OJK Recommends Shariah Business Unit Spin-offs be Made Voluntary Not Mandatory Under the Omnibus Law

Indonesia’s Financial Services Authority (OJK) has put forward a proposal requesting that the spin-offs of Shariah business units no longer be made mandatory. The OJK proposes to include this policy in the Omnibus Law Bill for the Financial Sector.

At present, under Law number 21 of 2008 pertaining to Islamic banking, it is mandated for Shariah business units to have an asset value of approximately 50% of the assets of its parent entity when spinning off, or disconnect from its parent within 15 years of the law’s enactment, in 2023.

OJK Banking Supervisor Head Heru Kristiyana, stated that these mandatory spin-offs require that the parent provide capital to allow the subsidiary to separate. Heru explained that whilst this was possible for stronger banks, i...