Private banks should focus on operational efficiency

Oct 13, 2025 by wbrum.org 69 views

Analysis of Bank Health Level with Bank Risk-Based Rating Methods in the Banking Industry in Indonesia

The banking industry in Indonesia is a crucial sector that plays a significant role in the country's economic growth. With the increasing number of banks operating in the country, it is essential to evaluate their health and risk levels to ensure stability and sustainability in the industry. This study aims to analyze the differences in the level of health between state-owned banks, private banks, and sharia commercial banks in Indonesia using the risk-based bank rating method for the 2015 to 2017 period.

The Importance of Bank Health Analysis

Bank health analysis is essential for stakeholders, including investors, regulators, and the community, to understand the risk and financial health of the bank. A healthy bank is one that is able to manage its risks effectively, maintain a stable financial position, and provide quality services to its customers. On the other hand, an unhealthy bank may pose a risk to the entire financial system, leading to instability and potential collapse.

Research Methods

This study employed a comparative research design using a population consisting of state-owned banks, private banks, and sharia commercial banks that have annual reports and corporate governance reports during the specified period. A total of 40 banks were used as samples, with 4 state-owned banks, 26 private banks, and 10 sharia commercial banks. The data analysis techniques applied include descriptive and inferential statistical analysis, with the normality test used to evaluate the distribution of data, followed by a hypothesis test using the Kruskall-Wallis Test to determine whether there are significant differences between bank groups.

Research Results

The results of this study indicate a significant difference in several variables, including:

Non-Performing Loan (NPL)

A high level of NPL can show a greater risk of failure in a bank, which can affect the overall health of the bank. The results of this study show that state-owned banks have a significantly higher NPL ratio compared to private banks and sharia commercial banks. This suggests that state-owned banks may be more vulnerable to risk and may require closer monitoring by regulators.

Return on Assets (ROA)

Low ROA may indicate that the bank is less efficient in using its assets to generate profits. The results of this study show that private banks have a significantly higher ROA ratio compared to state-owned banks and sharia commercial banks. This suggests that private banks may be more efficient in using their assets to generate profits.

Operating Expenses to Operating Income (BO/PO)

This ratio indicates bank operational efficiency. A high ratio can indicate that operational costs are too large compared to the revenue generated. The results of this study show that state-owned banks have a significantly higher BO/PO ratio compared to private banks and sharia commercial banks. This suggests that state-owned banks may be less efficient in managing their operational costs.

Loan to Deposit Ratio (LDR)

The LDR ratio indicates the bank's ability to manage its funding structure. A high LDR ratio can indicate that the bank is over-reliant on deposits and may be vulnerable to changes in market conditions. The results of this study show that there is no significant difference in the LDR ratio between state-owned banks, private banks, and sharia commercial banks. This suggests that the aspects of management and funding structure may not be striking between these types of banks.

Good Corporate Governance (GCG)

GCG is an essential aspect of bank management that ensures the bank operates in a transparent and accountable manner. The results of this study show that there is no significant difference in the GCG score between state-owned banks, private banks, and sharia commercial banks. This suggests that the aspects of management and governance may not be striking between these types of banks.

Conclusion

Through this analysis, it can be concluded that the difference in the level of health between various types of banks in Indonesia functions as an important indicator for stakeholders, including investors, regulators, and the community. This study emphasizes the importance of using bank risk-based methods as an evaluation tool to understand the risk and financial health of the bank. In the future, this research can be expanded by considering other factors that might affect the health of the bank, as well as involving more samples of various types of banks to get a more comprehensive picture of the banking industry in Indonesia.

Recommendations

Based on the findings of this study, the following recommendations are made:

Regulators should closely monitor state-owned banks: Given the higher NPL ratio and lower ROA ratio of state-owned banks, regulators should closely monitor these banks to ensure they are managing their risks effectively.
Private banks should focus on operational efficiency: Given the higher BO/PO ratio of private banks, these banks should focus on reducing their operational costs to improve their efficiency.
Sharia commercial banks should focus on GCG: Given the lower GCG score of sharia commercial banks, these banks should focus on improving their governance and management practices to ensure transparency and accountability.
Banks should consider using risk-based methods: Banks should consider using risk-based methods to evaluate their health and risk levels, as this can provide a more comprehensive picture of their financial health.

Limitations of the Study

This study has several limitations, including:

Limited sample size: The sample size of this study is limited to 40 banks, which may not be representative of the entire banking industry in Indonesia.
Limited time period: The study only analyzed data for the 2015 to 2017 period, which may not capture changes in the banking industry over time.
Limited variables: The study only analyzed a limited number of variables, which may not capture the full range of factors that affect bank health.

Future Research Directions

This study provides several avenues for future research, including:

Expanding the sample size: Future studies should aim to expand the sample size to include more banks and a more comprehensive picture of the banking industry in Indonesia.
Analyzing more variables: Future studies should aim to analyze more variables that affect bank health, such as credit risk, market risk, and liquidity risk.
Considering other factors: Future studies should aim to consider other factors that might affect bank health, such as economic conditions, regulatory changes, and technological advancements.
Q&A: Analysis of Bank Health Level with Bank Risk-Based Rating Methods in the Banking Industry in Indonesia

In our previous article, we discussed the analysis of bank health level with bank risk-based rating methods in the banking industry in Indonesia. In this article, we will answer some frequently asked questions (FAQs) related to the study.

Q: What is the purpose of this study?

A: The purpose of this study is to analyze the differences in the level of health between state-owned banks, private banks, and sharia commercial banks in Indonesia using the risk-based bank rating method for the 2015 to 2017 period.

Q: What are the variables used in this study?

A: The variables used in this study include Loan to Deposit Ratio (LDR), Non-Performing Loan (NPL), Good Corporate Governance (GCG), Return on Assets (ROA), Operational Expenses to Operating Income (BO/PO), and Capital Adequacy Ratio (CAR).

Q: What are the findings of this study?

A: The findings of this study indicate a significant difference in several variables, including NPL, ROA, and BO/PO. However, there is no significant difference in the LDR and GCG variables between state-owned banks, private banks, and sharia commercial banks.

Q: What are the implications of this study?

A: The implications of this study are that regulators should closely monitor state-owned banks, private banks should focus on operational efficiency, and sharia commercial banks should focus on GCG. Additionally, banks should consider using risk-based methods to evaluate their health and risk levels.

Q: What are the limitations of this study?

A: The limitations of this study include a limited sample size, limited time period, and limited variables.

Q: What are the future research directions?

A: The future research directions include expanding the sample size, analyzing more variables, and considering other factors that might affect bank health.

Q: How can this study be applied in practice?

A: This study can be applied in practice by regulators, banks, and other stakeholders to evaluate the health and risk levels of banks in Indonesia. It can also be used to inform policy decisions and to develop strategies for improving bank health and risk management.

Q: What are the benefits of using risk-based methods in bank health evaluation?

A: The benefits of using risk-based methods in bank health evaluation include providing a more comprehensive picture of bank health, identifying potential risks and vulnerabilities, and informing policy decisions.

Q: How can banks improve their health and risk management?

A: Banks can improve their health and risk management by implementing effective risk management strategies, maintaining a strong capital base, and ensuring good corporate governance.

Q: What are the challenges of implementing risk-based methods in bank health evaluation?

A: The challenges of implementing risk-based methods in bank health evaluation include data collection and analysis, model development and validation, and stakeholder engagement and communication.

Q: How can regulators support banks in implementing risk-based methods?

A: Regulators can support banks in implementing risk-based methods by providing guidance and resources, conducting regular assessments and evaluations, and promoting a culture of risk management and compliance.

Q: What are the future trends in bank health evaluation?

A: The future trends in bank health evaluation include the increasing use of technology and data analytics, the development of new risk-based methods and models, and the growing importance of sustainability and environmental, social, and governance (ESG) factors in bank health evaluation.