After decades of the "banking information secrecy" culture in Indonesia, local banks now seem more willing to share clients' financial information to tax authorities (both local and foreign authorities). Earlier, Indonesian banks were reluctant to disclose this information as such transparency could mean banks would lose valuable clients. These "big clients" supply over half of banks' deposits. However, the situation has now changed due to the government's tax amnesty program.

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Chances are big that the banking sector of Indonesia will see the non performing loan (NPL) ratio rise up to the range of 3.0 - 3.5 percent in 2017. Anton Gunawan, Chief Economist at state-controlled Bank Mandiri, says the rising NPL ratio is not so much caused by the lower quality of credit in Indonesia's banking system. The bigger problem is rising "special mention" loans, a loan grade that refers to assets that pose potential weaknesses that require close attention.

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Indonesia's state news agency Antara reported that the Financial Services Authority (OJK), the government agency that regulates and supervises the financial services sector, revoked the license of the local unit of the Royal Bank of Scotland NV (RBS NV), hence effectively ending the company's business in Indonesia. The revocation was conducted on request of the lender's headquarters in the Netherlands. This request was sent on 1 November 2016. The bank had a long history in Indonesia. RBS NV started operations in 1969 in Southeast Asia's largest economy under the name ABN AMRO BANK NV Indonesia.

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Kasikornbank, the fourth-largest bank in Thailand, expressed its intention to acquire a bank in Indonesia. However, in line with the content of the ASEAN Banking Integration Framework, this plan cannot be carried out rapidly. Meanwhile, Indonesia's Financial Services Authority (OJK), which regulates and supervises the financial services sectors in Indonesia, only allows a foreign investor to acquire a majority-stake in small Indonesian banks (categorized under the BUKU 1 system) provided the foreign investor purchases two (small) banks and merge these into one entity.

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Credit growth in Indonesia improved in October 2016 after touching a low in the preceding month. In October credit growth in Indonesia was recorded at a pace of 7.4 percent year-on-year (y/y), reaching IDR 4,246.6 trillion (approx. USD $314.6 billion), accelerating from a growth pace of 6.4 percent (y/y) in September. This development is caused by Bank Indonesia's lower interest rates although the victory of Donald Trump in the 2016 US presidential election may have curtailed demand for credit due to the higher degree of uncertainty about future US political and economic policies.

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The Financial Services Authority (OJK), the Indonesian government agency that regulates and supervises the country's financial services sector, expects credit growth in Indonesia to expand by a bleak 6 - 7 percent (y/y) in 2016, far below the initial growth forecast of 12 - 14 percent (y/y). OJK Chairman Muliaman D. Hadad said credit growth is slowing in Indonesia amid sluggish global and domestic economic growth as well as the strategy of companies to settle debts rather than seek credit for business expansion, while individual credit demand remains bleak as well.

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Indonesian entrepreneurs say their credit demand is limited due to few expansion and investment plans ahead of the end of the year. Although the Indonesian economy is recovering - reflected by accelerated GDP growth figures in the first two quarters of the year - demand from abroad for Indonesian products remains weak, while domestic demand remains somewhat subdued as well (reflected by the nation's structurally weakening export and import figures over the past 15 months). As a result credit growth has been slowing accordingly.

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Although Indonesia’s economic fundamentals and future economic outlook have improved in recent months, supported by government spending, recovering household consumption and rising commodity prices, Indonesian banks remain very conservative when it comes to disbursing new credit to companies. Recently, the central bank of Indonesia (Bank Indonesia) cut its projection for credit growth in the nation's banking sector this year from the range of 10 - 11 percent year-on-year (y/y) to 7 - 9 percent (y/y).

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State-controlled financial institution Bank Rakyat Indonesia (BRI) is scheduled to launch its satellite - called BRIsat - at 03:30 am local Jakarta time on 9 June 2016 in Kourou (French Guiana). BRI President Asmawi Syam told reporters that the launch is a milestone, not only for BRI but for the global banking industry as BRI will become the first bank to operate its own communications satellite. In Indonesia, the world's largest archipelago, a satellite is more efficient than fiber optic. With the BRIsat the bank is able to reach (potential) customers in the remote areas.

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Indonesian banks support the country's financial authorities' intention to cut lending rates to single digit margins (in a bid to boost credit growth and economic activity). However, these banks argue that lower interest rates should be the result of enhanced efficiency at banks, not by the Financial Services Authority (OJK)'s plan to cut banks' net interest margin (NIM). Earlier this year, the OJK - the government agency that regulates and supervises Indonesia's financial services sector - announced its plan to push state-owned banks' NIM down to the range of 3 to 4 percent.

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Moody's Investors Service, one of the big three global credit rating firms, predicts that profit in Indonesia's banking sector remains stable due to strong financial fundamentals. In its report "Indonesia Banking System Outlook", which discusses Indonesian banks' creditworthiness over the next 12 to 18 months, Moody's assesses that - despite an economic slowdown having reduced GDP growth to 5.78 percent in 2013 and puts some pressure on asset quality - high profitability and strong capital levels will continue into 2014.

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