The Impact of Indonesian Financial Service Authority’s Relaxation Policy Towards Bank’s Financial Performances

Abstract

This research examines the effect of the Indonesian Financial Service Authority's countercyclical regulation No.11/POJK.03/2020 regarding credit restructuring policy towards Indonesian banks' fundamental and market performance. The fundamental analysis uses some indicators: CAR, Gross NPLs, Net NPLs, credit impairment losses, LDR, primary statutory reserve requirements, LCR, NSFR, ROA, and ROE. While the market analysis is conducted using the measurement of Tobin's Q. Samples in this research are banks listed in the Indonesian Stock Exchange during 2018-2022. The results of this study show that the policy No.11/POJK.03/2020 has a positive impact on the Bank's credit quality (shown by a higher level of CAR, lower NPLs, and lower credit impairment losses), a positive impact on Bank's credit allocation (shown by lower LDR), has positive impacts on Bank's liquidity (shown by lower primary statutory reserve requirements, higher LCR, and higher NSFR), has positive impacts on Bank's profitability (shown by higher ROA and ROE), and has a positive impact on Bank's market performance (shown by higher Tobin's Q).