## ibs-2017

## Source details

**Canonical URL:** [ibs-2017](https://www.pwc.com/id/en/publications/assets/financialservices/ibs-2017.pdf)

## Other formats

- [Markdown version](/id/en/publications/assets/financialservices/ibs-2017.pdf.md)
- [Structured JSON version](/id/en/publications/assets/financialservices/ibs-2017.pdf.json)

---

### Outlook for growth
- 63% of respondents: market conditions for Banking in 2017 improving compared to 2016; 33% same; 4% worse.
- Foreign banks: half believe conditions are improving; generally less optimistic than state-owned banks.
- Mid-point loan growth expectation: 10-15%.
- 44% expect loan growth of less than 10% in 2017 (compared with 12% in 2015 and 2% in 2014).

### Profitability expectations and NIM trends
- Net income expectations for 2017 (Estimated change):
  - Total: 68% moderate increase, 10% significant increase, 9% stay the same, 13% decrease.
  - State-owned: 80% moderate or significant increase, 20% stay the same.
  - Local private: 58% moderate increase, 12% significant increase, 12% stay the same, 18% decrease.
  - Foreign: 76% moderate or significant increase, 13% stay the same, 11% decrease.
  - Syariah: 75% moderate or significant increase, 25% stay the same.
- NIM expectations:
  - 54% expect a NIM decrease in 2017 (0-25 bps, 25-50 bps, > 50 bps combined).
  - Cumulative NIM change expectations over 2017-2020 by bank size:
    - BUKU 4: 100% expect a NIM decrease.
    - BUKU 3: 67% expect a NIM decrease.
    - BUKU 1&2: 53% expect a NIM decrease.
  - BUKU 4 respondents more likely to expect larger declines (categories: 51-100 bps, 101-150 bps, >150 bps).
- 37% of respondents do not expect NIM to decrease at all over 2017-2020.
- Observation: Profitability expected to improve in 2017 largely due to improving expectations on NPLs and credit losses; NIM compression is an emerging challenge.

### Loan growth forecasts and composition
- Estimated 2017 lending growth (percent of respondents selecting each band):
  - Consumer lending: 0-5%: 11%; 5-10%: 23%; 10-15%: 32%; >15%: 35%.
  - Corporate lending: 0-5%: 12%; 5-10%: 32%; 10-15%: 32%; >15%: 23%.
- Distribution of banks expecting >15% loan growth in 2017:
  - State-owned: 75%; Syariah: 54%; Local private: 32%; Foreign: 19%; BPD: 13%.
- Consumer product focus: Mortgage loans most mentioned; credit cards cited among consumer products.

### Credit risk and NPL outlook
- Top-3 challenges to loan growth in 2017 (percent listing each):
  - Credit risk: 94%; Margin pressure: 75%; Weak demand: 30%; Liquidity: 24%; Regulations & Talent shortage: 10%; Sales channels: 8%.
- Trend in credit risk as barrier (percent seeing credit risk as top-3):
  - 2013: 24%; 2014: 49%; 2015: 67%; 2017: 94%.
- NPL expectations:
  - 2015: 46% expected NPL decrease, 17% expected increase.
  - 2017 survey: 47% expect NPL decrease, 16% expect NPL increase.
  - By bank type in 2017 (expect NPL decrease / increase):
    - State-owned: 87% decrease, 6% increase.
    - Local private: 53% decrease, 24% increase.
    - Syariah: 38% decrease, 19% increase.
    - Foreign: 28% decrease, 19% increase (over 50% of foreign banks expect no change).
- Areas of most concern for potential NPLs in 2017 by bank type:
  - Corporate/Commercial dominant (e.g., 71% for state-owned); SME significant (e.g., 61% for local private); Consumer/Retail and Micro lower relative concern.
- Gross NPL ratios (2016 data):
  - Global average: 3.9%; Indonesia: 2.9%; Brazil: 3.8%; India: 7.6%; Nigeria: 11.7%; China: 1.7%; Russia: 9.2%; South Africa: 3.2%; Thailand: 2.9%; Turkey: 3.2%; Philippines: 2.0%; Mexico: 2.3%; Malaysia: 1.7%.
- Observation: PSAK 71 (IFRS 9) will require an expected-loss model and increase demands on risk functions.

### Opportunities: Syariah, Infrastructure, and M&A
- Syariah banking market share forecast by 2025 (percent selecting each band):
  - Same as today: 28%; 5-10%: 53%; 10-15%: 14%; >15%: 5%.
- Current Syariah banking: roughly 5% of overall Indonesia banking market assets.
- Syariah bankers:
  - 88% focused on organic growth; unlikely to use M&A in next 2-3 years.
  - Only 13% reported satisfaction with operational risk.
  - More likely to list capital availability as a risk and interested in regulations impacting capital.
- Infrastructure finance in 2017:
  - 61% expect increased involvement (15% significantly more, 46% somewhat more, 27% same, 5% somewhat less, 9% significantly less).
  - At least 31% of infrastructure finance expected to come from the private sector (Indonesia National Medium Term Development Plan 2015-2019).
- M&A intentions (next 2-3 years):
  - Very likely: 12%; Somewhat likely: 34%; Somewhat unlikely: 28%; Very unlikely: 26%.
  - If likely, reasons for M&A: Customer base: 45%; Tech know-how: 22%; Economies of scale: 17%; Expand channels: 8%.
  - Observation: More than half said unlikely to engage in M&A in next 2-3 years; local banks considering M&A more likely to seek technical know-how (1 out of 3) vs foreign banks (1 out of 10).

### Divergence between foreign and state-owned banks
- Loan growth >15% expected:
  - State-owned: 75%; Foreign: 19%.
- Profit expectations:
  - More than one-third of foreign bank respondents expect profits to be the same or worse.
  - Every respondent from state-owned banks expects profits to improve.
- Market conditions improving:
  - State-owned: 70% more likely to say improving; Local private: 50% more likely to say improving.
- NPL outlook:
  - State-banks: 86% say they expect NPLs to decrease.
  - Foreign banks: more cautious with higher shares expecting no change.
- Observation: only 28% from foreign banks feel NPLs will decrease.

### Mid-size bank “vicious cycle”
- Characteristics and dynamics:
  - Smaller footprint and smaller deposit base (particularly smaller proportion of CASA funding) -> higher funding costs and lower NIM.
  - Smaller size limits economies of scale -> higher cost-income ratios; spikes in credit risk have proportionally greater impact.
  - Lower profitability -> need to seek higher lending rates -> reduced competitiveness; concentration in credit risk and less diversification -> limited growth -> continuing smaller footprint.

### Digital transformation and technology
- Drivers and investment intent:
  - 52% listed Technology as #1 transformation driver; Changing customer needs 17%; Operational excellence 15%; Competition 6%; Risk management 4%; Regulation 4%; other 4%.
  - More than half said technology is main driver over next 3 to 5 years.
  - 7 out of 10 Local bankers: technology #1 driver; 4 out of 10 Foreign banks: technology #1 driver.
  - 71% of BUKU 4 and 58% of BUKU 3 view technology as #1 driver.
  - 84% are likely to invest in technology transformation over next 18 months (Source: PwC Retail Banking 2020 Survey).
  - “59% of global bankers expect the importance of branch banking to diminish significantly as customers migrate to digital channels.”
- Planned tech investment in next 18 months:
  - Likely to invest: State-owned 42%; Foreign 93%; Local private 71%.
  - 94% of banks that selected Technology as #1 driver planned tech investment in next 18 months.
- Technology priorities and clarity:
  - Most direct tech investment towards e-banking; almost half said this was #1 priority.
  - Only 33% felt their strategy was “very clear”; 88% felt strategy was either ‘very clear’ or ‘somewhat clear’.
  - 55% felt their tech strategy was “very clear”.
  - IT systems readiness: 21% very prepared, 57% somewhat prepared, 18% somewhat or very unprepared.
- Channel migration and usage:
  - 45% said at least half of customer transactions come from traditional branches.
    - Local banks: 55% report at least half via branches.
    - Foreign banks: 34% report at least half via branches.
  - 48% said at least one-fourth of transactions were via mobile & internet (up from 27% in 2015).
  - Mobile & Internet transaction distribution: >50%: 17%; <10%: 45%; 11-25%: 23%; 26-50%: 15%.
  - 59% of foreign banks reported at least one-fourth of transactions via mobile & internet vs 36% for local banks.
  - ATM usage: 81% of local banks report at least 25% of transactions via ATM vs 44% for foreign banks.
  - Trend 2015->2017: branch dominance (>50% via branches) declined from 75% to 45%; mobile/internet at least 25% rose from 27% to 48%.
- Channel growth expectations over next 5 years:
  - Mobile application 89%; Website/web-based platform 78%; Social media 51%; Call center 22%; Email 19%; Branch 12%.
- FinTech:
  - FinTech trends viewed as Important/Very important across multiple areas; payment systems and funds transfer seen most at risk over next 5 years.
  - PwC Global FinTechReport quote: “23% of banking business could be at risk due to further development of FinTech, though FinTech companies anticipate they may be able to acquire 33% of incumbent business.”

### Strategy change and Fit for Growth
- Strategy changes over last 18 months: New strategy 22%; Moderate change 61%; Same strategy 8%; Reviewing strategy 9%.
- Clarity and talent:
  - Only 29% felt high clarity and understanding of strategy across their organization; 62% moderate; 4% low; 5% other.
  - Only 23% felt good availability of highly skilled talent in strategy-related areas.
- Fit for Growth prescription:
  - Focus on few differentiating capabilities; align cost structure to these capabilities; organize for growth.

### Top risks and preparedness
- Top #1 risks (2017): Macro-economic 41%; Credit risk 24%; Regulation 39% selected within top ranks.
- Sector gross NPL ratio for 2016 reported by OJK: 2.93%.
- Industry preparedness to address risks: Very prepared 5%; Somewhat prepared 24%; Somewhat unprepared 76%.
- Self (own bank) preparedness: Very prepared 15%; Somewhat prepared 70%.
- Larger banks more likely to feel very prepared; smaller banks more optimistic that industry is prepared.
- Risk management focus areas:
  - Top 3: Credit risk 92%; Liquidity risk 66%; Operational risk 64%.
  - Expected changes in 2017: Enhance loan quality monitoring significant change 49%; Enhance collection process significant change 35%.
- Risk management strategy presence:
  - 68% feel their bank has a clear risk management strategy in place; one-third said such a strategy was “in-progress.”
  - % with clear risk management strategy: State-owned 80%; Foreign 69%; Local private 47%.
- Risk management satisfaction (scale 1-5) — industry average:
  - Liquidity risk 3.84; Market risk 3.82; Compliance risk 3.80; Credit risk 3.46; Operational risk 3.69; Technology risk 3.54.
  - Only 7% very satisfied with technology risk management.
- Liquidity strategy:
  - CASA deposits 74%; Securities 37%; New Capital 25%; Derivatives 21%; other 8% and 5%.
  - No local private banks mentioned loan facilities as funding diversification; 43% of state-owned and 32% of foreign banks did.
  - 83% felt regulatory caps on deposit rates helpful in addressing pricing and liquidity concerns.

### Operational risk, compliance, governance and culture
- Operational risk management priorities (ranked #1):
  - People development 34%; Automation initiatives 33%; Enhance control assessments 17%; Enhance policies & procedures 9%; Invest in Cyber Security 4%; Internal Audit 3%.
  - Automation vs People Development: Foreign banks Automation 42% vs People 22%; Local banks Automation 22% vs People 50%.
- Compliance:
  - One-third expect increased legal and compliance risk in 2017; KYC and AML areas expected focus.
  - Areas seeking more clarity/dialogue with OJK: Draft banking law (34% #1, 71% top 3), RM and corporate governance, IT & Technology, Capital mgmt & Basel, Credit/provisioning, PSAK 71 (IFRS 9), IT onshoring, KYC/AML.
- Corporate governance maturity:
  - Perceived maturity averaged 3.7 on a scale of 1 to 5.
  - Governance of IT and systems scores noticeably lower.
- Risk culture:
  - Perceived strength: Overall 54% strong or very strong; 28% moderate; 18% needing improvement.
  - Foreign banks more confident about risk culture than local banks.
  - Six behavioural reinforcers for risk culture: Global operating norms, Organizational structure, Technology and infrastructure, Leadership action, Communication, People practices.

### Availability of talent
- Availability of highly skilled talent limited in several areas:
  - Only 23% feel good availability of talent in Strategy areas.
  - 32% felt limited availability of highly skilled risk management talent.
  - 37% indicated limited or very limited availability in several talent categories.

*Source: ibs-2017 - Section 1 (Indonesia Banking Survey 2017)*

### Section 1

### Section 1 — Outlook for growth

### Market attractiveness and sentiment
- Indonesia bankers view Indonesia as the most attractive market in Southeast Asia driven primarily by:
  - High margins
  - Low banking penetration
  - Population size
  - Loan growth
  - Economic growth
- Q: What is your view of Indonesia’s market conditions for Banking in 2017 compared to 2016?
  - 63% improving
  - 33% same
  - 4% worse
- Foreign banks are slightly less optimistic, but half of foreign banks still believe conditions are improving.

### Profitability expectations and NIM trends
- Expectations for Net Income in 2017 (Estimated change):
  - Total: 68% moderate increase, 10% significant increase, 9% stay the same, 13% decrease
  - State-owned: 80% moderate or significant increase, 20% stay the same
  - Local private: 58% moderate increase, 12% significant increase, 12% stay the same, 18% decrease
  - Foreign: 76% moderate or significant increase, 13% stay the same, 11% decrease
  - Syariah: 75% moderate or significant increase, 25% stay the same
- NIM expectations for 2017:
  - 54% of respondents expect a NIM decrease in 2017 (0-25 bps, 25-50 bps, > 50 bps combined)
- Cumulative NIM change expectations over 2017-2020 by bank size:
  - BUKU 4: 100% expect a NIM decrease
  - BUKU 3: 67% expect a NIM decrease
  - BUKU 1&2: 53% expect a NIM decrease
  - BUKU 4 respondents more likely to expect larger declines (e.g., 51-100 bps, 101-150 bps, >150 bps categories)
- Observations:
  - Bankers expect profitability to improve in 2017 largely due to improving expectations on NPLs and credit losses, but NIM compression is an emerging challenge.
  - 37% of respondents do not expect NIM to decrease at all over the 4-year period (2017-2020).

### Loan growth forecasts and composition
- Estimated 2017 lending growth (by segment; percent of respondents selecting each band):
  - Consumer lending:
    - 0-5%: 11%
    - 5-10%: 23%
    - 10-15%: 32%
    - >15%: 35%
  - Corporate lending:
    - 0-5%: 12%
    - 5-10%: 32%
    - 10-15%: 32%
    - >15%: 23%
- Distribution of banks expecting >15% loan growth in 2017:
  - State-owned: 75%
  - Syariah: 54%
  - Local private: 32%
  - Foreign: 19%
  - BPD: 13%
- Historical context:
  - The mid-point for loan growth is 10-15%.
  - 44% of respondents expect loan growth of less than 10% in 2017 (compared with 12% in 2015 and 2% in 2014).
- Product focus in consumer lending:
  - Mortgage loans most mentioned as a focus
  - Credit cards cited among consumer products

### Credit risk and NPL outlook
- Top-3 challenges to loan growth in 2017 (percent of respondents listing each):
  - Credit risk: 94%
  - Margin pressure: 75%
  - Weak demand: 30%
  - Liquidity: 24%
  - Regulations & Talent shortage: 10%
  - Sales channels: 8%
- Trend in credit risk as barrier (percent seeing credit risk as a top-3 challenge):
  - 2013: 24%
  - 2014: 49%
  - 2015: 67%
  - 2017: 94%
- NPL expectations:
  - 2015: 46% expected NPL decrease, 17% expected increase
  - 2017 survey: 47% expect NPL decrease, 16% expect NPL increase
  - In 2017:
    - Overall: 47% expect NPL decrease, 16% expect NPL increase, remainder undecided/same
    - By bank type (expect NPL decrease / increase):
      - State-owned: 87% decrease, 6% increase
      - Local private: 53% decrease, 24% increase
      - Syariah: 38% decrease, 19% increase
      - Foreign: 28% decrease, 19% increase (over 50% of foreign banks expect no change)
- Areas of most concern for potential NPLs in 2017 (by bank type):
  - Corporate/Commercial: dominant concern (e.g., 71% for state-owned)
  - SME: significant concern (e.g., 61% for local private)
  - Consumer/Retail: lower relative concern
  - Micro: lower relative concern
- NPL ratios (gross) comparison (2016 data):
  - Global average: 3.9%
  - Indonesia: 2.9%
  - Brazil: 3.8%
  - India: 7.6%
  - Nigeria: 11.7%
  - China: 1.7%
  - Russia: 9.2%
  - South Africa: 3.2%
  - Thailand: 2.9%
  - Turkey: 3.2%
  - Philippines: 2.0%
  - Mexico: 2.3%
  - Malaysia: 1.7%
- Observations:
  - Credit risk has steadily risen as a perceived barrier to growth across surveys.
  - There is no significant correlation between expectations of loan growth and views on credit risk in the survey responses.
  - PSAK 71 (IFRS 9) will require an expected-loss model and increase demands on risk functions.

### Opportunities: Syariah, Infrastructure, and M&A
- Syariahbanking market share forecast by 2025 (percent of respondents selecting each band):
  - Same as today: 28%
  - 5-10%: 53%
  - 10-15%: 14%
  - >15%: 5%
- Observations on Syariahbanking:
  - Current Syariah banking is roughly 5% of overall Indonesia banking market assets.
  - About half of bankers expect Syariahbanking to reach 5-10% by 2025; only 19% expect >10% by 2025.
  - Syariahbankers in the survey: 88% focused on organic growth; unlikely to use M&A in next 2-3 years.
  - Syariahbankers were more likely to list capital availability as a risk and were more interested in regulations impacting capital.
  - Operational risk satisfaction among Syariahbankers: only 13% reported satisfaction.
- Infrastructure finance expectations for 2017:
  - 61% of respondents expect an increase in involvement with infrastructure finance in 2017 (15% significantly more, 46% somewhat more, 27% same, 5% somewhat less, 9% significantly less).
  - At least 31% of infrastructure finance is expected to come from the private sector (Source: Indonesia National Medium Term Development Plan 2015-2019).
  - Drivers and issues: government prioritisation of infrastructure, increasing PPPs and availability payment mechanisms, pipeline of projects (hospitals, airports, broadband, waste-to-energy), availability of local currency finance, need for bank project finance expertise.
- M&A intentions (next 2-3 years):
  - Likelihood to use M&A to achieve strategic objectives:
    - Very likely: 12%
    - Somewhat likely: 34%
    - Somewhat unlikely: 28%
    - Very unlikely: 26%
  - If likely, reasons for using M&A (percent distribution):
    - Customer base: 45%
    - Tech know-how: 22%
    - Economies of scale: 17%
    - Expand channels: 8%
  - Observations:
    - More than half of respondents said it was unlikely they would engage in M&A in the next 2-3 years.
    - Local banks considering M&A are more likely to seek technical know-how (1 out of 3) compared to foreign banks (1 out of 10).

### Divergence between foreign and state-owned banks
- Foreign banks are generally less optimistic than state-owned banks across multiple metrics:
  - Loan growth >15% expected:
    - State-owned: 75%
    - Foreign: 19%
  - Profit expectations:
    - More than one-third of foreign bank respondents expect profits to be the same or worse.
    - Every respondent from state-owned banks expects profits to improve.
  - Market conditions improving:
    - State-owned: 70% more likely to say improving
    - Local private: 50% more likely to say improving
  - NPL outlook:
    - State-banks: 86% say they expect NPLs to decrease
    - Foreign banks: more cautious with higher shares expecting no change

*Source: ibs-2017 - Section 1 (Indonesia Banking Survey 2017)*

### 2017. By contrast, only 28% from foreign banks feel NPLs will decrease. We believe one

### Indonesia Banking Survey 2017

### Mid-size bank “vicious cycle”
- Smaller footprint and smaller deposit base (particularly smaller proportion of CASA funding) can lead to higher funding costs and lower NIM.
- Smaller size limits ability to reach economies of scale and drives higher cost-income ratios; spikes in credit risk or credit losses have a proportionally greater short-term impact.
- Lower profitability causes need to seek higher lending rates from customers and challenges competitiveness; smaller footprint can lead to concentrations in credit risk and less diversification.
- Overall growth more limited, resulting in a continuing smaller footprint.
- Observation: only 28% from foreign banks feel NPLs will decrease.

### Digital transformation and technology as a driver
- More than half of respondents said technology is the main driver of transformation in their bank over the next 3 to 5 years.
- 7 out of 10 Local bankers said technology was their #1 driver, as compared to 4 out of 10 Foreign banks.
- 71% of BUKU 4 banks and 58% of BUKU 3 banks view technology as the #1 driver of their transformation.
- Breakdown of top #1 drivers (Figure 17): Technology 52%, Changing customer needs 17%, Operational excellence 15%, Competition 6%, Risk management 4%, Regulation 4%, other 4%.
- 84% of Indonesia banks surveyed are likely to invest in technology transformation over the next 18 months (Source: PwC Retail Banking 2020 Survey).
- “59% of global bankers expect the importance of branch banking to diminish significantly as customers migrate to digital channels.”

### Planned tech investment in next 18 months
- Likely to invest in Technology in next 18 months (Figure 18): State-owned 42%, Foreign 93%, Local private 71%.
- 94% of banks that selected Technology as #1 driver planned tech investment in next 18 months (context from figure).

### Technology priorities and clarity of digital strategy
- Most banks direct tech investment towards e-banking; almost half said this was the #1 priority.
- Only 33% of bankers surveyed felt their strategy was “very clear”; 88% felt their strategy was either ‘very clear’ or ‘somewhat clear’.
- 55% felt their tech strategy was “very clear” (Figure 19 shows 55% as the top value in the visualization).
- Only 21% believe their bank IT systems are very prepared for future needs; 57% somewhat prepared, 18% somewhat or very unprepared (Figure 20: 21% very prepared).

### Channel usage and customer migration to digital
- 45% from our survey said at least half of their customer transactions come from traditional branches.
  - Local banks: 55% report at least half via branches.
  - Foreign banks: 34% report at least half via branches.
- 48% of respondents in 2017 said at least one-fourth of transactions were via mobile & internet (up from 27% in 2015).
- Mobile & Internet transactions distribution (Figure 21): >50%: 17%, <10%: 45%, 11-25%: 23%, 26-50%: 15% (preserved order as in figure).
- 59% of foreign banks reported that at least one-fourth of transactions are via mobile & internet, compared to 36% for local banks.
- ATM usage: 81% of local banks report at least 25% of transactions via ATM, compared to 44% for foreign banks.
- Trend from 2015 to 2017: branch dominance declined from 75% (>50% via branches in 2015) to 45% in 2017; mobile/internet at least 25% rose from 27% in 2015 to 48% in 2017.

### Branch and employee growth plans
- Very few banks (8%) plan significant growth in branches; 45% plan moderate growth; remainder plan no growth or reduction.
- Banks planning reduction in branches were almost entirely from foreign banks (representing 21% of total foreign bank respondents).
- Q: What are your plans for growth in 2017 number of branches? Growth (53%), Reduction (12%) — figure labels preserved.
- Q: What are your plans for growth in 2017 number of employees? Growth (60%), Reduction (21%).

### Channels expected to grow over next 5 years
- Channels expecting largest growth: Mobile application 89%, Website/web-based platform 78%, Social media 51%, Email 19%, Call center 22%, Branch 12% (Figure 24).

### FinTech disruption and expected impact
- FinTech trends viewed as Important/Very important across multiple areas (Figure 25: examples include 75% Very important for certain trends, 67%/50%/45% etc. as shown in figure).
- Mixed views on disruption level in 2017 (Figure 26): responses vary by bank type; overall general view is ‘moderate to significant’ impact.
- Areas most at risk over next 5 years: Payment systems and funds transfer.
- PwC Global FinTechReport quote: “23% of banking business could be at risk due to further development of FinTech, though FinTech companies anticipate they may be able to acquire 33% of incumbent business.”

### Strategy change and Fit for Growth
- Strategy changes over last 18 months: New strategy 22%, Moderate change 61%, Same strategy 8%, Reviewing strategy 9% (Figure 27).
- Only 29% felt high clarity and understanding of strategy across their organization (Figure 28: High clarity 29%, Moderate 62%, Low 4%, 5% other).
- Only 23% of bankers surveyed felt there was good availability of highly skilled talent in strategy-related areas.
- Fit for Growth prescription: focus on few differentiating capabilities; align cost structure to these capabilities; organize for growth.

### Top risks and rankings
- Top #1 risks (2017): Macro-economic 41%, Credit risk 24%, Regulation 39% selected within top ranks (Figure 30 shows rank comparisons with 2015).
- Overall gross NPL ratio for the sector for 2016 reported by OJK: 2.93%.
- Regulation and data on-shoring noted as rising concerns, particularly for foreign banks.

### Industry and self preparedness to address risks
- Industry preparedness: Very prepared 5%, Somewhat prepared 24%, Somewhat unprepared 76% (figure context preserved as shown).
- Self (own bank) preparedness: Very prepared 15%, Somewhat prepared 70% (Figure 31 shows percentages).
- Larger banks more likely to feel very prepared; smaller banks more optimistic that industry is prepared (only 8% of BUKU 2 and BUKU 1 felt industry unprepared).

### Risk management focus areas
- Top 3 risk management focus areas (Figure 32): Credit risk 92%, Liquidity risk 66%, Operational risk 64%; Technology/Cyber risk ranked lower.
- Expected change in credit risk management areas in 2017 (Figure 33): Enhance loan quality monitoring significant change 49%, Enhance collection process significant change 35%, Enhance approval process and limit exposures show various degrees of change.

### Risk management strategy presence and satisfaction
- % who feel they have a clear risk management strategy in place (Figure 34): State-owned 80%, Foreign 69%, Local private 47%.
- 68% of respondents feel their bank has a clear risk management strategy in place; one-third said such a strategy was “in-progress.”
- Industry average satisfaction with risk management (scale 1-5) across categories (Figure 35): Liquidity risk 3.84, Market risk 3.82, Compliance risk 3.80, Credit risk 3.46, Operational risk 3.69, Technology risk 3.54.
- Only 7% of respondents were very satisfied with technology risk management.
- 32% of Indonesia bankers surveyed felt there was limited availability of highly skilled risk management talent.

### Liquidity risk management and CASA focus
- Primary liquidity strategy: CASA deposits 74%, Securities 37%, New Capital 25%, Derivatives 21%, other 8% and 5% (Figure 36 lists percentages).
- No local private banks mentioned use of loan facilities as means of diversifying funding base; 43% of state-owned banks and 32% of foreign banks did.
- Observations: strong correlation between CASA Ratios and bank size; larger banks have lower cost of funds and better cost-to-income ratios.
- 83% of Indonesia bankers surveyed felt the regulatory caps on deposit rates was helpful in addressing pricing and liquidity concerns.

### Operational risk management priorities
- OpRisk strategies rated #1: People development 34%, Automation initiatives 33%, Enhance control assessments 17%, Enhance policies & procedures 9%, Invest in Cyber Security 4%, Internal Audit 3% (Figure 37).
- Automation vs People Development (% rated as #1): Foreign banks Automation 42% vs People 22%; Local banks Automation 22% vs People 50%.

### Compliance risk and regulatory dialogue with OJK
- One-third of bankers expect increased legal and compliance risk in 2017; KYC and AML areas expected focus.
- Areas where bankers want more clarity/dialogue with OJK (top mentions): Draft banking law (34% #1, 71% top 3), RM and corporate governance, IT & Technology, Capital mgmt & Basel, Credit/provisioning, PSAK 71 (IFRS 9 expected loss provisioning), IT onshoring, KYC/AML (Figure 38).

### Corporate governance maturity and IT governance
- Perceived maturity across governance components averaged 3.7 on a scale of 1 to 5.
- Governance maturity levels (representative figures): Board operations Level 4/5 distribution 24% Level 5, 9% Level 4, 59% Level 3, 8% Level 2 (figure format preserved).
- Scores were noticeably lower for governance of IT and systems—identified as a red flag given planned technology investment.

### Risk culture and behavioral reinforcers
- Perceived strength of risk culture (Figure 40): Overall 54% strong or very strong; 28% moderate; 18% needing improvement.
- Foreign banks more confident about risk culture than local banks.
- Six behavioural reinforcers listed for building risk culture: Global operating norms, Organizational structure, Technology and infrastructure, Leadership action, Communication, People practices.

### Availability of talent
- Availability of highly skilled talent across areas (Figure 41 examples): Finance, Board members, Risk management, Strategy show limited to moderate availability.
- Only 23% of bankers surveyed feel there is good availability of talent in Strategy related areas.
- 37% of respondents indicated limited or very limited availability in several talent categories (figure distributions preserved).

*Source: PwC Indonesia Banking Survey 2017 (content extracted from the provided PDF).*

---


_Source: https://www.pwc.com/id/en/publications/assets/financialservices/ibs-2017.pdf_