SBP Doubles Minimum Capital Requirement for Banks

In practice, the State Bank of Pakistan (SBP) has raised the minimum capital requirement for locally incorporated banks to Rs.

Key points

• Under the revised requirements, locally incorporated banks, including Islamic banking subsidiaries, must maintain a minimum capital of Rs.
• Foreign banks operating in Pakistan through branches will be required to maintain assigned capital, net of losses, of at least Rs.
• Nevertheless, statutory reserves counted toward the requirement cannot be withdrawn without prior approval from the central bank.
• Minimum capital requirements ensure that financial institutions maintain adequate capital to absorb unexpected losses, manage bad loans and withstand economic downturns.
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In a circular issued on Wednesday, the central bank remarked the rise would apply to new and existing banks, foreign bank branches and DFIs, citing higher operating costs associated with establishing and sustainably managing financial institutions.

Under the revised requirements, locally incorporated banks, including Islamic banking subsidiaries, must maintain a minimum capital of Rs. 20 billion. SBP Keeps Buying Billions of Dollars.

Foreign banks operating in Pakistan through branches will be required to maintain assigned capital, net of losses, of at least Rs. 5 billion if they operate up to five branches. Those with between six and 50 branches must maintain at least Rs. 10 billion.

Notably, the minimum capital requirement for DFIs has been set at Rs. 10 billion. Statutory reserves included in capital requirement.

Meanwhile, the SBP remarked statutory reserves established under Section 21 of the Banking Businesses Ordinance, 1962, would be eligible for inclusion in the minimum capital requirement, along with the items already prescribed under its 2013 regulations.

Minimum capital requirements ensure that financial institutions maintain adequate capital to absorb unexpected losses, manage bad loans and withstand economic downturns. Stay Connected with ProPakistani.

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Taken together, the developments around SBP Doubles Minimum Capital Requirement for Banks point to a situation that is still moving, and the coming days should bring more clarity.