OJK States Rupiah Weakening Could Affect Banking Financial Performance
The Financial Services Authority (OJK) has stated that geopolitical conflicts in the Middle East have the potential to impact both the global and domestic economies, triggered by disruptions to global energy supply chains in the Strait of Hormuz. Challenges in the domestic financial market are increasing as the rupiah exchange rate undergoes significant weakening.
OJK Executive Head of Banking Supervision, Dian Ediana Rae, noted that the banking sector is indirectly affected by these conditions. “The indirect impact on Indonesian banks can occur through increased market and credit risks. From a market risk perspective, rising volatility in global financial markets and pressure on the exchange rate can affect the performance of banking financial portfolios, particularly for those with large exposure to foreign currency liabilities,” Dian said in a statement on Sunday.
From a credit risk perspective, rising energy prices and inflationary pressures could increase production and distribution costs across business sectors, thereby reducing corporate profitability, debtor repayment capacity, and public purchasing power.
Nevertheless, Dian noted that amidst the various risks arising from global dynamics, the performance of the Indonesian banking sector generally remains solid, with maintained risk profiles and effective intermediation functions. Banking capital is also considered sufficiently strong to serve as a risk mitigation buffer in anticipating global uncertainty.
“As of March 2026, banking capital performance remains high, reflected by a Capital Adequacy Ratio (CAR) of 25.09 per cent. Furthermore, banking credit risk is well-maintained, reflected by a Non-Performing Loan (NPL) ratio of 2.14 per cent—below the 3 per cent threshold—alongside a relatively stable trend in the coverage of impairment losses (CKPN),” she explained.
Dian continued that to measure bank resilience against potential macroeconomic shocks, the OJK and individual banks conduct regular stress tests using scenarios to handle economic, financial market, and political situations, both globally and domestically, including energy price dynamics.
“The results of stress tests by both the OJK and banks show that current banking capital levels are adequate to face risks caused by significant changes in Indonesia’s macroeconomic conditions, including economic growth slowdowns, rupiah depreciation, or interest rate hikes that affect the devaluation of banking assets,” she elaborated.
Dian emphasised that the OJK continues to coordinate with the government and relevant stakeholders, including those within the Financial System Stability Committee (KSSK), to strengthen policy mix, monitoring, and implement necessary measures to maintain financial system stability.