SBP to en­sure Is­lamic banks meet Basel III reg­u­la­tions

Enterprise - - National News -

The State Bank of Pak­istan (SBP) said it was ex­pe­dit­ing its ef­forts to im­ple­ment re­vised cap­i­tal stan­dards for the Is­lamic banks to en­sure that Shariah-com­pli­ant lenders are well-placed to meet tough Basel III reg­u­la­tions.

“The as­sess­ment/fea­si­bil­ity of adap­tion of re­vised cap­i­tal ad­e­quacy stan­dard (IFSB-15) is in fi­nal stage; how­ever, the de­ci­sion of its im­ple­men­ta­tion de­pends on the re­sults/find­ings of its qual­i­ta­tive and quan­ti­ta­tive anal­y­sis and af­ter con­sid­er­ing rel­e­vant le­gal and regulatory con­cerns in con­sul­ta­tion with stake­hold­ers,” the cen­tral bank said.

The IFSB-15 pro­vides global cap­i­tal ad­e­quacy stan­dards set by the Malaysia-based Is­lamic Fi­nan­cial Services Board for the in­sti­tu­tions of­fer­ing Is­lamic fi­nan­cial services. Is­lamic bank­ing in­sti­tu­tions in Pak­istan need strength­en­ing their cap­i­tal ad­e­quacy po­si­tion in view of evolv­ing regulatory re­quire­ment till 2019.

The SBP had im­ple­mented Basel III re­forms to fur­ther en­hance the cap­i­tal related rules in 2013 in a phased man­ner with full im­ple­men­ta­tion in­tended by De­cem­ber 31, 2019.

Bankers said the im­ple­men­ta­tion of IFSB-15 guidelines on Is­lamic fi­nan­cial in­sti­tu­tions would help align the in­dus­try to global prac­tices. It could make the cap­i­tal framework more ro­bust and im­prove con­fi­dence in the Is­lamic bank­ing in­dus­try. “Based on the unique na­ture of Is­lamic bank­ing in­sti­tu­tions and par­tic­i­pa­tory na­ture of Is­lamic bank­ing de­posit, the adop­tion of IFSB stan­dard on cap­i­tal will be very help­ful to pro­mote this sec­tor,” said Ahmed Siddiqui, head of prod­uct devel­op­ment and Shariah com­pli­ance at Meezan Bank.

Siddiqui added that it would also be in line with the na­ture of Is­lamic banks and help strengthen the SBP’s re­solve to make Is­lamic bank­ing as a pre­ferred choice of bank­ing. The as­sets and de­posits of Is­lamic bank­ing in­dus­try are grow­ing at a de­cent pace of 11.9 per­cent and 13.7 per­cent, re­spec­tively. How­ever, their cap­i­tal ad­e­quacy ra­tio [CAR] fell to 12.94 per­cent at the end of 2016 from 13.75 per­cent in 2015. Though their CAR was above the re­quired level of 10.65 per­cent, but CAR of Is­lamic banks re­mained be­low the con­ven­tional bank­ing in­dus­try’s level of 16.45 per­cent in 2016.

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