SBP designated as resolution authority for banks, MFBs, and DFIs under new amendments

The State Bank of Pakistan (SBP) has issued new guidelines for banking institutions regarding resolution planning, following amendments to the Banking Companies Ordinance (BCO), 1962. 

These amendments designate the SBP as the resolution authority for banking companies, microfinance banks (MFBs), and development finance institutions (DFIs), aimed at strengthening the financial stability regime.

As part of these efforts, SBP has established the Financial Institutions Resolution Department (FIRD), tasked with ensuring the orderly resolution of distressed or problem banks. 

The guidelines on resolution planning stress the importance of providing timely and relevant data to prepare for the resolution of troubled institutions.

In line with the directive, banks are required to appoint a senior official—preferably the Chief Risk Officer (CRO) or Chief Financial Officer (CFO)—to coordinate and submit the necessary information to the SBP. This officer will be responsible for coordinating all matters related to resolution planning with the SBP.

The first set of required information, reflecting the bank’s position as of December 31, 2025, must be submitted to the SBP by April 30, 2026. Banks are also advised to update this information annually, or more frequently if there are significant changes in their operations, group structure, or material entities. The SBP may request periodic updates or additional information as needed.

The issuance of these guidelines is a key step in ensuring the financial stability of the banking sector, with a focus on mitigating the risks posed by distressed institutions. The new regulations also aim to enhance preparedness and transparency in managing the resolution of failing financial institutions.