Financial Sector Reforms & Soundness of Banks Operating in Pakistan

Azam ali, Ishaque Ahmed Ansari


This study assesses the impact of Financial Sector Reforms on the Soundness of Banks Operating in Pakistan over the last two decades. The paper attempts to answer the question; does financial sector reforms have any impact on the soundness of banks? Consequently, it is found that financial sector reforms, introduced in late 1980s, made significant impact on the Soundness of Banks. There has been a consolidation and merger of banks, capital adequacy ratios look much stronger, asset quality has been improved stemming the flow of Non Performing Loans (NPLs), and management has been strengthened by the induction of professionals at the top and second tiers. An important achievement in the last decade has been the transformation of a largely state-owned and weak banking system into healthier, primarily privately owned system. This has been facilitated by restructuring of major banks, ongoing corporate governance, and credit culture. The analysis strongly points toward the need for continuity of banking sector reforms. Though major efforts have been undertaken by the governments to update and improve the legislative framework, there remains a need to repeal, amend and update laws.

Keywords : Reforms, Pakistan, Banks, and Soundness

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