Do Sustainability Finance Regulations Improve Bank Profitability? Evidence From Indonesian KBMI 2 Banks

Yutrizal Jacoub; Median Wilestari

doi:10.58777/rfb.v4i2.657

Authors

Yutrizal Jacoub Faculty of Economics and Business, YARSI University, Jakarta
Median Wilestari Faculty of Economics and Business, YARSI University, Jakarta

DOI:

https://doi.org/10.58777/rfb.v4i2.657

Keywords:

POJK No. 51/POJK.03/2017, Sustainable Finance, KBMI 2 Banks, Return on Assets, Panel Data Regression

Abstract

Previous studies have mainly examined the link between voluntary sustainability reporting and corporate financial performance, offering limited evidence on mandatory sustainable finance regulations, especially among Indonesian KBMI 2 Banks. This study addresses this gap by assessing the effect of Financial Services Authority Regulation (POJK) No. 51/POJK.03/2017 on KBMI 2 Banks’ financial performance using panel data. It applies a quantitative explanatory design to data from eight KBMI 2 Banks during 2016–2025. Return on Assets (ROA) measures profitability, while a policy dummy captures implementation of POJK No. 51/POJK.03/2017. Capital Adequacy Ratio (CAR), Non-Performing Loans (NPL), and the Operating Expenses-to-Operating Income Ratio (BOPO) are control variables. Panel regression results show that, before the regulation, CAR positively affected ROA and BOPO had a significant negative effect. After implementation, only BOPO remained significant; CAR, NPL, and the policy dummy were insignificant. Thus, the regulation has not directly improved short-term profitability. This study provides an early policy evaluation focused on KBMI 2 Banks, confirms operational efficiency as the main profitability driver, and offers insights for banks and regulators developing more effective sustainable-finance implementation strategies. It also underscores the need for longer implementation periods and supportive supervisory measures across Indonesia.

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