OJK: Legal certainty needed for bankers in handling non-performing loans
The concept of the business judgement rule essentially provides legal protection to banks for business decisions taken in good faith, based on the principle of prudence, without conflicts of interest, and for the best interests of the company.
Jakarta (ANTARA) - The Financial Services Authority (OJK) views that banking industry players require legal certainty in handling non-performing loans to support healthy and sustainable credit growth.
To that end, OJK considers it important to have a common understanding among all stakeholders regarding the application of the business judgement rule in handling criminal cases in the banking sector.
“The concept of the business judgement rule essentially provides legal protection to the bank for business decisions taken in good faith, based on the principle of prudence, without conflicts of interest, and carried out for the best interests of the company,” said the Executive Head of Banking Supervision at OJK, Dian Ediana Rae, in a statement received in Jakarta on Wednesday.
She emphasised the importance of building a conducive climate for the banking industry through strengthened regulations, supervision, and law enforcement that are aligned.
Furthermore, Dian also expressed hope for a stronger common understanding between regulators, law enforcement officials, academics, and banking industry players regarding the application of the business judgement rule in the banking sector.
On Tuesday (12/5), OJK held the Banking Industry Seminar with the theme “Application of the Business Judgement Rule to Non-Performing Loans in Banks”.
Through this forum, OJK hopes that the banking industry will increasingly understand that the business judgement rule can provide protection in making business decisions, including the process of granting credit and financing, as long as it is carried out in accordance with the principle of prudence and applicable laws and regulations.
She explained that the business judgement rule can be applied as long as the cumulative requirements stipulated in Article 97 paragraph (5) of Law No. 40 of 2007 on Limited Liability Companies are met.
Those requirements include the execution of the decision in good faith, compliance with proper procedures, absence of conflicts of interest, and maximum efforts in mitigating the risk of loss.
If all those parameters are met but losses still occur, including the risk of non-performing loans, then it constitutes a business failure and not a criminal act, especially if influenced by external factors beyond the bank’s control.
In addition, she stressed the importance of prioritising the ultimum remedium principle, which states that the criminal route should be the last resort in resolving banking issues that have met the elements of good corporate governance.