MCR Policy
SBP aimed to achieve the
following broader objectives
through the MCR standard:
—To ensure banks have sufficient core capital base to bear shocks on account
of unexpected losses so
as to counter any fragilities in the financial system;
—Ensures that the bank
operates at a size which is more conducive to economies of scale;
—Increase the financial stake of
sponsors/owners in order to encourage prudent behavior.
—The GFC revealed that dozens of the largest US & European
banks had enough regulatory capital to satisfy Basel capital standards but
were having insufficient good quality (i.e. loss absorbing) capital.