<abstract xmlns="http://www.w3.org/1999/xhtml"><p>In determining its Domestic Systemic Important Banking (D-SIB), Indonesia implemented the Global Systemic Important Banking (G-SIB) based on three of five indicators, those being size, interconnectedness, and complexity. Both the G-SIB and the Indonesian D-SIB use an equal weight for each indicator, that is, 1/5 and 1/3 respectively. However, the weight could be modified by using the eigenvector of the Principal Component Analysis (PCA). We showed that this new weighting system was better than the official weighting system (referred to in this paper as the POJK approach) based on the Financial Services Authority (OJK) regulation No.46/POJK.03/2015.</p></abstract>

In determining its Domestic Systemic Important Banking (D-SIB), Indonesia implemented the Global Systemic Important Banking (G-SIB) based on three of five indicators, those being size, interconnectedness, and complexity. Both the G-SIB and the Indonesian D-SIB use an equal weight for each indicator, that is, 1/5 and 1/3 respectively. However, the weight could be modified by using the eigenvector of the Principal Component Analysis (PCA). We showed that this new weighting system was better than the official weighting system (referred to in this paper as the POJK approach) based on the Financial Services Authority (OJK) regulation No.46/POJK.03/2015.

Weighting on Systemic Important Banking (SIB) in Indonesia: The Official Versus PCA Approaches

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

In determining its Domestic Systemic Important Banking (D-SIB), Indonesia implemented the Global Systemic Important Banking (G-SIB) based on three of five...

Weighting on Systemic Important Banking (SIB) in Indonesia: The Official Versus PCA Approaches

Published Online: Jun 02, 2020

Page range: 155 - 182

Received: Feb 27, 2019

Accepted: Jun 27, 2019

DOI: https://doi.org/10.2478/jcbtp-2020-0018

Keywords
Eigenvectors, Indonesia, Principal Component Analysis, Systemic Important Banking, Weighting

© 2020 Samsul Anwar, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Weighting on Systemic Important Banking (SIB) in Indonesia: The Official Versus PCA Approaches

Published Online: Jun 02, 2020

Page range: 155 - 182

Received: Feb 27, 2019

Accepted: Jun 27, 2019

DOI: https://doi.org/10.2478/jcbtp-2020-0018

KeywordsEigenvectors, Indonesia, Principal Component Analysis, Systemic Important Banking, Weighting

© 2020 Samsul Anwar, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Eigenvectors, Indonesia, Principal Component Analysis, Systemic Important Banking, Weighting