Pakistan's central bank governor Shamshad Akhtar shows confidence in the system
The liberalization of Pakistan’s financial sector has generated unprecedented growth in the number and size of the country’s banks. Pakistan’s central bank governor, Shamshad Akhtar, discusses the challenges posed by the dramatic growth in the financial industry.
Are you happy with the state of Pakistan’s banking industry?
Pakistan’s banking industry has witnessed unprecedented and substantial growth in assets, deposits and advances. Supported by good management, the industry is performing quite well, as evident from its profitability indicators, such as return on equity, which currently stands at 26.5%. Strong earnings, coupled with prudent management, have enabled the industry to clean up its loan portfolio. Net non-performing loans are at an all-time low and the industry is fast meeting the requirements of the growing economy.
Does this rapid growth pose regulatory and supervisory challenges for the central bank?
The State Bank of Pakistan has played an enabling role in this turnaround of the industry but it has been alert to the various challenges emanating out of this transition. It introduced a few years back an international prudential regulatory and supervisory framework and has been vigilant in supervision and enforcement of these standards.
In its regulation, SBP has laid down stringent exposure limits consistent with best practices. It conducts regular stress testing of the banks and issues publicly a quarterly Banking Sector Review, both of which provide a candid assessment of the state of the banking industry.