State Bank of Pakistan has officially been designated as the resolution authority for banking companies, microfinance banks (MFBs), and development finance institutions (DFIs) following significant amendments to the Banking Companies Ordinance 1962. The move represents a critical step in strengthening Pakistan’s financial stability framework and ensuring a more structured response to distressed financial institutions.
As part of these regulatory reforms, the SBP has established the Financial Institutions Resolution Department (FIRD), a dedicated unit responsible for overseeing and managing the resolution of problem banks in an orderly manner. The creation of this specialized department is intended to enhance preparedness, minimize systemic risks, and support the stability of the overall financial system.
The newly issued guidelines on resolution planning emphasize timely and accurate data sharing by financial institutions to enable the SBP to act swiftly in the event of a crisis. Banks, microfinance institutions, and DFIs are now required to submit resolution plans and provide key financial and operational information that would assist the central bank in taking necessary steps during periods of distress.
According to the guidelines, each institution must appoint a senior official—preferably the Chief Risk Officer (CRO) or Chief Financial Officer (CFO)—to act as the focal person for all matters related to resolution planning. This designated officer will coordinate the submission of required data and ensure smooth communication with the SBP.
The first set of required information must reflect the institution’s position as of December 31, 2025, and must be submitted to the SBP by April 30, 2026. Financial institutions will also be required to update this information annually or more frequently in case of any significant changes in their structure, operations, or ownership. The central bank reserves the right to request additional information or interim updates whenever deemed necessary.
This framework aims to create a more resilient banking sector by ensuring that resolution measures are pre-planned and effectively implemented, reducing the potential impact on depositors and the broader financial system. It also seeks to bring Pakistan’s banking regulatory structure more in line with international best practices where resolution planning is considered a key component of financial stability.
By taking on the role of resolution authority, the SBP gains enhanced powers and clearer responsibilities to intervene in failing financial institutions. This allows for a more coordinated and less disruptive approach to addressing bank failures, protecting depositors, and preserving market confidence.
This development reflects a broader global trend toward proactive financial stability measures, where regulatory authorities focus on early intervention, structured resolution strategies, and risk mitigation. The banking sector in Pakistan is expected to benefit from improved oversight, greater operational discipline, and increased transparency.
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