"If the government is unable to push up the rupiahs exchange rate or lets the currency weaken to a level of Rp16,000 per dollar, the banking industry and non-bank financial industry will face difficult times and will be placed under the threat of bankruptcy", the President Director of the Center of Banking Crisis (CBC), Achmad Deni Daruri, said on Tuesday.
The stress test simulation conducted by the CBC had shown astonishing results, he said.
The simulation showed that if the rupiah weakened to Rp15,000 per dollar and the composite share price index of the Indonesia Stock Exchange dropped by up to 20 percent, one of the insurance companies would go bankrupt, he said.
Also, if the local currency continued to fall to a level of Rp16,000 per dollar, three middle-class banks would be under a threat of collapse, he said.
"But all this can be overcome if the government acts quickly. The short-term solution is to formulate a firm and clear protocol for crisis", he said.
"At this moment the rupiah is highly prone as the competitive edge in all sectors is weak. This must be strengthened. How can we do so? I think we have to take a lot of steps", he said.
The share price index of the Indonesian stock exchange closed 64.77 points or 1.56 percent higher at 4,228.5 points on Tuesday
The index rebound after a sharp fall earlier, with the 45 most liquid stocks jumping 2.32 percent to 708.26 points.
HD Capital analyst Yuganur Wijanarko said market players had bought back shares after being oversold.
The stock market recorded 320,615 transactions on Tuesday, with 4.64 billion shares valued at Rp5.37 trillion changing hands.
Gainers outnumbered decliners by 166 to 155 stocks, with 70 stocks remaining flat.
Meanwhile, the rupiah closed stronger at 14,024 per dollar, gaining from an earlier level of 14,049 per dollar.
PT Platon Niaga Berjangka analyst Lukman Leong attributed the rupiahs rise partly to Bank Indonesia buying back state securities in the secondary market.(*)
Editor: Heru Purwanto
Copyright © ANTARA 2015
