PPI Original Text (PPI-OT) – Limit for unsecured guarantees by Banks and DFIs doubled to USD 500,000 – Alfalah Securities Limited

Karachi, May 15, 2012 (PPI-OT): State Bank of Pakistan (SBP) has doubled the limit to USD 500,000 from USD 250,000 for issuance of unsecured guarantees by banks and DFIs in Pakistan against the counter-guarantees of the banks situated in foreign countries.

According to Alfalah Securities Limited, the amendments have been made to the Prudential Regulations for Corporate and Commercial Banking to improve efficiency of the banks and DFIs. In case of the counter guarantee issuing bank situated in a foreign country, National Scale Rating of at least ‘A’ or equivalent (or the rating of at least ‘A’ or equivalent by a local credit rating agency of the respective country) will be acceptable, provided the guarantee issuing bank in Pakistan is comfortable with and accepts the counter guarantee of such foreign bank. However, the prescribed rating requirement for banks situated in foreign countries may be relaxed for transaction amount up to USD 250,000 irrespective of tenor and up to USD 500,000 if tenor is up to one year. The banks and DFIs may approach SBP for specific approvals or exemptions for higher than limit guarantees.