INTERMEDIATION AND SUSTAINABLE FINANCIAL SYSTEM STABILITY AMIDST THE COVID-19 PANDEMIC

Abstract

This review aims to analyze the function of internalization and stabilization of the monetary-finance sector for the sustainability of financial system stability during the Covid-19 pandemic in Indonesia. The Covid-19 pandemic caused a deep recession in the national economy and a significant drop in the capital market index. Policy uncertainty over handling the pandemic and the continued emergence of various variants of Covid-19 exacerbated economic conditions. Bank Indonesia (BI) made several monetary policies to complement the policies taken by the government to maintain sustainability during the Covid-19 pandemic. Strengthening financial stability and supporting the intermediation recovery policy strengthens the monetary sector's sustainability and stabilization so that banks do not experience excessive pressure during Covid-19 and remain profitable. These perspectives were tested in the context of the Covid-19 pandemic, and the Indonesian banking and financial stability industry has shown sustainability in the last two years. On the other hand, the competition stability in the Covid-19 pandemic approach assumes that the borrower side of the relationship must be considered. Banks can charge exorbitant interest rates in collusive markets, increasing the cost of borrowing for businesses and triggering the moral hazard problem. Specifically for ASEAN and Indonesia, as a result of the recent global financial crisis in 2020, BI implemented expansionary monetary and fiscal policies in response to the crisis to stabilize its economies.