KARACHI: Silkbank Ltd will seek `further direction` from the Securities and Exchange Commission of Pakistan (SECP) for the holding of its Annual General Meeting (AGM) for the approval of annual accounts for 2021.

Holding the AGM within four months of the close of financial year is a regulatory requirement for every company.

Silkbank`s annual accounts for 2021 are still pending.

The bank has submitted an application to the SECP for holding the AGP before the end of 2022.

The inordinate delay in the AGM coincides with the directive by the International Monetary Fund (IMF) that first-stage recapitalisation of two troubled private-sector banks be completed before March 2023.

The first-stage recapitalisation requires the completion of capital injections to fill 50 per cent of the capital shortfall calculated as of Sept 30, 2021, resulting in the banks achieving positive capital.

Although the latest loan programme review report released by the IMF earlier this month didn`t name the two banks, analysts believe the international lender referred to Silkbank Ltd and Summit Bank Ltd, which lack capital adequacy as per the criteria laid out by the State Bank of Pakistan (SBP).

The two banks can become compliant by either receiving an equity injection from their current sponsors or getting acquired by other cash-rich investors. The sponsors of Silkbank have been trying to sell it for some time while there`s been some progress with respect to the fresh capital injection in Summit Bank.

The IMF has said the banks will enter `resolution` if they are not fully capitalised by the end of May 2023. The resolution of an undercapitalised bank means the entity has failed and can`t undergo the normal insolvency process without harming public interest resulting in financial instability.

The Pakistani authorities have told the IMF that they`re closely engaged with the two undercapitalised private banks and are committed to ensuring compliance with the minimum capital requirements. For Silkbank Ltd, the capital process was hampered but the bank has now identified an investor and a public announcement of intention was recently made for an equity injection.

A property development company with links to former Punjab minister Aleem Khan made on May 31 a public announcement that it wanted to acquire Silkbank Ltd.

Similarly, a public offer was made on March 18 for an equity injection into Summit Bank. However, the process couldn`t be completed by the end of May because of a legal dispute. `The legal dispute is expected to be resolved shortly, paving the way for equity injection, which would likely result in the bank achieving positive capital by the end of Sept 2022, meeting the first-stage recapitalisation requirement,` the Pakistani authorities told the IMP.

The authorities have committed to initiating an `orderly resolution` of either or both of these two banks by the end of May 2023 in case they remain undercapitalised at that point.