The Financial Services Authority (OJK) in Indonesia has stated that the country's national banks are maintaining their resilience despite the weakening of the rupiah and the strengthening of the US dollar [89fc2222]. OJK Chief Executive Dian Ediana Rae has reassured that the risks faced by the banking industry due to the strengthening US dollar can still be properly mitigated [89fc2222]. The weakening of the rupiah exchange rate currently has a relatively insignificant impact on bank capital [89fc2222]. Indonesia's banking net foreign exchange (PDN) is still below the threshold, and the banks have a high Capital Adequacy Ratio (CAR) to absorb fluctuations in the exchange rate and interest rate [89fc2222]. The foreign currency portion of the banks' funds is around 15 percent of the total banking DPK [89fc2222].
The OJK conducts regular resilience tests against banks and considers credit risk and market risk as the main risk factors [89fc2222]. The OJK also asks banks to monitor the potential impact of global and domestic economic developments on bank conditions and take necessary mitigation steps [89fc2222]. Despite the external factors, the domestic economy is still within the set target range [89fc2222].
The weakening rupiah exchange rate can have a positive effect on commodity exports and encourage domestic industries to increase the use of domestic components in the production process [89fc2222]. Additionally, the article mentions the impact of conflicts in the Middle East and Russia-Ukraine on energy commodity prices and logistics costs [89fc2222]. The strengthening of the US dollar is influenced by factors such as the high for longer interest rate policy and geopolitical tensions in the Middle East [89fc2222]. The domestic economy is also affected by the external geopolitical situation, as seen in Indonesia's inflation data for March 2024 [89fc2222]. The US dollar is considered a safe asset and continues to be sought after by market participants, leading to further strengthening [89fc2222].
Overall, the OJK believes that the national banks in Indonesia are resilient and well-prepared to handle the challenges posed by the weakening rupiah and the strengthening US dollar [89fc2222]. The banks' high Capital Adequacy Ratio and the relatively insignificant impact of the weakening rupiah on bank capital provide a strong foundation for the banking industry in Indonesia [89fc2222].