## 1idnea2023001 ## Source details **Canonical URL:** [1idnea2023001](https://www.imf.org/-/media/files/publications/cr/2023/english/1idnea2023001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1idnea2023001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1idnea2023001.pdf.json) --- ### Summary of mission outcomes and compilation achievements - STA provided technical assistance (TA) on financial soundness indicators (FSI) to the Otoritas Jasa Keuangan (OJK) during June 2-11, 2021; the mission was conducted remotely. - Mission objectives: - Review available source data for deposit takers (DTs). - Review the framework for compiling new FSIs from available source data. - Identify areas for improvement based on the 2019 FSIs Guide. - Review available data for other financial corporations (OFCs) to assess feasibility of a subsequent mission. - Compilation outcomes: - The mission and OJK staff compiled 18 core and 12 additional FSIs for DTs, and two additional FSIs on the size of the OFC subsector from available source data. - Coverage for DT FSIs includes 109 commercial banks; FSIs for DTs exclude rural banks, credit unions and credit cooperatives and microfinance institutions. - New FSIs compiled for DTs include: - common equity Tier-1 (CET-1) capital to risk weighted assets, - provisions to nonperforming loans, - Tier 1 capital to assets (leverage) ratio, - liquidity coverage ratio, - net stable funding ratio, - credit growth to private sector. - Methodology alignment: - Several existing OJK FSIs require updating to follow the 2019 FSIs Guide’s more prescriptive approach. Identified FSIs needing updates include: - nonperforming loans (NPLs) net of provisions to capital, - tier 1 capital to assets, - return on equity, - liquid assets to total assets and liquid assets to short-term liabilities, - net open position in foreign exchange to capital, - gross asset/liability position to capital, - residential/commercial real estate loans to total loans. - Reporting and dissemination: - Timeframe for reporting FSI data and metadata to the IMF was discussed and agreed with OJK officials. - As of June 2021, 146 countries’ FSI data are disseminated on the IMF’s FSI website. - OJK staff may now compile quarterly FSIs for DTs using the workbook developed by the mission in line with the 2019 FSIs Guide. ### Priority recommendations and action plan (selected high-priority items with exact target dates) - November 2021: Finalize and report to STA for review the new FSI sectoral financial statements (FSI-SR template) for DTs, with quarterly data beginning from 2012/Q1, semi-annual data beginning from 2011, annual data beginning from 2005, the new FSI institutional coverage (FSIC template) with annual data starting from 2005, and the new FSI metadata (FSM template). — Responsible: OJK - December 2021: Start regular reporting to STA of the new FSI-SR template (quarterly from 2012/Q1; semi-annual from 2011; annual from 2005) and the new FSIC template (annual from 2005). Report the new FSM template periodically. — Responsible: OJK - Detailed Action Plan (rec. numbers, priorities, target completion dates preserved): - Rec. 1 PR: Finalize and report to STA for review the new FSI-SR template for DTs with the specified periodicities. Target completion date: 11/30/2021. - Rec. 2 PR: Start regular reporting to STA and IMF dissemination of the new templates. Target completion date: 12/31/2021. - Rec. 3 H: Agree with Bank Indonesia (BI) and inform STA which institution will be the main counterparty to report the new FSIs to STA. Target completion date: 11/30/2021. - Rec. 4 H: Compile FSIs using cross-border, cross-sector, domestically incorporated consolidation basis. Target completion date: 12/31/2022. - Rec. 5 H: Compile and report to the IMF the concentration and distribution measures (CDM). Target completion date: 06/30/2022. - Rec. 6 H: Report the deposits with domestic and foreign banks under interbank loans. Target completion date: 12/31/2021. - Rec. 7 H: Report general and other provisions on the liability side as required by the 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 8 H: Exclude foreign bank branches from the compilation of Tier-1 capital, total regulatory capital, and risk weighted assets series for FSIs. Target completion date: 12/31/2021. - Rec. 9 H: In coordination with the BI, identify the source of the abrupt data change in the supervisory deductions data and update the historical series as necessary. Target completion date: 12/31/2021. - Rec. 10 H: Estimate total exposure measure for Islamic banks and incorporate into the memorandum series. Target completion date: 12/31/2021. - Rec. 11 H: Compile loan concentration by economic activity indicator in line with the 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 12 H: Update the liquid assets memorandum series per 2019 FSIs Guide definitions. Target completion date: 12/31/2021. - Rec. 13 H: Report liquidity coverage ratio and net stable funding ratio. Target completion date: 12/31/2021. - Rec. 14 H: Calculate net open position in foreign exchange to capital per aggregation approach in 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 15 H: Start reporting the new credit growth to private sector FSI. Target completion date: 12/31/2021. - Rec. 16 H: Start reporting underlying series (reference lending rates and reference deposit rates) for calculation of spread between reference lending and deposit rates. Target completion date: 12/31/2021. - Rec. 17 H: Compile residential real estate and commercial real estate loans memorandum series per 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 18 M: Update geographical distribution of loans consistent with the classification of the World Economic Outlook. Target completion date: 12/31/2021. - Rec. 19 M: Evaluate size of foreign currency linked loans and foreign currency linked liabilities for DTs and start collecting data if material. Target completion date: 12/31/2021. - Rec. 20 L: Report other comprehensive income (OCI) data. Target completion date: 12/31/2021. - Rec. 21 H: Report OFC total assets, including expansion to incorporate total assets of MMFs, ICs and PFs and other OFCs subsectors. Target completion date: 12/31/2021. - Rec. 22 H: Report institutional coverage for OFCs. Target completion date: 12/31/2021. ### Coverage, consolidation basis, and sector structure (key statistics preserved) - Current practice: FSIs for DTs are compiled using unconsolidated data. - Mission recommendation: Compile the FSIs on a “cross-border, cross-sector, domestically incorporated” (CBCSDI) basis. - Covered entities and exclusions: - Covered: Resident domestically controlled and foreign controlled DTs, with their domestic and overseas branches; branches in Indonesia of DTs incorporated abroad are included. - Excluded: Foreign deposit taking and foreign and domestic non-deposit taking financial subsidiaries of domestically incorporated DTs; intra-group adjustments are not undertaken. - Financial system composition (as of 31-Dec-20 unless otherwise specified): - Total reported assets of the financial system: IDR 12,078 trillion. - Assets of commercial banks constitute 76 percent of the total financial system assets. - Selected Table 2 figures (Sector — Number of institutions — Total assets (In Trillions of IDR) — Total assets (Percent of Nominal GDP) — Percent of Total Financial System Assets): - Commercial Banks: 109 — 9,178 — 59.46 — 75.98 - o/w domestically controlled: 71 — 6,681 — 43.29 — 55.31 - State-owned banks 1/: 4 — 3,819 — 24.74 — 31.61 - Subsidiaries of state-owned banks (Islamic banks): 3 — 240 — 1.55 — 1.98 - Regional development banks: 26 — 764 — 4.95 — 6.32 - Private banks: 38 — 1,859 — 12.05 — 15.39 - o/w foreign controlled: 30 — 2,061 — 13.35 — 17.06 - o/w branches of foreign banks: 8 — 436 — 2.82 — 3.61 - Rural banks: 1,669 — 170 — 1.10 — 1.41 - Deposit taking microfinance institutions: 226 — 1 — 0.01 — 0.01 - Insurance companies: 143 — 783 — 5.07 — 6.48 - o/w life insurance: 59 — 581 — 3.76 — 4.81 - o/w nonlife insurance, reinsurance: 84 — 202 — 1.31 — 1.67 - Pension funds: 219 — 317 — 2.05 — 2.62 - Money Market Funds: 262 — 95 — 0.61 — 0.78 - Other financial institutions: 715 — 1,536 — 9.95 — 12.72 - Other insurance: 5 — 672 — 4.35 — 5.56 - Leasing companies: 176 — 456 — 2.95 — 3.78 - Specialized financing institutions: 120 — 256 — 1.66 — 2.12 - Infrastructure financing: 2 — 116 — 0.75 — 0.96 - Venture capital: 61 — 19 — 0.13 — 0.16 - Insurance brokers: 160 — 9 — 0.06 — 0.08 - Reinsurance brokers: 42 — 5 — 0.03 — 0.04 - Peer to peer lending: 149 — 4 — 0.02 — 0.03 - Note: 1/ Excluding subsidiaries of state-owned banks. Source: Indonesia Financial Services Authority - Otoritas Jasa Keuangan. ### Accounting, regulatory frameworks, and prudential settings - Accounting and standards: - Financial Accounting Standards Board (DSAK) under the Indonesian Institute of Accountants (IAI) sets accounting standards; Indonesia National Accounting Standards (SAK) are adopted from IFRS; Indonesia maintains a one-year difference with the IFRS as issued by the IASB. - As of January 2020, Indonesia started implementing IFRS 9. - Rural banks apply Indonesian Accounting Standard for Non-Publicly Accountable Entities; Exposure Draft for Private Entities issued by DSAK-IAI. - IFRS 9 and provisioning: - OJK Regulation No 40/POJK.03/2019 on Quality Assessment of Asset for Commercial Banks effective January 1, 2020 sets asset classification rules. - Minimum provisioning rates: 1 percent for ‘Standard’ and 5 percent for ‘Special Mention’ categories. - OJK staff noted average provisioning requirement under IFRS 9 is around 60 percent higher compared to that of the prudential regulation. Should IFRS 9 provisions fall short of prudential requirements, banks are required to deduct the difference from Tier-1 capital. - NPL classification: - NPLs: past due for 90 days or more; categories “Substandard”, “Doubtful” and “Loss”. - Minimum specific provisioning requirements: 15 percent for “Substandard”, 50 percent for “Doubtful”, 100 percent for “Loss”. - Capital and Basel implementation: - Indonesian risk-based capital framework applies to all commercial banks; Basel-III standards implemented for definition of capital, minimum capital requirements, capital buffers, leverage ratio and liquidity requirements (LCR and NSFR). - Indonesia has not started implementing Basel III standards finalized December 2017; OJK planning to start implementation in 2023. - OJK Regulation No. 11/POJK.03/2016 implements Basel III capital adequacy framework. - Banks required minimum capital adequacy: 4.5 percent CET-1, 6 percent Tier-1, 8 percent total regulatory capital. - Rural banks: minimum capital adequacy ratio at least 12 percent of RWAs (OJK Regulation No. 5/POJK.03/2015). - CBBA and Tier-1 thresholds: - Consolidation requirement: commercial banks required to have at least IDR 3 Trillion of Tier 1 capital no later than December 31, 2022, with phased thresholds: - before December 31, 2020: at least IDR 1 Trillion Tier 1 Capital - before December 31, 2021: at least IDR 2 Trillion Tier 1 Capital - CBBA categories: - CBBA 1: Tier 1 less than IDR 1 trillion - CBBA 2: Tier 1 between IDR 1 trillion and IDR 5 trillion - CBBA 3: Tier 1 between IDR 5 trillion and IDR 30 trillion - CBBA 4: Tier 1 from IDR 30 trillion above - Capital buffers and liquidity: - Capital conservation buffer: 2.5 percent of RWAs; applies only to CBBA 3 and CBBA 4 banks. Due to COVID-19 relaxation, capital conservation buffer imposed is 0 percent until March 31, 2022. - Countercyclical capital buffer: 0 percent - 2.5 percent of RWAs; currently set to 0 percent. - Capital buffer for D-SIBs: 1 percent - 2.5 percent of RWAs. There are currently 14 D-SIBs in Indonesia. - Leverage ratio: OJK Regulation No. 31/POJK.03/2019 requires a 3 percent minimum leverage ratio for commercial banks; reporting started as of 2020Q4. Islamic banks exempted. - Liquidity standards: LCR and NSFR apply to CBBA 3, CBBA 4, and foreign banks; banks subject to 100 percent minimum LCR and NSFR requirements. ### Source data, reporting frequency, validations, and operational arrangements - Source data providers and collection channels: - Commercial banks’ unconsolidated monthly reports (Balance Sheet & Income Statement) collected through Bank Indonesia – Commercial Bank Integrated Reporting System; compilation and processing by OJK – Department of Bank Licensing and Banking Information. - Commercial banks’ micro prudential reports (e.g., Regulatory Capital, LCR, NSFR) collected and processed by OJK – Department of Bank Licensing and Banking Information. - Rural Banks (all reports) collected and processed by OJK – Department of Bank Licensing and Banking Information. - Consolidated data collected through the Commercial Bank Integrated Reporting System cover highly aggregated balance sheet and income statement information on a quarterly basis. - Islamic banks’ data are mapped to commercial banks data by an automated system following Annex 7.4 of the 2019 FSIs Guide. - Validations and responsibilities: - Validations conducted automatically by the IT system; responsible departments check data for validity and consistency. - Integrated Statistics Database: Integrated Data Management and Statistics Group (GDST). - Banking Data: Banking Information Directorate, under Banking Licensing and Information Department. - Capital Markets Data: Capital Market Statistics and Information Directorate, under Capital Market Supervision Department. - OFC’s Data: Non-Bank Financial Industry Statistics and Information Directorate, under Non-Bank Financial Industry Supervision Department. - Reporting timetables: - Source data for FSIs are reported on a monthly basis. - Monthly reports are due within 30 days of the end of the reporting period. - FSIs are reported to the IMF on a quarterly basis. - The OJK does not plan to start monthly reporting to STA. ### Compilation, mapping, methodology issues and mission recommendations - Compilation and mapping: - Mission developed compilation spreadsheets and mapped historical data to the FSI-SR reporting forms; mapping for new series based on 2019 FSIs Guide methodology. - Mission assisted OJK in compilation of 18 core and 12 additional FSIs for DTs and two additional FSIs for OFCs subsector size. - Concentration and Distribution Measures (CDMs): - Mission presented CDM tool; recommendation that OJK compile and report CDM indicators to IMF to capture tail risks and concentration. - Key methodological recommendations (selected): - Exclude foreign bank branches (FBBs) from compilation of Tier-1 capital, total regulatory capital, and RWAs for FSIs. - Compile FSIs on a CBCSDI consolidation basis to eliminate intra-group double counting. - Estimate total exposure measure for Islamic banks and include in memorandum series for leverage ratio. - Use total regulatory capital as denominator for NPLs net of provisions to capital FSI (2019 Guide). - Compile loan concentration by economic activity in line with ISIC Rev.4/KBLI. - Annualize net income before/after tax and average assets/capital per 2019 FSIs Guide for ROA and ROE calculations. - Update liquid assets memorandum series and report LCR and NSFR. - Calculate FX net open position to capital following aggregation approach in 2019 FSIs Guide. - Evaluate and start collecting data on foreign currency linked loans and liabilities if material. - Report general and other provisions on liability side; report deposits with domestic and foreign banks under interbank loans. ### Executive recommendations (selected) - The OJK to start reporting the new credit growth to private sector FSI. - The OJK to start reporting underlying series (reference lending rates and reference deposit rates) for the calculation of spread between reference lending and deposit rates. - The OJK, in coordination with the BI, to start reporting underlying series (highest interbank rate and lowest interbank rate) for the calculation of spread between highest and lowest interbank rates. - The OJK to compile residential real estate and commercial real estate loans memorandum series in line with the definitions provided in the 2019 FSIs Guide. - The OJK to report OFC total assets, including additional sectorization to incorporate total assets by MMFs, ICs and PFs and other OFCs subsectors. - The OJK to report institutional coverage for OFCs. - The OJK to finalize and report to STA for review the new FSI sectoral financial statements (FSI-SR template) for DTs, including balance sheets, income statements, and memorandum series, with quarterly data beginning from 2012/Q1, semi-annual data beginning from 2011, annual data beginning from 2005, the new FSI institutional coverage (FSIC template) with annual data starting from 2005, and the new FSI metadata (FSM template). - The OJK, in coordination with all relevant parties, to start regular reporting to STA, for dissemination on the IMF’s FSI website, of the new FSI-SR template and the new FSIC template and to report the new FSM template periodically. - Support OJK officials’ efforts to participate in IMF FSI training courses to improve methodological knowledge and skills. ### Selected FSI values and snapshots (Appendix I — exact figures) - Regulatory capital to risk-weighted assets: 22.89 (Dec-18), 23.31 (Dec-19), 23.81 (Dec-20), 24.05 (Mar-21). - Tier 1 capital to risk-weighted assets: 21.20 (Dec-18), 21.77 (Dec-19), 22.16 (Dec-20), 22.26 (Mar-21). - Nonperforming loans net of provisions to capital: 4.07 (Dec-18), 4.68 (Dec-19), 3.78 (Dec-20), 3.95 (Mar-21). - Nonperforming loans to total gross loans: 2.29 (Dec-18), 2.43 (Dec-19), 2.64 (Dec-20), 2.72 (Mar-21). - Provisions to nonperforming loans: 57.61 (Dec-18), 53.29 (Dec-19), 68.25 (Dec-20), 67.89 (Mar-21). - Return on assets: 2.51 (Dec-18), 2.47 (Dec-19), 1.47 (Dec-20), 1.78 (Mar-21). - Return on equity: 13.33 (Dec-18), 12.34 (Dec-19), 7.07 (Dec-20), 8.56 (Mar-21). - Interest margin to gross income: 69.75 (Dec-18), 65.31 (Dec-19), 60.95 (Dec-20), 58.69 (Mar-21). - Noninterest expenses to gross income: 48.12 (Dec-18), 46.30 (Dec-19), 46.96 (Dec-20), 40.70 (Mar-21). - Net open position in foreign exchange to capital: 1.68 (Dec-18), 1.59 (Dec-19), 0.89 (Dec-20), 1.25 (Mar-21). - Large exposures to capital: 0.40 (Dec-18), 0.45 (Dec-19), 2.06 (Dec-20), 1.93 (Mar-21). - Liquidity coverage ratio: 263.80 (Mar-21). - Net stable funding ratio: 138.62 (Mar-21). - Customer deposits to total (no interbank) loans: 98.09 (Dec-18), 97.12 (Dec-19), 103.20 (Dec-20), 104.37 (Mar-21). - Foreign-currency-denominated loans to total loans: 15.04 (Dec-18), 13.78 (Dec-19), 12.14 (Dec-20), 12.39 (Mar-21). - Credit growth to private sector: -2.89 (Mar-21). - OFCs' assets to total financial assets: total OFCs: 23.00 (Dec-18), 23.55 (Dec-19), 22.64 (Dec-20), 22.66 (Mar-21). - OFCs' assets to gross domestic product: OFCs: 16.17 (Dec-18), 16.59 (Dec-19), 17.70 (Dec-20), 17.87 (Mar-21). ### Appendix III — methodological amendments and observed differences (Mar-21 comparison) - Key recommended amendments (selected, as recorded in Appendix III): - Exclude foreign bank branches from compilation of Tier-1 capital, total regulatory capital, and RWAs. - Start reporting leverage ratio and estimate total exposure measure for Islamic banks. - Update liquid assets memorandum series; start reporting LCR and NSFR. - Calculate FX net open position per 2019 FSIs Guide aggregation. - Compile loan concentration by economic activity. - Start reporting underlying series for spreads and collect foreign-currency-linked instrument data if material. - Report OFC total assets by subsector and institutional coverage. - Appendix III. Table 2 — Comparison of FSIs Before and After the Technical Assistance (Mar-21) — selected entries (Mission / Old / Difference Basis Points): - Regulatory capital to risk-weighted assets: 24.05 / 24.05 / 0.00 - Tier 1 capital to risk-weighted assets: 22.26 / 22.26 / 0.00 - Nonperforming loans net of provisions to capital: 3.95 / 4.18 / (22.57) - Common Equity Tier 1 capital to risk-weighted assets: 20.25 / - - Tier 1 capital to assets/Leverage ratio: 11.97 / 14.50 / (252.47) - Liquid assets to total assets: 24.09 / 17.96 / 612.80 - Liquid assets to short-term liabilities: 35.65 / 25.99 / 966.16 - Liquidity coverage ratio: 263.80 / - - Net stable funding ratio: 138.62 / - - OFCs' assets to total financial assets: total OFCs: 22.66 / 16.51 / 615.69 - Credit growth to private sector: -2.89 / - - Residential real estate loans to total gross loans: 8.20 / 8.53 / (32.72) - Commercial real estate loans to total gross loans: 8.79 / 9.14 / (35.06) ### Metadata, training, and next steps - Metadata: - Mission developed FSI metadata (FSM file) for DTs and two additional FSIs on OFC subsector size; metadata should be updated with any changes to accounting, regulatory frameworks or call report instructions. - Metadata should explain deviations from the 2019 FSIs Guide. - Reporting and dissemination: - OJK aims to report quarterly FSIs for DTs and OFCs to IMF for posting on IMF’s FSI website, pending management approval. - Underlying data available at the OJK for FSI calculation starts from 2005. - FSIC template to report institutional coverage (numbers and assets split by ownership) should be reported to the IMF. - Training and capacity building: - Mission recommended OJK staff attend regional and HQ training courses on monetary and financial statistics and FSIs; STA has delivered in-person and remote courses and the mission provided in-situ training covering the 2019 FSIs Guide, CDM tool and FSIs for OFCs. *Source: APPENDIX TABLES (1idnea2023001) — Indonesia: International Monetary Fund* ### APPENDIX TABLES ### APPENDIX TABLES ### Summary of mission outcomes and priority recommendations - STA provided technical assistance (TA) on financial soundness indicators (FSI) to the Otoritas Jasa Keuangan (OJK) during June 2-11, 2021; the mission was conducted remotely. - Mission objectives: - Review available source data for deposit takers (DTs). - Review the framework for compiling new FSIs from available source data. - Identify areas for improvement based on the 2019 FSIs Guide. - Review available data for other financial corporations (OFCs) to assess feasibility of a subsequent mission. - Compilation outcomes: - The mission and OJK staff compiled 18 core and 12 additional FSIs for DTs, and two additional FSIs on the size of the OFC subsector from available source data. - Coverage for DT FSIs includes 109 commercial banks; FSIs for DTs exclude rural banks, credit unions and credit cooperatives and microfinance institutions. - New FSIs compiled for DTs include: - common equity Tier-1 (CET-1) capital to risk weighted assets, - provisions to nonperforming loans, - Tier 1 capital to assets (leverage) ratio, - liquidity coverage ratio, - net stable funding ratio, - credit growth to private sector. - Methodology alignment: - Several existing OJK FSIs require updating to follow the 2019 FSIs Guide’s more prescriptive approach. Identified FSIs needing updates include: - nonperforming loans (NPLs) net of provisions to capital, - tier 1 capital to assets, - return on equity, - liquid assets to total assets and liquid assets to short-term liabilities, - net open position in foreign exchange to capital, - gross asset/liability position to capital, - residential/commercial real estate loans to total loans. - Reporting and dissemination: - Timeframe for reporting FSI data and metadata to the IMF was discussed and agreed with OJK officials. - As of June 2021, 146 countries’ FSI data are disseminated on the IMF’s FSI website. - OJK staff may now compile quarterly FSIs for DTs using the workbook developed by the mission in line with the 2019 FSIs Guide. ### Priority recommendations (Table 1 and action plan highlights) - Target dates and priority recommendations (selected high-priority items and deadlines preserved exactly): - November 2021: Finalize and report to STA for review the new FSI sectoral financial statements (FSI-SR template) for DTs, with quarterly data beginning from 2012/Q1, semi-annual data beginning from 2011, annual data beginning from 2005, the new FSI institutional coverage (FSIC template) with annual data starting from 2005, and the new FSI metadata (FSM template). — Responsible: OJK - December 2021: Start regular reporting to STA of the new FSI-SR template (quarterly from 2012/Q1; semi-annual from 2011; annual from 2005) and the new FSIC template (annual from 2005). Report the new FSM template periodically. — Responsible: OJK - Detailed Action Plan (rec. numbers, priorities, and target completion dates preserved): - Rec. 1 PR: Finalize and report to STA for review the new FSI-SR template for DTs with the specified periodicities. Target completion date: 11/30/2021. - Rec. 2 PR: Start regular reporting to STA and IMF dissemination of the new templates. Target completion date: 12/31/2021. - Rec. 3 H: Agree with Bank Indonesia (BI) and inform STA which institution will be the main counterparty to report the new FSIs to STA. Target completion date: 11/30/2021. - Rec. 4 H: Compile FSIs using cross-border, cross-sector, domestically incorporated consolidation basis. Target completion date: 12/31/2022. - Rec. 5 H: Compile and report to the IMF the concentration and distribution measures (CDM). Target completion date: 06/30/2022. - Rec. 6 H: Report the deposits with domestic and foreign banks under interbank loans. Target completion date: 12/31/2021. - Rec. 7 H: Report general and other provisions on the liability side as required by the 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 8 H: Exclude foreign bank branches from the compilation of Tier-1 capital, total regulatory capital, and risk weighted assets series for FSIs. Target completion date: 12/31/2021. - Rec. 9 H: In coordination with the BI, identify the source of the abrupt data change in the supervisory deductions data and update the historical series as necessary. Target completion date: 12/31/2021. - Rec. 10 H: Estimate total exposure measure for Islamic banks and incorporate into the memorandum series. Target completion date: 12/31/2021. - Rec. 11 H: Compile loan concentration by economic activity indicator in line with the 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 12 H: Update the liquid assets memorandum series per 2019 FSIs Guide definitions. Target completion date: 12/31/2021. - Rec. 13 H: Report liquidity coverage ratio and net stable funding ratio. Target completion date: 12/31/2021. - Rec. 14 H: Calculate net open position in foreign exchange to capital per aggregation approach in 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 15 H: Start reporting the new credit growth to private sector FSI. Target completion date: 12/31/2021. - Rec. 16 H: Start reporting underlying series (reference lending rates and reference deposit rates) for calculation of spread between reference lending and deposit rates. Target completion date: 12/31/2021. - Rec. 17 H: Compile residential real estate and commercial real estate loans memorandum series per 2019 FSIs Guide. Target completion date: 12/31/2021. - Rec. 18 M: Update geographical distribution of loans consistent with the classification of the World Economic Outlook. Target completion date: 12/31/2021. - Rec. 19 M: Evaluate size of foreign currency linked loans and foreign currency linked liabilities for DTs and start collecting data if material. Target completion date: 12/31/2021. - Rec. 20 L: Report other comprehensive income (OCI) data. Target completion date: 12/31/2021. - Rec. 21 H: Report OFC total assets, including expansion to incorporate total assets of MMFs, ICs and PFs and other OFCs subsectors. Target completion date: 12/31/2021. - Rec. 22 H: Report institutional coverage for OFCs. Target completion date: 12/31/2021. ### Introduction and background - This was the first STA mission on FSIs for the OJK; Indonesia participated in the Coordinated Compilation Exercise launched in 2004 and has compiled and regularly reported annual FSI data to STA. - An STA visited Jakarta during July 27-August 9, 2011 to provide TA on FSIs to the BI. - Prior reporting and counterpart arrangements: - Indonesia reports 12 core and 12 encouraged FSIs for DTs and 11 encouraged FSIs, including two encouraged FSIs for OFCs to STA through ICS. - BI has been the main STA counterparty for timely reporting; DTs and OFCs related FSIs were compiled by the OJK. - With a letter dated March 3, 2021, the OJK requested STA to acknowledge its Group for Integrated Data and Statistics Management (GDST) as a counterparty for financial sector data. - Accounting and loan categorization context: - The OJK followed IASB recommendations on application of IFRS 9 in light of coronavirus uncertainty. - Restructured loans are allowed to be categorized underperforming (standard) until March 31, 2022. - Restructured loans exceed 20 percent of total loans and may have a large impact on FSIs once relaxation measures end. ### Indonesia’s financial system — structure and key statistics - Financial system composition (as of 31-Dec-20 unless otherwise specified): - Total reported assets of the financial system: IDR 12,078 trillion. - Assets of commercial banks constitute 76 percent of the total financial system assets. - Table 2 key figures (Sector — Number of institutions — Total assets (In Trillions of IDR) — Total assets (Percent of Nominal GDP) — Percent of Total Financial System Assets): - Commercial Banks: 109 — 9,178 — 59.46 — 75.98 - o/w domestically controlled: 71 — 6,681 — 43.29 — 55.31 - State-owned banks 1/: 4 — 3,819 — 24.74 — 31.61 - Subsidiaries of state-owned banks (Islamic banks): 3 — 240 — 1.55 — 1.98 - Regional development banks: 26 — 764 — 4.95 — 6.32 - Private banks: 38 — 1,859 — 12.05 — 15.39 - o/w foreign controlled: 30 — 2,061 — 13.35 — 17.06 - o/w branches of foreign banks: 8 — 436 — 2.82 — 3.61 - Rural banks: 1,669 — 170 — 1.10 — 1.41 - Deposit taking microfinance institutions: 226 — 1 — 0.01 — 0.01 - Insurance companies: 143 — 783 — 5.07 — 6.48 - o/w life insurance: 59 — 581 — 3.76 — 4.81 - o/w nonlife insurance, reinsurance: 84 — 202 — 1.31 — 1.67 - Pension funds: 219 — 317 — 2.05 — 2.62 - Money Market Funds: 262 — 95 — 0.61 — 0.78 - Other financial institutions: 715 — 1,536 — 9.95 — 12.72 - Other insurance: 5 — 672 — 4.35 — 5.56 - Leasing companies: 176 — 456 — 2.95 — 3.78 - Specialized financing institutions: 120 — 256 — 1.66 — 2.12 - Infrastructure financing: 2 — 116 — 0.75 — 0.96 - Venture capital: 61 — 19 — 0.13 — 0.16 - Insurance brokers: 160 — 9 — 0.06 — 0.08 - Reinsurance brokers: 42 — 5 — 0.03 — 0.04 - Peer to peer lending: 149 — 4 — 0.02 — 0.03 - Source: Indonesia Financial Services Authority - Otoritas Jasa Keuangan. - Note: 1/ Excluding subsidiaries of state-owned banks. - DTs sector components and characteristics: - DTs comprise commercial banks, rural banks, microfinance institutions, credit unions and credit cooperatives. - Commercial banks are licensed by the OJK and accept deposits per Law No. 7/1992 as amended by Law No. 10/1998. - Cross-jurisdictional claims and cross-jurisdictional liabilities of commercial banks account for 3.04 percent and 8.92 percent of total claims and total liabilities respectively. - There are 26 regional development banks (BPD). - Rural banks (Bank Perkreditan Rakyat/BPR): limited scope, simplified regulatory and reporting requirements compared to commercial banks; excluded from market risk and legal risk related requirements; not connected to payment and clearing system. - Microfinance institutions (MFIs): regulated by Non-bank Financial Institution Directorate of OJK; share of MFIs in total financial system assets is around 0.01 percent. - Islamic banks: as of December 2020, 14 Islamic commercial banks and 163 Islamic rural banks; total assets of Shariah compliant banks are IDR 399.8 trillion, 4.3 percent of the total assets of the commercial banks. Islamic rural banks constitute less than 10 percent of rural banks’ assets. - Credit unions and credit cooperatives: more than 12,000 operating as of 2014 (data not provided after 2014); OJK does not collect data on number and size. - Currently there are no DTs in receivership or liquidation in Indonesia. - OFCs subsector composition: - OFCs include insurance corporations (ICs), pension funds (PFs), money market funds (MMFs) and other types of financial institutions. - Insurance companies as of December 2020: 59 life insurance and 84 non-life insurance and reinsurance companies; insurance companies constitute 6.5 percent of financial system assets. - Pension funds: 219 pension funds; constitute 2.6 percent of financial system assets. - Other financial intermediaries and auxiliaries (leasing, brokers, venture capital, infrastructure financing) constitute around 12.7 percent of the financial system. - Mandatory insurance and social insurance companies are not included in the ICs subsector if they do not function like insurers by constituting reserves and charging premiums proportional to cost of service provided. *Source: APPENDIX TABLES (1idnea2023001) — Indonesia: International Monetary Fund* ### 18. FSIs for DTs are compiled using unconsolidated data. This approach covers resident ### 1idnea2023001 - 18. FSIs for DTs are compiled using unconsolidated data. This approach covers resident ### Coverage and consolidation basis for FSIs for DTs - Current practice: FSIs for DTs are compiled using unconsolidated data. - Covered entities: - Resident domestically controlled and foreign controlled DTs, with their domestic and overseas branches. - Branches in Indonesia of DTs incorporated abroad are included. - Exclusions from reporting sample: - Foreign deposit taking and foreign and domestic non-deposit taking financial subsidiaries of domestically incorporated DTs. - Intra-group adjustments are not undertaken. - Mission recommendation: - Compile the FSIs on a “cross-border, cross-sector, domestically incorporated” (CBCSDI) basis. - Rationale for consolidation recommendation: - The 2019 FSIs Guide recommends CBCSDI consolidated group reporting by a resident DT to include activities of its branches and financial subsidiaries (except ICs), with intra-group transactions and positions eliminated on consolidation. - Consolidated reporting preserves the integrity of capital in DTs by eliminating double counting of capital (double gearing) and avoids double counting of income and assets arising from intra-group activity. - The 2019 FSIs Guide recognizes a second option, the “domestic location” (DL) basis, as an alternative for countries with (i) very few or no foreign branches or subsidiaries, and (ii) very few or no cross-sector subsidiaries. - OJK constraints noted: - Consolidated data are available (consolidated balance sheet, consolidated income and expense statement and consolidated data for prudential regulations) but granularity of consolidated reporting is not sufficient to produce underlying FSIs data, including counterparty level data. - OJK lacks data on the number and size of DT’s foreign deposit taking or non-deposit taking financial subsidiaries. ### Scope of DT subsector coverage and monitoring advice - FSIs for DTs cover 109 domestically incorporated commercial banks, including foreign bank branches. - Subsector not covered includes rural banks, MFIs, and credit unions and credit cooperatives. - Size indicators provided: - Rural banks: 1.41 percent of the total assets of the financial system. - MFIs: 0.01 percent of the total assets of the financial system. - OJK staff observations: - Number of rural banks has been decreasing in recent years. - Size of MFSs is negligible. - Mission advice: - Continue closely monitoring trends in the size of rural banks and consider covering them in the FSIs should their significance increase. - Collect data on the number and size of credit unions and credit cooperatives to comprehensively assess financial stability risks. - Recommendation (explicit): - The OJK to compile FSIs on a CBCSDI consolidation basis. ### Accounting and regulatory frameworks underlying the FSI data - Reporting and supervisory regulations: - BI Regulation No. 8/12/PBI/2006 on Commercial Banks’ Periodic Reports (replaced by BI Regulation No 21/9/PBI/2019 on Integrated Commercial Bank Reporting, effective as of June 2021). - OJK Regulation No. 12/POJK.03/2019 on Commercial Bank Reporting. - OJK Regulation No. 63/POJK.03/2020 on Commercial Bank Reporting. - Accounting standards: - Financial Accounting Standards Board (DSAK) under the Indonesian Institute of Accountants (IAI) sets accounting standards. - Indonesia National Accounting Standards (SAK) are adopted from IFRS. - Indonesia maintains a one-year difference with the IFRS as issued by the IASB. - As of January 2020, Indonesia started implementing IFRS 9. - Rural banks and private entities: - Rural banks apply Indonesian Accounting Standard for Non-Publicly Accountable Entities set by DSAK-IAI. - DSAK-IAI issued an Exposure Draft of Indonesian Accounting Standard Private Entities referring to IFRS for small and medium size enterprises, to replace the Non-Publicly Accountable Entities standard. - IFRS 9 and prudential provisioning: - Indonesia implements IFRS 9 and a prudential asset classification and provisioning regulation simultaneously. - OJK Regulation No 40/POJK.03/2019 on Quality Assessment of Asset for Commercial Banks effective January 1, 2020 sets asset classification rules. - Minimum provisioning rates: 1 percent for ‘Standard’ and 5 percent for ‘Special Mention’ categories. - Banks must set aside general and specific provisions based on the maximum requirement introduced by IFRS 9 and prudential provisioning regulation. - OJK staff noted average provisioning requirement under IFRS 9 is around 60 percent higher compared to that of the prudential regulation. Should IFRS 9 provisions fall short of prudential requirements, banks are required to deduct the difference from Tier-1 capital. - Nonperforming loan (NPL) classification: - Loans are classified as nonperforming when one or more contractual payments of interest or principal are past due for 90 days or more. - Classification also based on business prospects, debtor performance, and ability to pay. - NPL categories: “Substandard”, “Doubtful” and “Loss”. - Minimum specific provisioning requirements: 15 percent for “Substandard”, 50 percent for “Doubtful”, 100 percent for “Loss”. - Valuation: - Valuation of financial assets follows national implementation of IFRS 9; recognition and measurement principles correspond to IFRS 9 concepts. - Capital framework and Basel implementation: - Indonesian risk-based capital framework applies to all commercial banks; Basel-III standards implemented for definition of capital, minimum capital requirements, capital buffers, leverage ratio and liquidity requirements (LCR and NSFR). - Indonesia has not started implementing Basel III standards finalized December 2017 (revised standardized approach for credit risk, revised operational risk framework and revised market risk framework); OJK planning to start implementation in 2023. - OJK Regulation No. 11/POJK.03/2016 implements Basel III capital adequacy framework. - Banks required minimum capital adequacy: 4.5 percent CET-1, 6 percent Tier-1, 8 percent total regulatory capital. - Rural banks: minimum capital adequacy ratio at least 12 percent of RWAs (OJK Regulation No. 5/POJK.03/2015). - Regulatory regime for Islamic banks is similar; differences follow Islamic Financial Services Board where applicable. - Minimum capital requirements based on risk profile (Table 3 reproduced as text): - Level-1: 8 percent - Level-2: 9 - 10 percent - Level-3: 10 - 11 percent - Level-4 and Level 5: 11 – 14 percent - Risk-weighted assets (RWAs) approaches: - Commercial banks implement standardized approaches under Basel-II for RWAs. - All commercial banks use standardized approach for credit risk and market risk, and basic indicators approach for operational risk. - No use of internal modeling approaches (IRB, VaR, AMA). - RCAP findings: - Regulatory Consistency Assessment Program (RCAP) completed for risk-based capital standards in 2016; standards largely compliant. - Credit risk component materially non-compliant due to: - Zero-risk weight assignment for all claims against Indonesian government and BI, regardless of currency denominated or funded. - 50 percent risk weight applied to certain loans to employees and pensioners of state-owned enterprises (Basel framework requires 75 percent risk weight). - Definition of regulatory capital (CET-1, Tier-1, Tier-2, supervisory deductions) follows Basel-III definition. - Foreign bank branches (FBBs): - Subject to Tier-1 and total regulatory capital requirements. - Tier-1 capital of FBBs includes current year profit and wholesale funds that meet certain criteria. - Tier-2 capital includes provisions up to 1.25 percent of RWAs. - CBBA categorization and Tier-1 thresholds: - OJK implements Commercial Banks Based on Business Activities (CBBA) framework assigning banks to four categories according to Tier-1 capital. - Consolidation requirement (OJK Regulation No. 12/POJK.03/2020): commercial banks required to have at least IDR 3 Trillion of Tier 1 capital no later than December 31, 2022, with phased thresholds: - before December 31, 2020: at least IDR 1 Trillion Tier 1 Capital - before December 31, 2021: at least IDR 2 Trillion Tier 1 Capital - CBBA categories (Table 4 reproduced as text): - CBBA 1: Tier 1 less than IDR 1 trillion - CBBA 2: Tier 1 between IDR 1 trillion and IDR 5 trillion - CBBA 3: Tier 1 between IDR 5 trillion and IDR 30 trillion - CBBA 4: Tier 1 from IDR 30 trillion above - Capital buffers (implementation and current settings): - Capital conservation buffer: 2.5 percent of RWAs; applies only to CBBA 3 and CBBA 4 banks. Due to COVID-19 relaxation, capital conservation buffer imposed is 0 percent until March 31, 2022. - Countercyclical capital buffer: 0 percent - 2.5 percent of RWAs; currently set to 0 percent. - Capital buffer for D-SIBs: 1 percent - 2.5 percent of RWAs. D-SIBs classified into four groups with surcharge requirements (Table 5 reproduced as text): - Bucket 1: 1 - Bucket 2: 1.5 - Bucket 3: 2 - Bucket 4: 2.5 - There are currently 14 D-SIBs in Indonesia. - Leverage ratio: - OJK Regulation No. 31/POJK.03/2019 requires a 3 percent minimum leverage ratio for commercial banks (Tier 1 capital/Total exposure measure as defined in Basel III). - Leverage ratio reporting to the OJK started as of 2020Q4. - Leverage ratio regulation not implemented for Islamic banks. - Large exposures: - Defined as sum of all exposure values of a DT to a counterparty or group of connected counterparties equal to or above 10 percent of the DT’s Tier-1 capital. - OJK implemented large exposures Basel standard via regulation No. 32/POJK.03/2018 starting from 2019. - Large exposures framework applies to all conventional commercial banks including foreign banks; Islamic banks are excluded (draft for Islamic banks under preparation). - Liquidity standards: - OJK implemented Basel-III LCR and NSFR standards. - LCR and NSFR apply to CBBA 3, CBBA 4, and foreign banks; Islamic banks excluded. - Indonesia assessed as compliant with LCR and NSFR in RCAPs conducted in 2016 and 2020, respectively. - Banks subject to 100 percent minimum LCR and NSFR requirements. - Additional liquidity ratios reported by banks: liquid assets to non-core deposit ratio and liquid assets to third party funds ratio. - Liquid assets defined as cash, placements in the central bank (excluding reserve requirements, macroprudential intermediation ratio requirement and macroprudential liquidity buffer requirement) and government bonds in domestic and foreign currency. - Foreign exchange open position: - BI Regulation No. 7/37/PBI/2005: net open position in foreign exchange ratio at end of each working day should be no more than 20 percent of the capital (Tier 1 + Tier 2 capital). - Overall net open position defined as sum of absolute values of (i) net difference between assets and liabilities on balance sheet for all foreign currencies; and (ii) net difference between claims and liabilities including commitments and contingencies recorded in off-balance sheet accounts for all foreign currencies, all expressed in Rupiahs. ### Source data, reporting frequency and validation - Source data providers and collection channels: - Commercial banks’ unconsolidated monthly reports (Balance Sheet & Income Statement) collected through Bank Indonesia – Data through Commercial Bank Integrated Reporting System; compilation and processing by OJK – Department of Bank Licensing and Banking Information. - Commercial banks’ micro prudential reports (e.g., Regulatory Capital, LCR, NSFR) collected and processed by OJK – Department of Bank Licensing and Banking Information. - Rural Banks (all reports) collected and processed by OJK – Department of Bank Licensing and Banking Information. - Consolidated data collected through the Commercial Bank Integrated Reporting System cover highly aggregated balance sheet and income statement information on a quarterly basis. - Islamic banks’ data are mapped to commercial banks data by an automated system following the approach in Annex 7.4 of the 2019 FSIs Guide. - Operational and technical validations: - Validations conducted automatically by the IT system. - Responsible departments check data for validity and consistency. - Departments’ responsibilities for Coordinated Integrated Statistics Database: - Integrated Statistics Database: Integrated Data Management and Statistics Group (GDST). - Banking Data: Banking Information Directorate, under Banking Licensing and Information Department. - Capital Markets Data: Capital Market Statistics and Information Directorate, under Capital Market Supervision Department. - OFC’s Data: Non-Bank Financial Industry Statistics and Information Directorate, under Non-Bank Financial Industry Supervision Department. - Reporting timetables: - Source data for FSIs are reported on a monthly basis. - Monthly reports are due within 30 days of the end of the reporting period. - FSIs are reported to the IMF on a quarterly basis. - The OJK does not plan to start monthly reporting to STA. *Source: 1idnea2023001 - chapter/section text provided.* ### 44. Indonesia is a timely reporter of FSIs. The BI has been the main STA counterparty for ### 1idnea2023001 - 44. Indonesia is a timely reporter of FSIs. The BI has been the main STA counterparty for ### Reporting arrangements and counterparties - Indonesia is a timely reporter of FSIs. The BI has been the main STA counterparty for the reporting of FSIs. - The FSIs related to DTs and OFCs were being compiled by the OJK and shared with the BI for reporting to STA. - With a letter dated March 3, 2021, the OJK requested STA to acknowledge OJK’s GDST as the data-producing agent for the financial sector data in Indonesia. - The mission informed the OJK staff that the Indonesian authorities need to agree on the main counterparty to report the new FSIs to STA. ### Compilation, mapping, and methodology for DTs - The mission developed compilation spreadsheets to derive FSIs from source data (aggregated income statement, balance sheet, and other supervisory series) for DTs. - Historical data reported to the IMF were mapped to the FSI-SR reporting forms. - For new series required by the implementation of the 2019 FSIs Guide, mapping of source data to the FSI-SR report forms was discussed and conducted based on the methodology of the 2019 FSIs Guide. - The compilation spreadsheets were provided to the OJK to ensure a smooth migration to the new FSI methodology. - The mission assisted the OJK in the compilation of 18 core and 12 additional FSIs for DTs and two additional FSIs relating to the size of OFCs subsectors. - Differences between existing OJK FSIs and those developed during the mission stem from compilation methodologies; the mission’s FSIs were based on the recommended compilation methodology of the 2019 FSIs Guide. ### Concentration and Distribution Measure (CDM) tool - The mission presented the Concentration and Distribution Measure (CDM) tool to the OJK staff. - The 2019 FSIs Guide introduced CDMs for selected FSIs to provide information about tail risks, concentrations, and variations in distributions over time. - The CDM tool aims to provide standard measures for tail risks and concentrations and can be downloaded from the IMF’s FSIs website. - The use of the CDM tool is especially important for Indonesia given the considerable variation across banks which may cause sectoral aggregates to be unrepresentative for the whole banking system. ### Recommendations (reporting and CDMs) - The OJK to compile and report to the IMF the CDM indicators. - The OJK to agree with the BI and inform STA on which institution will be the main counterparty to report the new FSIs to STA. ### Income statement treatment and OCI - Commercial banks are allowed to accrue interest on NPLs in line with the IFRS 9. - Several banks apply a more prudential approach where accrued interest on NPLs is recorded as off-balance sheet in contingencies and recognized as interest income using the approach on a cash basis. - The 2019 FSIs Guide recommends interest accrued on non-performing assets be credited to the provisions for accrual of interest on non-performing assets account rather than income; the provision account is reduced only when interest is actually paid (cash basis) and the amount is taken into income. - The OJK confirmed the size of accrued interest on NPLs is negligible (around 0.3 percent of accrued interest) and will not have significant effect on the income and expense statement and the respective FSIs. - The 2019 FSIs Guide recommends reporting other comprehensive income (OCI) as an additional line item in income and expense statements. - Commercial banks in Indonesia report OCI in their financial reports for quarterly publication, in line with quarterly reporting of FSIs to STA. Recommendation: - The OJK to report other comprehensive income (OCI) data. ### Balance sheet mapping and effects - Deposits with domestic and foreign banks on the asset side were mapped to interbank loans in line with the 2019 FSIs Guide; the total amount transferred as of 2021Q1 is IDR 245 trillion. Recommendation: - The OJK to report the deposits with domestic and foreign banks under interbank loans. - Provisions on performing loans and other assets were mapped to “General and Other Provisions” under liabilities in the new report forms; previously general provisions were a deduction under “other assets.” - This change increased the total size of the DT’s balance sheet by 2.3 percent as of 2021Q1. Recommendation: - The OJK to report general and other provisions on the liability side as required by the 2019 FSIs Guide. - Specific provisions are reported on the asset side as a deduction item from gross loans, consistent with the 2019 FSIs Guide; in Indonesia specific provisions are calculated according to the IFRS 9 lifetime expected losses framework. - IFRS 9 provisioning requirements are around 60 percent larger than that of the prudential regulatory framework. ### Supervisory series: regulatory capital and RWAs - Capital adequacy ratios are calculated using the Basel-III definition for total regulatory capital and its subcomponents (CET-1, additional Tier 1 and Tier 2). - Foreign bank branches (FBBs) are subject to Tier 1 capital and total capital requirements only (i.e., not subject to a CET-1 requirement); accordingly, reported CET-1 and additional tier 1 capital figures for the DTs sector do not add up to total Tier 1 capital of the DTs (which also incorporates FBBs). - FBBs constitute around 5 percent of the DTs assets, but their reported Tier-1 capital is more than 12 percent of the reported Tier-1 capital of the DTs sector. - Regulatory capital rules implemented for the FBBs are not in line with Basel III standards; FBBs regulatory capital as defined under OJK regulations has had the potential to significantly affect sectoral aggregates (e.g., capital adequacy of these institutions exceeding 50 percent which is much higher compared to the sectoral average) and hence conceal financial vulnerabilities in the DTs sector. - The CBCSDI consolidation basis also requires exclusion of FBBs from the FSIs reporting. - The mission identified an abrupt drop (i.e., to zero) in supervisory deductions in the historical data starting from 2018Q3 that was increasing the regulatory capital to RWAs significantly. - Supervisory deductions have 209 basis points effect on the regulatory capital to RWA ratio as of 2018Q2 (i.e., the last reporting date for the supervisory deductions). - OJK staff is working on identifying the source of the major change in reporting. Recommendations: - The OJK to exclude FBBs from the compilation of Tier-1 capital, total regulatory capital, and RWA series for the compilation of FSIs. - The OJK, in coordination with the BI, to identify the source of the abrupt data change in the supervisory deductions and update the historical series, as necessary. ### Leverage ratio - The new FSIs methodology recommends calculation of the Tier 1 Capital to Assets ratio based on Basel III leverage measure for jurisdictions that have implemented Basel III. - The OJK produces the total exposure measure in line with the Basel III standard. - Islamic banks are exempted from the Basel III leverage ratio requirement. While Tier 1 capital (numerator) is available for all banks, the denominator (total exposure) is produced based on a smaller sample of banks yielding an inconsistent leverage ratio for the sector. Recommendation: - The OJK to estimate total exposure measure for Islamic banks and incorporate this figure into the total exposure measure memorandum series. The method for estimating the total exposure measure should be provided in the metadata. ### Nonperforming loans net of provisions to capital - The 2019 FSIs Guide requires NPLs net of provisions to capital FSI to be calculated using total regulatory capital as denominator. - Indonesia has been reporting this FSI by using total capital and reserves obtained from the balance sheet as allowed under the 2006 FSIs Guide. - This FSI will be automatically generated by the FSIs template by using total regulatory capital as the denominator. ### Loan concentration by economic activity - The 2019 FSIs Guide defines loan concentration by economic activity FSI as the ratio of DTs’ lending to the largest three economic activities, as a proportion of their total gross loans to nonfinancial corporations. - Lending by economic activity is based on ISIC Rev.4 at its highest level. - Statistics Indonesia (Badan Pusat Statistik/BPS) implements KBLI which is in line with ISIC Rev.4. Recommendation: - The OJK to compile loan concentration by economic activity indicator in line with the methodology provided in the 2019 FSIs Guide. ### Profitability measures (ROA and ROE) annualization and averaging - The mission presented the annualization method of net income before/after tax and the averaging of total assets and capital and reserves for computation of ROA and ROE. - The 2019 FSIs Guide recommends using net profit before tax for ROA and net income after tax for ROE. - ROA = annualized net income before tax / average total assets. - ROE = annualized net income after tax / average total equity. - The OJK was reporting ROE using annualized net income before tax (per 2006 Guide) and needs updating to 2019 FSIs Guide methodology. - Preferred methods for annualization and averaging of quarterly data (example for 2019): - Annualizing net income before/after tax reported on a cumulative basis: - 2019Q1_Annualized = (2019Q1)*4; - 2019Q2_Annualized = (2019Q2)*2; - 2019Q3_Annualized = (2019Q3)/3*4; - 2019Q4_Annualized = (2019Q4). - Averaging total assets and capital: - 2019Q1_Annualized = (2018Q4+2019Q1)/2; - 2019Q2_Annualized = (2018Q4+2019Q1+2019Q2)/3; - 2019Q3_Annualized = (2018Q4+2019Q1+2019Q2 +2019Q3)/4; - 2019Q4_Annualized = (2018Q4+2019Q1+2019Q2+2019Q3+2019Q4)/5. ### Liquidity indicators and definitions - The 2019 FSIs Guide recommends LCR and NSFR ratios for jurisdictions implementing Basel-III liquidity standards. - The OJK collects source data for LCR and NSFR in line with Basel-III requirements; these ratios are calculated for a subset of commercial banks (i.e., CBBA 3, CBBA 4 and foreign banks). - The 2019 FSIs Guide recommends broad definition of liquid assets comprising: - (i) currency; - (ii) deposits and other financial assets available either on demand or within three months or less; - (iii) securities traded in liquid markets (including repo markets) readily convertible into cash with insignificant risk of change in value under normal business conditions. - Indonesia’s broad definition of liquid assets covers items such as derivative claims, deferred tax assets and prepaid expenses that do not satisfy the 2019 FSIs Guide’s definition. - For internal liquidity ratios (liquid assets to non-core deposit ratio and liquid assets to third party funds ratio), compilers defined liquid assets as cash, placements in the central bank (excluding reserve requirements, macroprudential intermediation ratio requirement and macroprudential liquidity buffer requirement), and government bonds in domestic and foreign currency. This internal definition is in line with the 2019 FSIs Guide and could be reported for FSIs compilation. - The 2019 FSIs Guide defines short term liabilities as short-term element of DTs’ debt liabilities and the net market value of their financial derivatives positions; short-term liabilities are those withdrawable on demand or within three months or less. - The OJK reports short-term liabilities on a remaining maturity basis. Recommendations: - The OJK to update the liquid assets memorandum series in line with the definitions provided in the 2019 FSIs Guide. - The OJK to report liquidity coverage ratio and net stable funding ratio. ### Net open position in foreign currencies - The FSI on net open position in foreign exchange to capital can be calculated using either on-balance sheet or on- and off-balance sheet measures; the 2019 FSIs Guide prefers the latter. - BI regulation No. 7/37/PBI/2005 defines overall net open position as the sum of the absolute values of net difference between assets and liabilities in all foreign currencies recorded on the balance sheet plus the net difference between claims and liabilities, comprising both commitments and contingencies, in all foreign currencies recorded in off balance sheet accounts. - The 2019 FSIs Guide recommends calculating open position for each foreign currency and gold, then measuring overall net open position by adding the sum of net short positions or the sum of net long positions (whichever is greater) plus the absolute value of the net position in gold. Recommendation: - The OJK to calculate the FSI on FX net open position in foreign exchange to capital in line with the aggregation approach specified in the 2019 FSIs Guide. ### Large exposures - The OJK’s large exposures definition is in line with the 2019 FSIs Guide. - Prudential reporting in line with the 2019 FSIs Guide started as of 2020/Q4. Before that, large exposures series reported by the OJK included only amounts exceeding 10 percent of tier-1 capital (i.e., not the total amount of exposures exceeding 10 percent of tier-1 capital). - FSIs reporting after 2020/Q4 includes all exposures exceeding the specified threshold. - The mission suggested the OJK update metadata to explain the change in methodology. - The numerator for the FSI needs to be updated to Tier-1 capital; currently Indonesia reports this indicator using total regulatory capital as numerator. ### Geographical distribution of loans - Claims are attributed to economies based on residency of the entity on which DTs have claims (economic territory concept, not strictly physical/political borders per paragraph 2.11 of the 2019 FSIs Guide). - Suggested regional grouping is provided in Annex 8.2 of the 2019 FSIs Guide based on the IMF’s World Economic Outlook classification. Recommendation: - The OJK to update geographical distribution of loans consistent with the classification of the World Economic Outlook. ### Gross asset/liability position in derivatives to capital - The FSI gross asset/liability positions in financial derivatives to capital gauges exposure of DTs’ asset/liability positions in derivatives relative to capital, where capital is measured as total regulatory capital. - Indonesia was using total capital and reserves as the denominator for these FSIs. - The 2019 FSIs Guide prescriptive approach will automatically generate this FSI using total regulatory capital as the denominator. ### Foreign-currency-denominated and linked instruments - The 2019 FSIs Guide recommends foreign-currency-linked instruments be included in calculation of foreign-currency-denominated loans and liabilities; foreign-currency-linked instruments are payable/receivable in domestic currency but amounts are linked to a foreign currency and thus considered denominated in foreign currency. - The OJK FSIs compilation does not cover foreign currency linked loans and liabilities and current reporting forms are not sufficient to identify foreign currency linked amounts. Recommendation: - The OJK to evaluate the size of foreign currency linked loans and foreign currency linked liabilities for the DTs and start collecting data if the size is considered material. ### Credit growth to private sector - The FSI credit growth to private sector is calculated using the year-over-year growth rate of total credit to the nonfinancial private sector. - This FSI intends to capture emerging systemic risks and serve as a forward-looking indicator of potential asset quality problems and vulnerabilities in the DT sector. - Credit to private sector data provided by the OJK, which is consistent with the 2019 FSIs Guide, includes gross loans extended by DTs to the nonfinancial private sector, plus debt securities issued by private nonfinancial corporations and held by DTs. *Source: IMF mission report text provided in the content unit.* ### 79. Recommendation: ### 1idnea2023001 - 79. Recommendation: ### Recommendations (executive) - The OJK to start reporting the new credit growth to private sector FSI. - The OJK to start reporting underlying series (reference lending rates and reference deposit rates) for the calculation of spread between reference lending and deposit rates. - The OJK, in coordination with the BI, to start reporting underlying series (highest interbank rate and lowest interbank rate) for the calculation of spread between highest and lowest interbank rates. - The OJK to compile residential real estate and commercial real estate loans memorandum series in line with the definitions provided in the 2019 FSIs Guide. - The OJK to report OFC total assets, including additional sectorization to incorporate total assets by MMFs, ICs and PFs and other OFCs subsectors. - The OJK to report institutional coverage for OFCs. - The OJK to finalize and report to STA for review the new FSI sectoral financial statements (FSI-SR template) for DTs, including balance sheets, income statements, and memorandum series, with quarterly data beginning from 2012/Q1, semi-annual data beginning from 2011, annual data beginning from 2005, the new FSI institutional coverage (FSIC template) with annual data starting from 2005, and the new FSI metadata (FSM template). - The OJK, in coordination with all relevant parties, to start regular reporting to STA, for disseminating on the IMF’s FSI website, of the new FSI-SR template with quarterly data beginning from 2012/Q1, semi-annual data beginning from 2011, annual data beginning from 2005, and the new FSIC template with annual data starting from 2005. Also report the new FSM template periodically. - Support OJK officials’ efforts to participate in IMF FSI training courses to improve their methodological knowledge and skills in compilation and interpretation of FSIs. ### Spread between Reference Lending and Deposit Rates - Indonesia compiles the FSI spread between reference lending and deposit rates. - The 2019 FSIs Guide requires reporting of the underlying series (i) reference lending rate, and (ii) reference deposit rate. - The OJK provided these memorandum series during the mission. This FSI will be automatically generated by the FSIs template (FSI-SR) using the underlying series. - Recommendation: The OJK to start reporting underlying series (reference lending rates and reference deposit rates) for the calculation of spread between reference lending and deposit rates. - Appendix I data points (selected): - Spread between reference lending and deposit rates (base points): (blank for Dec-18 and Dec-19), 517.80 (Dec-20), 556.02 (Mar-21). ### Spread between Highest and Lowest Interbank Rates - The FSI spread between highest and lowest interbank rates is available for Indonesia. - The 2019 FSIs Guide requires reporting of the underlying series (i) highest interbank rate, and (ii) lowest interbank rate. - The mission advised the OJK, in coordination with the BI, to start reporting underlying series (highest interbank rate and lowest interbank rate) for the calculation of spread between highest and lowest interbank rates. - Appendix I data points (selected): - Spread between highest and lowest interbank rates (base points): 185.24 (Dec-18), 59.47 (Dec-19), 124.49 (Dec-20), 125.62 (Mar-21). ### Real estate markets and definitions - The OJK compiles residential real estate loans to total loans, and commercial real estate loans to total loans FSIs. - OJK definitions: - Residential real estate loans: loans extended to households for purchasing houses and apartments. - Commercial real estate loans: loans extended for constructions and real estate sectors. - 2019 FSIs Guide definitions: - Residential real estate loans: loans that are collateralized by residential real estate. - Commercial real estate loans: loans that are collateralized by commercial real estate, loans to construction companies or loans to companies active in the development of real estate. - Observation: The definitions used by the OJK for the residential real estate and commercial real estate are narrower in scope in comparison to the 2019 FSIs Guide definitions. - The OJK staff confirmed the availability of the data to update these indicators. - Recommendation: The OJK to compile residential real estate and commercial real estate loans memorandum series in line with the definitions provided in the 2019 FSIs Guide. - Appendix I data points (selected): - Residential real estate prices (Percentage change/last 12 months): 2.95 (Dec-18), 1.77 (Dec-19), 1.43 (Dec-20), 1.17 (Mar-21). - Commercial real estate prices (Percentage change/last 12 months): 1.52 (Dec-18), 0.32 (Dec-19), 0.12 (Dec-20), 0.45 (Mar-21). - Residential real estate loans to total gross loans: 8.50 (Dec-18), 8.60 (Dec-19), 8.18 (Dec-20), 8.20 (Mar-21). - Commercial real estate loans to total gross loans: 9.11 (Dec-18), 9.46 (Dec-19), 8.94 (Dec-20), 8.79 (Mar-21). ### FSIs for OFCs (Other Financial Corporations) - Indonesia has been reporting two FSIs for OFCs: OFC financial assets to total financial assets and OFC financial assets to GDP. - The OFCs subsector is comprised of ICs, PFs, MMFs and other types of OFCs. - The OFCs subsector currently accounts for 22 percent of the reported assets of the financial system. - The mission advised that developments in the OFCs subsector be monitored given the importance of the OFCs subsector for Indonesia. - The 2019 FSIs Guide recommends similar FSIs for MMFs, ICs and PFs. - The OJK staff provided data on the assets for MMFs, ICs and PFs subsectors during the mission based on which the mission compiled these more granular series. - The 2019 FSIs Guide recommends compiling two new FSIs for MMFs, four new FSIs for ICs, and two new FSIs for PFs. - The OJK staff confirmed the availability of source data for the compilation of these FSIs starting from 2014/Q3. - The OJK is of the view that sectoral financial statements and memorandum series could be compiled by the OJK staff. - Specific institutional note: There are five social insurance and mandatory ICs operating in Indonesia: ASABRI (Mandatory insurance for Military Personnel), TASPEN (Mandatory insurance for civil servants), JASA RAHARJA (insurance covering accidents from vehicles and other modes of transportations such as rail, airplane, ship/boats), BPJS Kesehatan (National Health Insurance) and BPJS Ketenagakerjaan (National Worker's Insurance). These companies do not function like conventional ICs and therefore are categorized under “Other OFCs” subsector. - Indonesia has not yet reported institutional coverage for OFCs to STA. The new institutional coverage templates (FSIC) require (i) the number of the ICs, split by ownership and their respective total assets, and (ii) the number of other OFCs split by ownership, and their respective total assets to be reported through the FSIC template. - Recommendations: - The OJK to report OFC total assets, including additional sectorization to incorporate total assets by MMFs, ICs and PFs and other OFCs subsectors. - The OJK to report institutional coverage for OFCs. - Appendix I data points (selected): - OFCs' assets to total financial assets: total OFCs: 23.00 (Dec-18), 23.55 (Dec-19), 22.64 (Dec-20), 22.66 (Mar-21). - OFCs' assets to total financial assets: Money Market funds: 0.44 (Dec-18), 0.62 (Dec-19), 0.78 (Dec-20), 0.75 (Mar-21). - OFCs' assets to total financial assets: Insurance Corporations: 6.99 (Dec-18), 7.01 (Dec-19), 6.49 (Dec-20), 6.58 (Mar-21). - OFCs' assets to total financial assets: Pension Funds: 2.62 (Dec-18), 2.65 (Dec-19), 2.62 (Dec-20), 2.59 (Mar-21). - OFCs' assets to gross domestic product: OFCs: 16.17 (Dec-18), 16.59 (Dec-19), 17.70 (Dec-20), 17.87 (Mar-21). - OFCs' assets to gross domestic product: Money Market funds: 0.31 (Dec-18), 0.44 (Dec-19), 0.61 (Dec-20), 0.59 (Mar-21). - OFCs' assets to gross domestic product: Insurance Corporations: 4.91 (Dec-18), 4.93 (Dec-19), 5.07 (Dec-20), 5.19 (Mar-21). - OFCs' assets to gross domestic product: Pension Funds: 1.84 (Dec-18), 1.87 (Dec-19), 2.05 (Dec-20), 2.04 (Mar-21). ### FSI Metadata - The mission highlighted the need to complement the FSI data with the corresponding metadata. - Metadata reporting is important for interpreting the FSIs and to allow for cross-country comparisons. - Any deviations from the recommendations of the 2019 FSIs Guide should be explained in the metadata and updated when necessary. - The metadata should contain information on the content and coverage of the FSIs, as well as the accounting conventions and other national guidelines. - The mission developed FSI metadata for DTs and for two additional FSIs on the size of OFC subsectors based on the information provided by the authorities. - The metadata should be updated whenever changes are observed, for instance, when there are changes to the accounting and regulatory frameworks or to the call report instructions underlying the FSI source data. - The understanding of the calculation of key underlying series is important for better interpretation of FSIs. - Although the 2019 FSIs Guide provides guidance on the calculation of the underlying FSI series, the calculation of some data series used by national FSI compilers may not always be fully in line with the 2019 FSIs Guide due to lack of data. - There might be some adjustments to the underlying series for the FSI calculation of FSIs. - Appendix IV presents the detailed FSI metadata for DTs for reference. - The mission also prepared the FSI metadata Excel file (the FSM file) for reporting together with the FSI data to STA for posting on the IMF’s FSI website. ### FSI Data and Metadata Reporting - The OJK aims to regularly report the sectoral FSIs for DTs and OFCs to the IMF with quarterly frequency, to be posted on the IMF’s FSI website, upon the OJK management’s approval. - The OJK can compile and report all 18 core and 12 additional FSIs for DTs as well as two additional FSIs on the size of OFC subsectors on a quarterly basis. - Underlying data available at the OJK for the calculation of FSIs starts from 2005. - The mission introduced to the OJK officials the new institutional coverage template (FSIC template) with information on: - (i) the number of the reporting DTs and their branches, split by ownership, and their respective total assets, - (ii) number of the ICs, split by ownership and their respective total assets, and - (iii) number of other OFCs split by ownership, and their respective total assets. - The FSIC template should also be reported to the IMF for dissemination. - Recommendations (restated): - The OJK to finalize and report to STA for review the new FSI sectoral financial statements (FSI-SR template) for DTs, including balance sheets, income statements, and memorandum series, with quarterly data beginning from 2012/Q1, semi-annual data beginning from 2011, annual data beginning from 2005, the new FSI institutional coverage (FSIC template) with annual data starting from 2005, and the new FSI metadata (FSM template). - The OJK, in coordination with all relevant parties, to start regular reporting to STA, for disseminating on the IMF’s FSI website, of the new FSI-SR template with quarterly data beginning from 2012/Q1, semi-annual data beginning from 2011, annual data beginning from 2005, and the new FSIC template with annual data starting from 2005. Also report the new FSM template periodically. ### Resources, Training, and Technical Cooperation - The mission recommended that OJK staff seek to attend regional and HQ training courses on financial sector statistics. - STA has in the past regularly delivered courses on both Monetary and Financial Statistics and FSIs at IMF headquarters, and regional trainings centers. - STA has started delivering remote courses. - The mission provided several training sessions to the OJK staff covering the 2019 FSIs Guide, analytical use of the FSIs, consolidation approaches, CDM tool and the new FSIs for OFCs. - Recommendation: Support OJK officials’ efforts to participate in IMF FSI training courses to improve their methodological knowledge and skills in compilation and interpretation of FSIs. ### Selected Core and Additional FSI values (Appendix I - snapshot) - Regulatory capital to risk-weighted assets: 22.89 (Dec-18), 23.31 (Dec-19), 23.81 (Dec-20), 24.05 (Mar-21). - Tier 1 capital to risk-weighted assets: 21.20 (Dec-18), 21.77 (Dec-19), 22.16 (Dec-20), 22.26 (Mar-21). - Nonperforming loans net of provisions to capital: 4.07 (Dec-18), 4.68 (Dec-19), 3.78 (Dec-20), 3.95 (Mar-21). - Nonperforming loans to total gross loans: 2.29 (Dec-18), 2.43 (Dec-19), 2.64 (Dec-20), 2.72 (Mar-21). - Provisions to nonperforming loans: 57.61 (Dec-18), 53.29 (Dec-19), 68.25 (Dec-20), 67.89 (Mar-21). - Return on assets: 2.51 (Dec-18), 2.47 (Dec-19), 1.47 (Dec-20), 1.78 (Mar-21). - Return on equity: 13.33 (Dec-18), 12.34 (Dec-19), 7.07 (Dec-20), 8.56 (Mar-21). - Interest margin to gross income: 69.75 (Dec-18), 65.31 (Dec-19), 60.95 (Dec-20), 58.69 (Mar-21). - Noninterest expenses to gross income: 48.12 (Dec-18), 46.30 (Dec-19), 46.96 (Dec-20), 40.70 (Mar-21). - Net open position in foreign exchange to capital: 1.68 (Dec-18), 1.59 (Dec-19), 0.89 (Dec-20), 1.25 (Mar-21). - Large exposures to capital: 0.40 (Dec-18), 0.45 (Dec-19), 2.06 (Dec-20), 1.93 (Mar-21). - Gross asset position in financial derivatives to capital: 1.71 (Dec-18), 1.48 (Dec-19), 2.20 (Dec-20), 1.45 (Mar-21). - Gross liability position in financial derivatives to capital: 2.02 (Dec-18), 1.10 (Dec-19), 1.69 (Dec-20), 1.35 (Mar-21). - Trading income to total income: 2.66 (Dec-18), 4.16 (Dec-19), 6.62 (Dec-20), 3.50 (Mar-21). - Personnel expenses to noninterest expenses: 41.87 (Dec-18), 41.71 (Dec-19), 40.55 (Dec-20), 44.16 (Mar-21). - Customer deposits to total (no interbank) loans: 98.09 (Dec-18), 97.12 (Dec-19), 103.20 (Dec-20), 104.37 (Mar-21). - Foreign-currency-denominated loans to total loans: 15.04 (Dec-18), 13.78 (Dec-19), 12.14 (Dec-20), 12.39 (Mar-21). - Foreign-currency-denominated liabilities to total liabilities: 20.06 (Dec-18), 18.99 (Dec-19), 18.26 (Dec-20), 18.94 (Mar-21). - Credit growth to private sector: (blank Dec-18 and Dec-19 and Dec-20), -2.89 (Mar-21). ### Institutional contacts (Appendix II - officials met) - The mission met a broad set of OJK officials across departments and directorates including International Department, Banking Licensing and Information Department, Integrated Data Management and Statistics Group, Banking Supervision Development, Banking Research and Regulation Department, Supervision and Crisis Management Development Department, Non-Bank Financial Industry Statistics and Information Directorate, and International Department/Multilateral Relations Directorate. - Representative names and titles are recorded in Appendix II of the source document. ### Appendix III (summary) - The mission recommended amendments to align FSIs with the 2019 FSIs Guide. - Recommended amendments include improvements discussed in this report, as well as incorporation of amendments brought by the 2019 FSIs Guide. - Changes requiring a longer timeframe for implementation are bolded in the source table and spelled out as individual recommendations in this report. *Source: 1idnea2023001 - 79. Recommendation (IMF TA mission report).* ### Appendix III. Table 1. Indonesia: Recommended Amendments to FSIs ### Appendix III. Table 1. Indonesia: Recommended Amendments to FSIs ### Recommended amendments and updates to specific FSIs - Total Capital to RWA/Tier - Exclude foreign bank branches from the compilation of Tier-1 capital, total regulatory capital, and risk weighted assets series for the compilation of FSIs. (to be implemented). - Capital to RWA/Common Equity - (No separate text beyond table heading.) - Tier-1 Capital to RWA - Exclude foreign bank branches from the compilation of Tier-1 capital, total regulatory capital, and risk weighted assets series for the compilation of FSIs. (to be implemented). - Tier 1 Capital to Assets/Leverage ratio - Start reporting the new FSI (leverage ratio). Estimate total exposure measure for Islamic banks and incorporate this figure into the total exposure measure memorandum series (to be implemented). - NPLs net of provisions to capital - This FSI is automatically generated by the FSI template by using total regulatory capital as denominator. - NPLs to total loans - The definition of total loans should be aligned with the 2019 FSIs Guide definition. - Provisions to nonperforming loans - This FSI is automatically generated by the FSIs template by using the specific provisions and nonperforming loans data that is readily available. - Loan concentration by economic activity - Compile loan concentration by economic activity indicator in line with the methodology provided in the 2019 FSIs Guide. - Return on Assets (ROA) - Use annualized net income before tax in the numerator. - Aggregate the numerator as indicated in the report. - This FSI is automatically generated by the FSIs template by using annualized net income before tax. - Return on Equity (ROE) - Use annualized net income after tax in the numerator. - Aggregate the numerator as indicated in the report. - This FSI is automatically generated by the FSIs template by using annualized net income after tax. - Interest margin to gross income - Deduction of accrued interest on nonperforming loans from interest income has limited effect on the indicator. - Noninterest expenses to gross income - Deduction of accrued interest on nonperforming loans from interest income has limited effect on the indicator. - Liquid assets to total assets/Liquid assets to short-term liabilities - Update the liquid assets memorandum series in line with the definitions provided in 2019 FSIs Guide. (to be implemented). - Liquidity coverage ratio - Start reporting the new FSI. - Net stable funding ratio - Start reporting the new FSI. - Net open position in foreign exchange to capital - Calculate the FX NOP in line with the aggregation approach specified in the 2019 FSIs Guide (to be implemented). - Large exposures to capital - Large exposures memorandum series to cover all exposures as defined in the Basel Framework. - Geographical distribution of loans to total loans - Update geographical distribution of loans consistent with classification of the World Economic Outlook. - Gross asset/liability position in derivatives to capital - These FSIs are automatically generated by the FSIs template by using total regulatory capital as denominator. - Trading income to total income - Deduction of accrued interest on nonperforming loans from interest income has limited effect on the indicator. - Personnel expenses to noninterest expenses - No change. - Spread between reference lending and deposit rates - Start reporting underlying series (reference lending rates and reference deposit rates) for the calculation of spread between reference lending and deposit rates. - Customer deposits to total non-interbank loans - No change. - FX loans to total loans / FX liabilities to total liabilities - Evaluate the size of foreign currency linked loans and foreign currency linked liabilities for the DTs and start collecting data if the size is considered material (to be implemented). - Credit growth to private sector - Start reporting the new credit growth to private sector FSI. - Assets to total financial system assets (for total of OFCs and by subsectors)/Assets to gross domestic product (GDP) (for total of OFCs and by subsectors) - Report OFC total assets, including additional sectorization to incorporate total assets by MMFs, ICs and PFs and OFCs: other subsectors. - Report institutional coverage for OFCs. - Residential real estate prices - This FSI has been categorized under core FSIs in the 2019 FSIs Guide. - Residential real estate loans to total loans/Commercial real estate loans to total loans - Report residential real estate and commercial real estate loans memorandum series in line with the definitions provided in the 2019 FSIs Guide (to be implemented). - Observational note: - These data and methodological revisions have resulted in significant changes to some FSIs. The mission recommended to the OJK to update the calculation of FSIs in line with the 2019 FSIs Guide. Appendix III-Table 2 covers the size of change observed in the FSIs before and after the mission. ### Appendix III. Table 2 — Comparison of FSIs Before and After the Technical Assistance (Mar-21) - Core FSIs (Mar-21 Mission / Mar-21 Old FSIs / Difference Basis Points) - Regulatory capital to risk-weighted assets: 24.05 / 24.05 / 0.00 - Tier 1 capital to risk-weighted assets: 22.26 / 22.26 / 0.00 - Nonperforming loans net of provisions to capital: 3.95 / 4.18 / (22.57) - Common Equity Tier 1 capital to risk-weighted assets: 20.25 / - - Tier 1 capital to assets/Leverage ratio: 11.97 / 14.50 / (252.47) - Nonperforming loans to total gross loans: 2.72 / 2.83 / (10.84) - Loan concentration by economic activity: 56.81 / - - Provisions to nonperforming loans: 67.89 / - - Return on assets: 1.78 / 1.84 / (6.32) - Return on equity: 8.56 / 12.37 / (380.33) - Interest margin to gross income: 58.69 / 58.71 / (2.63) - Noninterest expenses to gross income: 40.70 / 40.67 / 2.59 - Liquid assets to total assets: 24.09 / 17.96 / 612.80 - Liquid assets to short-term liabilities: 35.65 / 25.99 / 966.16 - Liquidity coverage ratio: 263.80 / - - Net stable funding ratio: 138.62 / - - Net open position in foreign exchange to capital: 1.25 / 1.25 / 0.00 - Residential real estate prices (Percentage change/last 12 months): 1.17 / 1.17 / - - Additional FSIs and other indicators (Mar-21 Mission / Mar-21 Old FSIs / Difference Basis Points) - Large exposures to capital: 1.93 / 1.78 / 14.34 - Geographic distribution of total loans: Domestic economy: 98.28 / 98.28 / 0.00 - Geographic distribution of total loans: Advanced economies: 0.57 / 0.57 / 0.00 - Geographic distribution of total loans: Emerging market and developing economies: 1.15 / 1.15 / 0.00 - Geographic distribution of total loans: Emerging and developing Asia: 0.97 / 0.97 / 0.00 - Geographic distribution of total loans: Emerging and developing Europe: 0.00 / 0.00 / 0.00 - Geographic distribution of total loans: Latin America and the Caribbean: 0.18 / 0.18 / 0.00 - Geographic distribution of total loans: Middle East and Central Asia: 0.00 / 0.00 / 0.00 - Geographic distribution of total loans: Sub-Saharan Africa: 0.00 / 0.00 / 0.00 - Gross asset position in financial derivatives to capital: 1.45 / 1.54 / (8.29) - Gross liability position in financial derivatives to capital: 1.35 / 1.43 / (7.73) - Trading income to total income: 3.50 / 3.50 / 0.22 - Personnel expenses to noninterest expenses: 44.16 / 44.16 / (0.00) - Spread between reference lending and deposit rates (base points): 556.02 / 556.02 / (0.00) - Spread between highest and lowest interbank rates (base points): 125.62 / 125.62 / - - Customer deposits to total (no interbank) loans: 104.37 / 104.37 / (0.00) - Foreign-currency-denominated loans to total loans: 12.39 / 12.88 / (49.40) - Foreign-currency-denominated liabilities to total liabilities: 18.94 / 18.89 / 4.93 - Credit growth to private sector: -2.89 / - - Other financial corporations (Mar-21 Mission / Mar-21 Old FSIs / Difference Basis Points) - OFCs' assets to total financial assets: total OFCs: 22.66 / 16.51 / 615.69 - OFCs' assets to total financial assets: Money Market funds: 0.75 / - - OFCs' assets to total financial assets: Insurance Corporations: 6.58 / - - OFCs' assets to total financial assets: Pension Funds: 2.59 / - - OFCs' assets to gross domestic product: OFCs: 17.87 / 15.89 / 198.69 - OFCs' assets to gross domestic product: Money Market funds: 0.59 / - - OFCs' assets to gross domestic product: Insurance Corporations: 5.19 / - - OFCs' assets to gross domestic product: Pension Funds: 2.04 / - - Real estate markets (Mar-21 Mission / Mar-21 Old FSIs / Difference Basis Points) - Commercial real estate prices (Percentage change/last 12 months): 0.45 / 0.45 / - - Residential real estate loans to total gross loans: 8.20 / 8.53 / (32.72) - Commercial real estate loans to total gross loans: 8.79 / 9.14 / (35.06) ### FSI Metadata for Deposit Takers — key metadata points - Metadata purpose - Metadata should be disseminated together with FSI data to facilitate data interpretation. Metadata include information about FSIs and their compilation, such as data definitions, how data are consolidated, supervisory and accounting rules adopted by the reporting banks, institutional coverage, and data sources, which are useful to data users. The updated metadata templates also provide a good coverage on the implementation of the prudential measures. - Residence of institutional units - Foreign-owned companies incorporated in Indonesia are classified as residents in line with System of National Accounts (2008 SNA), which classifies foreign-owned companies as residents in an economic territory where they engage in and intend to continue engaging in economic activities and transactions on a significant scale for at least one year. - Exchange rate - Financial institutions use Bank Indonesia mid-market rate (end of reporting period) for converting all items in foreign currencies into national currency. - Consolidation basis - FSIs for DTs in Indonesia are compiled on an unconsolidated basis. This approach covers resident domestically controlled and foreign controlled DTs, with their domestic and overseas branches. The consolidation basis also includes the branches in Indonesia of DTs that are incorporated abroad. However, foreign DTs and foreign and domestic non-deposit taking financial subsidiaries of domestically incorporated DTs are excluded from the reporting sample. - Consolidation adjustments - Intragroup adjustments refer to the elimination of financial flows (income and expense) and financial positions between DTs within the same banking group (parent, its branches, and subsidiaries). Intra-group adjustments are not undertaken for the compilation of FSIs. - Institutional coverage - FSIs for DTs cover 109 commercial banks. Rural banks, deposit taking microfinance institutions and credit unions and credit cooperatives are not included in the FSIs compilation. - Regulatory framework - Capital adequacy calculation follows a Basel III approach for the definition of regulatory capital and Basel-II approach for the definition of risk weighted assets. Basel III standards such as leverage ratio, large exposures framework, liquidity coverage ratio and net stable funding ratio are implemented in Indonesia. - Accounting framework - Both public and private companies must comply with accounting standards issued by the DSAK-IAI. Indonesia national accounting standards (SAK) are adopted from the IFRS. Indonesia’s approach to the IFRS adaptation is to maintain one-year difference with the IFRS as issued by the IASB. - Data definitions - Common Equity Tier 1 capital/Tier 1 capital/Total regulatory capital definitions are in line with Basel-III standards. - Risk Weighted Assets is calculated using standardized approaches for credit and market risk and basic indicator approach for operational risk. - High quality liquid assets/total net cash outflows/available stable funding/required stable funding definitions are in line with Basel-III standards. - Nonperforming loans (NPLs) is defined as loans for which one or more contractual payments of interest or principal are past due for 90 days or more. Delay on payment (90 days rule) is only one of the criteria in classifying a loan or other assets as NPLs or nonperforming assets. Classification of assets is basically based on business prospects, performance of the debtors, and repayment capability. - Return on assets (ROA) is calculated as the ratio of annualized net income before tax divided by average total assets. - Return on equity (ROE) is calculated as the ratio of annualized net income after tax divided by average capital and reserves. - Source data - Source data for compiling FSIs for DTs include income and expense statements, the balance sheets and other monthly data collected that are relevant for compiling supervisory series relating to definition of capital, deposit breakdown and nonperforming loans. Commercial banks are required to submit monthly reporting within 30 days after the reporting period. *Sources: TA Mission and the Indonesia Financial Services Authority - Otoritas Jasa Keuangan* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1idnea2023001.pdf_