BI governor Agus Martowardojo said that the banking sector, which dominates Indonesia’s financial sector, has a high level of resilience. This is reflected on the above-20-percent capital adequacy ratio (CAR), a non-performing loan (NPL) ratio that is lower than threshold, and the high rate of return on assets (RoA).
“Banks are strong enough to absord credit, market, and liquidity risks,” Agus said on the sidelines of a book launch at the BI Building on Thursday, December 11, Bisnis Indonesia reported.
Despite the positive estimate, Agus said that the central bank will continue to observe all development in the global and domestic financial industry. The biggest potential for risks is still coming from The Federal Reserve’s normalization policy, with their interest rates projected to rise in stages.
A Fed Rate hike, Agus said, may lead to capital outflows from developing markets. There is also the risk of commodity prices corrections, triggered by China and Europe’s slow-growing economies.