Macroprudential Policy Instrument

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Macroprudential Incentives


Macroprudential incentives are offered by Bank Indonesia to banks extending loans/financing to priority and green sectors and MSMEs and/or banks meeting the RPIM target in the form of lower rupiah reserve requirements. The incentives are expected to revive the bank intermediation function, specifically in priority sectors and slow starters, while increasing disbursements of People's Business Loans (KUR) and green loans/financing, to support the economic recovery.

 

The latest regulations concerning Macroprudential Incentive policy are as follows:

  • Bank Indonesia Regulation (PBI) No. 24/5/PBI/2022 concerning Incentives for Banks Disbursing Funds for Specific and Inclusive Economic Activities.
  • Board of Governors Regulation (PADG) No. 1 of 2023, as the second amendment to PADG No. 24/4/PADG/2022 concerning the Implementation Regulations of Incentives for Banks Disbursing Funds for Specific and Inclusive Economic Activities (Second Amendment to Incentives PADG). ​

RPIM

Macroprudential Inclusive Financing Ratio (RPIM)

The Macroprudential Inclusive Financing Ratio (RPIM) is a policy innovation to revive growth of disbursed loans, particularly to MSMEs, MSME cooperatives and low-income individuals, and accelerate the economic recovery while strengthening financial inclusion. RPIM also indicates the portion of inclusive financing in the banking industry.  Fulfilment of the RPIM ratio is adjusted to the expertise and business model of each respective bank in accordance with risk management and prudential principles, as well as the bank's contribution to improving financial inclusion.

 

RPIM financing comprises three modalities as follows:

  1.  direct and supply chain financing,
  2.  financing through financial institutions/service agencies, and
  3.  financing through purchases of inclusive financing securities.

The latest regulations concerning RPIM policy are as follows:

  • Bank Indonesia Regulation (PBI) No. 24/3/PBI/2022, as an amendment to PBI No. 23/13/PBI/2013 concerning the Macroprudential Inclusive Financing Ratio (RPIM) for Conventional Commercial Banks, Sharia Commercial Banks and Sharia Business Units.
  • Board of Governors Regulation (PADG) No. 24/6/PADG/2022, dated 31st May 2022, concerning the Implementation Regulations of the Macroprudential Inclusive Financing Ratio (RPIM) for Conventional Commercial Banks, Sharia Commercial Banks and Sharia Business Units (PADG RPIM).​

LTV/FTV Ration

The Loan-to-Value or Financing-to-Value (LTV/FTV) Ratio is the ratio of the value of the loans/financing disbursed by a Conventional or Sharia Commercial Bank against the value of collateral in the form of property when the loan is originated based on the most recent 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.

 

This countercyclical macroprudential policy instrument aims to maintain financial system stability and mitigate systemic risk.  With an accommodative macroprudential policy stance, this also aims to revive a balanced, quality and sustainable bank intermediation function, thus supporting national economic growth, while maintaining the stability of the financial system.

 

The latest regulations concerning LTV/FTV policy are as follows:

  • Bank Indonesia Regulation (PBI) No. 23/2/PBI/2021, as the third amendment to PBI No. 20/8/PBI/2018 concerning the Loan-to-Value (LTV) Ratio for Property Loans, Financing-to-Value (FTV) Ratio for Property Financing, and Down Payments on Automotive Loans/Financing.
  • Board of Governors Regulation (PADG) No. 24/16/PADG/2022, as the fourth amendment to PADG No. 21/25/PADG/2019 concerning the Loan-to-Value (LTV) Ratio for Property Loans, Financing-to-Value (FTV) Ratio for Property Financing, and Down Payments on Automotive Loans/Financing. 

CCyB


The Countercyclical Capital Buffer (CCyB) is additional capital that functions as a buffer to anticipate losses caused by excessive credit growth with the potential to undermine 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.  Bank Indonesia, therefore, evaluates the CCyB level at least once every six months.

 

In general, Bank Indonesia will raise the CCyB during an economic boom and lower the level during an economic contraction. CCyB policy is 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 provisions are regulated in accordance with PBI No. 17/22/PBI/2015 concerning the Countercyclical Capital Buffer. ​


 Countercyclical Capital 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
​19 Oct 2021
​0% ​19 Oct 2021
​Link
​19 Apr 2022
​0% ​19 Apr 2022
Link
​20 Oct 2022 0% ​20 Oct 2022 Link
​18 Apr 2023
​0% 18 Apr 2023
Link
19 Oct 2023
0%​​19 Oct 2023
Lin​k


MIR and Sharia 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 countercyclical macroprudential policy instrument can be adjusted in line with changes in economic and financial conditions.

 

The (sharia) MIR Giro is the balance of rupiah demand deposits held at Bank Indonesia that must be maintained by conventional commercial banks, sharia banks and sharia business units to meet the (sharia) MIR.

NPL/NPF​ Minimum Capital Adequacy Requirement (KPMM) Lower Disincentive Parameter Upper Disincentive Parameter
≥5%
-
0.00
0.00
<5%
KPMM ≤ 14%
0.00
0.00
  14% < KPMM ≥ 19%
0.10
0.00
  KPMM > 19%
0.15
0.00


The latest regulations concerning (sharia) MIR policy are as follows:

  • Bank Indonesia Regulation (PBI) No. 24/16/PBI/2022, as the fourth amendment to PBI No. 20/4/PBI/2018 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MPLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units.
  • Board of Governors Regulation (PADG) No. 24/14/PADG/2-22, dated 31st October 2022, as the fifth amendment to PADG No. 21/22/PADG/2019 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MPLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. 

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 sharia banks in the form of rupiah securities that can be used in monetary operations, the level of which is set by Bank Indonesia as a percentage of rupiah third party funds (TPF).

 

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 (OMO) as a percentage of rupiah third party funds at the conventional commercial bank or sharia bank.

 

(Sharia) MPLB policy is expected to overcome procyclical liquidity issues as a liquidity-based macroprudential instrument applicable to all banks. The latest regulations concerning (sharia) MPLB policy are as follows:

  • Bank Indonesia Regulation (PBI) No. 24/16/PBI/2022, as the fourth amendment to PBI No. 20//4/PBI/2022 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. 24/14/PADG/2-22, dated 31st October 2022, as the fifth amendment to PADG No. 21/22/PADG/2019 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MPLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. ​

Announcement Date
Effective Date
Regulation
Press Release
​Instrument Amount Flexibility
​3 Apr 2018
​16 Jul 2018
PBI No.20/4/PBI/2018 Link
​MPLB ​4% ​2%
​MPLB Sharia ​4% ​4%
15 Nov 2018 ​30 Nov 2018 PADG No.20/31/PADG/2018 Link
​MPLB
​4% ​2%


​MPLB Sharia ​4% 4%​
​19 Nov 2020 ​30 Sep 2020 ​PBI No.22/17/PBI/2020 ​MPLB
​6% ​6%
​MPLB Sharia ​4.5% ​4.5%
​20 Apr 2021
​30 Sep 2020
​PBI No.22/17/PBI/2020
Link
​MPLB
​6% ​6%
​MPLB Sharia
​4.5% ​4.5%
​19 Oct 2021 ​30 Sep 2020 ​PBI No.22/17/PBI/2020 Link ​MPLB
​6% ​6%
​MPLB Sharia ​4.5% ​4.5%
​19 Apr 2022 ​30 Sep 2020 ​​​PBI No.22/17/PBI/2020 Link ​MPLB
​6% ​6%
​MPLB Sharia ​4.5% ​4.5%
​20 Oct 2022 ​30 Sep 2020 ​PBI No.22/17/PBI/2020 Link MPLB 6% 6%
MPLB Sharia 4.5% 4.5%
18 Apr 2023
31 Oct 2022
​PBI No.24/16/​PBI/2022
Link
MPLB
6%
6%

MPLB Sharia4.5%
4.5%



PLJP and PLJPS

Short-Term Liquidity Assistance (PLJP) and Sharia Short-Term Liquidity Assistance (PLJPS)

As the central bank, Bank Indonesia consistently implements its function as Lender of Last Resort (LoLR). According to the LoLR framework, Bank Indonesia can disburse Short-Term Liquidity Assistance (PLJP) and Sharia Short-Term Liquidity Assistance (PLJPS). PLJP/ PLJPS aims to overcome the short-term liquidity difficulties experienced by banks and, thus, maintain financial system stability and public confidence. Short-term liquidity difficulties are the conditions experienced by banks caused when fund inflows are insufficient compared to fund outflows denominated in rupiah, thereby leaving the bank unable to meet minimum reserve requirements.

 

The latest regulations concerning (sharia) PLJP policy are as follows:

  • Bank Indonesia Regulation (PBI) No. 22/15/PBI/2020, as the third amendment to PBI No. 19/3/PBI/2017 concerning Short-Term Liquidity Assistance for Conventional Commercial Banks.
  • Board of Governors Regulation (PADG) No. 22/31/PADG/2020, as the third amendment to PADG No. 19/6/PADG/2017 concerning Short-Term Liquidity Assistance for Conventional Commercial Banks. ​


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