Abstract
The COVID-19 pandemic has affected people’s lives and increased the banking solvency risk. This research aimed to build an early warning and early action simulation model to mitigate the solvency risk using the system dynamics methodology and the Powersim Studio 10© software. The addition of an early action simulation updates the existing early warning model. Through this model, the effect of policy design and options on potential solvency risks is known before implementation. The trials conducted at Bank BRI (BBRI) and Bank Mandiri (BMRI) showed that the model had the ability to provide an early warning of the potential increase in bank solvency risk when the loan restructuring policy is revoked. It also simulates the effectiveness of management’s policy options to mitigate these risks. This research used publicly accessible banking data and analysis. Bank management could also take advantage of this model through a self-stimulation facility developed in this study to accommodate their needs using the internal data.
Highlights
The COVID-19 pandemic has impacted all sectors and the economic activities of people in Indonesia
The non-performing loan (NPL) restructured based on this regulation can still be categorized as a performing loan, and the bank does not have to set aside any loan impairment expenses
The model volved comparing the1st simulation results of several financial statement with hisoutput accuracy was using the degree of correlation and the mean torical data in the
Summary
The COVID-19 pandemic has impacted all sectors and the economic activities of people in Indonesia. Almost all economic activities experienced a slowdown, especially businesses supported by loans from banks, including large enterprises and small and medium enterprises (SMEs). These conditions have impacted the banking sector, resulting in several risks. The economic crisis due to the COVID-19 outbreak is different from previous crises, it has similar consequences, including widespread business bankruptcies, increased unemployment, and worsening banking solvency (Danielsson et al 2020). The Financial Services Authority (OJK), as the supervisory authority and regulator of banking in Indonesia, issued a loan restructuring policy for debtors that were affected by the pandemic in March 2020 to reduce the pandemic’s impact on solvency risk. The non-performing loan (NPL) restructured based on this regulation can still be categorized as a performing loan, and the bank does not have to set aside any loan impairment expenses
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
