ProdukHukum BankIndonesia
Towards Better Financial Supervisory Regime:
Perspective of Indonesia
Halim Alamsyah
Director of Banking Research and Regulation
Bank Indonesia
This presentation does not represent views and stances of Bank Indonesia. All errors are my own.
In addition, all data sources are from Bank Indonesia unless stated otherwise
Bank Indonesia 7th Annual International Seminar on Financial Stability
Bali - June 13 – 14, 2009
Presentation Plan
A Brief Note on The Role of Financial Sector
Financial Supervisory Regime and the Performance of
Indonesian Financial Sector
Challenges in Financial Supervisory Regime Indonesia
Future Financial Supervisory Regime in Indonesia
The Role of Financial Sector
A financial sector in general performs some of the following functions:
Roles
Descriptions
Intermediation
Channel funds from surplus to deficit units
Payment System
Carry out payment and fund settlements
Wealth Management
Venue for leveraging assets and managing wealth
Policy transmission
Serving as a conduit for central bank policy in
attempting to achieve its monetary policy target
Price discovery
Help determine the price of an asset in the
marketplace through the interactions of buyers
and sellers
Allocation of resources
Help apportion productive assets among
different uses due to limited supply and scarcity
of resources
How to Make the Role of Financial Sector Works?
...depends on Financial Supervisory Regime...
• There are at least 3 aspects need to be considered:
– Objectives of financial supervisory functions
• Trade off between Efficiency vs. Stability
• Support for equitable developments
– Regulatory regime
• Prudential vs market conduct regulations
– Structure of financial supervisory functions
• Integrated vs. two or three peaks models
• macro vc micro prudential responsibilities
Structure of Indonesian Financial System
In Billion IDR (USD = Rp10,000)
Source: Bank Indonesia, Bapepam-LK
•
Source: Bank Indonesia, Bapepam-LK
A Bank-based economy – banks are leading financial institutions
• Capital market is growing but remain undersized
• Prevalent deposit to lending model - banks are heavily dependent on short term
deposits (around 93% of deposits have maturity of less than 3 months)
• Banks confront high intermediary costs
• Thus, banking failure can have significant magnitude of systemic risk
A Skeleton of Financial Supervisory Regime
in Indonesia
• Bank-based system
• Separation between banks, NBFIs, and capital market
– Each segments has its own Acts and regulations (Banking,
Insurance, Multifinance, Capital Market Acts)
• Coordination through the so-called financial stability
forum/committee
– Currently being proposed in the Financial Safety Net Bill
Financial Supervisory Regime in Indonesia
• Put more emphasis on Banking Stability :
– Encourage banks to place their excess liquidity into BI certificates (SBI)
– LOLR for commercials and rural banks (BPR)
– Deposits protection scheme (up to $200.000)
• Setting a “firewall wall” between bank and capital market + NBFIs, e.g.
– Limits on banks’ exposure toward capital market and underwriting
activities
– Limits on bank lending to NBFIs
– Administrative control on short term external debt of banks , etc
• Pursuing an active banking policy to encourage greater access for the poor
and unbanked groups
• Promoting banking consolidation, esp through tier 1 capital requirement
• Results so far: stable, liquid, well capitalized and profitable
banks; yet, less efficient and with a shallow financial market
Financial System Depth (1/2)
Deposit Money Bank Assets / GDP (%) - 2008
M 2 / GDP (%) - 2008
160
160
140
120
140
114
127
120
97
100
149
139
136
103
94
100
90
82
80
80
71
61
53
60
42
48
55
45
60
40
40
20
20
0
55
49
49
46
40
37
0
SGP MYS THA KOR VNM PHL INDO
IND PAK JPN USA
SGP
MYS
KOR
THA
VNM
PHL INDO
IND
PAK
GBR
JPN
Source: International Financial Statistics, World Bank, and Bank Indonesia
• Indonesia financial system is lagging behind that of neighbouring ASEAN peers (in
particular SG, MY, TH)
•
Liquidity (M2/GDP) is less than its peers
• Total assets ratio is also the lowest among its peers
• Low penetration of banks compared to the size of economy – provides ample
opportunity for banks to expand their business volumes and competition
• Looking from this perpespective, Indonesia is not an overbank financial
system
USA
Financial System Depth (2/2)
Equity Market (%) - 2008
Stock Market Capitalization / GDP
Stock Market Turnover Ratio
• Market cap is smaller than
that of other Asian countries
Stock Market Total Value Traded / GDP
400
• Ample opportunity to develop
a deeper equity market
298
300
200
100
271
252
182
157
52
38
153
167 162
163
134 129
121
152
82
54
7474
92
53
13
89
62
50
82
41
8
31
28
813 1715
89
104
7584
24
0
MYS SGP TWN THA KOR CHN PHL INDO
PAK USA GBR JPN
Bond Market (%) - 2008
200
188
Public Bond Market Capitalization / GDP
Private Bond Market Capitalization / GDP
Total Bonds
150
100
IND
160
• Similarly, bond market is not
as develop as that of peer
ASEAN countries, except PH.
• Corporate bond market is
extremely small
91
76
60
50
• Deep stock market helps
stabilize financial system in
Indonesia
60
40
30
30
CHN
PHL INDO
26
33
34
IND
PAK
• Overall, financial depth of
Indonesia is less than its peers
0
MYS KOR SGP TWN THA
JPN
Source: International Financial Statistics, World Bank, and Bank Indonesia
USA
• Ample opportunity to develop
a deeper financial system
Banking Performance in Indonesia
Well-capitalized, with CAR of 17.6% (April 2009)
Slow pace of intermediation in recent months
Profitable, yet some dues from placement in Bank Indonesia
Key Indicator
Total Assets
Deposits
- Demand deposits
- Saving accounts
- Time deposits
Earning Assets
- Loans
- Certificate of Bank Indonesia
- Overnight Placement at BI
- Securities
- Inter-bank placement
- Equity Investment
Net Interest Income (Cumm.)
Capital Adequacy Ratio (%)
Loans/Earning Assets (%)
Gross Non Perform. Loans (%)
Net Non Perform. Loans (%)
Return on Assets (%)
Net Interest Margin (NII/AP) (%)
Operational Exp/Opr. Income (%)
Loan to Deposit Ratio (%)
Number of banks
Number of bank office networks
Dec-06
1,693.5
1,287.0
338.0
333.9
615.1
1,556.2
832.9
179.0
38.6
342.9
156.8
5.9
83.1
20.5
53.5
7.0
3.6
2.6
0.5
86.4
64.7
130
9,110
Dec-07
1,986.5
1,510.7
405.5
438.5
666.7
1,792.0
1,045.7
203.9
46.8
350.2
139.8
5.6
96.4
19.3
58.4
4.6
1.9
2.8
0.5
78.8
69.2
130
9,680
(In Trillion Rupiah, unless stated otherwise)
Dec-08
Jan-09
Feb-09
Mar-09
2,310.6
1,753.3
430.0
498.6
824.7
2,170.9
1,353.6
166.5
71.9
358.5
213.8
6.6
113.1
16.2
62.4
3.8
1.5
2.3
0.5
84.1
77.2
124
10,936
2,307.1
1,745.6
430.7
483.4
831.4
2,168.4
1,325.3
208.5
53.9
361.6
212.3
6.8
114.7
17.6
61.1
4.2
1.6
2.7
0.5
86.4
75.9
123
12,007
2,344.9
1,767.1
427.3
482.6
857.2
2,196.5
1,334.2
211.8
42.9
373.3
227.5
6.8
113.8
17.7
60.7
4.3
1.6
2.6
0.3
86.9
75.5
123
12,033
2,352.1
1,786.2
437.0
492.5
856.7
2,215.0
1,342.1
208.1
46.8
374.0
236.9
7.0
118.2
17.4
60.6
4.5
1.9
2.8
0.6
82.3
75.1
123
12,039
Apr-09
2,327.4
1,780.9
442.8
496.0
842.1
2,189.0
1,332.1
211.2
52.7
362.9
223.4
6.7
120.2
17.6
60.9
4.6
2.0
2.7
0.5
82.0
74.8
122
12,201
Moderate Risks Facing Banking Industry in Indonesia
•
•
•
•
•
Traditional banking system – deposit to lend business model
Leverage in general is not a pervasive problem
Market risk exposure is limited, with negligible FX exposures
Credit risk is manageable, albeit a slight upward pressures recently
Systemic risk is relatively low– integrated stress testing reflected that vast
majority of banks are quite resilient against growing pressure of risks
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Profitable and yet still inefficient (2/2)
• Banking sector is very profitable – even compared to those
of neighboring ASEAN peers
• Nevertheless, less efficient than its peers
• Beside from lending, profits are some due to the facts that
placement in Bank Indonesia (SBI) are significant
• As banks have limited option of financial instruments
88
86
Operating Exp/Oper. Income of Banks in South East
Asia
ROA of Banks in South East Asia
86,4
84,1
84
82
INDO
82
MY
80
PH
78
TH
76
74
2006
2007
2008
Sources: Respective monetary authorities in ASEAN
Credit Risk Remains Moderately Increasing
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Net NPL (lhs)
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2003
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2009
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Presentation Plan
Stylized Facts on Indonesian Financial Sector
Post Crisis Banking Policy Response: Reasons behind the
notable performance
Vision of Future Supervisory Regime
Banking Policy Direction
Post 1997/98 crisis, Indonesian banking policy shifted to a total
transformation: after recapitalization cum consolidation programs
since 1999-2002, since 2003 Indonesian Banking Architecture (IBA)
has been set as the long term policy direction and responses to
structural weaknessess in six areas:
Sub-optimal banking system structure
Weak legal/regulatory and enforcements
Feeble banks’ governance
Weak risk management and culture
Sub- optimal infrastructure
Absence of proper customer protection
Key Initiatives of IBA
Some key results:
The IBA 6 key pillars are to:
1.
2.
bolster the structure of the national
banking system
enhance the quality of regulatory
regime according to international
standards
3.
enhance the quality of supervisory
system
4.
strengthen the quality of bank
management and operations
5.
develop banking infrastructure
6.
develop effective customer protection
scheme
1.
2.
3.
4.
5.
6.
7.
8.
Banking consolidation: number of
banks reduced significantly from 250
to 122
Roadmap on Basel 2 implementation
Implementation of 25 BCP and Risk
Based Supervision (RBS) system
Promotion of Risk Culture and Risk
Management
GCG implementation
Credit Bureau
Customer and Deposits protection
scheme
Financial Stability Surveillance and
Crisis Management Protocol
17
Presentation Plan
Financial Supervisory Challenges in Indonesia
Challenges in Supervisory Function(1/2)
Challenges
Issues
1. Information Gap among
financial supervisors
• Transparency needs to be improved;
• Information gap among regulators in
Indonesia needs to close
2. Regulatory Arbitrage among
markets
• Banks have been highly regulated
• Financial institutions take advantage
of regulatory differentials between
bank and non-bank as well as highly
and less regulated markets
3. Systemic prudential
enforcement
• No legal power
• Need to strengthen prudential
enforcement
Challenges in Supervisory Function (2/2)
Challenges
4. Stability vs Efficiency :
Regulatory Forbearance
Issues
• There is an objective need to pursue active
banking policy to provide greater acces for
the poor and unbanked groups (financial
inclusion);
• However, burden being put on banking
prudential policy without a well designed
policy and clear objectives on access for the
poor/unbanked people nationally
5. Crisis Management Protocol
• CMP has been based on MOU (Emergency
Law). Clear mandate and accountability is
needed, in particular when dealing with
systemic/crisis situations
Presentation Plan
Stylized Facts on Indonesian Financial Sector
Supervisory Regime in Indonesia
Future Financial Supervisory Regime in Indonesia?
Future Global Financial System
Post-crisis, financial system may have the following characteristics:
• Global financial integration goes on with international
financial centers continues to be heavily dependent on
open trade
• Large and complex financial institutions continue to
operate in multiple jurisdictions
• Capital markets will continue to develop as the source of
intermediation
• But market players will tend to focus more on
counterparty risks
• Regulators will focus more on systemic risks and there
are needs to have a stronger financial stability standards
• More banking consolidation
Desired Roles of Financial Services in Indonesia
• Given the complexity and imperfect global financial
architecture, there is still the need to pursue stability
objective in Indonesian context
• Yet with a vision to have a more efficient financial system
so as to provide low-cost financing for the economy
• The need to deepen financial system:
• Greater financial inclusion for poor and unbanked
society
• Widen access of the SME to the financial markets
(access to finance for SMEs to support a long-term,
stable socio economid development)
• Provide more financial instruments to wider array of
community and investors
Future Financial Policy : A pragmatic approach
Support for equitable development
1.
Current Financial System
2.
3.
More emphasis on
promoting efficiency i.e.
Putting more market
competition and financial
innovations;
It may reduce the scope for
regulatory forbearance
(intervention) and rely more
on market mechanism to
allocate resources, esp. to
SMEs
However, it bears costs. It
may increase the risk of
instability in the financial
system;
Future Financial System
More
Stability
More
Efficiency
Perspective of Indonesia
Halim Alamsyah
Director of Banking Research and Regulation
Bank Indonesia
This presentation does not represent views and stances of Bank Indonesia. All errors are my own.
In addition, all data sources are from Bank Indonesia unless stated otherwise
Bank Indonesia 7th Annual International Seminar on Financial Stability
Bali - June 13 – 14, 2009
Presentation Plan
A Brief Note on The Role of Financial Sector
Financial Supervisory Regime and the Performance of
Indonesian Financial Sector
Challenges in Financial Supervisory Regime Indonesia
Future Financial Supervisory Regime in Indonesia
The Role of Financial Sector
A financial sector in general performs some of the following functions:
Roles
Descriptions
Intermediation
Channel funds from surplus to deficit units
Payment System
Carry out payment and fund settlements
Wealth Management
Venue for leveraging assets and managing wealth
Policy transmission
Serving as a conduit for central bank policy in
attempting to achieve its monetary policy target
Price discovery
Help determine the price of an asset in the
marketplace through the interactions of buyers
and sellers
Allocation of resources
Help apportion productive assets among
different uses due to limited supply and scarcity
of resources
How to Make the Role of Financial Sector Works?
...depends on Financial Supervisory Regime...
• There are at least 3 aspects need to be considered:
– Objectives of financial supervisory functions
• Trade off between Efficiency vs. Stability
• Support for equitable developments
– Regulatory regime
• Prudential vs market conduct regulations
– Structure of financial supervisory functions
• Integrated vs. two or three peaks models
• macro vc micro prudential responsibilities
Structure of Indonesian Financial System
In Billion IDR (USD = Rp10,000)
Source: Bank Indonesia, Bapepam-LK
•
Source: Bank Indonesia, Bapepam-LK
A Bank-based economy – banks are leading financial institutions
• Capital market is growing but remain undersized
• Prevalent deposit to lending model - banks are heavily dependent on short term
deposits (around 93% of deposits have maturity of less than 3 months)
• Banks confront high intermediary costs
• Thus, banking failure can have significant magnitude of systemic risk
A Skeleton of Financial Supervisory Regime
in Indonesia
• Bank-based system
• Separation between banks, NBFIs, and capital market
– Each segments has its own Acts and regulations (Banking,
Insurance, Multifinance, Capital Market Acts)
• Coordination through the so-called financial stability
forum/committee
– Currently being proposed in the Financial Safety Net Bill
Financial Supervisory Regime in Indonesia
• Put more emphasis on Banking Stability :
– Encourage banks to place their excess liquidity into BI certificates (SBI)
– LOLR for commercials and rural banks (BPR)
– Deposits protection scheme (up to $200.000)
• Setting a “firewall wall” between bank and capital market + NBFIs, e.g.
– Limits on banks’ exposure toward capital market and underwriting
activities
– Limits on bank lending to NBFIs
– Administrative control on short term external debt of banks , etc
• Pursuing an active banking policy to encourage greater access for the poor
and unbanked groups
• Promoting banking consolidation, esp through tier 1 capital requirement
• Results so far: stable, liquid, well capitalized and profitable
banks; yet, less efficient and with a shallow financial market
Financial System Depth (1/2)
Deposit Money Bank Assets / GDP (%) - 2008
M 2 / GDP (%) - 2008
160
160
140
120
140
114
127
120
97
100
149
139
136
103
94
100
90
82
80
80
71
61
53
60
42
48
55
45
60
40
40
20
20
0
55
49
49
46
40
37
0
SGP MYS THA KOR VNM PHL INDO
IND PAK JPN USA
SGP
MYS
KOR
THA
VNM
PHL INDO
IND
PAK
GBR
JPN
Source: International Financial Statistics, World Bank, and Bank Indonesia
• Indonesia financial system is lagging behind that of neighbouring ASEAN peers (in
particular SG, MY, TH)
•
Liquidity (M2/GDP) is less than its peers
• Total assets ratio is also the lowest among its peers
• Low penetration of banks compared to the size of economy – provides ample
opportunity for banks to expand their business volumes and competition
• Looking from this perpespective, Indonesia is not an overbank financial
system
USA
Financial System Depth (2/2)
Equity Market (%) - 2008
Stock Market Capitalization / GDP
Stock Market Turnover Ratio
• Market cap is smaller than
that of other Asian countries
Stock Market Total Value Traded / GDP
400
• Ample opportunity to develop
a deeper equity market
298
300
200
100
271
252
182
157
52
38
153
167 162
163
134 129
121
152
82
54
7474
92
53
13
89
62
50
82
41
8
31
28
813 1715
89
104
7584
24
0
MYS SGP TWN THA KOR CHN PHL INDO
PAK USA GBR JPN
Bond Market (%) - 2008
200
188
Public Bond Market Capitalization / GDP
Private Bond Market Capitalization / GDP
Total Bonds
150
100
IND
160
• Similarly, bond market is not
as develop as that of peer
ASEAN countries, except PH.
• Corporate bond market is
extremely small
91
76
60
50
• Deep stock market helps
stabilize financial system in
Indonesia
60
40
30
30
CHN
PHL INDO
26
33
34
IND
PAK
• Overall, financial depth of
Indonesia is less than its peers
0
MYS KOR SGP TWN THA
JPN
Source: International Financial Statistics, World Bank, and Bank Indonesia
USA
• Ample opportunity to develop
a deeper financial system
Banking Performance in Indonesia
Well-capitalized, with CAR of 17.6% (April 2009)
Slow pace of intermediation in recent months
Profitable, yet some dues from placement in Bank Indonesia
Key Indicator
Total Assets
Deposits
- Demand deposits
- Saving accounts
- Time deposits
Earning Assets
- Loans
- Certificate of Bank Indonesia
- Overnight Placement at BI
- Securities
- Inter-bank placement
- Equity Investment
Net Interest Income (Cumm.)
Capital Adequacy Ratio (%)
Loans/Earning Assets (%)
Gross Non Perform. Loans (%)
Net Non Perform. Loans (%)
Return on Assets (%)
Net Interest Margin (NII/AP) (%)
Operational Exp/Opr. Income (%)
Loan to Deposit Ratio (%)
Number of banks
Number of bank office networks
Dec-06
1,693.5
1,287.0
338.0
333.9
615.1
1,556.2
832.9
179.0
38.6
342.9
156.8
5.9
83.1
20.5
53.5
7.0
3.6
2.6
0.5
86.4
64.7
130
9,110
Dec-07
1,986.5
1,510.7
405.5
438.5
666.7
1,792.0
1,045.7
203.9
46.8
350.2
139.8
5.6
96.4
19.3
58.4
4.6
1.9
2.8
0.5
78.8
69.2
130
9,680
(In Trillion Rupiah, unless stated otherwise)
Dec-08
Jan-09
Feb-09
Mar-09
2,310.6
1,753.3
430.0
498.6
824.7
2,170.9
1,353.6
166.5
71.9
358.5
213.8
6.6
113.1
16.2
62.4
3.8
1.5
2.3
0.5
84.1
77.2
124
10,936
2,307.1
1,745.6
430.7
483.4
831.4
2,168.4
1,325.3
208.5
53.9
361.6
212.3
6.8
114.7
17.6
61.1
4.2
1.6
2.7
0.5
86.4
75.9
123
12,007
2,344.9
1,767.1
427.3
482.6
857.2
2,196.5
1,334.2
211.8
42.9
373.3
227.5
6.8
113.8
17.7
60.7
4.3
1.6
2.6
0.3
86.9
75.5
123
12,033
2,352.1
1,786.2
437.0
492.5
856.7
2,215.0
1,342.1
208.1
46.8
374.0
236.9
7.0
118.2
17.4
60.6
4.5
1.9
2.8
0.6
82.3
75.1
123
12,039
Apr-09
2,327.4
1,780.9
442.8
496.0
842.1
2,189.0
1,332.1
211.2
52.7
362.9
223.4
6.7
120.2
17.6
60.9
4.6
2.0
2.7
0.5
82.0
74.8
122
12,201
Moderate Risks Facing Banking Industry in Indonesia
•
•
•
•
•
Traditional banking system – deposit to lend business model
Leverage in general is not a pervasive problem
Market risk exposure is limited, with negligible FX exposures
Credit risk is manageable, albeit a slight upward pressures recently
Systemic risk is relatively low– integrated stress testing reflected that vast
majority of banks are quite resilient against growing pressure of risks
&
&
&
%# "&
%% %
%' (
#
$ ##
! &
&
!"
&
!
"# $
%
$'
(
)#
* #+ #
(
(
-
. + #( /#
0
,
( 123 -
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Profitable and yet still inefficient (2/2)
• Banking sector is very profitable – even compared to those
of neighboring ASEAN peers
• Nevertheless, less efficient than its peers
• Beside from lending, profits are some due to the facts that
placement in Bank Indonesia (SBI) are significant
• As banks have limited option of financial instruments
88
86
Operating Exp/Oper. Income of Banks in South East
Asia
ROA of Banks in South East Asia
86,4
84,1
84
82
INDO
82
MY
80
PH
78
TH
76
74
2006
2007
2008
Sources: Respective monetary authorities in ASEAN
Credit Risk Remains Moderately Increasing
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Presentation Plan
Stylized Facts on Indonesian Financial Sector
Post Crisis Banking Policy Response: Reasons behind the
notable performance
Vision of Future Supervisory Regime
Banking Policy Direction
Post 1997/98 crisis, Indonesian banking policy shifted to a total
transformation: after recapitalization cum consolidation programs
since 1999-2002, since 2003 Indonesian Banking Architecture (IBA)
has been set as the long term policy direction and responses to
structural weaknessess in six areas:
Sub-optimal banking system structure
Weak legal/regulatory and enforcements
Feeble banks’ governance
Weak risk management and culture
Sub- optimal infrastructure
Absence of proper customer protection
Key Initiatives of IBA
Some key results:
The IBA 6 key pillars are to:
1.
2.
bolster the structure of the national
banking system
enhance the quality of regulatory
regime according to international
standards
3.
enhance the quality of supervisory
system
4.
strengthen the quality of bank
management and operations
5.
develop banking infrastructure
6.
develop effective customer protection
scheme
1.
2.
3.
4.
5.
6.
7.
8.
Banking consolidation: number of
banks reduced significantly from 250
to 122
Roadmap on Basel 2 implementation
Implementation of 25 BCP and Risk
Based Supervision (RBS) system
Promotion of Risk Culture and Risk
Management
GCG implementation
Credit Bureau
Customer and Deposits protection
scheme
Financial Stability Surveillance and
Crisis Management Protocol
17
Presentation Plan
Financial Supervisory Challenges in Indonesia
Challenges in Supervisory Function(1/2)
Challenges
Issues
1. Information Gap among
financial supervisors
• Transparency needs to be improved;
• Information gap among regulators in
Indonesia needs to close
2. Regulatory Arbitrage among
markets
• Banks have been highly regulated
• Financial institutions take advantage
of regulatory differentials between
bank and non-bank as well as highly
and less regulated markets
3. Systemic prudential
enforcement
• No legal power
• Need to strengthen prudential
enforcement
Challenges in Supervisory Function (2/2)
Challenges
4. Stability vs Efficiency :
Regulatory Forbearance
Issues
• There is an objective need to pursue active
banking policy to provide greater acces for
the poor and unbanked groups (financial
inclusion);
• However, burden being put on banking
prudential policy without a well designed
policy and clear objectives on access for the
poor/unbanked people nationally
5. Crisis Management Protocol
• CMP has been based on MOU (Emergency
Law). Clear mandate and accountability is
needed, in particular when dealing with
systemic/crisis situations
Presentation Plan
Stylized Facts on Indonesian Financial Sector
Supervisory Regime in Indonesia
Future Financial Supervisory Regime in Indonesia?
Future Global Financial System
Post-crisis, financial system may have the following characteristics:
• Global financial integration goes on with international
financial centers continues to be heavily dependent on
open trade
• Large and complex financial institutions continue to
operate in multiple jurisdictions
• Capital markets will continue to develop as the source of
intermediation
• But market players will tend to focus more on
counterparty risks
• Regulators will focus more on systemic risks and there
are needs to have a stronger financial stability standards
• More banking consolidation
Desired Roles of Financial Services in Indonesia
• Given the complexity and imperfect global financial
architecture, there is still the need to pursue stability
objective in Indonesian context
• Yet with a vision to have a more efficient financial system
so as to provide low-cost financing for the economy
• The need to deepen financial system:
• Greater financial inclusion for poor and unbanked
society
• Widen access of the SME to the financial markets
(access to finance for SMEs to support a long-term,
stable socio economid development)
• Provide more financial instruments to wider array of
community and investors
Future Financial Policy : A pragmatic approach
Support for equitable development
1.
Current Financial System
2.
3.
More emphasis on
promoting efficiency i.e.
Putting more market
competition and financial
innovations;
It may reduce the scope for
regulatory forbearance
(intervention) and rely more
on market mechanism to
allocate resources, esp. to
SMEs
However, it bears costs. It
may increase the risk of
instability in the financial
system;
Future Financial System
More
Stability
More
Efficiency