Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
ISSN 2086-1575 E-ISSN 2502-7115
The Risk-Taking Channel and Monetary Transmission Mechanisms in Indonesia Pristanto Silalahi1.
Telisa Aulia Falianty2 Faculty of Business.
Duta Wacana Christian University.
Yogyakarta, 55224.
Indonesia Economics.
Faculty of Economics and Business.
University of Indonesia.
Depok, 16424.
Indonesia e-mail: pristanto@staff.
Received: June 27, 2022.
Revised: April 8, 2023.
Accepted: April 13, 2023 Permalink/DOI: http://dx.
org/10.
17977/um002v15i12023p124 Abstract This study aims to analyze monetary and macroprudential policies through risk taking banks in Indonesia.
The importance of risk-taking channel analysis in the transmission mechanism of monetary policy is that it is a newer route and is different from the bank lending channel that has been previously proposed in monetary policy theory.
This risk-taking channel affects the supply of credit by banks through the bank's decision to channel credit based on changes in bank behavior in dealing with bank risk.
The study also recognizes the impact of monetary and macroprudential policies and the role of the characteristics of banks, as well as macroeconomic conditions such as economic growth and inflation rates.
The analytical method used is fixed effects through panel data in the period 2012-2019.
This study uses 3 types of proxies to measure risk, first with the Z-score measurement method, second with the ratio of the number of risky assets to total assets and third, the ratio of the number of bad loans to total assets.
The results of this study found that the impact of monetary policy and macroprudential policy significantly affects bank risk.
In addition to the main variables, this study also uses GDP growth and inflation variables as control variables for macroeconomic conditions that significantly effect on bank risk, liquidity, and bank size variables as control of bank characteristics which also significantly affect bank risk.
So it can be concluded that the risk-taking channel exists in the IndonesiaAos banking.
Keywords: monetary policy: macroprudential policy.
risk-taking JEL Classification: B22.
C33.
E58
INTRODUCTION
Excessive risk-taking in the US banking industry driven by the Federal Reserve's long-term expansionary monetary policy is considered a key factor contributing to the global crisis in 2008.
Starting from the lowering of the US central bank interest rate in 2001, which was around one percent.
This was done to move the American economy, which at that time was in a negative state.
By lowering the central bank's interest rates, lending rates will also decrease.
Low loan interest rates will be an incentive for households and companies to borrow money from banks, both for doing business and for consumption.
Increased economic activity through investment and consumption Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
ISSN 2086-1575 E-ISSN 2502-7115
will have a positive impact on economic growth.
In addition, the existence of production activities through it is also expected to reduce the number of unemployed.
But on the other hand, low-interest rates also have a side effect, if the application is too low for too long.
So that this condition can encourage economic agents to behave in excessive risk-taking behavior.
As a result, it will lead to financial imbalances and further increase the risk of financial system stability.
It is also considered to be one of the main contributors to the 2008/2009 crisis.
As a result of this phenomenon, many researchers have investigated the relationship between monetary policy and bank risk taking and have raised debates and questions for researchers and policymakers about how too low central bank interest rates can affect bank risk taking (Borio and Zhu .
, and Adrian and Shin, .
Leonardo Gambacorta, .
Borio and Zhu .
were the first to propose a monetary policy risk-taking Changes in monetary policy can affect the risk perception and risk tolerance of financial intermediaries, thereby affecting portfolio risk, asset pricing, and external financing requirements.
Subsequently, several studies emerged and followed.
The purpose of monetary policy by the central bank is actually to achieve a certain level of inflation and economic growth.
However, based on experience from the 2008 global crisis, it turns out that there is a trade-off with banking risk-taking that has the potential to threaten the stability of the financial system and even the economic This link between monetary policy and financial sector stability has finally become a central issue to see how the transmission of monetary policy adopted ultimately affects banking risk.
This transmission line is called the risk-taking channel (Borio & Zhu, 2.
Furthermore.
Borio .
suggests the importance of risk-taking channel analysis in the monetary policy transmission mechanism.
This is different from the bank lending route proposed by Bernanke and Blinder .
and Bernanke and Gertler .
who argue that monetary policy works through bank reserves .
ank reserv.
and next influences offer credit banking in the economy.
The risk-taking channel affects the supply of credit by banks through the bank's decision to channel credit based on changes in bank behavior in dealing with risk credit.
Adrian and Shin .
suggest that this risk-taking channel is also different from the concept of financial accelerators proposed by Bernanke and Gertler .
In this regard, the results of empirical research are sufficient to provide evidence of the existence of risktaking channels in the policy transmission mechanism monetary.
This study will analyze the relationship between interest rates and bank risk in Indonesia.
Study this will use three methods to measure risk bank which not yet been carried out in previous studies.
In addition, this research will also include macroprudential policies, namely the Statutory Reserves (GWM) and Loan to value (LTV).
LITERATURE REVIEW
Related to the relationship between interest rates and bank risk, one aspect that is also of concern to researchers is how to measure bank risk.
One method that is widely used to measure risk is the Z-score method.
This method is considered under the definition of risk in the banking literature (Lapteacru, 2.
Bankruptcy is defined as a state when losses exceed equity, so the probability of bankruptcy or risk bank Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
ISSN 2086-1575 E-ISSN 2502-7115
yuNROA yayaycI could be defined as Prob [OeROA < CAR].
Mark Z obtained from Z = yuaycIycCya an inverse representation of bank risk.
However.
This method has a restriction that must be met, namely normality.
The Z value can represent bank risk only if the return on assets (ROA) data is a normally distributed random variable (Demirgyy-Kunt & Huizinga, 2.
Various methods of transformation have been used by researchers to overcome this Laeven & Levine .
proposed using the logarithm of the Z value as a measure of banking risk, while Demirgyy-Kunt & Huizinga .
used the logarithm of the Z value plus one to include the negative Z value.
Meanwhile.
Lapteacru .
has conducted a simulation test to compare the consistency of Z values, both before and after being transformed.
There are at least two conclusions important from the study by Lapteacru .
First, if distribution a skewed and or has excess kurtosis, the application of the indigo Z approach .
ithout transformatio.
gives inconsistent results.
Second, the logarithmic transformation does not reduce the slope and therefore fails to give satisfactory results in accordance.
Previous research (Minghua, 2.
used this method in measuring risk.
Through the calculation process using the Z-Score formula, the resulting Z value is not normally distributed but is left-skewed.
Therefore, researchers transform with method logarithm mark (Z .
with hope mark results normally distributed transformation.
The value of this transformation is used to represent bank risk.
However, when referring to the results of the Lapteacru .
study, the use of the Z score method.
data that are not normally distributed can result in Z values that fail to represent risk bank even though already done transformation logarithmic.
So from.
Therefore, another method is needed to measure risk if the data is not distributed normally.
This study will also use two other risk measurement methods such as those carried out by Delis .
First, calculate the ratio of the number of risky assets to total assets.
Risk assets are bank assets that can change in value due to changes in market conditions or changes in credit quality in various payment opportunities.
other words, an increase in risky assets indicates a riskier bank condition.
Second, by calculating the ratio of the number of bad loans to total assets.
Bad loans reflect the quality of the bank's assets, namely the negative potential for income and the market value of assets because of the quality of credit decrease.
So credit congestion could make as a proxy for credit risk because apart from credit congestion will result in a loss for banks.
The higher bad credit scores will increase the credit risk Furthermore, in this study, to analyze the mechanism of transmission policy monetary through tracking risk-taking banks, not only see the effect of interest ratebased monetary policy but also macroprudential policies, namely the Statutory Reserves and LTV.
This is because of the linkages between monetary policy and macroprudential and risk-taking behavior in the banking sector, where efforts to maintain financial stability through monetary and macroprudential policies are often responded to by excessive risk-taking behavior by banks which can worsen economic conditions .
onetary policy-bank risk nexu.
So that studying the pattern of risktaking behavior of banks in responding to policy mix interventions, can be one of the foundations for risk mitigation in the banking sector.
Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
ISSN 2086-1575 E-ISSN 2502-7115
Approach beginning in explaining the role of the bank in transmitting policy, the monetary view is believed to be through the money channel or the obligations of the banking sector to the economy .
oney vie.
, then the idea that banks influence the economy through credit channels develops.
The credit line in the monetary policy transmission mechanism was first developed by Bernanke and Blinder .
Analysis of how the supply of bank credit is influenced by monetary policy can be through various channels analyzed by economists and is active research in the study of monetary economics.
The transmission lines of monetary policy through bank credit that have been proposed so far include the liquidity channel (Diamond and Rajan, 2.
, the Bank Capital Channel (Van der Heuvel, 2.
, and those that have recently become the attention of economists since the onset of the economic crisis.
Globally in 2008 was the risk-taking channel (Borio, 2008.
Adrian and Shin, 2.
Borio .
suggests the importance of risk-taking channel analysis in the monetary policy transmission mechanism.
The risk-taking channel affects the supply of credit by banks through the bank's decision to channel credit based on changes in bank behavior in dealing with credit risk.
In this regard, the results of empirical research are sufficient to provide evidence of the existence of a risk-taking channel in the transmission mechanism of monetary policy.
In the context of the Indonesian economy, in-depth observation of the role of risk factors in the financial sector in the operation of the transmission mechanism has not been carried out.
Goeltom et al.
generally conclude that based on empirical analysis, risk perception plays a significant role in transmitting monetary policy in Indonesia.
This presentation indirectly indicates an interaction between monetary policy and risk in the banking sector which is transmitted through the supply of bank credit.
Second, the reason behind the existence of a macroprudential policy is the procyclicality theory, which shows the phenomenon where the financial cycle accelerates the economic cycle.
In periods of an increasing economy, the financial cycle tends to be faster than the economic cycle.
Expansion of bank credit increases rapidly, prices of financial assets and property can soar, and excessive accumulation of debt will lead to a higher accumulation of risk.
In general, the macroprudential policy does not yet have a theoretical framework so the uncertainty of the impact of a central bank instrument is pragmatic in its use .
ank Indonesia, 2.
Several studies related to macroprudential policy, namely Antipa et al.
conducted a UK and US case study, analyzing that macroprudential policies are effective for managing ( smoothing ) the credit cycle and preventing the impact of a deeper global financial crisis.
Furthermore.
Barrel et al.
also conducted a case study of OECD countries (Latin America and Asi.
, stating that macroprudential policies can be used to address macroeconomic risks in banking while reducing the probability of a crisis occurring.
Finally, by using macroprudential policy, it is very effective in stabilizing the credit cycle in the short term.
Macroprudential policy as a complement to monetary policy is more effective in reducing procyclicality and bank risk.
The characteristics of banks also greatly influence macroprudential policies in dealing with credit problems (Gambacorta et al, 2.
In the context of economic conditions in Indonesia, several previous studies related to the effects of macroprudential policies such as those conducted by Swaningrum & Hariwan .
in evaluating the effectiveness of macroprudential Jurnal Ekonomi dan Studi Pembangunan, 15 .
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ISSN 2086-1575 E-ISSN 2502-7115
policy instruments in reducing systemic risk in Indonesia.
This study can conclude that the proxy variable for macroprudential policy is LTV and GWM LDR on year study not yet can be effectively overcome procyclicality credit.
Furthermore.
Nuryana .
investigates the assessment of the effectiveness of macroprudential instruments in reducing Indonesian banking risks.
The results of his research show that the Capital Buffer and LDR reserve requirements simultaneously have a significant effect on credit risk.
Partially, the Capital Buffer affects credit risk, while the LDR reserve requirement does not affect credit risk.
Finally, there is Maria .
, the effectiveness of macroprudential policies on banking risk.
The results of his research related to credit risk in the go public banking industry in Indonesia show that the Capital Buffer and Statutory Reserves, as macroprudential policy instruments and have a positive and significant effect on bank credit risk in Indonesia.
Meanwhile, for further research, it is recommended to add the Loan to Value (LTV) variable as a macroprudential policy instrument.
RESEARCH METHODS
Data This study uses secondary data in the form of panel data, which is a combination of cross-section data and time-series data.
30 banks in Indonesia act as sections here.
Observations were made quarterly for 8 years, from 2012 to 2019, so there were 32 time series in this study.
The data used were obtained from various sources, including data on reports from each bank.
Bank Indonesia (BI), and the Financial Services Authority (OJK).
Data on bank characteristics are sourced from quarterly reports of each bank which can be accessed through the official website of each bank as well as through statistical data from the Financial System Authority (OJK).
This bank characteristic data will be used to measure the dependent variable, namely risk, as well as for the control variable.
Data to measure the independent variables, that is ethnic group flower Bank Indonesia and Current Account Must Minimum (GWM) and Loan to value (LTV) sourced from Bank Indonesia (BI).
Meanwhile, data on other control variables, namely macroeconomic conditions (GDP and Inflatio.
were from BI.
Method This research refers to the theoretical model developed by Dell'Ariccia .
Riskit = i 1 MONETERY POLICYit 2 MACROPRUDENTIAL POLICYit 3 MONETERYit*MACROPRUDENTIALit 4 CHARACTERISTICS BANKit 5 MACROit Ait Where:
Riskit : risk of bank i during quarter t MONETARYit : Monetary policy (IR) Interest rate at the quarter t MACROPRUDENTIALit: Macroprudential policy (GWM.
LTV) during quarter t CHARACTERISTICS OF BANKit: Specific control variables (BANK SIZE.
LIQ) Characteristics of a bank during quarter t MACROit : Specific control variables Macroeconomic conditions as seen from (GDP.
INF) Ait : error Jurnal Ekonomi dan Studi Pembangunan, 15 .
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The model that will be used in this research is the fixed effect model.
The fixed Effect model can accommodate heterogeneity between sections, in this case, heterogeneity bank that will be arrested through mark intercept.
Use says fixed in the fixed-effect model to show that the factors causing heterogeneity in each bank are assumed to be constant throughout the observation period (Ekananda, 2.
RESULTS AND DISCUSSION
Descriptive analysis The monetary policy and macroprudential policy adopted by the central bank will directly have an impact on the performance .
specially profi.
of the banking This is because the banking sector is the most strategic part of the transmission line for monetary policy and the transmission line for macroprudential policy.
This fact has prompted banks to take bolder behavior in taking risks to get more profits when monetary policy and macroprudential policies adopted by the central bank provide large profit opportunities, and banks can also act very anticipatively to secure their funds if monetary policy and macroprudential policies adopted by the central bank pose a threat of harm to the banking business.
The image below is a graph of ZScores risk, asset risk, and NPL.
BANK RISK
Year Graph 1.
Bank risk for the last 8 years .
Source: processed by the author Graph 1 shows the evolution of bank risk over the past decade, the trend tends to increase until 2019.
It can be seen how the consequences of taking bank risk began to emerge suddenly in 2016, triggered by the monetary policy of Bank Indonesia which drastically lowered the BI rate.
Whereat the beginning of 2016 BI was around 7.
percent and experienced a decline of 5 times in the same year until the end of December 2016 it fell to 4.
75 percent.
Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
ISSN 2086-1575 E-ISSN 2502-7115
Table 1.
Descriptive statistics Variable Obs
Mean
RISK A
RISK B
RISK C
GWM
LTV
BANK SIZE 960
LIQ
GDP
INF
Std.
Dev.
Min Max It can be seen that the lowest risk with a min value is at risk C = 0.
0027, namely Bank Danamon in 2014-2, and the highest risk is at Risk A 2.
1945, namely Bank of Tokyo Mitsubishi in 2017-3.
Meanwhile, the highest interest rate was at 6.
04 percent in 2015-4, and the lowest was at 3.
83 percent in 2012-2.
The highest RR with a value of 8 percent was in 2012 and the lowest was with a value of 6 percent in 2019.
The highest LTV with a value of 95 percent was in 2019 and the lowest was with a value of 60 percent in 2013.
Conditions between RR and LTV are slightly inversely proportional, where the Statutory Reserves tend to decrease every year and vice versa LTV tends to increase every year.
Estimated Results of Monetary Policy with Bank risk Model 1 .
shows the results of the regression to analyze monetary policy on bank risk which is reviewed through interest rates (IR) on the Z-Score.
The Z-score value is calculated from the ratio of ROA and CAR.
Furthermore, the risktaking channel, which is the transmission channel of monetary policy, can be analyzed through the bank's response to these risks.
Therefore, the dependent variable in the Risk A model is measured using Z-score bank i and period t.
According to the monetary policy theory of Mishkin .
that when the central bank implements a contractionary monetary policy .
he policy rate increase.
, interest costs will increase, thereby reducing the growth in the volume of credit extended by banks.
For different Jenga sectors such as corporations and households, credit demand is influenced by interest rates, as well as credit spreads.
In addition, the net worth of households and firms determines the extent of their borrowing capacity (Andrian & Shin, 2.
Thus, the growth in credit volume can increase bank risk.
Under the classical theory that the higher the interest rate, the higher a person's desire to save or keep money in the bank.
Based on the results of the variable estimation test .
, monetary policy in this case is proxied by the interest rate (IR) which significantly influences the risktaking channel .
ank ris.
The results of the regression carried out show that the IR variable has a significant negative effect on bank risk, which is measured by Risk A and Risk C, different things for Risk B which have different directions, namely positive but not significant.
This is stated based on the results of the t-test in the Risk A table, the IR variable shows a significant estimation result with a p-value below the 10% real level and has a coefficient with a negative direction of -1.
This means that when a contractionary monetary policy is implemented, there is an increase in the interest rate by 1 percent, and it will be able to reduce bank risk by 1,035 percent.
Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
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cateris paribus.
Vice versa if monetary policy is expansionary.
This implies that the higher the interest rate, the lower the bank's risk.
Next for Risk C, the IR variable is also significant and consistently has a negative direction on bank risk.
The estimation results of the t-test show that the p-value level is below the 5% significance level with a coefficient value of -0.
This means that if each IR increases by 1 percent, it will result in a decrease in bank risk of 0.
002 Risk C.
These results are under the findings of Jimenez et.
Dell'Ariccia, .
Maddaloni and Peydro .
Angeloni et al.
and by Minghua Chen, et al .
Macroprudential Policy Estimation Results on Bank risk Furthermore, macroprudential policy variables or often referred to as complementary instruments in this case are proxied by the Statutory Reserves (GWM) and Loan to Value (LTV).
Of the three types of bank risk measurement, the estimation results show that the significant effect is the reserve requirement variable in model 2 .
in Risk A with a p-value below the 1% real level and has a negative coefficient direction.
These results show that when the macroprudential policy is contractionary, i.
an increase in the statutory reserve requirement set by the central bank can reduce bank risk.
On the other hand, if the central bank implements an expansionary policy, it can increase bank risk.
From the coefficient value, the analysis shows that when the reserve requirement policy is increased by 1 percent, it will reduce bank risk by 2,806 percent, cet paribus.
The results of this test are following the hypothesis and confirm the findings of Cordella et al.
and Federico et al.
that macroprudential policy is effective and influences bank risk.
This is different from the central bank's macroprudential policy based on Loan to Value (LTV).
In model 3 .
the LTV variable is LTV policy with a negative direction and the coefficient value is 5,204 but statistically not significant.
This means that when the LTV policy is enforced, the tendency of credit will be in a safe condition without much influence.
The failure of the implementation of LTV according to Oh Hwa Se .
could be because, in its implementation.
LTV policies can experience deviations.
Deviations can occur due to the expansion of non-bank This situation may also occur in Indonesia, the Government of Indonesia is also implementing subsidized mortgages as one of the political economy methods that the government does for the lower-middle-class people, which makes mortgage practices still run smoothly even though there is LTV implementation.
People are attracted to credit at non-bank institutions because the down payment at non-banks is very cheap or through Islamic banks.
The absence of a significant influence from LTV or the lack of success of the LTV policy is reinforced by the reports on the Indonesian economy by BI and LPS in The report states that Bank Indonesia's move in early 2016 to ease monetary policy by cutting the BI Rate and the relaxation of LTV regulations quite aggressively has not had a significant impact in helping increase property sales.
Therefore, the failure of the LTV policy in Indonesia could and needs to be reviewed and managed so that the function of macroprudential policy, in this case.
LTV, can be successful in controlling bank risk in Indonesia.
Hahm et al.
stated that for Korea and several Asian countries the use of the DTI ratio was an important complement to LTV policies for macroprudential purposes in controlling mortgages and in the case of Hong Kong.
Jurnal Ekonomi dan Studi Pembangunan, 15 .
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Meanwhile in Indonesia, the DTI macroprudential policy has not been regulated, only to regulate and implement LTV.
Estimated Result of Interaction of Monetary Policy with Macroprudential Policy on Bank Risk Furthermore, this study also investigates the effect of the interaction between monetary policy and macroprudential policy on risk-taking channels both at Risk A (Z-Scor.
Risk B, and Risk C.
First.
Risk A Model 4 .
interacts between monetary policy based on the interest rate (IR) with the reserve requirement macroprudential policy, and model 5 .
interacts between interest rate-based monetary policy (IR) and LTV macroprudential policy.
The estimation test results show that there is no significant effect as seen from the p-value above the 10% real level, while the direction of the coefficient is different when IR interacts with GWM on bank risk, the coefficient is negative, and when IR with LTV is negative.
Second, the Risk B model .
and model .
interact with monetary policy and macroprudential policy, namely IR with Statutory Reserves and IR with LTV.
The results of the two estimation tests are not significant as seen from the p-value which is above the 10% real level.
Meanwhile, the direction of the coefficients is different, model .
is positive and model .
is negative.
Third.
Risk C when viewed in the model .
and model .
interacts with monetary policy and macroprudential policy, namely IR with Statutory Reserves and IR with LTV.
The results of both estimation tests also show that there is no significant value seen from the p-value which is above the 10% real level.
Meanwhile, the direction of the coefficients is different, model .
is positive, and model .
is negative.
This interaction variable is not significant, it may be due to several things as found by Dell A'rcia et.
regarding the optimal macroprudential policy response to the credit boom, as well as the optimal mix of monetary and macroprudential policies are likely to depend on the type of credit boom.
Given that the data used in this study is less specific and focuses on aggregate credit.
He added that regarding the optimal combination of policies, it is also necessary to take into account political economy considerations and the type of supervisory arrangement in a country.
This result is also supported by several previous research results such as the results found by Collard et al.
suggest that monetary and macroprudential policies can be uncooperative, so separate policies are optimal conditions.
Furthermore, research in the same year conducted by Cerutti, et.
found an important conclusion that in developed countries, effective policies that tend to be used are borrower-based policies such as LTV restrictions and DTI ratios while in developing countries, macroprudential policies are more often used with policies related to foreign exchange rate policy.
This can be drawn from the conditions and status of the Indonesian state as a small open economy so that it is very vulnerable to external shocks.
The last and most recent findings of Martin, et.
state that macroprudential policy and monetary policy are largely interdependent.
This interdependence implies a potential trade-off between the two policy functions because the transmission of macroprudential instruments is likely to affect the transmission mechanism of monetary policy.
With these various conditions and findings, in the analysis results in this study, the interaction variables of monetary policy and macroprudential are not significant to risk.
Jurnal Ekonomi dan Studi Pembangunan, 15 .
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Effect of Liquidity on Bank Risk The liquidity variable in this study is proxied as LDR.
A high LDR level indicates that a bank lends its funds quite large .
oan-up ) or relatively illiquid .
because the amount of funds needed to finance credit is getting bigger, so this is closely related to the risk if at any time the owner of the funds withdraws.
the funds or in other words the bank cannot return the funds it borrowed from the customer.
In Table Risk A, the t-test results show that the LIQ variable does not have a significant effect on bank risk as measured by the Z-score.
Although the effect is not significant, there is a positive relationship between LDR and Z-score.
Likewise, it does not affect risk C.
The results of this study support the research conducted by Wimboh .
This means that the LDR ratio which is in the best range determined by Bank Indonesia indicates that the bank concerned has succeeded in carrying out its intermediation function, namely funding and well.
Where this condition means the bank has succeeded in achieving its profit target.
In contrast to the Risk B model, the results of the LDR test on risk assets, this study shows that LDR has a positive and significant effect on the occurrence of bank These results are following the hypothesis in this study.
Where indicates that the higher the LDR ratio will lead to increased risk to the bank, conversely the lower the LDR ratio will cause a decrease in bank risk.
The results of this study confirm that if the bank lends a large number of funds .
oan-up ) considering that the bank's assets include credit, then the bank will have a high risk of uncollectible loans which can later lead to non-performing loans and the bank will experience losses.
The results of this study support the empirical findings of Kohler .
Effect of Bank Size on bank risk It can be seen in tables Risk A.
Risk B, and Risk C that the results of the Bank size test on bank risk consistently have a negative effect.
These results show under the initial hypothesis.
However, based on the results of statistical tests.
Bank size is significant for Risk A at a p-value below the 5% significance level.
This means that when bank size increases by one unit, it will reduce bank risk, which in this case is calculated by Z-scores of 2,620.
For the significance of bank size on Risk B at a pvalue below the 1% level of significance, it means that when bank size increases by one unit, it can reduce risk which in this case is calculated based on asset risk of 0.
This means that larger banks show a lower level of bank risk-taking because they can obtain greater privacy.
Following the research conducted.
by Levine .
Agoraki et al.
and Delis.
Manthos D and Kouretas.
Georgios .
Kohler .
, and Andries.
Cocri, & PlecEu.
which state that bank size harms bank risk.
Inflation Effect on Bank Risk Inflation is one of the other control variables that will be used in this study to describe macroeconomic conditions.
Inflation is a condition where there is an absolute increase in prices that lasts continuously for a long period and is followed by a decline in the real .
value of a country's currency.
The results of the regression carried out show that the inflation variable has a significant negative effect on bank risk, both Risk A.
Risk B, and Risk C.
This is stated based on the results of the t-test in the Risk A table, the inflation variable at the p-value level is below the real level 1 % and has Jurnal Ekonomi dan Studi Pembangunan, 15 .
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a coefficient that is consistent with the negative direction.
From the results of the regression that has been carried out, it is obtained that the inflation variable has a coefficient of -0.
These results indicate that each inflation increases by 1 percent, it will result in a decrease in bank risk by 0.
933 for Risk A.
Meanwhile, for Risk B, the inflation variable is also significant and has a negative effect.
This is evidenced by the results of the t-test, the level p-value is below the 10% real level, with an efficiency value of -0.
This means that each inflation increases by 1 percent, it will result in a decrease in bank risk by 0.
007 Risk B.
Likewise with Risk C, the inflation variable is still consistent and has a significant effect in a negative direction on bank risk.
can be seen that the p-value is below the 1% level of significance with a coefficient of --0.
This shows that each inflation increases by 1 percent, it can reduce bank risk 001 Risk C.
These results support the research conducted by Vodova and Shen et al.
with similar results.
When there is high inflation, banks will increase loan and deposit interest rates.
The increase in interest on these loans will lead to smaller loans disbursed by banks.
In addition, with high inflation, prices will become higher so that the real income of the community decreases.
This can cause bank liquidity to decrease because people are reluctant to save their funds in banks Effect of GDP on Bank Risk In addition to inflation, the control variable describes macroeconomic conditions, namely GDP.
The economy generally experiences ups and downs, at least as seen from the development of output levels and prices.
The ups and downs of economic activity are relatively repeated with varying timescales.
In economics, this up and down motion is known as the business cycle.
In addition, the macroeconomic environment has a fairly strong influence on the banking sector.
As stated by FestiN and Bekc .
that exposure to macroeconomic risk factors is a source of systemic risk that affects the performance of the banking sector which is expressed as the ratio of non-performing loans to total loans.
In general, the business cycle theory highlights the countercyclicality of credit risk and business failure.
GDP growth indicates an increase in economic activity which makes people's incomes increase so that people can fulfill their obligations and the risk of nonperforming loans will decrease, it can be said that an increase in GDP will reduce bank This can happen because of an increase in economic growth which shows that all business fields are in good condition, which is marked by an increase in productivity.
When growth increases, business activities will usually be profitable so that the income received by the community increases as well.
The GDP variable shows the estimation results with the t-test test showing that the GDP variable has a negative and significant effect on bank risk as measured by Risk A and Risk C, the difference for Risk B is not significant.
This can be seen based on the results of the t-test in the Risk A table, the GDP variable at the p-value level is below the 1% real level and has a coefficient with a negative direction.
From the results of the regression that has been carried out, it is obtained that the inflation variable has a coefficient of -7.
These results indicate that every 1 percent increase in GDP will result in a decrease in bank risk of 7,801 Risk A.
Likewise with Risk C, the GDP variable also consistently has a significant effect in a negative direction on bank risk.
It can be seen that the p-value is below the 5% significance level with a Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
ISSN 2086-1575 E-ISSN 2502-7115
coefficient of -0.
This shows that every GDP growth increases by 1 percent, it can reduce bank risk by 0.
013 Risk C.
This result is in line with the results obtained by research by Gambacorta .
Altunbas et.
, and Kohler .
Meanwhile, for Risk B, the GDP variable gives an insignificant estimation result.
Robustness Check This research was conducted based on the theoretical model developed by Dell'Ariccia .
with 3 risk measurement methods referring to Delis .
and Kohler .
, the analysis in this study found evidence of a significant relationship between interest rate-based monetary policy on bank risk as well as a macroprudential policy with the Statutory Reserves instrument also has a significant influence on bank In addition, the debate or attention of sensitive factors so far in the study of bank risk is the size of the bank against the risk of the bank.
Based on research by Kohler .
, bank size has a significant effect on banks' response to the direction of risk.
Meanwhile, research from Dell'Arcia .
shows that the size of the bank has no significant effect on the direction of the bank's risk To prove this, this study also tries to identify these problems by doing several sample separations.
So that the sample classification is carried out between systemic and non-systemic banks based on the amount or amount of the bank's assets.
The regression results show that there is no significant difference in the direction of the bank's risk response.
Researchers found a significant negative relationship between bank size and bank risk, in a sample of small or non-systemic banks.
consistent negative coefficient between bank size and bank risk is obtained in the full sample that includes systemic and nonsystemic.
This shows that the results of this study are not contaminated by large or systemic banks .
CONCLUSIONS AND SUGGESTIONS
Conclusion This study aims to identify and analyze the relationship between monetary policy, macroprudential policy on bank risk, and the interaction of the policy mix on bank risk.
Based on the theoretical model developed by Dell'Ariccia .
with 3 risk measurement methods referring to Delis .
and Kohler .
First, based on the results and analysis in this study, there is evidence of a significant relationship between interest rate-based monetary policy and bank risk.
Second, similar to monetary policy, this study also finds a significant relationship between macroprudential policy and the Statutory Reserves instrument on bank risk.
Third, the case is different for the macroprudential policy with LTV instruments, there is no significant effect on bank risk.
Similarly, when the interaction of monetary policy with a macroprudential policy on bank risk shows no significant effect.
In the end, this research shows that of the three risk measurement methods used, the one that better describes risk is risk A with a z-score measurement compared to the other two methods.
This is evident from the significance and suitability of the model with the variables used.
The main implication of this research is that monetary policy and macroprudential policy through risk-taking channels exist in Indonesian banking.
Jurnal Ekonomi dan Studi Pembangunan, 15 .
, 2023
ISSN 2086-1575 E-ISSN 2502-7115
Suggestion Based on the results of this study, that interest rate-based monetary policy and macroprudential policy with Statutory Reserves have a significant impact on bank risk, so it is suggested to the monetary authority in this case that the central bank needs to make a stable interest rate policy and Statutory Reserves, not make policy changes that are too high or low.
because it can lead to excessive risk behavior.
Furthermore, the macroprudential policy based on the LTV instrument is not significant, this can be due to the risk proxy in this study not being specific but accumulative risk so that further research can be carried out specifically on property credit risk.
Finally, the interaction of the policy mix in this study also did not show a significant effect.
So it is also important for the monetary authority in this case the central bank to learn how to take into account the effect of its policies on risk-taking.
REFERENCES