Bank Rate Research Articles

Economic Recession and Survival of Selected Deposit Money Banks Before and During the Covid-19 Era in Nigeria

The study “examines Economic Recession and Survival of Selected Deposit Money Banks before and during the Covid-19 Era in Nigeria". It uses secondary data. The secondary data used is annual reports of selected deposit money banks from the year 2015 to 2020. The population size used for this study was the entire 14 Deposit Money Banks listed on the floor of Nigeria Stock Exchange, whose shares were traded by the Security and Exchange Commission in Nigeria during the period under review, while only 5 banks were adopted as sample size because they were identified by Moody’s Investors Service as the most affected banks in Nigeria during the last recession. Purposive sampling technique was adopted for the study, while regression and correlation analyses using E-views 9.0 statistical software packages were used to analyze the data and tested the formulated hypotheses at 5% level of significance. The study revealed that there is a significant effect between interest rate and banks' liquidity of Nigeria's deposit money banks, thus concluded that economic recession has a serious negative effect on the interest rate and inflation rate, which affects banks' survival variables like liquidity and share capital in the Covid-19 Era. It was recommended that the Central Bank of Nigeria in collaboration with Deposit Money Banks should coax interest rate on banks' liquidity downward in the areas of loans to stimulate the economy in case of another Covid-19 pandemic.

Factors Influencing Bank Selection Decision of Youth in Butwal City

This study proposes to evaluate the factors impacting the bank selection choice of youth by applying a set of dependent (bank selection decision) and independent variables (convenience, bank rate, reputation, and bank staff). This study is based on 280 replies from bank customers, utilizing a convenience sample approach. Regression and correlation methods were utilized to achieve the result. A structured questionnaire has been deployed as the study instrument on a five point Likert scale of intensity. The results demonstrated that reputation, bank rate, and convenience have a major impact on the bank’s decision making, while bank personnel have a low impact on bank selection decisions. The findings of this study are useful to youth customers, worried bankers, academicians, government authorities, and future researchers, which will help them to be more concerned about their customers in the future. Keywords: Convenience, bank rate, bank staff, reputation

THE SOUNDNESS LEVEL ASSESSMENT OF PT BANK PAN INDONESIA TBK USING RISK-BASED BANK RATING IN 2018-2022

The financial industry is crucial for a nation's growth and well-being, with banks playing a vital role in utilizing financial resources. The soundness of a bank is essential, with stakeholders including shareholders, bank management, customers, and the general public involved. Maintaining soundness is paramount for financial institutions like banks, as internal risk can affect the bank's financial status. This study examines the financial report of PT Bank Pan Indonesia Tbk for 2018-2022. The research uses historical data and descriptive data analysis methodology, analyzing financial statements using the Risk-Based Bank Rating method. This study indicates that PaninBank's soundness level is in a Very Healthy condition from 2018 to 2022, as measured by the NPL ratio, Good Corporate Governance, ROA ratio, NIM ratio, BOPO ratio, and CAR ratio. The soundness level of the PaninBank is also in a Very Healthy condition, with composite scores of 93%, 93%, 93%, 90%, and 93% for the five years spanning 2018-2022.

Technological and industrial sovereignty: problems of ensuring and contours of macroeconomic and sectoral policy.

The article presents an overview of the features of the economic development of the country during the period of liberal transformations and the problems associated with ensuring technological sovereignty in Russia. The main ones are: a low share of innovations in the structure of industrial production, as well as enterprises that carry them out; obsolescence of a significant part of fixed assets in industry; a high key rate of the Central Bank of the Russian Federation, which does not contribute to economic growth and acceleration of industrial modernization in Russia. The article attempts to identify the elements of macroeconomic policy that contribute to ensuring technological sovereignty. To achieve economic growth, it is necessary to significantly increase the share of investments in fixed and human capital. To activate investment activity in the real sector of the economy, it is necessary to reduce the discount rate. In order to overcome the technological gap and solve the problem of import substitution, it is also necessary to optimize the industry and antimonopoly policy. It is necessary to reconsider the attitude to the integration policy of enterprises in the markets in order to increase their production efficiency, despite the increase in the level of concentration, and also to determine which structure in key industries is optimal for solving the problem of import substitution and restoring production chains destroyed as a result of sanctions.

Gauging on the Performance of Top 1,000 Banks/G-SIBs/Investment Banks in the World via Rating Transition Matrices

Despite the prevalence of commercial banks’ rankings by The Banker, yet, no research has been undertaken to gauge on the transitional performance of these banks. This study attempts to fulfil such a research gap by focusing on finer rating categories under an interval gap of 50 banks, a time horizon of one year under a full time spanning from 2010 to 2020. A novel technique is deployed, namely rating transition matrices (RTMs) to gauge on the transition of ratings of banks over time. Findings show that probabilities assigned to unchanged ratings are relatively more pronounced relative to those attached to changed ratings. Evidence is found as to most banks found in the list of the top 50 banks being able to preserve their rating category over a decade with COVID-19 entailing no major effects on their RTMs. Policy wise, the Financial Stability Board could consider the full list of top 50 banks as globally systemically important banks. Absence of leapfrogging in RTMs substantiates a rather ‘less intrusive’ nature of banking business in the world.

Risk-Based Bank Rating (RBBR) Method Using Risk Profile, Good Corporate Governance, Earning, and Capital (RGEC) Factors as an Assessment of Bank Health: Case Study of PT Bank Pembangunan Daerah Jawa Timur Tbk Period 2018-2022

Banks play a very important role in driving the wheels of the country's economy because they provide credit access facilities and provide interest rates to people who want to save. Through Bank Indonesia Regulation Number 13/1/PBI/2011, Bank Health Level Assessment using the Risk-Based Bank Rating (RBBR) method using Risk Profile, Good Corporate Governance, Earning, and Capital (RGEC) factors is a method for assessing how healthy a bank is. This research wants to assess the health level of Bank Jatim through the financial ratios in the Financial Report. The data used are ROA, ROE, NPL-Gross, LDR, BOPO, NIM, CAR, and the results of GCG self-assessment reporting which follow factors. As a result, the Risk Profile factor decreased in 2020 and 2021 and improved in 2022. The Earnings factor decreased in 2021 and 2022 compared to 2019. The GCG factor increased in 2019 but the trend is stagnant until 2022. The Capital factor decreased in 2019 and experienced a positive increase from 2020 to 2022.

Evaluating the resource management and profitability efficiencies of US commercial banks from a dynamic network perspective

The central concept of strategic benchmarking is resource management efficiency, which ultimately results in profitability. However, little is known about performance measurement from resource-based perspectives. This study uses the data envelopment analysis (DEA) model with a dynamic network structure to measure the resource management and profitability efficiencies of 287 US commercial banks from 2010 to 2020. Furthermore, we provide frontier projections and incorporate five variables, namely capital adequacy, asset quality, management quality, earning ability, and liquidity (i.e., the CAMEL ratings). The results revealed that the room for improvement in bank performance is 55.4%. In addition, we found that the CAMEL ratings of efficient banks are generally higher than those of inefficient banks, and management quality, earnings quality, and liquidity ratios positively contribute to bank performance. Moreover, big banks are generally more efficient than small banks. Overall, this study continues the current heated debate on performance measurement in the banking industry, with a particular focus on the DEA application to answer the fundamental question of why resource management efficiency reflects benchmark firms and provides insights into how efficient management of CAMEL ratings would help in improving their performance.

ОСОБЕННОСТИ ФОРМИРОВАНИЯ ФИНАНСОВОЙ СТРАТЕГИИ КОМПАНИИ НА ОСНОВЕ ПРОГНОЗНОГО БАЛАНСА В УСЛОВИЯХ ДИСКОНТИРОВАНИЯ ДЕНЕЖНЫХ ПОТОКОВ И ИЗМЕНЕНИЯ КЛЮЧЕВОЙ СТАВКИ ЦЕНТРАЛЬНОГО БАНКА РОССИЙСКОЙ ФЕДЕРАЦИИ

The article is devoted to the specifics of the formation of a company’s financial strategy based on a forecast balance sheet in conditions of discounted cash flows. The purpose of this study is to establish the degree of impact and materiality criteria for the formation of the company’s financial strategy of such important factors as the forecast balance sheet, discounting of key economic indicators and changes in the key rate of the Central Bank of the Russian Federation. To achieve this goal, the essence, significance and procedure for forming a financial strategy based on the impact of the forecast balance sheet as the most important tool for assessing the financial stability of the company, as well as discounting factors and changes in the discount rate of the Bank of Russia were investigated, the advantages of the company’s financial strategy formed taking into account these criteria were assessed, and prospects for identifying potential financial problems and planning short-term financial strategy. In the article, the research methodology is determined by the use of general scientific and private scientific methods, a formal logical approach; in addition, methods of selecting significant indicators and analyzing them were used to determine the degree of influence of the main factors in comparative techniques and methods. Methods of modeling the relationships between the performance indicator (financial policy) and the main components (forecast balance, discounting, discount rate of the Bank of Russia) are used. As a result of the study, it was found that the formation of a successful financial strategy of the company is based on forecast information about the company’s assets (including cash, inventories, equipment), liabilities (loans, delinquencies, taxes, etc.), equity, discounting of these indicators. In addition, it was found that the development and updating of the financial strategy is significantly influenced by changes in the academic rate of the Central Bank of the Russian Federation and the data of the forecast balance sheet, which in turn can be used as a basis for developing company budgets, for attracting investments and loans, for reporting to interested parties – investors, partners and regulatory authorities.

Functioning of banks with foreign capital in the context of ensuring the financial security of Ukraine

The article examines modern features of the functioning of banks with foreign capital from the point of view of ensuring the financial security of Ukraine. It was established that banks with foreign capital play an important role in the development of the country's financial sector: in 2019–2023, they formed more than a quarter of the volume of net assets, liabilities and net profit of the domestic banking system. At the same time, according to the results of the analysis of the trends of changes in the specific indicators of infrastructure, net assets, liabilities and profit, a reduction in the presence of banks with foreign capital in the Ukrainian financial market was recorded due to the worsening of the geopolitical situation in the country. The declining nature of the rate of growth of lending by banks with foreign capital to individuals and legal entities was noted. At the same time, it was emphasized that the less rapid fall in the volume of lending to business entities compared to lending to individuals is due to several stimulating measures by the Government and the National Bank of Ukraine regarding the more active participation of banks in lending programs of the real sector of the economy. The change of priorities in the activity of banks with foreign capital towards the investment direction is also noted. Based on the analysis of the dynamics of the share of foreign capital in the authorized capital of Ukrainian banks, it was revealed that the level of concentration of foreign banking capital in the national financial system has decreased by almost four times. Conclusions were made about the probability of additional financial risk and the threat of deterioration of the economic situation in the country due to the reduction of access channels to foreign investments. In this regard, it is proposed to increase the competitiveness of domestic banks by actively implementing the principles of sustainable development. It is emphasized that for the implementation of ESG approaches, there is a need to improve the organizational culture of banks, to establish effective interaction with society and state authorities. It is noted that the high positions in the ratings of banks with foreign capital confirm the possibility of forming a positive reputational impact based on the effective management of ESG risks of banking activity, which contributes to increasing the volume of assets and profits of banks.

КЕЙНСІАНСЬКА КРИТИКА НЕЗАЛЕЖНОСТІ ЦЕНТРАЛЬНИХ БАНКІВ

The article is aimed at analyzing the arguments of Keynesianism representatives against the modern paradigm of central banks independence. According to the result of the study, the modern paradigm of independence of central banks is the result of the adoption of a framework for monetary policy in the form of inflation targeting and represents a certain set of indicators of legal and actual protection against political interference in monetary policy. The Keynesian approach to monetary policy is based on an understanding of the principles of the money market, where there is only a natural interest rate and the role of the central bank is usually offset by this. The natural interest rate is defined as the equilibrium rate of the economy with flexible prices and reflects the potential in the dichotomy of “consumption-investment”. In turn, the central bank's rate, which is usually not the same as the natural one, determines the monetary institution's policy of limiting or stimulating economic growth through control of inflation. The central bank is given the role of an auxiliary tool for ensuring economic equilibrium along with fiscal policy or a discretionary body, which adapts to short-term decisions aimed at reducing unemployment. According to Keynesianism in the long term, there is a tendency to neutrality of money and the central bank can only influence demand in the short term. From this position, the implementation of an activist independent monetary policy negatively affects the economic development due to the uneven impact of interest rates on various sectors of the economy; the inability of central banks to “fine-tune” the economy and the inefficiency of interest rates as a tool of monetary policy by incorporating it into the expectations of economic entities. Based on this, the author determined that the role of central banks, according to Keynesian tradition, varies from an auxiliary tool for ensuring economic growth (Phillips curve) to their compliance with systematic, objective rules for limited purposes (price stability and proper functioning of the financial system).

Монетарні впливи на ринок праці в умовах невизначеності

The aim of the article is to study the features of the impact of monetary policy on the domestic labor market during the wartime. The main trends in the labor market of Ukraine both before the full-scale invasion of the russian federation and under martial law are determined. The indicators of official statistics on the number of unemployed are studied, assumptions about the real level of this indicator are made, and short-term trends in the revival of registration of persons in the employment center as unemployed or job seekers are predicted. The impact of the bank rate policy pursued by the central bank on employment of the population has been proved. It is determined that the overall impact of changes in the bank rate in the country depends on the ratio between small and large enterprises, as well as on the share of employees with high and low levels of education. Reserve requirements for banking institutions are mentioned as a monetary instrument for influencing the labor market. It is emphasized that one of the main obstacles to doing business in wartime is the lack of working capital. It is calculated that in the structure of loans granted by the banks of Ukraine, the dominant value (more than 70%) belongs to economic entities. Considerable attention is paid to business lending (including within the framework of the state program «Affordable Loans at 5-7-9%») as a prerequisite for the creation of new jobs. The problems of growth in the volume of non-performing loans during the wartime are considered. The catastrophic position of Ukraine in the ranking of countries by the level of NPLs in the total volume of loans issued, compiled according to the World Bank data, is underlined. The trends in the level of NPLs in Ukraine before the full-scale invasion and the reasons for the growth in the volume of non-performing loans in 2022–2023 are analyzed. It is proved that the high cost of credit resources limits the availability of working capital in business and forces it to optimize wage costs, which leads to a decrease in the level of remuneration and reduction of jobs. It is substantiated that the monetary aspects of the influence on the preservation of the labor potential of the nation acquire special importance during the war.

ЛЬГОТНЫЕ ПРОГРАММЫ ФИНАНСИРОВАНИЯ, КАК ОДИН ИЗ ИНСТРУМЕНТОВ РЕАЛИЗАЦИИ ИНВЕСТИЦИОННЫХ ПРОЕКТОВ ИНЖИНИРИНГОВОГО ДИВИЗИОНА ГК «РОСАТОМ»

The article analyzes the changes in the conditions for the implementation of investment projects of the Engineering Division of Rosatom State Corporation as a result of the sanctions burden and changes in general economic situation. The influence of the key rate of the Central Bank of the Russian Federation on investment activity and the choice of sources of financing investment projects is shown. At the present stage, preferential financing programs are becoming particularly important as an effective tool for implementing investment projects. Analysis and monitoring of their use is presented in this article.

THE INFLUENCE OF MONETARY POLICY ON THE FORMATION OF OIL PRICES

The relationship between monetary uncertainty and price volatility in the global crude oil market has attracted considerable attention in recent years. Understanding this relationship is extremely important for both policy makers and market participants and investors. The purpose of this article is to explore a modern approach to regime switching in order to shed light on the dynamic interaction between monetary uncertainty and price volatility in the crude oil market. If we consider that oil is one of the main sources of energy in the world, and the price of oil plays an important role in the global economy, then the formation of oil prices depends on many factors, including supply and demand, political stability in the production regions, geopolitical events, climate change and, of course, monetary policy. The scientific significance of the article lies in the fact that it allows for a deeper understanding of the relationship between the economic policy of central banks and the dynamics of commodity prices. The practical significance lies in the fact that understanding the impact of monetary policy on oil prices can be useful for both government agencies and businesses. In this research methodology, an empirical method of work was used, in which the influence of monetary uncertainty on the volatility of world crude oil prices was considered. We also touch upon the issue of political uncertainty on the price of oil during the pandemic. The relevance of this article lies in the fact that the price of oil is one of the key indicators for the global economy, the study of the impact of monetary policy on this market is important. The price of oil can influence monetary policy in various ways. For example, changes in the interest rates of central banks affect investors and their decisions to invest in oil companies. In addition, monetary policy also affects the exchange rate, which also has an impact on the price of oil. In conclusion, it can be said that studying the impact of monetary policy on oil prices is important for both science and practice, and may lead to the development of more effective methods of economic and business management.

Վերաֆինանսավորման տոկոսադրույքի տատանումների ազդեցությունը շուկայական տոկոսադրույքների վրա Հայաստանի Հանրապետությունում / Effect of Refinancing Interest Rate Fluctuations on Market Interest Rates in the Republic of Armenia

It is indisputable that the real sector of the economy requires investment, especially in the current technological age. Banks, on the other hand, possess significant financial resources, but due to insufficient, asymmetric information and the underdeveloped financial system, the interaction between the real and financial sectors is ineffective. The "late response" of the financial sector to changes in the real sector has become the cause of a chronic oversupply of financial services, resulting in a situation where the level of liquidity in banks is largely independent of economic cycles. The paper aims to identify the ways in which interest rate fluctuations impact the real and financial sectors of the RA economy and to evaluate this impact. The paper analyzes trends in the main indicators characterizing the real and financial sectors of RA, as well as the behavior of various types of interest rates according to the factors determining them. It comments on the macroeconomic developments in RA caused by interest rate fluctuations. With the help of econometric models, the study estimates the effect sizes between various links on the interest rate path. The study made it possible to highlight the problems with the transmission mechanisms of the monetary policy of RA and suggest possible solutions. As a result of the assessment, it was found that deposit and credit interest rates, interbank repo rates, and one-year government bond yield rates respond to changes in the refinancing rate of the Central Bank in different time lags.

СЕЛЕКТИВНІ РИЗИКИ ВКЛАДНИКІВ ВІТЧИЗНЯНИХ БАНКІВ В УМОВАХ ВОЄННОГО СТАНУ

The article examines the essence and types of selective risks of bank depositors and their features in the conditions of martial state. The main types of selective risks of bank depositors are characterized. The expediency of improving the determination of the rating of banks when determining the risk of incorrect bank selection is substantiated. An approach to improving the determination of the rating of financial stability of banks by normalizing financial indicators taking into account their normative values is proposed. It has been established that an important factor in the depositor's determination of the bank's reliability in nowadays conditions is the level of its technologies. The essence of the risk of incorrect choice of the deposit currency by the depositor is determined and a method of its assessment based on the application of Value at Risk measurement technology is proposed. It has been established that the main source of risk of incorrect choice of deposit currency by the depositor is the level of devaluation or revaluation of the national currency during the deposit period. The expediency of using Value at Risk technology to assess this risk is substantiated. It has been established that in the conditions of martial state and increased turbulence of the foreign exchange market, it is advisable to assess the risk of incorrect choice of the deposit currency taking into account both the volatility and the trends in the exchange rates. The essence of the risk of the wrong choice of the term of the deposit is determined and the complexity of its assessment in the conditions of martial state is substantiated. Attention is focused on the importance of effectively managing the risk of the wrong choice of the type of deposit in the conditions of martial state by forming a so-called financial security cushion in the form of placing a certain amount of funds on demand deposits or time deposits with the right of early withdrawal. The necessity of developing a strategy for forming the optimal portfolio of a bank depositor in the conditions of martial state is substantiated, which can become the subject of further scientific researches.

Inflation targeting, exchange rate and output gap in Central and Eastern European countries

This paper aims at empirical assessment of monetary policy relationships in Central and Eastern European countries (Czechia, Hungary, Poland, Romania), which practise the monetary regime of inflation targeting. Using quarterly data for the period of 2004-2019, the authors examined the relationship between the output gap, nominal and real exchange rate misalignment, consumer price inflation and the central bank policy rate, using the panel vector autoregression (PVAR) model. According to estimates, the central banks of the CEE-4 countries react with an increase of their policy rate to the output gap and inflation, as implied by the Taylor rule. At the same time, a monetary reaction to nominal (real) exchange rate misalignment is lost in the estimates for the post-crisis period of 2010-2019. An increase of the central bank rates does not seem to have unfavourable output effects, while the nominal exchange rate is likely to depreciate with three to five quarter lags. However, there is evidence of the price puzzle when monetary tightening is followed by a counterintuitive increase in the inflation rate. In full accordance with the New Keynesian framework, inflation depends on the output gap, while being expansionary in the real sector. Evidence of the exchange rate pass-through (ERPT) to inflation is mixed. This article provides insights into the average monetary policy reaction function and its macroeconomic effects in the CEE-4 countries, with the value added in that following the Taylor rule does not guarantee effectiveness in tackling inflation in the presence of the price puzzle. Based on the estimated exchange rate effects on the output gap and inflation, deliberate currency appreciation resulting from the central bank foreign exchange interventions and/or fiscal austerity measures can be helpful for such a disinflation that minimises output losses.

Komparasi Tingkat Kesehatan Bank Syariah dan Bank Konvensional dengan Pendekatan Resiko

This research aims to find out how the health level of Sharia Banks and Conventional Banks compares using the Risk-Based Bank Rating (RBBR) method. This research is quantitative research with comparative methods. This research data uses secondary data taken from the Bank Indonesia website. This research data analysis uses comparative quantitative statistics. The total sample is 10 banks consisting of 5 sharia banks and 5 conventional banks. The research results show that there is a significant (real) difference between the average value of credit risk in Islamic banks and conventional banks. There is no significant (real) difference between the average value of liquidity risk in Islamic banks and conventional banks. There is a significant (real) difference between the average ROA value for Islamic banks and conventional banks. There is no significant (real) difference between the average NIM value of Islamic banks and conventional banks. There is a significant (real) difference between the average CAR value for Islamic banks and conventional banks.

EXAMINING INDONESIA'S ISLAMIC COMMERCIAL BANKS HEALTH STATUS USING THE RBBR METHOD

The scientific importance of Indonesia's Islamic banks' state is the focus of this study using a strategy based on the Risk-based Bank Rating technique. This quantitative descriptive research analyzes the health of Indonesia's Islamic commercial banks, namely Bank Syariah Indonesia and Bank Muamalat Indonesia, for the years 2019 to 2022, focusing on the degree of bank health as measured by the RBBR approach. The study's data analysis leads to the conclusion that Bank Syariah Indonesia's overall condition is represented by a Composite Rank 2 (PK-2) of 85% in 2019, meaning that it is deemed "Healthy" and capable of withstanding significant negative influences from changes in business conditions and other external factors. However Bank Muamalat Indonesia's overall composite rating (PK3), or "Healthy Enough," corresponds to the bank's evaluation of its health level from 2019 to 2022 using the Risk-based Bank Rating method, which includes indicators of Risk Profile, Good Corporate Governance, Earnings (Rentability), and Capital as a whole.

Does Monetary Policy Influence Non-performing Loans of Listed Commercial Banks in Kenya?

The Kenya banking sector plays a crucial role in Kenya’s economy despite the prevailing macroeconomic headwinds in the Country. The Banking Sector Industry Report of 2023 indicated that the banking sector contributed to 66% of gross domestic product as of December 2022. The high levels of non-performing loans remain a concern in the Kenya banking sector. The study sought to assess the influence of monetary policy on non-performing loans in the banking sector in Kenya. The target population is all listed commercial banks in Kenya. Using monthly secondary data from November 2019 to September 2023 obtained from the Central Bank of Kenya, the study utilized a multiple regression model to estimate the influence of monetary policy on the percentage growth of nonperforming loans of listed commercial banks in Kenya. Findings pointed out that Repo rates and Treasury bill rates do not influence non-performing loans of listed commercial banks in Kenya as measured by the gross non-performing loans ratio as exhibited by the P-values of 0.327866 and 0.577173 respectively, which is greater than 0.05. The results also implied that the central bank rate and interbank rates do influence non-performing loans of listed commercial banks in Kenya as measured by the gross non-performing loans ratio as illustrated by the P-values of 0.028844 and 0.00018 respectively, which is less than 0.05. According to the findings, the study recommends that policymakers should prioritize creating a strong financial ecosystem so that monetary policy can be utilized to regulate commercial bank interest rates. This will, in effect, serve to decrease the expansion of non-performing loans, reduce risk and entice competitors into the financial sector, enhance the capital base, increase lending to promote feasible projects, and, as a result, stimulate the country's growth.

Interest Rate Transmission on Indonesia’s Monetary Policy Analysis: Case of Banking Interest Rate

Indonesia's economic stability should be achieved by implementing monetary and fiscal policies, for instance, setting the interest rate by Bank Indonesia (BI) as policy rate of central bank, which should be followed by other banking institutions. Unfortunately, this interest rate regulation by BI had not been able to achieve the goal of restoring economic stability since it always had long time lag. This happened because the policy of increasing interest rates had not been followed up spontaneously by other banking institutions. In fact, time lag might cause disadvantages such as long-lasting high inflation, increased poverty, and severe economy vulnerability. This research was conducted to analyze the time lag of the transmission of Bank Indonesia's interest rate monetary policy and the response of banking institutions in Indonesia. The method used in this study was survival analysis. The results indicated that the time lag of monetary policy transmission using the interest rate in Indonesia needed to be improved to double adjustment speed to reach the optimal point. The response of banking institutions could be improved because there was still asymmetry response in all aspects including types of interest rates, allocations, and change direction. Meanwhile, from the aspect of ownership, both state-owned and private-owned banks had shown in line response of time lag performance.