Resolution planning: SBP issues guidelines on core info requirements

KARACHI: The State Bank of Pakistan (SBP) has issued guidelines on core information requirements for resolution planning, directing banks to submit detailed data for preparing advance strategies to manage distressed financial institutions.

The purpose of a resolution plan is to determine the critical functions of a bank, identify and address any impediments to its resolvability and prepare for its possible resolution in an orderly manner.

A resolution plan is a comprehensive document, which details the characteristics of a bank and describes the preferred resolution strategy for that bank, including which resolution tools to apply, such as, bail-in of liabilities, reconstruction, amalgamation, use of bridge bank, etc.

In line with Financial Stability Board’s (FSB) key attributes for effective resolution regimes, the SBP has been empowered under section 42C(1)(i) of the Banking Companies Ordinance (BCO), 1962 to prepare resolution plans for banks, in order to meet the objectives of overall financial stability and to protect depositors’ interest. Accordingly, banks (or their group companies/entities) are required to provide information, records or documents for resolution planning and resolvability assessment purposes.

As per recent amendments in the BCO, 1962, the SBP has also been designated as the resolution authority for banking companies and other institutions as specified under section 3A of the BCO with the objective to strengthen the financial stability regime.

Accordingly, the SBP has established ‘Financial Institutions Resolution Department’ (FIRD) for orderly resolution of distressed/problem banks, Microfinance Banks (MFBs) and Development Finance Institutions (DFIs) (hereinafter referred to as “banks”).

In this regard, resolution planning is considered as an essential pre-requisite for preparing in advance for an orderly resolution of distressed banks. The timely provision of relevant information/data would serve as a key input for preparation of resolution plans.

Accordingly, broad guidelines are being issued on the information requirements. In this regard, banks shall designate a senior level official, preferably the Chief Risk Officer (CRO) or Chief Financial Officer (CFO), under intimation to FIRD, who shall be responsible for internal coordination and submission of information as well as coordination with the SBP on all resolution planning related matters.

In accordance with the guidelines, the banks are advised to prepare the first set of required information based on position as of December 31, 2025 and send a confirmation to the SBP to this effect by April 30, 2026.

Further, banks are advised to update their required information at least annually or more frequently to reflect any changes in their business operations, group structure, or their material entities. The SBP may require all or any specific bank(s) to submit the required information on periodical basis or as and when required.

Copyright Business Recorder, 2025