The impact of COVID-19 and bank capital ratio on loan changes of ASEAN-5’s banking industry

Abstract

The COVID-19 pandemic has affected economies around the world, including the banking industry, and this depends on various factors. The aim of this study is to understand the influence of COVID-19 independently and through the moderation of bank capital ratios on changes in loans of Association of Southeast Asian Nations 5 (ASEAN-5) banking industry players. The study uses a sample of 86 banking companies listed on the stock markets of Indonesia, Malaysia, the Philippines, Singapore, and Thailand from the first quarter of 2018 to the fourth quarter of 2020 by employing the panel data regression technique. The results showed that COVID-19 had a significant negative effect on changes in bank lending. However, a bank’s capital ratio was not found to play a role in moderating the effect of COVID-19 on changes in bank lending. These findings have three main implications: (i) the role of the government in recapitalization and liquidity injection can eliminate differences in behavior between banks with the classification of capital ratios; (ii) there are no signs of zombie lending in ASEAN-5’s banking industry; and (iii) regulating incentives to change bank lending behavior in future crises must take into account that bank capital categorization will not be effective. AcknowledgmentThis study was made possible with the support of a research grant by Universitas Indonesia number NKB-533/UN2.RST/HKP.05.00/2022.

Are Financial Ratios Able to Predict Bank Stock Prices During the COVID-19 Pandemic?

“…Total capital ratio merupakan rasio yang menggambarkan kemampuan bank untuk mendanai aktivitas atau kegiatan seharihari serta untuk memberikan jaminan kepada stakeholder bahwa bank akan terus beroperasi di masa depan (Etudaiye-Muhtar & Abdul-Baki, 2021). Covid-19 berpengaruh signifikan negatif pada total capital ratio bank (Hukom & Lubis, 2023) sehingga bank dengan nilai capital ratio yang tinggi di masa pandemi Covid-19 menunjukkan bahwa bank tersebut mampu manajemen risiko dengan baik (Bitar dkk., 2018) dalam menghadapi efek negatif dari Covid-19 (Hukom & Lubis, 2023). Semakin tinggi nilai capital ratio yang dimiliki bank artinya risiko yang dihadapi bank tersebut semakin kecil (Abbas & Ali, 2020).…”

“…Hasil penelitian yang dilakukan Hukom & Lubis (2023) menunjukkan bahwa Covid-19 berpengaruh signifikan negatif pada total capital ratio bank. Maka dari itu, bank dengan nilai capital ratio yang tinggi di masa pandemi Covid-19 menunjukkan bahwa bank tersebut mampu manajemen risiko dengan baik (Bitar dkk., 2018) dalam menghadapi efek negatif dari Covid-19 (Hukom & Lubis, 2023). Semakin tinggi nilai total capital ratio yang dimiliki bank maka nilai tersebut akan semakin menjauhi nilai minimum CAR yang ditetapkan Bank Indonesia dan hal ini memberikan sinyal positif kepada investor (Nguyen dkk., 2021).…”