The State Bank of Pakistan (SBP) has unveiled a new “Regulatory Framework on Recovery Planning” for all banks to bolster financial stability and align domestic practices with international standards.Â
The framework, which sets out the SBP’s supervisory expectations, is designed to standardise recovery planning across the banking sector.
The framework’s main objective is to ensure that banks are well-prepared for financial stress, allowing them to stabilise their finances, recover from losses, and prevent failure. It requires banks to develop and maintain recovery plans, including multiple recovery options, to assess their effectiveness.
Banks are expected to include strategies to reduce their risk profile and conserve capital, such as restructuring liabilities or divesting business lines. These plans must be aligned with the latest banking laws, including amendments to the Banking Companies Ordinance (BCO) and the Deposit Protection Corporation (DPC) Act, which grant SBP greater authority to enforce these requirements.
The SBP has mandated that banks submit their first recovery plans by June 30, 2026, based on their audited financial statements for December 31, 2025. Following this, annual updates will be required by June 30 each year or within 15 days after the board’s approval in case of significant changes.
Additionally, foreign bank branches operating in Pakistan must align their recovery plans with those of their head offices, while Islamic banking institutions must ensure their plans comply with Shariah principles. The SBP also emphasized the need for contingency funding plans to handle unforeseen situations effectively.
The SBP warned that non-compliance with these directives would result in strict penalties under the Banking Companies Ordinance, 1962.
