Sumiyana Sumiyana

Department of Accounting, 

Faculty of Economics and Business, University of Gadjah Mada, 

Indonesia

sumiyana@ugm.ac.id 

ORCID 0000-0002-1518-9681

Does the Indonesian banking architecture matter substantively? The case of improving understandability and comparability

Tri Hanani

Master of Science and Doctorate Programmes, 

Faculty of Economics and Business, University of Gadjah Mada, 

Indonesia

trihanani1024@gmail.com

Abstract. This research investigates the constructive validity of Indonesian Banking Architecture (IBA), especially regarding the structure of international, national, local development, and rural credit banks. It impeaches the existent structure, which is unclear as to the earning power, capacity, investment scalability, growth opportunities, and the discount rate of banks. This study argues that the IBA’s structure concentrates exclusively on the classification of assets’ size and legal form. It examines the old IBA’s structure using mean comparison in differentiating among banks’ book levels. This study found that the IBA’ structure does not matter substantively. It recommends that the current IBA’s structure be transformed into a new matrix structure similar to the GE and BCG Models, including at least two measurement factors. This new matrix would result in a more meaningful description and ensure the understandability and comparability of the Indonesian banking industry. Regulators could use such structure to shape the banking industry more inclined to adaptive structuration, dynamic capability, and business agility.

Received: November, 2020

1st Revision: June, 2021

Accepted: September, 2021

DOI: 10.14254/2071-8330.2021/14-3/5

JEL Classification: G24, E58

Keywords: banking architecture, modern measurement, adaptive structuration, dynamic capability, business agility