Assessing the Resilience of Macroprudential Policies in an Era of Uncertainty
The war involving the United States and Israel against Iran has shifted global uncertainty from mere risk shadows to actual economic disruptions. This conflict is no longer solely a matter of military and diplomatic affairs but concerns energy, logistics, inflation, exchange rates, and market confidence.
The IMF emphasises that the primary channels of impact operate through energy prices, supply chains, and financial markets, ultimately leading to higher prices and slower growth.
For Indonesia, this conflict cannot be dismissed as an ordinary event; strategies must be prepared to minimise its effects on the domestic economy. At a Focus Group Discussion (FGD) hosted by Bank Indonesia in Palembang, attended by around 60 academics and researchers from various research institutions, discussions on developments in the financial sector and recent macroprudential policies sparked questions about the resilience of macroprudential policies in this era of profound uncertainty.
This is because current conditions indicate that escalating geopolitical tensions pressure the financial system through trade channels, commodity channels, and financial channels, ultimately disrupting production and distribution, driving up global commodity prices, squeezing capital flows to emerging markets, strengthening the US Dollar, and exerting pressure on the Rupiah’s exchange rate. Nevertheless, Bank Indonesia assesses that financial system stability is still maintained, while intermediation must continue to be encouraged.
Bank Indonesia data shows that credit in February 2026 still grew by 9.37% year-on-year, supported by third-party funds growing by 13.18%. Banking resilience is also relatively strong, with adequate capital and liquidity, while credit risk remains generally under control. The 2026 credit outlook is projected to remain in the 8–12% range. This picture indicates that the foundation of Indonesia’s financial sector is still sufficiently robust, but a strong foundation does not automatically mean the growth engine is operating optimally.
The main problem lies in transmission. When conflicts drive up energy prices, production costs soar, distribution is disrupted, and imported inflation can easily creep upwards. In such a context, businesses tend to hold back on expansion, households become cautious, and financial institutions grow more selective in extending financing. Gita Gopinath (2024) warns that geopolitical and geo-economic fragmentation can disrupt investment, weaken global risk-sharing, and amplify macrofinancial volatility, meaning that developing countries require policies that are not only stable but also flexible and anticipatory.
It is here that macroprudential policies are tested. Their resilience cannot be measured merely by sustained high Capital Adequacy Ratio (CAR) or capital adequacy ratio, or low Non-Performing Loans (NPL) or high-risk loans, but by their ability to maintain stability while promoting intermediation.
A study by the European Central Bank shows that geopolitical risks can pressure bank capitalisation through economic slowdowns, inflation pressures, sovereign stress, and asset price changes. Therefore, macroprudential policies must serve as an active buffer, not just an emergency brake, when damage becomes uncontrollable.
The most tangible test lies in the real sector, particularly SMEs. Bank Indonesia data reveals that SME credit in February 2026 is still experiencing contraction, banks’ appetite for SME financing remains tight, and credit risk in this segment must still be monitored even though NPL coverage is adequate. This fact is crucial because when the financial sector appears stable but SMEs still struggle to obtain affordable and flexible enough financing, there is a wide gap between macro stability and the pulse of the people’s economy.
In a scientific article, Demir and Danisman (2021) demonstrate that economic uncertainty and geopolitical risk suppress banking credit growth. Other findings from Wu et al. (2021) indicate that economic uncertainty can weaken bank soundness, including through slowed credit growth. This means that if global shocks are viewed only as money market issues, we will be late to respond, as their impacts extend to investment decisions, cost of capital, credit demand, and the ability of small businesses to survive.
Therefore, policy responses must not stop at maintaining prudential metrics. The following actions are necessary: First, macroprudential incentives need to be more sharply directed towards productive sectors and healthy SMEs affected by costs and uncertainty.
Second, coordination between monetary, macroprudential, and fiscal policies must be strengthened so that available liquidity truly flows to businesses, rather than stagnating in balance sheets. Third, financing innovations must be expanded, including guarantees, supply chain financing, and digital finance capable of reducing traditional collateral barriers. The OECD (2025) emphasises that digitalisation, financing innovations, and enhancing small business capabilities can strengthen SME resilience amid global pressures.
Joseph E. Stiglitz (2023) also reminds us that when pressure sources primarily stem from the supply side, policy responses must be more targeted and not uniform, as indiscriminate tightening can weaken investment and burden the real sector. This warning is relevant for Indonesia. Stability remains important, but stability that is too comfortably on paper, without sufficient financing flows to productive sectors, will only make the economy appear calm in statistics, while businesses hold their breath.
In the end, the US–Israel war against Iran teaches that today’s geopolitical shocks do not stop at foreign news. They infiltrate prices and