Bank AL Habib announces to set up wholly owned exchange company

Bank AL Habib Limited (BAHL) has announced to set up an exchange company with an initial share capital of Rs 1 billion as disclosed to the Pakistan Stock Exchange (PSX) on Friday.

This decision is in accordance with Sections 96 and 131 of the Securities Act, 2015, as well as Clause 5.6.1 (a) of the Rule Book of the Pakistan Stock Exchange.

According to the stock filing, the exchange company would be BAHL's 100 percent-owned subsidiary.

Before the exchange company can be officially established, it must obtain the necessary approval or clearance from the State Bank of Pakistan (SBP) and fulfill other regulatory compliance requirements, including capital adequacy, governance standards, and operational criteria.

This development follows the recent crackdown against black market operatives, and the subsequent announcement by the SBP to introduce structural reforms in the exchange companies’ sector.

The point of the crackdown has been to rein in the open market and strengthen the sector's governance, internal controls, and compliance culture. As part of these reforms, leading banks actively engaged in foreign exchange business would establish wholly owned Exchange Companies to cater to the legitimate foreign exchange needs of the general public.

Additionally, the minimum capital requirement for Exchange Companies has been increased from Rs 200 million to Rs 500 million, free of losses.

It is pertinent to note that BAHL has now become the fourth major bank to establish an exchange company, as United Bank Limited (UBL), Meezan Bank and MCB Bank Limited (MCB) have already decided to set up exchange companies.