Indonesia’s financial system remains stable

11:15 | 01/05/2018 Global Economy

The financial system of Indonesia remains stable and the bank intermediation function continues to improve, stated Bank Indonesia (BI) Executive Director for Communications Agusman.

The financial system of Indonesia remains stable - Photo: Antara

According to ANTARA news, Agusman noted in a statement on April 23 that maintained stability in the financial system is reflected in the high Capital Adequacy Ratio (CAR) of the banking industry, reaching 23.1 percent, and liquidity ratio, 23 percent, in February 2018.

He remarked that the loosing of the monetary and macroprudential policies was effectively reflected through the interest rate channel, with the banks inclined to lower their deposit and lending rates by 203 basis points (bps) and 155 bps respectively since BI began easing its monetary policy.

The banking industry reported credit growth at 8.2 percent year-on-year in February 2018, up from 7.4 percent a month earlier.

Earlier, BI projected a stronger deposit and credit growth in 2018 at 10-12 percent and 9-11 percent year-on-year, respectively.

Agusman said that improvement in the US economic indicators was accompanied by market expectations of an aggressive federal funds rate hike and increased pressures on the rupiah along with the impending risk of a trade war between the United States and China. Such inauspicious dynamics triggered a capital reversal and global exchange rate depreciation pressure, including on the rupiah.

Nonetheless, with BI's stabilization efforts, controlled domestic inflation, Indonesia's upgraded rating, and trade surplus that drew non-resident capital inflows, the rupiah quickly stabilised in the first half of April 2018, he said.

BI will continue to monitor the build-up of uncertainty and risks in the global financial market while implementing measures to stabilise the exchange rate to safeguard the rupiah's fundamental value and maintain market mechanisms, he noted.

Theo VNA