Pakistan bank develops risk management guide

KARACHI, Pakistan— The State Bank of Pakistan is developing new risk management guidelines that call for the country's Islamic banking institutions to tighten internal controls and ensure that financial risks are properly managed.

The state bank has distributed a draft of its guidelines that will apply to Shariah-compliant banking institutions and plans to issue a final document after receiving input on the proposals from the institutions.

The guidelines call for Shariah-compliant institutions to "consider the full range of material operational risks...including the risk of loss resulting from inadequate or failed internal processes, people and systems from external events."

The state bank also warns financial institutions of the "risks relating to Shariah non-compliance" and said compliance must "permeate throughout the organization and their products and activities."

The guidelines also cover credit and market risks as well as rate-of-return, liquidity and equity investment risks.~

The draft guidelines are at www.spb.org.pk.