The Financial Services Authority of Indonesia (OJK) published an assessment of the impact of closure of Silicon Valley Bank on the banking industry, along with a regulation on products and activities of Sharia banks and Sharia business units. The regulation on products and activities of Sharia banks and Sharia business units ensures that banks should apply Sharia Principles, prudential principles, and customer protection principles while issuing new products and activities. The regulation, which sets out provisions on general requirements, risk management, product explanations, licensing, reporting, and discontinuation of new products and activities, shall come into force on the date of promulgation. Additionally, OJK is seeking comments, until April 17, 2023, on the maximum legal lending limits for rural banks (or BPRs) and the maximum limits for distribution of funds for Sharia rural banks (or BPRS).
Following the Basel Committee on Banking Supervision (BCBS) meeting in Hong Kong, Dian Ediana Rae, Chief Executive of OJK Banking Supervision, highlighted that the impact of closure of Silicon Valley Bank and its spillover effects was minimal on the banking industry in Indonesia. Indonesian banks are expected to strengthen the implementation of governance, risk management, and prudential principles by conducting stress testing and monitoring of bank asset and liability portfolios, including the risk concentration on loans and funding. Furthermore, banks should maintain the capital adequacy ratio and the availability of liquidity in high-quality assets and must avoid speculative practices of excessive risk-taking behavior. In addition, banks are regularly asked to conduct stress tests in various scenarios to test banking resilience. OJK will continue to conduct various collaborative and synergistic policy steps with Bank Indonesia, the Ministry of Finance, the Deposit Insurance Corporation, both directly and through the Financial System Stability Committee (KSSK)—to anticipate global impacts and pressures that may occur.
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