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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involved in foreign exchange activities to establish wholly-owned exchange
companies
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