OJK Warns Rising Global Risks Could Push Up Indonesian Banks' Funding Costs
OJK Warns Rising Global Risks Could Push Up Indonesian Banks’ Funding Costs
Jakarta. Indonesia’s banking industry should stay alert to emerging risks that could affect performance, including rising funding costs driven by geopolitical tensions and changes in the country’s sovereign outlook, the Financial Services Authority (OJK) said.
Prolonged conflict in the Middle East could push global interest rates higher, while recent negative outlook adjustments by international rating agencies on several major Indonesian banks also warrant attention.
However, OJK stressed that the outlook revisions by Moody’s and Fitch Ratings were not due to weakening banking fundamentals, but rather reflected the change in Indonesia’s sovereign outlook from stable to negative.
“OJK assesses that the change in sovereign outlook could increase the risk premium, which may moderately raise banks’ cost of funds and trigger short-term volatility in some Himbara bank stocks,” said OJK Banking Supervision Chief Dian Ediana Rae.
Despite the revision, Dian said state-owned banks grouped under Himbara still maintain access to global financial markets and continue to hold investment-grade credit ratings, reflecting confidence in their capital strength, liquidity, asset quality and profitability.
“Global investors also continue to show appetite for emerging markets such as Indonesia as a destination for international investment,” he added.
According to OJK, Himbara banks have strong structural advantages, including extensive and integrated domestic and international networks. Their domestic presence supports financial inclusion and financing for productive sectors, while overseas networks strengthen trade finance and cross-border transactions.
These networks also help broaden the customer base and support third-party fund growth.
“Sustained growth in low-cost funds, or CASA, reflects strong public confidence in Himbara banks and reinforces an efficient and stable funding structure,” Dian said.
OJK added that ongoing digital transformation and long-term business model improvements will help Himbara banks remain resilient amid global economic volatility.
The regulator also emphasized that supervision remains prudent, with governance, risk management and provisioning aligned with international standards. Overall, Indonesia’s banking system remains strong, supported by adequate capital and liquidity buffers.
“With strong performance, capital and risk management, OJK views Himbara banks as remaining in healthy condition and capable of supporting sustainable national economic growth,” Dian said.
OJK noted that the negative outlook reflects external macroeconomic factors and Indonesia’s sovereign profile rather than deterioration in bank performance.
“Negative outlook is more a signal of caution regarding external and fiscal risks, not a direct indication of pressure on bank health,” Dian said.
Separately, Permata Bank Chief Economist Josua Pardede said prolonged tensions between the United States and Iran could pressure both global and domestic economies, including the banking sector.
“If the conflict persists, the main risk is higher oil prices. This could drive domestic inflation and influence interest rate policy,” Josua said.
Higher energy prices could affect oil-importing countries like Indonesia, potentially pushing up inflation and forcing monetary policy adjustments.
If interest rates rise, banks’ funding costs would also increase, potentially slowing credit growth this year. However, Josua said Bank Indonesia still has room to cut its benchmark interest rate.
“Banking fundamentals remain relatively strong, but external risks from geopolitical conflict still need to be monitored,” Josua said.
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