The State Bank of Pakistan (SBP) has taken an important step to strengthen the country’s financial stability by setting up a dedicated department to handle the disturbing banks and financial institutions.
The move follows the recent amendments to the Banking Companies’ Ordinance (BCO), 1962, which formally designate SBP as “Resolution Authority” for banks and other specific entities.
The resolution of the newly formed financial institutions will be responsible for the organized solution to the disturbing banks, including the Microfinance Bank (MFBS) and the development finance agencies (DFI).
The purpose is that if a bank faces severe problems, there is a clear, pre -planned process to handle its resolution without panic or instability in the financial system.
The resolution plan is now mandatory
If this new framework is a part of, SBP has released wide Guidelines All banks need to develop a detailed “resolution plan”. These projects are primarily blueprints on how a bank will be injured or reorganized in case of a crisis, ensuring that important work continues and the collectors are protected.
Banks have been instructed to nominate a senior official, preferably the Chief Risk Officer (CRO) or the Chief Financial Officer (CFO), to integrate all resolution planning activities and work as a key point to contact the SBP FIRD.
Strict deadline and released updates
The first collection of the required information should be developed based on the position of the banks by December 31, 2025, which will be confirmed to the SBP by 30 April 2026. Subsequently, banks are expected to update their information at least once a year, or more often if there are. Operations or group structure.
The SBP has also reserved the right to demand the latest information from any bank at any time, indicating a maximum approach to monitoring the financial sector health.
Detailed information for financial functions
The central bank has asked financial institutions to provide detailed information in five important sectors.
- Reserves – including retail, corporate, and government accounts.
- Loan and loan service- cover the corporate, SME, consumer and agriculture loans.
- Payment, clearing, custody and settlement – such as cash services and retail and wholesale settlements.
- Wholesale funding markets – including securities financing, wholesale loans, and securities loan;
- Capital markets and investments – loan and other securities, asset management, and insurance cover.
Why does it make a difference
The move has brought Pakistan in accordance with international best ways, where central banks and regulators have clear options and plans to deal with failed financial institutions. With the need to plan for banks and share critical information, the SBP aims to minimize the risk of eliminating people at risk.