27/03/2012

Indonesian Financial System

Banking and Monetary System

Banking Finansial System

Non Bank Financial System

Ahmad Cahyo Nugroho

Type of Bank
In Indonesia (UU 23/1999; UU 10/1998):
Comercial Bank Rp. 3 Trilion
Bank Perkreditan Rakyat Rp. 1-2 Bilion/500
Milion

Non Bank Financial Institution

Multifinance
Insurance
Pension Fund
Mutual fund
Assurance company
Venture Capital Companies
Penggadaian

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Function of Financial Markets

1. Allows transfers of funds from
person or business without
investment opportunities to one who
has them
2. Improves economic efficiency

Balance sheet of the central bank

Assets

Liabilities

Loans granted to commercial banks

Currency in circulation

Securities

Commercial banks reserves

Reserves

Deposits

Other assets

Securities issued
Other liabilities

Source: Mishkin, Frederic S. and Apostolos Serletis, The Economics of Money, Banking and Financial Markets, 2nd Canadian Edition,
Pearson Addison Wesley, 2004

Balance sheet of the commercial bank

Assets

Liabilities

Bank reserves

Liabilities to central bank

Bank credits

Deposits of households and firms

Other assets

Other liabilities

The Deposit Multiplier

All commercial banks are required by law
and the CB regulations to keep a fraction of
their deposits as reserve.
The ratio of new deposits to the increase in
reserves is called the money supply
multiplier: 1/r

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Balance sheet of the Commercial bank I

Required reserves r = 10 %
Loans and
Investment
9 000,-

Loans and
Investment
8 100,-

Bank I
Reserves

Deposits

+ 1 000

+ 10 000

Deposit

10 000

Bank II
Reserves
+ 900

Deposits

Deposit
9 000,-

+ 9 000

Assets

Liabilities

Bank reserves

1 000

Liabilities to central bank

Bank credits

9 000

Deposits of households
and firms

Other assets

Other liabilities

Total

..............

Bank reserves
Bank credits

900
8 100

Liabilities to central bank

Deposits of households
and firms

9 000

Other liabilities
9 000

Total

Total

10 000

The Deposit Multiplier

Liabilities

Other assets
Total

10 000

Deposit
8 100,-

Balance sheet of the Commercial bank

II.
Assets

10 000

9 000

Bank I:
Bank II:
Bank III:

Deposits:

Loans:

10 000
9 000
8 100

9 000
8 100
7 290

Total
100 000
Total reserves : 10 000

90 000

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How Commercial Bank Creating

Money Methods
Substitution
Transformation
Funding

How Commercial Bank Creating

Money Mechanism
Account Statement Loan
Currency Deposit

BANK EXPO
Aktiva

Passiva

Kas Rp 1.000.000.000

ACCOUNT STATEMENT LOAN

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BANK EXPO
Aktiva
Kas

BANK EXPO
Passiva

Rp 1.000.000.000

Aktiva

Passiva

R/K (Tn.A) Rp 100.000.000

Kas

Debitur (Tn.A) Rp 100.000.000

Rp 975.000.000

R/K (Tn.A) Rp 75.000.000

Debitur (Tn.A) Rp 100.000.000

BANK EXPO
Aktiva
Kas

Passiva
Rp 900.000.000

R/K (Tn.A) NIHIL

Debitur (Tn.A) Rp 100.000.000

CURRENCY DEPOSIT

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BANK EXPO

BANK EXPO

Aktiva
Kas

Passiva
Rp 100.000.000

Giro (Tn B) Rp 100.000.000

Aktiva
Kas

Passiva
Rp

20.000.000

Debitur (Tn.C) Rp

80.000.000

Giro (Tn B) Rp 100.000.000

BANK EXPO
Aktiva
Kas

Passiva
Rp

80.000.000

Giro (Tn C) Rp 80.000.000