The Effect Of Credit Risk Management On The Financial Performance Of Foreign Exchange Banks

Abstract

Carrying out banking practices, banks are faced with financial credit risks, so there needs to be an element of management in avoiding financial credit risks that will later have an impact on the bank's financial performance.  This study aims to describe the effect of financial credit risk management (NPL) on bank financial performance (Return on assets (ROA) and Return on Equity (ROE)).  Thisenelitian uses a quantatif approach with an associative type. The research sample was 39 foreign exchange banks consisting of 4 government-owned banks (State-Owned Enterprises / BUMN) namely Bank BNI, Bank BRI, Bank Mandiri, and Bank BTN. The rest are private banks operating in Indonesia. Among these foreign exchange banks are some international corporate banks.  Government foreign exchange banks that reported financial performance in the last 7 years, namely the 2016-2020 period. Sampling is determined by purposive sampling technique.  Research data were collected through documentation and literature studies, and analyzed by descriptive techniques and ordinary least squares regression. The results of the study obtained a t-count value between NPL and ROA of 2.783 greater than the t-table value (1.9822 < 2.783) which means that there is an influence between the two. The results of the t-test subsequently obtained a significance level of 0.006, smaller than 0.05 or t-sig < 0.05 which means significant. Thus the constructed hypothesis that NPLs have a positive and significant effect on ROE is accepted. Then the t-test between the NPL against the ROE obtained a t-count value of 4.298, which means that it is greater than the t-table value (1.9822 < 2.783) so that there is an influence between the NPL and the ROE.  The results of the t-test also obtained a significance value of 0.000 smaller than 0.05 or a t-sig < 0.05 which means significant. This means that the constructed hypothesis that NPLs have a positive and significant effect on ROE is accepted. It was obtained that NPLs have a positive and significant effect on ROA and ROE, so that they can be used as information for foreign exchange banks in making policies related to improving bank financial performance.