Indonesia Deposit Insurance Corporation Research Articles

Examining the Indonesian dual banking system: an exploration of market discipline indicators

PurposeThis research aims to investigate the disciplinary functions of depositors and subordinated debt holders within Indonesia's dual banking system, examining the impact of regulatory changes on market discipline.Design/methodology/approachThe study employs a comprehensive analysis of the dual banking system in Indonesia over 15 years. Utilizing a non-public dataset from the Financial Services Authority and the Indonesia Deposit Insurance Corporation, the study employs propensity score matching and difference-in-differences analysis.FindingsThe findings reveal distinct patterns in the exercise of market discipline by depositors over different regulatory regimes. During the blanket guarantee regime (2002–2005), depositors lacked the incentive to monitor banks but resumed their disciplinary role under the limited guarantee regime (2005–2017). Islamic banks faced simultaneous market and regulatory discipline, with market discipline prevailing.Originality/valueThis study contributes to the literature by providing novel insights into the interplay between regulatory changes, market discipline and depositor behavior within Indonesia's dual banking system. The utilization of a comprehensive non-public dataset from regulatory authorities adds to the originality of the research.

Analysis of Bank Saving Growth Below IDR2 Billion in Indonesia

The COVID-19 pandemic, global economic shocks, and global geopolitical risks have resulted in the banking industry facing global uncertainty that affects both banks and customers. This uncertainty has grown significantly in recent years. This research examines the differences between the periods before and after the COVID-19 pandemic and the long-term and short-term effects of inflation, BI-7DRR, deposit rates, SBN yields, and the COVID-19 pandemic on DPK growth. The research utilizes the Difference Test and the Error Correction Model methodologies. The study reveals differences in DPK, BI-7DRR, deposit rates, and SBN yields before and during the COVID-19 pandemic. The findings indicate that inflation, BI-7DRR, deposit rates, and the COVID-19 pandemic have a long-term impact but do not exhibit a short-term impact. Meanwhile, SBN yield has no long-term or short-term effect on DPK growth. Inflation affects the growth of DPK in the long term because people see the direction of economic conditions. BI-7DRR has a long-term with DPK because banks require a time lag. The level of DPK does change in the long term because banks must adjust interest rates based on economic conditions. Increased savings in banks because people see the COVID-19 pandemic as a shock economy. Disclaimer: All views in this paper are the authors' and do not necessarily reflect the views of Indonesia Deposit Insurance Corporation (Lembaga Penjamin Simpanan).

Do customer knowledge and customer trust in IDIC affect bank customer retention? Evidence from Indonesia

Purpose — The primary focus of this research was to examine the impact of customer knowledge and customer trust in Indonesia Deposit Insurance Corporation (IDIC) on the retention of bank customers in Indonesia.Method — The study employed a cross-sectional design and quantitative survey study. Questionnaires were distributed randomly to respondents via social media. 141 respondents from bank customers in Indonesia have been analyzed. Hypothesis testing is done by multiple linear regression analysis with structural equation modeling and SmartPLS as a statistical tool.Result — The results show that the average bank customer in Indonesia has sufficient knowledge about the role, function, task, and performance of IDIC. However, knowledge needs to be improved because some customers do not understand it well. The results provide empirical evidence that customer knowledge and customer trust in IDIC have positive influence on bank customer retention.Contribution — There is a new concept with the integration of two theories that will benefit future research. The findings contribute to addressing research gaps that have inconsistent results. The findings also contribute to improving customer knowledge and customer trust as a solution to the impact of the COVID-19 pandemic and the global financial crisis. This study supports the G20 in strengthening financial safety nets, where multilateral development banks are encouraged to strengthen their financing systems to face global economic challenges.

Legal Construction against Customer Deposit Protection as a Result Liquidity of PT Bank Perkreditan Rakyat Mustika Utama Kolaka

This article discusses the protection of customer deposits of PT. Bank Perkreditan Rakyat (BPR, rural bank) Mustika Utama Kolaka. This type of research is descriptive and qualitative with data collection methods using observation, interviews, and documentation. The research data is categorized into primary data and secondary data, processed and analyzed through data reduction steps, data presentation, and conclusion drawing with an analytical descriptive approach. The results showed that the procedure carried out by the Financial Services Authority (OJK) in the process of expiring PT. BPR Mustika Utama Kolaka's license was to carry out direct and indirect supervision of the bank. OJK after declaring its business license revoked, the handling of customer deposit protection is carried out based on the procedures established by the Indonesia Deposit Insurance Corporation (IDIC) by referring to Law Number 21 of 2011 concerning the Financial Services Authority. On the other hand, in terms of the legal construction of conflict resolution between customers and the bank, it prioritizes steps to acculturate local wisdom and actualize legal culture in the local community.

Beneficiary of Resolution Bank by Indonesia Deposit Insurance Corporation (LPS)

As an intermediary institution that functions to mobilize public funds, the bank has its potential to experience failure or fraud which can cause ad decline in the soundness of the bank (through CAMEL; Capital, Assets, Management, Earnings, and Liquidity). The Deposit Insurance Corporation was formed to guarantee limited deposit funds (limited guarantee) as a substitute for a blanket guarantee. LPS also has an active role in maintaining the stability of the banking system in accordance with its authority where after the OJK declares a failed bank, the banks is handed over to LPS, for non-systemic failed banks, a settlement is carried out by a rescue (at the expense of the shareholders) and not perform a rescue (liquidate the failed bank). If the bank failes having a systemic impact, the IDIC (LPS) will take care of the Systemic Failed Bank placing a temporary capital placement (PMS) to make it sound and resale it within 3 years. The issue is: How does failing bank restructuring meets the principle of benefit by the Indonesia Deposit Insurance Corporation ? Type of this research is juridical- normative research and legal materials tracebility technique using qualitative analytical. This research approach using statute approach, conceptual approach, and historical approach. Conclusion of this paper is Resolution Bank or restructuring of failed bank by LPS that meets the beneficiary principle must carry out the following the four (4) categories of Commercial Banks Based on Business Activities (BUKU), where for category 3 and 4, a long period of restructuring is required because the bank has many derivative products.

Apakah Terjadi Perpindahan Simpanan Nasabah Bank Kecil Ke Bank Besar (Flight to Quality) Pada Saat Krisis Pandemi Covid-19?

This paper aims to explain whether flight to quality or the transfer of deposit funds from small banks to large banks actually occurred during the Covid-19 pandemic crisis as suspected by banking analysts. This research is descriptive research with a quantitative approach. The secondary data source in this study was obtained from the website of the Indonesia Deposit Insurance Corporation which lists the value of Commercial Bank Deposits from July 2013 to d. July 2020. Analysis of the data using panel data regression analysis. The results of this study conclude that 1) the Covid-19 pandemic does not significantly affect the performance of small banks in collecting deposits, 2) the Covid-19 pandemic causes flight to quality small bank deposits, namely Book 1 banks, Islamic banks, and regional banks to category banks. others who have large assets and 3) Economic growth does not affect the performance of small banks in collecting deposits during the Covid-19 Pandemic.How to Cite:Ashari, H., & Nugrahanti, T. P. (2021). Apakah Terjadi Perpindahan Simpanan Nasabah Bank Kecil ke Bank Besar (Flight to Quality) Pada Saat Krisis Pandemi Covid-19? Akuntabilitas: Jurnal Ilmu Akuntansi, 14(2), 215-230.

Improving Performance Loan Fraud Model Prediction Using Mean Decrease Accuracy and Mean Decrease Gini

The purpose of this research is to develop a fraud detection model on loan transactions at failed banks in the context of deposit and deposit guarantees mandated to the Indonesia Deposit Insurance Corporation (IDIC). The data used in this study is the data of a bank in the Jakarta area that had liquidated at the end of 2015. Meanwhile, data on loan transaction ranges ranged from 2010 to 2015. This research also focuses on improving the performance of detection models by using feature selection. With the feature selection, it expected that the impact of the reduced performance of the model exposed to high variance and high bias due to the many features used can handled better.

Pengaruh Tipe Kepemilikan Ultima Keluarga dan Negara Terhadap Risiko Likuiditas Bank

This research aims to examine the effects of family and state bank ownership on bank liquidity risk. The 20% ownership threshold determines the type of ownership, and the robustness test determined by the 25% ownership threshold, then bank liquidity risk is measured by Loan to Deposit Ratio (LDR). This study also used bank size to measure total bank assets, dummy listed or non-listed banks on the Indonesia Stock Exchange, and Capital Adequacy Ratio (CAR) as a measure of bank capital. The data used in this research are panel data of 59 commercial banks operated in Indonesia since 2010 to 2016. Using multiple linear regression analysis with Generalized Least Square estimation, the result shows that banks owned by family or state have lower liquidity risk than banks that do not belong to family or state. This research can be a reference for The Financial Services Authority and Indonesia Deposit Insurance Corporation to establish strategies and regulations related to bank liquidity risk.

Deposit structure, market discipline, and ownership type: Evidence from Indonesia

In this paper, we extend the literature on the discipline imposed by depositors on banks by disentangling the impact of macro risk and micro risk. We also take advantage of a unique dataset in which depositors are split into different categories of deposit size in different types of banks (bank ownership structure). We consider the Banking Stability Index, which is used by the Indonesia Deposit Insurance Corporation as a dashboard to monitor banking stability at the country level as well as individual stability measures such as the Z-score. Using monthly data from 2005 to 2013, our findings show that both macro and micro levels of risk are considered by depositors to discipline banks. Large uninsured depositors are more effective at disciplining banks, highlighting the credibility of the insurance system that is in place. Bank ownership type also matters in explaining the difference in market discipline by depositors.

UNDERSTANDING OF DEPOSIT PROTECTION FUND AS A GUARANTOR IN THE AGREEMENT BETWEEN CUSTOMERS AND BANKS

The function of the Indonesia Deposit Insurance Corporation (IDIC) is to guarantee a deposit of customers. The guarantee is significantly important for the main financial industries, such as a bank whose activity is to raise funds from the public and distribute the funds back to the public. As a consequence, public trust becomes the primary factor. In spite of the useful function of the IDIC, the public is still not familiar with the organization and they often question whether the status of the IDIC is a guarantee or insurance. This issue potentially creates a dispute between parties who are the bank and the customer. Hence, this research aims to discover evidence relating to the IDIC as the guarantor in the agreement between bank and customer. This research used a legal pluralism method that integrates juridical research, sociological research (living law) and philosophical research. The result of the research indicates the uncertainty of the status of the IDIC, whether it is a guarantee or insurance, whereas both statuses maintain different legal consequences. The uncertainty may lead to legal uncertainty and result in the disruption of the balance of both parties’ legal relationships.

ANALYSIS FINANCIAL PERFORMANCE OF RURAL BANKS IN INDONESIA

During the period 2006-2019 many rural banks were liquidated by Indonesia Deposit Insurance Corporation (LPS) which have an impact on the performance of rural banks. This study aims to determine the effect of CAR, LDR, OCOI and NPL on the ROA of Rural Banks in Indonesia. The results of the study show that CAR, LDR, and OER have a significant effect on ROA. Every increase in operating costs will result in a decrease in pre-tax profit which results in a decrease in ROA. NPL has no significant effect on ROA. because rural bank has a large CAR ratio to cover credit risk.

Bank Failure Prediction Model Based on Governance: A Case of Rural Banks in Indonesia

Since it was first operating in 2005 until 2017, Indonesia Deposit Insurance Corporation (IDIC) has liquidated 91 rural banks which were determined as failed banks by supervision authority. The cause of the failing of the bank is mainly due to the incapability of the bank to meet the minimum Capital Adequacy Ratio (CAR). Bank’s capital was shrunk by the loss caused by fraud. The fraud is mostly induced by the lack of good corporate governance implementation. By using the logistic regression, it can be concluded that (1) the incomplete of responsibility letter which will be used in the event of bank failure, submitted by the bank commissioners; (2) the incomplete of responsibility letter which will be used in the event of bank failure, submitted by the bank directors; (3) role duplication between shareholders and board of directors; and (4) bank had classified as special supervision, have impact on the increase of rural banks failure. At the same time, the compliance level of rural banks to a correct premium payment has impacted to decrease of rural banks failure possibilities.

LEMBAGA PENJAMIN SIMPANAN DALAM LIKUIDASI BANK DI INDONESIA

Abstract
 Legally, LPS has been regulated in Law Number 24 of 2004 concerning the Deposit Insurance Corporation. LPS itself has two functions, namely guaranteeing bank customer deposits and resolving failed bank disputes through liquidation. The process of bank liquidation carried out by the Indonesia Deposit Insurance Corporation through the Liquidation Team of the bank is never complete or leaves a problem for bank customers whose savings are not guaranteed by the Deposit Insurance Corporation. The existence of the Deposit Insurance Agency is also expected to be able to carry out its functions properly in guaranteeing limited bank customer deposits so as to support efforts in stability in the banking sector.
 Keyword : customer bank; guaranteed; depositsl; LPS.

PENGARUH PENJAMINAN SIMPANAN, CAR, DAN NPL PADA TINGKAT DEPOSIT, RISIKO MORAL HAZARD, DAN NIM

Banking industry plays a very important role in Indonesian economy. Therefore, stability of banking system is considered substantial by the government. Bank Indonesia (BI), the central bank; Indonesia Deposit Insurance Corporation (LPS) and Financial Services Authority (FSA) seeks to preserve the stability of banking system using policy of capital adequacy ratio (CAR), the maximum limit of non-performing loan (NPL) and the obligations to become member of deposit insurance. This study wants to examine whether these regulations affect the level of deposits, moral hazard risk and the net interest margin (NIM) in Indonesian commercial banks in the period 2000-2012. Using a sample of 99 commercial banks with panel data regression method, the result demonstrate implementation of deposit insurance negatively but not significantly affect level of commercial bank deposits while variable CAR and NPL is giving negative and significant effect. Implementation of deposit insurance proved increasing moral hazard risk while variable CAR and NPL have negative and significant effect on the moral hazard risk. Other findings showed implementation of deposit insurance and CAR positively but insignificant affect NIM, but negatively and significant influenced by NPL.

Does Dual Banking System in Indonesia Differentiate Investment Account Requirement?

Abstract. This paper aims to propose a model of investment account based on Islamic Financial Services Board guiding principles. The research figures out some factors affect ing the process of deploying investment account, the proposed model, cost - benefit analysis as well as the steps to be taken by Islamic banking stakeholders to install the model in the future. Having reviewed many litetatures related to irregular deposit, investment account as well as the institutional theory , the study found that t he adoption of investment account heavily relies on the political factor applied by Bank Indonesia. Law No. 21 Year 2008 that regulates Indonesian Islamic Banking clause 35 stated that Bank Indonesia has coercive power to drive the accounting and governance standard for the Indonesian Islamic banking. Other actors such as Financial Services Authority, National Sharia Board, and Indonesia Deposit Insurance Corporation also do affect the regulation on Investment Account. This paper informs the policy makers to set different regulation on investment account within the practice of dual banking system.

Deposit insurance and financial intermediation: The case of Indonesia Deposit Insurance Corporation

The article analyzes the impact of the establishment of the Indonesia Deposit Insurance Corporation (IDIC) on financial intermediation in Indonesia. The research uses technical analysis and multipl...

Determining Factors of Deposit Level of Islamic Bank in Indonesia

One Way to maintain the stability of banking industry is by applying the deposit insurance scheme. The application of the deposit insurance scheme has an impact by increasing the level of bank deposits. The objectives of the research are to identify the factors affecting the level of deposits of Islamic banks in Indonesia and managerial implications regarding to the functions of Indonesia Deposit Insurance Corporation (LPS). The technique used is the panel data regression with fixed effect model using the data from the 11 Islamic banks for the period of 2011 -2015. The results show that the factors affecting the level of deposits of the Islamic banks in Indonesia significantly and positively include the size of banks and their non-performing financing (NPF); however, they influence the capital negatively. Based on these results, LPS is required to build or sharpen the surveillance systems as part of its early detection by doing the mapping based on the size and to monitor the bank capital structure and bank finance portfolio structure. DOI: 10.15408/aiq.v9i2.5156

Did the Establishment of the Indonesia Deposit Insurance Corporation (IDIC) Significantly Impact the Performance of Indonesian Banking Industry?

The article analyzes the impact of the establishment of the Indonesia deposit insurance corporation on bank intermediation in Indonesia. Results from technical analysis and econometric methods show that enormity of the tasks of isolating the effect of IDIC establishment on banking intermediation from the influence of other factors (high interest rate, relatively volatile exchange rate during the post IDIC period, among others). Nonetheless, in the very short term, though there is no significant difference in total bank deposits before and after IDIC establishment, the composition in growth shows a different picture. State owned banks mobilize the highest level of savings followed by private national banks, regional development banks, and foreign and joint venture banks, and there is significant difference in asset-weighted credit prior to and after the IDIC establishment, the same applies to the case of credit channeled by private national banks, and foreign and joint venture banks, and regional development banks. To a certain extent such behavior manifests what some authors have termed the indiscipline of large savers wanting to shift risks, an effect that is corroborated by a lower decrease in savings deposits placed in state owned banks compared to what occurs in national private, regional development and foreign and joint venture banks. By the same token, savings deposits placed in state owned and foreign and joint venture banks (have not been dogged by bank closures), experiencing a shallower dip compared with a steep decline in savings placed in national private national banks after IDIC establishment This behavior also points to risk aversion in savers’ behavior. The shift to savings deposits from time deposits and demand deposits, and reducing the amount per account to the maximum covered by the IDIC in the immediacy of IDIC establishment, reflect savers’ desire to redefine their risk profiles by emphasizing safety over return as the new banking regime gets established. Such a hypothesis is backed by the fact that asset weighted savings in state owned banks remained higher than in national private banks, and regional development banks, but higher in foreign and joint venture banks after IDIC establishment. Moreover, the growth in banks assets in state owned banks and regional development banks after IDIC establishment was higher than in private national and foreign and joint venture banks, signaling that state owned and regional development banks are lending more, hence more trusted as sources of funds by economic agents than private national and foreign and joint venture banks. If that holds through the long run, then there no denying the fact that IDIC establishment has to some extent altered, in some way, the behavior of savers, investors, and lenders from being passive onlookers to becoming active monitors of what goes on in the banking industry. This is because the establishment of IDIC has increased the cost for the banking institution and the individual of not doing so. Moreover, though IDIC establishment hasn’t altered fundamentally the determinants of sources of funds for commercial banks and uses to which such funds are put, has increased the sources of potential risk for banks and savers alike indicated by higher fluctuation in some credit disbursements especially to risky sectors (SMEs and agriculture), and rising levels of bank Indonesia certificates. However, analysis results show that in the long run, IDIC establishment hasn’t changed fundamentally the savings and borrowing functions in Indonesian banking system; no significant shift in savers’ behavior involving the transfer of their money from relatively longer time horizon (time deposits) to savings deposit accounts in both state and private national banks, an effect that tapers off returning savings habits to pre IDIC patterns; and in general regional and state owned banks, do not seem to gain more ground in attracting savings and source of loans, than national, private, and foreign and joint venture banks, rather the increasing dominance of national private banking institutions in bank intermediation.

BANKING MARKET DISCIPLINE IN INDONESIA AN EMPIRICAL TEST ON CONVENTIONAL AND ISLAMIC BANK

A sound banking system is vital in supporting a sound and strong economy. One of the important pillars of a sound banking system is market discipline, which is the reaction of the market makers on the risks taken by banks as a form of supervision and discipline. The objectives of this paper are to examine: (i) the existence of market discipline by depositors in the deposit insurance era by the Indonesia Deposit Insurance Corporation (LPS); (ii) the difference in market discipline by depositors before and after the policy of increasing the value of deposit covered; (iii) the difference between market discipline by depositors of Islamic banks with conventional banks. The data used are annually individual bank data from the Indonesian Banking Directory (DPI) in 2005-2009. The dependent variable is the change in deposits, which is used as proxy for market discipline in t period. The independent variables used are CAR, APB, NIM, and LDR as proxy of financial risk/fundamental condition of the bank in t-1 period. The result indicates the existence of market discipline in Indonesia and also shows that market discipline is detected stronger in the period 2005-2007 than the period 2008-2009. This study also indicates that market discipline by depositors of Islamic banks are stronger than those of conventional. Keywords: market discipline, deposit insurance, Islamic and conventional banks.