CAPITAL AND RISK TEND TO DEFAULT EVIDENCE FROM RURAL BANK IN EAST JAVA INDONESIA

Abstract

This study aims to investigate regulatory capital funds and risk tend to default of rural banks in East Java, Indonesia. The method used is descriptive verification and panel data analysis while secondary data obtained from Bank reports during the period 2009 to 2018 were used. The population in this study includes rural banks in East Java and the sample selection is based on purposive sampling. From the results, it was shown that net interest margin, non-performing loan, operation efficiency and return on assets have a significant influence on tend to default risk. Meanwhile, loan to deposit ratio has no significant influence on tend to default risk. This research will be useful for identifying banks that may fail in the future through the variables discussed in this study. The ability to detect setbacks in bank conditions and the ability to distinguish between healthy and problematic banks is expected to anticipate bank default. This model will become an early warning system and can be used by banking regulators to maintain rural bank sustainability, which has not been conducted previously.