MID TEST CASE STUDY

Company Introduction BCC provides services for consumer

BCC Bank is a banking and finance and personal loan financing that are used for
company that focuses on providing banking consumptive purposes as well as for
services for customers that are looking to developing the consumer loan business
save money for the short-medium term. from the housing value chain and prepares
BCC has been serving millions of customers and develops qualified, professional, and
spread all around Indonesia ever since 2005. high integrity human capital. BCC believes
For the following years, BCC aims to be the that employees are one of the most valuable
number one financial service provider for the assets for any organization and company.
people of Indonesia. Sustainability will not be possible without
As a financial company that strongly the contribution of employees. BCC also
believes in good corporate governance strives to create the best conditions and
(GCG), BCC’s company value aims to reflect work experiences for all employees.
the spirit of good corporate governance and
sustainable finance. Stated below is BCC’s Services Provided
company value, motto, vision, and mission: BCC provides service that makes
banking activities faster and more efficient.
Company Value
The convenience of accessing everything
Excellence, Accountability, Adaptability,
from smartphones from maximizing the
Trust, and Integrity
users’ money with higher interest rates,
managing finance with multiple debit cards,
Vision
and even allocating money and setting
To become the number 1 financial service
budget limits is what differentiate BCC from
provider of Indonesia
traditional banks. With BCC, customers can
have up to three different debit cards, check
Mission
and manage all your cards easily, and also
Be better, Working optimally.
set the parameters of your debit cards such
as setting the transaction limit,
Humanising Financial Services.
block/unblock any or all the cards remotely,
or changing the card’s PIN number.
Increase Awareness and responsibility
As a fairly traditional bank, BCC relies
through the environment and society.
on loan returns in order to maintain the profit
need for ensuring operational sustainability.
With no end in sight for the pandemic, said
sustainability is visibly threatened.

1
Main Challenges
It is no doubt that the pandemic has collection of receivables, as needs develop
affected everyone from the biggest of to raise payables to large suppliers. The
corporations to the smallest businesses. As primary reason banks have a liquidity
a financial services company, BCC problem is that there is a continuous and
experienced several challenges that often unpredictable shift in deposits.
threatens the company’s profit and Especially when customer behavior
operational sustainability. The internal team continues to change during the pandemic.
at BCC has determined the most important And thus pressure on liquidity happens. This
problems, which boils down to the following: pressure on liquidity makes banks profitless
because their assets are being used to fill
Increase in past-due and nonperforming their financial obligations.
loans
A loan in banking is when a bank Declining net interest margins and fee
offers to lend money to consumers for a income
certain time period. Bank loans have some Net interest margin (NIM) refers to
conditions for the borrower, the borrower the comparison of the net interest income
will need to pay a certain amount of interest generated by a financial firm from credit
per month, or per year. There are six products such as loans and mortgages, with
categories of loans, personal loans, credit the interest it pays to lenders and holders of
cards, home-equity loans, home-equity lines savings accounts and certificates of
of credit, credit card cash advances, and deposit. NIM is commonly expressed as a
small business loans. percentage, which indicates the profitability
Due to the pandemic, the of a bank or investment firm. A study by
performance of bank loans has decreased Angbazo in 1997 shows that the net interest
significantly. Referring to a study by margins of commercial banks reflect both
Strategy&, Non-Performing Loan (NPL) have default and interest rate risk premiums,
doubled because of the pandemic. while other classes of banks are more
Corporate and small to medium enterprises sensitive to one of these risks, but not the
credit will be the largest things of new NPLs, other. This shows that particular attention
accounting for almost two-thirds of the NPL has been paid to relating interest margins to
ratio increase. The impact of the pandemic risks faced by the bank.
on the corporate credits is diverse between The COVID-19 pandemic has
industries. The COVID-19 made NPL was contributed to both a significant uptick in
overwhelmed. business lending and a slowdown in
household lending. Though the overall stock
Pressure on liquidity of credit issued has increased, the net
Liquidity in banking refers to a bank's interest income during the first half of 2020
capacity to satisfy its financial contracted, thanks to the negative
commitments as they come due. Depending contribution of average loan book rates. This
on the market, many businesses may see results in a declining net interest margin for
lower sales during the pandemic, resulting in banks, which further decreases the profit of
less cash flow, along with a delayed banks.

2
Capital assessment and risk management The percentage of loan growth should be
Capital assessment means a change maintained to achieve banks’ profitability
against any lot representing a portion of the and prevent non-performing loans (NPL)
association’s cost for the purchase, rates from soaring. Indonesia experiences
installation, construction, or expected and loan growth depression because of the
unexpected repair or replacement, of any pandemic. The loan growth rate was at 5,93
capital improvement (including the percent in February 2020 and is said to be
necessary fixtures). the lowest rate since November 2009. In
Risk management becomes 2020, Indonesian economists predicted that
especially important during times of crisis to the condition will be back to normal in March
retain customer trust and ensure the this year. However, seeing no decrease in
stability of the financial system by assessing Covid-19 cases in Indonesia, the condition
the short-term, medium-term, long-term, remains unknown (Parama, 2020).
and so on. The outbreak has created
considerable strain and uncertainty in the Case Discussion
global financial markets. Banks are The impact of the COVID-19
experiencing liquidity risk management pandemic has affected the company’s
issues from deferred loan repayments, condition severely. With no clear outcome in
potentially higher deposit run-offs, and sight, the uncertainty has caused difficulties
margin calls due to increased volatility. for the company in maintaining operational
The COVID-19 pandemic is still and profit sustainability in this condition.
expected to put downward pressure on the Other than the 5 problems mentioned
capital of banks. Risk-Weighted assets before, the company also struggles in
(RWA) may be impacted by higher charges allocating their budget to fit the uncertain
from increased volatility levels and higher future. Especially in marketing, with the
counterparty risk. This possible increase in customer needs and the market condition
loan provisioning from higher default rates constantly changing, it is uncertain for the
from the pandemic could increase credit company whether to focus on traditional
risk-weighted assets, therefore, reducing the marketing, digital marketing, social media
capital adequacy ratio. It may be difficult to marketing, or other types of marketing.
accurately predict how long the outbreak will Based on the explanation stated
last. above, formulate a strategy and a budget
allocation (optional) to ensure both profit
Depressed loan growth and operational sustainability for the
Loan growth defined as the total of a company in the short run and in the long run.
bank’s customer loan year to year in percent For a comparison, the marketing budget of
(Foos et al., 2010). As we know, retail and BCC in the previous year (before COVID-19)
commercial banks gain profit mainly from is IDR 96 billion or around 0.05% of its total
the loan or lending system interest rate. assets. The marketing budget for the next
Covid-19 pandemic causing economic year is still up for discussion. In that case,
uncertainty that leads to a shift in pricing make sure that the strategy is economically
and corporate loans in the market and viable and executable with consideration to
affecting the loan growth of Indonesian the current and possible future situation in
banks (Hasan et al., 2020). Indonesia.

3
Further Readings Paper Format
National Loan Growth Data Writing Format
https://tradingeconomics.com/indonesia/lo Title : Times New Roman, 16pt Bold
an-growth Body : Times New Roman, 12pt
Layout : Justified
Paper Size : A4
National Net Interest Margin and Net Line Spacing : 1.5 lines, no before after
Interest Income Data Margin : 2.5 cm (top & bottom), 2 cm
https://fred.stlouisfed.org/series/DDEI01ID -------------------------(left and right)
A156NWDB File Format : PDF

https://www.ceicdata.com/en/indonesia/in
The minimum content of the paper are as
come-statement-commercial-bank/comm-
follows:
banks-net-interest-income
Introduction
Theoretical Framework
Nonperforming Loans Data Content
https://www.ceicdata.com/en/indicator/ind Conclusion
onesia/non-performing-loans-ratio Suggestion

https://www.theglobaleconomy.com/Indon
esia/nonperforming_loans/

https://data.worldbank.org/indicator/FB.AS
T.NPER.ZS?locations=ID

4
References
Angbazo, L. (1997). Commercial bank net
interest margins, default risk, interest-rate
risk, and off-balance sheet banking. Journal
of Banking & Finance, 21(1), 55-87.
S c i e n c e d i r e c t .
10.1016/S0378-4266(96)00025-8
Foos, D., Norden, L., & Weber, M. (2010,
December). Loan Growth and Riskiness of
Banks. Journal of Banking & Finance,
21(12), 2929-2940.
https://doi.org/10.1016/j.jbankfin.2010.06.0
07
Hasan, I., Politsidis, P. N., & Sharma, Z. (2020,
October 15). Bank lending during the
COVID-19 pandemic. SSRN.
https://dx.doi.org/10.2139/ssrn.3711021
Parama, M. (2020, April 20). Indonesia’s loan
growth to slump to 4% amid pandemic:
Economist. The Jakarta Post. Retrieved
February 02, 2021, from
https://www.thejakartapost.com/news/202
0/04/20/indonesias-loan-growth-to-slump-t
o-4-amid-pandemic-economist.html
PWC. (2020). Covid-19: Finance and Liqudity:
PWC. Retrieved from PWC Web Site:
https://www.pwc.com/us/en/library/covid-
19/finance-liquidity.html
Tutorials Point . (2021). Bank Management -
Liquidity : Tutorials Point. Retrieved from
Tutorials Point Web
Site:https://www.tutorialspoint.com/bank_
management/bank_management_liquidity.
htm
Wackerbeck, P., Marek, S., & Wegner, T. (2020,
July 4). Non-performing loan management
in light of COVID-19. Strategy&.
https://www.strategyand.pwc.com/de/de/i
mplications-of-covid-19/non-performing-loa
n-management.html
Whittlesey, C. R. (1945). Bank Liquidity and the
War. National Bureau of Economic
Research, 14.