Pakistan's continued inclusion in FATF grey list negative for banks: Moody's

ISLAMABAD: Pakistan’s continued inclusion in Financial Action Task Force (FATF) grey list is credit negative for the country’s banking system, rating agency Moody’s said on Thursday.

Global watchdog Financial Action Task Force (FATF) said last week that Pakistan would remain on the grey list, and asked the country to implement the agreed-upon action plan until June.

“The announcement is credit negative for Pakistani banks because it raises questions about potential additional restrictions relating to banks’ foreign-currency clearing services, as well as their foreign operations,” Moody’s said, adding that increased compliance costs would also hamper banks’ profitability.

Pakistan’s compliance with global rules had improved, Moody’s said, its weakness risked banks losing access to foreign currency-clearing services, crucial for cross-border payments used to fund imports and exports.

It is to be mentioned here that Pakistan’s compliance with the 27 points of the FATF action plan has reached to 14 points.

State Bank of Pakistan believes that the country’s compliance in June 2020 will reach to the level that will help it to be removed from the FATF grey list, the Moody’s report added.