{"id":3063,"date":"2025-01-24T10:03:37","date_gmt":"2025-01-24T05:03:37","guid":{"rendered":"https:\/\/pkfin.kotenterprises.dev\/?p=3063"},"modified":"2025-01-24T10:03:37","modified_gmt":"2025-01-24T05:03:37","slug":"sbp-issues-guidelines-for-pool-management-for-islamic-banking-institutions","status":"publish","type":"post","link":"https:\/\/pkfin.kotenterprises.dev\/?p=3063","title":{"rendered":"SBP Issues Guidelines for Pool Management for Islamic Banking Institutions"},"content":{"rendered":"

The State Bank of Pakistan (SBP)<\/a> has recently issued updated guidelines regarding Profit and Loss Distribution and Pool Management for Islamic Banking Institutions (IBIs), along with amendments to the IFRS 9 Application Instructions. The developments were highlighted in a research note by Topline Securities, a leading brokerage house.<\/p>\n

Key Highlights<\/h2>\n

Impact on Profit and Loss Distribution<\/strong>
\nSBP clarified that provisions created against non-performing assets, as per relevant SBP regulations, will now be charged to the respective pool. Furthermore, in paragraph 2 of IFPD Circular No. 9 dated November 26, 2024, the phrase \u201c(excluding fixed assets)\u201d has been removed, according to Topline.<\/p>\n

The brokerage house estimates that these changes will reduce borrowing costs for Islamic banks by approximately 30 basis points (bps). This reduction is expected to positively impact Meezan Bank Limited (MEBL)<\/a>, Pakistan\u2019s largest Islamic bank, with an estimated increase of PKR 0.77 per share, accounting for 2% of the bank’s 2025 earnings per share (EPS).<\/p>\n

Amendments to IFRS 9 Implementation<\/strong>
\nTo facilitate the adoption of IFRS 9, SBP has amended its application instructions. Modification accounting is now required to be applied retrospectively, effective for loans modified on or after January 1, 2020. Financial institutions are also permitted to maintain general reserves and provisions exceeding the Expected Credit Loss (ECL) calculated for Stage 1 and Stage 2 loans, up to December 31, 2026.<\/p>\n

Revenue Recognition and Islamic Financial Standards<\/strong>
\nThe central bank<\/a> has directed IBIs to comply with Islamic Financial Accounting Standards (IFAS) 1 and 2, where applicable, and to continue their current accounting practices for other Islamic products until further instructions are issued. However, IBIs are required to disclose the potential impact in their financial statements had IFRS 9 been fully adopted.<\/p>\n

SBP has also reiterated in IBD Circular No. 02 of 2008 that the “Charity Fund shall not constitute income of the IBI.” The treatment of charity must align with existing SBP instructions and should not be recognized as income.<\/p>\n

Market Outlook<\/strong>
\nTopline Securities has described these changes as neutral for the banking sector, noting that the impact of IFRS 9 on banks will be gradual rather than abrupt or volatile. The brokerage house has maintained a market-weight stance on the banking sector<\/a>, with Meezan Bank (MEBL) and Habib Bank Limited (HBL) remaining its top picks.<\/p>\n

These updates from SBP mark a significant step toward aligning Islamic banking practices<\/a> with global financial reporting standards while ensuring transparency and stability in the sector.<\/p>\n","protected":false},"excerpt":{"rendered":"

The State Bank of Pakistan (SBP) has recently issued updated guidelines regarding Profit and Loss Distribution and Pool Management for Islamic Banking Institutions (IBIs), along with amendments to the IFRS 9 Application Instructions. The developments were highlighted in a research note by Topline Securities, a leading brokerage house. Key Highlights Impact on Profit and Loss […]<\/p>\n","protected":false},"author":1,"featured_media":3064,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","footnotes":""},"categories":[8],"tags":[],"class_list":["post","format-standard"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t