THE MARKET STRUCTURE OF THE BANK, ITS PERFORMANCE, AND THE MACROPRUDENTIAL POLICY

Tumpak Silalahi (), Adler H.Manurung and Yuli Teguh Hidayat
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Tumpak Silalahi: Bank Indonesia

Bulletin of Monetary Economics and Banking, 2015, vol. 18, issue 1, 45-60

Abstract: Recently, numerous Central Banks implement various macro-prudential policies to complement the existing monetary policy. This paper analyzes the impact of these policies along with the market structure, on the bank’s performance. Using panel data analysis, this paper conclude that the reserve requirement ratio policy negatively affect the bank’s performance (ROA). The empirical test shows the banking industry in Indonesia respond to the increase of reserve requirement by raising the Net Interest Margin to achieve their targeted operating profits. Secondly, this paper fail to find uniform conclusion across model variants about the effect of the policy rate on bank’s performance. This also applies on the Loan to Value policy. Fourth, the market concentration has a more significant effect on banks’ profitability as compared to market power. Fifth, the production index significantly affects the banking profitability. These findings implies a necessity for policy makers to redownload the financial market structure before formulating effective policy package to promote a healthy competition in the banking industry.

Keywords: Macro-prudential policy; banking structure; bank’s performance. (search for similar items in EconPapers)
JEL-codes: E52 E61 G21 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:18:y:2015:i:1b:p:45-60

DOI: 10.21098/bemp.v18i1.514

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