State Bank of Pakistan increases capital requirements for exchange companies

The State Bank of Pakistan (SBP) has increased the minimum paid-up capital requirement for exchange companies to PKR 1.0 billion, which need to be met by December 31, 2027.

SBP has notified a new set of regulations called “Regulatory Framework for Exchange Companies (RFEC)”, which has doubled the paid-up capital.

A capital-deficient exchange company is required to meet the shortfall by reaching PKR 600 million by December 31, 2025, PKR 800 million by December 31, 2026, and PKR 1.0 billion by December 31, 2027.

The Minimum Capital Requirement (MCR) of PKR 1.0 billion must also be maintained on an ongoing basis.

Besides, companies must maintain 15% of their paid-up capital as a regulatory reserve with the SBP in cash or approved government securities.

Exchange companies are also required to develop and implement a comprehensive IT and Information security policy.

The framework, effective January 1, 2025, mandates that exchange companies update their internal policies, procedures, and systems to comply with the RFEC by June 30, 2025.

It also restricts shareholders and directors from withdrawing funds as loans or credits without written approval from the SBP and forbids the extension of loans to the company without prior approval.

Furthermore, companies are prohibited from obtaining financing facilities, except for leasing business-required vehicles, without SBP’s approval.

Shareholders are also restricted from divesting any part of their capital without SBP’s consent.

The framework also outlines the licensing process for exchange companies.

The SBP may also suspend or revoke authorizations and limit business activities as per the framework. Companies intending to cease operations voluntarily must apply for revocation of authorization to the SBP.

Additionally, exchange companies must comply with Anti-Money Laundering, Combating the Financing of Terrorism, and Countering Proliferation Financing (AML/CFT/CPF) regulations as part of the new framework.