Types of Banks. Given the estimated differences between banks and nonbank trustees in channeling entrusted loans in the face of monetary policy changes, we expand the difference-in- difference regression by taking into account different roles played by different types of banks as log Ss = α + αt + αsI (Smallb) + αAI (Largeb) + αggt−1 + βsgt−1I (Smallb) + βAgt−1I (Largeb) + Controlb + εs, (2.3) where I (Smallb) returns 1 if the trustee is a small bank and 0 otherwise; I (Largeb) returns 1 if the trustee is a large bank and 0 otherwise. Other control variables, denoted by Controlb, are listed in Table 2.9. Table 2.6 reports the estimated results, which are consistent with the previous results. The estimate of αg is similar to that in Table 2.5. As expected, the estimated coefficients for the two double-interaction terms gt−1I (Largeb) and gt−1I (Smallb) sandwich the estimated double-interaction coefficient reported in Table 2.5 for all banks (−4.63 > −6.05 > −7.15). The statistical significance of the estimate for all banks in Table 2.5 comes from small banks as reported in Table 2.6. Similarly, the significant impact of monetary changes on entrusted lending via all banks stems from small banks as well. According to Table 2.6, a one-percentage-point fall in M2 growth has a much stronger effect on entrusted loans via small banks than those via large banks in both magnitude and significance: entrusted lending via small banks increases by 5.23% with a less than 1% significance level while entrusted lending via large banks increases by only 2.71%, which is statistically insignificant. M2 growth also has an insignificant impact on entrusted lending facilitated by nonbank trustees. When monetary policy contracts, therefore, small banks’ behavior differs quantitatively from nonbank trustees as well as large banks. This evidence is consistent with evidence of why large banks differ from small banks on their balance-sheet behavior as provided in Section 2.4.2.
Types of Banks. In order to improve the banking system in Indonesia, steps were taken to simplify the types of banks into Commercial Banks and Rural Banks. This is in accordance with what is stated in Article 1 numbers 3 and 4 of Law No. 10 of 1998 concerning the amendment of Law No. 7 of 1992 concerning Banking. According to its type, banks consist of :
