Will Silicon Valley Bank Bankruptcy Affect Indonesia?

Illustration of the Rupiah (Photo: Doc. Antara)

JAKARTA - A bank from America, Silicon Valley Bank (SVB) is reported to have gone bankrupt. SVB was forced to collapse or go bankrupt after 48 hours of experiencing a capital crisis on Friday 10 March.

Former Assistant Vice President (AVP) of PT Bank Negara Indonesia (BNI) as well as a banking observer, Paul Sutaryono said, the fall of the SVB was an early warning for the global banking industry.

"For what? To be more careful in dealing with global economic uncertainty," he told VOI, Tuesday, March 14.

Paul added, the early warning also applies to the national banking industry. Will the fall of the SVB affect banks in Indonesia?

He explained that the national banking liquidity condition currently looks solid. This can be seen from the ratio of liquid assets/non-core deposits (AL/NCD) of 129.64 percent as of January 2023.

"Although the ratio has decreased from 137.67 percent as of December 2022, it is still far above the 50 percent threshold," explained Paul.

Likewise liquid assets or third party funds (DPK) 29.13 percent as of January 2023. Paul said, although the ratio was down from the previous month's 31.20 percent, it was still far above the 10 percent threshold.

"National banking capital is also still strong as can be seen in the capital adequacy ratio (CAR) of 25.93 percent as of January 2023. This ratio has strengthened from the previous month's 25.63 percent as of December 2022," he explained.

However, he continued, banks in Indonesia must also increase the formation of reserves for impairment losses (CKPN). It's important to be able to anticipate the unexpected. Mis "explosion" when the credit restructuring was released by OJK in March 2024.

"On the other hand, OJK and BI should continue to be obliged to increase their awareness of the fall of SVB, which once occupied the top 16 banks in the US," said Paul.

In line with Paul, BCA economist David Sumual explained that SVB's bankruptcy had little effect on global capital market volatility, especially Indonesia.

"I think this is an isolated problem in US banking. The impact is insignificant to the Indonesian economy," David told VOI, Tuesday, March 14.

According to David, institutionally Indonesia has been better off after the 1997 crisis. However, David advised that what happened to the SVB could be a case study for Indonesian monetary and financial policymakers so that bank capital does not focus on sources originating from just one sector.

"Maybe this can also be a study case for national banks in managing their balance sheet. The SVB and deposit business is too concentrated in start-ups," he concluded.