COVID-19: The catalyst for accelerating bank consolidation

Narada Kumara, Febriantoro Suardy, Johanna Devi
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PREMIUM

Jakarta / Wed, July 1, 2020 / 11:44 am

COVID-19: The catalyst for accelerating bank consolidation

Hard cash: Finance Minister Sri Mulyani Indrawati (left) and State-Owned Enterprises Minister Erick Thohir announce the government’s placement of Rp 30 trillion (US$2.12 billion) in state banks on June 24. The funds will be channeled as loans to businesses to boost the real sector. (Antara/Sigid Kurniawan)

As the rampaging COVID-19 pandemic continues to disrupt – and even paralyze – Indonesia’s economy and adversely affect financial stability, it has (or will) eventually taken a toll on the banking industry. The soaring number of non-performing loans or restructured loans would have negatively impacted banks’ cash inflows, triggering the pressing concern of the banks’ liquidity, and in turn, the banks’ financial soundness. While large banks may find a way to withstand the COVID-19 storm, small and medium-sized banks might find it harder to do so. The government reacted rightly and quickly – in less than a month after it confirmed the first COVID-19 positive case – by issuing Regulation in Lieu of Law (Perppu) No. 1/2020 on state finances and the stability of the financial system policies for the mitigation of the COVID-19 pandemic and/or t...