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Systemically important financial institutions (SIFI) in Indonesian banking system

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  • Zaafri Ananto Husodo
  • Daniel Wojtyla

Abstract

We study the Indonesian Banking System, as one of the emerging economies with significant numbers of bank employing component expected shortfall (CES) as a market-based systemic risk measurement. The measure is a hybrid one that combines too big to fail and too interconnected to fail paradigms. Our result shows that systemic risk in Indonesian Banking System is highly concentrated, dominated by five big banks which contributes to more than 80% of the total risk of the banking system. Moreover, the concentration increased as the financial turmoil waived the whole banking system in September 2008. As a robustness test, this research uses various weighting scheme using total assets, total equities, and total loans as weights of the firm. The result show relatively consistent systemically important financial institutions (SIFI) cluster compared to market capitalisation weight.

Suggested Citation

  • Zaafri Ananto Husodo & Daniel Wojtyla, 2018. "Systemically important financial institutions (SIFI) in Indonesian banking system," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 11(4), pages 327-344.
    • Handle: RePEc:ids:ijmefi:v:11:y:2018:i:4:p:327-344
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