OJK: Banking Exposure to Exchange Rate Risk Relatively Well Contained

The Financial Services Authority (OJK) stated that banks’ direct exposure to exchange rate risk is relatively well-contained and under control, reflected in a Net Open Position (PDN) ratio consistently far below the maximum threshold of 20 percent of bank capital. In April 2026, the PDN ratio was recorded at 1.63 percent, with a long position, meaning foreign currency assets were larger than foreign currency liabilities. "Nevertheless, the OJK continues to be vigilant regarding various risk transmission channels from rupiah exchange rate movements to financial service institutions in Indonesia," said OJK Board of Commissioners Chairperson Friderica Widyasari Dewi during a press conference on the results of the May 2026 Board of Commissioners Monthly Meeting in Jakarta, Friday. She noted several risks requiring attention, including a potential increase in the burden of foreign currency liabilities for corporations, pressure on business sectors with high import exposure, and the impact of rising raw material and operational costs. These conditions could affect banking asset quality, particularly through a decline in the repayment capacity of affected debtors if financial pressure persists. To mitigate these risks, the OJK is strengthening monitoring of foreign exchange activities in banks through more intensive daily PDN monitoring, foreign currency liquidity adequacy checks, and compliance with related foreign exchange provisions. The OJK is also conducting supervisory dialogue with banks showing specific position accumulations to ensure adequate implementation of market risk and liquidity risk management. "We continue to strengthen coordination with Bank Indonesia as the monetary authority to ensure sufficient foreign currency liquidity in the financial system is maintained," Friderica said. On the same occasion, OJK Chief Executive of Banking Supervision Dian Ediana Rae confirmed that his party consistently monitors and periodically evaluates exchange rate movements and their impact on banking. With the PDN in a long position, Dian said the direct impact of rupiah weakening on banking stability is also relatively limited. "However, continued rupiah weakening could potentially affect debtors with exposures vulnerable to foreign exchange movements, which in turn could pressure debtor repayment capacity and increase credit risk," he said. Under such conditions, the OJK continues to ask banks to ensure adequate provisioning for impairment losses (CKPN) and strong capital resilience. To ensure banks in Indonesia measure and control various risks, the OJK continuously monitors risk developments and asks banks to carry out comprehensive risk management. "Amid global conditions still full of uncertainty, the OJK is increasing its focus on individual bank supervision. This is the most important thing we do," Dian said. To measure banking resilience in facing various potential macroeconomic shocks, the OJK also regularly conducts stress tests. Based on stress test results, the banking sector is considered still capable of facing potential pressures arising from rupiah weakening. In addition, banks also routinely conduct stress tests independently, using both their own scenarios and assumptions as well as those prepared by the authorities, to ensure their ability to mitigate risks faced, including those arising from exchange rate depreciation.