THE EFFECTS OF MACROPRUDENTIAL POLICIES ON THE PERFORMANCE OF CONVENTIONAL BANKS IN INDONESIA
DOI:
https://doi.org/10.2478/eoik-2025-0012Keywords:
banking system, macroprudential policies, conventional banks, Return on AssetAbstract
A resilient banking system in Indonesia is essential to withstand eco-
nomic fluctuations that have significantly impacted Indonesia, espe-
cially during financial crises. To address these challenges, effective
macroprudential policies are required to support the development of a
high-performance banking sector. This research examines the impact
of macroprudential policies on the performance of conventional banks
in Indonesia. The research uses time-series data from 2014 to 2023
obtained from the Indonesian Financial Services Authority (OJK) and
the Central Bank of Indonesia (BI). The data is analysed using the
Vector Autoregression (VAR) method. The variables estimated in-
clude macroprudential policy instruments, including the Macropru-
dential Intermediation Ratio, Countercyclical Capital Buffer, Loan-
to-Value ratio, Minimum Statutory Reserves, and Return on Assets.
The results of the study found that most macroprudential measures
do not have a substantial impact on the performance of conventional
banks in Indonesia. Only Minimum Statutory Reserves significantly
affect Return on Assets. Additionally, most variables do not exhibit
reciprocal relationships. However, some variables display unidirec-
tional effects. Specifically, the Countercyclical Capital Buffer has a
significant causal impact on Return on Assets, while Minimum Stat-
utory Reserves also play a notable role in affecting Return on Assets.
Moreover, there is a causal relationship between the Macroprudential
Intermediation Ratio and Minimum Statutory Reserves, as well as be-
tween the Countercyclical Capital Buffer and Minimum Statutory Re-
serves. The results of this study can contribute to policies in helping
regulators formulate strategies to deal with future economic crises by
ensuring that existing policies can maintain financial stability.
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