Banks usually wax and wane along with the economies they serve. Pakistan, for better or worse, is slave to no one else’s model, and its banks have been faring rather better than the country at large. But they lend more to the government than the real economy, which heightens both their credit and their strategic risk.
Given how poorly Pakistan's economy performed after the global financial crisis of 2008, it may seem surprising how stable the country's banking industry has been. That reflects how firmly banks have been regulated by the State Bank of Pakistan (SBP), which does not allow leveraging up and insists all loans of any size are secured. It also reflects the reforms that took place as the big banks began to be re-privatised in the 1990s. That sometimes-controversial process began under current prime minister Nawaz Sharif during an earlier term of office and he now hopes to complete it.
