Indonesia central bank, Bank Indonesia, in its latest policy to increase the stability of its financial system in Southeast Asia's largest economy, has announced and issued its new rule on November 28, 2012, to impose higher capital adequacy ratio (CAR) requirement for some commercial banks, from current CAR of flat 8 per cent to range of between 8 and 14 per cent depending on their risk profile. This new rule will be in force in March 2013.
Come March 2013, banks with the lowest risk profile will still require CAR ratio of 8 per cent, banks with medium-risk will require CAR ratio of between 9 -11 per cent, banks with the highest risk profile will require CAR ratio of between 11-14 per cent.
Whilst Indonesia's larger banks have maintained high levels of Tier 1 capital and proved resilient to global financial challenges, the new requirements are unlikely to deter them from expanding in Indonesia as demonstrated by their loan growth at over 20 per cent against Indonesia growing economy of 6 per cent.