The Balance Sheet Network Analysis for Measuring Systemic Risk of Islamic Commercial Banks in Indonesia

  • D. Agus Harjito Universiti Islam Indonesia
  • M.A.B. Hananta Wiratama Universiti Islam Indonesia


Systemic risk in a simple definition is potential loss suffered by the financial system which is commonly caused by the individual institution in the system. The default of Bear Sterns and Lehman Brothers in 2008 which were two of the five largest investment banks in the U.S at the time has changed the perspective that Too-Big To Fail was not solely an issue in the vulnerable financial system. Nevertheless, recent studies indicate that Too-Connected To Fail (TCTF) problem is actually the main issue of the vulnerable financial system. This study provides early warning system regarding the systemic event by measuring the systemic risk in Indonesian Islamic commercial banks (ICBs). This study employs a balance sheet network analysis to measure the systemic risk in Indonesia ICBs which relies only on the interconnection among banks in the system. The purposive sampling method is applied in this study involving 10 banks in 2012 and 11 banks in 2013 and 2014. This study investigates the capital loss suffered by an individual institution in case of bank default in the system, the Too-Connected to Fail (TCTF) risk which measures how risky the individual bank towards others and system, and the TCTF vulnerability which measures how vulnerable an individual bank in case of a bank default in the system. It is forecast that this study can be one of the references for the macro prudential and micro prudential supervisions in Indonesia.



Aldasoro, I., & Angeloni, I. (2013). Input - Output - Based Measure of Systemic Importance. SAFE Working Paper No. 29. Retrieved from:
Anand, K., Gai, P., Kapadia, S., Brennan, S., & Willison, M. (2013). A Network Model of Financial System Resilience. Journal of Economic Behavior & Organization. 85(C), 219-235.
Ascarya, C.W., & Syarifuddin, F. (2012). The Anatomy of Financial Crisis and How to Prevent It: The Case of Dual Financial System in Indonesia. Bank Indonesia Working Paper.
Bank for International Settlement. (1994). Annual Report 1993-1994. Basle, Switzerland.
Bank Indonesia. (2009). Peraturan bank Indonesia NOMOR 11/ 3 /PBI/2009 . Jakarta.
Bank Indonesia. (2009). PERATURAN BANK INDONESIA NOMOR 11/10/PBI/2009. Jakarta.
Beck, T., Kunt, A. D., & Merrouche, O. (2010). Islamic vs. Conventional Banking Business Model, Efficiency, and Stability. Policy Research Working Paper.
Blancher, N., Mitra, S., Morsy, H., Otani, A., Severo, T., & Valderrama, L. (2013). Systemic Risk Monitoring ("SysMo") Toolkit - A User Guide. IMF Working Paper.
Bluhm, M., & Krahnen, J. P. (2014). Systemic risk in an interconnected banking system with endogenous asset markets. Journal of Financial Stability, 13, 75-94.
Borri, N., Giorgio, G. D., Caccauaio, M., & Sorrentino, A. M. (2012). Systemic Risk in European Banking Sector. Department of Economics and Finance, LUISS University, Viale Romania .
Chan Lau, E. V. (2009). Assessing The Systemic Implications of Financial Linkages. IMF Working Paper of Globa Financial Stability Report. IMF.
Choiruzzad, S. A. (2012). The Central Bank in the Development of Islamic Economy Project in Indonesia: Role, Motivations and Moderating Effect. The Ritsumeikan. Journal of International Studies, 25(2), 437–460.
Gai, P., Haldane , A., & Kapadia, S. (2011). Complexity, Concentration and Contagion. Journal of Monetary Economics, 58(5), 453-470.
Hanif, M. (2014). Differences and Similarities in Islamic and Conventional Banking. National University of Computer & Emerging Sciences, Islamabad .
Huser, A. C. (2015). Too Interconnected to Fail: A Survey of the Interbank Networks Literature. SAFE Working Paper No. 91. Retrieved from:
Kaufmann, G. G. (1996). Bank Failures, Systemic Risk, and Bank Regulation. Retrieved from:
Krause, A., & Giansante, S. (2012). Interbank Lending and The Spread of bank Failures: A Network Model of Systemic Risk. Journal of Economic and Behavior, 83, 583-608.
Kuzubas, T. U., Omercikoglu, I., & Saltoglu, B. (2014). Network centrality Measures and Systemic Risk: an Application to the Turkish Financial Crisis. Physica A: Statistical Mechanics and its Applications, 405, 203-215.
Laeven, L., Ratnovski, L., & Tong, H. (2014). Bank Size and Systemic Risk. International Monetary Fund Research Divission .
Lau, J. A. (2013). Systemic Risk Assessment and Oversight. London: Incisive Media.
Lenzu, S., & Tedeschi, G. (2012). Systemic Risk on Different Interbank Network Topologies. Physica A: Statistical Mechanics and its Applications 391 (18), 4331–4341.
Ministry of Religion. (2010). Al-Qur'an. Yogyakarta: UII Press.
Otoritas Jasa Keuangan. (2013). Statistik Pebankan Syariah Desember 2013. Jakarta: Departemen Perizinan dan Informasi Perbankan Deputi Direktur Publikasi dan Administrasi (IDAP) Otoritas Jasa Keuangan.
Otoritas Jasa Keuangan. (2014). Statistik Perbankan Syariah Desember 2014. Jakarta: Departemen Perizinan dan Informasi Perbankan Deputi Direktur Publikasi dan Administrasi (IDAP) Otoritas Jasa Keuangan.
Penerbit, T. (2010). Undang-Undang Perbankan Syariah dan Surat Berharga Syariah Negara . Bandung: Fokus Media.
Roulet, C., & Wignall, A. B. (2013). Macro-prudential Policy, Bank Systemic Risk and Capital Controls. OECD Journal. Financial Market Trends, 2013(2).
Simorangkir, I. (2012). Kajian Indikator Peringatan Dini Bank Runs di Indonesia: Pendekatan Markov-Switching. Bank Indonesia Working Paper. Jakarta, Bank Indonesia.
How to Cite
Harjito, D. A., & Wiratama, M. (2017). The Balance Sheet Network Analysis for Measuring Systemic Risk of Islamic Commercial Banks in Indonesia. Journal of Islamic Finance, 6, 100-113. Retrieved from