Regulatory implications
Unlike banks, nonbanks mostly operate under lighter prudential regulation and often provide limited disclosure of their assets, leverage, and liquidity which makes vulnerabilities and interconnections harder to detect.
- The IMF notes the approach of regulators in the UK and Australia where they have begun integrating system-wide stress tests and scenario analysis to better understand the dynamics at play.
- For banks, the IMF underscores the importance of implementing the Basel III standards and advancing recovery and resolution frameworks to safeguard the sector against contagion from weak banks.
- For non-banks, the IMF calls for enhanced supervision through more extensive data collection, improving forward-looking analysis, and strengthening co-ordination between supervisors.
- The IMF calls for improving and expanding the availability and usability of liquidity management tools for open-ended investment funds to address pressures and forced bond sales by non-banks.
OJK issues two new regs on capital and liquidity structure
OJK Strengthens Capital and Liquidity Structure with Two New Regulations for Islamic Banks
Summary
Jakarta, October 31, 2025 — The Financial Services Authority of Indonesia (OJK) has issued two new regulations aimed at enhancing the resilience and competitiveness of the national Islamic banking industry:
- OJK Regulation (POJK) No. 20 of 2025 on the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for Islamic Commercial Banks (BUS) and Islamic Business Units (UUS).
- OJK Regulation (POJK) No. 21 of 2025 on the Leverage Ratio for Islamic Commercial Banks.
These regulations reinforce capital structure, liquidity management, and long-term funding for Islamic banks, aligning Indonesia’s Islamic finance system with international standards under Basel III and the Islamic Financial Services Board (IFSB).
In more detail
POJK No. 20 of 2025 – Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)
This regulation requires Islamic Commercial Banks (BUS) and Islamic Business Units (UUS) to maintain both the LCR and NSFR at a minimum of 100 percent, ensuring robust short-term liquidity and stable long-term funding. Implementation will be phased in from 2026 to 2028 in line with industry readiness.
The rule mandates regular calculation, monitoring, and reporting of liquidity and funding adequacy — both on an individual and consolidated basis — to ensure transparent and measured liquidity risk management.
Modeled after Basel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools and The Net Stable Funding Ratio, and guided by IFSB’s Guidance Note GN-6, this regulation aims to align Indonesia’s Islamic banking framework with international best practices.
Ultimately, this is expected to enhance liquidity discipline, improve asset–liability composition, and strengthen banks’ ability to withstand multiple stress scenarios — all without compromising their intermediation function.
This initiative is part of the 2023–2027 Islamic Banking Development and Strengthening Roadmap (RP3SI), particularly under Pillar I (industry resilience) and Pillar V (regulation, licensing, and supervision).
POJK No. 21 of 2025 – Leverage Ratio
This regulation introduces a new capital adequacy indicator to strengthen the resilience of Islamic Commercial Banks by requiring a minimum leverage ratio of 3 percent, consistent with global Basel III and IFSB-23 standards.
The leverage ratio enhances the industry’s awareness of maintaining proportional business growth relative to its capital base, independent of risk-weighted asset adjustments. This helps banks anticipate potential deleveraging impacts across various scenarios.
The regulation, effective September 17, 2025, requires:
- First reporting: end of Q1 2026
- First public disclosure: September 2026
- Banks failing to meet the minimum threshold must submit a corrective action plan to OJK. Non-compliance may result in administrative sanctions, including fines or non-monetary penalties.
This move supports the creation of a strong capital foundation for Islamic Commercial Banks, enabling a healthy, globally competitive, and resilient Islamic banking system.
Next steps
- For BUS and UUS:
- Begin internal readiness assessments for LCR, NSFR, and leverage ratio calculations.
- Develop systems and processes for phased reporting between 2026–2028.
- Integrate risk management frameworks aligned with Basel III and IFSB standards.
- For OJK:
- Continue supervision and capacity building to ensure smooth transition and compliance.
- Facilitate harmonization of Islamic financial reporting and monitoring tools.
These new regulations mark a significant milestone in building a resilient, efficient, and internationally competitive Islamic banking ecosystem in Indonesia.
HKMA consults on new capital requirements for cryptoasset exposures
The HKMA is seeking industry feedback on a proposed prudential framework for cryptoasset exposures held by locally incorporated authorized institutions, aligning with global standards.
In more detail
The Hong Kong Monetary Authority (HKMA) issued a letter to consult the banking industry on proposed changes to the Supervisory Policy Manual (SPM) module CA-G-1, on the capital adequacy regime.
The proposal introduces a comprehensive prudential framework for Authorized Institutions’ (AIs) exposures to cryptoassets. It outlines a risk-based approach by categorizing cryptoassets into different groups, assigning differentiated capital treatments. New sections covering the topic include “Credit risk (cryptoasset exposures)” and”Calculation of risk-weighted amounts of cryptoasset exposures.” The revisions are designed to align the capital adequacy requirements with international Basel III standards and also cover derivatives, market risk, and infrastructure-related exposures.
What’s next
The consultation period is open until November 24, and the HKMA currently anticipates the revised standards to be implemented starting January 1, 2026.
UK and Switzerland publish guidance for firms on the Berne Financial Services Agreement (BFSA)
Summary
The United Kingdom’s Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have issued joint guidelines for UK and Swiss firms on implementing the Berne Financial Services Agreement (BFSA). The BFSA establishes mutual recognition of financial services regulation between the UK and Switzerland, allowing cross-border provision of wholesale financial services based on deference to each jurisdiction’s supervisory frameworks. The guidance clarifies notification procedures, eligibility criteria, and reporting obligations for firms operating under the new regime. Similarly, Switzerland’s financial regulator FINMA also published guidelines for interested institutions.
Context
The BFSA represents the first bilateral financial services agreement of its kind between the UK and Switzerland since Brexit, formalising regulatory cooperation and equivalence across key sectors such as investment and insurance services. It aims to simplify market access for wholesale and high-net-worth clients while maintaining robust prudential standards and investor protection. The framework also strengthens supervisory collaboration among the FCA, PRA, Bank of England, and Switzerland’s FINMA.
Key takeaways
- Mutual Recognition Framework: Each country recognises the other’s regulatory and supervisory systems as achieving equivalent outcomes in covered sectors, promoting market integrity and financial stability.
- Swiss Investment Services Firms:
- May provide cross-border investment and ancillary services to UK wholesale clients and high-net-worth individuals without UK authorisation, subject to notification and registration via FINMA’s EHP platform.
- Must meet conditions on client disclosures, annual reporting (by 30 April), and suitability tests for high-net-worth clients.
- Required to obtain client consent for regulatory information sharing and ensure segregation of client assets when using sub-custodians.
- UK Insurance Firms:
- May offer certain general insurance services into Switzerland without Swiss authorisation, provided they meet solvency and prudential standards equivalent to Solvency II and are registered with FINMA.
- Must report annually to FINMA (copied to PRA/FCA) and confirm that services are also offered outside Switzerland.
- Retail and life insurance are excluded; only large corporate clients (meeting at least two of turnover, balance sheet, or employee thresholds) are in scope.
- UK Investment Services Firms:
- Must notify the FCA before providing investment services into Switzerland through client advisers on a temporary basis and comply with disclosure obligations for Swiss clients.
Next steps
Firms seeking to rely on the BFSA must complete the relevant notification process (via FCA Connect or FINMA’s EHP system) before providing services.
- Annual reporting deadlines begin in April 2026, covering the 2025 reporting year.
- The FCA and PRA will publish corresponding rule amendments disapplying conflicting domestic provisions to give full effect to the BFSA.
- Both regulators encourage firms to review their governance, client disclosure processes, and cross-border operational structures ahead of implementation.
