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

Authors

Shilvia Kurniawati, Institut Teknologi Bandung, IndonesiaFollow
Deddy Priatmodjo Koesrindartoto, Institut Teknologi Bandung, IndonesiaFollow

Document Type

Article

Abstract

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.

Recommended Citation

Kurniawati, Shilvia and Koesrindartoto, Deddy Priatmodjo (2020) "MACROPRUDENTIAL STRESS-TESTING THE INDONESIAN BANKING SYSTEM USING THE CREDIT RISK MODEL," Bulletin of Monetary Economics and Banking: Vol. 23: No. 1, Article 6.
DOI: https://doi.org/10.21098/bemp.v23i1.1093
Available at: https://bulletin.bmeb-bi.org/bmeb/vol23/iss1/6

First Page

121

Last Page

138

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Institut Teknologi Bandung