INDONESIA'S CONVENTIONAL BANKS' STABILITY THROUGHOUT NORMAL AND CRISIS ECONOMIC CONDITION: A MULTIDIMENSIONAL APPROACH

Stability of banking sector is considerably important because of its important role in an economy. Historically, banking crisis that hits a country would cost 15% of the total asset of banks and 2% of a country’s GDP for recovery cost. Previous studies has successfully measured the stability of banking sector and financial system stability using Altman’s Z-score that focus on profitability measurements. This study proposes Q-index multidimensional approach that uses pressure, efficiency and intermediation dimension to measure conventional bank’s stability. This approach has some advantages that could be used to improve the stability condition and form some regulation for improving and or recover banks stability condition. The formed index shows majority Indonesia’s conventional banks had reached index higher than index 2 threshold, a crisis condition in year 2007-2008, a global financial crisis period. Ever since 2009 the stability condition of Indonesian’s conventional banks has improved and steadily reached a good condition, below index 1.3.