Jakarta / Hong Kong / Singapore, July 14 (Fitch) on Thursday, Bank Indonesia (BI) of 50 basis points rate hike on the stability of the banking system was positive, because the bank is likely to slow economic growth, streamline loan, Fitch Ratings (Fitch Ratings) representation. Higher interest rates should help to ease credit risk accumulated several years of rapid growth, and supports the sovereignty and the bank's credit standing. For highly capitalized banks in Indonesia, we believe that excessive expansion of credit risk than debt increased due to higher interest rates negative impact on profitability. Indonesia is one of the five countries in Asia and the macro-prudential indicators (MPI) score of '3 ', highlighting a high risk of systemic pressures. However, banks have higher capital buffers, comfortable provision coverage and strong production ability to generate retained earnings. In addition, the central bank has taken prudent measures to counter the potential macroeconomic shocks, such as from consumer finance sector. BI last year increased down payment requirements, as well as cars and motorcycles mortgage financing. We expect Indonesia's banking sector remains sound, from higher interest rates and lower bank lending growth slowed profitability rising impairment charges. We believe that the central bank to tighten mortgage requirements recommended - along with raising interest rates - should take steam out of the property market. In the 14 metropolitan residential property prices increased by 4.8% over Q113 according to BI data series began in 2002, the strongest since the rise - as well as five or more rings than the 1.2 percent average. Authorities are trying to support confidence in the people and investors for economic and financial stability commitment. The central bank raised interest rates 75 basis points, the total in the last two months - the largest since 2008, moving. We believe that this year is likely to further raise interest rates if inflation exceeds a revised 7.8% inflation target. This is because the new central bank governor, Agus Martowardojo, will focus more on fighting inflation than stimulating economic growth. We have previously highlighted the risk of inflation remains high and volatile, and the emergence of the current account deficit sovereignty - especially in the global financial conditions change. Reduce current account deficits, and to avoid from the recent rise in fuel prices of second-round effects on inflation, will strengthen our confidence, monetary policy management in line with economic to maintain basic stability. Therefore, it will also support the sovereignty and the bank's credit status. Contact: Iwan Wisaksana financial institutions director +62 21 2902 6406 PT Fitch Ratings Indonesia Level 20 Prudential Tower JL. JEND. Sudirman Kav.79, Jakarta, Indonesia, 12910 Andrew Colquhoun, senior director of sovereign +852 22639938 Cynthia Chan, Senior Director Fitch Wire +44 2035301655 Media Relations: Leslie Tan, Singapore, Tel: +65 6796 7234, email: leslie.tan @ fitchratings.com. The above article originally appeared in Fitch's line of credit market commentary page as a post. Original article can be accessed at www.fitchratings.com. Fitch Ratings (Fitch Ratings) all opinions expressed. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. By following this link, please read these restrictions, disclaimers: Here. In addition, the rating agency's public website "WWW.FITCHRATINGS.COM" the definition and rating Terms of Use. At any time from this website published ratings, criteria and methodologies. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available in the Code "behavior 'section of this website. Fitch may allow service provides an alternative to the rated entity or its related third parties. principal analyst for this service, is headquartered in the EU registered entities rated entity summary page can be found on this issuer Fitch website.
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