We monitor risks to financial stability very closely: Tommaso Padoa-Schioppa used to say this was in central banks’ DNA. But let’s not forget that the objective of monetary policy is price stability. Financial stability involves different tools. As far as we are concerned, it’s a question of bank regulation and “macroprudential” tools.
The regulatory and supervision functions of the State Bank of Pakistan have been significantly strengthened, and strict enforcement of prudential regulations have led to widespread recapitalization and a consequent improvement in the efficiency and profitability of banking system. More than 80 percent of banking assets are now owned and managed by the private sector.