The Presidents/Chief Executive Officers
All Banks/ Digital Banks/ DFIs


Dear Sir/Madam,

Basel Capital Adequacy Framework: Revised Instructions for Credit Risk (Standardized Approach)

         Please refer to BSD Circular No. 8 of June 27, 2006, and BPRD Circular No. 6 of August 15, 2013, regarding implementation of Basel Capital Adequacy Framework in Pakistan.

2.       The Global Financial Crisis (GFC) exposed critical weaknesses in the financial system, prompting global regulatory reforms. In response, the Basel III framework was introduced by the Basel Committee on Banking Supervision (BCBS) to address shortcomings of the pre-crisis regime and strengthen the resilience of the banking sector.

3.       BCBS reforms are broadly divided into two phases. Phase I focused on enhancing capital adequacy, introducing liquidity and leverage ratios, and establishing the D-SIB framework. Phase II emphasizes revisions to the risk-weighting regime, leverage ratio, and other enhancements.

4.       SBP has already implemented Phase I reforms. As a first step toward adopting Phase II reforms in a smooth and timely manner, and in line with BCBS guidance, SBP has developed revised instructions on the Standardized Approach for Credit Risk.

5.        These revised instructions will be implemented across the industry on a parallel run basis from September 30, 2025 to June 30, 2026 (four quarters). This approach will allow SBP to assess practical challenges and incorporate industry feedback, if required, for final implementation.

6.       During the parallel run, banks, Digital Banks and DFIs shall submit capital adequacy returns under both existing and revised instructions as follows:

1. Existing instructions:


1. Quarterly returns: 14 working days from quarter-end;
2. Annual audited returns: 3 months from year-end.


2. Revised instructions:


1. Quarterly returns: by end of the month, following the quarter-end;
2. Annual audited returns: by April 30, 2026.


3. Regulatory compliance assessments will continue to be based on the existing instructions and no enforcement action will be taken on the non-compliance with the revised framework during the parallel run.

7.       Submissions under the revised framework shall be sent in soft copy (Excel format) to [email protected] within the prescribed timelines.

8.        All other instructions on the subject remain unchanged.

           Please acknowledge receipt.

Enclosed:

1. Instructions for Credit Risk
2. Reporting Template