SBP revises banks’ sensitivity risk guidelines

KARACHI: The State Bank of Pakistan has revised its guidelines on stress testing of the banking sector. The new guidelines will replace those issued in 2012.

Stress testing is a key tool used globally by banks for risk management and capital planning. The new guidelines will help improve the sector by strengthening the management capacity of banks, Development Finance Institutions (DFIs), and Micro Finance Banks (MFBs).

In terms of coverage, besides banks/DFIs, the Islamic banks and MFBs will also perform SA exercise. Further, Domestic Systemically Important Banks (D-SIBs) will be required to conduct MST annually, which will facilitate in improving the supervision and monitoring of these large sized banks.

The scope of revised guidelines has been broadened to incorporate guidance on Macro-stress Testing (MST), besides the Sensitivity Analysis (SA) with an enhanced number of shock scenarios.