OJK The Value Of National Bank Resilience Is Maintained Amid Weakening Of Rupiah

Illustration. (Photo: Doc. Antara)

JAKARTA - The Financial Services Authority (OJK) considers the resilience of national banking to be maintained amid strengthening the US dollar and global geopolitical pressure. "The risks faced by the national banking industry due to the strengthening of the United States dollar can still be properly mitigated," said OJK Chief Executive OJK Banking Supervisory Dian Ediana Rae in Jakarta, quoted from Antara, Friday, April 19. Based on the results of the resistance test conducted by OJK, the weakening of the rupiah exchange rate. Currently, it is relatively insignificant to directly affect bank capital, considering that the position of Indonesia's banking neto foreign exchange (PDN) which is still far below the threshold and generally in the position of 'long' PDN or foreign exchange assets is greater than the foreign exchange obligation. Dian said that the banking capital pad is quite large with a high Capital Adequacy Ratio (CAR), which is believed to be able to absorb fluctuations in the rupiah exchange rate and interest rate which are still relatively high.Porition of Parties Funds The third (DPK) in the form of foreign currency is currently around 15 percent of the total banking DPK. Until the end of March 2024, the foreign exchange rate still grew quite well both year on year (yoy) and compared to the beginning of 2024 year to date (ytd). According to him, the current weakening of the rupiah exchange rate can also have a positive effect on commodity exports and their derivatives which are expected to offset non-resident withdrawals and encourage domestic industries to increasing the use of domestic components in the production process. OJK conducts regular resilience tests against banks using several variable macroeconomic scenarios and considers the main risk factors, namely credit risk and market risk. OJK always carries out optimal supervision to ensure that various risks due to the weakening of the exchange rate and relatively high interest rates for each bank are properly mitigated. OJK also asked banks to always carry out monitoring related to the potential impact of transmission from the development of the global and domestic economy on bank conditions and carry out the necessary mitigation steps. Coordination with members of the Financial System Stability Committee (KSSK) also continues to be carried out with a commitment to continue to issue policies that are needed in an appropriate and timely manner. Dian appealed to the public to remain calm in the face of the impact of global geopolitical shocks that are currently happening. "The calm and rationality of the community, as well as coordination between related authorities, are key factors in dealing with the current dynamics of the global economy," he said. So far, the strengthening of the US dollar has occurred to all currencies globally, as reflected in the US dollar index which recorded an upward trend since the end of March 2024. Several factors that have influenced the strengthening of the US dollar include the high for longer interest rate policy that is still continuing in the middle The strong economy of the US economy but at the same time the pace of US inflation is still quite far from the target of 2 percent.

This was reinforced by a statement by the US central bank or the Fed which stated that it would not be in a hurry to lower interest rates and would continue to look at the development of future economic data. Meanwhile, the increasing geopolitical tension in the Middle East after the direct conflict between Iran and Israel caused fears of an increasingly widespread war and could burden the world's economy, especially from rising energy commodity prices and major minerals as the increase in logistics costs as major trade routes were disrupted due to conflicts in the Middle East and Russia-Ukraine. "This increase in geopolitical tension and global uncertainty caused the US dollar which is one of the safe assets to continue to be hunted by market participants and pushed for further strengthening," said Dian. On the other hand, the domestic economy is also affected by the external geopolitical situation, as can be seen from Indonesia's inflation data March 2024 which was recorded at 0.52 percent month to month (mtm) or 3.05 percent (yoy) or an increase compared to 2.75 percent (yoy) in February 2024, although it is still within the set target range.