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November 15, 2024 | 06:35 am
TEMPO.CO, Jakarta - Chief Executive of Banking Supervision and Member of the Financial Services Authority (OJK) Commissioners, Dian Ediana Rae, presented the impact of Donald Trump's victory in the United States general election on the banking sector. The change of government from the Democratic Party to the Republican Party is estimated to affect global liquidity.
The change in leadership is considered to change the direction of policies. "The inward-looking Republican Party may drive capital outflow from emerging markets to the United States," said Dian in an official statement on Thursday, November 14, 2024.
Trump is considered to be more protective and inward-looking, focused on the domestic economy. Therefore, the flow of capital will exit from developing countries such as Indonesia. However, according to Dian, the expectation of the reduction of the US central bank interest rate or the Fed Fund Rate, which will continue until 2025, will have a positive impact on liquidity conditions domestically, including in the banking sector.
For now, banking liquidity conditions are still adequate, with a liquidity ratio above the threshold. Until September 2024, banks' liquidity coverage ratio (LCR) was 222.64 percent, far above the threshold of 100 percent. The non-core deposit liquid asset ratio (AL/NCD) and third-party liquid fund asset ratio (AL/DPK) were 112.66 percent and 25.40 percent, respectively, still above the expected limits of 50 percent and 10 percent.
Dian said most banks also project an improving liquidity condition by the end of 2024, according to the results of the OJK Banking Business Orientation Survey (SBPO) for the third quarter of 2024.
In the meeting with House Commission XI on Wednesday, November 6, 2024, the BI Governor, Perry Warjiyo, also highlighted the impact of the US elections. Trump's victory will strengthen the US dollar and keep US interest rates high. "Of course, the trade war is ongoing," he said.
This dynamic will impact all countries, including Indonesia. Perry added that it could pressure exchange rates, capital flows, and uncertainty in the financial markets.
ILONA ESTHERINA | MARTHA WARTA SILABAN
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