COVID-19 AND THE BANKING SECTOR IN PAKISTAN: A NARRATIVE ANALYSIS OF CHALLENGES AND RESILIENCE

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Muhammad Atif Nazeer
Rana Muhammad Ayaz bin Mehmood
Niaz Hussain Buriro
Shazia ibrahim
Muhammad Rizwan

Abstract

The Covid-19 pandemic has posed profound impact on the lives and business of the people worldwide. It also triggered a multifaceted crisis in the banking sector, particularly in developing economies with fragile financial market architecture. This study focuses on examining the pandemic’s potential impacts on the Pakistan’s banking sector, which already struggles with high non-performing loans (NPLs). Using a state-designed stress testing model, the effects of Covid-19 on firm value, capital adequacy, and interest income under various NPL shock scenarios were estimated. Findings indicate that all banks will likely experience a decline in risk-weighted asset value, capital adequacy ratio, and interest income, with larger banks being more vulnerable. Moreover, a 10% NPL shock could push capital adequacy below the minimum BASEL-III requirement, Results emphasize the need for immediate and innovative policy measures to prevent a large-scale banking crisis in countries like Pakistan. Thus, the study offers valuable lessons for other developing and emerging economies facing similar challenges with suggesting viable recommendations.

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How to Cite
Muhammad Atif Nazeer, Rana Muhammad Ayaz bin Mehmood, Niaz Hussain Buriro, Shazia ibrahim, & Muhammad Rizwan. (2024). COVID-19 AND THE BANKING SECTOR IN PAKISTAN: A NARRATIVE ANALYSIS OF CHALLENGES AND RESILIENCE. International Journal of Contemporary Issues in Social Sciences, 3(2), 1670–1682. Retrieved from https://ijciss.org/index.php/ijciss/article/view/876
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