TEMPO.CO, Jakarta - The Financial Services Authority (OJK) asked the banking sector to mitigate and contain the impact of Covid-19 on the industry. To banks, OJK chief executive for banking supervision said there are four steps they must take to minimize damages.
"These are precautionary measures," he said in an online discussion in Jakarta, May 19.
The first step is to conduct scenario analyses to identify Covid-19 impact on the industry—covering the real sector, economic growth, and debtors' performance.
The second is to mitigate credit risks and ensure there is ample liquidity, by understanding economic sectors and debtors' outstanding affected by the pandemic. The mitigation also includes activating early warning systems as well as drafting rescue scenarios and debtors' bailout schemes.
The third step is to conduct stress tests on capital adequacy ratios and liquidity; by drawing up a scenario analysis of capital needs and availability related to credit risk hikes, identifying liquidity gaps, and testing various strategies.
The fourth step is optimizing portfolio management by identifying vulnerable and affected portfolios, optimizing capital allocation and liquidity, as well as applying various crisis scenarios.