Indonesian banks are already well placed to meet the tighter capital and liquidity requirements set by the Basel III international regulation, a new report by Moody'€™s has concluded.

In the report published on Monday, Moody'€™s stated that Indonesian banks were among the ASEAN lenders, alongside those from Malaysia, the Philippines, Singapore, Thailand and Vietnam, that had sufficient capital to absorb shocks that may emerge from financial stress in the next 12 to 18 months.

'€œMoody'€™s-rated banks in the ASEAN region are well capitalized and can meet the higher minimum capital requirements under Basel III,'€ Moody'€™s vice president and senior analyst Alka Anbarasu said.

'€œAs for the 60 percent minimum liquidity coverage ratio under Basel III, in many cases, the banks are already 100 percent compliant, though national differences make it difficult to compare the reported ratios across different banking systems,'€ she added.

Basel III is a set of reform measures developed by the Basel Committee on Banking Supervision and is applied internationally.

It aims to strengthen regulation, supervision and risk management in the banking sector. The measures include setting additional ratio benchmarks for both capital and liquidity.

The minimum total capital is currently set at 8 percent, but from 2016, banks will have to meet an additional capital buffer of 0.625 percent, raising the minimum total capital to 8.625 percent.

The benchmark is set to increase gradually each year to reach 10.5 percent by 2019, when the Basel III requirement will be fully implemented.

Banks are also required to meet a liquidity coverage ratio (LCR) requirement of 60 percent, which will reach 100 percent by 2019.

Those that bear the status of global systematically important banks (G-SIB) and domestic systematically important banks (D-SIB) will have additional specific capital requirements as a loss-absorbment buffer.

Moody'€™s expects local regulators to announce the names of the D-SIBs in 2015, with a country'€™s top three or four banks -at least- to be identified as D-SIBs. In Singapore, seven banks have been deemed systematically important lenders.

Nelson Tampubolon, commissioner for banking supervision at the Financial Services Authority (OJK), said that the OJK had not yet completed its final D-SIB assessment.

He added that potential D-SIBs now numbered in the dozens and that the additional capital requirement would be 2 percent at most.

However, Moody'€™s has warned that even banks with strong capital status will have to adjust their asset growth to capital retention.

'€œWe expect strong loan growth in both Indonesia and the Philippines '€” 15 to 20 percent per annum over the next 12 to 18 months, which would require capital management at some of these banks,'€ the report said.

Executives at state lenders say they are well on their way to meeting the Basel III requirement, citing their capital adequacy ratios (CAR).

'€œWe have a CAR of 17.5 percent, which is way above the 10.5 percent required by Basel III. With that capital, we can continue expanding our business until 2018,'€ said Bank Mandiri'€™s treasury and markets director, Pahala N. Mansury.

Meanwhile, Bank Rakyat Indonesia (BRI) finance director Haru Koesmahargyo said that the bank had a CAR of 19 percent, enough to fund business expansion for the next two to three years.

Separately, Bank Negara Indonesia (BNI) finance director Rico Rizal Budidarmo said that the lender would see its CAR grow to between 16 and 17 percent by the end of the year.

'€œOur shareholders have also reduced the dividend payout ratio for the past several years to help us strengthen our capital,'€ he said.

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