Indonesian Banking System 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.

Regulation and Practice of Salam and Istishna Contracts in The Islamic Banking System in Indonesia

This study analyzes the regulation and practice of akad salam and istishna in the Sharia banking system in Indonesia. By paying attention to the existing regulatory framework, this article examines the practical implementation of akad salam and istishna by Sharia banks in Indonesia as well as the challenges faced in the application of the contract. The results of the analysis highlight the importance of a deep understanding of sharia principles in the development of appropriate sharia banking products and services. Keywords: Akad Salam, Istishna, Sharia Banking, Regulation, Practice.

The Impact Of Size And Other Income On Systemic Risk In Indonesia

This research aims to measure systemic risk, especially in the banking system, between 2018 and 2022. In this research, the measurement method used is SRISK, which aims to measure the potential capital shortage of a bank when there is pressure on the market. The lack of capital from a bank, which is an individual risk for a bank, also poses the potential for a contagious threat which could end up becoming a systemic risk in the banking system in Indonesia. This research shows that several banks, through SRISK calculations, have the potential for capital shortages when market pressure occurs, especially from 2019 to 2022. In this research, bank size and non-interest income are essential factors in systemic risk in the banking system. Meanwhile, business complexity does not affect systemic risk in Indonesia.

PENGARUH STRUKTUR MODAL TERHADAP PROFITABILITAS BANK PADA DUAL BANKING SYSTEM DI INDONESIA

The dual banking system in Indonesia still faces the problem of inadequate capitalization with a high level of leverage. This study aims to analyze the effect of capital structure on bank’s profitability in Dual Banking System in Indonesia. The data analysis method used is panel data regression and difference test on 8 conventional banks and 8 Islamic banks. Panel data regression is intended to identify the influence of capital structure proxied through DER and CAR ratios on profitability (ROA) with control variables of bank size and asset’s growth. The secondary data used is annual report data for the period 2013-2022 sourced from OJK. The estimation results on conventional banking show that the DER and growth variable has a significant positive impact on profitability, while CAR and bank size have no significant influence on profitability. Then, in Islamic banking, DER has a significant negative influence on profitability performance, while CAR and growth have no significant influence on Islamic bank’s profitability performance. Meanwhile, bank size is proven to affect the Islamic bank’s profitability performance. Through a t-test, there is a significant difference in profitability performance and capital structure between the two banking systems in Indonesia.

Analyzing the Influence of Bank Competition on Credit Risk: Perspectives from Indonesia's Dual Banking System

This study analyzes the effect of competition banks on credit risk in the dual banking system in Indonesia. This research was conducted using a purposive sampling technique in selecting a sample of 5 conventional commercial banks and 5 Islamic commercial banks. The method used is the Generalized Method of Moments (GMM) from 2011 to 2020. Credit risk for Conventional Banks is measured by the value of Non-Performing Loan (NPL), while Islamic Bank Financing is measured by the value of Non-Performing Financing (NPF). The results of this study indicate that Return on Assets (ROA) for Conventional Banks and Islamic Banks has a significant effect on credit risk in the dual banking system, Loan to Deposit Ratio (LDR) for Conventional Banks does not have a significant effect on Non-Performing Loan (NPL) while Financing to Deposit Ratio (FDR) of Islamic Banks has a significant level 2 influence on Non-Performing Financing (NPF). Bank size does not have a significant influence on credit risk in the dual banking system, and the Lerner Index for Conventional Banks has a significant effect on Non-Performing Loan (NPL), while the Lerner Index for Islamic Banks has no effect on Non-Performing Financing (NPF). The Central Bank in making policies can see that the level of competition for banks in the dual banking system in Indonesia is categorized as a monopolistic competition market, where each bank has its own market segment so that it has market power that is strong enough to set prices that are relatively.

REGULATION, SUPERVISION, AND IMPLEMENTATION OF SHARIA PRINCIPLES IN BANKING BY OJK (ANALYSIS OF LEGAL ASPECTS AND CHALLENGES)

Banking institutions play an important role in the economic development of the country. Banks are intermediary institutions that cannot be separated from people's lives. Sharia banking is part of the existing banking system in Indonesia which has its own challenges in implementing sharia principles and maintaining its stability. Prior to the establishment of OJK (Financial Services Authority), Bank Indonesia had full authority in supervising the financial services industry, including banking. The Financial Services Authority was established as an answer to problems that arose in the banking sector after the crisis in several national banks. The OJK Law which came into force on November 22, 2011 authorizes OJK to conduct supervision, regulation and investigation in the banking sector in Indonesia. This study discusses the legal aspects of banking regulation and supervision as well as the implementation of sharia principles in OJK sharia banking. The research methods used are legal approaches and literature reviews. The results of the study show that OJK has an integrated regulatory and supervisory function in the entire financial services sector. OJK is considered a superior institution with great authority. OJK also plays a role in regulating and supervising Islamic banking

Legal Aspects Of Liquidation Of The Bank Against The Customer

The purpose of writing this article is to be able to determine the regulation of legal aspects of liquidation that have an impact on customers when a bank is liquidated. The method used to study this article is the normative legal research method. In huku research methodsm normative approach is using legislation- invitation and conceptual approach as a way to solve the problem based on legal materials obtained and analyzed by the description technique qualitative . After reviewing the results obtained that arrangements related to bank liquidation in the banking system in Indonesia have actually been arranged. This can be seen in the Banking Act, the UU LPS, Government Regulation No. 25 of 1999 and other provisions. Basically, the decree contains the same thing, namely that liquidation is the end of bank failure. In the event that the bank is liquidated, the bank must return the deposits held by customers. If the assets owned by the bank are insufficient, the commissioners, directors and shareholders can be held accountable to meet the obligations of the bank.

Konversi Pada Bank Perkreditan Rakyat (BPR) Menjadi Bank Perkreditan Rakyat Syariah (BPRS) dan Pengaruh Terhadap Kinerja Keuangan Pada PT. BPR Jam Gadang

The Sharia law can work in Indonesia because the Indonesian banking system still adheres to a 2 window system. According to Law No. 21 of 2008 concerning Sharia banking, the 2 window banking principle in Indonesia will end no later than 2023, whereby banks that have been running Sharia business using the Sharia law will be forced to spin off or convert. One of the reasons for the conversion of Conventional Banks into Islamic Banks is the large number of Islamic financial institutions which show enormous potential, as shown by the number of Conventional Banks which have formed sharia divisions. The Islamic banking industry also applies principles that comply with Islamic law and Sharia recommendations. This study aims to see how the Conversion of Rural Banks (BPR) to Sharia Rural Banks (BPRS) and the Effect on the Financial Performance of Jam Gadang. This study uses a qualitative method with a case study approach. With the researcher can get a complete picture of the problems that are formulated by focusing on the process and the search for meaning behind the phenomena that arise in the research process. The method that can be used for this time series analysis is the Least Square Method of linear line equations from time series analysis.

Dispute Settlement in Sharia Banking in Indonesia

The birth of the dual banking system in Indonesia was marked by the establishment of Indonesia's first sharia commercial bank, Bank Muamalat. The first amendments to the Religious Courts Act of 1989 were seen as a response to dispute resolution, but the advent of the law did not immediately open an opportunity for dispute resolution, due to the National Sharia Council and banking fatwas. Indonesian regulations continue to treat disputes in the sharia banking industry as arbitrators, and Law No. 21 of 2008 on Sharia Banking Regulation is another legislative instrument that provides channels for Islamic banking disputes through litigation and out-of-court proceedings. This study was conducted normatively, using different legal materials depending on the issue. The study found that forms of Islamic banking consist of profit products and social and religious products. For charitable sharia banking products, disputes with bank customers can be resolved by national sharia arbitration courts and judicial institutions, whereas social and religious sharia banking products can only be resolved by religious courts or district courts. At the discretion of the judge according to the contract. In the case of disputes between banks and customers, the arbitration board only has the power to decide the dispute and not to enforce the law, but in sharia banks, disputes in litigation, religious courts and district courts have jurisdiction for dispute resolution. Have the right Enforcement where principal or the losing party does not act voluntarily to decide or enforce and/or where the auction leads to legal proceedings.

PENGARUH KEPEMIMPINAN BUDAYA ORGANISASI DAN MOTIVASI KERJA TERHADAP DISIPLIN KERJA PADA KARYAWAN PT. BPR TRIDARMA PUTRI DI KABUPATEN KLUNGKUNG

Developments in the financial sector, especially changes in the composition or structure of the banking system in Indonesia, are expected to bring positive changes to the national economy. Employee discipline in the company must be improved and sustainable, therefore it is necessary to have periodic monitoring and evaluation to ensure that employees who work are always disciplined. Every employee who is a member of the company has a different culture, because they have different cultural backgrounds, but all these differences will unite into one culture, namely organizational culture, to become a group that works together in achieving organizational goals. An employee can be productive at work and be more disciplined if his needs and desires are met, because if it is not matched by motivation, it will be difficult to increase discipline at work. The purpose of this study was to determine the effect of organizational leadership and work motivation on work discipline among employees at PT. BPR Tridarma Putri in Klungkung Regency. The sample in this study were all employees at PT. Tridarma Putri BPR in Klungkung Regency, totaling 57 people. The data analysis technique used is multiple linear regression coefficient analysis, determination analysis, t-test and F-test, using the help of a computer program (SPSS) Version 26.00 for Windows. The results of the analysis show that 1) Leadership, organizational culture and motivation partially have a positive and significant effect on work discipline. 2) Leadership, organizational culture and motivation simultaneously have a positive and significant effect on work discipline.

Relevance Of Islamic Banking In Indonesia To The Muamalah System Of The Prophet And The Caliph

The emergence of Islamic banks in Indonesia today is increasingly mushrooming. This is inseparable from the role of the number of Muslim populations in Indonesia who want an Islamic economic and banking system that is far from usury. The Islamic banking system has been exemplified by the Prophet Muhammad and his companions in the past and this has become the basis or foundation for the establishment of Islamic banks. But in reality in Indonesia, the relevance of the Islamic banking system is less attractive. This research is a descriptive qualitative research, using library research method. The purpose of this study is to examine the practice of Islamic banking as exemplified at the time of the Prophet Muhammad SAW and to see the relevance and development of Islamic banking practices in Indonesia. The conclusion of this study is that the model of banking services, products and activities exemplified by the Prophet is still used in the Islamic banking system in Indonesia, but in fact there are many Islamic bank practices that deviate and are not in accordance with Sharia rules.

Bank Ownership and Decline in Loan Growth due to the Pandemic

This study aims to analyze the effect of bank ownership structure on loan growth before and during the pandemic. Specifically, we developed four models to capture different loan types provided in the Indonesian banking system; working capital, investment, consumer, and total loan growth. This study used 150 observations of commercial banks for 2019 (before the pandemic) and 2020 (during the pandemic). We conducted the regression method to test hypotheses. The main finding of this study was that foreign banks’ consumer credit growth significantly lower than domestic banks. Similar findings occurred for other types of loans, and this conclusion has controlled for the adverse effects of the pandemic. This finding means that foreign banks in Indonesia are not substitutes for loan suppliers in the domestic market and tend to behave pro-cyclical. The government needs to carry out regulations to reduce the risk-accelerate nature of foreign banks in the Indonesian economy

Implementasi Kebijakan Peraturan Otoritas Jasa Keuangan (POJK) No.11/Pojk.03/2020 dalam Menekan Non Performing Financing pada Perbankan Syariah

The Coronavirus Disease-19 pandemic is an outbreak that has hit the world, with no exception for Indonesia. Many things are harmed from all aspects of life ranging from political, social, cultural, religious and economic fields. It also has an impact on the melemamahnya sharia banking system in Indonesia. This research has the purpose of knowing how the Financial Services Authority Regulation Policy (POJK) No.11/POJK.03/2020 in Suppressing Non Performing Financing (NPF) in Sharia Bank. This study uses narrative qualitative research methods with primary data from various electronic media, journals, and books, and related sources. The results of this study show that banks can implement policies that can support economic growth for sharia bank financing customers affected by the spread of Covid-19. Customers who get a restructuring waiver policy are customers affected by Covid-19 directly or indirectly.

Management Behaviour Testing: Relationship of Non-Performing Loan and Operational Efficiency Ratio in the Indonesia Banking Sector

This paper aims to build on previous research conducted by Berger and DeYoung (1997) on management behavior in the context of the Indonesian banking industry in 4 different ownership cluster by looking the nexus of NPL ratio and bank operational efficiency which specifically proxied by the non-interest expense/non-interest income in the Indonesian banking industry. This paper is the first to look at the management behavior framework in the Indonesian banking system using the approach of operational efficiency, to the best of the author’s knowledge. This study also aims to give useful insights for regulators in order for them to recognize the real challenges in the banking industry, which might help Indonesia’s banking growth. All datasets were gathered from the Indonesia Banking Statistic Reports, which were collected in quarterly basis from January 2010 to September 2021. The OLS estimation in the granger causality approach were focusing on examining the first two hypotheses: the bad management and bad luck hypotheses. According to the findings, authors found that each of bank cluster in the Indonesian Banking System behaved differently regarding the association between the problem loans and operational efficiency and found sensitive to the lags included in the model. In summary, the bad management, skimping and bad luck hypotheses were found in separately in the 4 different bank cluster models. These findings might bring insights to regulators to act differently towards the different bank cluster in order to create precise regulations that are relevant and in accordance with the current behaviour.

Produk-Produk Dana Pihak Ketiga (DPK) Sebagai Sarana Simpanan Dana Dan Layanan Pendukung Di PT Bank Sumut KCP Syariah Simpang Kayu Besar

The banking system in Indonesia is currently growing rapidly, which aims to facilitate the banking sector and especially from the convenience and security of the banking customers themselves. This study aims to find out what are the products of third party funds as a means of depositing funds and supporting services at Bank Sumut Syariah Kcp Simpang Kayu Besar. In this study, the authors used qualitative research methods with descriptive analysis techniques. Then all the sources of this research were obtained by conducting interview sessions with the bank, while the secondary data obtained in this study were obtained based on what had been obtained from the literature study. In the process of raising funds, the bank has several ways of raising funds and one of them is by relying on Third Party Funds (DPK). In this DPK, the Bank offers several products for depositing funds, namely Savings, Current Accounts, and Time Deposits. Based on data obtained from PT Bank Sumut Syariah Kcp Simpang Kayu Besar, there is a decrease and increase in the annual margin that occurs in TPF in 2019-2021 at PT Bank Sumut Syariah Simpang Kayu Besar.

Quantitative Easing, liquidity and Banking Growth; Evidence from Indonesian Banking System

Quantitative easing (QE) is an unconventional monetary policy issued by the central bank to provide economic stimulus in expecting growth of aggregate demand as well as amplifying inflation. This policy typically involves purchasing large-scale financial assets from the open market and it is expected to reduce interest rates and the term structure of the yield which is supposed to have an impact on increasing the distribution of credit to the business (Bowman, Cai, Davies, & Kamin, (2015), Christensen and Krogstrup, (2019). Central banks in developed countries have already utilized the QE policy after the financial crisis hit their countries to ensure financial stability and economic growth. The covid 19 pandemic forced Indonesia Central Bank (BI) to implement a QE policy in early April 2020. The total amount of quantitative easing during this year was IDR 694.87 trillion (in the year 2020) and IDR 505.14 trillion was flooded in the year 2021 (Kebijakan Moneter, 2020). The program was conducted by injection the public fund into the banking system; by purchasing large-scale financial assets such as government bonds as well as other marketable credit securities. Additionally, the BI also reduces the minimum bank reserve that boosts the availability of current account balance to be disbursed in the credit market. Keywords: Indonesian Banks; Lending Growth; Liquidity; Pandemic; Quantitative Easing

Juridical Review of Credit Collateral within Financial Engineering in Indonesia: An Introduction

Lending is the main business activity in the banking business. However, it should be noted that in addition to promising benefits as the main source of bank income, lending also has a high risk side for banks, namely the risk of failure to return, resulting in losses for the lending bank. To reduce this risk, before extending credit, banks must make a careful assessment of the character, ability, collateral and business prospects of the debtor. Credit collateral has an important role in lending. Creditors collateral is an additional guarantee submitted by a Debtor Customer to a bank in the framework of providing credit or financing facilities based on Sharia Principles. This paper aims to provide an overview of the juridical overview of credit collateral in financial engineering in Indonesia. The research result shows that guarantee is not an absolute requirement. Therefore, it is possible for banks to provide unsecured credit. Guarantee is only one of the conditions that must be met by the customer in addition to other conditions. However, in operational practice, in lending, banks need to require collateral in the form of assets belonging to the debtor. This is based on the premise that lending is a risky banking activity, so in its implementation, banks must pay attention to sound credit principles. Keywords: credit collateral, financial engineering, Indonesian banking system DOI: 10.7176/JLPG/121-01 Publication date: June 30 th 2022

Industry Market Structure and Banking Performance in Indonesia

After the economic crisis, Indonesian banks began to compile the Indonesian Banking Architecture to design the Indonesian banking system. Banks mostly have a motive to increase their market share by increasing the amount of third-party funds and the amount of credit extended, thus changing the character of the banking market structure in Indonesia. This research measures the effect of performance as reflected in the level of bank profitability in relation to the market structure by assuming that these conditions are influenced by internal (Asset Liability Management) and market factors. Bank market concentration is measured by the Herfindahl-Hirschman Index. This research concludes that the Indonesian banking industry has a monopolistic market structure. The effect of bank market concentration, capital ratio, and liquidity ratio are positive and significant on bank performance. Conversely, the credit risk ratio has a negative effect on banking performance. Received: 31 August 2021 / Accepted: 11 February 2022 / Published: 5 March 2022

Islamic Green Banking At Bank Pembangunan Daerah In Indonesia

This research aims to prove the concept of Islamic Green Banking in the banking system in Indonesia, precisely at the Bank Pembangunan Daerah (BPD) bank and to proves that CSR, Green Accounting, Growth Financing, NPF, Liability on Green Banking have a simultaneous and partial test effect on Green Banking. The research method used is descriptive quantitative, using secondary data from the bank's Annual Report from 2015-2020 at PT. BPD Aceh Syariah, PT. BPD Sumatera Utara, PT. BPD Jambi, PT. BPD. Nagari, PT. BPD. Riau and Kepulauan Riau, PT. BPD Sumatera Selatan and Bangka Belitung. The results of the study prove that the Corporate Social Responsibility (CSR), Growth Financing, Green Accounting, NPF variable have an effect on Green Banking except for Liability variable which shown negative result on Green Banking and this study is that the application of Green Banking is a pattern that can be implemented by the BPD through digitizing online services.

Dual Banking System Stability Index in the Shadow of COVID-19 Pandemic

The financial system is categorized as stable if there is no excessive volatility from financial pressures or crises. The IMF indicates that the crisis is not only related to one element but more than two or three elements of the crisis. The banking system's stability is measured by the banking stability index, gauging the effectiveness of monetary policy and financial risk. This study aims to measure the stability of the Indonesian banking system in the dual banking system model. The indicator to measure banking stability used the Z-score statistic based on fluctuations of Return on Assets for each type of bank. The Markov Switching Vector Autoregressive (MSVAR) model method was used to analyze the volatility of banking stability. Independent variables used included credit risk (NPL), Loan to Deposit Ratio, Liquidity Risk, Net Interest Margin, Capital Adequacy Ratio, Money Market Rate, Inflation, Gross Domestic Product, Federal Reserve rate, and Exchange Rate. The results of the regime switch analysis concluded that Indonesia's banking stability experienced a structural break due to the effects of the pandemic in April 2020. Based on the average Z-score value, the Islamic banking stability index was higher than conventional banking. In other words, Islamic banking was more stable than the conventional banking system. The Islamic banking stability index (iZscore) was significantly influenced by the level of Net Operating Margin, Financing to deposit ratio, Potential Loss Profit Sharing, Islamic Money Market Rate, and Exchange Rate. However, non-performing financing did not affect Islamic banking stability since the profit-sharing system implemented by Islamic banking stability was more influenced by the ratio of potential loss and profit-sharing system.