Moody has termed Pakistan as “credit negative for the country banks” for consciously remaining on the Financial Action Task Force (FATF) grey list.
As per Moody’s credit outlook, “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 said, “Banks’ profitability risks being constrained as a result of increased compliance and operational costs.” Pakistan is directed to improve its anti-terrorism financing measures until June 2020.
Moody stated that if Pakistan doesn’t succeed to implement the Financial Action Task Force (FATF)’s action plan, international financing institutions can reduce or terminate their interaction with Pakistani banks.
According to Moody’s analysis, the performance of Pakistan is improving yet not satisfactory. “Clearing in US dollars is particularly important given Pakistan’s high import and export economic activity, as well as the fact that a large proportion of international payments are made in this currency,” Moody added.