Indonesian banks told to maintain at least 3% leverage ratio from 2020

Indonesia's banking regulator on Monday issued a decree requiring banks to keep a minimum leverage ratio of 3% starting Jan 1, 2020, to comply with Basel III banking regulation recommendations.

The ratio of a bank's core capital measured against its total exposure - including total assets, derivative exposure, securities financing, etc - must be kept at at least 3%, the Financial Services Authority (OJK) said in a summary of the new regulation.

OJK said Indonesian banks are capitalised well beyond this requirement, with the industry average at 13.8%, based on end-2018 data.

The intention of the decree was "to limit over leveraging in the banking sector, so that the process of deleveraging deteroriating assets that can endanger the whole financial and economic system can be avoided", the OJK said.

(Reporting by Gayatri Suroyo; Editing by Kim Coghill)