KARACHI: Broadly speaking, the banking sector in the country is stable. Many may find it a bit surprising in view of the hit that global financial system has taken in recent days, but that is what it is. The question is, why Pakistani banks have fared better than their counterparts elsewhere?

Despite all political and financial ups and downs that the national scene has witnessed in the last year-and-a-half, the bankers do not see the current situation too alarming. Though investor sentiment has dipped during the period, bankers are not willing to go on record while attributing the lack of confidence among investors which has translated into disinvestment and flight of capital from the country, causing an economic slowdown. On their part, government officials believe that around $10 billion have gone abroad during this period.

“The long-term impact of the 18-month political uncertainty has now started appearing in different shapes, like massive flight of capital, real estate plunge, collapse of the stocks business, severe liquidity problems in the banking sector and the record high interbank money rates witnessed recently,” said a senior banker of one of the largest local banks.

Despite the depressing situation, however, there is no report of bankruptcy, even among smaller banks. How these banks succeeded in absorbing the shocks of the declining economy which might fall to 3.5 per cent instead of the targeted six? If the bankers are to be believed, the boom that preceded the slowdown earned them record profits and helped the industry mature in terms of improving its capacity to absorb shocks.

Confident bankers view the situation as being not as bad as it is for the other sectors. If at all, banks, they say, would be the last victim of the negative impact. Confidence apart, vibes coming out of the bankers community do spell fear as the industry is based on depositors’ confidence. What lack of confidence can do to an economy may well be seen in even the developed countries where erosion of confidence in the financial system has proved to be the real problem.

“Banking is run on trust and confidence. The collapse of giant banks that were ruling the global financial system caused an erosion of confidence which has yet to be overcome despite several steps taken by respective governments,” said a central banker.

Pakistani banks, at least for the time being, still retain public trust. Bankers believe that the economic growth could be slowed down in the days ahead, which, in turn, will reduce their profit margins, but they don not foresee any collapse.

“Yes, the foreign influence is reaching Pakistan, but assessing the possible impact at this stage is too early, incomplete and may well be misguiding,” remarked a senior banker.