Although Indonesia’s economy tends to be stable, the
Europe’s economic crisis and United States economic slowdown makes Bank
Indonesia take a watchful attitude.
High credit risk and increase of Rupiah interest
rate are ones of the causes of decline of capital adequacy ratio (CAR). Even
though result of Bank Indonesia’s stress test on banking portfolio of first semester
of 2012 shows that banks are able to absorb these risks, bankers must be
continually watchful as these risks ere potential to cause decline of CAR. So far,
CAR position is still above the minimum requirement at 8%. This high rate of
CAR can support banks in risk absorption.
Based on result of research conducted by Bank Indonesia,
state-owned banks and regional development banks (BPD) are those who are most
sensitive to credit risk and increase of Rupiah interest rate.
Increase of non-performing loans (NPL) will reduce
CAR of BPD by 3.26% and CAR of state-owned banks by 2.53%. And, increase in
Rupiah interest rate will reduce CAR of BPD by 3.55% and CAR of state-owned banks
by 2.71%.
Bank Indonesia also recorded that state-owned banks
and foreign bank branches (KCBA) are sensitive to risk of weakening of state
debentures. Fall of state debenture prices continue to reduce CAR of state-owned
banks by 2.26% and of foreign bank branches by 2.6%. This is as a consequence
of calculation of mark to market where state debenture value declines due to
market value.
Meanwhile, risk of exchange rate weakening mostly
affects joint venture banks and foreign bank branches. CAR decline of joint
venture banks is 0.36% and of foreign bank branches is 0.52%, as of end of
September 2012, CAR position of state-owned banks is 16.81%, regional development
banks 17.75%, joint venture banks 18.5%, and foreign bank branches 27.42%.
In the present condition, bankers should be more
cautious in distributing credit as an attempt to maintain loan quality to
remain current. Banks must also place excess of fund in low-risk securities,
even though the yield is relatively low. The reason is that banks must gain as
maximum profit as possible so they could increase their capital independently.
Banking is a capital-intensive industry. To avoid
credit and market risk, bank owners and shareholders must continually
strengthen banks capital. One of the options is that bankers can ask the share holders
to reduce portion of dividend as part of net profit allocated for capital
strengthening to support business expansion and increase of risk absorption.
Banks must also be watchful to external consequences.
If there is volatility, such as a mass demonstration, NPL risk from industry
sector will increase because production is disturbed. And, export decline due
to economic slowdown in Europe and China is potential to disturb banking
business so borrowers ability to meet their obligations will be declining.
Capital strengthening becomes important considering
that Bank Indonesia will issue a new regulation regarding bank's capital. Banks
operating domestically cannot freely open new branches. Bank Indonesia will
adjust banks business activities and distribution of office networks to banks
capital capacity.
Regulation concerning Banks Business Activities and
Office Networks is arranged to adjust banks business activities and
distribution of office networks to capital capacity of the banks. This is
stated In the Performance Report on of Bank Indonesia’s Tasks end Authorities
of Third Quarter of 2012.
The regulation, which will be released soon, is in
accordance with Indonesian Banking Architecture (API). Even though it is quite
successful in increasing sustainability of Indonesian banking, API programs are
continually perfected. The scope of perfection of API is not limited to program
implementation, but It also includes sharpening of vision.
This regulation is set forth in the Policy Concerning
Indonesian Banking Structure (Pillar 1). Pillar 1 policy is aimed to create a
healthy banking structure. All policies related to Pillar 1 are contained in
the policy package on increase of banking sustainability and competitiveness.
There are several aims of the regulating of bank?
Business activities and office networks. Firstly, to increase sustainability
and competitiveness of national banking through strengthening of risk
management, governance, and efficiency. Secondly, to build a conducive banking
system for increase of banking contribution in economy and expansion of banking
service areas, especially in underbanked areas.
Thirdly, to boost realization of
banking coordination to strengthen national banking industry. Fourthly, to
increase banks? sustainability through suitability of capital access to
business activities and office networks. This Bank Indonesia policy is in the process
of making and is predicted to be issued by the end of 2012.
Other matters concerning API
policy in pillar 1 are, amongst others: Firstly, to increase optimization of
banking Intermediation in various commercial sectors which are potential and have
a strategic role in supporting the economy.
Secondly, to Increase suitability
of product development and banks activities to scale, characteristic,
competency, and preparedness of banks? infrastructures. Thirdly, to support a
more even distribution of economic growth by re-regulating licensing, opening
of office networks, and by increasing principle of reciprocity in the opening
of office networks in other countries.
From the above description, it is
clear that banking regulators expect Indonesian banking to become stronger and
healthier through capital strengthening to be able to anticipate every
potential risk, especially credit risk, operational risk, and market risk.
The bigger the capital is, the stronger a bank will
be in absorbing potential crisis. And, the more aggressive the bank will be in
distributing credit to accelerate the real sector. This is the essence of
banks? Capital strengthening.
Business News - November 23, 2012
No comments:
Post a Comment