The Operating Cost Ratio of Non-Foreign Exchange Private Banks is Inefficient

The July 2016 Banking Statistics show that the highest ratio of Operational Expenses to Operational Income (BOPO) was recorded by the group of National Conventional Non-Foreign Exchange Private Commercial Banks (BUSN) at 100 percent, while the lowest ratio was recorded by Conventional Regional Development Banks (BPD) at 75 percent. According to Bank Indonesia regulations, an excessively high BOPO ratio indicates that the performance of some banks in Indonesia is still inefficient.

The historical data of the BOPO for the group of Conventional Non-Foreign Exchange Private Commercial Banks (BUSN) has been continuously increasing since 2012, previously standing at only 79 percent. For Conventional BPDs, the highest BOPO was recorded in October 2015 at 80.46 percent.

The Financial Services Authority (OJK) and Bank Indonesia continue to strive to encourage Indonesian banks to suppress their BOPO ratios to prevent them from becoming too high. One example of this is the issuance of the Financial Services Authority Regulation (POJK) Number 6/POJK.03/2016 concerning Business Activities and Branch Networks Based on Bank Core Capital.