OJK Sets Criteria for Prime Banks to Build Trust

The sector’s continued success in the future will depend not just on its robust regulatory framework and continuing alignment with global standards, but on the trust that builds between Indonesian financial institutions and the worldwide banking community. 

The role of Prime Banks

Prime Banks, which account for around two thirds of Indonesia’s banking sector, are vital to its continuing development and success. The designation, which is classified by Otoritas Jasa Keuangan (OJK), Indonesia’s Financial Services Authority, indicates the financial strength and stability of a bank in the global market. OKJ defines a Prime Bank based on two specific criteria:

1. Investment ratings: A Prime Bank must have an investment rating issued by recognized credit rating agencies, which help to determine the ability of the bank to meet its financial obligations, are essential for assessing the long-term business prospects and financial stability of the bank. The OJK specifies that for Prime Banks these ratings must be at least:
   • BBB- based on Standard & Poor’s rating
   • Baa3 based on Moody’s rating
   • BBB- based on Fitch’s rating, or
   • An equivalent rating from other agencies recognized by the OJK.
2. Global ranking in total assets: The bank must also have total assets that place it among the top 200 banks worldwide. This is assessed through their listing in the LexisNexis® Bankers Almanac®, a globally recognized directory that ranks banks by total assets and provides detailed information on financial institutions around the world.

Building trust in correspondent banking relationships

Correspondent banking relationships drive the international financial system but can expose financial institutions to operational, credit and reputational risks. 

OJK’s classification of Prime Banks is an important step in demonstrating trust and stability of Indonesian banking system within the international financial community. It indicates that these banks operate in line with globally recognised financial standards. The rating and ranking measures help navigate the operations and counterparty relationships of counterparts within the Asia-Pacific and global region. 

Financial institutions across the world are leveraging technology and global data to enable fast, safe transactions, and yet, meet regulatory requirements. The majority of these solutions rely on the comprehensive Bankers Almanac® repository – a trusted source of reliable, globally-recognized financial data on banks worldwide to help them conduct counterparty due diligence, assess risk exposures, and build operational resilience. This helps build trust between correspondents supporting global payment routing. Solutions such as Bankers Almanac provide the foundation for a range of trusted data that allow banks and other institutions to meet stringent compliance requirements and manage risk effectively, without any negative impact on the customer experience. Some examples include:

• Know-Your-Customer screening. Bankers Almanac provides comprehensive KYC data, across 26,000 financial institutions, such as bank addresses, clearing codes and , correspondent standard settlement instructions for cross-border payments compliance and risk assessment.
• Anti-money laundering (AML/CFT) compliance. The database of Bankers Almanac is a key tool for verifying the identity and legitimacy of financial institutions, helping correspondent banks adhere to AML/CFT regulations.
• Sanctions screening. Bankers Almanac provides up-to-date information on institutions that are subject to sanctions or restrictions by all major sanctioning bodies worldwide.
• Effective risk management. Rapid and comprehensive screening solutions such as Bankers Almanac® Enhanced Due Diligence allow banks to drive compliance workflow, proactively manage risk and make informed decisions about new and current counterparties and correspondent banking relationships.

These solutions ensure that financial institutions remain constantly in line with an evolving regulatory landscape. KYC and AML/CFT requirements, sanction lists, and reporting standards are regularly updated, ensuring that financial institutions remain compliant. Financial institutions are able to focus on assessing risk, rather than gathering information. Standardised KYC due diligence reports and processes also signal to regulators and the international banking community that an institution is able to adopt a risk-based approach to evaluating customers and financial counterparties. 

Financial strength, stability and compliance are essential elements of the banking relationship. The continued growth and success of Indonesia’s banking sector will depend on its ability to foster trusted, mutually beneficial relationships in an increasingly interconnected world. This will help signal financial credibility and strength of Indonesia’s financial market and build Indonesian Prime Banks as a regional and global institutions.