SBP unveils new regulatory framework for exchange companies

A key change is the increase in the minimum paid-up capital requirement for exchange companies
 

SBP issues regulatory guidelines for exchange companies

The State Bank of Pakistan (SBP) has announced a new regulatory framework for exchange companies, set to take effect on January 1, 2025.

Under the new framework, exchange companies are required to align their policies and operational systems with the updated regulations by June 30, 2025.

A key change is the increase in the minimum paid-up capital requirement for exchange companies, which has been raised to Rs. 1 billion. Full compliance with this capital requirement is expected by 2027. By December 2025, exchange companies must have a paid-up capital of Rs. 600 million, followed by Rs. 800 million by December 2026.

 

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Additionally, exchange companies are mandated to keep 15 percent of their regulatory reserves in the form of cash security with the SBP. Shareholders and directors of exchange companies must also obtain approval from the SBP before withdrawing company funds or securing loans.

The new regulations also restrict exchange companies to using financing exclusively for vehicle-related loans. Companies must report their returns, regulatory reserves, and relevant documentation to the SBP to ensure compliance with the framework.

The SBP has stated that these measures are designed to enhance transparency within exchange companies, thereby strengthening investor confidence.

Earlier this week, the SBP also launched the upgraded version of the Electronic Credit Information Bureau (eCIB) system in Karachi, with the new system becoming operational from January 1, 2025. The updated eCIB V2 aligns with the latest technological advancements and reporting standards, introducing several improvements to credit information reports.

 

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What is eCIB?

The Credit Information Bureau (CIB), established by the SBP in 1992 under Section 25(A) of the Banking Companies Ordinance-1962, plays a vital role in managing credit risk and fostering a robust credit culture within Pakistan's financial system.

Initially, the CIB focused on collecting and organizing data on borrowers with loans of Rs. 500,000 or more on a quarterly basis. However, with the launch of the eCIB online system in 2003, it became the first such facility in the region.

Since its overhaul in September 2005, the eCIB now encompasses a broader range of borrowers, removing the minimum reporting threshold. It now collects data from over 4 million borrowers across nearly 100 member institutions.

 

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The upgraded system uses advanced technologies, including high-capacity servers, enhanced security protocols, and point-to-point encryption. These improvements enhance the system's efficiency, speed, and reliability, helping financial institutions make more informed lending decisions, assess credit risks accurately, and expand credit access to sectors such as SMEs, agriculture, and consumer finance.

The strengthened CIB is expected to further contribute to Pakistan's financial stability and align the country’s financial practices with international standards.

Source: ARY News

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