and management of three banks. several institutions were forced to liquidate or merged with strong institutions. if these actions were not taken these banks would have collapsed with disastrous effects for the financial markets. ( b ) several development financial institutions have either been closed, wound up, privatized, converted into a bank, restructured and adequately capitalized for eventual sale to the private sector. ( c ) an independent assessment of the financial sector by a joint world bank - imf team has concluded that the financial soundness indicators of pakistani banking system are robust and can withstand exogenous shocks. observance of internationally accepted standards and codes has found to be quite high. ( d ) minimum capital requirements of banks have been raised twice during the last four years to weed out weak banks and allow mergers and consolidation to take place so that fewer but stronger banks operate in the system. ( e ) stringent measures have been laid and enforced on classification of non - performing loans, loan loss provisioning, tier 1 and tier 2 capital adequacies, write off of unrecoverable debt and allocation of capital against market risk. ( f ) three different sets of regulations specifically tailored to manage the risk profiles of corporate, consumer and sme lending have been issued by the state bank in consultation with the banks and businesses. central bank autonomy central banks are required to promote the establishment and operation of a safer and sound financial system i. e. the framework of prudential regulations and supervision as well as payment and settlement systems. central banks also play a critical role in crisis management through provision of emergency liquidity assistance. finally, price stability has to be assured to lay the foundation for long - term sustainable growth. for these functions to be performed effectively the central banks require a degree of autonomy. state bank of pakistan has gradually won a substantial amount of autonomy and independence during the last several years. the laws governing the bank have been modified from time to time to provide adequate decision making authority and powers in respect of the conduct of monetary policy, banking supervision and regulation, exchange rate and foreign reserves management and payment and settlement system. a monetary and fiscal coordination board has been set up to coordinate monetary and fiscal policies. an independent board of directors consisting of seven eminent individuals drawn from various walks of life oversees the activities of the bank and formulates policy guidelines. the ministry of finance has only one representative on the board and exercises a single vote in decision - making. the governor and the board cannot be removed by the

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