KARACHI, Dec 12: The State Bank of Pakistan on Friday issued the revised Institutional Risk Assessment Framework (IRAF) to protect banks and Development Financial Institutions (DFIs) from risk and shocks.

The IRAF was introduced in 2004 for ensuring proactive monitoring of the risks the banks and DFIs are exposed to and further strengthen the existing supervisory mechanism of the State Bank.

In line with the dynamic regulatory environment, the existing IRAF questionnaire has been revised making it more objective and concise, said the SBP.

The scope of IRAF has been enlarged and two new set of questionnaires relating to prudential regulations for agricultural financing and guidelines regarding shariah compliance of Islamic banks have been introduced to cover these areas of operations of banking sector as well.

In addition, a scale from 1–5 has been introduced in order to provide bank and DFIs flexibility to assess themselves more objectively instead of responding with existing available ‘yes’ or ‘no’ option.

“All the financial institutions are advised to ensure submission of revised set of questionnaire as of December 31, 2008 within stipulated timeframe i.e. by February 14, 2009,” said the circular.

With this circular series of questionnaire are attached which shows that how State Bank is willing to monitor the banks minutely and deeply.

The SBP will get sweeping powers under the agreement with International Monetary Fund (IMF).

The government assured the IMF that by mid March 2009, amendment in Companies Ordnances will be made to empower the SBP enabling it to change the management, remove executives, suspend licence and take up the ownership of a bank.

However, bankers said the change in IRAF has been made due to massive change in the global financial system which vastly hit the banks while the central banks in the developed economies are taking series of ‘unconventional’ measures to protect the banking system and banks.

“The State Bank wants to provide protection shield before the shocks take the full impact and the measures could help the banks to minimise the impact,” said a banker.