Banking system stable with over Rs 1 trillion equity base, says SBP

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Since the imposition of moratorium on KASB Bank Limited, rumours are being spread that the financial condition of some banks is weak and they may also face supervisory action.

This the central bank said in a statement issued on Monday.

These rumours, the regulator said, were also being accompanied with misleading information attributed to the State Bank of Pakistan (SBP). Having taken a strong notice of such “misinformation”, the SBP clarified that no such information had been circulated through media nor it had been placed on its website.

The public needed not to pay attention to such rumours that were trying to undermine the overall stability and performance of the banking system, the bank added. The SBP reassured the general public that the country’s banking sector was “stable and strong”.

To strengthen the banking system, the SBP had set certain milestones for enhancing banks’ capital base which are being achieved satisfactorily. The SBP is regularly engaged with banks for capital improvement. Consequently, the equity base of the banking system has increased by 11 per cent to above Rs 1 trillion in September 2014 from Rs 900 billion in September 2013. It is reiterated that the banking sector’s performance has been quite impressive.

As already reported in the quarterly banking system statistics for end September, the banks in Pakistan earned historical profit before tax of Rs 176 billion for first nine months of the year 2014.

While its solvency remains strong with Capital Adequacy Ratio (CAR) of 15.5 per cent. The banking sector is the second largest sector in terms of market capitalization and dividend payouts among the companies listed on the stock exchanges, the regulator said.

The capital position of the banking system would further strengthen due to expected fresh capital inflows and improving profitability. The continuous improvement in capital base of the banks clearly contradicted the rumours currently circulating in the media.

“The SBP assures the public that its policies are directed towards safeguarding the interest of depositors and stability of the banking system,” said the bank.

Regulatory action like the one taken in respect of KASB Bank only aimed at resolving the problems faced by the institution thus protecting depositors’ interest, it added.