Analysis of the Level of Competition in Commercial Banks in Indonesia

Abstract

Sound bank competition will give rise to banks with good performance that can compete at both the regional and global levels. The global financial crisis in 1998 influenced Indonesia’s financial sector. The goals of this research are (1) to analyze the level of different banking competitions between banks according to BUKU 1, BUKU 2, BUKU 3, BUKU 4; (2) to analyze the SCP of the commercial banks in Indonesia; and (3) to formulate a recommendation for the implication of the Indonesian general banks’ competition level for the financial sector policies. According to the research results, banks are classified into BUKU 1, BUKU 2, BUKU 3, and BUKU 4 based on the amount of core capital with a performance that increased respectively from BUKU 1 to BUKU 4; banks are classified based on the ownership into state-owned banks, foreign private banks, private banks, Islamic banks, and regional development banks. The research showed that the state-owned bank group exhibited the best performance and the regional development banks demonstrated the worst performance. The novelty of the research is in analyzing the level of competition between all banks in Indonesia and between the type of banks (government, private, Syariah, local) and level of capital (Buku 1, Buku2, Buku3, and Buku4).

Keywords: BUKU banks, performance, structure conduct performance.