THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO (For listing on the Stock Exchange 2016-2018) 1 st Sheny Syahfitri, 2 nd Flourien Nurul Ch, SE., M.Si., Ak., CA Accountancy Indonesian College of Economics , Indonesia [email protected]; [email protected] Abstract This study aims to determine the effect of non-performing loans, banking ability in returning its liabilities and operating expenses and operating income to Adequacy of capital in banks that are listed on the (BEI) used in this research is a research strategy that is associative with research methods the method used is documentation. In this study, researchers used data that were of a characteristic Quantitative measured using a panel data regression-based method with Eviews-10. Data taken from the audited financial statements of banking companies for 2016-2018. Samples are determined based on purposive sampling method of 40 banks so that the total observation 120. The research results prove that: 1) Non-performing loans have no effect on Capital Adequacy Ratio. 2) Loan to Deposit Ratio has a significant negative effect on Capital Adequacy Ratio. 3) Operating Costs Operating Income has a significant negative effect on Capital Adequacy Ratio

Keywords: Capital Adequacy Ratio, Non Performing Loan, Load to Deposit Ratio and Cost Operational Operating Income

I. Introduction A. Background problems are a very important thing for the community at developed area. The bank is considered a safe financial institution in carrying out various kinds of financial activities. Financial activity which is often done by the community, among others, activities to save funds investment, sending money from one place to another quickly and safe (Ismail, 2018: 1). In carrying out its functions and business activities, banks need capital so that management runs well. The funds are obtained from main capital and from owner's capital.

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO Average CAR of Commercial Banks for the Period 2011-2018 (In%)

2011 2012 2013 2014 2015 2016 2017 2018

BUKU I 20,13 20,67 21,09 22,11 22,30 22,38 21,73 21,2 9 BUKU II 20,58 21,56 21,89 22.98 23.,05 23,72 26,47 25,9 1 BUKU III 20,31 21,98 22,01 23.20 23,30 24,85 24,85 24,7 1 (Source: Indonesian Banking Statistic Report Data (Reprocessed)

Based on the table above, it can be seen that the average CAR for commercial banks from 2011 - 2018 experienced an increase and decrease or not stable but still in a healthy condition because it is above 8%. CAR movement the fluctuation needs to be followed up by the management in order to know what factors influence CAR changes the.

Figure 1.1

Credit Growth Graph and Banking NPL

source: Financial Report 2018

CAR in 2018 has decreased, it can be seen from the report finance Bank Indonesia credit growth and bad credit growth increased. According to Anjani (2018) the growth of bad credit can cause a decrease in the value of CAR because the bank must use capital to cover the risk caused by the bad credit. Can be seen also in graph 1.1 in the financial statements of Bank Indonesia the amount of credit growth between 2017 and 2018 experienced an increase and the value of the NPL ratio also increased. This matter indicates that the number of non-performing loans increases.

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO Graph of Banking Liquidity Resilience

Source: Bank Indonesia Financial Report 2018

Based on data from the Deposit Insurance Corporation (LPS) of deposits or funds third party (DPK) per September 2018 only grew 6.88% meanwhile credit growth increased by 12.12% from the previous year. Based on Graph 1.1 is a report from Bank Indonesia on credit growth from 2017 to 2018 there was an increase and credit growth non-performing loans increased while TPF grew slower than growth credit this can result in the bank's liquidity in a position that is not secure. Seen from graph 1.2 of bank liquidity from 2017 to 2018 although still in safe condition but almost entered the alert area. B. Problem Formulation 1.) Does Non Performing Loans affect Capital Adequacy Ratio in Banks listed on the Indonesia Stock Exchange in 2016-2018? 2.) Does Loan to Deposit Ratio affect Capital Adequacy Ratio in Banks listed on the Indonesia Stock Exchange in 2016-2018? 3.) Does the Operating Expenses affect the Operating Income Capital Adequacy Ratio for Banks listed on the Stock Exchange Indonesia 2016-2018? C) Research Objectives 1. To test the effect of Non Performing Loans on Capital Adequacy Ratio for banks listed on the Indonesia Stock Exchange in 2016-2018 2. To test the effect of the Loan to Deposit Ratio on Capital Adequacy Ratio for banks listed on the Indonesia Stock Exchange in 2016-2018 3. To test the effect of Operating Expenses on Operating Income against the Capital Adequacy Ratio in Banks listed on the Stock Exchange Indonesia 2016-2018

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO

D) Benefits of Research 1.) For Science This research can provide information, broaden horizons, an additional reference on risks affecting CapitalAdequacy Ratio (CAR) in banking companies in Indonesia.For Regulators 2.) This research is useful for banking in Indonesia to find out bank risks that affect CAR so that it can do what strategies must be done to increase the CAR value. 3.) For Investors This research provides benefits to investors because it can help investors know the bank risks that affect capital Adequacy Ratio (CAR) so that it can do a better evaluation and can make more informed investment decisions. II. BASIS OF THEORY AND HYPOTHESIS DEVELOPMENT Theory of the firm or company theory is an organization that combine and organize various resources with a view to producing goods / services for sale. Firm is an organization that combines and managing all the resources available to produce goods and services which is ready to be sold. The company is in the midst of society because benefit in the distribution process of goods and services that are difficult to obtain carried out by individuals separately. In long term existence they are not only profitable for the owners or shareholders, but also will bring benefits to the wider community and government through a process called the flow of economic activity (The Circulation Flow of Economic Activity). Theory company is a basic concept used in most economic studies managerial. Capital adequacy or Capital Adequacy Ratio is the ratio of capital adequacy which shows the bank's ability to maintain sufficient capital and bank management's ability to identify, measure and control the risks that arise and can affect their size bank capital (IBI, 2015: 18). According to 15/12 / PBI / 2013 banks are required to provide a minimum capital according to their profile risk. Calculation of provision of drinking capital or bank capital adequacy (capital Adequati ratio is done by comparing the capital owned by the bank with the amount of risk weighted assets (RWA for minimum capital provision as referred to is determined at the lowest as follows: a. 8% (eight percent) of the Risk Weighted Assets (RWA) for Banks with a risk profile rating of 1 (one); b. 9% (nine percent) to less than 10% (ten percent) of RWA for Banks with risk profile rating 2 (two) c. 10% (ten percent) to less than 11% (eleven percent) of ATMR for Banks with risk profile rating 3 (three); or d. 11% (eleven percent) to 14% (fourteen percent) of the RWA for Bank with risk profile rating 4 (four) or rating 5 (five).

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO

There are several objectives of Bank Indonesia in establishing regulations regarding CAR. Regulation on CAR can prevent banks from continuing to grow in beyond the ability of bank management to handle the size of the bank Regulator to enforce CAR provisions to prevent financial distress due to the impact of financial distress on banks can have a huge impact on the economy Bank.

According to IBI (2015: 32), Gustaf (2016), Winda (2016), the formula used;

( )

In accordance with Bank Indonesia Regulation No. 15/12 / PBI / 2013 Credit Risk is the risk due to failure of the debtor and / or other parties to fulfill obligations to the Bank. Meanwhile, according to IBI (2015: 22) credit risk is a risk customers who are unable to fulfill obligations that are past due. According to Pandia (2012: 156) Credit risk comes from the activities of channeling funds and other commitments, this risk arises because the borrower cannot fulfill its financial obligations to the bank at maturity, in other words this risk arises because of uncertainty about the repayment of the loan by debtor. Therefore, the bank must be careful in choosing prospective borrowers to anticipate the possibility of this risk. Several indicators for grouping the five credit quality are as follows: A. Credit is classified as current, namely: 1. Payment of principal and / or interest installments on time, developments good account and no arrears and in accordance with credit terms. 2. Complete credit documentation 3. There is no violation of the credit agreement. 4. Credit groups with special attention, namely: 5. There are arrears in principal and / or interest payments that have not past 90 days or 6. You rarely have an overdraft 7. Complete credit documentation 8. There was a credit violation that was not in principle. B. Loans are classified as substandard, namely: 1. There are arrears in principal and or interest installments that have exceeded 90 day equals 120 days. 2. There are repeated overdrafts especially to cover losses operations and lack of cash flow. 3. Incomplete credit documentation. 4. There is a violation of the principal terms of credit which is quite principal. C. Credits classified as doubtful are: 1. There are arrears in principal and or interest installments that have exceeded 120 days to 180 days.

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO

2. There is an overdraft of a permanent nature especially to cover losses operations and lack of cash flow. 3. Incomplete credit documentation. 4. There is a principal violation of the basic terms of the agreement credit. D. Loans which are classified as bad, namely 1. There is an arrears in principal and or interest installments that have exceeded the limit 180 days. 2. There is no credit documentation. 3. There are customers who are very pronsipil to the main requirements in credit agreement According to Pandia (2012: 23), Gustaf (2016), Kartika (2017) the formula used:

According to IBI (2015: 27) Operational Risk is the potential loss due to factors human, inadequate procedures, system errors and due to external factors. Bank it must have a framework for controlling operational risk, and it must strive to undertake mitigation so that the level of operational risk does not exceed tolerance the risk that has been fixed. Then, the bank must have a methodology for determine capital adequacy to cover operational risks. According to IBI (2015: 28) in addition to operational risks related to work processes, banks too carry out the BCM (Business Continuity Management) process in order for each event extremes that occur, the bank has prepared itself to operate immediately, especially for vital bank activities such as customer servants. Apart from that, the bank too carry out APU (anti money laundering) and PPT (Funding Prevention) procedures Terrorism) which essentially prevents banks from being used as a vehicle for illegal financial traffic such as money from corruption, money from drug trafficking, and money to finance terrorism activities. BOPO is measured by a ratio scale and the amount is expressed in percent (%), in Bank Indonesia Circular Letter No.15 / 7 / DPNP dated 8 March 2013 explained that the ratio BOPO that must be maintained by commercial banks is not more than 85%. According to Ismail (2018: 55), Fatimah (2016) and Gustaf (2016) the formula used:

Andini (2015) explains that NPL has a negative effect on CAR. This result is in line with the research hypothesis which states that NPL is partial significant negative effect on CAR. The NPL value has decreased, p This indicates that non-performing loans faced by banks during 2009-2013 was getting smaller but the total credit extended to third parties continued increased. Then the hypothesis formulation is:

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO

H 1: Non Performing Loans have a negative effect on the Capital Adequacy Ratio Kadek's (2015) research results show that LDR has a negative effect significant to CAR. The negative relationship obtained in this study implies that LDR is inversely related to CAR. If the LDR goes up then CAR will experience a decline and vice versa if the LDR falls, then the CAR will increase. With the increasing LDR as a result of growth in the amount of lending was greater than the growth in the amount of funds accepted, it will make bank liquidity conditions even more risky. Because limited amount of funds owned by the bank in fulfilling all term obligations in short. This condition will cause a loss of trust society in a bank. For that, in an effort to maintain public trust in the bank it is necessary to provide a large amount of funds which is possible taken from bank capital in order to provide liquidity. Besides, the result of large lending will make the value of weighted assets according to Risk (RWA) will be even greater, so that the ability of bank capital is deep address the possible risks caused by the activity bank operations will be lower. Therefore, the increase in LDR will be lowering bank CAR. Based on the theory and results of previous research, the hypothesis is formulated are: H 2: Loan to Deposit Ratio has a negative effect on Capital Adequacy Ratio Kadek's research (2015) shows that BOPO has a negative effect against CAR. The negative relationship obtained in this study has meaning that BOPO is inversely related to CAR. If the BOPO goes up, the CAR will be has decreased and vice versa if BOPO goes down, the CAR will increased. The test results show that, there is an influence between the ratio of BOPO to CAR, considering that BOPO is the ratio used to measure operational risk. If the bank is less efficient in controlling operating costs when compared with the acquisition of operating income. Then this condition will cause the bank's operating profit to be low and Of course, one of the aspects that can increase the CAR value will be low. With if the operating profit is low, the CAR will also be low. Vice versa, with the high level of cost efficiency by the bank, the profit is obtained by the bank will be even bigger. So that it will cause a profit obtained is also high, and this condition will cause the CAR value to also increase. By therefore, increasing BOPO will decrease the value of bank CAR, and vice versa. Based on the theory and previous research above, the hypothesis is is: H 3: Operational Expenses Operational income has a negative effect on Capital Adequacy Ratio Based on the elaboration of the theory, research objectives, and problem formulations There is a research hypothesis as follows: H 1: Non Performing Loans have a negative effect on the Capital Adequacy Ratio H 2: Loan to Deposit Ratio has negative effect on Capital Adequacy Ratio H 3: Operational Expenses Operational income has a negative effect on Capital

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO

Adequacy Ratio Based on theory, previous research and existing hypotheses the researcher made the following research framework:

Research Framework

NPL (X 1) (-)

(-) CAR (Y) LDR (X2)

BOPO (X3) (-)

III. RESEARCH METHODS Purposive Sampling Table

Kategori Jumlah Bank

Perusahaan perbankan yang terdaftar di Bursa Efek 43

Indonesia tahun 2016-2018

Perusahaan perbankan yang tidak menerbitkan laporan (3)

keuangan tahunan audited tahun 2014-2018.

Jumlah sampel perusahaan 40

Tahun Observasi 3 tahun

Jumlah Observasi selama tahun 2016-2018 120

Source: www.idx.co.id

A. Data collection techniques Data collection techniques used in this study are documentation technique by collecting secondary data in the form of reports finances of public companies that are on the Indonesia Stock Exchange. Financial statements which will be used are the financial statements of the banking company listed on the Indonesia Stock Exchange for a period of 3 years, namely 2016

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO

up to 2018 and has been audited. Data collection for this research was also carried out by means of study literature, namely reviewing books, economic and accounting journals, as well as from papers or reliable written work. In addition, researchers also conduct research internet ( online research ) to obtain additional data and information from websites related to research. All this data collection aims to increase the number of references that support this research.

Operationalization of Variables

Variabel Indikator Skala

Resiko Kredit Rasio

Resiko Rasio

Likuiditas Resiko Rasio Operasional

Rasio

CAR ( )

1. Data Analysis. This research method uses descriptive statistical methods, namely methods to describe variables and to provide an overview or characteristics of the data used in the study. Analytical tool which used, among others, the average ( mean ) value of the frequency distribution, the minimum value and the maximum value. 2. Descriptive Statistical Analysis After the data used has been obtained, data processing is carried out by compiling data and adjusting it to the variables studied. In the initial stage, descriptive statistical tests will be used for describe variables and to provide an overview or characteristics of the data used in the study. Analytical tool which used, among others, the average ( mean ) value of the frequency distribution, the minimum value and the maximum value. 3. Classic Assumption Test

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO This research will use multiple linear regression analysis method by using the help of the E-views software application to do data processing. Previously, the assumption test will be carried out classic for the purpose of ensuring that no regression model is used

there are multicollinearity problems, autocorrelation, and distributed data normal. 4. Data Normality Test a) If the Jarque-Bera (JB) value <χ2 table and probability > 0.05 (bigger of 5%), then the data can be said to be normally distributed. b) If the Jarque-Bera (JB) value> χ2 0.05 and a probability <0.05 (smaller of 5%), it can be said that the data is not normally distributed. 5. Autocorrelation Test To find out whether there is autocorrelation or not, by looking at the value table Durbin Watson (DW test ) with the following conditions:

Hipotesis nol Keputusan Jika Tidak ada autokorelasi positif Tolak 0 < d < dl

Tidak ada autokorelasi positif No desicison dl ≤ d ≤ du

Tidak ada korelasi negative Tolak 4 – dl < d < 4

Tidak ada korelasi negatife No desicison 4 –du ≤ d ≤ 4 – dl

Tidak ada autokorelasi, Tidak ditolak du < d < 4 – du positif atau negative

6. Durbin Watson Terms Apart from using the Durbin Watson value, the correlation test is also possible proven by using the Run Test test. Test Run test is a part from nonparametic testing, which is used to test whether the inter residuals have a high correlation or not. If the sig value exceeds 0.05 then the data does not experience autocorrelation. 7. Heteroscedasticity Test a) If the probability value is ≥ 0.05, it means that there is no problem heteroscedasticity. b) If the probability value ≤ 0.05, it means that there is a problem heteroscedasticity 8. Panel Data Regression Model According to Sanusi (2017: 80) the stages in the panel data regression are as follows a) Common Effect Model (CEM) Is the simplest panel data model approach because it only combines time series and cross section data . On This model does not pay attention to the time dimension or the individual, so that it is assumed that the behavior of company data is the same in various periods time. This method can use the Ordinary Least

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO Square approach (OLS) or the least quadrant technique to estimate the panel data model b) Fixed Effect Model (FEM) This model assumes that differences between individuals can accommodated from the difference in the intercept. To estimate panel data

Fixed Effecs model uses dummy variable technique to capture differences in intercept between companies, differences in intercept can occur because differences in work culture, managerial, and incentives. However, the slop same between companies. This estimation model is often referred to as Variable Least Squares Dummy (LSDV) technique c.) Random Effect Model (REM) This model will estimate the panel data where the disturbance variable is may be interrelated over time and between individuals. And models Random Effect intercept differences are accommodated by continuous errors each company. The advantage of using models Random Effect namely eliminates heteroscedasticity. This model is also known as Error Componet Model (ECM) or Generalized Leass Square (GLS) technique . 9. Panel Data Regression Model Selection Method To choose the right model, there are several testing that can be done as follows: 10. Chow test a) H0: Select CE ( Commont Effect ). Value of the Probability Cross Section Chi Square > 0.05 b) H1: Select FE ( Fixed Effect ). Value of the Probability Cross Section Chi Square < 0.05 11. Hausman Test If Result: a) H0: Select RE ( Random Effect ). Probability Value Cross Section Random > 0.05 b) H1: Select FE ( Fixed Effect ). Value Probability Cross Section Random <0.05 12. Lagrange Multiplier (LM) Test a) If the Breusch-food cross section value > 0.05 (significant value) then H 0 accepted, so the most appropriate model to use is Common Effect Model (CEM). b) If the value of the Breusch-food cross section <0.05 (significant value) then H 0 rejected, so the appropriate model to use is the Random Effect Model (REM). The hypothesis used is: H 0 : Common Effect Random (CEM) H 1 : Random Effect Model (REM) 13. Analysis of Multiple Linear Regression Equations This method is very useful for researching and analyzing influence several variables that are correlated with the tested variable. This analysis used to test compliance with NPL, LDR and BOPO against CAR. A multiple linear regression formula can be written as: CAR it = α + β 1 NPL it + β 2 LDR it + β 3 BOPO it + € .... (3.1)

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO Information : CAR it: Capital Adequacy Ratio (CAR) β 1 NPL it: Non Performing Loan (NPL)

β 2 LDR it : Loan To Deposit Ratio (LDR) β 3 BOPO it: Operational Costs Operating Income € : Interfering Error Rate

IV. RESULTS The object of this research is a banking company listed on the Stock Exchange Indonesian Securities for the period 2016-2018. A registered banking company The Indonesia Stock Exchange consists of 43 companies. This research uses the method purposive sampling with the following criteria: 1) Banking companies that are listed on the Indonesia Stock Exchange 2016-2018, 2) Banking companies that are did not publish the 2016-2018 audited annual financial report. Based on Some of the predetermined criteria were selected as many as 40 samples banking company. Here's a list of conventional banking companies that are be the sample in this study: List of Samples of Conventional Banking Companies

No Kode Nama Perusahaan

1 AGRO Agro Niaga Tbk

2 AGRS Bank Agris Tbk

3 ARTO Bank Artho

4 BACA Bank Capital Indonesia

5 BBCA Bank Centrak Asia

6 BBHI Bank Harda Internatioal

7 BBKP Bank Bukopin

8 BBNI Bank Negara Indonesai

9 BBNP Bank Nusantara Parahyangan

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 10 BBRI Bank Rakyat Indonesia Tbk

11 BBTN

12 BBYB Bank Tabungan Negara

13 BCIC Bank J Trust Indonesia

14 BDMN Indonesia

15 BEKS Bank Pembangunan Daerah Banten Tbk

16 BGTB Bank Ganesha Tbk

17 BINA Bank Ina Perdana

18 BJBR Bank Jabar Banten

19 BJTM Bank Pembangunan Daerah Jawa Timur Tbk

20 BMAS Indonesia

21 BMRI

22 BNBA Bank Bumi Arta

23 BNGA Bank CIMB Niaga

24 BNII Bank Indonesia

25 BNLI Bank Permata

26 BSIM Bank Sinar Mas

27 BSWD Indonesia Tbk

28 BTPN Bank Tabungan Pensiuan Nasional

29 BVIC Bank Victoria Internasional

30 DNAR Bank Dinar Indonesia Tbk

31 INPC Bank Arta Graha International

32 MAYA Bank Mayapada International

33 MCOR Bank China Construction Ban. Ind

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 34 MEGA Bank Mega

35 NISP Bank OCBC NISP Tbk

36 NOBU Bank Nationalnobu Tbk

37 PNBS Bank Panin Syariah

38 NAGA Bank Mitraniaga

39 PNBN Bank Pan Indonesia

40 SDRA Bank Wori Saudara Indonesia

Source: www.idx.co.id A. Capital Adequacy Ratio Capital adequacy is the capital adequacy ratio that shows the bank's ability to maintain sufficient capital and bank management's ability to identify, measure and control the risks that arise and can affect the amount of bank capital (IBI, 2015:18). Capital adequacy is measured by using the Capital Adequacy Ratio.

Capital Adequacy Ratio

No Nama Perusahaan 2016 2017 2018

1 Bank Rakyat Indonesia Agro Niaga Tbk 23,68 29,58 28,34

2 Bank Agris Tbk 23,99 22,05 18,84

3 Bank Artho 22,83 20,22 18,63

4 Bank Capital Indonesia 20,64 22,56 18,66

5 Bank Centrak Asia 21,9 23,1 23,4

6 Bank Harda Internatioal 21,73 19,6 16,85

7 Bank Bukopin 11,62 10,52 13,41

8 Bank Negara Indonesai 19,4 20,14 19,15

9 Bank Nusantara Parahyangan 20,57 17,5 18,8

10 Bank Rakyat Indonesia Tbk 22,91 22,96 21,21

11 Bank Tabungan Negara 25,03 24,64 25,3

12 Bank Tabungan Negara 21,38 19,47 18,18

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 13 Bank J Trust Indonesia 15,28 14,15 14,03

14 Bank Danamon Indonesia 20,9 22,1 22,2

15 Bank Pembangunan Daerah Banten Tbk 13,22 10,22 10,04

16 Bank Ganesha Tbk 34,93 30,1 31,85

17 Bank Ina Perdana 30,36 66,43 55,03

18 Bank Jabar Banten 18,43 18,77 18,63

Bank Pembangunan Daerah Jawa Timur 19 Tbk 23,88 24,65 24,21

20 Bank Maspion Indonesia 24,32 21,59 21,28

21 Bank Mandiri 21,36 21,64 20,96

22 Bank Bumi Arta 25,15 25,67 25,52

23 Bank CIMB Niaga 17,96 18,6 19,66

24 16,77 17,53 19,04

25 Bank Permata 15,6 18,1 19,4

26 Bank Sinar Mas 16,7 18,31 17,6

27 Bank of India Indonesia Tbk 34,5 42,64 39,46

28 Bank Tabungan Pensiuan Nasional 25 24,6 25,3

29 Bank Victoria Internasional 26,18 18,76 16,98

30 Bank Dinar Indonesia Tbk 26,84 25,83 28,1

31 Bank Arta Graha International 19,92 17,44 19,8

32 Bank Mayapada International 13,34 14,11 15,82

33 Bank China Construction Ban. Ind 19,43 15,75 15,69

34 Bank Mega 26,21 24,11 22,79

35 Bank OCBC NISP Tbk 18,28 17,51 17,63

36 Bank Nationalnobu Tbk 26,06 26,83 23,26

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 37 Bank Panin Syariah 18,17 11,51 23,15

38 Bank Mitraniaga 17,03 20,27 19,08

39 Bank Pan Indonesia 21,45 22,26 23,49

40 Bank Wori Saudara Indonesia 17,2 24,86 23,04

Source: www.idx.co.id

Bank Indonesia Regulation No. 15/12 / PBI / 2013 article 2 paragraph 3 states that the minimum capital stock for a bank is no exception for commercial banks is 8 percent of their RWA and will continue to increase if the risk rating increases as well. Judging from table 4.2 the value of Capital Banking Adequacy Ratio in Indonesia above 8% means all companies banking has complied with the provisions of Bank Indonesia regulations. B. Non Performing Loan (NPL) According to Pandia (2012: 45), problem loans or often referred to as namely the quality of non-performing credit assets due to loans by borrowers failed to make payment due to external factors. Credit problems measured using a Non Performing Loan (NPL) Non Performing Loan

No Nama Perusahaan 2016 2017 2018

1 Bank Rakyat Indonesia Agro Niaga Tbk 2,88 2,59 2,86

2 Bank Agris Tbk 3,56 5,45 6,44

3 Bank Artho 4,08 4,08 4,15

4 Bank Capital Indonesia 3,17 2,77 2,95

5 Bank Centrak Asia 0,3 0,4 0,4

6 Bank Harda Internatioal 1,9 2,39 2,44

7 Bank Bukopin 2,87 6,37 4,75

8 Bank Negara Indonesai 3 2,3 1,9

9 Bank Nusantara Parahyangan 4,07 4,5 3,83

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 10 Bank Rakyat Indonesia Tbk 2,03 2,1 2,14

11 Bank Tabungan Negara 0,8 0,9 1,2

12 Bank Tabungan Negara 2,48 9,92 2,07

13 Bank J Trust Indonesia 6,98 2,94 4,26

14 Bank Danamon Indonesia 3,1 2,8 2,7

15 Bank Pembangunan Daerah Banten Tbk 5,71 5,37 5,9

16 Bank Ganesha Tbk 1,32 0,81 4,25

17 Bank Ina Perdana 3,14 4,6 2,43

18 Bank Jabar Banten 1,69 1,51 1,65

Bank Pembangunan Daerah Jawa Timur 19 Tbk 4,77 4,59 3,75

20 Bank Maspion Indonesia 0,91 1,52 2,14

21 Bank Mandiri 3,96 3,45 2,79

22 Bank Bumi Arta 1,82 1,7 1,51

23 Bank CIMB Niaga 3,89 3,75 3,11

24 Bank Maybank Indonesia 3,42 2,81 2,59

25 Bank Permata 8,8 4,6 4,4

26 Bank Sinar Mas 2,1 3,79 4,74

27 Bank of India Indonesia Tbk 4,69 3,59 3,23

28 Bank Tabungan Pensiuan Nasional 0,8 0,9 1,2

29 Bank Victoria Internasional 3,89 3,05 3,48

30 Bank Dinar Indonesia Tbk 1,41 2,58 2,58

31 Bank Arta Graha International 2,77 6,11 5,99

32 Bank Mayapada International 2,11 5,65 5,54

33 Bank China Construction Ban. Ind 3,03 3,07 2,54

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 34 Bank Mega 3,44 2,01 1,6

35 Bank OCBC NISP Tbk 1,88 1,79 1,73

36 Bank Nationalnobu Tbk 0,01 0,02 0,59

37 Bank Panin Syariah 2,26 12,52 4,81

38 Bank Mitraniaga 2,34 1,03 0,22

39 Bank Pan Indonesia 0,87 0,77 0,91

40 Bank Wori Saudara Indonesia 0,98 0,9 1,08

Source: www.idx.co.id The maximum NPL limit is 5% (percent) according to a Bank Circular Indonesia No,15/7 / DPNP 2013. Judging from table 4.3 there are still several banks that have a Non Performing Loan (NPL) value above 5%, such as Bank Agris in 2017 and 2018 with NPL values of 5.45 and 6.44. At the Panin bank Sharia 2017 also has a very high NPL value of 12.52. Thing This must be of particular concern to banking in order to maintain the NPL value below 5% by paying attention to non-performing loans and looking for solutions to be able to collect the problematic credit C. Loan to Deposit Ratio According to Ismail (2018: 42) Loan to Deposit Ratio is a ratio used in measuring the ability of a bank to make repayments obligations to customers who collect funds channeled through credit - the credit given to the debtor. Loan to Deposit Ratio No Nama Perusahaan 2016 2017 2018

1 Bank Rakyat Indonesia Agro Niaga Tbk 88,25 88,33 86,75

2 Bank Agris Tbk 84,54 84,46 84,68

3 Bank Artho 80.74 72,68 76,74

4 Bank Capital Indonesia 55,34 50,61 51,96

5 Bank Centrak Asia 77,1 78,2 81,6

6 Bank Harda Internatioal 89,04 99,74 94,19

7 Bank Bukopin 83,61 81,34 86,18

8 Bank Negara Indonesai 90,4 85,6 88,8

9 Bank Nusantara Parahyangan 92,11 93,99 94,01

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 10 Bank Rakyat Indonesia Tbk 87,77 88,13 89,57

11 Bank Tabungan Negara 95,4 96,2 96,2

12 Bank Tabungan Negara 84,45 86,76 86,49

13 Bank J Trust Indonesia 96,33 88,87 80,45

14 Bank Danamon Indonesia 91,1 93,3 95

15 Bank Pembangunan Daerah Banten Tbk 83,85 91,95 82,86

16 Bank Ganesha Tbk 87,94 85,55 87,81

17 Bank Ina Perdana 79,54 61,45 68,66

18 Bank Jabar Banten 86,7 87,27 91,89

Bank Pembangunan Daerah Jawa Timur 19 Tbk 90,48 79,69 80,19

20 Bank Maspion Indonesia 99,88 97,14 100,87

21 Bank Mandiri 85,86 87,16 95,46

22 Bank Bumi Arta 79,03 82,1 84,26

23 Bank CIMB Niaga 98,38 96,24 97,18

24 Bank Maybank Indonesia 88,92 88,12 96,46

25 Bank Permata 80,5 87,5 90,1

26 Bank Sinar Mas 77,47 80,57 84,24

27 Bank of India Indonesia Tbk 82,7 67,78 99,48

28 Bank Tabungan Pensiuan Nasional 95,4 96,2 96,2

29 Bank Victoria Internasional 68,38 70,25 73,61

30 Bank Dinar Indonesia Tbk 81,91 69,57 69,28

31 Bank Arta Graha International 86,39 82,89 77,18

32 Bank Mayapada International 91,4 90,08 91,83

33 Bank China Construction Ban. Ind 86,43 79,49 88,35

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 34 Bank Mega 55,35 56,47 67,23

35 Bank OCBC NISP Tbk 89,86 93,42 93,51

36 Bank Nationalnobu Tbk 53,02 51,57 75,35

37 Bank Panin Syariah 91,99 86,95 88,82

38 Bank Mitraniaga 50,27 42,02 41,99

39 Bank Pan Indonesia 53,45 65,78 56,89

40 Bank Wori Saudara Indonesia 110,45 111,07 145,26

Source: www.idx.co.id

If the growth in the amount of credit extended is greater than growth in the amount of funds raised, the LDR value of the bank will be the higher it is. The higher the ratio, the lower the ratio the liquidity capacity of the bank concerned. This is due to the number the funds needed to finance credit will be even greater (Andini, 2015). According to PBI No. 15/7 / PBI / 2013 Article 10 limit LDR Target between 78% - 92%. Judging from Table 4.4, there are still many Loan to Deposit Ratio values that are not in accordance with Bank Indonesia Regulations. D. Operational Expenses Operating Income Ismail (2018: 54) explains operating expenses operating income (BOPO) is the efficiency ratio used to measure management capability banks in controlling operating costs against operating income. BOPO is measured by a ratio scale and the amount is expressed in percent (%) Operational Expenses Operating Income

No Nama Perusahaan 2016 2017 2018

1 Bank Rakyat Indonesia Agro Niaga Tbk 87,59 86,48 82,99

2 Bank Agris Tbk 97,79 100,82 108,48

3 Bank Artho 145,31 113,7 127

4 Bank Capital Indonesia 89,11 92,24 92,11

5 Bank Centrak Asia 60,4 58,6 58,2

6 Bank Harda Internatioal 89,04 99,74 151,19

7 Bank Bukopin 94,36 99,04 98,41

8 Bank Negara Indonesai 73,6 71 70,1

9 Bank Nusantara Parahyangan 87,9 82,3 78,9

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 10 Bank Rakyat Indonesia Tbk 68,69 69,14 68,48

11 Bank Tabungan Negara 81,9 86,5 79,2

12 Bank Tabungan Negara 82 122,97 96,93

13 Bank J Trust Indonesia 128,26 93,87 116,32

14 Bank Danamon Indonesia 77,3 72,1 70,9

Bank Pembangunan Daerah Banten 15 Tbk 195,7 117,66 121,97

16 Bank Ganesha Tbk 82,36 83,81 97,57

17 Bank Ina Perdana 90,56 90,11 93,06

18 Bank Jabar Banten 81,22 82,25 84,22

Bank Pembangunan Daerah Jawa 19 Timur Tbk 72,22 68,63 70,28

20 Bank Maspion Indonesia 83,81 83,34 87,25

21 Bank Mandiri 80,94 71,78 66,48

22 Bank Bumi Arta 85,8 82,86 81,43

23 Bank CIMB Niaga 90,07 83,48 80,97

24 Bank Maybank Indonesia 86,02 85,97 83,47

25 Bank Permata 150,8 94,8 93,4

26 Bank Sinar Mas 47,05 83,47 97,31

28 Bank Tabungan Pensiuan Nasional 81,9 86,5 79,2

29 Bank Victoria Internasional 94,3 94,53 100,24

30 Bank Dinar Indonesia Tbk 91,17 94,13 101,01

31 Bank Arta Graha International 96,17 96,55 97,12

32 Bank Mayapada International 83,08 87,2 92,61

33 Bank China Construction Ban. Ind 93,47 93,45 90,6

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 34 Bank Mega 81,81 81,28 77,78

35 Bank OCBC NISP Tbk 79,84 77,07 74,43

36 Bank Nationalnobu Tbk 93,33 93,21 94,77

37 Bank Panin Syariah 96,17 217,4 99,57

38 Bank Mitraniaga 93,02 96,17 94,49

39 Bank Pan Indonesia 89,67 91,34 89,9

40 Bank Wori Saudara Indonesia 79,25 73,05 70,39

In Bank Indonesia Circular Letter No.15 / 7 / DPNP dated 8 March 2013 it is explained that the BOPO ratio that must be maintained by commercial banks is not more than 85%. Judging from table 4.5, the BOPO value of banks in Indonesia exceeds a lot a value of 85% and there are even banks whose BOPO value exceeds 100% such as banks Victorya Internasional, Bank Dinar Indonesia, Bank Artho, Bank J Trust Indonesia which means that the banking sector is less efficient. Therefore, banking must have a strategy so that the company's BOPO value is not high. E. Data Analysis 1.) Descriptive Statistical Analysis Descriptive Statistics Test Results CAR NPL LDR BOPO

Mean 21,83867 3,017333 83,54833 92,39292

Median 20,93 2,78 86,595 88,47

Maximum 66,43 12,52 145,26 235,2

Minimum 10,04 0,01 41,99 47,05

Std. Dev. 7,413358 1,980112 14,76283 26,05266

Observations 120 120 120 120

Source: The results of data processing with Eviews version 10.

From the results of the descriptive statistics above, it can be seen that for variables dependent Capital Adequacy Ratio (CAR) shows a minimum value of 10.04% owned by the Banten Blood Development Bank in 2018. Value A maximum of 66.43% is owned by Bank Ina Perdana in 2017. As well the average banking company has a Capital Adequacy Ratio (CAR) of 21.83867% which means that it means that the banking company has comply with the regulatory standards stipulated by Bank Indonesia, namely must has a capital adequacy ratio of 8%. Then the standard deviation a capital adequacy ratio of 7.413358%. This shows that regularly statistics during 2016-2018 the amount of a distributed capital adequacy ratio well

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO while the standard deviation value is still relatively small in comparison with its average value it shows that the deviation of capital data relatively good adequacy ratio . BOPO has a mean value of 92.39292%, in a circular Bank Indonesia No.15 / 7 / DPNP dated 8 March 2013 explained that the ratio Therefore, the BOPO that must be maintained by commercial banks is not more than 85% shows that the banking company as a whole is still valued not yet efficient in carrying out its operationalization. The standard deviation value is 18.92467%. The minimum value of 47.050000% is owned by Sinar Mas bank 2016 means that the bank is efficient in managing its operational costs. Score a maximum of 235.2000%, this very high value is owned by the Bank of India Indonesia this means that banks are very inefficient in managing costs operations. Panin Syariah Bank must reduce costs operations so that the BOPO value is not high. F. Classical Assumption Test 1.) Normality Test a) If the probability value> 0.05 (greater than 5%), then the data can said to be normally distributed. b) If the probability value is <0.05 (smaller than 5%), it can said the data are not normally distributed.

VI. CONCLUSION, IMPLICATIONS AND LIMITATIONS OF THE RESEARCH A) Conclusion Based on the results of the research and discussion of this study, then the following conclusions can be drawn: 1.) Non Performing Loans do not affect capital adequacy at banking companies listed on the IDX in 2016-2018. Because Banks not only benefit from credit interest, however bank operating income can also come from asset income other productive, such as Fee Based Income. 2.) The bank's ability to repay its obligations has an effect negative towards capital adequacy in banking companies listed on the IDX in 2016-2018. Due to the growth in the number of credits which is given higher than the growth in the amount of the fund collected will cause a decrease in the capital adequacy value. 3.) Operational Expenses Operating income (efficiency ) has a negative effect against the capital adequacy of the banking company registered with IDX in 2016-2018 because of the low BOPO value that the banking sector has made efficiency so that it will increase value capital adequacy.

B. Suggestions 1.) In providing credit the bank should minimize the risk that will be occurs so that the non-performing credit score is not high or not more than 5%. 2.) Banks must increase efficiency so that the value of Operational Expenses Operating Income (BOPO) below 85% according to a Bank Circular Indonesia No.15 / 7 / DPNP dated 8 March 2013.

C. Research Limitations Researchers are aware that this research still has shortcomings limitations in the study, as for the limitations of the study in question that is :

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THE EFFECT OF NON PERFORMING LOAN, LOAN TO DEPOSIT RATIO, AND OPERATING EXPENSES OPERATING INCOME ON CAPITAL ADEQUACY RATIO 1.) For researchers who are interested in studying the same problem should conduct research in a more recent period, namely until the period of 2019. 2.) For researchers who wish to continue this research, if possible add additional variables that are not yet in this study such as moderating or intervening variables

VIII. REFERENCE Abdalla. 2014. Determinants of Capital Adequacy in Commercial Banks of Jordanan Empirical Study. International Journal of Academic Research in Economics and Management Sciences. July 2013, Vol. 2, No. 4. ISSN: 2222-6990 Abusharba. 2017. Determinants of Capital Adequacy Ratio (CAR) in Indonesian Islamic Commercial Banks. Global Review of Accounting and Finance . March 2013. Pp. 159 - 170, Vol. 4. No. 1. Andini. 2015. Analysis of the Effect of Return on Assets (ROA), Return On Equity (ROE), Non Performing Loans (NPL), and Loan to Deposit Ratio (LDR) To Capital AdequaRATIO (CAR) At the Bank Company at Indonesia . E- Proceeding of Management t: Vol.2, No.2 August 2015 | Page 1384. ISSN: 2355-9357 Andersson. 2016. The Impact of Based II Regulation in the Eurppean Banking market. Journal of the University Of Gothenburg. June 2013 Andri. 2016. Research Methods . Bandung: PT. Publisher IPB Press Anjan i. 2014. The Effect of Non Performing Loans (NPL), Liquidity, and Profitability against the Capital Adequacy Ratio. University Management e-journal Udayana , 3 (4) : 1140-1155 Fatimah. 2016. The Effect of Profitability, Efficiency, and Liquidity on Islamic Capital Adequacy. Journal of Economics and Management. Vol 3.2013 Ghozali, Imam. 2018. "Application of Multivariate Analysis with the SPSS Program" . Semarang: Diponegoro University Publishing Agency. Gustaf. 2016. The effect of business risk on the capital adequacy ratio (CAR) on National Foreign Exchange Commercial Banks go public. Journal of Business and Banking , Volume 6 Number 1 May - October 2016, ISSN 2088-7841 IBI. 2016. Banking Risk Management Governance . Jakarta: PT. Gramedia Main Library IBI. 2015. Risk Management I . Jakarta: PT. Gramedia Pustaka Utama. Ismail. 2018. Banking management. Jakarta: Prenadamedia Group Juliansyah. 2015. Analysis of Economic & Management Research Data. Jakarta : Grasindo

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