Financial Stability Exposed to Domestic, External Risks

TEMPO.CO, Jakarta – The Financial System Stability Committee (KSSK) pointed out the Indonesia’s financial system stability would be exposed to risks posed by domestic and global economic conditions.

“Domestic risks include the intermediation condition of financial services institutions,” Finance Minister Sri Mulyani Indrawati told Tempo at her office in Jakarta on Monday, October 24, 2016.

Sri Mulyani explained that the intermediation condition of financial services institutions was affected by three factors, namely the economic growth, the exposure of corporate debts, and cautions shown by the banking industry to anticipate the pressures on their non-performing loans.

Sri Mulyani added external risks included the Federal Reserves’ plan to increase its Fed Funds Rate in 2016, in addition to the impacts of Brexit on the capital market and the government debt papers market.

Another external risk, Sri Mulyani pointed out, was the 2016 global economic growth that was predicted to be lower than the previous projection. Therefore, commodity prices could be under pressure due to the global economic slowdown.

Finally, the third external risk, Sri Mulyani suggested, was China’s economic condition. Sri Mulyani said that the KKSK would continue to monitor and anticipate the impact of China’s economic condition on Indonesia’s economy.

Sri Mulyani further revealed that her institution, Bank Indonesia, the Financial Services Authority (OJK), and the Deposit Insurance Corporation (LPS) had agreed to take necessary measures to improve market confidence and maintain the financial system stability.

“[The Financial System is expected] to provide positive contributions to the national economic growth, job creation and investment recovery,” Sri Mulyani said.