POLICY

 

Oct 21 - 27 , 2002

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

INDEPENDENT AUTHORITY TO REGULATE BANKS

The government has decided to set up an independent regulatory authority for all commercial banks. Official sources told that a Financial Services Authority (FSA) will be set up on the pattern of the United States to regulate commercial banks in Pakistan.

 

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 money laundering.

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 Rules 2000.

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 countries.

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 over Afghanistan.

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.