Pakistan's Premier Multilingual News Agency

Four banks in Pakistan fined Rs83 million for regulatory breaches

Four banks in Pakistan have been penalized with fines exceeding Rs83 million for breaching regulations

Karachi, 26 October, 2023(GNP): “The State Bank of Pakistan (SBP) imposed fines on United Bank Limited (UBL), The Bank of Punjab (BoP), JS Bank Limited (JSBL), and Allied Bank Limited (ABL) for non-compliance with banking regulations.”

During the first quarter (July-September) of the current fiscal year, these four financial institutions were collectively fined Rs83.157 million for failing to adhere to the central bank’s guidelines pertaining to foreign exchange, customer due diligence, and general banking operations.
As per the information disclosed in the significant enforcement action report on the SBP’s website on Tuesday, United Bank Limited (UBL) incurred the highest fine, totaling Rs26.500 million, followed by The Bank of Punjab (BoP) with Rs21.569 million, JS Bank with Rs18.510 million, and Allied Bank Limited (ABL) with a fine of Rs16.578 million. These fines were imposed due to violations of regulations concerning know your customer and customer due diligence, foreign exchange trading, and general banking operations.

Alongside the penalties, the State Bank of Pakistan (SBP) has also issued recommendations to these banks to enhance their systems and controls, aiming to prevent future regulatory breaches.

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It’s important to note that these penalties are a response to shortcomings in complying with regulatory directives and should not be construed as a reflection on the financial stability of these banks, as stated by the SBP.

In the previous year, the government initiated investigations into banks accused of manipulating currencies to boost their earnings and profits.

Nevertheless, neither the report’s findings nor the specific penalties or financial actions against the banks were disclosed to the public.

The primary reasons cited for the banks’ higher spreads included a shortage of forex liquidity, short net open forex positions held by the banks, and increased currency volatility and uncertainty.

The 2022 Financial Stability Review, the State Bank of Pakistan’s annual flagship publication, attributed this expansion primarily to investments, while advances showed a decrease.

The banks’ solvency remained strong due to well-managed delinquencies and increased profitability, with a capital adequacy ratio of 17.0%, comfortably exceeding the minimum regulatory requirement of 11.5%.

Additionally, the Islamic banking segment also experienced substantial growth, recording a 29.6% increase during 2022