GUARD Your Bank’s Vault! A small misstep could result in your funds being “taken” by a rival bank. Bankers are already complaining about the rising cost of liquidity. The competition between banks for funds has becomes a common occurrence. However, this „erce rivalry, which has been ongoing for the past decade, has now taken a more aggressive turn, involving the monetary authority of Bank Indonesia and the Ministry of Finance. If this competition for funds is not controlled, it may lead to the onset of crowding out.

Bank Indonesia’s products, such as Retail Bank Indonesia Securities and Government Securities, have become key competitors to banks. In fact, banks are now competing aggressively for third-party funds. The situation has become even more pressured since late last year, when major „nancial institutions like the Social Security Management Agency and the Hajj Financial Management Agency began pressuring banks to raise their interest rates.

Is this the beginning of crowding out, or is it simply a result of the banking sector’s inherent sensitivity due to the shallow level of „nancial deepening, which makes it more vulnerable to market ¦uctuations? The shallowness of the „nancial sector causes the banking industry to be highly sensitive to economic disruptions. Interest rates tend to rise suddenly, akin to a runny nose when someone has the ¦u, rising quickly, but di§cult to lower.