News & Publications
Vol. 2: Offshore Loan Compliances to Bank Indonesia and Ministry of Finance
View file in pdf version
Written by:
Oscar Damarjati | Raisa Rinaldi | Janet Lim
Introduction
In our previous Newsflash , we discussed about the recent development on the offshore loan reporting / approval regime in Indonesia, specifically regarding the revocation of the Presidential Decree No. 39 of 1991 concerning Coordination of Management of Foreign Commercial Loans, along with the dissolution of Tim Koordinasi Pengelolaan Pinjaman Luar Negeri / Offshore Loan Coordination Team (the “PKLN Team”) (“PD 39/1991”).
As such, what remains of the offshore loan reporting / approval obligation in Indonesia today are the reports made to Bank Indonesia (“BI”) and the Ministry of Finance (“MOF”). In this Newsflash, we will briefly elaborate such offshore loan reporting / approval obligations which shall be carried out by a non-bank corporation borrower who obtains (or will obtain) an offshore loan (“Borrower”) based on the regulations in force as of September 2020. The timeline of each of the reporting can be found on the Annexures to this Newsflash below.
The summary and timeline of each of the reporting can be found on the Annexures to this Newsflash below.
I. Bank Indonesia - Offshore Loan Reporting.
A. Foreign Exchange Activities Report (“Laporan Lalu Lintas Devisa” or “LLD Report”)
Under PBI No. 21/2/PBI/2019 (“PBI 21/2019”), a Borrower is required to submit an LLD Report. The LLD Report includes the reporting on the followings:
(i) offshore loan plan;
(ii) offshore loans/RPTs basic data;
(iii) withdrawal and/or repayment plan of offshore loans/RPTs;
(iv) withdrawal and/or repayment realization of offshore loans/RPTs; and/or
(v) the position and changes of offshore financial liabilities, offshore financial assets and/or RPTs.
Since March 2019, in addition to the offshore loan reporting obligation, PBI LLD also introduced the obligation for Borrowers to report Risk Participation Transactions (“RPT”) as part of the information that needs to be disclosed in the LLD activities report. RPTs are transactions that transfer the risk of credit or other facilities from one party to another based on a master risk participation agreement. The applicable reporting forms and deadlines for RPT reportings are similar to those of offshore loans reporting.
Read our previous Newsflash on the dissolution of PKLN Team here: https://hs.co.id/vol-1-update-on-offshore-loan-reportingapproval-the-abolishment-of-pkln-team-115
B. Withdrawal of Foreign Exchange from Offshore Loans / Devisa Utang Luar Negeri (“DULN”)
Based on PBI DHE/ULN, a Borrower is obliged to withdraw offshore loans through banks in Indonesia who carry out foreign exchange activities (“Indonesian Foreign Exchange Bank”). This obligation applies to withdrawals from the (i) non-revolving offshore loan; and (ii) offshore loan based on debt securities. Moreover, the implementation of this obligations has to be reported by the Borrower to Bank Indonesia using the offshore loan LLD Report regarding withdrawal realisation.
C. Prudential Principle Implementation Activity (“KPPK”)
Borrower is also required to submit several reports as the implementation of KPPK pursuant to PBI LLD/KPPK and PBI KPPK. In general, Borrower must submit:
- the prudential principle implementation activity report (“KPPK Report”): (i) a non-attested KPPK Report which includes information and data regarding foreign currency assets and foreign currency liabilities; and (ii) an attested KPPK Report (attested by a public accountant);
- information on the fulfilment of credit ratings, which includes the information and data regarding credit rating, timing of the rating and name of rating agency; and
- the financial statements of the company, consisting of: (i) unaudited financial statements; and (ii) annual audited financial statements.
In order to be able to submit those reports, Borrower shall firstly apply for user ID through BI’s reporting website. The aforesaid reporting obligations shall also be submitted online.
BI will then examine the accuracy of the reportings made by the Borrower. BI can also request clarifications, evidence, records or other supporting documents from the relevant party or institutions, including direct inspection of the company or appoint a third party to do so. The details regarding the reporting obligations to BI will be elaborated further on Annex 1 to this Newsflash.
II. MOF – Offshore Loan Reporting/Approval
In addition to the reporting obligations to BI, MOF still maintains offshore loans reporting obligations to be conducted by Borrower. In addition, MOF also regulates that state-owned / regional-owned entities shall obtain approval from MOF prior to obtaining offshore loans. There is no clear normative guideline on the report form or application form for offshore loans pre-approval, made to the MOF. However, in practice, MOF requires the same information reported to BI to be submitted to MOF. The details regarding the reporting obligations to MOF will be elaborated further on Annex 2 to this Newsflash.
III. Sanctions
A. Sanctions - Bank Indonesia Offshore Loan Reporting / Withdrawal
The administrative sanctions on the failure to meet the reporting obligations to apply for (i) an incorrect report, (ii) late of report submission, and/or (iii) not submitting the report at all. A Borower who fails to fulfill its LLD reporting obligations to BI will receive a written notice from BI, and:
- after a Borrower receives 2 (two) written notices within a year on its failure to submit its Loan Plan Report, BI will also notify the competent authority, the parent company, and/or the creditor of such Borrower regarding the impositions of such sanction;
- after Borrower receives 3 (three) written notices within a year on Borrower’s failure to submit its LLD Report, BI will also notify the relevant authority or body and/or the parent company of such Borrower regarding the impositions of such sanction; and
- after Borrower receives 4 (four) written notices within a year on Borrower’s failure to submit its LLD Report, BI will notify the relevant creditor regarding the imposition of such sanction.
In relation to the violation of the obligation of a Borrower to offshore loan withdrawal through an Indonesian Foreign Exchange Bank, such Borrower will be subjected to administrative sanctions, a fine in the amount of 0,25% for any withdrawal which is not conducted through Foreign Exchange Bank with maximum amount of IDR50,000,000 alongside with (i) a written notice; and/or (ii) a notification of such failure to relevant offshore creditor and/or the relevant authority or body. As for the failure to submit the report in a timely manner, it will be subjected to administrative sanction: a fine in the amount of IDR500,000 for each business day.
As for a Borrower’s failure to meet its KPPK reporting obligations to BI, it will be subjected to administrative sanctions in the form of fine and written notices:
- for an incorrect report: a fine of IDR500,000;
- for a late submission: a fine of IDR500,000 for each business day (with maximum fine of IDR5,000,000);
- for a failure of submission report: a fine of IDR10,000,000, in addition to a written notice and/or the notification of such failure to the relevant authority or body; and/or
- for a late or failure of submission of a credit rating report: a written notice and/or the notification of such failure to the relevant authority or body.
B. Sanctions - MOF Offshore Reporting / Approval
Under MOF Reg. 261, there is no clear/explicit sanction on the violation of offshore loan reporting / approval obligation to MOF similar to the sanctions provisions under the relevant BI regulations as mentioned above. Even though there is no explicit sanction under MOF Reg. 261, in practice, lenders will still ask the Borrower to comply with the reporting / pre-approval obligations by including these obligations (as relevant) in the loan agreement.
Conclusion and Remarks
With the abolishment of PKLN Team, the above are the current obligations of the Borrower to submit a report / to obtain approval in relation to its offshore loans. As explained in our previous Newsflash, with the shift of PKLN’s authority from PKLN Team to MOF, some would still argue that the pre-approval from PKLN, or reporting obligations to PKLN, still has to be made to MOF. On this matter, business actors need to wait for further development/clarification e.g., for MOF to issue a new regulation on this matter.
ANNEX 1 – BANK INDONESIA OFFSHORE LOAN REPORTING
| No. | Borrower’s Obligation | Relevant Document / Information | Timing |
|---|---|---|---|
| 1. | LLD Report – Loan Plan | Information and the relevant supporting documents (if any), among others:
|
No later than 15 March of the relevant year. Any change on the loan plan must be submitted no later than 15 June of the relevant year. Note: In the event that the borrower does not have new loan plan for the next year, the borrower must still report its loan plan for the next year as “NIHIL (NIL)”. |
| 2. | LLD Report – Basic Data | Information and the relevant supporting documents (if any), among others, the offshore loan and/or RPT’s terms and conditions with the creditors pursuant to the offshore loan agreement. | Monthly report, no later than the 15th. Any correction of such report must be submitted no later than the 20th of the relevant month. |
| 3. | LLD Report – Withdrawal and/or Repayment Plan | Information and the relevant supporting documents (if any), among others:
|
Monthly report, no later than the 15th. Any correction of such report must be submitted no later than the 20th of the relevant month. |
| 4. | LLD Report - Withdrawal and/or Repayment Realisation | Information and the relevant supporting documents (if any), among others:
|
Monthly report, no later than the 15th. Any correction of such report must be submitted no later than the 20th of the relevant month. |
| 5. | LLD – Report - Position and Changes of Offshore Financial Liabilities and/or RPTs | Information and the relevant supporting documents (if any), among others:
|
Monthly report, no later than the 15th. Any correction of such report must be submitted no later than the 20th of the relevant month. |
| 6. | Credit Rating Report Note: Credit Rating Report is not required for refinancing transactions. |
Information and the relevant supporting documents (if any), among others:
|
No later than the end of the following month after the signing of the loan agreement. |
| 7. | Unattested KPPK Report and Unaudited Financial Statement Report | Information and the relevant supporting documents (if any), among others:
|
Quarterly, with the following deadlines: - June 30th for activities within January – March; - September 30th for activities within April – June; - December 31st for activities within July – September; and - March 31st for activities within October – December. |
| 8. | Attested KPPK Report and Audited Financial Statement Report | Information and the relevant supporting documents (if any), among others:
|
Annually, no later than 30 June of the relevant year. |
ANNEX 2 – MOF OFFSHORE LOAN REPORTING / APPROVAL
| No. | Borrower’s Obligation | Relevant Document / Information | Timing |
| 1. | Offshore loan approval | Same as the items reported to BI regarding LLD Report – Loan Plan, which includes information regarding:
|
Prior to a state-owned entity/regional-owned entity enters into a loan agreement. |
| 2. | Periodic report | Same as the items reported to BI regarding LLD Report. | Quarterly, provided that (i) the first report is upon the signing of the loan agreement, and (ii) the last report is upon the full repayment of the loan. |
Note: This writing is prepared solely based on the regulations in force as of September 2020, i.e. when the prevailing regulations are (1) Bank Indonesia Regulation No. 21/2/PBI/2019 concerning the Reporting of Foreign Exchange dated 7 January 2019 (“PBI LLD”) and its implementing regulation, (2) Members of the Board of Governors Regulation No. 21/3/PADG/2019 on Offshore Loans and Other Bank Obligations in Foreign Currency dated 15 February 2019 ("PADG 21"), (3) Bank Indonesia Regulation No. 16/22/PBI/2014 concerning the Reporting of Foreign Exchange and Implementation of Prudential Principles Activities on The Management of Offshore Loans of Non-Bank Corporations dated 31 December 2014 (“PBI LLD/KPPK”), (4) Bank Indonesia Regulation No. 16/21/PBI/2014 concerning the Implementation of Prudential Principles on The Management of Offshore Loans of Non-Bank Corporations dated 29 December 2014, as amended by Bank Indonesia Regulation No. 18/4/PBI/2016 concerning the Amendment of Bank Indonesia Regulation No. 16/21/PBI/2014 dated 22 April 2016 and its implementing regulation (“PBI KPPK”), (5) Bank Indonesia Regulation No. 16/10/PBI/2014 concerning Receipt of Foreign Exchange Export Proceeds and Withdrawal of Foreign Exchange External Loans dated 14 May 2014 as amended by Bank Indonesia Regulation No. 17/23/PBI/2015 concerning Amendment of Bank Indonesia Regulation No. 16/10/PBI/2014 dated 23 December 2015 (“PBI DHE/ULN”), (6) Presidential Decree No. 59 of 1972 concerning the Receipt of Offshore Credits dated 12 October 1972, as amended by Presidential Decree No. 15 of 1991 concerning the Receipt of Offshore Loans and the Issuance of Bank Guarantee for the Receipt of Offshore Loans by State Owned Banks and Regional Development Banks Appointed as Foreign Exchange Banks dated 18 March 1991 (“PR 59”), and (7) Minister of Finance Decree No. 261/MK/IV/5/1973 concerning the Implementing Provisions on the Receipt of Offshore Credits dated 3 May 1973, as amended by the Minister of Finance Decree No. 417/KMK.013/1989 concerning the Amendment to Article 2 Minister of Finance Decree No. 261/MK/IV/5/1973 dated 1 May 1989 and by the Minister of Finance Decree No. 279/KMK.01/1991 concerning Implementing Provisions on the Receipt of Offshore Loans and the Issuance of Bank Guarantee for the Receipt of Offshore Loans by Foreign Exchange Banks dated 18 March 1991 (“MOF Reg. 261”).
The writing of this article is also assisted by Clara Luciana (Associate) and Rizky Rachmadina (Associate)
Copyright © 2020 HS. All rights reserved.
Disclaimer:
The foregoing material is the property of Hendra Soenardi and may not be used or relied upon by any other party without our prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.
