KARACHI, Oct 11: The financial crisis in the US and European countries will also hit the local banking industry, but its intensity will be much less than some other countries, said Pakistan Banks’ Association on Saturday.

“We don’t live in isolation. The impact of deteriorating banking system in the US and some European countries will not impact us the way it did in the West,” PBA Chairman Aftab Manzoor told Dawn.

He said with the slowdown in economic growth in the US and Europe, the demand for goods would fall and result in shrinking exports from Pakistan.

He said banks are on sound footing since the exposures of Pakistani banks are not too high as in United States and other European countries.

The PBA did not call any special meeting to discuss the situation and make strategy. Aftab Manzoor said the banks used to discuss the issue in regular meetings. However, he stressed the need to work together to deal with the situation.

He said the banks were in touch with the State Bank of Pakistan, which is fully aware about the global financial crisis.

“The SBP has supported the banks by reducing the Cash Reserve Requirement (CRR) to provide banks with sufficient liquidity,” said the PBA chairman.

The SBP has reduced the CRR by 2 per cent to 7 per cent in two steps which would provide a total liquidity of about Rs61 billion to the banking system.

The decision was taken after acute shortage of cash in the banks and as the call money rates reached 40 per cent. The shortage was primarily because of Ramazan-related withdrawals.

“Now the liquidity has started flowing into the banking system and the rates have substantially dropped,” said Aftab Manzoor.

It has been noticed that the confidence of a small number of depositors in Pakistan has wavered in the light of what they see happening across the globe, he said.

“We are surprised that how rumours about very sound banks like Standard Chartered is being spread,” said Manzoor.

He said that the recent turmoil in global financial markets had been severe and many global financial institutions were facing solvency and continuity issues.

“Pakistan’s banking system has remained resilient in the face of global volatility and continues to perform well,” said the chairman PBA.