Banks paid-up capital requirements slashed

[Naveed Yaseen]

RIZWAN BHATTI
KARACHI (April 16 2009): The State Bank of Pakistan on Wednesday announced over 50 percent reduction in minimum capital requirement (MCR) to facilitate the banking sector. This decision has been taken in view of the general global slowdown in growth and capital accumulation by financial institutions and representations from shareholders, the SBP said.

Now the banks are required to raise their minimum paid up capital (free of losses) to Rs 10 billion by December 31, 2013, instead of earlier set limit of Rs 23 billion, according to BSD Circular No 7 of April 15, 2009.

According to the circular, the banks will now be required to raise their minimum paid-up capital (free of losses) to Rs 6 billion by December 31, 2009; Rs 7 billion by December 31, 2010; Rs 8 billion by December 31, 2011; Rs 9 billion by December 31, 2012; and Rs 10 billion by December 31, 2013.

The instructions issued earlier (BSD Circular No 19 dated the 5th September, 2008), required the banks to raise their MCR to Rs 10 billion by December 31, 2010, Rs 15 billion by December 31, 2011, Rs 19 billion by December 31, 2012 and Rs 23 billion by December 31, 2013.

BSD Circular No 7 of April 15 further says that while capital adequacy standards will continue as previously, and all banks/DFIs shall be required to increase CAR to 10 percent from December 31, 2009 irrespective of their CAMELS-S rating, till further instructions. Branches of foreign banks (FBs) operating in Pakistan are also required to raise their assigned capital (net of losses) to Rs 10 billion within the above prescribed timelines.

However, those foreign banks whose Head Offices hold paid up capital (free of losses) of at least equivalent to 300 million dollars and have a CAR of at least 8 percent, or minimum prescribed by their home regulator, whichever is higher, will be allowed, with prior approval of the State Bank, to maintain assigned capital as under:

a. FBs operating with up to 5 branches are required to raise their assigned capital to Rs 3 billion latest by 31st December 2010.

b. FBs operating/desirous of operating with 6 to 50 branches are required to raise their assigned capital to Rs 6 billion latest by 31st December 2010, BSD Circular No 7 added.

http://www.brecorder.com/index.php?id=25352