“…Moreover, financial crises incur substantial fiscal costs and output losses, averaging about 13.3 percent and 20 percent of GDP and can be as high as 55.1 percent and 98 percent of GDP, respectively (Valencia & Laeven, 2008). In 2008, Bank Century (formerly known as Bank CIC) was declared as a failing bank by The Financial System Stability Committee (KSSK) and rescued by the Government of Indonesia with an IDR 6.7 trillion bailout to prevent a spillover (Manurung & Moestafa, 2011 Financial regulators believe that diversification in banks can improve financial stability since it can minimize the likelihood of failure of an individual institution (Wagner, 2010), but the global financial crisis of 2007-2008 remained even though banks, especially large ones, had diversified their activities (Banwo et al, 2019). Banks begin to diversify their assets, funding, and revenue to face the increasing financial liberalization and innovation in the financial industry (Kim et al, 2020), without realizing that diversification can increase the spread of instability between institutions that will cause transmission of one institution's failure to other institutions, thereby increasing systemic risk and disrupting the stability of the financial system (Allen et al, 2012; Arinaminpathy et al, 2012; Banwo et al, 2019; De Jonghe, 2010; Kamani, 2019;Slijkerman et al, 2013;Wagner, 2010;Yang et al, 2019).…”