The State Bank of Pakistan (SBP) has amended Regulation R-6 of the Banking and Commercial Banking Regulations for Equity Investments of Banks and Development Financial Institutions through BPRD Circular Letter No. 04 of 2022.
Pursuant to circulars issued to banks and development financial institutions, It has decided to amend Section 1-A of the Commercial Banking/Corporate Banking Prudential Rules Regulations regarding the acquisition of shares or investment limit for an individual company.
In accordance with this amendment, the total Equity investment of banks and development financial institutions in a single company should be less than 5% of the Tier 1 capital of the Bank and the Development FI , as mentioned in the previous audited semi-annual/annual financial statements, or 10% of the paid up capital of the investee company, which ever is lower.
These Limits also apply to banks and development financial institutions that invest in shares of all types of mutual funds.
In addition, all investments by banks and development finance institutions in shares or shares of start-ups including fintech start-ups, should be less than 5% of Tier 1 Capital of Bank/DFI, or PKR500mn, whichever is lower.
Meanwhile, the total investment of banks and development financial institutions in shares of REITs should be less than 5 percent of tier-1 Capital of banks and DFIs or 15 percent of the paid-up capital of the Investee company.
SBP has also asked banks and financial development institutions to implement approved policies, including an internal evaluation process, to objectively review and evaluate investment decisions based on a range of factors. This includes, but is not limited to, the financial condition of the Bank and Iraq. Total development and investment fund portfolio Acceptable risk and expected return Level of experience Business strategy, including exit strategy, etc., and other relevant recommendations remain unchanged.
Full Circular can be read here
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