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Non-core deposit of Indonesian banking

Author

Listed:
  • Cicilia A. Harun
  • Raquela Renanda Nattan

Abstract

Purpose - This paper aims to examine non-core deposit (NCD), or the fraction of deposit most likely to be withdrawn, based on bank liquidity behavior. NCD is an analytical component of bank deposit; hence, its withdrawal rate is crucial. Design/methodology/approach - The paper categorizes all 114 commercial banks in Indonesia using K-Median clustering and produces NCD coefficients for each cluster. Clustering result resembles the bank ownership-based grouping. Findings - Generally, state-owned banks and private-domestic banks have smaller NCD coefficients compared to foreign-owned, joint-venture and regional government-owned banks. The NCD coefficient then can form thresholds for an event of extreme deposit withdrawal for macroprudential surveillance. Originality/value - NCD is an analytical indicator that can be useful to manage the liquidity risk of banks; however, this indicator is rarely found in the literatures, hence not many know how to estimate the indicator.

Suggested Citation

  • Cicilia A. Harun & Raquela Renanda Nattan, 2019. "Non-core deposit of Indonesian banking," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 38(2), pages 207-226, August.
    • Handle: RePEc:eme:sefpps:sef-10-2018-0311
    DOI: 10.1108/SEF-10-2018-0311
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    More about this item

    Keywords

    Financial accounting; Banking liquidity; Non-core deposit; Third party deposit; Core deposit; Banks liquidity level; G32; G17; G21;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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