OJK Spills Impact of Middle East Escalation on Indonesia's Financial System Stability

TEMPO.CO, Jakarta - The Financial Services Authority (OJK) will continue to monitor the latest developments in the Middle East and their impact on intermediation performance and the stability of the national financial system.

The Head of the OJK Literacy, Financial Inclusion, and Communication Department Aman Santosa said on Wednesday that the stability of the national financial services sector is maintained in the face of increased global geopolitical tensions, including conflicts in the Middle East.

Maintaining the stability of the national financial sector can be seen from strong capital, adequate liquidity, and a manageable risk profile.

Amid increasing uncertainty, said Aman, OJK assesses that the fundamentals of the Indonesian economy are well maintained, as seen from the sustained growth at around 5 percent. Other indications are inflation within Bank Indonesia's target range, maintaining a surplus record for the trade balance, adequate foreign exchange reserves, and the availability of fiscal space.

As of February 2024, direct exposure of financial services institutions (LJK) to the Middle East region is relatively limited.

As an illustration, securities with issuers from the Middle East owned by domestic banks only amount to Rp1.3 trillion or 0.06 percent of the total securities owned by banks. Insurance and finance companies do not have securities with issuers from the Middle East.

In addition, the value of share ownership of investors from the Middle East in the stock market was Rp65.73 trillion, or around 2 percent of the total value of share ownership by non-resident investors. Next, LJK (controlling) ownership by investors in the Middle East is recorded in the banking sector with an asset share of 0.1 percent of total banking assets.

In the future, maintaining financial system stability amidst the potential for conflict escalation in the Middle East is considered sufficient.

However, OJK will continue to pay close attention to market risk developments in financial services institutions and pay close attention to financing to sectors that have high exposure to conflict in the Middle East, including paying close attention to the conditions of individual LJKs.

LJKs are also urged to evaluate the potential transmission impact of global and domestic economic developments on their portfolios and take the necessary mitigation steps. Meanwhile, OJK continues to coordinate with members of the Financial System Stability Committee (KSSK) and is committed to issuing the necessary policies promptly.

ANTARA

Editor’s Choice: Jokowi Asserts Diplomacy, Economic Policy to Anticipate Middle East Conflict Escalation

Click here to get the latest news updates from Tempo on Google News