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OJK urges banks to speed up provisioning, consolidation
The Financial Services Authority (OJK) has urged banks to brace for reduced stimulus spending at home and abroad, which could disrupt and create risks in the financial sector.
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An employee counts US dollar banknotes at a money changer in Jakarta in this undated photo. (Antara/Rivan Awal Lingga)
T
he Financial Services Authority (OJK) has urged banks to brace for a winding down of stimulus spending in both the domestic and overseas markets, which could disrupt the financial sector and heighten risks for lenders.
OJK chairman Wimboh Santoso said on Thursday that banks needed to speed up their provision for credit losses ahead of the planned end of the loan restructuring program in 2023.
Other measures included hastening consolidation among banks to beef up their capital adequacy and liquidity, he added
“There is a large number of restructured loans in banks and nonbank institutions. We will push this provision, so when [developed economies begin] normalizing [monetary policy], no one is surprised, all have adequate provisions, and it will not upset their balance sheets,” Wimboh told reporters during a press conference.
Stimulus spending has helped banks stay afloat in the challenging market environment during the pandemic. The OJK’s loan restructuring program has given banks some breathing room in their balance sheets by allowing them not to classify loans restructured during the COVID-19 pandemic as nonperforming.
Stimulus spending by developed countries has increased liquidity in the financial sector, helping to keep the economy going despite many activity restrictions amid the health emergency.
The OJK said total banking industry provisions had reached Rp 103 trillion (US$7.17 billion), or 14.85 percent of all restructured loans, and were expected to increase further this year.
