SBP authorises two private banks to launch exchange companies

• Bank of Punjab has also received central bank’s nod for EC

KARACHI: The State Bank of Pakistan (SBP) has authorised Bank AL Habib Limited (BAHL) and Allied Bank Limited (ABL) to commence operations of their wholly-owned Exchange Companies (ECs), notices issued on Pakistan Stock Exchange (PSX) showed on Friday.

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In a notification to the PSX, BAHL said that they had expressed intention to establish an EC as a wholly-owned subsidiary, with an authorised share capital of Rs 1,000 million. Following the issuance of a Certificate of Incorporation from the Securities and Exchange Commission of Pakistan (SECP), SBP has granted a license for the commencement of operations to ‘AL Habib Exchange Company (Private) Limited’.

Likewise, ABL also sent a notification to the PSX saying that they too have received approval from SBP for their EC, named ‘ABL Exchange (Private) Limited’.

Earlier, SBP announced initiative to implement structural reforms in the EC sector, to enhance controls. This move was announced in response to the significant depreciation of the rupee in the open market last year. The central bank had announced that leading banks involved in foreign exchange business would establish wholly-owned ECs to address the legitimate foreign exchange needs of the public.

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SBP has also increased the minimum capital requirement for ECs from Rs 200 million to Rs 500 million, thereby raising the entry barrier for the private sector.

Furthermore, Bank of Punjab (BoP) has also received a ‘No Objection’ from SBP to establish an EC named ‘BoP Exchange Company (Pvt) Limited’, according to a separate statement.