The State Bank of Pakistan will only be responsible
for the monetary policy of the commercial banks, while the rest of the
regulatory work will be handled by the proposed FSA.
And the non-baking functions will be handed over to
the Security and Exchange Commission of Pakistan (SECP).
Sources said that the federal cabinet approved
amendment in the Companies Ordinance to transfer supervisory role to
SECP for all non-banking companies including investment financial
services, leasing houses, venture companies, investment advisory
services, assets management services and modarabas.
The cabinet approved the amendment in the ordinance
when told by Minister for Finance Shaukat Aziz that non-banking
financial institutions were important part of the financial system and
it was necessary to properly regulate and strengthen these institutions.
In line with the international practices, the
government took a decision earlier this year to consolidate the
regulation of all non-banking institutions under one roof — under the
regulatory ambit of SECP and also to promote the concept of non-bank
finance companies — essentially an umbrella approach whereby the same
NBFC can be licensed to engage in one or more activities or financial
services, provided it meets the prescribed regulatory criteria for each
of these services.
STATE BANK MAKES WRITE-OFFS EASIER
The State Bank has allowed banks and non-bank
financial institutions to write-off loss-making loans up to half a
million rupees without moving courts. Loss-making loans are the loans
whose principal or mark-up — or both remain unpaid for three years.
Under a new set of guidelines issued by the SBP, the
boards of directors of banks and NBFIs may allow the management to
write-off loss-making loans up to Rs500,000 "without going for
litigation." The guidelines spelt out in a circular (BPD no. 29) say
that they can write-off loss-making loans worth more than Rs500,000 to
Rs2.5 million after making cash recovery of 75 per cent or more.
But this is specific to circumstances where forced
sale value of the security is more than the outstanding amount. But
where it is less than the outstanding amount the cash recovery should be
equal to forced sale value. Forced sale value is the value of the
security evaluated by the banks or NBFIs.
MICROFINANCE BANKS TO CHECK MONEY LAUNDERING
Microfinance banks/institutions are supposed to
develop and implement effective procedure to avoid becoming a conduit of
The State Bank has issued a set of rules to govern
the working of microfinance banks/institutions that call upon them to
develop and implement "effective procedures and methods" to determine
the true identity of its clients.
The rules that take immediate effect are contained in
a SBP circular (BSD no. 18) and replace the existing Microfinance Bank
WB HOPES TO SIGN AGREEMENT
The World Bank is awaiting the formation of new
government to come to an agreement on shared private sector development
agenda in Pakistan, sources in the economic affairs division told. The
WB, these sources said, has prepared a private sector assistance
strategy for Pakistan in consultation with the military authorities
which will have to be implemented by the new administration.
CDS REMAINS BOGGED DOWN
The Central Depository System (CDS) — the electronic
stock settlement system managed by the Central Depository Company (CDC)
— remained bogged down.
The CDC informed the Karachi Stock Exchange that due
to "technical problems", the system had remained unavailable to the
bourse all through the day.
PAKISTAN, SWITZERLAND REACH ACCORD ON TAXATION
Pakistan and Switzerland signed the revised
convention on the avoidance of double taxation between the two
Member direct taxes, Vakil Ahmed Khan said that the
convention was initialled after extensive deliberations by tax experts
of both the countries.
This will be an important step towards strengthening
bilateral economic relations and promotions of investment between the
two countries, said the spokesman.
MUSHARRAF CALLS FOR AFGHANISTAN'S RECONSTRUCTION
President Pervez Musharraf has called for an
accelerated reconstruction of Afghanistan and said this was necessary to
ensure peace and stability in the region.
Addressing the Turkish War Academy, the president
said that Pakistan fully backed President Hamid Karzai in his efforts to
develop his country after decades of fighting.
Gen Musharraf said that support to Mr Karzai was also
imperative in order to help him establish the writ of his government all
SHAUKAT ASSURES INVESTORS
Finance Minister Shaukat Aziz assured the local and
foreign investors that the new democratic government will continue the
economic policies adopted by the present government.
"Investors need not to worry, as we hope for the
continuity of economic policies by the new government", the minister
said while speaking at a signing ceremony regarding the loan
reconstruction of Southern Electric Power Company (SEPC) by the banks.
Shaukat said Pakistan welcomes foreign investment by
providing a level playing field to local as well as foreign investors,
adding, no country can move ahead without investment.
President NBP Ali Raza presented a cheque for Rs250
million to chief executive of the SEPC as initial amount under the
financial reconstruction agreement.