Title: Systemically important financial institutions (SIFI) in Indonesian banking system

Authors: Zaafri Ananto Husodo; Daniel Wojtyla

Addresses: Faculty of Economics and Business, Department of Management, Universitas Indonesia, Campus UI, Depok 16424, Indonesia ' Indonesia Financial Services Authority, Banking Supervision Department 3, Menara Radius Prawiro, Jakarta, 10110, Indonesia

Abstract: We study the Indonesian Banking System, as one of the emerging economies with significant numbers of bank employing component expected shortfall (CES) as a market-based systemic risk measurement. The measure is a hybrid one that combines too big to fail and too interconnected to fail paradigms. Our result shows that systemic risk in Indonesian Banking System is highly concentrated, dominated by five big banks which contributes to more than 80% of the total risk of the banking system. Moreover, the concentration increased as the financial turmoil waived the whole banking system in September 2008. As a robustness test, this research uses various weighting scheme using total assets, total equities, and total loans as weights of the firm. The result show relatively consistent systemically important financial institutions (SIFI) cluster compared to market capitalisation weight.

Keywords: systemic risk; SIFI; systemically important financial institutions; CES; component expected shortfall; Indonesian banking industry.

DOI: 10.1504/IJMEF.2018.095741

International Journal of Monetary Economics and Finance, 2018 Vol.11 No.4, pp.327 - 344

Received: 14 Oct 2016
Accepted: 15 Dec 2016
Published online: 19 Oct 2018 *

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