IMPACT OF COVID-19 ON LIQUIDITY OF THE BANKING SECTOR OF PAKISTAN

Abstract

The 33 banks of Pakistan’s banking sector were tested using different stressed testing techniques
already used in researches are renowned in world of finance to stress test any financial
institutions. The results of Stress testing suggest that only Faysal Bank and Standard Chartered
Bank are secured banks in terms of stable liquidity outlook. All other banks except foreign banks

are vulnerable to small liquidity shocks. Moreover, most of the banks have very low Liquidity
Coverage ratio showing the clear asset liability mismatch in short run. The test is run on the
Balance sheet data of December 31, 2020.