ISLAMABAD: Rating agency Moody’s said on Wednesday the Pakistani government’s credit profile was stable on the back of reforms and policy effectiveness, adding that the country’s banking system reflected banks’ solid funding and liquidity, although a challenging operating environment would weigh on asset quality and profitability.
Moody’s published its outlook on the Pakistan Banking System titled, “Banking System Outlook – Pakistan: Stable outlook balances loan book and profitability pressure against stable funding and a resilient sovereign.”
“Despite a difficult environment, the government’s credit profile is stable due to ongoing reforms and increasing policy effectiveness – a positive for the banks given their outsized holdings of Pakistani government debt link their credit profiles to that of the government,” said Constantinos Kypreos, a Moody’s Senior Vice President. “Deposit-based funding and good liquidity buffers also remain strengths, while the probability of government support in a crisis is high, even if its ability to do so is limited by fiscal challenges.”
The report said restrictions in place to contain the spread of the coronavirus would keep economic activity below pre-outbreak levels but the Pakistani economy was expected to return to modest growth of 1.5% in fiscal 2021.
“Government and central bank policy responses and structural reforms will soften the pandemic’s impact but not fully offset it,” the report said. “In this environment, we expect private-sector lending to grow modestly, by 5%-7%, over the calendar year.”
Nonperforming loans (NPLs) would rise from a sector-wide level of 9.9% of gross loans at September 2020 as the economic slowdown took a toll on borrowers’ repayment capabilities, the report said. Banks’ foreign operations, export-oriented industries and companies that depend on government payments and subsidies would be hit hardest. Loan repayment holidays and other support measures would contain the deterioration, but not eliminate the risks entirely. Banks’ heavy exposure to government bonds would also continue to link banks’ credit profiles with the fiscal strength of the government.
The report also said capital was modest but would remain broadly stable and profitability had materially increased during 2020, but would come under some pressure in 2021: Net interest margins will narrow after a huge 625-basis-point interest rate cut in 2020. Together with rising provisioning needs and subdued business generation, this will curb bottom-line profits.
“The government remains willing to support troubled banks but its ability to do so is limited by fiscal challenges reflected in its B3 rating,” the report concluded.
Moody’s maintains stable outlook for Pakistan banks
https://arab.news/gpn84
Moody’s maintains stable outlook for Pakistan banks
- Says despite difficult environment, government’s credit profile stable due to ongoing reforms and increasing policy effectiveness
- Pakistani economy expected to return to modest growth of 1.5 percent in fiscal year 2021 despite coronavirus restrictions
Pakistan clears global crypto exchanges Binance, HTX under new regulatory framework
- NOCs allow Binance, HTX to conduct engagement activities within Pakistan, says regulator PVARA
- Says move allows entities to open subsidiaries in Pakistan but doesn’t constitute as operating license
ISLAMABAD: The Pakistan Virtual Assets Regulatory Authority (PVARA) announced on Friday that it has granted no objection certificates (NOCs) to global crypto exchanges Binance and HTX, the latest in a series of moves by Islamabad to regulate its fast-growing virtual assets market.
PVARA said the NOCs were granted following a review process it conducted with public sector stakeholders which focused on governance structures, compliance frameworks, risk management controls and alignment with Pakistan’s emerging regulatory requirements for virtual asset activities.
Pakistan has been moving to regulate its fast-growing crypto and digital assets market by bringing virtual asset service providers (VASPs) under a formal licensing regime. Officials say the push is aimed at curbing illicit transactions, improving oversight and encouraging innovation in blockchain-based financial services.
“The introduction of this structured NOC framework demonstrates Pakistan’s commitment to responsible innovation and financial discipline,” Finance Minister Muhammad Aurangzeb was quoted as saying in a press release issued by PVARA.
The regulatory authority said the NOCs allow Binance and HTX to conduct preparatory and engagement activities within Pakistan under “defined regulatory oversight,” clarifying that it does not constitute a “full operating license.”
The NOCs allow Binance and HTX to begin registration on the FMU goAML, Pakistan’s anti–money laundering reporting platform, as reporting entries. It also allows them to engage with the Securities and Exchange Commission of Pakistan (SECP) regulator to incorporate their subsidiaries in the country.
HTX and Binance can also prepare and submit their full VASP license applications once licensing regulations are promulgated and provide anti-money laundering (AML) registered services after the completion of their goAML registration.
“PVARA will continue to engage with domestic and international stakeholders as it advances subsequent phases of its regulatory framework,” the authority said.
“Additional guidance regarding licensing standards, compliance obligations and supervisory expectations for virtual asset service providers will be issued in due course.”
Chairman PVARA Bilal Bin Saqib said issuing the NOCs marks the first step toward a fully licensed and regulated environment for digital assets in Pakistan.
“By adopting a phased and internationally aligned approach, Pakistan is ensuring that only well-governed, fully compliant global platforms progress toward full licensing,” Saqib was quoted as saying by PVARA.
According to PVARA, Pakistan already ranks at number three in crypto adoption and is home to an estimated 30 to 40 million users.
It said industry-wide assessments estimate that annual digital asset trading activity linked to Pakistan exceeds $300 billion.
The development takes place days after Prime Minister Shehbaz Sharif met a delegation of Binance in Islamabad, led by its CEO Richard Teng, to discuss regulating digital assets in Pakistan.
