The Presidents/Chief Executive Officers

All Conventional Banks / Islamic Banks / Islamic Banking Branches of Conventional Banks / DFIs

Dear Sirs/Madams,

Framework for Collateral & Counterparty Eligibility for SBP Monetary Policy Lending Operations and Mudarabah Based Financing Facilities

Please refer to DMMD Circular No. 12 of 2017, DMMD Circular No. 25 of 2021, DMMD Circular No. 11 of 2022, DMMD Circular No. 1 of 2009 and DMMD Circular No. 24 of 2021.

In order to further strengthen risk mitigation measures for SBP’s Monetary Policy Lending Operations and Mudarabah Based Financing Facilities (OMOs and Standing Ceiling Facility), following instructions are being issued:

A. Collateral Requirements

Based on duration and volatility estimates, SBP will apply the following haircuts on the market value of government securities offered as collateral:

Application of Haircut:

Post haircut Price = Market Price of the security × (1 − Applicable Haircut)

Floating Rate Instruments:

• Quarterly coupon → up to 3-month maturity bucket haircut
• Semiannual coupon → 3 to 6-month maturity bucket haircut

B. Counterparty Eligibility Criteria

SBP will apply the following criteria:

• Regulated Entity: Must be regulated by SBP
• Current Account: Must maintain account with SBP-BSC
• PRISM Participation: Must be part of PRISM system

Participant Categories:

1. Regular Participants

• Meet Capital Adequacy Requirements (MCR, CAR, Leverage Ratio)
• Meet Liquidity Requirements (LCR, NSFR)

2. Watch List Participants

*No incremental financing allowed during this period.

3. Ineligible Institutions

• Failure to restore compliance within grace period
• Declared failed under Deposit Protection Corporation Act 2016
• Under resolution or liquidation
• License cancelled or revoked

These instructions will be applicable from 02nd July, 2025.

All other instructions shall remain unchanged.