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Hamdard University Seminar
June 28 - July 04,1999

On keeping them in line
Quote Unquote

Hamdard University Seminar
  From Crisis to Hope

New role of Central bank
Improving financial sector efficiency to ensure sound economy

As a link in the chain of their Management Development Programme for Bankers, the Centre of Excellence Hamdard University organized a national level Seminar, on 18th June 1999 at the Pearl Continental Hotel. The topic was "New Role of SBP Supervision and Internal Audit in improving financial sector's efficiency and ensuring soundness of Pakistan's Economy".

Mr. Mukhtar Nabi Qureshi, Deputy Governor State Bank of Pakistan, inaugurated the Seminar which was attended by a good number of Presidents of Banks and Financial Institutions and technical delegates comprising of Senior Executives from Karachi, Lahore, Islamabad, and Hyderbad. Besides Mrs. Sadia Rashid, President, Hamdard Foundation others present on the occasion were, Mr. Kaleem-ur-Rehman, President, Askari Commerical Bank, Mr. Safar Ali Lakhani, President, Soneri Bank, Mr. Muneer Kamal, President, Faysal Bank, Mrs. Tahira Mujeeb, ACTG President, First Women Bank Limited, Mr. Zaigham Rizvi, Managing Director, Pak-Libya Holding Company and Mr. Paul Rusch, Chief Executive, Societe Generale. The Seminar started with recitation of the Holy Quran by Prof. M. Wali Khan Durrani. CEO, City Campus.

Welcoming the Chief Guest, Dr. Ahsan H. Khan, Executive Director Centre of Excellence and Chairman Department of Banking, Hamdard University dwelt upon the role played by Internal/ External Audit and Supervision by the State Bank of Pakistan in improving quality and achieving excellence in performance. He eulogized the policies/directives issued and practical measures adopted by the State Bank of Pakistan in this connection especially after the autonomy given to the State Bank of Pakistan. This he stated, has been instrumental in improving the health of the Banking and financial sector of the country.

Mr. Mukhtar Nabi Qureshi, Deputy Governor replying to the welcome address explained in detail as to what the country's Central Bank has .been doing towards strengthening and revamping its supervision role and assigning new role to statutory auditors and internal auditors of banks/NBFIs. He said that besides traditional functions of regulating the monetary and credit system of the country, the State Bank of Pakistan performs additionally, functions of bank supervision so as to ensure soundness of financial system in the country. He dwelt upon the historical perspective since independence and said that a review of the performance of banking sector in Pakistan was conducted in 1972. It was noted that the banking system which was in private sector then had registered an almost unparalleled rate of growth and achieved substantial professionalization through effective training arrangements and other policy measures. However, weaknesses and failures, were noted on the side of regulating credit, concentration of credit, agglomeration of banking facility in urban areas, low level of capital and reserve, accumulation of sizeable amount of bad debts etc. To improve the situation a number of steps were initiated which included enhancing of capital base, introduction of credit plan through national credit council, small loan scheme, introduction of refinancing and subsidy schemes for newly emerging exports and setting up of Credit Information Bureau to collect information about indebtedness of individual parties. Due to nationalization of banks in the year 1974 the frame work was disturbed and Central Bank's authority was diluted with the setting up of the Pakistan Banking Council, deterioration of banking sector marked for bad lending. Exogenous pressure, corruption and unhealthy practices flourished, The problem of infected portfolio assumed gigantic proportion.

In view of these developments a programme of Financial Sector Reforms was initiated around l990s with the main objectives of good governance encouraging private ownership of banks, accelerating privatization of banks, strengthening prudential supervision and setting up market based monetary management. The post nationalization era seriously suffered in respect of good governance. A process of laying down proper framework was, therefore, initiated which included autonomy of the Central Bank, formulation of Prudential Regulations and changes in Banks Nationalization Act, Banking Companies Ordinance, State Bank of Pakistan Act and promulgation of new Recovery Law etc. Deputy Governor informed the audience that to ensure efficacy and viability of the banking system, proper attention was being paid to improve inspection skills and upgrading the same in line with the modern banking trend. Besides systemic changes, policy framework as also entire gamut of rules is being improved. For the purpose State Bank has hired the services of an international consulting firm is in the process of setting up dealing room to monitor market activities and intervene when found necessary. Debt management and Securities wing is also being strengthened and upgraded. State Bank has also stressed upon banks to strengthen the role of internal auditors and statutory auditors of banks so as to ensure effectiveness of external and internal audit. Another important development relates to revising old formats of financial statements in accordance with international accounting standards. Yet another initiative taken pertains to changing capital requirement in accordance with internationally accepted Basle Committee Capital formula based on risk weighted assets. The new dispensation will strengthen capital base of banks. To improve profitability of banks and increase rates of return on deposits, Banks have been asked to reduce their financial intermediation cost. Finally necessary steps including change in legal framework have been taken to ensure recovery of stuck up loans. These include introduction of incentive schemes for repayment, setting up of Committee for revival of industrial sick unit etc.

Concludingly Deputy Governor expressed his gratitude to the management of Hamdard University for inviting him to address such an illustrious gathering and expressed the hope that MBA courses offered by the Banking Department of Hamdard University would go a long way in enriching the knowledge of students.

Eminent professionals like Mr. S. Masuod Ali Naqvi, FCA, Senior Partner, Taseer Hadi & Co, Mr. Sirajuddin Aziz, Senior Executive Vice President & Regional Chief Executive, Union Bank Limited, Mr. Khawaja Waheed Raza, Senior Executive Vice President & Chief

Executive, Habib Bank Limited, Mr. Aameer Karachiwala, Chief of Staff, United Bank Limited and Mr. Saleem Omar, World Bank Advisor on Bankers' Training addressed the technical session, which comprised of VPs to EVPs of various banks and financial institutions. Mr. Kaleem-ur-Rehman, President, Askari Commercial Bank Limited chaired the morning session while the evening session was chaired by Mr. Muneer Kamal, President, Faysal Bank. In the evening, certificates were distributed to the participants by Mr. Kaleem-ur Rehman, Mr. Aameer Karachiwala, Mr. Khawaja Waheed Raza, Prof: M. Wali Khan Durrani, Mr. Sirajuddin Aziz and Dr. Ahsan H. Khan.At the end, majority of the participants rated the Seminar as EXCELLENT.