The State Bank of Pakistan has made it mandatory for all financial institutions including banks to have themselves credit rated by June 30. Previously only non-bank financial institutions were required to seek credit ratings.
An State Bank circular issued recently said the decision was aimed at safeguarding the interest of prospective investors/depositors and creditors. It said only those credit rating companies that are on SB panel could assign ratings to financial institutions.
The circular has been issued at a time when Habib Bank (one of the largest Bank in Pakistan) is set to raise Rs12 billion through stock exchange.
Following are the instructions contained in the said circular:
(i) The credit rating will be an ongoing process i.e. credit rating should be updated on a continuous basis from year to year and the rating report be submitted to the State Bank within one month of the last notification of the ratings.
(ii) All Banks and Non-Banking Financial Insttutions listed on stock exchange will disclose their credit rating to the public within one month of the last notification of the ratings.
(iii) All other Banks and Non-Banking Financial Insttutions not listed on stock exchange will get themselves credit rated. However, it will be mandatory upon them to make their credit rating public within a month of two years from the date of their first rating and thereafter annually within one month of the notification of ratings.
The circular warns that non-compliance of these instructions would render the financial institutions liable to penal action.
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