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Journal : The International Journal of Financial Systems

Measuring the Financial Resilience of Indonesian Banking Sector under Geopolitical Uncertainty Using Panel Vector Autoregression (PVAR) Nisak, Khoirun; Setyowati, Endah; Najib, M. Thoha Ainun
The International Journal of Financial Systems Vol. 3 No. 2 (2025)
Publisher : Otoritas Jasa Keuangan

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.61459/ijfs.v3i2.88

Abstract

Geopolitical tensions can affect the stability of companies, including Indonesia's banking sector. Geopolitical risk, as measured by the Geopolitical Risk Index (GRI), is an external factor that reflects economic and political uncertainty arising from global adverse events. This study aims to understand the dynamics of the interaction of geopolitical risk on the stability of banking indicators, including ROA, ROE, CAR, and NPL. Furthermore, this study aims to assess financial resilience in the banking sector amid geopolitical tensions. Sampling was conducted across banking categories, including KBMI 4, KBMI 3, Islamic banks, and regional development banks. The data used are quarterly panel time series from 2015 to 2024. The analysis was conducted using Panel Vector Autoregression (PVAR) with the Generalised Method of Moments (GMM) approach. The results show that the impact of the GRI shock on banking indicators is short to medium-term, with the most significant effects on profitability (ROA, ROE) and credit quality (NPL). The results confirm that global geopolitical pressures play a dominant role in explaining fluctuations in bank indicators in Indonesia, particularly capital efficiency and capital structure. Based on the dynamics of these interactions, Bank A, Bank B, Bank D, and Bank E are classified as more resilient, and Bank C, Bank F, Bank G, and Bank H are classified as less resilient. More resilient banks are characterised by a low GRI impact on ROA and CAR, and a quick return to stability, while less resilient banks have a high GRI impact on ROE and CAR.
Co-Authors ', Gusnardi Abdul Basid Al Anshori, Muhammad Zakariya Alhanina, Shiva Aminulloh, Izuddin Nur Anggraeny Puspaningtyas Arif Mahya Fanny Ayudyanti, Ika Bahtiar, Yuyun Beti Kristinawati Budianto Budianto Bulan, Linda Sari Chairul Saleh Daniel -, Daniel Darajat, Mulkan Devi Endah Setyowati Endayana, Bestari Evie Destiana Fathul Lubabin Nuqul Febrianti, Yeni Elviza Firdaus, Thoriqi Gusmaniarti Hardisem Syabrus Hendra Sukmana ibnu rochim, Achluddin Ilhami, Maylina Janah, Unun Roudlotul Junaidi, Muhammat Kamilah, Aqila Sofia Kartika Rose Rachmadi Khasibah, Nur Krisnaningsih, Diah Lathifunisa, Hilwa Sifa’ulia Leli Hasanah Lubis Luhur Prasetiyo M. Umar Burhan Maghfiroh, Henik Mawazin, Fawaz Ma’ruf, Amar Midtahillah, Miftahillah Mubarak, Fadhil Muqsith, Abdurrahman Naifa, Rena Fauzan Najib, M. Thoha Ainun Nasution, Mayang Sari Nur Widayati Pardiman Pardiman Partahian, Partahian Pratama, Muhammad Farhan Putra Priyo Subagyo, Panggih Purwati Anggraini, Purwati Puspitasari, Rinda Eka Putri, Ariana Diyah Anesti Putri, Grace Febry Permata Putri, Mita Oktavia Raden Mohamad Herdian Bhakti Ratno Abidin Rosyidah, Nur Hidhayatur Ruminda Hutagalung Salimah, Ifa Dotus Santoso, Akhsan Fitri Sa’adah, Silvia Bilqis Sa’ida, Naili Sepriani, Nadia Shodiq, Muhammad Ahsan Fatwaddin Siregar, Muhammad Nuh Siti Salmah Supeno Syafiani, Angela Syaifuddin Syaifuddin Syamsiar, Syamsiar Syephiana, Ismi Erli tihawa, tihawa Ummah, Salwa Zahrotul Utami, Meldi Putri Utsmani, M. Mujib Wardani, Dewi Novi Wibisono, Amri Mashuri Wulandari, Wanda Tri Yeni Widiyawati