JAKARTA (TheInsiderStories) - The meeting of the Board of Commissioners of Financial Services Authority (OJK) sees the condition of the stability of Indonesia’s financial services sector to remain in a normal condition, although some indicators of the financial services sector need to be examined in more depth.
The world’s financial markets in August 2016 moved mixed. The mixed global exchange rates were also influenced by the uncertainty which still pervades the global economic recovery and the Fed hawkish sentiment at the end of the month related to the increase in the Federal Funds Rate (FFR).
Nevertheless, the majority of the exchange rate in Emerging Market remains firmly underpinned by gains in oil and commodity prices. The FFR bullish sentiment also had a relatively limited impact on global stock markets, so that the majority of global stock markets strengthened in August, 2016.
The domestic stock market was observed to strengthen. Strengthening stock markets is the impact of the tax amnesty sentiment and a cabinet reshuffle in July 2016. Compared to the previous month, JCI grew by 3.26 percent with non-resident investors who recorded a significant net buy in the stock market amounted to Rp12.9 trillion.
The stock market had reached the level 5461.45 (18/8), the highest level since May 2015. Over the past two weeks, the market began to experience a correction and closed at the level of 5,386 is partly due to the action of portfolio rebalancing by investors.
Market Government Securities was observed slightly lower. Yields on government bonds in August 2016 increased on average by 7 bps. However, in the period of non-resident investors still recorded a net buy in the government securities market amounted Rp9,06 trillion.
Intermediation of financial institutions showed a slowdown.
The growth of bank credit by July 2016 stood at 7.74 percent yoy, down from growth of credit in June 2016 at the level of 8.89 percent (yoy). Intermediation finance companies also observed slowing, growth in finance receivables per July 2016 slowed to 0.36 percent (yoy) compared to June 2016 amounted to 0.81 percent (yoy).
The financial institution credit risk has also increased but was still at a level well-managed. The NPL ratio stood at 3.18 percent compared to the position in June increased by 3.05 percent and NPF per July 2016 at 2.23 percent compared to 2.20 percent position in June. The liquidity and capital remained at a good level.
Liquid assets held by banks in a condition sufficient to finance credit expansion. Liquid assets to third party fund in July amounted to 19.17 percent higher than the previous month’s 15.97 percent. While the rate of loan to deposit ratio in July reached 90.18 percent compared to the position in June fell 91.19 percent.
From the capital side, the resilience of the domestic financial services institutions in general are at a level that is sufficient to anticipate potential risks. Capital Adequacy Ratio of banks are at a fairly high level of 23.19 percent as of July 2016. In the insurance industry, the Risk-Based Capital (RBC) in July 2016, at the level of 524 percent for life insurance and 269 percent for general insurance , well above the minimum requirement applicable.
FSA will continue to monitor the development of the risk profile of financial institutions and prepare the various steps required to mitigate the possibility of an increased risk in the financial services sector, in particular credit risk. Coordination with the relevant parties also continue to be strengthened.
Looking ahead, the FSA saw that the liquidity and capital conditions were pretty good LJK need optimized to support the strengthening of the intermediary function and reverse the rising trend in NPLs.