KARACHI: The State Bank of Pakistan (SBP) has designed and issued a framework for identification and regulation/ supervision of Domestic Systemically Important Banks (D-SIBs) in the country.
The SBP has sought comments on this document from the banking industry, academia, economists and other stakeholders before implementation of the framework, said the SBP statement here on Thursday.
This is as part of SBP’s commitment to ensure stability of financial system and further strengthen the supervisory and regulatory regime.
The focus on systemically important financial institutions came in the wake of the recent global financial crisis. In November 2011, Financial Stability Board (FSB)/Basel Committee on Banking Supervision (BCBS) issued a G-SIFIs framework for enhancing resilience of large financial institutions. Later in October 2012, the framework was extended to D-SIBs.
Cognizant of the developments in international arena as well as to better manage build up of systemic exposures in the financial institutions of Pakistan, SBP has designed the framework for setting criteria for identifying the D-SIBs and for the way forward on policy implications with respect to D-SIBs to enhance their resilience.
The framework adopts the benchmark BCBS methodology for constructing criteria for identifying D-SIBs in Pakistan. Indicators used to gauge systemic importance include size, inter-connectedness, substitutability and complexity. 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 Government guarantee for managing D-SIBs during crisis.
It is expected that identification of the Domestic-Systemically Important Financial Institutions and future work on development of regulatory and supervisory framework will go a long way in limiting systemic risk and ensuring financials sector stability.
