Karachi: The State Bank of Pakistan (SBP) on Friday said that the multilateral institution that maintains financial stability and operational stability of the financial sector due to policy measures, regulatory measures and assistance resulting in economic recovery and low inflation.
In the 2023 Financial Stability Review press release, the central bank stated that the financial sector grew by 29.5 percent, the asset base grew by 27.0 percent, the CAR of the banking sector increased to 19.7 percent, and the debt coverage to 92.7 percent has increased. December 2023.
The assessment of the overall risk for financial stability, as done by the SBP, emphasized policy continuity and called for continued improvement of the country’s macroeconomic fundamentals and structural reforms as critical to the stability and performance of the financial sector.
The Financial Stability Review (FSR) for CY2023, prepared and published as a statutory requirement, assesses the performance and risk of various segments of the financial sector, as well as the financial position of the main users of credit and financial services.
In calendar year 2023, electronic banking continues to grow, while SBP implements the third phase of Raast’s personal-to-merchant (P2M) mode to accept digital payments for merchants and businesses.
The FSR shows the healthy performance of the non-banking financial sector with strong expansion in the asset base of non-development financial institutions (DFIs) and non-banking financial institutions (NBFIs) during CY2023, while the insurance sector witnessed growth in assets and gross. income
Despite the challenges related to the macroeconomic environment in the first half of 2023, policy measures and regulatory measures to address growing inequality, including the provision of a 9-month self-employment agreement (SBA) from the HPG, helped to improve the macroeconomic situation. CY2023, SFR observations.
Inflation began to decline, economic growth recovered and the exchange rate stabilized by the end of the year, said Syn, against which the financial sector showed strong growth and performance, maintaining financial strength and operational stability.
“The growth of these assets is mainly driven by investment in government securities, while the growth of the private sector is driven by the backdrop of macro-financial conditions,” the review noted, noting that the expansion of the bank’s balance sheet was largely financed by high-growth deposits of 20 years. high return environment.
At the same time, non-performing loans (NPL) increased to 7.6% in December 2023 from 7.3% in December 2022 and provisioning coverage increased to 92.7%.
The banking sector’s healthy profitability, solvency and capital adequacy ratio (CAR) rose to 19.7% in December 2023, above the minimum regulatory requirements, on the back of higher rates and rising revenues.
Islamic banking institutions continue to maintain growth momentum in CY2023 and improve sustainability with strong profits and favorable asset performance, Syn said, but the microfinance banking (MFB) sector remains under stress in CY2023.
The review found the general condition of the non-financial corporate sector to be satisfactory, with satisfactory solvency and solvency indicators. Large borrowers from the banking sector are reported to have demonstrated stable payment capacity and no significant violations of the law.
The FSR also highlighted the robust performance of the Financial Market Infrastructure (FMI) during CY2023, where e-banking has fueled the growth of retail payments and the SBP has moved into the third phase of the P2M (P2M) mode.
The SBP said all risks to financial stability are manageable due to the expected moderation of macroeconomic stress and strong buffers and risk management capabilities of the banking sector.
The results of the latest stress test show that the banking sector is resistant enough to withstand severe but medium-term macro-financial shocks, FSR assessed: “However, the continuation of the structural reform policy remains important for the continuous improvement of the macroeconomic fundamentals of the country. and the resilience and productivity of the sector financial”.
