Karachi, August 29, 2024 – The State Bank of Pakistan (SBP) has announced the designation of Domestic Systemically Important Banks (D-SIBs) for the year 2024.
This annual designation, conducted under the Framework for Domestic Systemically Important Banks established in April 2018, identifies banks that are critical to the stability of the country’s financial system due to their size, interconnectedness, and complexity.
The SBP’s framework aligns with international standards and incorporates global best practices tailored to Pakistan’s financial landscape. The framework provides a comprehensive methodology for identifying and designating D-SIBs, establishing enhanced regulatory and supervisory requirements to strengthen these banks’ resilience against financial shocks and improve their risk management capabilities.
The identification process for D-SIBs involves a two-step approach. Initially, a sample of potential D-SIBs is identified annually based on both quantitative and qualitative criteria. This sample is then further evaluated to determine the final D-SIBs, based on a composite systemic score that considers the banks’ size, interconnectedness, substitutability, and complexity.
Following its annual assessment, based on financial data as of December 31, 2023, the SBP has designated three banks as D-SIBs for 2024: National Bank of Pakistan (NBP), United Bank Limited (UBL), and Habib Bank Limited (HBL). Each of these banks is subject to additional regulatory requirements designed to ensure their stability and protect the broader financial system.
For 2024, the designated D-SIBs and their respective additional Common Equity Tier-1 (CET-1) capital requirements are as follows:
• National Bank of Pakistan (NBP): Placed in Bucket C, NBP is required to maintain an additional CET-1 capital buffer of 1.5%.
• United Bank Limited (UBL): Designated in Bucket B, UBL must hold an additional 1.0% CET-1 capital.
• Habib Bank Limited (HBL): Also in Bucket B, HBL is required to maintain an additional 1.0% CET-1 capital.
In addition to these requirements, branches of Global Systemically Important Banks (G-SIBs) operating in Pakistan must hold additional CET-1 capital against their risk-weighted assets at the rate applicable to their respective principal G-SIBs.
The SBP emphasized that the enhanced regulatory and supervisory requirements for D-SIBs are crucial in maintaining the stability of Pakistan’s financial system. By ensuring that these key banks are adequately capitalized and have robust risk management practices, the SBP aims to safeguard against potential financial shocks that could have widespread economic impacts.
As the financial landscape evolves, the SBP remains committed to regularly reviewing and updating its framework for D-SIBs, ensuring alignment with international standards and addressing emerging risks in the domestic financial sector.
