The State Bank of Pakistan (SBP) has announced new guidelines on core information requirements for resolution planning, setting out detailed reporting obligations for banks to prepare strategies aimed at handling potential distress in the financial sector. The move is part of broader efforts to reinforce financial stability, protect depositors, and ensure the orderly resolution of problem institutions.
According to the central bank, a resolution plan is designed to determine the critical functions of a financial institution, identify obstacles to its resolvability, and outline a clear path for its potential resolution. The plan is meant to serve as a comprehensive document, covering a bank’s structural and operational details while describing the preferred resolution strategy. Tools identified in these strategies include bail-in of liabilities, restructuring, amalgamation, and even the use of a bridge bank if necessary.
The initiative aligns with the Financial Stability Board’s (FSB) key attributes for effective resolution regimes. Under section 42C(1)(i) of the Banking Companies Ordinance (BCO), 1962, the SBP has been empowered to prepare such resolution plans. These efforts aim to minimize systemic risks, safeguard depositors, and support confidence in the country’s banking system.
The SBP has further emphasized that banks and their associated group companies or entities will be required to provide all relevant data, records, and documents to facilitate the preparation of resolution plans and resolvability assessments. These requirements are bolstered by recent amendments to the BCO, which designated the SBP as the resolution authority for banking companies and other specified institutions under section 3A.
To operationalize this framework, the SBP has established the Financial Institutions Resolution Department (FIRD). This dedicated unit is tasked with ensuring orderly resolution of distressed banks, Microfinance Banks (MFBs), and Development Finance Institutions (DFIs). Resolution planning, according to the SBP, is viewed as an essential prerequisite to preparing in advance for potential challenges in the sector.
The guidelines call on banks to designate a senior-level official, preferably the Chief Risk Officer (CRO) or Chief Financial Officer (CFO), who will act as the primary point of contact with the SBP on resolution-related matters. This official will be responsible for coordinating internally and ensuring timely submission of all required information to FIRD.
In accordance with the new rules, banks must prepare their first set of required information based on their position as of December 31, 2025. Confirmation of this submission must be sent to the SBP no later than April 30, 2026. Beyond the initial requirement, banks will be required to update their submissions annually or more frequently if significant changes occur in their business operations, organizational structure, or key entities.
The SBP has clarified that it reserves the right to demand updated information on either a periodic or ad hoc basis, depending on evolving circumstances in the financial sector. This ensures that resolution planning remains relevant and responsive to the fast-changing dynamics of the banking system.
With these guidelines, Pakistan takes a significant step toward strengthening its financial safety net and aligning with international best practices on bank resolution. For banks operating in the country, the framework not only underscores the need for enhanced internal preparedness but also highlights the central bank’s increasing role in crisis management and depositor protection.
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