Karachi: In its Staff Report ( prepared for July 12 Executive Board meeting to approve the $3 billion Stand-By agreement) the International Monetary Fund (IMF) said that even though the banking industry appeared stable, the impact of economic downturn is yet to materialise. IMF further said that a delay in resolving four undercapitalised banks would hamper the stability of the financial sector of Pakistan.
Though the global money lender has not mentioned names in their report, economic analysts believe that undercapitalised banks include Summit Bank Ltd, SME Bank Ltd, and Silkbank Ltd.
IMF said that swift action has to be taken to address undercapitalised financial organisations to maintain financial stability. It added that recapitalise process should be accelerated by the State Bank of Pakistan (SBP).
SBP has told IMF that if the undercapitalised banks fail to recapitalise, then they would enter ‘resolution’. In banking, resolution refers to restructuring in a situation where regulators claim no prospect of recovery.
Silkbank has been looking for investors as its losses amount to Rs20.2 billion by 2020 (the last time bank issued financial accounts). Silkbank’s capital was Rs3.16 billion, and the prescribed MCR was Rs10 billion.
There is ambiguity among analysts on the name of the fourth bank, but it is believed that the fourth undercapitalised bank is Sindh Bank. The lender has Rs2 billion in losses and equity of Rs 16 billion.
According to Chase Securities, depositors should not worry about their funds in any undercapitalised bank as SBP has a record of saving depositors over shareholders.
