A Study in Risk Analysis
The financial sector in Pakistan has evolved over the years in response to the growth of the economy and the government’s plans for the growth and development of the country. The sector as on 31 March 2002 comprises the State Bank of Pakistan, 4 state-owned banks, 2 newly privatised banks, 4 specialised banks, 14 private scheduled banks, about 30 leasing companies, 45 Modarabas, 14 investment banks, 3 stock exchanges, 58 insurance companies, and Government Saving Centers. Commercial banks were nationalised in 1974 and are now in the process of being privatised. Two nationalised commercial banks have been privatised since 1990: Muslim Commercial Bank was sold by auction/ negotiation, while Allied Bank was sold to its employees .The market share of the nationalised commercial banks has been declining with the introduction of new private banks. The three nationalised commercial banks in Pakistan—Habib Bank Limited, United Bank Limited, and National Bank of Pakistan—have a large branch network that allows them to expand and compete with the private banks in deposit mobilisation. The newly privatised banks have acquired the branch network that will allow them to expand and compete with the state-owned banks. While these institutions play an important role in financing short-term credit requirements, their success in raising deposits ensures that they have a significant surplus of funds that can be lent or invested in government securities. There are 19 foreign banks which have been established from time to time. The foreign banks in Pakistan are branch operations; they are not separate legal entities. Much of their success can be attributed to their superior management skills and better access to international financial markets. A large fraction of foreign currency deposits are with foreign banks, partly because of their marketing efforts and partly because of their...