Is banking system at risk
Global markets have been rocked by recent bank failures in the United States, Switzerland and Lebanon. Pakistan’s economic situation is also uncertain, raising concerns about the stability of its banks. But the answer to whether we should worry about our banking system is not a simple one – yes and no.
First of all, it is important to note that there are some structural problems with Pakistani banks that have been playing a role in the problems faced by the banking industry. One of the structural problems of Pakistani banks is their vulnerability to concentration. This is because a few large banks have a large percentage of assets in the banking system.
This creates a concentration risk, as the failure of one or more of these banks can have a significant impact on the entire financial system. The second structural problem is the high number of non-performing loans (NPLs). This is a major problem as it means that a large proportion of the loans taken out by the banks are not repaid, leading to liquidity problems in the banking sector. In addition, many of these bad loans are questionable and may appear to have been used to benefit certain individuals through collusion.
It is imperative that we increase transparency in the banking system by making financial reporting accessible to the public and by encouraging whistleblowers to come forward with information about corruption and fraud, particularly in relation to credit underwriting.
The third challenge is the lack of transparency and accountability in the banking system, which has led to widespread corruption, money laundering and fraudulent activities. This resulted in a loss of public confidence in the banking sector and led to a lack of confidence among domestic and foreign investors.
