Comparison of Bank Soundness Levels Using the Risk-Based Bank Rating Method Before and During the Covid-19 Pandemic

Abstract

The financial system plays a very important role in achieving sustainable growth rates. Banks with their financial performance are the main role in a country's financial system. This study aims to determine differences in bank soundness level using the Risk-Based Bank Rating method in the aspects of Risk Profile, Good Corporate Governance, Earnings, and Capital before and during the Covid-19 pandemic. This research is conducted at commercial banks in Indonesia with a total sample of 84 banks registered at OJK. The data analysis technique used is the Wilcoxon Signed Rank Test. The results show that the aspects of Risk Profile which are measured using LDR, Earnings which are measured using ROA and NIM, and Capital which is proxied by CAR there are significant differences during the Covid-19 pandemic. The results also show that there was no significant difference in the Risk Profile aspect as measured using the NPL and Good Corporate Governance aspects during the Covid-19 pandemic. From a bank's soundness level point of view, commercial banks are still in a safe position even though their ROA and NIM have experienced downgrades due to the ineffective performance of banks during the pandemic. Credit restructuring and the ineffectiveness of bank lending were the main reasons for the ineffectiveness of bank performance during the pandemic.