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RISK OF INDONESIAN BANKS: AN APPLICATION OF HISTORICAL EXPECTED SHORTFALL METHOD

Bulletin of Monetary Economics and Banking

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Title RISK OF INDONESIAN BANKS: AN APPLICATION OF HISTORICAL EXPECTED SHORTFALL METHOD
RISK OF INDONESIAN BANKS: AN APPLICATION OF HISTORICAL EXPECTED SHORTFALL METHOD
 
Creator Danila, Nevi
Bunyamin, Bunyamin
Munfaqiroh, Siti
 
Description Asian and European crises were witnesses of banks’ vulnerable due to market risks. The Basel Committee requires an internal risk assessment applying Value at Risk (VaR). However, a replacement of VaR with Expected Shortfall (ES) has been suggested recently due to an excessive losses produced by banks which are beyond VaR estimations. This paper studied the risk of Indonesian banks applying a historical expected shortfall. We used JIBOR (overnight) from 2009 – 2012 as a proxy of market risk. The assessment of a historical expected shortfall of the net position of 27 banks accounts for October 2012 showed that state owned banks placed among the five highest value of each component (net position) in the balance sheet, namely placement to Bank Indonesia, interbank placement, spot and derivatives claims, securities, and loans. It means that the state owned banks had the highest risk and were the most aggressive among Indonesian banks. It might be due to carrying some of the government’s program, such as small enterprise loans.
 
 
Keywords: expected shortfall, value at risk, banks, risk.
 


JEL Classification: D81, G210
Asian and European crises were witnesses of banks’ vulnerable due to market risks. The Basel Committee requires an internal risk assessment applying Value at Risk (VaR). However, a replacement of VaR with Expected Shortfall (ES) has been suggested recently due to an excessive losses produced by banks which are beyond VaR estimations. This paper studied the risk of Indonesian banks applying a historical expected shortfall. We used JIBOR (overnight) from 2009 – 2012 as a proxy of market risk. The assessment of a historical expected shortfall of the net position of 27 banks accounts for October 2012 showed that state owned banks placed among the five highest value of each component (net position) in the balance sheet, namely placement to Bank Indonesia, interbank placement, spot and derivatives claims, securities, and loans. It means that the state owned banks had the highest risk and were the most aggressive among Indonesian banks. It might be due to carrying some of the government’s program, such as small enterprise loans.
 
 
Keywords: expected shortfall, value at risk, banks, risk.
 


JEL Classification: D81, G210
 
Publisher Bank Indonesia
 
Date 2015-01-10
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://www.bmeb-bi.org/index.php/BEMP/article/view/3
10.21098/bemp.v17i3.3
 
Source Buletin Ekonomi Moneter dan Perbankan; Vol 17 No 3 (2015): JANUARY; 299-314
Buletin Ekonomi Moneter dan Perbankan; Vol 17 No 3 (2015): JANUARY; 299-314
2460-9196
1410-8046
 
Language eng
 
Relation https://www.bmeb-bi.org/index.php/BEMP/article/view/3/704
 
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