JAKARTA - The Financial Services Authority (OJK) believes that the banking industry is able to face and overcome the risks or impacts of the Middle East war, while ensuring that the capital condition (capital adequacy ratio/CAR) is in a strong position to absorb risks.
The Head of the OJK Banking Supervisory Executive, Dian Ediana Rae, noted that the capital adequacy ratio (CAR) of the banking industry is currently in the range of 25-27 percent, far above international provisions.
"We have faced situations worse than this, such as COVID that lasted for years, but we were able to survive with policies. So there is nothing to worry too much about because we have faced worse situations, that's about it," he said, quoted by Antara, Thursday, April 2.
Dian explained that the impact of the spillover of the Middle East conflict on the national financial system, including banking, depends on the duration of the conflict.
He ensured that the authorities continued to analyze and calculate the various risks that might arise. The impact of the conflict is said to be able to enter the financial system through various transmission channels, such as exchange rates, inflation, and other indicators.
All of these implications, said Dian, are being and will continue to be analyzed in depth, including the potential market risks that banks will face. Monitoring is carried out periodically, even down to each bank.
"Secara voluntary, bank-bank itu kan melakukan stress test. Dan kita sendiri pun, di tim kita (OJK) juga melakukan hal yang sama sebetulnya untuk melakukan stress test," kata dia.
When asked about the projection of net interest margin (NIM) this year, Dian said that its development still depends on the economic situation and various factors that can affect, such as interest rates, deposits, credit distribution, and market risks including the possibility of yield increases.
According to him, the impact of global uncertainty on the NIM of the banking industry still exists, but the amount still has to be reviewed more deeply in accordance with the development of the situation.
When asked whether the industrial NIM could increase this year, Dian also stated that he could not confirm this because he still needed to look at the overall economic conditions and business situation.
"The situation of our economic conditions, business and other situations, we must also see, yes. Our hope is of course that NIM will improve. But I dare not say (NIM has the potential to rise or fall) before I conduct a deeper analysis," said Dian.
Previously, in the face of rising geopolitical risks in the Middle East, the Association of National Banks (Perbanas) ensured that the banking industry tightened prudential measures, including the risk management framework and the principle of prudence (prudential banking).
Perbanas Chairman Hery Gunardi in a statement in Jakarta, Friday, March 27, emphasized that the fundamental indicators of domestic banking are still at a solid level, even though external volatility has increased.
This is reflected in the growth of credit which is still maintained, adequate liquidity, and strong capital.
Perbanas noted that a number of mitigation steps have been and continue to be strengthened by the banking industry in the country.
Some of these steps include through sectoral stress tests and strengthening the early warning system to anticipate potential credit quality deterioration.
The sectoral stress test is carried out on sectors that are sensitive to increases in energy costs such as transportation, logistics, and manufacturing.
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