OJK announced changes to the credit risk-weights for motor vehicle, housing, and healthcare sector loans from banks and financing companies. The regulator also launched the Indonesian Banking Development Roadmap for 2020-2025 as a reference for authorities, the banking industry, and other stakeholders. Both these developments are part of a response to encourage economic growth in these difficult times, through the financial services sector policy.
For motor vehicle loans of banks, credit risk-weight has been lowered from 100% to 50%. Banks that meet the risk profile criteria 1 and 2 are allowed to provide a down payment for motor vehicle loans of 0%. For credit provision to battery-based electric motorized vehicle manufacturers, the credit risk-weight has been lowered from 75% to 50%. Under the housing-backed credit policy with respect to banks, OJK has established that the applicable risk-weight is 35% for loans with down payment of up to 30%, 25% for down payment of 30% to 50%, and 20% for down payment of more than 50%. Furthermore, OJK stipulates that credit for the health sector will be subject to a risk-weight of 50%, which represents a reduction from the earlier risk-weight of 100%.
In the other update from OJK, Heru Kristiyana, the Executive Head of the OJK Banking Supervision, explained that the development roadmap for banking sector will serve as a guideline for the development of the banking industry ecosystem and future regulatory, supervisory, and licensing infrastructure. The roadmap addresses structural development of the sector in stages over a period of five years, in addition to the short-term development for optimizing the role of banks in accelerating the process of national economic recovery due to the impact of the COVID-19 pandemic. The direction of structural development is aimed to strengthen the national banking institutions for better resilience, higher competitiveness, and a more optimal contribution to the national economy. The roadmap constitutes of the four developmental pillars for the banking sector:
- Strengthening the structure and competitive advantage by increasing capital, accelerating consolidation and strengthening bank business groups; improving governance and efficiency; and encouraging product and service innovation.
- Accelerating digital transformation by strengthening IT governance and risk management, encouraging the use of IT game changers, forging technology collaborations, and implementing advanced digital banking.
- Strengthening the role of banking sector in the national economy by optimizing the role in economic financing, encouraging financial market deepening through multi-activity businesses, encouraging Islamic banking to become a catalyst for the Islamic economy, increasing financial access and literacy, and encouraging participation in sustainable financing.
- Strengthening regulation, supervision, and licensing via improved regulations by using a principle-based approach, available technology, and supervision of bank business groups (includes strengthening integrated supervision using technology).
Related Links (in Indonesian)
Keywords: Asia Pacific, Indonesia, Banking, COVID-19, Roadmap, Credit Risk, Risk Weighted Assets, LTV, Islamic Banking, Governance, Basel, Regulatory Capital, OJK
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.