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Weighting on Systemic Important Banking (SIB) in Indonesia: The Official Versus PCA Approaches Cover

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Weighting on Systemic Important Banking (SIB) in Indonesia: The Official Versus PCA Approaches

Journal of Central Banking Theory and Practice

Volume 9 (2020): Issue 2 (May 2020)

By: Samsul Anwar

Open Access

|Jun 2020

Abstract

In determining its Domestic Systemic Important Banking (D-SIB), Indonesia implemented the Global Systemic Important Banking (G-SIB) based on three of five indicators, those being size, interconnectedness, and complexity. Both the G-SIB and the Indonesian D-SIB use an equal weight for each indicator, that is, 1/5 and 1/3 respectively. However, the weight could be modified by using the eigenvector of the Principal Component Analysis (PCA). We showed that this new weighting system was better than the official weighting system (referred to in this paper as the POJK approach) based on the Financial Services Authority (OJK) regulation No.46/POJK.03/2015.

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Articles in this issue

DOI: https://doi.org/10.2478/jcbtp-2020-0018 | Journal eISSN: 2336-9205

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Language: English

Page range: 155 - 182

Submitted on: Feb 27, 2019

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Accepted on: Jun 27, 2019

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Published on: Jun 2, 2020

Published by: Central Bank of Montenegro

In partnership with: Paradigm Publishing Services

Publication frequency: 3 issues per year

Keywords:

Principal Component Analysis,

Systemic Important Banking,

Related subjects:

Business and economics,

Business management,

Business management, other

© 2020 Samsul Anwar, published by Central Bank of Montenegro
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Volume 9 (2020): Issue 2 (May 2020)

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