The increasing competition and enhanced regulatory expectations in terms of fairness to customers, financial stability and compliance with applicable laws and regulations expose banks to significant challenges. In this challenging macro environment, the effective compliance with regulatory requirements, best practices and internal policies has particularly become a key determinant for financial institutions’ performance and stability. Therefore, policy makers and financial institutions around the globe have modified the compliance risk management frameworks. These global initiatives mainly focus on refinements in corporate governance, risk management and internal control frameworks and inculcation of enabling culture that duly appreciates the importance of compliance risk.

2.  The State bank of Pakistan, in line with best international practices, has developed guidelines on ‘compliance risk management’ to provide banking industry a uniform and systematic approach for identification, assessment and management of compliance risk. The guidelines aim to promote enabling ‘compliance culture’ in banks and strengthen the effectiveness of compliance function by adopting structured and risk focused approach.

3.  These guidelines supplement the role and responsibilities of compliance function as already prescribed in Para-D of regulation G-1 of Prudential Regulations for Corporate/Commercial Banking as amended from time to time.

4.  All banks/DFIs/MFBs are advised to comply with these guidelines in letter and spirit. Keeping in view their size, nature & scope of business and complexities of operations, the banks/DFIs/MFBs are advised to bring their compliance functions, policies and procedures in line with requirement of guidelines by December 31, 2017.


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Encl: Guidelines on Compliance Risk Management (CRM)