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

Shilvia Kurniawati () and Deddy Priatmodjo Koesrindartoto ()
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Shilvia Kurniawati: Institut Teknologi Bandung
Deddy Priatmodjo Koesrindartoto: Institut Teknologi Bandung

Bulletin of Monetary Economics and Banking, 2020, vol. 23, issue 1, 121-138

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.

Keywords: Stress Test; Credit Risk; Macroprudential Supervision (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:23:y:2020:i:1f:p:121-138

DOI: 10.21098/bemp.v23i1.1093

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