Supervisory Role of SBP

(From SBP ppt)

Our Vision
Our vision to transform SBP in a modern and dynamic central bank, highly professional
and efficient, fully equipped to play a meaningful role on sustainable basis in the
economic and social development of Pakistan.
Our mission
Our mission is to promote monetary and financial stability and foster a sound and
dynamic financial system, so as to achieve sustained and equitable economic growth and
prosperity in Pakistan.

Role and functions of SBP

Being the central bank of the country, SBP has been entrusted with the responsibility to
formulate and conduct monetary and credit policy in a manner consistent with
Government targets for growth and inflation and the recommendation of monetary and
fiscal policy coordination board with respect to macro-economic policy objectives aimed
towards price stability and economic growth.
SBP performs both traditional and developmental functions to achieve macro- economic
goals.
Traditional (Primary)functions
• Issue of notes
• Regulation and supervision of financial system
• Bankers' bank
• Lender of last resort
• Banker to Government
• Conduct of monetary policy
Secondary functions
• Agency functions like Management of public debt
• Management of foreign exchange
• Advising govt. on policy matters
• Relation with international financial institutions

Banking Sector Supervision in State Bank of Pakistan

State bank of Pakistan(SBP) which is the Central Bank of the country has been interalia
entrusted with the responsibility for an ongoing effective supervision of the
Banking sector by virtue of law under:-
Banking Companies Ordinance, 196
State Bank of Pakistan Act, 1956
Bank's Nationalization Act, 1974
Financial Institution, 2001 etc.

Financial Sector in Pakistan

The Financial Sector in Pakistan comprises of:
Commercial Banks
Development Finance Institutions(DFIs)
Micro Finance Banks(MFBs)

Need for a Regulatory Framework

Create Discipline
Create Confidence
Strengthen institution rather than individual
Avoid misuse
Ensure Stability
Ensure Sustainability
Promote Competition

Objectives of SBP Act 1956

Relates to Constitution of SBP
To regulate the Monetary & Credit System of the Country
Secure Monetary & Financial Stability
Fuller Utilization of Country’s Productive Resources
Establishment and maintenance of subsidiary or trust

SBP ACT 1956 (Section 17-40)

Sole Right to issue bank notes
• Legal Tender
• Denomination of Bank Notes
• Reissue of bank notes
• Lost stolen and imperfect notes

Issuance of Rupee coins on behalf of Govt.

Penalties on unauthorized issuance of Bills/Notes

Cash Reserve Requirements for banks

Submission of Returns to Federal Govt.

• Weekly account of issue & banking dept.
• Annual Accounts with a report by CB regarding working of the bank
during year
• Return on shareholding details

BANKING LAWS
• The Foreign Exchange Regulation Act, 1947
• The Banks (Nationalization) Act , 1974
 • The Banking Companies Ordinance, 1962
Foreign Exchange Regulation Act, 1947

OBJECTIVES
To regulate certain payments, dealings in foreign exchange and Securities and the import
and export of currency and bullion.

The FERA, 1947 – Sec: 3 – 10

Authorized Dealers & money changers in Foreign Exchange

Restrictions on dealing in Foreign Exchange & Payments
Blocked & Special accounts
Restrictions on import and export & Acquisition & Surrender of foreign exchange

The Banking Companies Ordinance, 1962

OBJECTIVES
To consolidate and amend the law relating to banking companies

The BCO, 1962

OBJECTIVES To consolidate and amend the law relating to banking companies
Coverage Business of Banking Companies
Suspension of Business and winding up of Banking Companies,
Banking Mohtasib, Miscellaneous

PRUDENTIAL REGULATIONS

 OBJECTIVE: TO SET MINIMUM STANDARDS OF PRUDENCE FOR

(Initially developed in 1992)
 Corporate/ Commercial Banking
 SMEs Financing
 Consumer Financing
 Agriculture & Micro-finance
 Structure:-
 Regulations for Risk Management (R)
 Regulations for Corporate Governance (G)
 Regulations for Anti Money Laundering (M)
 Regulations for Operations (O)

Bank Licensing
  State Bank of Pakistan is the sole supervisory and regulatory authority of
commercial banks, Islamic Commercial Bank, Development Financial Institutions
(DFIs), Micro Finance Banks and Exchange Companies in Pakistan.
 The authorization/issuance of a commercial banking license has been vested in
State Bank of Pakistan (SBP) under Section 27 of the Banking Companies
Ordinance, 1962.

Supervisory & R

On-site Examination
Bankin
“There is no substitute for a physical presence inside a bank to determine its true
financial condition and other area of concern to the supervisory authority”.

OFF-SITE SUPERVISION
This role is mainly played by OSED and is responsible for off-site supervision &
enforcement.
How OSED perform its assigned function……

Development/
Sup