As the world grapples with persistent economic turbulence, the question arises: Is Indonesia adequately prepared to weather the storm of global economic volatility? Amidst the lingering uncertainty clouding the global economic horizon, Indonesia is steadfastly erecting robust pillars to serve as shields: the macroprudential policies of Bank Indonesia (BI). With the aim of fortifying domestic financial stability, BI has unveiled three strategic policy approaches.
These pillars, far from being mere reactionary measures, stand as stalwart guardians of Indonesia’s financial system stability amidst the turbulent seas of economic uncertainty. In times of economic adversity, the imperative of safeguarding becomes paramount.
This underscores the escalating significance of macroprudential policies in navigating the tempestuous waters of global economic upheavals. By enhancing financial system resilience, these policies strive not only to preempt risks but also to fortify the foundations against potential disruptions to overall financial stability.
In the context of Indonesia, where the currents and waves of global economics can wield significant impact, the urgency of implementing macroprudential policies becomes increasingly pronounced.
These policies are not merely reactive; they are proactive in nature. By bolstering financial system resilience, these policy pillars ensure that financial entities, from banks to non-bank financial institutions, possess robust foundations to weather external shocks. This enables Indonesia to remain stable even amidst the fiercest tempests of global economics.
One pivotal aspect of macroprudential policy lies in its capacity to identify and preempt potential risks. By conducting comprehensive evaluations of potential threats, governmental and financial authorities can undertake preventive measures to mitigate adverse impacts. This encompasses addressing various scenarios stemming from global economic uncertainty, ranging from liquidity crises to sharp market downturns.
Bank Indonesia’s Macroprudential Policies
Deputy Governor of Bank Indonesia (BI), Juda Agung, underscores the significance of macroprudential policy pillars in safeguarding Indonesia’s financial system amidst ongoing global economic uncertainties. He emphasizes that BI’s policies in addressing the current global economic landscape will be centered on maintaining macroeconomic stability and financial system integrity, while sustaining the momentum of national economic growth.
Macroprudential policy, crafted and implemented by BI, is devised to prevent and mitigate systemic risks, promote balanced and quality intermediation functions, enhance financial system efficiency and access in upholding Financial System Stability (FSS), and support monetary and payment system stability.
“For this reason, monetary policy will remain geared towards promoting stability, while macroprudential policy will be oriented towards fostering economic growth. Focusing on macroprudential policy, there are three focal points on each pillar of BI’s current macroprudential policy,” Juda emphasized at a seminar event in Jakarta on Wednesday, March 27, 2024, as quoted from infobanknews.
3 Macroprudential Policies by Bank Indonesia
The first policy pillar aims to stimulate balanced and optimal lending. BI intends to reinforce the implementation of macroprudential liquidity incentive policies. “Currently, there is still over Rp100 trillion of untapped liquidity potential for banks to channel credit. We will assess sectors that can drive productive credit growth, ensuring that BI’s liquidity incentives are effectively utilized to stimulate the national economy,” stated Juda during the launch of Financial Stability Review No. 42 on Wednesday (3/27/2024).
Additionally, to enhance banking liquidity management, BI is in the process of formulating macroprudential policies aimed at optimizing non-traditional funding while maintaining adequate prudential considerations.
The second pillar pertains to cyber resilience. Juda disclosed that BI is finalizing cyber resilience and security (CRS) encompassing all stages, from governance and preparation of preventive measures to response protocols in the event of cyber attacks. “This encompasses mechanisms for coordination between authorities and industries, as well as monitoring and supervision,” elucidated Juda.
The third pillar aims to promote inclusive and sustainable finance and economy. Various policies, including Loan to Value (LtV) and relaxation of down payment requirements for environmentally friendly vehicles, will be directed towards supporting sustainable financing.
Conclusion
Amidst global economic uncertainty, the pillars of macroprudential policy serve as beacons, guiding Indonesia and offering protection. By strengthening financial system resilience and anticipating potential risks, these policies not only uphold economic stability but also empower Indonesia to forge ahead despite the storms. As the forefront defender of national interests, macroprudential policy stands as a sturdy foundation, safeguarding Indonesia’s economic stability and resilience amidst the persistent waves of global economics.
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