Does Bank Stability Moderate the Determinants of Capital Buffer? Evidence from Indonesian Islamic Commercial Banks

Abstract

Purpose: This study examines the determinants of capital buffers in Indonesian Islamic Commercial Banks (BUS) during the 2021–2024 post-pandemic recovery by analyzing the effects of profitability (ROE), financing risk (NPF), liquidity (FDR), operational efficiency (BOPO), and bank size, with bank stability as a moderating variable. Methodology: A quantitative panel data approach was applied to 13 Islamic Commercial Banks supervised by the Financial Services Authority (OJK). Moderated Regression Analysis (MRA) was employed to examine the effects of bank-specific factors on capital buffers and the moderating role of bank stability. Results: The findings show that ROE, BOPO, and bank size influence capital buffer decisions, whereas NPF and FDR do not. Bank stability strengthens the relationships between ROE, BOPO, bank size, and capital buffer but does not moderate the effects of NPF and FDR. Conclusion: Capital buffer decisions in Indonesian Islamic Commercial Banks are shaped not only by internal financial characteristics but also by bank stability, which enhances managers' ability to balance business expansion with financial resilience under the current regulatory framework. Implications: The findings support stability-oriented supervision under the Basel III framework, particularly for larger and more stable Islamic banks that tend to maintain lower excess capital buffers. Originality: This study extends the capital buffer literature by identifying bank stability as a quasi-moderating variable and demonstrating that the influence of bank-specific factors on capital buffer decisions depends on banks' financial stability, providing a more comprehensive explanation of capital management in Indonesian Islamic banking.