Indonesia’s Financial System Stable, Risk Assessments Reveal
A comprehensive risk assessment of Indonesia’s financial system has revealed a stable and resilient sector, with systemic risk levels deemed low. The findings, released yesterday, suggest that the country’s macroeconomic performance has been robust since the 2010 Financial Sector Assessment Program, with the banking system showing impressive resilience to severe shocks.
Systemic Risk Levels Deemed Low
Market-based indicators point to relatively low levels of systemic risk, according to the assessment. While banks did experience sizable credit losses under severe stress-test scenarios, particularly from corporate exposures, high capital levels and strong profitability helped absorb most of these losses. Many banks also faced relatively small shortfalls in liquidity stress tests, including foreign currency, which appear manageable for Bank Indonesia.
Progress Made Since Global Financial Crisis
The report highlights the importance of effective financial regulation and supervision in maintaining stability. It concludes that Indonesia’s banking system has made significant progress since the global financial crisis, with banks now better equipped to withstand severe shocks.
Recommendations for Regulators and Supervisors
Indonesia’s financial sector policy and analysis have received praise for their efforts in promoting financial stability, with stress testing playing a key role in identifying potential vulnerabilities. The report recommends continued vigilance by regulators and supervisors to ensure the sector remains stable and resilient in the face of evolving global economic conditions.
Key Takeaways
- Indonesia’s financial system is deemed stable and resilient
- Systemic risk levels are low according to market-based indicators
- Banks have made significant progress since the global financial crisis
- Effective financial regulation and supervision are crucial for maintaining stability
- Regulators and supervisors must remain vigilant to ensure continued stability