December 15, 2022 (MLN): The State Bank of Pakistan (SBP) on Thursday announced the designation of Domestic Systemically Important Banks (D-SIBs) for the year 2022 under the Framework for D-SIBs that was introduced in April 2018.

The framework introduced by the State Bank is consistent with international standards and practices and takes into account the local dynamics.

It specifies the methodology for the identification and designation of D-SIBs, enhanced regulatory and supervisory requirements, and implementation guidelines.

These enhanced requirements aim to further strengthen the resilience of the systemically important banks against shocks and augment their risk management capacities.

The identification of D-SIBs involves a two-step process.  In the first step, sample banks are identified each year based on quantitative and qualitative criteria. 

In the second step, D-SIBs are designated from among the sample banks based on institutions’ systemic scores in terms of their size, interconnectedness, substitutability, and complexity. 

In line with the D-SIBs framework, SBP has carried out the annual assessment based on banks’ financials as of December 31, 2021.

As per this assessment, three banks viz.  Habib Bank Limited, National Bank of Pakistan, and United Bank Limited have been designated as D-SIBs.

These banks will be required to follow the following additional common equity tier-1 capital (CET-1) requirement revised recently through BPRD Circular Letter No.34 dated the 12th December 2022, in addition to the enhanced supervisory requirements:

Besides, branches of Global-Systemically Important Banks (G-SIBs) operating in Pakistan will hold additional CET1 capital against their risk-weighted assets in Pakistan at the rate applicable to the respective principal G-SIB.

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Posted on: 2022-12-15T15:26:18+05:00