Da Afghanistan Bank

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• Da Afghanistan Bank
• Financial Supervision Department

Da Afghanistan Bank Financial Stability
SAARCFINANCE Governors Symposium Kumarakom,
Kerala June 9-11, 2011
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Da Afghanistan Bank Financial Supervision
Department
Core Objectives

1. Price Stability
2. Efficient Payment System
3. Financial Stability

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Da Afghanistan Bank Financial Supervision
Department
Outline of Presentation

1. Financial System in Afghanistan
2. Legal Framework
3. Financial Stability

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Da Afghanistan Bank Financial Supervision
Department
Afghanistans Financial System
Financial System
Banking Institutions Non-Banking
Institutions
Banks Money Service
Providers Foreign Exchange Dealers
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Da Afghanistan Bank Financial Supervision
Department
The Banking System of Afghanistan
Initially there were six nonfunctional
state-owned commercial banks, today banking
system in Afghanistan consists of 17
duly-licensed and permitted banking
organizations - State-owned banks 2
Private full-fledged banks 10 Branches of
foreign banks. 5 The number of banking
facilities all across the country is as
follows Full Service Branches 177 Limited
Service Branches 184 Automated
Teller Machines 88 Point of sales 101 Other
194 744
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Da Afghanistan Bank Financial Supervision
Department
Non-Banking Institutions
Initially MSPs and FXDs ware operating
without having license and no respective
regulations were drafted and approved, while
today the number of licensed MSPs and FXDs are
331 and 654 respectively and operating under
regulatory framework.
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Da Afghanistan Bank Financial Supervision
Department
Assets
Total assets of the banking system are AFN 203.84
billion (USD 4.49 billion), up by 12.59 percent
since Hoot 1388(March 2010), where the total
assets of the system were AFN 181.04 billion (USD
3.85 billion).
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Da Afghanistan Bank Financial Supervision
Department
Loan Portfolio
Loans/Advances portfolio of the system currently
is AFN 80.24 billion (USD 1.77 billion), up by
20.68 percent since Hoot 1388 (March 2010)
Breakdown of Gross Loans as of March 2011 (million AFN) Breakdown of Gross Loans as of March 2011 (million AFN)
State-owned Banks 6,856
Private Banks 70,091
Branches of foreign Banks 3,295
Total 80,242
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Da Afghanistan Bank Financial Supervision
Department
Sector wise Designation of Loans March 2011 As age of Total Loans
Commercial Real Estate and Construction Loans 25.98
Other Commercial Loans  
Mining 0.02
Manufacturing 2.72
Trade 34.16
Communication 1.23
Service 6.72
Utilities 0.03
Others 8.42
Agricultural Loans 0.75
Consumer Loans 1.01
Residential Mortgage Loans to Individuals 8.95
All Other Loans 10.00
Total 100.00
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Da Afghanistan Bank Financial Supervision
Department
Legal Framework

• Da Afghanistan Bank Law ( Dec. 2003)
• Law of Banking in Afghanistan (Dec. 2003)
• Anti-Money Laundering Law (Nov. 2004)
• Afghanistan Law on Combating the Financing of
  Terrorism (Jan. 2005)
• Law of Mortgage on Immovable Property
• Secure Transaction of Movable Property Law
• Negotiable Instruments Law
• 25 Regulations
• Proposed New Laws
• Islamic Banking Law.
• Leasing Law.
• For more details www.centralbank.gov.af

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Da Afghanistan Bank Financial Supervision
Department
Financial Stability

• Why financial stability important ?
• Function of financial system in an economy ?
  Intermediation role
• Safeguarding depositors interests
• Supervision and Prudential Regulation strives
  to-
• Develop sound regulatory and supervisory
  framework (promote sound rules and code of
  practices in the financial market to benefit the
  economy at large).
• Undertake effective surveillance (exert influence
  set direction on particular activities)
• Enforce compliance (gain control over the
  activities of financial institutions should the
  need arises)

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Da Afghanistan Bank Financial Supervision
Department
Financial Stability Framework
Achieve Financial Stability Through Continuous
Monitoring Conduct assessment of the general
financial conditions of FIs Strategy - Avoid
Amber Institutions
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Da Afghanistan Bank Financial Supervision
Department
Evolution of Banking Supervision in Afghanistan
Early Years of Supervision Rigorous process
whereby examination scope ranged from assessing
banking institutions from a macro perspective to
transaction testing Risk-Based Supervision
Greater priorities in areas which entail higher
level of risk and areas where internal risk
management are less effective Regular ad-hoc
on-site examination, supplemented with dynamic
off-site monitoring CAMELS assessment Prompt
corrective measures Enhanced Risk-Based
Supervision Focus on significant activities and
quality of risk management Relationship managers
continuous surveillance concept Universal
framework
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Da Afghanistan Bank Financial Supervision
Department
Risk Assessment Approach
DAB is using following risk assessment approaches
for onsite and offsite monitoring. On-Site
Monitoring Off-Site Monitoring Capital
Adequacy Capital Adequacy Asset
Quality Asset Quality Management
Earnings Earnings Liquidity Liquidity
Sensitivity Sensitivity
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Da Afghanistan Bank Financial Supervision
Department
Financial Indicators
Key Financial Soundness Indicators of the Banking Sector at end of December Percent Key Financial Soundness Indicators of the Banking Sector at end of December Percent Key Financial Soundness Indicators of the Banking Sector at end of December Percent Key Financial Soundness Indicators of the Banking Sector at end of December Percent Key Financial Soundness Indicators of the Banking Sector at end of December Percent Key Financial Soundness Indicators of the Banking Sector at end of December Percent Key Financial Soundness Indicators of the Banking Sector at end of December Percent
Ratio 2006 2007 2008 2009 2010 2010
Total Capital Adequacy Ratio 44 30.23 29.82 27.55 -14.93 33.87
Tier 1 Capital Adequacy Ratio N.A 28.93 28.21 25.65 -15.59 32.38
Non-Performing Loans to Total Gross Loans N.A 1.13 1.16 0.6 51.88 3
Return on Assets ( ROA) -0.29 1.42 1.95 1.38 -26.38 1.16
Return on Equity ( ROE) -1.11 7.57 11.09 9.87 -342.89 8.64
Liquidity Ratio (Broad Measure) N.A 1.13 49.06 66.56 64.05 64.05
Liquidity Assets to Total Assets N.A 23.18 32 40.38 42.14 47.01
Excluding Kabul Bank Excluding Kabul Bank Excluding Kabul Bank Excluding Kabul Bank Excluding Kabul Bank Excluding Kabul Bank Excluding Kabul Bank
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Da Afghanistan Bank Financial Supervision
Department
To Strengthening Financial System Stability

• Off-site Automation.
• Developing Certified Financial Sector Regulator
  program to give staff career path.
• Broadening scope of on-site examinations to
  include IT, business continuity, and disaster
  recovery.
• Quickening enforcement action and follow up with
  tougher action if required.
• Completing regulatory regime for DMFIs.

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Da Afghanistan Bank Financial Supervision
Department
To Strengthening Financial System Stability

• Establishing of Afghan Deposit Insurance
  Corporation (ADIC)
• Establishing Credit Information Bureau (CIB).
• Establishing Collateral Registry.

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Da Afghanistan Bank Financial Supervision
Department
THANK YOU !