Jakarta (ANTARA) – The Financial Services Authority (OJK) acknowledged an insignificant impact of the Middle East conflict on the capital and liquidity of Indonesian banks, as exposure to non-resident parties in the region is quite small.“The direct impact of the Middle East conflict on Indonesian banks is relatively limited,” Dian Ediana Rae, chief executive of banking supervision at the OJK, said here on Monday.However, considering Indonesia is an open economy, he emphasized the need to closely monitor global developments—particularly in light of the ongoing war involving the US, Israel, and Iran, which have impacted geopolitical and geoeconomic conditions.If the war escalates for a long time, he continued, this condition may become a cause of vulnerability that will impact the Indonesian economy through trade and financial channels.Rae noted that disruptions to global energy distribution channels, including the closure of the Strait of Hormuz, could disrupt energy commodity prices.Rising global energy prices will drive up fuel prices and the cost of distributing goods, including raw materials and food, thereby increasing inflationary pressures both globally and domestically, he warned.Under these conditions, if inflationary pressures are responded to with tighter monetary policy, he warned that economic growth could be impacted through reduced public consumption and production activity.Furthermore, he stated that the rising cost of living amidst slowing demand will pressure corporate margins or profits and increase overall corporate risk.This situation could be exacerbated by increasing global uncertainty, which encourages investors to adopt a risk-off attitude, thus increasing Indonesia's risk premium, triggering capital outflows, and depressing the rupiah exchange rate—ultimately posing financial risks to banks.In terms of credit, he explained that rising energy prices and inflationary pressures could increase production and distribution costs, reduce company profitability as well as weaken debtors' repayment capacity and public purchasing power.This situation has the potential to increase non-performing loans (NPLs) and the need for provisions for impairment losses (CKPN).He added that these risks are particularly heightened in sectors sensitive to energy prices and logistics costs, such as transportation, manufacturing, and sectors dependent on imported raw materials.Furthermore, Rae stated that pressure on purchasing power could also increase credit risk in the MSME and consumption segments, which are more sensitive to changes in economic conditions.Under these conditions, banks tend to be more cautious in disbursing credit, which could impact future credit growth.However, he emphasized that the resilience of Indonesian banking remains strong amidst various global risks, with financial standards above international best practices.As of February 2026, banking capital remained high, with a CAR ratio of 25.83 percent, while credit risk remained manageable, with a gross NPL ratio of 2.17 percent and a stable trend in provisions for impairment losses (CKPN).On the liquidity side, banking liquidity remains adequate, with the ratio of liquid assets to third-party funds (LA/TPF) and liquid assets/non-core deposits (AL/NCD) above the threshold, a loan-to-deposit ratio (LDR) of 84.72 percent within a healthy range, and a liquidity coverage ratio (LCR) of 195.64 percent, well above the regulatory threshold.While continuing to monitor risk developments, he emphasized that the OJK has urged banks to implement prudential principles in lending and overall risk management.Banks need to routinely conduct stress tests, both at individual banks and through the authorities, to measure resilience to various potential macroeconomic shocks, he suggested.According to him, the stress test results indicate that banking capital remains adequate to face the risks of significant changes in macroeconomic conditions.Furthermore, Rae ensured that the OJK continues to coordinate with relevant institutions, including the Financial System Stability Committee (KSSK), to monitor developments and take necessary steps to maintain financial system stability and support national economic growth.