Banks and Banking Sector in Pakistan

Banking sector (51 Banks/DFIs) operating in Pakistan can be divided into following categories:
        1) NCBs/Govt Owned – 4,
        2) Privatized Banks -4,
        3) Private Banks -16
        4) Foreign Banks -7
        5) Islamic Banks -5
        6) DFIs -5
        7) Specialized Banks -4
       8) Micro Finance Banks/Institution -6

SBP supervisory framework: CAMEL, which involves the analysis of six indicators which reflect the financial health of financial institutions.
        1) Capital Adequacy,
        2) Asset Quality,
        3) Management Soundness,
        4) Earnings and Profitability,
        5) Liquidity and
        6) Sensitivity to Market Risk.

• SBP has the sole authority to set criteria and approve or transfer ownership of bank licensing.

• Presently, banks/DFIs are required to, in a phased manner, to meet capital requirements which have reached $50 million as of December 2006 and will be doubled to $100 million by 31 December 2009.

• Of 39 institutions, 32 banks are well on their way to meeting stipulated capital requirements.

• 8 banks already complying with the 2009 capital requirements.

• To the extent capital of banks is being enhanced through M&A process it has facilitated a degree of consolidation among conventional banks.

• The license are being issued for Islamic banks as well as microfinance banks - two areas which hold phenomenal prospects for augmenting financial penetration.

• Thus far 6 Islamic banks and 6 microfinance banks have been allowed with former expected to constitute at least 10% of total banking sector by 2010 and microfinance reach to enhance to additional 3 million customers.