The following will be discussed in this chapter: Banking sector supervision in Pakistan, financial sector of Pakistan, banking companies ordinance, powers of state bank of Pakistan, prudential regulation for banks, off site on site monitoring at SBP, monitoring policy of SBP.
ions operate in a safe and sound manner The focus of the supervisory efforts by the State Bank of Pakistan is on the health and stability of the banking system in Pakistan 29 Off-Site Monitoring at BSD • The objectives of off-site surveillance over the banking system are:– to monitor the condition of individual banks, – as well as condition within the banking system; – to provide early identification of problems so that corrective action can be effected; and – to target scarce on-site supervisory resources to areas or activities of greater risk 30 Off-Site Monitoring at BSD (Contd.) • Off-site surveillance system revolves around; – • receipt, review and analysis of periodic financial statements and returns submitted to the State Bank The off-site analysis facilitate monitoring of each bank’s performance and its observance of supervisory requirements over time, so that problems may be identified as soon as these emerge 31 Off-Site Monitoring at BSD (Contd.) • • The process thus assists in making the most effective use of scarce on-site inspection resources The system also works as an early warning to identify those areas which reflect high probability of financial difficulties so that policies and corrective actions can be designed and implemented accordingly 32 On-site Monitoring at BID • In consonance with the responsibilities envisaged under the Core Principles recommended by the Basle Committee, the On-Site examination capabilities at the State Bank of Pakistan have been substantially augmented to bring them at par with the expected international standards 33 On-site Monitoring at BID (Contd.) • While regulations have existed for some time aimed at convergence of the essential industry indicators to the globally accepted criteria, a risk-based approach to evaluations has been adopted by the bank in all its assessments 34 On-site Monitoring at BID (Contd.) • Periodic On-Site examinations of the financial condition of institutions, falling within SBP’s jurisdictions, remains the most effective supervisory tool, which support Banking Supervision Departments in maintaining a proactive approach in discharge of the statutory responsibilities 35 Monitoring Policy of SBP • The State Bank of Pakistan’s policy for frequency of inspection of banks and DFIs is designed to provide flexibility in scheduling inspections consistent with the need to maintain safety and soundness 36 Monitoring Policy of SBP (Contd.) • The policy provides a framework within which supervisory ratings, surveillance and financial monitoring results, and other appropriate indicators of banks soundness, are to be considered in carrying out the State Bank of Pakistan’s fundamental policy of subjecting each bank and non-bank financial institution under its supervision to a periodic on-site inspection 37 Monitoring Policy of SBP (Contd.) • With a view to streamline the approach and the underlying procedures for effective and efficient banking supervision State Bank of Pakistan has embarked upon a major overhauling of its own capabilities so as to bring them at par with international practices 38 ... condition of a bank and the banking system as a whole 41 Summary of this session • Banking sector Supervision in Pakistan • Financial sector of Pakistan • Banking Companies Ordinance • Powers of State... legitimate and true financial condition of a bank the off-site surveillance system and the on-site inspection functions of banking supervision work extremely close together As a result of these...Off-Site Monitoring at BSD • The objectives of off-site surveillance over the banking system are :– to monitor the condition of individual banks, – as well as condition within the banking