In such a scenario, since local subsidiaries (Brazil, Mexico, Chile, Colombia and Peru) cannot reduce capital reserves below a certain level, we assume these subsidiaries would only lower their capital reserves up to one standard deviation above the legalminimum, to prevent potentially violating any regulatory requirements during periods of heightened volatility.
While the January package referred vaguely to "strengthening the legal and supervisory framework for banking, " the new deal sets minimumcapital of 250 billion rupiah and makes loan-loss provisions tax-deductible.