The State Bank of Pakistan (SBP) has released its latest announcement regarding the designation of Domestic Systemically Important Banks (D-SIBs) for the year 2025. This development comes under the framework for Domestic Systemically Important Banks introduced in April 2018 and updated in December 2022. The framework aligns with global best practices while being tailored to the specific needs of Pakistan’s financial landscape, ensuring a robust supervisory regime for the country’s most influential banking institutions.
Under this framework, D-SIBs are identified annually through a comprehensive methodology designed to safeguard the banking system against potential shocks. The criteria include both quantitative and qualitative measures, with a focus on four major aspects: size, interconnectedness, substitutability, and complexity. The designation process follows a two-step approach, beginning with the selection of potential candidates and concluding with the assignment of systemic scores that determine the final list of D-SIBs.
Following its annual assessment of financial statements as of December 31, 2024, the SBP has designated three major institutions as D-SIBs for 2025: National Bank of Pakistan (NBP), United Bank Limited (UBL), and Habib Bank Limited (HBL). These banks play a central role in Pakistan’s financial system due to their scale, interlinkages across the economy, and the level of services they provide to both corporate and retail sectors.
To enhance their resilience, the designated banks are now required to maintain additional Common Equity Tier-1 (CET-1) capital buffers starting from March 31, 2026. National Bank of Pakistan has been placed in Bucket D, requiring an additional CET-1 capital of 2.5 percent. United Bank Limited and Habib Bank Limited have both been categorized in Bucket C, each with a requirement of 1.5 percent. These measures are intended to strengthen the banks’ capacity to absorb financial stress, reducing the risk of systemic disruptions.
In addition to domestic institutions, foreign branches of Global-Systemically Important Banks (G-SIBs) operating in Pakistan will also be obligated to hold additional CET-1 capital. The level of this capital will be determined according to the standards set by the Financial Stability Board for their parent entities, ensuring that international operations within Pakistan adhere to the same stringent safeguards.
The SBP emphasized that this initiative reflects its ongoing commitment to preserving financial stability and supporting sustainable economic growth. By enforcing enhanced regulatory and supervisory measures on systemically important banks, the central bank aims to protect the economy from risks that could arise due to the failure or stress of large financial institutions.
The designation of D-SIBs is not only a regulatory requirement but also a proactive measure to fortify Pakistan’s banking ecosystem. It underscores the importance of robust risk management and capital adequacy, ensuring that the backbone of the financial sector remains resilient in the face of potential challenges.
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