The role of capital in loan growth is based on liquidity creation Syarief Fauzie, Irsyad Lubis, Muhammad Syafii
Universitas Sumatera Utara
Abstract
The implementation of Basel III in the banking industry in Indonesia requires additional capital in addition to the required capital which is called a capital buffer. Formation of this additional capital to anticipate losses from excessive loan growth. Therefore, this study aims to analyze the effect of capital on loan growth in the value creation process. This study uses two groups of banks classified as banks with high and low liquidity creation. The use of two groups of banks based on liquidity creation to see the role of each capital in increasing loan growth. This study uses 27 banks listed on the Indonesia Stock Exchange. The data used in this study is quarterly data for the period 2017 - 2020 where the generalize method of moment is used as an analytical tool. The results of the study show that overall capital and capital buffers have an important role in increasing the growth of loans to banks. But based on the classification of bank groups based on liquidity creation, only banks with high liquidity creation indicate that capital has an important role in loan growth.
Keywords: Capital, loan growth, liquidity creation, capital buffer
