Non-core deposit of Indonesian banking

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This paper aims to examine non-core deposit (NCD), or the fraction of deposit most likely to be withdrawn, based on bank liquidity behavior.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.

Citation

Harun, C.A. and Nattan, R.R. (2021), "Non-core deposit of Indonesian banking", Studies in Economics and Finance, Vol. 38 No. 2, pp. 207-226. https://doi.org/10.1108/SEF-10-2018-0311