MACROPRUDENTIAL STRESS-TESTING THE INDONESIAN BANKING SYSTEM USING THE CREDIT RISK MODEL

This study implements a macroprudential stress test and develops the Economic Risk Weighted-Capital Adequacy Ratio (ERW-CAR) to evaluate the resilience of the Indonesian banking sector. The results show that the historical and one-year ahead predicted ERW-CARs are currently three percent lower than...

Full description

Bibliographic Details
Published in:Buletin Ekonomi Moneter dan Perbankan
Main Authors: Shilvia Kurniawati, Deddy Priatmodjo Koesrindartoto
Format: Article
Language:English
Published: Bank Indonesia 2020-02-01
Subjects:
stress test
credit risk
macroprudential supervision
Online Access:https://www.bmeb-bi.org/index.php/BEMP/article/view/1093
Description
Summary:This study implements a macroprudential stress test and develops the Economic Risk Weighted-Capital Adequacy Ratio (ERW-CAR) to evaluate the resilience of the Indonesian banking sector. The results show that the historical and one-year ahead predicted ERW-CARs are currently three percent lower than the Indonesia regulatory CAR, and continue to decrease by nearly two percent following an exchange rate shock. However, the capital adequacy requirement stands above the eight percent threshold and the banks are still able to optimize their capital allocation.
ISSN:1410-8046
2460-9196

Similar Items