PRESS RELEASE - The Closure of Silicon Valley Bank Has No Direct Impact
Jakarta, 13 March 2023. The Indonesian Financial Services Authority (OJK) believes that the closure of Silicon Valley Bank (SVB) by the US Federal Deposit Insurance Corporation (FDIC) on 10 March will not have a direct impact on Indonesia’s strong and stable banking industry.
OJK Chief Executive for Banking Supervision, Dian Ediana Rae, said that the closure of SVB is expected to have no direct impact on Indonesian banks which evidently have no business connections, facility lines, or investments in SVB securitized products.
In addition, unlike SVB and US banking in general, banks in Indonesia do not offer loans and investments to either tech start-ups or crypto companies.
“Therefore, OJK hopes that neither the public nor the industry will be affected by any growing speculations,” Dian said.
Dian explained that after the 1998 financial crisis, Indonesia had taken fundamental measures to strengthen its institutional arrangement, legal infrastructure, and governance, as well as consumer protection which leading to the establishment of a strong, resilient, and stable banking system.
This is reflected in the solid and maintained performance of the banking industry which keeps its positive growth amidst ongoing domestic and global economic pressures.
At present, Indonesia’s banking industry demonstrates strong liquidity performance, including, among others, the banking ratios of Liquid Assets/Non-Core Deposits (AL/NCD) and Liquid Assets/Third-Party Deposits (AL/DPK) were maintained above the threshold, i.e., 129.64 percent and 29.13 percent, respectively, far above the regulatory threshold of 50 percent and 10 percent.
Banking assets were also maintained in proportionate composition, where Third Party Funds (DPK) were dominated by Current Accounts and Saving Accounts (CASA) or low-cost funds that were increasing, thus they were less sensitive to changes in interest rates.
Other performances such as credit risk, market risk, capital, and profitability were well maintained and grew positively. In addition, no commercial banks in Indonesia are currently categorized as “Banks in Resolution”, i.e., banks that are in financial difficulties, having their business continuity at risk, and cannot be restructured.
OJK continues to take various collaborative and synergistic policy measures with the Central Bank of Indonesia (Bank Indonesia), Ministry of Finance, and Indonesian Deposit Insurance Corporation (LPS), both directly or through the Financial System Stability Committee (KSSK) to anticipate any potential global impacts and pressures.
OJK ensures that it will continue to improve monitoring of global developments and the implications to Indonesian banks, ensure the implementation of risk management and good corporate governance for banks in productive asset portfolios and funding management activities, as well as mitigate concentration risk that might impact on banks’ financial performance.
Further, OJK also requires banks to continue taking strategic measures, among others, by enhancing the role and functions of the Asset & Liability Committee in managing assets and liabilities, evaluating the adequacy of risk reserves, conducting comprehensive stress tests, and periodically reviewing and updating recovery and resolution plans.
OJK policies going forward will be directed towards establishing conditions that are more conducive to boosting sustainable economic growth.