Silk Bank still in danger zone owing to its short ‘Paid Up’ capital

KARACHI:  The Silk Bank is still in a danger zone as it could not fulfill its ‘Paid-Up’ capital requirement as per law of the State Bank of Pakistan (SBP), therefore, its hardship is increasing further to meet the quarterly and annual financial reporting requirements and other operations.

“There are two banks in Pakistan, Summit Bank and the Silk Bank, who are facing shortfall in its paid-up capitals and need further local and foreign investments,” the banking analyst said. These banks are in danger zone for last one-year and the State Bank is inspecting them time to time.

According to Slik Bank’s financial reports of June 30, 2019, the equity of the Silk Bank stood at Rs 14.54 billion including deficit on revaluation of assets. This includes share capital (net of losses and discount on shares) of Rs 13.76 billion against the minimum requirement of Rs 10 billion as prescribed by SBP. Further the Capital Adequacy Ratio (CAR) of the bank is, 10.43 per cent against the minimum CAR requirement of the State Bank of Pakistan of 11.90%. The CAR requirement of 11.90% is made up of minimum CAR of 10% plus 1.90% of Capital Conservation Buffer (CCB), it added.

On June 3, the Silk Bank in a letter to the Pakistan Stock Exchange (PSX) said, “the SPB, in its recent inspection of the Silk Bank, has identified a shortfall in collateral (paid-up capital) against certain financial facilities granted by the bank.” “In compliance with the SBP requirements, the Bank obtained additional collateral, equivalent to identified shortfall,” it added.

SBP is also required the Bank to assess the value of the additional collateral obtained and allowed the Bank to delay its quarterly financial statements, as of September 30th, 2019, of the Bank, till the conclusion of the said valuation process so that the financial statements reflect the full impact of additional collateral obtained, the letter informed the PSX.

In this connection, the Silk Bank has requested Director I HOD – Surveillance, Supervision and Enforcement Department of Securities and Exchange Commission of Pakistan (SECP), regarding delays in approval and disclosure of third Quarter of 2019 financial statements and Annual Accounts of 2019 of the Bank, for information and record, the bank’s letter to PSX said.

In view of the current nationwide lockdown due to emerging situation from COVID-19 (Corona Virus) pandemic and the consequent extension in the various reporting requirements given to the industry by the State Bank of Pakistan, the Bank has further requested the SBP that an extension may be granted till June 30th, 2020, for approval / disclosure of third quarter of 2019 financials, Annual Accounts of 2019 and March 30th, 2020 financials, to meet the mandatory notice period requirements, for calling the said meetings. Whereas, the shareholders’ meeting for adoption of Annual Accounts of 2019 (AGM) requiring 21 days prior notice will be conducted by July 25, 2020.

According to the letter, the Silk Bank is awaiting for the response from SBP. Once the Bank receives aforesaid extensions along with approval for hold of AGM by July 25, 2020, the Bank will submit its formal request to the SECP to allow the same.

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