Macroprudential Policy Instrument

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​​Countercyclical Capital Buffe​r (CCB)

The countercyclical capital buffer (CCyB) functions as an additional buffer to anticipate losses caused by excessive credit growth with the potential to disrupt financial system stability.

The risks are associated with procyclical lending in the banking industry, where banks tend to increase lending during an expansionary economic boom period and restrict lending during a contractionary economic bust period.  Procyclicality in Indonesia necessitated CCyB implementation, as evidenced by the direct correlation between credit growth and economic growth.

The additional capital buffer that must be maintained by banks during an expansionary period may be used when the banks experience pressures during an economic contraction, thus maintaining continuity of the bank intermediation function. The CCyB is dynamic within a 0-2.5% range of risk-weighted assets (RWA) in the banking industry.  Therefore, Bank Indonesia evaluates the level of CCyB no less than once every six months.

In general, Bank Indonesia will increase the CCyB during an economic boom and decrease the level during an economic contraction. CCyB policy is inextricably linked to bank capital regulations issued by the Indonesian Financial Services Authority (OJK) and is expected to strengthen the resilience of the banking industry.

The latest CCyB regulation, Bank Indonesia Regulation (PBI) PBI No.17/22/PBI/2015, dated 23rd December 2015, concerning the Countercyclical Capital Buffer (CCyB), is available at the following link.

  Countercyclical Buffer Data

Date

Rate Effective Date
Press Release
28 Dec 2015 0% 1 Jan 2016 Link
23 May 2016​ ​0% ​23 May 2016 Link
21 Nov 2016​ ​0% ​21 Nov 2016 Link
​19 May 2017 ​0% ​19 May 2017 Link
16 Nov 2017 0% 16 Nov 2017 Link
​17 May 2018 ​0% ​17 May 2018 Link
​15 Nov 2018
​0%
​15 Nov 2018
Link
​16 May 2019 ​0%
​16 May 2019
Link
​21 Nov 2019 ​0%
​21 Nov 2019
Link
​19 May 2020 ​0%
​19 May 2020
Link
​19 Nov 2020 ​0% ​19 Nov 2020 ​Link
​20 Apr 2021
​0% ​20 Apr 2021
Link

Loan To Value/Financing To Value

The Loan-to-Value or Financing-to-Value (LTV/FTV) Ratio is the ratio of the value of the loan/financing disbursed by a Conventional or Islamic Commercial Bank against the value of collateral in the form of property when the loan is originated based on the latest evaluation.  On the other hand, a downpayment on an automotive loan/financing is the initial payment as a percentage of the value of the motor vehicle paid by the borrower or customer.

Recently, rising property prices have become a growing risk faced in the financial system. One goal of LTV/FTV policy is to maintain financial system stability and mitigate systemic risk stemming from higher property prices.

In addition, LTV/FTV policy is also a macroprudential instrument used to stimulate a balanced and quality bank intermediation function in order to support national economic growth while maintaining financial system stability. LTV/FTV policy is a countercyclical macroprudential policy instrument that can be adjusted to changes in economic and financial conditions.

The current LTV/FTV regulation is Bank Indonesia Regulation (PBI) PBI No.21/13/PBI/2019, dated 2nd December 2019, as an amendment to Bank Indonesia Regulation (PBI) No. 20/9/PBI/2018 concerning the Loan to Value Ratio for Property Loans, Financing to Value Ratio for Property Financing and Downpayments on Automotive Loans or Financing, which can be accessed at the following link.


Date
​Rate​
​Effective Date
​Regulation
Press Release

​26/11/2019
​​i) Loan-to-Value or Financing-to-Value (LTV/FTV) Ratio for property loans/financing of 5%,
ii) Downpayment on automotive loans/financing in 5-10% range, and
iii) Additional 5% relief on LTV/FTV and downpayment requirements for green finance
​02/12/2019
​PBI No. 21/13/PBI/2019
​19th September 2019

Macroprudential Intermediation Ratio (MIR)

The Macroprudential Intermediation Ratio (MIR) and Sharia Macroprudential Intermediation Ratio (Sharia MIR) are macroprudential instruments to ensure the bank intermediation function is managed in line with economic capacity and target growth, while maintaining prudential principles.

 
Rasio-Intermedia-Makroprudensial-(RIM).jpg​​​​​​
(Sharia) MIR policy accommodates diverse forms of bank intermediation by including bank investment in securities.  Furthermore, (sharia) MIR policy also promotes the creation of a balanced and quality intermediation function, thus preventing and reducing risk and procyclical behaviour in the banking industry.

This macroprudential policy instrument is countercyclical and can be adjusted in line with changes in economic and financial conditions. The (sharia) MIR Giro is the balance of the rupiah demand deposit at Bank Indonesia that must be maintained by conventional commercial banks, Islamic banks and Islamic business units to meet the (sharia) MIR.

The latest (sharia) MIR regulations are available at:
  • Bank Indonesia Regulation (PBI) No. 21/12/PBI/2019, dated 25th November 2019, as an amendment to Bank Indonesia Regulation (PBI) No. 20/4/PBI/2018 concerning Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MPLB) for Conventional Commercial Banks, Islamic Banks and Islamic Business Units
  • Board of Governors Regulation (PADG) No. 21/5/PADG/2019, dated 29th March 2019, as the third amendment to Board of Governors Regulation (PADG) No. 20/11/PADG/2018, dated 31st May 2018, concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MPLB) for Conventional Commercial Banks, Islamic Banks and Islamic Business Units (Third Amendment MIR and MPLB PADG).

Macroprudential Liquidity Buffer (MPLB)

The Macroprudential Liquidity Buffer (MPLB) and Sharia Macroprudential Liquidity Buffer (Sharia MPLB) are minimum liquidity reserves denominated in rupiah that must be maintained by conventional commercial banks and Islamic banks in the form of rupiah securities that can be used for monetary operations, the level of which is set by Bank Indonesia as a percentage of rupiah deposits.

The (sharia) MPLB is flexible, meaning that under certain conditions rupiah securities may be transacted through repurchase agreements (repo) with Bank Indonesia in terms of Open Market Operations as a percentage of rupiah deposits at the conventional commercial bank or Islamic bank.
This macroprudential policy instrument is countercyclical and can be adjusted in line with changes in economic and financial conditions.

(Sharia) MPLB policy is expected to overcome procyclical liquidity issues as a liquidity-based macroprudential instrument applicable to all banks. MPLB must be met by all Conventional Commercial Banks and Islamic Business Units, while the sharia MPLB is only applicable to Islamic banks.

The latest (sharia) MPLB regulations are as follows:
  • Bank Indonesia Regulation (PBI) No. 20/4/PBI/2018, dated 3rd April 2018, concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MPLB) for Conventional Commercial Banks, Islamic Banks and Islamic Business Units .
  • Board of Governors Regulation (PADG) No. 20/31/PADG/2018, dated 30th November 2018, as an amendment to Board of Governors Regulation (PADG) No. 20/11/PADG/2018, dated 31st May 2018, concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MPLB) for Conventional Commercial Banks, Islamic Banks and Islamic Business Units ​.

Short-Term Liquidity Assistance (PLJP)

Short-term liquidity assistance (PLJP) is provided by Bank Indonesia to the banking industry in order to overcome short-term liquidity difficulties.  Meanwhile, sharia short-term liquidity assistance (PLJPS) is sharia-compliant financing provided by Bank Indonesia to Islamic banks experiencing short-term liquidity difficulties.

Short-term liquidity difficulties are a condition experienced by a bank when fund inflows are insufficient compared to fund outflows denominated in rupiah, thus leaving the bank unable to meet minimum reserve requirements.

The latest PLJP regulations are available at​:

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