OJK Reg 1/2026: What Banks Need to Know About the New Foreign Worker Regulations
Authors
The Financial Services Authority (Otoritas Jasa Keuangan – "OJK") Regulation Number 1 of 2026 on the Utilization of Foreign Workers by Banks ("OJK Reg 1/2026") thoughtfully refreshes the rules on how Indonesian banks may employ foreign workers (tenaga kerja asing – "TKA") in the Indonesian banking sector. While the previous regime under OJK Regulation No. 37 of 2017 primarily focused on approval requirements and general compliance, OJK Reg 1/2026 takes a more structured and forward-looking approach, welcoming international expertise where it adds real value, while investing in Indonesian talent through clearer governance, supportive supervision, and knowledge transfer program.
Tightened Eligibility and Structural Limitations on TKA Utilization
OJK Reg 1/2026 sets out a clearer map of where foreign talent fits best. Banks with foreign shareholding of less than 25% may bring in TKA primarily as experts or consultants, directing their contribution to areas where specialist insight adds the most value.[1]
Where a foreign shareholder holding less than 25% nonetheless qualifies as a controlling shareholder or otherwise exercises control over the bank, the use of TKA may extend to seats on the Board of Directors, Board of Commissioners, and/or as experts or consultants.
At the governance level, OJK Reg 1/2026 reinforces localization requirements by mandating that the majority of the Board of Directors, at least 50% of the Board of Commissioners, and the majority of executive officers must be Indonesian citizens.[2] This is a positive step that anchors strategic decision-making in local insight, while continuing to draw on international expertise where it counts.
Role Restrictions and Functional Limitations
OJK Reg 1/2026 identifies the areas where foreign expertise is most welcome, namely: treasury, risk management, information technology, credit or financing, investor relations, marketing, finance, and internal audit.[3] These are generally areas where specialized expertise may justify foreign involvement.
Two areas — human resources and compliance — are reserved for Indonesian professionals. This is a sensible choice; these are functions where deep familiarity with Indonesian local culture, laws, and people is the foundation of sound governance.
For overseas structures, similar limitations apply. Foreign bank branch offices (Kantor Cabang dari Bank yang Berkedudukan di Luar Negeri – "KCBLN") and representative offices (Kantor Perwakilan dari Bank yang Berkedudukan di Luar Negeri – "KPBLN") are restricted to employing TKA only in certain leadership or expert roles.[4] Any use of TKA outside the permitted roles or functions requires prior approval from OJK.[5]
Mandatory Planning and OJK Approval Framework
Another major development under OJK Reg 1/2026 is the requirement to integrate TKA utilization into the bank's formal planning framework in their annual business plan submitted to OJK. This plan must contain a comprehensive justification, including reasons for not employing Indonesian workers, details of the roles, duration, number of personnel, and a structured knowledge transfer program.[6]
Any use of TKA not previously included in the business plan requires prior approval from OJK.[7] In terms of approvals, candidates for senior roles such as Directors, Commissioners, and branch leaders must obtain OJK approval through the fit and proper test mechanism.[8] Similarly, the use of TKA as executive officers or in specialized roles requires prior approval supported by detailed documentation.[9]
Knowledge Transfer as a Core Regulatory Obligation
Banks and representative offices employing TKA are required to implement a structured knowledge transfer program.[10]
This obligation includes appointing Indonesian employees as counterparts to TKA, with at least two counterparts required for each TKA in a bank, providing training and development programs for these counterparts, and ensuring that TKA actively deliver training, seminars, or similar programs during their tenure.[11]
In addition, banks are required to facilitate outbound assignments for Indonesian employees to develop competencies abroad, reinforcing a reciprocal approach to capability development.[12]
Time Limitation and Regulatory Control Over Tenure
OJK Reg 1/2026 further introduces clear limits on the duration of TKA employment. The maximum period for employing TKA in executive, specialized, or consultant roles is five years.[13] This period is calculated cumulatively, preventing repeated short-term engagements from bypassing the limitation, unless there is a break of at least three years.[14]
Any extension beyond the permitted period requires OJK approval and is subject to strict evaluation criteria, including performance and the effectiveness of knowledge transfer implementation.[15]
Ongoing Reporting and Supervisory Oversight
Post-approval, OJK Reg 1/2026 imposes extensive reporting obligations to ensure ongoing supervision. Banks must report the appointment of TKA in key roles within specified timeframes,[16] and include TKA utilization in their business plan realization reports.[17]
More importantly, banks are required to submit performance-based reports detailing the roles, responsibilities, and outcomes of TKA engagement, as well as the implementation of knowledge transfer programs.[18]
- Article 3 of OJK Reg 1/2026. ↩
- Article 4 of OJK Reg 1/2026. ↩
- Article 8 of OJK Reg 1/2026. ↩
- Article 7 of OJK Reg 1/2026. ↩
- Article 9 of OJK Reg 1/2026. ↩
- Article 12 of OJK Reg 1/2026. ↩
- Article 13 (2) of OJK Reg 1/2026. ↩
- Article 15 of OJK Reg 1/2026. ↩
- Article 16 of OJK Reg 1/2026. ↩
- Article 22 of OJK Reg 1/2026. ↩
- Article 22 (2) of OJK Reg 1/2026. ↩
- Article 23 of OJK Reg 1/2026. ↩
- Article 10 (2) of OJK Reg 1/2026. ↩
- Article 10 (4) of OJK Reg 1/2026. ↩
- Articles 28 and 29 of OJK Reg 1/2026. ↩
- Article 18 of OJK Reg 1/2026. ↩
- Article 24 (1) of OJK Reg 1/2026. ↩
- Article 25 of OJK Reg 1/2026. ↩