CAR POLICY, CREDIT RISK, AND ITS IMPACT ON BANKING INDUSTRY RESERVES: ASEAN-5 EVIDENCE
(1) Universitas Sriwijaya
(2) Central Bank of Indonesia
(3) Universitas Sriwijaya
(*) Corresponding Author
Abstract
This study aims to see Bank Capital to Assets Ratio and Credit Risk to Bank Liquid Reserves to Bank Assets Ratio in ASEAN-5. The data used is in the form of panel data, with an annual period of 2010–2020. The research method used was panel data regression. Empirical findings show that an increase in bank capital adequacy has a significant impact on reducing bank liquidity reserves. The implications of these findings affirm the importance of achieving an optimal balance in capital and liquidity management as a key prerequisite for achieving banking stability and resilience. Financial authorities in ASEAN must undertake careful and strategic policy design that considers the complex dynamics between capital and liquidity. The need to develop capital adequacy policies that not only focus on credit risk, but also accommodate liquidity needs, is a key aspect in maintaining banking industry stability. In addition, it was also found that the regression results showed a positive correlation between credit risk and Bank Liquid Reserves to Bank Assets Ratio (BLR). Therefore, the findings provide policy-relevant insights for financial authorities and banking institutions in ASEAN in developing risk-management and regulatory strategies that consider capital strength, credit risk, and liquidity simultaneously.
Keywords
References
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DOI: http://dx.doi.org/10.33019/ijbe.v10i3.1373
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