OJK Establishes Memorandum Of Understanding With ESMA

Photo: (Aris Nurjani/VOI)

JAKARTA - The Financial Services Authority (OJK) has signed a memorandum of understanding with the European Securities and Market Authority (ESMA).

In addition, PT Kliring Penjaminan Efek Indonesia (KPEI) has received recognition as the Third Country Central Counterparty (CCP).

For information, KPEI as the Third-Country Central Counterparty (CCP) is based on Article 25 of the European Market Infrastructure Regulation (EMIR) and the recognition is based on the Decree of the Board of Supervisors ESMA dated October 19, 2023.

Chief Executive of the Capital Market Supervisory, Derivative Finance and Carbon Exchange OJK Inarno Djajadi said, with the signing of the motorbike between OJK and ESMA, coordination will be arranged on the supervision of CCP which has received ESMA recognition, so that KPEI can increase capacity as a global qualification CCP and is able to compete internationally.

"Giving KPEI's recognition as TCCP by ESMA on October 19, 2023, is a follow-up to OJK's efforts to encourage Kliring and Guarantee Institutions in Indonesia, in this case KPEI, to increase its service capacity at a higher level, namely the international and global level," said Inarno at a press conference at the OJK Office of the Soemitro Djojojohadikusumo Building, Jakarta, Monday, November 13.

Inarno said that the recognition by ESMA was in line with OJK's efforts to continue to encourage the principles of good corporate governance, the principle of prudence, effective risk management, security principles, efficiency, and reliability in the Capital Market.

He said based on the ESMA assessment, KPEI is included in the Tier 1 Third-Country CCP category which means that KPEI has a small (non-systemically imported) risk of financial stability in the European Union or in one or more member states of the European Union.

With the ESMA recognition, KPEI can provide clearing services to clearing members and exchanges (trading venues) established in the European Union. ESMA's recognition of KPEI as CCP's Third-Country comes into effect December 31, 2023.

The process of recognizing KPEI as the Third-Country CCP was preceded by the issuance of an equality decision from the European Commission on June 8, 2023 which concluded that the legal provisions and supervisory mechanisms in Indonesia continuously comply with legally binding requirements that are equivalent to EMIR requirements.

As part of the requirements for KPEI's recognition as the Third-Country CCP by ESMA, on September 30, 2023, OJK and ESMA have signed a memorandum of understanding of ESMA's monitoring of compliance with the continuous recognition requirements by CCP which was founded in Indonesia and supervised by the OJK.

Inarno conveyed that the scope of cooperation based on the memorandum of understanding includes general problems, including developments in regulation, supervision, law enforcement, or other developments regarding CCP which is covered and monitoring by ESMA on the development of regulation and supervision in Indonesia.

Furthermore, it includes problems related to operations, activities, and CCP services that are covered, coordination of surveillance activities and if appropriate, providing assistance in the implementation of law enforcement decisions and other fields that are of common interest.

Inarno conveyed that the memorandum of understanding also contained a clause regarding the delivery of notifications as soon as possible, exchanging written information, and implementing local checks on CCP covered.

Through the memorandum of understanding in question, OJK and ESMA affirm their commitment to cooperate with each other in the context of regulating and supervising CCP which is covered as long as it is in accordance with and permitted by applicable laws and regulations.

In fulfilling its objectives and responsibilities, ESMA will refer to the framework of OJK regulation and supervision considering that OJK is the authority in Indonesia responsible for the sustainability of CCP under its supervision.