Bank Condition Healthy In General: OJK

Jakarta (Antara Bali) - The Financial Service Authority (OJK) dismissed fears of new wave of banking crisis, saying in general the condition of the country's banking industry is healthy.

"Most of the country's 118 banks are in rating II or good and only around 10 percent are in rating III or standard," Deputy Commissioner for Banking Supervision of the agency Irwan Lubis said in a news statement on Friday.

By June, banks still recorded growth with credit growing 4.18 percent year to date, Irwan said, adding, funds grew 4.5 percent.

There was still growth though not as good as in the first half of 2014 as a result of  unfavorable economic condition, he said.

Based on the banking regulation the maximum foreign exchange threshold for  bank is 20 percent of capital, and now the banking industry's  net position of foreign exchange (PDN)is around 5 percent.

Individually, the PDN of 54 foreign exchange banks is around 2-10 percent , well below the threshold.

Irwan said 51 of the 54 foreign exchange banks are  in 'long' position  with the balance sheet  could still record profit despite falling value of rupiah.

Only three in 'short' position with shrinking rupiah likely to inflict losses, he added.

"However, in general, the bank PDN is still well safe below the threshold that falling value of rupiah would cause no much damage," he added.

He said the capital adequacy ratio (CAR) of  the country's 118 banks average 20.19 percent  or safe from the minimum level of 10-14 percent considered risky.

"Therefore,  the rupiah fall in value to at the level of 14,000 per U.S. dollar, would have no significant effect on banks," he said.

On the contrary most of the banks would gain though the three in 'short position' would suffer a correction but still would post profit, he said.

The result of "stress test" in March 2015, there were five conventional banks in difficult condition  and the OJK had  met with the five banks , but no action had been taken, he said.

"We recommended additional capital  and three already made the capital addition, but two  as they are still on the border line we asked them to make improvement in business strategy such as strengthening remedial unit or efficiency in office network and employees," he said.

He said  from March to August, 2015,  the condition changed with three banks making capital injection  and they are now financially healthy .

Now, the  CAR of the five banks had exceeded the risk level at around 11 percent, he said, adding their condition is  improving .

He said stress test has been made several times when rupiah fell in value to the level of 16,000 per U.S. dollar.

He said the gross  non performing loans (NPL) ratio of banks averaged  2.55 percent in June  and in July it was estimated at around 2.56  or 2.58 percent.

"This year, the rentability of banks is almost certain to decline  as banks have to provide additional reserves, but profit is still to be posted," Irwan said. (WDY)