The impact of COVID-19 on bank stability: Do bank size and ownership matter?

  • Received March 20, 2022;
    Accepted May 30, 2022;
    Published June 27, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/bbs.17(2).2022.11
  • Article Info
    Volume 17 2022, Issue #2, pp. 124-137
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This work is licensed under a Creative Commons Attribution 4.0 International License

During the COVID-19 pandemic, bank stability became a priority for the Indonesian Financial Services Authority and the government. Economic activity is expected to be restored by muffling the shocks caused by the COVID-19 outbreak. This paper investigates the influence of COVID-19 on banking stability by differentiating bank core capital size and ownership. Using data from 108 commercial banks in Indonesia for the period March 2020 and March 2021, the paper analyzes data using fixed effects regression. The results show that COVID-19 has a detrimental and significant effect on bank stability in Indonesia. Regardless of the size and ownership of a bank’s core capital, it was found that no bank is immune for a year to the severe implications of COVID-19. This condition was experienced by both state banks and private banks, large and small. To assist in the absorption of COVID-19 shocks, this paper proposes policies for regulators that include stimulus packages and countercyclical roles in the banking system via government-owned banks.

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    • Table 1. Descriptive statistics
    • Table 2. Correlation matrix
    • Table 3. COVID-19 and bank stability – baseline regression
    • Table 4. COVID-19 and bank stability – large vs small banks
    • Table 5. COVID-19 and bank stability – government vs private banks
    • Table 6. COVID-19 and bank stability – robustness checks with alternative measurement of bank stability
    • Table 7. COVID-19 and bank stability – robustness checks with alternative measurement of COVID-19
    • Table 8. COVID-19 and bank stability – robustness checks with alternative measurement of econometric specifications
    • Conceptualization
      Siti Maria
    • Formal Analysis
      Siti Maria, Rizky Yudaruddin
    • Funding acquisition
      Siti Maria
    • Methodology
      Siti Maria, Rizky Yudaruddin, Yanzil Azizil Yudaruddin
    • Project administration
      Siti Maria
    • Resources
      Siti Maria, Rizky Yudaruddin
    • Supervision
      Siti Maria
    • Validation
      Siti Maria, Yanzil Azizil Yudaruddin
    • Writing – review & editing
      Siti Maria
    • Data curation
      Rizky Yudaruddin, Yanzil Azizil Yudaruddin
    • Investigation
      Rizky Yudaruddin, Yanzil Azizil Yudaruddin
    • Software
      Rizky Yudaruddin, Yanzil Azizil Yudaruddin
    • Visualization
      Rizky Yudaruddin
    • Writing – original draft
      Rizky Yudaruddin, Yanzil Azizil Yudaruddin