## Indonesia: Financial Sector Assessment Program-Financial System Stability Assessment

_IMF Staff Country Reports, August 8, 2024_

## Source details

**Canonical URL:** [Indonesia: Financial Sector Assessment Program-Financial System Stability Assessment](https://www.imf.org/en/publications/cr/issues/2024/08/08/indonesia-financial-sector-assessment-program-financial-system-stability-assessment-553313)

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## Bibliographic details
- Published: August 8, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400286438.002

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### 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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_Source: https://www.imf.org/en/publications/cr/issues/2024/08/08/indonesia-financial-sector-assessment-program-financial-system-stability-assessment-553313_