Gunadarma                                                                                         Michael Timothy
Partner of Banking & Finance, and General Corporate Matters     Associate
gunadarma@aymp.law                                                                       michael@aymp.law

AYMP Atelier of Law
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OVERVIEW
The past few years have witnessed significant growth in Indonesia’s repo market with transaction spanning in a staggering amount of IDR 150.2 trillion. Albeit the increasing popularity, there was a lacuna in terms of its legal foundation and clear market guideline resulting in wide array of unstandardized variations of repo transactions which in turn expose unnecessary problems to the transaction.

REPO TRANSACTION REGULATION

To overcome this issue, the Indonesian Financial Services Authority (OJK) has issued OJK Regulation No.9/POJK.04/2015 regarding Repo Transaction Guideline for Financial Services Institution (“POJK 9/2015”) as the underlying regulation for repo transaction in Indonesia (subject to below limitation). The salient points of which are:

• Change of ownership – All repo transactions must result in change of ownership over its securities.

• Agreement – All repo transaction must be made in writing in line with Indonesian Global Master Repurchase Agreement (“GMRA Indonesia”).

• Reporting – All debt securities repo transactions must be reported to OJK while all equity securities repo transactions must be reported to KSEI.

• Grandfather clause – POJK 9/2015 only applies for repo transactions made after its promulgation.

• Exclusion – Sharia based repo transactions are not required to comply with POJK 9/2015.

• Governing Law – Mandatory use of Indonesian law as the governing law.

GMRA INDONESIA

Following the issuance of POJK_9/2015, OJK also issued OJK Circular Letter No.33/SEOJK.4/2015 regarding GMRA Indonesia. Although the formulation is deeply rooted from GMRA version 2000 issued by International Capital Market Association, GMRA Indonesia distinct itself through the insertion of Indonesia Country Annex and several adjustments in the annexes to adapt to Indonesian law. Despite intended as boilerplate for repo transactions in Indonesia, amendment to the annexes is still allowed provided that it does not violate the provisions of POJK 9/2015. Some vital points in GMRA Indonesia include mandatory use of IDR as the base currency, choice of dispute settlement forum, English as the prevailing language, and use of Indonesian tax regime.

LIMITATION OF APPLICABILITY

Mandatory imposition of POJK 9/2015 and GMRA Indonesia is confined to Repo Transaction which is (i) conducted over Securities (defined as scriptless securities regulated and supervised by OJK as well as registered with and settled through Bank Indonesia and/or KSEI); and (ii) entered by Indonesian Financial Services Institution.

WHAT’S MORE IN THE PIPELINE?

To establish a more holistic repo market, Indonesian regulator also considers issuing specific accounting standard for repo transactions and enactment of certain tax treatments.