Liquidity Risk Analysis

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Analysis of Liquidity Risk of Islamic Bank in Indonesia Before and After Spin-Off

Abstract Islamic Bank is banking system that is based on the Islamic law that has two principles: sharing of profit and loss and the disallowance of the collection and payment of interest. The regulation stated that conventional bank is allowed to conduct business activities based on sharia guidelines through Unit Usaha Syariah (UUS). In 2008, Bank Indonesia declared a new regulation that one of the provisions is duty of conventional banks to do spin-off their Unit Usaha Syariah and convert into Bank Umum Syariah (BUS). The transformation from Unit Usaha Syariah to Bank Umum Syariah creates several risks. Liquidity risk is one of the several risks that are interesting
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The higher the LAR ratio indicates the loan of bank us up and its liquidity is lowly. So, the higher the ratio, the bank is more risky may be to higher defaults.
Loan to Asset Ratio= (Total Loans)/(Total Assets) X 100% Capital Adequact Ratio (CAR)
Capital Adequacy Ratio (CAR) or also known as KPMM (Kewajiban Penyediaan Modal Minumum) is a measure of a bank’s capital to absorb losses by calculating the ratio of capital to risk. CAR is a ratio that shows how much of the total assets of bank that contain risks (credit, investment, securities bills of other banks) financed part of its own capital in addition to obtaining funds from outside the bank. This ratio is utilized to cover depositors and encourage the effectiveness and substantiality of financial system.
Accordance with standards established by the Bank of International Settlements (BIS), all banks in Indonesia are required to provide a minimum capital of 8% of ATMR (Aset Tertimbang Menurut Resiko).
The higher the Capital Adequacy Ratio (CAR) of the bank, then the chances of banks getting financial difficulties is smaller. Thus, bank has strong financial capability and is able to control the risk of loss
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First part explains about determination of variable used in the research and its measuring tools. The next part is about research design. Research design is systematic plan to study a scientific problem in order to answers to research question. The last part is methodology process. The process of methodology itself will be described in detail every stages.
3.1 Defining the Variables In this study, the variable is liquidity risk and will be measured by cash ratio, financing to deposit ratio, loan to asset ratio, and capital adequacy ratio.
3.2 Research Design
The variables in this research and the relationship will be drawn in the schematic diagram as shown below: Based on the figure 3.1 above, the research design consists of three events. First is liquidity risk before spin-off that the researcher observes. Next is the experiment event which is spin-off process. The last is liquidity risk after spin-off, the observed event. The comparison of the two observed event will be measured by liquidity ratio. The research design will be applied to the Bank BNI Syariah and Bank Jawa Barat dan Banten Syariah to know the performance of liquidity before and after spin-off.
3.3 Methodology

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