Pakistan, Sept. 12 -- To assess the systemic risk in Pakistan's banking sector, we need to analyse the balance sheets of the banks. Our banking debate is often surrounded by ideological and categorical dimensions, i.e., Islamic versus conventional finance. From the analysis of the banking sector balance sheets, there is a structural configuration which is defined less by labels and more by incentives, risk asymmetries, and sovereign financing needs. At the systemic level, Pakistani banks collectively hold approximately PKR 27.3 trillion in Pakistan Investment Bonds (PIBs), PKR 6.1 trillion in Treasury Bills (T-Bills), and PKR 6.8 trillion in Sukuk instruments.

As of the 2025-2026 period, the total sovereign exposure is nearly 60-62% of t...