SBP to determine resilience of financial institutions

KARACHI: The State Bank of Pakistan (SBP) has sought comments from the stakeholders on its new framework to identify resilient financial institutions, its statement said on Thursday.
The SBP has formulated a framework for identification, regulation and supervision of domestic systemically important banks (D-SIBs) in Pakistan.
“The SBP is seeking comments on this document from the banking industry, academia, economists and other stakeholders before implementation of the framework,” the statement said.
The framework adopts the benchmark Basel committee on banking supervision methodology for constructing criteria for identifying D-SIBs in the country.
“Indicators used to gauge systemic importance include size, interconnectedness, substitutability and complexity,” the SBP said.
“Further, the framework touches upon the matter of possible specific regulations, monitoring, and disclosure requirements for D-SIBs to maintain financial stability and reduce the probability of direct support and implicit the government guarantee for managing D-SIBs during crisis.”
The focus on systemically important financial institutions came in the wake of the recent global financial crisis. In November 2011, financial stability board /Basel committee on banking supervision issued framework for enhancing resilience of large financial institutions. Later in October 2012, the framework was extended to D-SIBs.
Analysts said the solvency of banks is strong as they have less risk exposures and due to their lowest advance to deposit ratio.