Karachi, September 6, 2023 – In a significant move aimed at fortifying the financial stability of exchange companies in Pakistan, the State Bank of Pakistan (SBP) announced on Wednesday that it would be raising the minimum paid-up capital requirement for these entities from PKR 200 million to PKR 500 million.
The decision, which marks the first major adjustment in capital requirements for exchange companies since 2002, reflects the SBP’s commitment to ensuring the robustness of these financial institutions and their ability to sustain and expand their operations. This move is expected to enhance the overall solvency and resilience of exchange companies in the country.
Previously, exchange companies were mandated to maintain a minimum paid-up capital of PKR 200 million. However, in light of evolving market dynamics and the need for a stronger financial foundation, the SBP has deemed it necessary to increase this threshold.
According to the SBP’s official statement, exchange companies with paid-up capital (free of losses) falling below the newly established PKR 500 million benchmark are strongly advised to bolster their capital reserves to meet the new requirement. The deadline for achieving this capital enhancement is set for December 31, 2023.
Exchange companies seeking to comply with the revised capital requirement are required to submit a comprehensive capital enhancement plan to the Exchange Policy Department no later than September 30, 2023. This plan should outline the strategies and steps the respective companies intend to take to raise their capital to the prescribed level.
Moreover, exchange companies must provide a report of their compliance with the new capital requirement, accompanied by supporting documentary evidence of capital augmentation, to the Exchange Policy Department by December 31, 2023. This step will ensure transparency and accountability in the process of meeting the updated regulatory standards.
The SBP’s decision to enhance the minimum paid-up capital requirement for exchange companies has been met with mixed reactions within the financial industry. While some stakeholders welcome the move as a crucial step towards strengthening the sector’s financial health, others express concerns about the potential challenges smaller exchange companies may face in meeting the new capital threshold.
The central bank’s proactive approach to regulatory oversight underscores its commitment to maintaining the stability and resilience of Pakistan’s financial industry. This development is expected to promote sound financial practices and enhance investor confidence in the exchange company sector.
For exchange companies operating in Pakistan, adapting to these new capital requirements will be a top priority in the coming months, as they work towards ensuring compliance with the SBP’s directive by the end of the year.
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