Indonesia: Financial Sector Assessment Program-Financial System Stability Assessment
IMF Staff Country Reports, August 8, 2024
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- Indonesia: Financial Sector Assessment Program-Financial System Stability Assessment
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Bibliographic details
- Published: August 8, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400286438.002
Summary assessment
- Presents financial sector stability assessment as part of the Financial Sector Assessment Program in Indonesia.
- The financial system appears to be broadly resilient, has strong capital and liquidity buffers but remains relatively small and dominated by banks, especially few state-owned banks.
- Household and corporate indebtedness and public debt are low.
- The mission finds that banks appear to be resilient despite a tightened sovereign-bank nexus from increased holdings of government bonds and loans to state-owned enterprises.
Key findings and risks
- Banking sector structure:
- Dominated by banks, notably a small number of state-owned banks.
- Financial system remains relatively small.
- Sovereign-bank nexus:
- Increase in banks’ holdings of government bonds and loans to state-owned enterprises has tightened the sovereign-bank nexus.
- Despite the tighter nexus, banks appear to be resilient.
- Credit risk:
- Credit risk tends to be higher in pandemic-hit industries and highly leveraged corporations.
- Liquidity and FX risks:
- Corporate and banks foreign exchange (FX) liquidity analysis are identified as areas for integration to better identify systemic FX risks.
- Supervisory and resolution frameworks:
- Independence of the supervisor should be strengthened and clarity provided on primary supervisory objectives.
- Indonesia’s resolution framework should be more closely aligned to the FSB Key Attributes, including regarding the bail-in tool, and should cover financial conglomerates.
- Authorities should not delay resolution of weak banks by providing liquidity assistance from the deposit insurance fund.
Policy recommendations
- Strengthen loan quality recognition by banks.
- Enhance risk assessment of small banks.
- Integrate corporate and banks FX liquidity analysis to inform micro- and macroprudential policy instruments and identify systemic FX risks.
- Strengthen independence of the supervisor and clarify primary supervisory objectives.
- Align the resolution framework more closely with the FSB Key Attributes, including:
- Adoption and clarity on the bail-in tool.
- Coverage of financial conglomerates within the resolution framework.
- Refrain from delaying resolution of weak banks through liquidity assistance from the deposit insurance fund.
Publication and metadata
- Publication title: Indonesia: Financial Sector Assessment Program-Financial System Stability Assessment
- Date: August 8, 2024
- Series: Country Report No. 2024/272
- Volume: 2024
- Issue: 272
- Pages: 63
- DOI: https://doi.org/10.5089/9798400286438.002
- Stock No: 1IDNEA2024003
- ISBN: 9798400286438
- ISSN: 1934-7685
- Publication type: IMF Staff Country Reports
Subjects and keywords
- Subjects: Anti-money laundering and combating the financing of terrorism (AML/CFT), Commercial banks, Crime, Financial institutions, Financial Sector Assessment Program, Financial sector policy and analysis, Financial sector stability, Macroprudential policy
- Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), bank FX liquidity stress test, banking sector, banks FX liquidity analysis, Commercial banks, coverage ratio, Financial Sector Assessment Program, Financial sector stability, Global, Macroprudential policy, systemwide FX liquidity stress test
International Monetary Fund. Indonesia: Financial Sector Assessment Program-Financial System Stability Assessment (IMF Staff Country Reports 2024, 272).
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