Increase Sharia Bank Trust, OJK Issues Sharia Governance POJK

Illustration (Photo: Doc. ANTARA)

The Financial Services Authority (OJK) continues to encourage the strengthening of governance and increasing public trust in the application of sharia principles in the banking sector by issuing Financial Services Authority Regulation (POJK) Number 2 of 2024 concerning the Implementation of Sharia Governance for Sharia Commercial Banks and Sharia Business Units (POJK Procedure Syariah BUS UUS) on February 16, 2024.

POJK Syariah Management BUS UUS was issued to complete the previous provisions of POJK Number 17 of 2023 concerning the Implementation of Governance for Commercial Banks (POJK Governance), which is more specific in regulating banking activities as a consequence of the application of sharia principles that have an impact on business activities, human resource capacity and culture, as well as the business orientation of Islamic banks.

This POJK regulates fundamental and strategic matters in implementing governance to ensure the fulfillment of sharia principles in business activities and operations of BUS and UUS.

The POJK regulates, among other things, the strengthening of authority, structure and function of DPS, the implementation of sharia compliance functions, the function of sharia risk management, and the internal sharia audit function, as well as the obligation to conduct external reviews of the implementation of sharia governance.

Chairman of the OJK Board of Commissioners Mahendra Siregar said that the OJK will continue to improve the integrity of the financial system, one of which is through improving governance in all sectors of financial services.

"All parties, PSP, directors and commissioners in the financial services sector must provide tones of the top regarding the importance of this governance," he explained in his official statement, Wednesday, March 6.

Meanwhile, Chief Executive of Banking Supervision Dian Ediana Rae said that OJK's efforts to accelerate the development of Islamic banking could not be separated from efforts to continue to improve sharia banking governance in order to ensure high, healthy and sustainable growth.

"The loss of trust in Islamic banks will have a very serious impact on the development of the next Islamic bank," he explained.

The POJK for Sharia Management of the UUS BUS was also published as a manifestation of the implementation of the 2023-2027 Sharia Banking Development and Strengthening Roadmap which aims to develop healthy, efficient, integrity and competitive sharia banking, and contribute significantly to the national economy to achieve the benefit of the community.

Through the implementation of sharia governance consistently in all bank business and operational activities, it is hoped that public trust and convenience in Islamic banking in Indonesia will increase which will strengthen and develop the presence of the Islamic banking industry in Indonesia.

The issuance of the UUS Syariah Governance POJK is also in order to follow up on Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK), which includes placing the Sharia Supervisory Board (DPS) in the same group as the Board of Commissioners and Directors.

Strengthening the position of DPS further emphasized that the role and function of DPS is very important for the Islamic banking industry. DPS is tasked with supervising the implementation of bank activities in accordance with sharia principles.

However, the application of sharia principles in banks is not solely the duty of DPS. All levels and organizational levels at banks are also required to ensure that bank activities are in accordance with sharia principles.

The Board of Directors, board of commissioners, compliance functions, risk management functions, and bank internal audit functions also have duties related to the application of sharia principles in banks. In addition, banks must fully support DPS so that DPS can carry out its duties properly as regulated in this POJK.

In its preparation, in addition to considering input originating from stakeholders, POJK also pays attention to the General Guidelines for Government of Indonesian Sharia Entities in 2023 published by the National Committee for Governance Policy and the IFSB-10 Guiding Principles on Shariah Governance Systems for Institutions Offering Islamic Financial Services standards.

With the issuance of this Sharia Governance POJK, all BUS and UUS must implement sharia governance in accordance with POJK as an addition to the implementation of good governance in accordance with POJK Number 17 of 2023 concerning the Implementation of Governance for Commercial Banks which had already been issued.