Minimum
Capital requirements for Banks |
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Besides,
investments made in the equity of subsidiary companies engaged
in banking and financial activities
which are not consolidated will also be deducted from
the equity in the consolidated Group balance-sheet. |
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The
subordinate debt will be limited to a maximum of 50%
of the amount of equity. To be eligible for inclusion
in Supplementary Capital the instrument should be fully
paid up, unsecured, subordinated to the claims of other
creditors and should not be redeemable at the initiative
of the holder and without the prior approval of the
SBP.
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General
Provisions or Reserves for loan losses shall include
only such provisions which are not created against identified
losses and are as such freely available to meet unidentified
losses. These provisions or reserves will be limited
to maximum of 1.25% of risk assets.
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Undisclosed
Reserves will be permitted to be included in the Supplementary
Capital despite being unpublished, provided they appear
in the internal accounts of the banking company and
have basically arisen out of the earnings of the banking
company duly certified by the External Auditors and
are accepted as such by the State Bank. To be eligible
to be shown as part of the Supplementary Capital, the
Undisclosed Reserves should not be encumbered by any
provision or known liability and should be freely available
to meet unforeseen losses.
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Revaluation
Reserves shall be the Reserves created by revaluation
of fixed assets and equity instruments held by the banking
company. The assets and investments must be prudently
valued fully taking into account the possibility of
price fluctuations and forced sale, Revaluation reserves
reflecting the difference between the historical cost
book value and the market value will be eligible upto
50% for treatment as Supplementary Capital subject to
the condition that the reasonableness of the revalued
amount is duly certified by the external auditors of
the banking company.
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All
claims are to be assigned the highest risk wightage
(100%) unless a lower risk-weightage can be specifically
assigned to them.
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Netting
may be done only in respect of assets where provisions
for depreciation or for bad and doubtful debts have
been made.
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Assets
which have been deducted from equity pursuant to Paragraph
4(ii) above will have a weightage of ‘0’.
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For
the purpose of calculating MCR in respect of exposure
under various Off-Balance-Sheet transactions, the banks
shall apply credit conversion factors as indicated below
to the different types of Off-Balance-Sheet transactions.
The credit conversion factors will be multiplied by
the weights applicable to the corresponding On-Balance-Sheet
transaction based on the credit risk involved in the
Off-Balance-Sheet exposure:-
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5)
CALCULATION OF MINIMUM CAPITAL REQUIREMENTS : |
The
banking companies shall calculate MCR for their respective
On-Blance-Sheet assets by applying the
weights as given below:- |
a) |
Assets |
%
Weight |
b) |
Cash
(including approved foreign currencies and gold bullion) |
0% |
c) |
Balances
held with scheduled banks and banks abroad.
(Be they term deposits, Certificates of Deposits or
money at call) |
20% |
d) |
Claims
on the State Bank, the Federal Government, the Provincial
Government, and other Central Banks |
0% |
e) |
Claims
on or Guaranteed by banks of international repute incorporated
in G.10 countries |
20% |
f) |
Claims
covered by cash collateral, or guarantee of the Federal Government
or of the State Bank. |
0% |
g) |
Loans
to staff |
0% |
h) |
Claims
on domestic entities owned or controlled by the Federal Government
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0%,
10%, 20% or 50% as may be prudently determined by the banking
company. |
i) |
Loans
fully secured by mortgage of residential or commercial property |
50% |
j) |
Loans
and advances including bills purchase/discount (less cash
margin
and government securities held) to private sector entities) |
100% |
k) |
Investments
in shares and other capital instruments of companies set up
in the private sector |
100% |
l) |
Fixed
assets (land, building, equipment’s, furniture &
fixture, stationery)
net of depreciation |
100% |
m) |
Other
Assets |
100% |
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Off-Balance-Sheet
transaction |
Credit
conversion factors |
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a) |
Loan
Repayment Guarantees and Acceptances (less Cash Margin) |
100% |
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b) |
Purchase
& Resale Agreements (Reverse REPO) other than those
effected through SGL of State Bank |
100% |
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c) |
Performance
Bonds, Bid Bonds, Warranties and similar instruments (less
Cash Margin & Government Securities held) |
50% |
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d) |
Revolving
Underwriting commitments |
50% |
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e) |
Standby
Letters of Credit & Other Standby Facilities with an
original maturity of over one year, and other Letters of
Credits (less Cash Margin & Government Securities held) |
50% |
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f) |
Outstanding
foreign exchange contracts |
3% |
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