Indonesia’s Financial Services Authority (OJK) has instructed the country’s biggest banks to set aside more capital this year to reduce risks to the financial sector.
OJK will rank systemically important banks (SIBs) based on their size, interconnectedness with the financial system and the complexity of their business.
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Under new regulations, SIBs are required to set aside capital surcharges of between 0.25 percent and 0.625 percent of risk-weighted assets starting from 1 January – depending on how systemically important the institutions are.
This surcharge will be gradually increased each year until 2019 when it reaches 1 percent to 2.5 per cent of the institution’s risk-weighted assets.
This comes on top of capital adequacy regulations, which start at a minimum of 8 percent of risk-weighted assets. The regulation is part of Indonesia’s move to fully adopt Basel III.
OJK has already identified banks that are systemically important, although it has yet to name them.
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