State Bank issues guidelines for banks to provide flexibility in managing foreign exchange operations
The State Bank of Pakistan (SBP) has revised the Foreign
Exchange Exposure Limit (FEEL) for banks in an effort to provide greater
flexibility in managing foreign exchange operations amid evolving market
conditions.
In a circular issued on August 1, the SBP announced that,
effective August 4, 2025, banks’ foreign exchange exposure will now be
calculated at **7.5% of each bank’s Tier-1 Capital**, based on their latest
annual audited financial statements. This updated framework is designed to help
Authorized Dealers (ADs), or banks, align their FX operations more effectively
with current trade volumes and market dynamics.
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The revision marks a shift from the previous policy implemented in July 2020, under which the exposure limit was capped at 25% of a bank’s Paid-up Capital (free of losses), subject to a maximum ceiling of PKR 5 billion. That framework also permitted the SBP to impose lower limits on banks based on their behavior in the foreign exchange market.
Under the new guidelines, the SBP will individually notify
each bank of its revised exposure limit, tailored to its Tier-1 Capital
position. The central bank clarified that all other instructions relating to
FEEL will remain unchanged.
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This move signals the SBP’s intent to adopt a more dynamic and risk-sensitive regulatory approach. By linking exposure limits to Tier-1 Capital, the central bank aims to enhance market discipline while granting banks increased flexibility to respond to foreign exchange demands.
Source: pkrevenue.com