Evaluation Of Macroprudential Policy On Credit Growth In Indonesia:  Credit Registry Data Approach

Dana, Badara Shofi

doi:10.15408/etk.v17i2.7324

Cited by 5 publications

(7 citation statements)

References 32 publications

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“…The greater the debt to equity ratio means the greater the company's assets or funding that comes from debt, so that the role of capital will act to overcome this problem, therefore the buffer is negative. Dana (2018) explains that bank capital is the difference between the value of its assets and the value of its debt obligations (including deposits). In other words, it is the part of the bank's assets that belongs to its shareholders.…”

Section: Resultsmentioning

confidence: 99%

Capital Structure: Capital Buffer, Return on Equity, Capital Adequacy Ratio in Go-Public Banking in Indonesia

Wahyudin,

Widiyanti,

Andriana

et al. 2024

jss

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Banking companies may be faced with adjustment costs (cost of capital adjustment) to obtain optimal capital ratios. These costs arise when banks increase or obtain new external capital so that capital adjustments can lead to excess or shortage of capital which can have a negative impact and cause banks to be reluctant to react quickly when capital shocks occur. This research explores the most significant factors that influence bank capital policy choices in Indonesia. This study examines the financing choices of 8 banks for the 2013-2022 period using panel data regression analysis techniques with STATA.17. The results of the Random Effect Model Estimation research where bank companies in Indonesia have high leverage support the fact that the nature of bank business is different from non-banking companies. The significant negative relationship of the capital buffer is in line with the too big fail theory, packing order theory and agency theory, as well as the Retrun On Equity and Capital Adequancy Ratio variables which have a significant positive relationship at an accuracy level of 85.01%, so in other words banking companies can use debt to finance the company on the basis of agency or managerial policies and strategies, thereby proposing pecking order theory with the assumption that there is information asymmetry and agency costs that are relevant both in the long term.

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Section: Resultsmentioning

confidence: 99%

Capital Structure: Capital Buffer, Return on Equity, Capital Adequacy Ratio in Go-Public Banking in Indonesia

Wahyudin,

Widiyanti,

Andriana

et al. 2024

jss

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“…Thus, additional capital that must form during the expansion period can be used when the condition of contraction in the economic growth. Hessou and Lai (2018) and Dana (Dana 2018) confirm that CCyB is used to mitigate procyclical credit growth.…”

Section: The Effectiveness Of Macroprudential Policies Inmentioning

confidence: 98%

The Effectiveness of Macroprudential Policies in Mitigating the Systemic Risk in Indonesia

Akbar¹

2021

AIJIEF

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This study aims to investigate the effectiveness of macroprudential policies in mitigating the systemic risk in Indonesia. The study uses quantitative descriptive analysis with the Vector Error Correction Model (VECM) and emphasizes on the impact of two macroprudential instruments applied in Indonesia; Macroprudential Liquidity Buffer (MLB) and Countercyclical Capital Buffer (CCyB) to credit growth for conventional and financing growth for Sharia bank. This study employes monthly data over the periods M12010-M102019 that obtained from Bank Indonesia’s (BI) website (www.bi.go.di) and the data published monthly by Financial Service Authority (OJK); Indonesia Bank Statistic and Sharia Bank Statistic.The result indicates that MLB has a positive impact on credit growth and negative effect financing for Sharia Bank. Otherwise, CCyB shows the opposite results, where it has a negative effect on credit growth, while in the Sharia bank, CCyB has a positive effect. Therefore, it is sufficient to conclude that MLB has a capability to curb the systemic risk for Sharia bank, whereas CCyB is effective for conventional bank.

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“…Guidara et al [35] find weak evidence that CCBs affect Canadian bank risk-taking, but the appropriateness of both a micro-and macro-prudential "through-the-cycle" approach to capital adequacy explains why Canada performed better during the global financial crisis of 2008. CCB and RR are capable of procyclical mitigation in Indonesia, LTV can reduce credit growth although it cannot mitigate procyclicality [11,36]. However, LTV has significant and persistent effects on household debt and real house prices in Korea [30].…”

Section: Literature Reviewmentioning

confidence: 99%

“…A larger Z-score denotes a smaller value of bank risk-taking. We estimate Equations (11) and (12) by the SYS-GMM and summarize the results in columns (1-5) of Table 5. Columns (1)(2)(3) show the effect of three individual macroprudential tools on bank risk-taking.…”

Section: Alternative Proxies Of Bank Risk-takingmentioning

confidence: 99%

“…Based on the model proposed by Dell'Ariccia et al [10], we focus on an extant work and the interaction between a MPP coordinated with monetary policy and bank risk-taking, and analyze the transmission mechanism of MPPs on bank risk-taking behaviors by adding CCB. CCB and RR affect the willingness of a bank's lending behavior and LTV restricts borrowers' access to new property loans [11], which are related to the balance sheets of commercial banks and thus affect bank risk-taking behaviors. We empirically analyze the effectiveness of three macroprudential tools, i.e., CCB, RR and LTV, including the individual and overall effects of these three tools in reducing bank risk-taking behaviors using the bank-specific data of 231 commercial banks in China.…”

Section: Introductionmentioning

confidence: 99%

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Macroprudential Policy, Credit Cycle, and Bank Risk-Taking

Zhang

et al. 2018

Sustainability

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This paper constructs a theoretical model to analyze the effect of macroprudential policies (MPPs) on bank risk-taking. We collect a data set of 231 commercial banks in China to empirically test whether macroprudential tools, including countercyclical capital buffers, reserve requirements, and caps on loan-to-value, can affect bank risk-taking behaviors by using the dynamic unbalanced panel system generalized method of moment (SYS-GMM). The results provide further evidence on the important role of MPPs in maintaining financial stability, which helps mitigate financial system vulnerabilities. Bank risk-taking will be decreased with the strengthening of macroprudential supervision, which greatly benefits the resilience and the sustainability of bank sector. Moreover, the credit cycle has a magnifying role on MPPs’ effect on bank risk-taking. Reducing risks in bank loans requires a further slowing of credit growth, which is necessary to ensure sustainable growth in a bank system, or more ambitiously, to smooth financial booms and busts. The results survive robustness checks under alternative estimation methods and alternative proxies of bank risk-taking and MPPs.

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Evaluation Of Macroprudential Policy On Credit Growth In Indonesia: Credit Registry Data Approach

Cited by 5 publications

References 32 publications

Capital Structure: Capital Buffer, Return on Equity, Capital Adequacy Ratio in Go-Public Banking in Indonesia

Capital Structure: Capital Buffer, Return on Equity, Capital Adequacy Ratio in Go-Public Banking in Indonesia

The Effectiveness of Macroprudential Policies in Mitigating the Systemic Risk in Indonesia

Macroprudential Policy, Credit Cycle, and Bank Risk-Taking

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