OJK Keeps a Vigilant Eye on Banks and Insurance Companies Amid Global Economic Uncertainties

Jakarta –

The Financial Services Authority (OJK) continues to monitor the performance of banks and insurance companies. Khurus is for the bank, according to the Chairman of the Board of Commissioners OJK Mahendra Siregar The problems facing banks in the United States and Europe are relatively limited to the Indonesian banking industry.

This is because there is no direct exposure to closed banks in these countries, and conditions of domestic financial stability are maintained. Also because of the quick response from authorities in various countries who were able to reduce the risk of contagion.

“In order for banks to remain resilient and able to anticipate downside risks from global dynamics, the OJK asked banks to take mitigation steps,” said Mahendra in a press conference, Monday (3/4/2023).

For example by strengthening the implementation of governance, risk management and prudential principles. Then do stress testing regularly with various scenarios.

Then monitor the bank’s asset and liability portfolio including concentration risk on loans and funding. “In this case, the OJK also closely monitors the composition of deposits and bank loans so that they are properly diversified,” said Mahendra.

Banks are also required to maintain the capital adequacy ratio and the availability of liquidity in high quality assets. Then avoid speculative practices of excessive risk taking behavior.

Furthermore, OJK also asked insurance companies to carry out the underwriting process, the formation of technical reserves, and prudent investment management, to avoid the impact of declining economic conditions on liquidity and solvency conditions.

This is intended so that insurance companies remain resilient in facing global economic uncertainties that can affect the insurance market cycle, especially due to increases in the cost of capital and risk exposure that can be insured, especially those that are sensitive to economic conditions.

In order to mitigate the possibility of creeping impacts due to the end of the credit restructuring policy in certain segments and sectors, OJK ensures that FSI has established and evaluated the adequacy of reserves.

“Including continuously requesting FSI to conduct a re-assessment of the condition of debtors who are being restructured as well as the possibility of further reduction and pressure on said debtors,” he said.

Apart from that, taking into account fluctuations in global financial markets which have the potential to continue, OJK closely monitors the adequacy of banking liquidity, especially the availability and composition of the securities portfolio which are classified as High Quality Liquid Assets (HQLA).

(kil/hns)