Weekly Digest: Liquidity Issues Erode Banking Financial Resilience

More capital for banks
Summary

  • Circulating news that Bank Bukopin is facing liquidity shortages had put the national banks' resilience amid the pandemic into the spotlight. However, the bank has regained public confidence as one of its shareholders, Koomin Bank, reportedly plans to inject capital.
  • Based on the worst economic scenario in a stress test, eight banks potentially experience difficulties in fulfilling their obligations to customers.
  • Small banks had suffered the most severe financial pressures as of March 2020, with shrinking loans and third party funds (DPK), soaring non-performing loans (NPL) to 3.3-3.8 percent – slightly under Rural Bank NPLs, as well as tight liquidity.
  • BPK had highlighted OJK supervision, which was considered inadequate on seven banks, in which three of them had capital difficulties, including Bank Bukopin, Bank Muamalat, and Bank Banten. All seven banks had their NPL soared.

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