Three Mitigation Steps for Banking Sector to Address Geopolitical Conflict
The Chairman of the Association of Indonesian Banks (Perbanas), Hery Gunardi, has stated that the banking industry faces challenges from global uncertainty stemming from current geopolitical conflict in the Middle East. Consequently, he emphasised that risk mitigation measures are necessary to maintain the stability of the financial sector.
Prolonged geopolitical tensions have the potential to drive energy inflation and food price increases, compress consumer purchasing power, and slow economic activity. “At the same time, economic uncertainty also pressures business sector performance,” Hery said in a written statement on Monday, 9 March 2026.
The impact could increase non-performing loan (NPL) risks, ultimately requiring banks to be more selective in credit distribution. Banks will also strengthen risk management and asset quality.
The Chief Executive of PT Bank Rakyat Indonesia (Persero) Tbk stated that there are three matters that banking institutions need to prepare. First, strengthening risk management by conducting sectoral stress tests on portfolios in the transportation, logistics, and manufacturing sectors, which are heavily dependent on fuel, implementing early warning systems for potential NPL deterioration, and tightening credit discipline and risk-based pricing.
Second, banks must ensure adequate liquidity availability to address potential volatility in fund flows by strengthening the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). “There is no alternative; banks must have sufficient cash flow buffers,” Hery stated.
Third, banks must manage foreign exchange and foreign currency liquidity risks by maintaining a conservative net foreign asset position (PDN), strengthening hedging strategies for foreign currency exposures, and managing foreign currency maturity mismatches.
Hery believes these measures are important to ensure the availability of foreign currency liquidity for strategic sectors, including exporters and importers, to maintain the smooth flow of national trade activities.
Deputy Commissioner for Regulation, Licensing and Quality Control at the Financial Services Authority Deden Firman Hendarsyah stated that Indonesia’s banking sector conditions are deemed sufficiently resilient, particularly from capital adequacy indicators. The banking industry possesses strong capital buffers to face global dynamics.
“Similarly, from the liquidity perspective, conditions remain ample and all key indicators are above the minimum thresholds set by regulators,” Deden noted.
Despite challenges in the first quarter, Hery Gunardi assessed that the fundamental condition of Indonesia’s banking industry remains solid. This is reflected in credit growth of 9.96 per cent year-on-year as of January 2026, up from 9.63 per cent in 2025.
Third-party funds (DPK) grew by 13.48 per cent year-on-year. The non-performing loan ratio also remained secure at around 2.14 per cent. Meanwhile, the banking industry’s capital resilience remained strong with a Capital Adequacy Ratio (CAR) of approximately 25.87 per cent.
“Although the banking industry’s overall outlook remains reasonably positive, we must remain anticipatory regarding various potential risks ahead,” Hery concluded.