady! OJK ‘Back up’ & Prohibits Regional Heads from ‘Dismissing’ BPD Directors

By Eko B. Supriyanto, Editor-in-Chief of Infobank

THERE IS GOOD NEWS FROM THE FINANCIAL SERVICES AUTHORITY (OJK). Regional heads, whose hobby is to dismiss BPD directors in the middle of the road, can no longer subjectively “remove” them. Dismissal of directors and commissioners in the middle of the road must now be approved by OJK.

Although the controlling shareholder (PSP)  does it, they can no longer dismiss it at will. Currently, there are all procedures. Unlike previous cases that occurred in several BPDs. The change of directors and commissioners of commercial banks (not only BPD) is now regulated in accordance with good governance.

Some time ago, OJK issued POJK Number 17 of 2023 concerning the Implementation of Governance for Commercial Banks. This POJK Governance consists of 23 chapters. Dian Ediana Rae, Chief Executive of OJK Banking Supervision, emphasized that this POJK is a legal umbrella. This also applies to sharia.

That means, harmonizing various provisions, both related to aspects of governance that are regulated in separate provisions and other provisions. Also, provide strengthening or adjustments, in line with the latest banking needs. Complete regulates the management of directors and commissioners, including procedures for dismissing directors and commissioners.

In addition, this POJK regulates remuneration, provision of funds, and regulation of dividend payout ratio. Shareholders can no longer take dividends at will. Banks must have a policy on dividends and communicate it to shareholders. This dividend policy does not regulate the percentage amount.

Perhaps, this POJK on governance for commercial banks really protects the interests of banks, so that they can withstand the challenges ahead, in addition to the sustainability of bank operations. This regulation on governance also answers the complaints of directors, especially BPD directors, who are often intervened by PSPs with many practical political interests.

In fact, in terms of timing, this POJK is appropriate, because it came out in the current political year. Officials (PJ) governors who are now mostly replacing elected governors often make policies to change directors and transfer local government funds out of BPD. So, now the shareholders can no longer remove and give orders that stifle BPD.

Article 11 of the POJK on Governance emphasizes that the dismissal or replacement of the managing director and/or director in charge of the compliance function before the term of office ends must obtain prior approval from OJK before being decided at the GMS.

Clearly emphasized, before the main director and compliance director are dismissed there must be OJK permission. Not only permission for dismissal, OJK will also conduct an assessment of the cause and effect. Therefore, before dismissal, the permit must already be approved by OJK, because it could be that OJK does not approve the dismissal. In fact, it is written in article 13 regarding OJK’s authority to make corrections and evaluations of the actions of appointment, dismissal, replacement, and/or resignation of directors through written orders.

Admittedly, in the case of this sudden change of directors, OJK “put up a body” and still maintain good governance. The articles on the removal of directors are the answer to the haphazard actions of PSPs, which are mostly carried out by regional heads (PSPs) against BPD directors.

In addition, OJK is guarding the actions of PSPs who have been taking dividend payouts without paying attention to the condition of the bank. Many BPDs need capital, but instead dividends are distributed large. The reason is, because the largest regional original income (PAD) from BPD, it needs to be taken for development. Clearly, this logic needs to be straightened out.

In the future, in addition to the POJK Governance being implemented consistently and firmly, OJK must have the courage to disregard PP 54/2017, which actually dwarfs BPD. Many articles on directors and commissioners contradict this POJK Governance. Hopefully, OJK will not say, as long as it is not regulated in the POJK, then it still applies. Hopefully, OJK will explicitly state that PP 54/2017 does not apply to BPD and only applies to non-bank SOEs.

But, honestly, OJK’s courage to “put up its body” in changing the board of directors should be appreciated, because banks should not be willing to be used as “cash cows” by shareholders. On the other hand, banks should also not be filled with people who can endanger the bank. (*)