03 October 2004	Sunday	17 Shaban 1425

KARACHI, Oct 2: The State Bank has eased the prudential regulation that calls for minimum rating of foreign banks required for acceptance of their counter guarantee by banks in Pakistan.

A letter issued on Saturday by the SBP Banking Policy Department amended the relevant paragraph of Regulation No 7 of the Prudential Regulations for Corporate/Commercial Banking for this purpose.

The amended paragraph says that the requirement of security can be waived by banks or DFIs in cases of guarantees issued to Pakistani firms and companies functioning in the country against various kinds of counter guarantees. And it envisages the minimum rating of the banks required for acceptance of their counter guarantee by scheduled banks in Pakistan.

The amended paragraph reads: "The requirement of security can be waived by the banks/DFIs in cases of guarantees issued to Pakistani firms and companies functioning in Pakistan against back to back/counter guarantees of branches of guarantee issuing bank/DFI or banks/DFIs rated at least A or equivalent by a credit rating agency on the approved panel of the State Bank of Pakistan or Standard & Poor's.

"Besides, in case the counter guarantee issuing bank is situated in a foreign country, the rating of at least A or equivalent by a local credit rating agency of the respective country shall also be acceptable, provided the guarantee issuing bank in Pakistan is comfortable with, and accepts the counter guarantee of such foreign bank."

The earlier version of the prudential regulation did not contain this last facility for waiver of the requirement of seeking security against loaning.