State Bank designates UBL, HBL and NBP as D-SIBs for 2024

KARACHI: The State Bank of Pakistan on Thursday announced the designation of domestic systemically important banks (D-SIBs) for the year 2024 under the framework that was introduced in April 2018, a statement said.

The framework introduced by the SBP is consistent with international standards and takes into account global best practices and local dynamics. It specifies the methodology for the identification and designation of D-SIBs, enhanced regulatory and supervisory requirements, and implementation guidelines for D-SIBs.

“The enhanced requirements aim to further strengthen the resilience of the systemically important banks against shocks and further augment their risk management capacities,” the SBP said.The identification of D-SIBs involves a two-step process. In the first step, sample D-SIBs are identified each year based on the quantitative and qualitative criteria. In the second step, D-SIBs are designated from amongst the sample D-SIBs based on institutions’ composite systemic score in terms of their size, interconnectedness, substitutability, and complexity.

In line with the D-SIBs framework, the central bank has carried out the annual assessment based on banks’ financials as of December 31, 2023.As per the assessment, three banks, namely National Bank of Pakistan, United Bank Limited, and Habib Bank Limited have been designated as D-SIBs for the year 2024. These banks will have to follow additional Common Equity Tier-1 (CET-1) capital requirements, in addition to implementing the enhanced supervisory requirements.

NBP will require maintaining an additional CET-1 of 1.5 per cent, with UBL and HBL maintaining 1.0 per cent.Besides, branches of global-systemically important banks (G-SIBs) operating in Pakistan will be required to hold additional CET-1 capital against their risk-weighted assets in Pakistan at the rate as applicable on the respective principal G-SIB, according to the SBP.