Section 42D: Resolution triggers

42D. Resolution triggers.__ (1) The State Bank may, by an order in writing stating reasons, place a banking company under Resolution, if the State Bank is satisfied that one or more of the circumstances exist under which the banking company,__ (i) has become or is likely to become insolvent; (ii) has failed to comply with the capital requirement specified by the State Bank; and (a) has no reasonable prospect of becoming compliant with the relevant requirement within a reasonable timeframe in the opinion of the State Bank; (b) fails to become adequately capitalized when required to do so; (c) fails to submit a capital restoration plan acceptable to the State Bank within the time specified; or (d) fails to implement a capital restoration plan to the satisfaction of the State Bank; (iii) has suspended or is likely to suspend payments as these fall due; (iv) has defaulted or is likely to default in making payments to depositors; (v) is part of a group, one or more entities of which, is under liquidation, or in respect of which a custodian, receiver, administrator or liquidator has been appointed, and the assets and liabilities of such entity or its links with the banking company are such that it may impair the ability of the banking company to continue its operations in a safe and sound manner; (vi) is a branch or subsidiary of a banking company whose license to carry on banking business in the country of its origin has been cancelled or any Resolution action or insolvency proceeding in the country of origin does not sufficiently protect the financial stability of Pakistan and the interest of depositors, or the State Bank considers that no action will be taken in respect of a failing banking company in its country of origin; (vii) fails to implement any of the measures as required under section 42, including failure to provide a plan of action or documents of commitment or has breached requirements under any plan of action or documents of commitment submitted to the State Bank; (viii) is otherwise in a situation or circumstance which in the opinion of the State Bank may materially impair the ability of the banking company to make payments, meet its obligations or otherwise continue its operations; or (ix) has contravened, circumvented or failed to comply with any requirement of this Ordinance in a manner that seriously prejudices the financial stability in Pakistan and the interests of depositors, or has continued such contravention, circumvention or failure beyond such period or periods as may be specified in that behalf by the State Bank from time to time. (2) The adoption of any supervisory action or any early intervention measures as set out in section 42 or the submission of any report under sub-section (2) of section 40A shall not be a precondition for Resolution. (3) No order under this section shall be made unless the banking company concerned has been given an opportunity of making a representation to the State Bank. Provided that if in the opinion of the State Bank, any delay would be detrimental to the achievement of Resolution objectives, the State Bank may, at the time of giving the opportunity aforesaid or at any time thereafter and pending the consideration of the representation aforesaid, if any, make an order under sub-section (1). (4) An order made under sub-section (1) shall be notified to the banking company concerned and a summary of it shall be published, as soon as practical, on the State Bank's website with due regard to the confidentiality requirements. (5) Except as otherwise provided in the order made by the State Bank under sub-section (1) or at any time thereafter in consultation with the Securities and Exchange Commission of Pakistan, the trading on securities exchange in shares and debt instruments of the baking company under Resolution, and disclosure and reporting requirements applicable to such a banking company by virtue of being a listed entity shall remain suspended: Provided that provision of this sub-section shall have effect notwithstanding anything contained in the Companies Act, 2017 (XIX of 2017), the Securities Act, 2015 (III of 2015), the Securities & Exchange Commission of Pakistan Act, 1997 or any other law for the time being in force.

Effective date: 1962-06-07

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