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.


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How to Cite
HARJITO, D. Agus; WIRATAMA, M.A.B. Hananta. The Balance Sheet Network Analysis for Measuring Systemic Risk of Islamic Commercial Banks in Indonesia. Journal of Islamic Finance, [S.l.], v. 6, p. 100-113, dec. 2017. ISSN 2289-2117. Available at: <>. Date accessed: 24 jan. 2018.