S&P: Indonesian Banking Should Be Resilient In Facing Risk Of Policy Changes

 11 Apr 2014

Year of 2014 plays as a political year for Indonesia, since there will be both parliamentary and presidential elections on April and July 2014. According to the report published by Standard & Poor's Ratings Services on April 9, broadcasted in Bloomberg with title "Rated Indonesian Entities Will Remain Resilient to Persisting Policy Risks under The Forthcoming Administration" citing that Indonesia's corporate and banking sectors should be able to withstand the lingering policy risks under a new government.

S&P explained that the risks of policy and regulatory changes are similar regardless of the election results, and these risks have already factored in the rating. This also supported by the fact that Indonesian banks have sufficient earnings buffers to offset a potential rise in credit costs. Currently, all the four rated domestic banks, including BRI, are in the 'BB' rating category. The companies that are rated in the 'BB' category or higher generally have stronger market positions, higher profitability, or lower leverage, which gives them greater ability to absorb heightened policy risk or complicated regulations.