SBP issues new Basel III guidelines for AFS/FVOCI portfolios

By MG News | May 19, 2025 at 04:51 PM GMT+05:00

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May 19, 2025 (MLN): The State Bank of Pakistan (SBP) has issued new guidelines on the treatment of AFS/FVOCI portfolios under the Basel III Capital Framework.

SBP has clarified the treatment of AFS/FVOCI portfolios for Capital Adequacy Ratio (CAR) calculations.

This clarification aligns with earlier communications including BSD Circular No. 8 of 2006, updated FAQs, and a PBA letter dated July 2, 2024.

Recognizing the significant impact of this change, SBP has allowed a transitional arrangement that enables banks and DFIs to gradually reclassify their AFS/FVOCI portfolios from the Banking Book to the Trading Book over a three-year period:

Time Period	Min FVOCI Portfolio in Trading Book
25-Dec	25%
26-Dec	50%
27-Dec	100%

Banks and DFIs may opt for earlier reclassification; however, they must not fall below the prescribed minimum thresholds in any given year.

SBP has warned that any non-compliance will result in penal action under relevant legal provisions.

All other instructions on this subject remain unchanged. SBP has asked all institutions to acknowledge receipt of the circular.

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