OJK Amends Credit Risk RWAs and Launches Roadmap for Banking Sector
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
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
