Systemic Risk: The Impact of COVID-19 on The Dual Banking System in Indonesia

Muh Rudi Nugroho and Akhmad Syakir Kurnia

A chapter in Macroeconomic Risk and Growth in the Southeast Asian Countries: Insight from Indonesia, 2023, vol. 33A, pp 83-92 from Emerald Group Publishing Limited

Abstract: This study investigates how this pandemic impacted the systemic risk in Indonesia’s Islamic commercial banks (ICBs) and conventional commercial banks (CCBs). The authors use quantitative methods, and systemic risk is measured using value at risk (VaR) and Conditional Value at Risk (CoVaR). This study provides empirical evidence regarding the estimation and determination of systemic risk. By using spillover measures, the authors find a significant increase in systemic risk among the sample banks. The novelty in this research is the measurement of the level of banking risk in the dual banking system in Indonesia. This study makes profound contributions to the literature and suggests various policy recommendations, including identifying essential institutions and testing the benefits of policy responses in containing systemic risk. These findings need to be considered by the government and financial authorities in making accurate regulations and policies.

Keywords: Dual banking system; systemic risk; COVID-19; value at risk; accurate regulations; conditional value at risk; G21; G32; G28 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-03862023000033a006

DOI: 10.1108/S1571-03862023000033A006

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