The State Bank of Pakistan (SBP) has launched another risk assessment tool to be known as Systemic Risk Survey (SRS) to gauge the views of market participants and experts about various existing and emerging risks that can potentially undermine the stability of the financial system. The Survey would aim at evaluating the respondents' confidence in the stability of the financial system as a whole, particularly in the banking system. SRS participants will include senior executives of commercial banks, DFIs, microfinance banks, exchange companies, insurance companies, asset management companies, famous academicians and journalists in the economic field. SRS will be conducted twice a year and the findings of this survey will be used by the central bank to strengthen its risk assessment of the financial system and take appropriate mitigating measures. Responses to the survey would be kept confidential. Further, the findings will not be used for any purpose other than the assessment of risks in the financial system.
We feel that this measure of the SBP to gauge the level of stability of the financial system in Pakistan is a welcome initiative that will certainly help preclude the possibility of failure of the financial system by flagging its weaknesses in the SRS well in time. It may be mentioned that the SBP, being the central bank and banking sector regulator and supervisor, plays a pivotal role in ensuring stability of country's financial system. Although, assessment of key risks are already regularly reported by the SBP in its publications viz. "Financial Stability Review" and "Quarterly Performance Review of the Banking Sector", their observations are of general nature and do not cover the risks to the financial system comprehensively whereas, in pursuance of the SBP Vision 2020, central bank is committed to strengthening its financial stability regime to identify and manage systemic risks arising from within and outside the country's financial system. SRS, it may be noted, is a market intelligence tool used by most of the central banks, through which feedback from various participants and experts regarding their risk perceptions and confidence in the stability of the financial system is sought. The SBP has also tried to include a variety of relevant institutions and individuals in the exercise but how their input will be sought and used has not been probably finalized as yet. Anyhow, such an exercise will give a timely warning to the SBP that something is amiss in the financial system and needs to be fixed. Stability of the financial system is indeed very important for the development of the country because confidence in the banking system once lost is very hard to regain. In Pakistan, risks to the existing financial system have been generally low and the SBP has managed to keep them under control without any serious consequences but it is better to be more careful. However, the decision to keep the responses confidential and not to use them for any purpose other than the assessment of risks in the financial system is hard to understand. "Financial Stability Review" and "Quarterly Performance Review of the Banking System" published regularly have added to the information of all the relevant entities for determining the health of country's financial system.