OJK Climate Tests Arrive as Fires Hit Bank Books

Indonesia’s financial regulator issued a 2026 climate-risk playbook for banks on October 2, after fires and a quake had already hit borrowers. The Financial Services Authority, OJK, published Climate Risk Management and Scenario Analysis (CRMS) 2026 in Bali alongside a five-year banking roadmap. System capital still looks thick. The first real test is in the provinces, not in the ratio.

The 2023 promise that every bank would have to fold climate into lending has arrived as an updated method, not a new capital charge. OJK still says buffers can absorb a managed energy shift. The same officials have spent September warning that El Niño fires and a Nusa Tenggara earthquake are already chewing on cash flow in the real economy.

OJK Puts Climate Into the Banking Playbook

Chair of the OJK Board of Commissioners Friderica Widyasari Dewi and executive head of banking supervision Dian Ediana Rae launched the 2026 to 2030 Indonesian Banking Development and Strengthening Roadmap, RP3I, with commercial-bank chiefs in Denpasar on Friday, October 2. One of the five priorities is sustainable finance and strength against sustainability risks. The CRMS 2026 guide is the climate piece of that rollout.

CRMS is the method banks use to put climate into governance, strategy, risk limits, metrics, and public disclosure. The 2026 refresh updates how banks count carbon, which climate and macro paths they run, and how far physical risk analysis must go. It also adds a seventh book of standardized solutions so smaller shops can copy a common worksheet instead of building a model from scratch.

THE CRMS 2026 UPDATES

• Carbon math: Book 3 revises how banks calculate financed emissions.
• Scenarios: Book 4 refreshes climate paths and the matching macro assumptions.
• Physical risk: Book 5 widens the analysis of floods, drought, fire, and related shocks.
• Worksheets: Book 7, Standardized Solutions, gives a practical template for the industry.

Dewi told the Bali hall that banks need strong capital and liquidity and tight risk control, and that they also have to stay productive and inclusive while the climate file grows. Rae, speaking around the same launch, said natural disasters from Sumatra to Nusa Tenggara, and abroad, had reached a dangerous point, and that sustainable finance has to sit inside business strategy and risk management, not only inside a compliance checklist. Banks still supply about 80 percent of financing in Indonesia, he said, so the credit pipe is the main lever.

OJK posted the launch in its own words the next morning.

#SiaranPersOJK

Otoritas Jasa Keuangan (OJK) meluncurkan Roadmap Pengembangan dan Penguatan Perbankan Indonesia (RP3I) 2026–2030 sebagai langkah strategis untuk memperkuat fondasi dan meningkatkan daya saing industri perbankan dalam menghadapi dinamika perekonomian ke depan. pic.twitter.com/dkrgQk91YX

— OJK Indonesia (@ojkindonesia) October 3, 2026

The Three-Year Climb From a Pilot to a Rulebook

Commercial banks already had a legal duty before this week’s binder showed up. OJK Regulation Number 17 of 2023 on governance for commercial banks requires them to identify, measure, reduce, and disclose climate risk, both physical and transition, as part of ordinary risk control. Rural banks and sharia rural banks picked up a parallel duty under OJK Regulation Number 9 of 2024, which tells them to run sustainable-finance action plans and to fold climate into capital allocation.

The missing piece was a shared method. In March 2024 OJK issued a six-book climate-risk management guide and put the largest banks through a pilot, with working papers due that July. Seven banks also signed a net-zero support pledge at that launch. That pilot is what the original 2026 climate-test plan was pointing toward when the regulator first said the whole industry would have to price the risk.

THE ROAD TO THE 2026 GUIDE

1. 2023: POJK 17 requires commercial banks to treat climate as a core risk, and a climate stress-test note goes out to the sustainable-finance task force.
2. March 2024: OJK publishes CRMS in six books and starts a pilot among the largest banks.
3. February 26, 2025: The IMF and World Bank climate-risk review of the Indonesian financial system lands, and asks Jakarta to put the results into prudential policy.
4. March 2026: OJK releases the Climate Risk and Banking Resilience Assessment, CBRA, and says aggregate capital can handle a managed transition.
5. October 2, 2026: CRMS 2026 and the 2026 to 2030 banking roadmap go out together in Bali.

What did not arrive is a Basel-style add-on that forces every bank to hold extra capital against coal, palm, or coastal property. The 2026 product is still a guide, sitting on top of the 2023 governance rule. Supervisors can now ask for the worksheets. They have not published a climate capital floor.

Official Capital Ratios Still Look Comfortable

On the numbers OJK took to Bali, the industry is not short of loss-absorbing room. As of August 2026, the capital adequacy ratio stood at 24.1 percent and gross non-performing loans at 2.11 percent. Bank lending was up 13.65 percent from a year earlier. Third-party funds were up 10.92 percent.

BANK BUFFERS IN AUGUST 2026

• Capital: CAR at 24.1 percent, well above the usual regulatory floor.
• Bad loans: Gross NPL at 2.11 percent for the system as a whole.
• Credit growth: Lending up 13.65 percent year on year.
• Deposits: Third-party funds up 10.92 percent year on year.

CBRA, released in March 2026 with Australian and Prospera support, ran a forward look at asset quality, profit, and capital under transition and physical paths. OJK’s English summary said that, in aggregate, the banking sector has enough capital for climate pressure in managed transition scenarios. The same assessment warned that banks still have to put climate into governance, risk, and strategy in a more systematic way, and that supervisors will push for clearer data on carbon-heavy exposures.

Simulations inside CBRA put a hard number on delay. Physical losses, if the country does not shift, could cut Indonesian GDP growth by 15 to 16 percent on the paths OJK ran. The cost of moving toward net-zero emissions by 2060 sits around 4 percent of GDP. Those are long-horizon model outputs, not next-quarter earnings. They explain why OJK can call capital “adequate” and still call the climate file unfinished.

Almost Three-Quarters of Loans Face Transition Risk

The IMF and World Bank climate note, published February 26, 2025, is the cleanest map of what those worksheets will actually touch. Almost three-quarters of Indonesian bank lending sits in sectors exposed to climate transition risks. Coal already fuels more than 50 percent of electricity and accounts for about 10 percent of exports. Palm oil still supplies more than 70 percent of the global market. A shift in technology costs, carbon rules, or buyer standards hits those books through the borrower, not through a headline ratio.

WHERE THE LOAN BOOK SITS

Those five slices add to 60 percent. Other transition-sensitive credits make up the rest of the IMF’s almost three-quarters. The Fund treated the exercise as exploratory and said it should not be read as a capital-needs test. Even so, the physical-risk runs are blunt: in the harshest compound earthquake-and-flood case, common equity tier 1 ratios fall by about 2 percent. Under today’s climate that is modest against a 24.1 percent CAR. Under mid-century climate the same compound shock is larger, which is why OJK is widening Book 5 rather than declaring the file closed.

Green credit is growing from a high base and is still concentrated. OJK put sustainable lending at Rp2,075 trillion as of December 2024, up from Rp1,959 trillion in 2023. The largest bank group, KBMI 4, supplied Rp1,471 trillion of that, or 70.9 percent. The climate tests will bite hardest where the rest of the book still lives: factories, plantations, trucks, and buildings that do not carry a green tag.

Fires and a Quake Are Already Testing Borrowers

September gave supervisors a live drill. On September 21, Rae said forest and land fires in Kalimantan and Sumatra, amplified by El Niño, were a physical climate risk for banks with heavy credit in the affected belts. Agriculture, plantations, livestock, fisheries, and food processing feel the weather first. Smoke, closed schools, and broken distribution then hit traders and small firms. Rural banks whose books sit in one district take that shock faster than a Jakarta lender with a national spread.

Climate risk, in this case El Niño, provides an impact felt primarily by economic sectors that have a very high dependency on weather conditions, such as agriculture, plantations, livestock, fisheries, as well as the food and beverage industry.

Dian Ediana Rae, OJK executive head of banking supervision, written response, September 21, 2026

Rae said OJK and the banks already run disaster stress tests, and that capital at commercial banks remains enough to absorb potential climate losses. He also said banks with a high share of weather-tied sectors or regions face a greater drop in asset quality than diversified peers. OJK did not name the most exposed banks or print a fire-related NPL spike.

A week later the file moved from smoke to shaking ground. On September 28 OJK set special credit treatment for borrowers in eight kabupaten in East Nusa Tenggara under Regulation Number 19 of 2022 on disaster zones. For facilities up to Rp10 billion, quality can be judged on payment timeliness. Restructured loans can be classed current. The window runs three years. That is climate-adjacent credit administration in all but name: keep the borrower alive, keep the bank’s reported NPL from jumping, and buy time for the real economy to restart.

The system ratio can stay at 2.11 percent while a BPR in a fire belt is already working problem names. CRMS 2026 is supposed to make that gap visible before the next dry season, not after the relief circular goes out.

The First Hit Lands on Rural Books and Coal

CBRA’s calm headline and the IMF’s 2 percent CET1 drop describe the commercial-bank average. The weak joints sit off that average. Rural banks are tied to farm cash flow. POJK 9 of 2024 is the tool OJK is using on them: action plans, ESG practice, and climate in capital allocation. They do not have 24.1 percent CAR and a national deposit base. They have a district.

Coal is the other joint. Researchers Teguh Yudo Wicaksono and Rima P. Artha built a network from 34 listed coal firms and 38 listed banks. Under a 2C path they found stranded coal values of $60.1 billion, with a 90 percent range of $50.5 billion to $72.3 billion. Under 1.5C the stranded value rises to $99.2 billion. Those losses pass into bank credit losses of $1.8 billion (2C) and $3.2 billion (1.5C). No bank in their run breaches the regulatory capital floor. The most exposed systemically important bank still takes a hit equal to 43 percent of annual earnings. Macro impact is 0.37 percent of GDP under 2C and 0.62 percent under 1.5C, with bank deleveraging as the largest channel.

That is the shape of a concentrated risk: the system walks away, one large book does not. Asia Research and Engagement’s 2025 benchmark put Indonesian banks at 53 percent overall and only 17 percent on policy. Bank Rakyat Indonesia was the only major name with a 2050 net-zero target, a decade ahead of the national 2060 date. None of the country’s banks had committed to stop financing new coal plants, unlike named peers in Malaysia and Thailand. CRMS can measure that exposure. It does not, by itself, cap it.

What the 2026 Guide Still Does Not Reprice

The taxonomy that tells a loan officer whether a plant is “green,” “transition,” or outside the map is still generous to coal. Indonesia’s sustainable-finance taxonomy update, TKBI version 3, went out on February 5, 2026 and widened technical screens for agriculture, manufacturing, and waste. Earlier versions had already allowed some coal plants into the transition bucket if they met an emissions-cut path that energy researchers at the Institute for Essential Services Reform called too weak. CRMS uses TKBI as a reference for sustainable-portfolio counts. A worksheet that inherits a soft coal screen will not spit out a hard stop.

The IMF’s 2024 FSAP asked Bank Indonesia and OJK, in the short term of one to two years, to put climate-risk results into prudential policy on a risk basis. That clock runs through 2026. What landed on October 2 is better method, a seventh book of templates, and a public finding that capital is fine in a managed transition. It is not a sectoral risk weight on coal, a floor on coastal real estate, or a deadline to exit new captive power for nickel and aluminium.

OJK says the next steps are an adaptive watch, more transparent carbon-heavy exposures, a richer CRMS method, and more targeted transition finance aligned with 2060 net zero. The NTT relief runs until 2029. The fire belt will have another dry season before Book 5 is a habit. Banks now have a 2026 worksheet for a risk their borrowers have been paying in smoke and lost harvests for months.

Disclaimer: This article is news reporting and analysis of Indonesian banking rules and published climate-risk research. It is for information only. It is not investment, credit, legal, or regulatory advice, and it should not be used to buy or sell bank shares, to change loan terms, or to judge a bank’s capital. Readers who need to act on CRMS, POJK duties, or climate-risk models should consult a licensed Indonesian legal, risk, or financial professional. Figures and rule status reflect the official releases and research papers named in the piece and can change as OJK updates CRMS and as banks file new results.