KARACHI: Bank Alfalah Limited (BAFL) said on Tuesday that its board has approved the setting up of a wholly-owned exchange company.
"The Board of Directors of Bank Alfalah Limited in its meeting held in Abu Dhabi, UAE on October 3, 2023, has approved the establishment of an exchange company with an authorized capital of Rs2 billion in accordance with the framework prescribed by the State Bank of Pakistan (SBP)," the bank said in a filing to the Pakistan Stock Exchange.
"The Exchange Company would be a wholly-owned subsidiary of the Bank and would operate as an exchange company within the framework prescribed by the SBP." BAFL said that the development is subject to SBP clearance and approval and the fulfillment of other regulatory compliance requirements.
Five to six other banks have also expressed interest in establishing exchange firms. Analysts predict that the exchange firms run by banks will increase market depth and efficiency. Last month, the SBP introduced reforms for the exchange businesses, which included encouraging banks to create wholly-owned exchange companies to meet the legitimate demands of the general public in terms of foreign currency.
Following the rupee hitting record lows last month, the government stepped up its crackdown on illicit dollar trade. The SBP began taking action against money changers involved in illegal foreign exchange operations by revoking their licenses.
Experts have occasionally expressed concern about the shoddy operational structure and low levels of compliance found in category "B" exchange companies. The SBP has now advised both category "B" firms and franchisees to either merge with established full-fledged entities or sell their businesses to stronger counterparts. Failure to comply with this directive within the stipulated three-month window will result in the automatic cancellation of licenses for standalone category "B" firms.