Non-core deposit of Indonesian banking

Cicilia Harun and Raquela Renanda Nattan

Studies in Economics and Finance, 2019, vol. 38, issue 2, 207-226

Abstract: Purpose - This paper aims to examine non-core deposit (NCD), or the fraction of deposit most likely to be withdrawn, based on bank liquidity behavior. NCD is an analytical component of bank deposit; hence, its withdrawal rate is crucial. Design/methodology/approach - The paper categorizes all 114 commercial banks in Indonesia using K-Median clustering and produces NCD coefficients for each cluster. Clustering result resembles the bank ownership-based grouping. Findings - Generally, state-owned banks and private-domestic banks have smaller NCD coefficients compared to foreign-owned, joint-venture and regional government-owned banks. The NCD coefficient then can form thresholds for an event of extreme deposit withdrawal for macroprudential surveillance. Originality/value - NCD is an analytical indicator that can be useful to manage the liquidity risk of banks; however, this indicator is rarely found in the literatures, hence not many know how to estimate the indicator.

Keywords: Financial accounting; Banking liquidity; Non-core deposit; Third party deposit; Core deposit; Banks liquidity level; G32; G17; G21 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-10-2018-0311

DOI: 10.1108/SEF-10-2018-0311

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