SBP amends rules for banks and DFIs

State Bank of Pakistan

KARACHI: State Bank of Pakistan (SBP) has made amendments in Prudential Regulations (PR) for corporate/commercial banking in order to provide flexibility to the banks/Development Finance Institutions (DFIs).

According to the amendments made in paragraph 2 of Regulation R-7 of the above mentioned PR, the existing limit of $250,000, for issuance of unsecured guarantees by the banks/DFIs in Pakistan against the back to back/counter-guarantees of the banks situated in foreign countries not meeting the prescribed rating of at least ‘A’, has been enhanced to $500,000 if tenor of such guarantees is up to one year.

Moreover, for the back to back/counter-guarantee issuing banks situated in foreign countries, National Scale Rating of at least ‘A’ or equivalent shall also be acceptable provided the guarantee issuing bank in Pakistan is comfortable with it. Accordingly, paragraph 2 of Regulation R-7 has been amended.

“The requirement of security can also be waived by the banks/DFIs in case of guarantees issued to Pakistani firms and companies functioning in Pakistan against the back to back/counter guarantees of branches of guarantee issuing bank/DFI or banks/DFIs rated at least ‘A’ or equivalent by a credit rating agency on the approved panel of SBP or Standard and Poor, Moody’s, Fitch-Ibca or Japan Credit Rating Agency (JCRA).

Besides, in case the counter guarantee issuing bank is situated in a foreign country, National Scale Rating of at least ‘A’ or equivalent or the rating of at least ‘A’ or equivalent by a local credit rating agency of the respective country shall also be acceptable, provided the guarantee issuing bank in Pakistan is comfortable with and accepts the counter guarantee of such foreign bank. – Dailytimes