Indonesian Banks Strengthen Capital Amid Potential KBMI 1 Phase-Out

Regulatory Landscape and Bank Responses

The Financial Services Authority (OJK) is considering eliminating the KBMI 1 category, which includes banks with core capital below Rp6 trillion. In response, several banks are implementing strategies to strengthen their capital. Bank IBK Indonesia (AGRS), with a current core capital of Rp5.7 trillion, plans to reach the Rp6 trillion threshold through organic growth, projecting earnings of Rp210 billion in both 2025 and 2026.

Capital Strengthening Strategies

Different banks are adopting various approaches:

• Bank IBK Indonesia: Planning to meet the Rp6 trillion core capital requirement through retained earnings
• Bank Victoria International (BVIC): Focusing on digital transformation and operational efficiency while exploring capital enhancement options
• Bank Neo: Prioritizing profitability improvement and better communication of their financial performance to the market

Industry Implications and OJK's Perspective

OJK Executive Director Dian Ediana Rae emphasized that consolidation is necessary to create larger, more efficient banks that can better support national economic growth. The authority believes that bigger banks can more effectively invest in technology and digital banking initiatives.

Market Impact and Future Outlook

The potential phase-out of KBMI 1 is driving banks to strengthen their capital positions and explore consolidation opportunities. While some banks like Bank Neo are cautious about immediate action, others are proactively planning their capital enhancement strategies. The outcome is expected to shape the future landscape of Indonesia's banking industry, potentially leading to a more consolidated and competitive market.