Please refer to BSD Circular No. 08 dated June 27, 2006 on the Basel II implementation in Pakistan.

2. In terms of the above referred Circular, banks/DFIs are required to have a process for assessing their overall capital adequacy on continuing basis in relation to their risk profile and a strategy for maintaining their capital levels. In order to facilitate banks/DFIs to develop such process, “Guidelines on Internal Capital Adequacy Assessment Process” have been developed, which are enclosed. These guidelines are aimed to supplement the instructions issued vide above referred Circular.

3. All Banks/DFIs are required to have in place sound and effective process for assessing their overall capital adequacy in the light of enclosed guidelines. They may adopt any available capital assessment methodology based on their size, nature and complexity of the operations. The assessment process so adopted should be comprehensively documented and made part of bank/DFI’s strategic decision making process.

4. All Banks/DFIs are advised to submit the major findings of ICAAP latest by 30th April, 2009 to Banking Surveillance Department according to the format provided as Annexure-A in the enclosed Guidelines. It is emphasized that ICAAP is an ongoing activity and submission of findings at a particular date should not be construed as a periodical exercise.

Encl. Guidelines