Minimum
Capital requirements for Banks |
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STATE
BANK OF PAKISTAN
BANKING POLICY & REGULATIONS DEPARTMENT
(RISK MANAGEMENT & ANALYSIS DIVISION )
CENTRAL
DIRECTORATE
KARACHI
BPRD
Circular No. 36 4th November, 1997
All Banks
Dear
Sirs,
MINIMUM
CAPITAL REQUIREMENTS
Banks
are aware that Section 13 of the Banking Companies Ordinance,
1962 relating to requirement of minimum paid up capital and
reserves has recently been modified through the Banking Companies
(Second Amendment ) Ordinance, 1997 (copy enclosed). The modified
law interlay states that no banking company shall commence business
unless it has a minimum paid up capital as may be determined
by the State Bank or carry on business unless the aggregate
of its capital and unencumbered general reserves so of such
minimum value within such period as may be determined and notified
by the State Bank from time to time. Accordingly, in exercise
of the powers vested under the above provisions of law it has
since been decided that effective from December 31, 1997 all
banks shall maintain minimum capital as laid down in the enclosed
Annexure.
Please
acknowledge receipt.
Yours
faithfully,
(MANSUR-UR-REHMAN KHAN)
Director
ANNEXURE
TO BPRD CIRCULAR No.36
DATED
4TH NOVEMBER, 1997
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INSTRUCTIONS
ON CALCULATION OF MINIMUM CAPITAL
REQUIREMENTS
BASED ON RISK WEIGHTED ASSETS |
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- No
banking company incorporated in Pakistan shall commence and
carry on banking business unless it has a minimum paid up capital
or Rs 500 million. Similarly, no banking company incorporated
outside Pakistan shall commence and carry on banking business
in Pakistan unless it has a minimum paid up capital of the value
of Rs 500 million.
- Provided
that where a banking company already in existence is found short
of the minimum required paid up capital on 31st December,
1997, it shall meet shortfall by 31st December, 1998.
-
Effective
from where the capital and unencumbered general reserves maintained
by a banking company are found short of the minimum required
capital and unencumbered general reserves (MCR) on December
31st, 1997, the State Bank shall, on request from
the banking company concerned, consider grant of extension
in time for meeting the required capital adequacy.
-
The
capital and unencumbered general reserves for the purposes
of the minimum requirement of 8% of risk weighted assets shall
mean and include:-
A
Equity :
- Fully
paid up capital / capital deposited with SBP*
- Balance
in share premium account
- Reserve
for Bonus Shares
- General
Reserves as disclosed on the balance-sheet
- Unappropriate/unremitted*
profits (net of accumulated losses, if any)
*
in the case of foreign banks operating in Pakinstan.
- Supplementary
Capital :
- General
Provisions or Reserves for loan losses
- Revaluation
Reserves
- Undisclosed
Reserves
- Subordinate
debt.
- The
computation of the amount of Equity and Supplementary Capital
shall be subject to the following limitations and restrictions:-
- The
sum total of the different components of the Supplementary
Capital will be limited to the sum total of the various
components of the Equity.
- While
calculating the amount of equity the followings shall be
deducted:-
- Book
value of intangible assets such as goodwill, etc.
- Shortfall
in provisions required against classified assets irrespective
of any relaxation allowed by the State Bank
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