Indonesian lenders have enough capital to withstand pressure from the falling rupiah, even if the currency would depreciate to 15,000 against the US dollar, the Financial Services Authority (OJK) said on Friday.
The country's 54 lenders that are allowed to perform foreign exchange transactions have capital adequacy ratios (CAR) of between 10 percent to 14 percent -- higher than the minimum of 8 percent required by the authority. The average CAR of 118 banks in the country was 20 percent as of June, data from the OJK showed.
The lenders also managed to keep their net open position in foreign currency between 2 percent to 10 percent of their capital, far below the 20 percent cap set by Bank Indonesia, the central bank. Fifty-one of the lenders are holding more forex than needed to fulfill their overseas liabilities, the OJK data showed.
“They will not be affected even if the rupiah trades at between 14,000 to 15,000 per US dollar," said Irwan Lubis, OJK deputy commissioner for banking supervision.
The rupiah has fallen around 13 percent against the greenback this year to Rp 14,011, according to BI's Jakarta Interbank Spot Dollar Rate data early on Friday.
The OJK's assessment of banks' CAR, asset quality, management capability, earnings, liquidity and sensitivity to market risks did not show any of the lenders being in a particularly difficult position due to the weakening rupiah, the authority said.
The authority said it had actually seen improvements, after five small-sized banks were flagged in a stress test five months ago.
"Three of the five banks have injected fresh capital as of August while the other two are improving their strategies, such as restructuring their non-performing loans, increase efficiency in network, offices and employees," Irwan said.
original source: http://jakartaglobe.beritasatu.com/business/ojk-indonesias-banks-can-handle-weaker-rupiah/