Regulatory Alerts2025-12-26 | FSD Circular No. 01Added · Updated
Guidelines on Climate Stress Testing 2025
The State Bank of Pakistan introduces Section 5 to the Guidelines on Stress Testing, 2020, requiring regulated financial institutions to conduct annual climate stress tests using end-December data by the second quarter of the following year. Banks, DFIs, and MFBs must apply four physical risk credit shocks and one liquidity shock based on historical flood events and district vulnerability rankings, while sample Domestic Systemically Important Banks must also assess transition risks including carbon tax scenarios. The guidelines mandate a static balance sheet assumption, require the inclusion of climate risk in macro-stress testing for sample D-SIBs, and specify that the first analysis may be conducted by the end of Q3CY26 based on end-December 2025 data.