OJK Considers Condition of Domestic Financial Services Sector Remains Manageable with Adequate Stability

Mar 11 2015
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Financial Services Authority, Jakarta, March 11, 2015: Financial Services Authority (OJK) held a press conference with Bank Indonesia and Finance Ministry on Development and Risk Profile of Financial Services Industry as of February 2015 in Jakarta, Wednesday (March 11, 2015). OJK considered that domestic financial services sector in general remained manageable with adequate stability.

In the middle of global and domestic economy dynamics, financial services sector was generally stable. Financial performance and risk profile in financial services institutions were still in normal condition. Indicators of Crisis Management Protocol in each sector of banking, capital market, and non-bank financial industry were also at normal level.

During February 2015, capital market and bond market showed indicators of reinforcement, supported by progress in condition of domestic macroeconomic fundamentals, despite a continuing depreciation of Rupiah exchange rate. Composite Index (IHSG) strengthened by 3.04 percent month to month amid pressure against Rupiah exchange rate. This reinforcement was influenced by global and regional sentiments (the Fed`s normalization policy in the near future, agreement for Greece, and quantitative easing in euro zone), and the bettering condition of domestic macroeconomic fundamentals, including decrease of Bank Indonesia (BI) rate.

Meanwhile, development in financial services institutions was still in good condition. Several main indicators in financial services sector showed stable performance. Condition of capitalization in banking sector was excellent. For the last few months, capital adequacy ratio (CAR) was consistently at a level above 19 percent, even reached 21.01 percent in January 2015 with core capital component (Tier 1) of 18.75 percent. Rentability and efficiency were relatively stable. Net interest margin (NIM) as of January 2015 was stable at 4.24 percent since October 2014. Level of banking efficiency was reasonably good, with operational cost and operational income (BOPO) at 82.15 percent. In general, efficiency will get better for the current year.

On the other side, risk profile of financial services sector remained manageable in general. Whereas liquidity risk in banking, insurance and capital market industries was at a relatively low level. Banking sectors liquidity instruments remained adequate for anticipating third potential party fund withdrawal, with ratio of asset liquidity to non-core deposit (AL/NCD) and ratio of asset liquidity to third party fund (AL/TPF) at 89.84 percent and 18.18 percent respectively as of end of February 2015. These figures were way above respective threshold of 50 percent and 10 percent.  In stock exchange, average bid-ask spread in February 2015 showed constraint compared to the average figure in previous month.

OJK also considered that credit risk in financial services institutions was relatively low in general. Market risk in financial services industry was also relatively low and could still be managed well. Having considered those indicators, OJK emphasized that condition of domestic financial services sector is strong enough to anticipate recent turmoil.

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