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The Market Structure Of The Bank, Its Performance, And The Macroprudential Policy

Author

Listed:
  • Tumpak Silalahi

    (Bank Indonesia)

  • Adler H.Manurung
  • Yuli Teguh Hidayat

Abstract

Recently, numerous Central Banks implement various macro-prudential policies to complement the existing monetary policy. This paper analyzes the impact of these policies along with the market structure, on the bank’s performance. Using panel data analysis, this paper conclude that the reserve requirement ratio policy negatively affect the bank’s performance (ROA). The empirical test shows the banking industry in Indonesia respond to the increase of reserve requirement by raising the Net Interest Margin to achieve their targeted operating profits. Secondly, this paper fail to find uniform conclusion across model variants about the effect of the policy rate on bank’s performance. This also applies on the Loan to Value policy. Fourth, the market concentration has a more significant effect on banks’ profitability as compared to market power. Fifth, the production index significantly affects the banking profitability. These findings implies a necessity for policy makers to redownload the financial market structure before formulating effective policy package to promote a healthy competition in the banking industry.

Suggested Citation

  • Tumpak Silalahi & Adler H.Manurung & Yuli Teguh Hidayat, 2015. "The Market Structure Of The Bank, Its Performance, And The Macroprudential Policy," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 18(1), pages 1-16, July.
    • Handle: RePEc:idn:journl:v:18:y:2015:i:1:p:1-16
    DOI: 10.21098/bemp.v18i1.514
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    Citations

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    Cited by:

    1. Nuraini Yuanita, 2019. "Competition and bank profitability," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-15, December.

    More about this item

    Keywords

    Macro-prudential policy; banking structure; bank’s performance.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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