SBP imposes fines on four banks for violating laws

Karachi: The State Bank of Pakistan (SBP) fined United Bank Limited (UBL), The Bank of Punjab (BoP), JS Bank Limited (JSBL) and Allied Bank Limited (ABL) for violating banking laws.

In the first quarter of the current fiscal year, from July to September, these four financial institutions were fined a total of Rs83.157 million for breaking the central bank's guidelines on foreign currency, client due diligence, and general banking activities.

The SBP published information about the major enforcement action on its website on Tuesday. UBL was fined the most, Rs 26.500 million, followed by BoP (Rs 21.569 million), JS Bank (Rs 18.510 million), and ABL (Rs 16.578 million).

The banks received penalties for violating regulations concerning general banking operations, foreign exchange trading, know your client, and consumer due diligence.

In addition to penal action, these banks have been advised by the SBP to strengthen their systems and controls to prevent future regulatory infractions.

The SBP states that the punitive measures are based on violations of regulatory directives and do not address the banks' overall financial stability.

The government began looking into banks last year after learning that they were manipulating currencies to boost their earnings.

However, neither the findings of the report nor the penalty or fiscal action taken against the banks were made public.

Short forex liquidity, short net open forex positions held by the banks and greater currency volatility and uncertainty were cited as the main reasons why the banks’ spreads were higher.

Notwithstanding the economic challenges seen by the nation in 2022, the banking sector demonstrated resilience by recording a robust 19.1% increase in assets.

The Financial Stability Review for 2022, the SBP's yearly flagship report, stated that investments were the primary driver of this increase while advancements slowed.

The contained delinquencies and higher profitability supported banks’ solvency as the capital adequacy ratio stood at 17.0% – well above the minimum regulatory requirement of 11.5%.

The Islamic banking segment also observed robust growth of 29.6% during 2022.