National banking industry remains safe amid rupiah`s depreciation: BI

"If we look at the stability of the financial system itself, we are all in a good condition," Deputy Governor of Bank Indonesia (BI) Erwin Rijanto stated.
Jakarta (ANTARA News) - The national banking industry is still safe amid the depreciating rupiah, Deputy Governor of Bank Indonesia (BI) Erwin Rijanto stated.

"If we look at the stability of the financial system itself, we are all in a good condition," Rijanto noted here on Friday.

The deputy governor pointed out that the BI has conducted a stress test on the banking industry, with the exchange rate at Rp14 thousand per US dollar, and the results show that the banks are still in a good condition to restrain the rupiahs depreciation.

"We view the US dollar with regard to market risk," he remarked.

In terms of market risk, Rijanto stated that the BI was concerned about the strengthening of the US dollar, which affects the securities held by banks.

"In the meantime, securities trading is still good, and the amount is not too large," he pointed out.

The potential for a currency war can become one of the contributing factors that could weaken the rupiahs exchange rate against the US dollar, Indonesian Finance Minister Bambang Brodjonegoro earlier stated.

"It is difficult for the rupiah to strengthen as the others too have weakened," the minister stated after the plenary session of the Parliament, here, Thursday.

The minister remarked that the potential for a currency war does exist after the Chinese Yuan and Vietnamese Dong were devalued, and the external pressure has indirectly affected the rupiahs performance.

"What is occurring these days is not due to a fundamental issue, but it is really a global issue since the equilibrium has been disturbed by the devaluation of the Chinese Yuan," he explained.

He admitted that the rupiah has been "undervalued," but the situation has still been maintained as the government and the central bank, Bank of Indonesia, continue to work to reduce the volatility in the rupiah exchange rate against the US dollar.

"We are looking at the fundamental conditions, but now, it is very undervalued, and strengthening efforts must be undertaken," he emphasized.

However, the minister pointed out that in view of the current situation of increasing global pressure, the rupiah exchange rate should not be too strong, as it would be contradictory to the existing conditions.

"If the rupiah is reinforced too much and strengthened against all currencies, then it will later have an impact on our competitiveness," the minister pointed out.(*)

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