Banking Crisis Contagion Effect, How Resilient Are Indonesian Banks?
Summary
- Increasing financial pressure at Credit Suisse, combined with the failures of two small US banks over the past two weeks, has caused the health of the global financial system in doubt. The market remains cautious despite regulators' deposits "guarantee," causing selloffs in bank stocks all over the world.
- The failures, especially in SVB, reflected vulnerabilities in the global financial system. Other small and medium-sized banks might experience the same financial problems as SVB right now, while a bigger threat from European bank sneak in.
- Indonesia's central bank and financial authorities are confident but cautious. BI's official stated that the banking system was resilient enough according to the latest stress test. D-Insights found that, unlike SVB, most deposits in local banks were distributed in credit, not in long-term securities. Bank ownership of securities has jumped since 2020, but credit is still dominant. However, some banks are exposed to a decline in startup deposits.
- Regulators and global systematically important banks (G-SIB) have been rushing to contain the collapse of banks. UBS potentially acquired Credit Suisse. JP Morgan and other major US banks made a total of US$30 billion in deposits to First Republic Bank – a move that made the public wary of the spiraling effect.