' ABDUS SATTAR ASGHAR, J.-This Civil Revision under section 115 of Civil Procedure Code, 1908 is directed against the judgment and decree dated 30-6-2011 passed by learned Civil Judge Nankana Sahib whereby petitioner's suit for recovery of damages amounting to Rs,25,000 against Muhammad Shakil respondent has been dismissed. It further assails the judgment and decree dated 28-9-2011 passed by learned Additional District Judge Nankana Sahib whereby petitioner's appeal was also dismissed.
2. It is argued by learned counsel for the petitioner that both the learned courts below misconceived while rendering the impugned judgments and decrees considering it a case of malicious prosecution instead of defamation; that the impugned judgments and decree are against law and facts, based on misreading and non-reading of evidence causing serious miscarriage of justice and liable to set aside.
3. Arguments heard. Record perused.
4. Succinctly facts leading to this Civil Revision are that petitioner lodged a suit for recovery of Rs,25,000 as damages for defamation, loss of reputation, mental and physical torture allegedly caused by the respondent by filing an application before District Police Officer Nankana Sahib on 7-3-2009 attributing false implication of theft of bite cattles against the petitioner and imputing derogatory statements against the petitioner in the locality, brotherhood and relatives of the petitioner. Respondent was proceeded against ex parte evidence. Petitioner produced Alamdar Hussain ASI Incharge Complaint Office DPO Nankana Sahib. He brought original record of application No, 154-RC dated 7-3-2009 and produced a copy thereof (Exh.P-1) and report thereupon (Exh.P-2). Petitioner himself, appeared in the witness box as P.W.2 and reiterated his assertions as set-forth in the plaint. He also produced Mehboob Ali (P.W.3) who corroborated the petitioner.
5. It is settled principle of law that defamation is the publication of a statement which reflects on a person's reputation and tends to lower him In the estimation of right thinking members of society generally or tends to make them shun or avoid him. Defamation ordinarily takes the form of two separate torts i,e, libel and slander. There is no cavil to the proposition that libel is actionable per se and injury to reputation will be presumed. However, whether the case is one of libel or slander the following elements must be proved A by the claimant:- '
(a) The imputation must be defamatory;
(b) It must identify or refer to the claimant;
(c) It must be published/communicated to at least one person other than the claimant.
6. In the instant case documentary evidence produced by the petitioner fails to contain any defamatory imputation. Exh.P-1 and Exh.P-2 do not reveal that respondent had levelled any allegation of theft of cattles against the petitioner' therefore the contents of the petition (Exh.P-1) do not fall within the ambit of libel. As regards the other part of the petitioner's plea that respondent has been giving defamatory, statement against him in the locality before the other members of the society, suffice to say that Mehboob Ali (P.W.3) appearing in the witness box has categorically stated that petitioner bears a good reputation and commands the honour and respect in the area.
He has not stated that the alleged imputation of the respondent had lowered* the respect or reputation of the petitioner in his estimation or in the estimation of right thinking members of the society in general or made him shun to avoid the petitioner. Petitioner has not been able to establish the allegation against the respondent for causing defamatory imputation amounting to libel or slander to claim any damages.
7- I do not find any misreading or non-reading of evidence, material illegality or irregularity in the impugned judgments and decrees passed by learned courts below.
8. For the above reason this Civil Revision having no merit is dismissed in limine.
(f) status and implications of any lawsuit or judicial proceedings of material nature, filed by or against the Public Sector Company;
(g) any show cause, demand or prosecution notice received from any revenue or regulatory authority, whleh may be material;
(h) material payments of government dues, including Income tax, excise and customs duties, and'other statutory dues Including penal charges thereon;
(1) inter-corporate investments in and loans to or from associated concerns in which the business group, of which the Public Sector Company is a part, has significant interest;
(j) policies related to the award of contracts and purchase and sale of raw materials, finished goods, machinery etc;
(k) default in payment of principal or Interest, including penalties on late payments and other dues, to a creditor, bank or financial institution or default in payment of public deposit;
(l) failure to recover material amounts of loans. Advances, and deposits made by the Public Sector Company, including trade debts and inter-corporate finances;
(m) any significant accidents, dangerous occurrences and instances of pollution and environmental problems involving the Public Sector Company:
(n) significant public or product liability claims made or likely to be made against the Public Sector Company, including any adverse judgment or order made on the conduct of the Public Sector Company or of any other company that may bear negatively on the Public Sector Company;
(o) disputes with labour and their proposed solutions, any agreement with the labour union or collective bargaining agent and any charter of demands on the Public Sector Company;
(p) payment for goodwill, brand equity or intellectual property;
(q) annual, quarterly, monthly or other periodical accounts as are required to be approved by the Board for circulation amongst its members;
(r) reports on governance, risk and compliance issues;
(s) whistle-blower protection mechanism;
(t) report on Corporate Social Responsibility (CSR) activities; and
(u) related party transactions.
8. Performance evaluation.-(1) The performance evaluation - of the members of the Board including the chairman and the chief executive shall be undertaken for which the Board shall establish a process, based on specified criteria, and the chairman of the Board shall take ownership of such an evaluation. The committees shall also carry out their evaluation on an annual basis.
(2) Thd Board shall monitor and assess the performance of senior management on a periodic basis, at least once a year, and hold them accountable for accomplishing objectives, goals and key performance indicators set for this purpose.
9. Related party transactions.-(1) The details of all related party transactions shall be placed before the audit . Committee of the Public Sector Company and upon recommendations of the audit committee, the same shall be placed before the Board for review and approval.
(2) The related party transactions which are not executed at arm's length price shall also be placed separately at each Board meeting along with necessary justification for consideration and approval of the Board on recommendation of the audit committee of the Public Sector Company.
(3) The Board shall approve the pricing methods for related party transactions that were made on the terms equivalent to those that prevail in arm's length transaction only if such terms can be substantiated.
(4) Every Public Sector Company shall maintain a party wise record of transactions. In each financial year, entered Into with related parties in that year along with all such documents and explanations. The record of related party transaction shall include the following particulars in respect of each transaction, namely:--
(a) name of related party;
(b) nature of relationship with related party;
(c) nature of transaction;
(d) amouht of transaction; and
(e) terms and conditions of transaction, including the amount of consideration received or given.
(5) The Public Sector Company may seek a general mandate fronr Its members for recurrent related party transactions of revenue or trading nature or those necessary for Its day-to-day operations such as the purchase and sale of supplies and materials, but not in respect of the purchase or sale of assets, undertakings or businesses. A general mandate is subject to annual renewal.
10. Quarterly and Monthly Financial Statements and Annual Report.-(1) Every Public Sector Company shall, within one month of the close of first, second and third quarter of Its year of account, prepare a profit and loss account for. And balance-sheet as at the' end of, that quarter, whether audited or otherwise, for the Board's approval. Annual report including annual financial statements shall be placed on the Public Sector Company's website.
(2) Every Public Sector Company shall also prepare monthly accounts, for circulation amongst the Board members.
11. Board orientation and learning.-(1) Orientation courses shall be held by a Public Sector Company, to enable directors, to better comprehend the specific context In which it operates, including Its operations and environment, awareness of Public Sector Company's values and standards of probity and accountability as well as their duties as directors. t
(2) In order to ensure that the directors are well conversant with the corporate laws and practices, they are encouraged to have certification under an appropriate training or education program offered by any institution, local or foreign.
(3) In order to acquaint the Board members with the wider scope of responsibilities concerning the use of public resources, to act in good faith and in the best interests of the Public Sector Company, at least one orientation course shall be arranged annually for the directors and the following information in writing, inter alia, shall be provided, namely: ~
(a) Public Sector Company's aims and objectives;
(b) control environment and control activities;
(c) key policies and procedures;
(d) risk management and internal control framework;
(e) background of key personnel, including their job descriptions;
(f) delegation of financial and administrative powers;
(g) board and staff structure: and
(h) budgeting, planning and performance evaluation systems. i2. Formation of Board committees.-
(1) The Board shall set up the following committees to support it in performing its functions efficiently, and for seeking assistance in the decision making process, namely: ~
(a) audit committee, for an efficient and effective internal and external financial reporting mechanism:
(b) risk management committee, in case of Public Sector Companies either in the financial sector or those having ashets of five billion rupees or more, to effectively review the risk function:
(c) human resources committee, to deal with all employee related matters including recruitment, training, remuneration, performance evaluation, succession planning, and measures for effective utilization of the employees of the Public Sector Company;
(d) procurement committee, to ensure transparency in procurement transactions and in dealing with the suppliers; and
(e) nomination committee, to Identify and recommend the candidates for the Board for the consideration of cut shareholders after examining their skills and characteristics that are needed in such candidates.
(2) The Board committees shall be chaired by nonexecutive directors and the majority of their members shall be independent. However, the independent directors in the committees shall not be less than their proportionate strength during the first four years of this notification. The existence of such committees shall not absolve the Board from its . Collective responsibility for all matters.- Such committees shall have written terms of reference that define their duties, authority and composition, and shall report to the full Board. The minutes of their meetings shall be circulated to all Board members.
(3) The Board shall concern itself with policy formulation and oversight and not the approval of individual transactions except which are of an extraordinary nature or involve materially large amount.
13. Chief Financial Officer, Company Secretary and Chief Internal Auditor - appointment and removal.-
(1) The Board shall appoint a chief financial officer, a company secretary and a chief internal auditor.
(2) The appointment, remuneration and terms and conditions of employment of the chief financial officer, the company secretary and the chief internal auditor of Public Sector Company shall be determined with the approval of the Board.
(3) The chief financial officer, the company secretary, or the chief internal auditor of Public Sector Company shall not be removed except with the approval of the Board.
14. Role and qualification of Chief Financial Officer and Company Secretary,-(1) The chief financial officer shall be responsible for ensuring that appropriate advice is given to the Board on all financial matters, for keeping proper financial records and accounts, and for maintaining an effective system of internal financial control. ,.
(2) No person shall be appointed as the chief financial officer of a Public Sector Company unless he is,-
(a) a member of a recognized body of professional accountants with at least five years relevant experience, in case of Public Sector Companies having total assets of five billion rupees or more; or cu>
(b) a person holding a master degree in finance from a university recognized by the Higher Education Commission with at least ten years relevant experience, in case of other Public Sector Companies.
(3) The company secretary shall be responsible for ensuring that Board procedures are followed, and that all applicable laws, rules and regulations and other relevant statements of best practice are complied with. Where the company secretary is not separately appointed, the role of company secretary may be combined with chief financial officer or any other member of senior management.
(4) No person shall be appointed as the company secretary of a Public Sector Company unless he is a,-
(a) member of a recognized body of professional accountants; or
(b) member of a recognized body of corporate or chartered secretaries; or
(c) person . Holding a master degree in business administration or commerce or being a law graduate from a university recognized by the Higher Education Commission with at least five years relevant experience.
(5) No person shall be appointed to the positions of the chief financial officer and company secretary unless he is fit and proper for the position.
15. Requirement to attend Board Meetings.-(1) The chief financial officer and the company secretary of a Public Sector Company shall attend ail meetings of the Board:- Provided that unless elected as a director, the chief financial officer and. The company secretary shall not be deemed to be a director or entitled to cast a vote at meetings of the Board for the purposes of these rules: Provided further that the chief financial officer and the company secretary shall not attend such part of a meeting of the Board, which involves consideration of an agenda item relating to them or that relating to the chief executive or any director.
(2) In pursuance of sub-rule (1), the Board shall ensure that the; chief financial officer and the company secretary attend Board meetings, wherever required.
16. Financial Reporting Framework.-Every Public Sector Company shall adopt International Financial Reporting Standards, as are notified by the Commission under clause (i) of subsection (3) of section 234 of the Ordinance.
17. Directors' report to the Shareholders.-(1) The Board shall submit an annual report to the shareholders.
(2) The Board shall make the following statements and provide the following information In their report to the shareholders, prepared under section 236 of the Ordinance, namely:-
(a) the Board has complied with the relevant principles of corporate governanee, and has Identified the rules that have not been complied with, the period in which such non-compliance continued, and reasons for such non-compliance: .
(b) the financial statements, prepared by the management of the Public Sector Company, present fairly its .State of affairs, the result of its operations, cash flows and changes in equity;
(c) proper books of account of the Public Sector Company have been maintained;
(d) appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates ate based on reasonable and prudent judgment;
(e) they recognize their responsibility to establish and maintain sound system of internal control, which Is . Regularly reviewed and monitored: and
(f) the appointment of chairman and other members of Board and the terms of their appointment along with the remuneration policy adopted are in the best interests of the Public Sector Company as well as in line with the best practices.
(3) The disclosure of an Executive's remuneration ,1s an important aspect for a Public Sector Company. The annual report of a Public Sector Company shall contain a statement on the remuneration policy and details of the remuneration of members of the Board. Separate figures need to be shown for salary, fees, other benefits and other performance- related elements.
(4) The directors' report of a Public Sector Company shall also include the following, where applicable, namely: -
(a) where the Public Sector Company is reliant on a - subsidy or other financial support from the Government, a detailed disclosure of the fact;
(b) significant deviations from last year In operating results of the Public Sector Company shall be highlighted and reasons thereof shall be explained;
(c) key operating and financial data of last six years shall be summarized;
(d) key performance indicators of the Public Sector Company relating to its social objectives and outcomes which significantly reflect the work and impact-of Public Sector Company and a comparison of actual results with the budgeted figures. Such indicators shall focus on as to how well the Public Sector Company, has responded to accountability requirements, improved service delivery, reduced costs and adherence to the principles of environmental and corporate social responsibilities;
(e) where any statutory payment on account of taxes, duties, levies and charges is overdue or outstanding, the amount together with a brief description and reasons for the same shall be disclosed;
(f) significant plans and decisions, such as corporate restructuring, business expansion and discontinuance of operations, shall be outlined along with future prospects, risks and uncertainties surrounding the Public Sector Company; ' (g) a statement as to the value of investments of provident, gratuity and pension funds, based on their respective audited accounts, shall be included;
(h) the number of Board meetings held during the year and attendance by each director shall be disclosed; and
(i) the pattern of shareholding shall be reported to disclose the aggregate number of shares (along with details, stated below) held by,-
(1) Government;
(ii) associated companies, undertakings and related parties (name wise details);
(Hi) mutual funds;
(iv) directors, Chief Executive, and their spouse and minor children (name wise details);
(v) Executives;
(vl) Public Sector Companies and corporations;
(vil) banks, development finance institutions, non-banking finance companies, insuranpe companies, takaful companies, and modarabas; and
(viii) shareholders holding fi^e percent or more voting rights in the Public Sector Company (name wise details).
18. Disclosure of Interests by Directors and Officers.-
(1) Every director of a Public Sector Company, if he or his relative, is in any way, directly or indirectly, concerned or interested in any contract or arrangement entered into, or to be entered into, by or on behalf of.The Public Sector Company shall disclose the nature of' his concern or interest at a meeting of the directors. ,
(2) Any other officer (including the Chief Executive and other Executives) of a Public Sector Company, if he or his relative, is in any way, directly or indirectly, concerned or interested in any proposed contract or arrangement by the company shall disclose to the Company through a communication to the company secretary, the nature and extent of his interest in the transaction.
Such officer and the company shall ensure that such information is properly placed and considered by any forum where the matter relating to such proposed contract or arrangement is to be discussed and approved.
(3) If a director or officer has an existing Interest, before joining the Board, he shall disclose such interest to the Board, which shall take such facts into Consideration for any current and future decision making.
19. Directors' Remuneration.-(1) There shall be a formal and transparent procedure for fixing the remuneration packages of individual directors. No director shall be involved in deciding his own remuneration.
(2) Directors' remuneration packages shall encourage value creation within the company, and shall align their interests with those of the company. These shall be subject to brior approval of shareholders or Board as required by company's Articles of Association. Levels of remuneration shall be sufficient to attract and. Retain the directors needed to run the company successfully.
(3) Subject to the provisions of the company's Articles of Association, the shareholders or Board shall determine the scale of remuneration for non-executive directors. However, it shall not be at a level that could be perceived to compromise their independence.
'(4) The Public Sector Company's annual report shall contain criteria and details of the remuneration of each director, including salary, benefits and performance linked incentives.
20. ResponsibUity for financial reporting and corporate compliance.--No Public SeGtor Company shall circulate Its financial statements unless the chief executive and the chief financial officer, present the financial statements, duly certified under their respective signatures, for consideration and approval of the audit committee and the Board. The Board shall, after consideration and approval, authorize the signing of financial statements for issuance and circulation.
21. Audit Committee.-(J) The Board-shall establish an audit committee, whose members shall be financially literate and majority of them, including its chairman, . Shall be Independent Non- Executive Directors, subject to the provisions of sub-rule (2) of rule 12. The names of members of the audit committee shall be disclosed in each annual report of the Public Sector Company.
(2) The chairman of the Board as well as the chief executive of the Public Sector Company shall not be a member of the audit committee.
(3) The chief financial officer, the chief internal auditor,' and a representative of the external auditors shall attend all meetings of the audit committee at which issues relating to accounts and audit are discussed:-- Provided that at least once at year, the audit committee shall meet the external auditors without the presence ' of the chief financial officer, the chief internal-auditor and other executives being present, to ensure independent communication between the external auditors and the audit committee: Provided further that at least once a year, the audit committee shall 'meet chief Internal auditor and other members of the internal audit function without the chief financial officer and the external auditors being present.
(4) The Board shall determine the terms of reference of the audit committee. The terms of reference shall be in writing, specifying the mandate of the audit committee. The audit committee shall have full and explicit authority to Investigate any matter within its terms of reference and shall be provided with adequate resources and access to all relevant Information.
(5) The audit committee shall, inter alia, be responsible for recommending to the Board the appointment of external auditors by the Public Sector Company's shareholders and shall consider any questions of resignation or removal of external auditors, audit fees and provision by external auditors of any service to the Public Sector Company in addition to audit of its financial statements. In the absence of strong grounds to proceed otherwise, the Board shall act in accordance with the recommendations of the audit committee in all these matters. However, the Board shall not be deemed to absolve itself of its overall responsibility for the functions delegated to the audit committee.
(6) The terms of reference of the audit committee may also include the following, namely:--
(a) determination of appropriate measures to safeguard the Public Sector Company's assets;
(b) review of financial results; '
(c) review of quarterly, half-yearly and annual financial statements of the Public Sector Company, prior to their approval by the Board, focusing on,-
(i) major judgment areas;
(ii) significant adjustments resulting from the audit;
(ill) the going-concern assumption;
(iv) any changes in accounting policies and practices; and
(v) compliance with applicable accounting standards. Explanation.- The appropriateness of the use of the going concern assumption In the preparation of the financial statements is generally not in question when auditing Public Sector Company having funding arrangements backed by the Government. However, where such arrangements do not exist, or where Government funding of the Public Sector Company may be withdrawn and the existence of the Public Sector Company may be at risk, International Standards on Auditing provide useful guidance. This issue is Increasingly Important for Public Sector Companies which have been privatized;
(d) facilitating the external audit and discussion with external auditors of major observations arising from interim and. Final audits and any matter that the auditors may wish- to highlight (in the absence of management, where necessary); t
(e) review of management letter issued by external auditors and management's response thereto;
(f) ensuring coordination between the internal and external auditors of the Public Sector Company;
(g) review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and Is appropriately placed within the Public Sector Company;
(h) consideration . Of major findings of Internal investigations and management's response thereto;
(i) ascertaining that the internal control system including financial and operational controls, accounting system and reporting structure are adequate and effective;
(j) review of the Public Sector Company's statement on internal control systems prior to endorsement by the Board;
(k) recommending or approving the hiring or removal of the chief internal auditor;
(l) . Instituting special projects, value for money studies or other investigations on any matter specified by the' Board, in consultation with the chief executive and to consider remittance of any matter to the external s auditors or to any other external body:
(m) determination of compliance with, relevant statutory requirements;
(n) monitoring compliance with the best practices of corporate governance and Identification of significant violations thereof:
(o) overseeing whistle-blowing policy and protection mechanism; and
(p) . Consideration of any other issue or matter as may be assigned by the Board.
(7) The audit committee shall be responsible for managing the relationship of Public Sector Company with the external auditors. In managing the Public Sector Company's relationship with the external auditors on behalf of the Board, the audit committee's responsibilities include,--
(a) suggesting the appointment of the external auditor to the Board, the audit fee,, and any questions of resignation or dismissal;
(b) considering the objectives and scope of any non- financial audit or consultancy work proposed to be undertaken by the external auditors, and reviewing the remuneration for this work;
(c) discussing with the external auditors before the audit commences the scope of the ' audit and the extent of reliance on internal audit and other review agencies;
(d) discussing with the external auditors any significant issues from the review of the financial statements by ' the management, and any .Other work undertaken or overseen by the audit committee;
(e) reviewing and considering the external auditors' -communication with management and management's response thereto; and
(f) reviewing progress on accepted recommendations from the external auditors.
(8) The recommendations of the audit committee for appointment of retiring auditors or otherwise, as mentioned in sub-rule (7) above, shall be included in the directors' report. In case of a recommendation for change of external auditors before the lapse of three consecutive financial years, the reasons for the same shall be included in the directors' report.
(9) The audit committee shall appoint a secretary of the Committee, who shall circulate minutes of Its meetings to the all members, directors and the chief financial officer, within fourteen days of the meeting.
22. Internal Audit.-(1) There shall be an internal audit function in. Every Public Sector Company. The chief internal auditor, who is the head of the Internal audit function in the Public Sector Company, shall be accountable to the audit committee and have unrestricted access to the audit committee.
(2) No person shall be appointed to the position of the chief Internal auditor unless he is considered and approved as "fit and proper" for the position by the Audit Committee. No person shall be appointed as the Chief Internal Auditor of a Public Sector Company unless he has five years of relevant audit experience and is a,-
(a) member of a recognized body of professional accountants; or
(b) certified internal auditor; or
(c) certified fraud examiner; or
(d) certified internal control auditor: or
(e) person holding a master degree in finance from a university recognized by the Higher Education Commission: Provided that individuals serving as chief internal auditor of the Public Sector Company for the last five years at the time of coming into force of these rules shall be exempted from the above qualification requirement.
(3) Every Public Sector Company shall ensure that Internal audit reports are provided for the review of external auditors. The external auditors shall discuss any major findings in relation to the reports with the audit committee, which shall report matters of significance to the Board.
(4) The internal audit function shall have an audit charter, duly approved by the audit committee and shall work, as far as practicable, in accordance with the standards for the professional practice, of internal auditors issued by the Institute of Internal Auditors Inc., (the global professional organization of internal audit profession).
23. External Auditors'.-(1) Every Public Sector Company shall ensure that its annual accounts are audited by external auditors, as envisaged under section 252 of the Ordinance. When carrying out audit of a Public Sector Company, the external auditors shall take into account the specific requirements of any other relevant regulations. Ordinances or ministerial directives which affect the audit mandate and any special auditing requirements.
(2) In assessing materiality, the external auditor must, In addition to exercising professional judgment, consider any legislation or regulation which may impact that assessment.
(3) The external auditors shall Independently report to the shareholders in accordance with statutory and professional requirements. They shall also report to the Board, and audit committee the -matters of audit interest, as laid down In the International Standards on Auditing.
(4) No Public Sector Company shall appoint as external auditors a firm of auditors which firm or a partner of which firm is non-compliant with the International Federation of Accountants' (IFAC)
Guidelines on Code of Ethics, as applicable In Pakistan.
(5) The external auditors shall observe applicable guidelines Issued by the International Federation of Accountants with regard to restriction of non-audit services. The audit committee shall also ensure that the external auditors do not perform management functions or make management decisions, responsibility for which remains with the Board and management of the Public Sector Company. '
(6) Every Public Sector Company in the financial sector shall change Its external auditors every five years. Financial sector, for this purpose, means banks, non- banking . Finance companies, mutual funds,, modarabas, takaful companies and insurance companies. Every Public Sector Company other than those in the financial sector shall, at a minimum, rotate the engagement partner after every five years. .
(7) No Public Sector Company shall appoint a person as its chief executive, chief financial officer, chief internal auditor or director who was a partner of the firm of its external auditors (or an employee Involved in the audit of the Public Sector Company) at any time during the two years preceding, such appointment.
' (8) Every Public Sector Company shall require external auditors to furnish a management letter to its Board not later than thirty days from the date of audit report.
24. Compliance with the rules.-(1) Every Public Sector Company shall publish and circulate a statement along with its; annual report to set out the status . Of its compliance with these rules, and shall also file with the Commission and the registrar concerned such statement along with its annual report.
(2) Every Public Sector Company shall ensure that the statement of compliance with the rules is reviewed and certified by external auditors, where such compliance can be objectively verified, before publication by the Public Sector Company.
(3) Where the Commission is satisfied that it is not practicable to comply with any of these rules, the Commission may, for reasons to be recorded, relax the same subject to such conditions as it may deem fit to impose.
25..Penalty for contravention of the rules.-Whoever fails or refuses to comply with, or contravenes any provision of these rules, or knowingly and wilfully authorises or permits such failure, refusal or contravention shall, in addition to any other liability under the Ordinance, be punishable with fine and, in the case of continuing failure, to a further fine, as provided in subsection (2) of section 506 of the Ordinance. ' ' cut Public Sector Companies. 75 #TBS VoLXII-20131 #TBE (Corporate Governance) Rules., 2013 / L .** * ;T" '. ' j '
ANNEXURE I See Rule 317)1 CRITERIA FOR DETERMINING A ' FIT AND PROPER PERSON1
(1) For the purpose of determining as to whether a person proposed to be appointed as director is a 'fit and proper person", the Commission shall take into account any consideration as it deems fit.
Including but not limited to the following criteria, namely:- The person proposed for the said position -- ,
(a) is at least graduate;
(b) Is a reputed businessm an or a recognised professional with relevant sectoral experience;
(c) has financial Integrity:
(d) has no convictions or civil liabilities;
(e) is known to have competence;
(f) has good reputation and character;
(g) has the traits of efficiency and honesty:
(h) does not suffer from any disqualification to act as a director stipulated in the Ordinance:
(i) has not been subject to ari order passed by the Commission cancelling the certificate of registration granted to the person individually or collectively with others on the ground of its indulging in insider trading, fraudulent and unfair trade practices or market manipulation. Illegal banking, forex or deposit taking business: *
(j) has not been subject to an, order passed by the Commission or any other regulatory authority, withdrawing or refusing to grant any license or approval to him which has a bearing on the capital market:
(k) is not a stock broker or agent of a broker; and
(l) does not suffer from a conflict of Interest: this Includes political office holders in a legislative role.
(2) A director shall cease to be considered as a "fit and proper person" for the purpose, if he incurs any of the following disqualifications, namely:-
(a) he is convicted by a court for any offence involving moral turpitude, economic offence, disregard of securities and company laws or fraud;
(b) an order for winding up, has been passed against a company of which he was the officer as defined under section 305 of the Ordinance;
(c) he or his close relatives have been engaged in a business which is of the same nature as and directly competes with the business carried on by the Public Sector Company of which he is the director. CORPORATE SOCIAL RESPONSIBILITY GUIDELINES 2013 I
1. Introduction and Scope 1.1 In order to promote responsible business conduct that supports community growth for public interest, eliminates adverse practices impacting the public sphere and ensures corporate accountability, the Securities and Exchange Commission of Pakistan ("SECP") is pleased to issue the Guidelines for Corporate Social Responsibility ("the Guidelines"). .
1.2 These Guidelines are voluntary in nature and businesses are encouraged to move beyond the recommended minimum provisions articulated in this document.
1.1 The Guidelines are being published for all companies that have initiated or intend to initiate corporate social responsibility ("CSR") activities. Further, it is expected that all companies may endeavor to adopt working models that complement the recommended guidelines with a focus on fair, transparent and responsible business practices.
1.2 For the purpose of facilitation, companies are encouraged to use (self-assessment) CSR governance benchmark and terms of reference of CSR committee, annexed to the guidelines.
1.3 The Guidelines are being Issued in exercise of powers under section 506B of the Companies Ordinance, 1984.
2. Objective The objective of these Guidelines is to promote the development of a framework for CSR initiatives by all companies. Companies are encouraged to strive and work in cooperation with stakeholders for implementing a transparent and socially responsible strategy. .
3. C8R governance Companies are encouraged to have a CSR policy endorsed by the board of directors ("board") of the company, reflecting their understanding and commitment to CSR, thereby ensuring that:-
(a) CSR- policy is incorporated Into the vision, code of ethics and business plan /strategy -of the company.
(b) CSR commitment statement Is agreed through meetings/session by Board of Directors w.r.t.
CSR definition, business value of CSR, vision and commitment (resources, time, personnel). ft
(c) Output of the CSR commitment is integrated into a board level CSR policy.
(d) CSR mandate is executed either through a preexisting committee or . By forming a new CSR committee.
(e) Hold education/orientation sessions to ensure that board members have adequate understanding and expertise of CSR for making informed decisions.
(f) Include CSR activities as part of agenda of the board meetings and incorporate CSR as part of annual board evaluation.
(g) Periodically review operations of the board to Identify and implement measures to align the board operations with CSR strategy of the company.
(h) Ensure that CSR goals, objectives and targets are incorporated into business plans/strategy.
(1) Board members determine CSR risks, opportunities CID and impact prior to any major business decisions (acquisition, mergers, product variation, capital expenditures).
(j) Review and approve CSR related communications to internal and external stakeholders ensuring compliance with relevant reporting framework.
4. Consultative Committee The Company is expected to adopt a focused approach towards CSR through formation of a CSR Consultative Committee ideally led by a CSR expert. The committee members are expected to have an understanding and experience of implementing CSR activities/projects. The committee may be entrusted to ensure transparent, specialized supervision of CSR activities and periodic reporting to Board of Directors in adoption of CSR policy and reporting its progress. A sample term of reference of CSR Committee is annexed to these Guidelines.
5. CSR Management Systems CSR policy of a company is expected to be formulated in a manner that serves as a guide to its strategic plans, paves way for a systematic CSR management system and projects the roadmap of CSR initiatives. The systems are expected to reflect following broad indicators:--
(a) Express commitment of the board and the top management to formulate and implement CSR Policy
(b) Ensure that policies, processes and systems exist and support the CSR policy. This is measured by:
(1) Specifying the organizational approach towards CSR
(ii) Incorporating the CSR approach into code of ethics of company
(ill) Defining objectives for carrying out CSR activities
(Iv) Setting targets for achievement of CSR objectives
(v) Determining the working model and devising action plan (time, resources, budget)
(vl) Delegating responsibility and management of resources with respect to CSR policy
(c) Sensitization and training of the board, senior management and employees for implementation of CSR targets ' (d)' Mechanism for stakeholder engagement prior, during and on conclusion of CSR plans
(e) Periodic monitoring and evaluation of CSR activities
(f) Disclosure and reporting of CSR achievements
(g) Recognizing and documenting the shortfalls/failures
(h) Incorporating improvement in future CSR policy/plans
6. Areas of Interest CSR policy is expected to clearly determine the priority areas wherein the CSR projects are currently being managed (ongoing projects) and are planned to be initiated (upcoming projects). The areas may broadly cover:
(a) Community investment (skill development, livelihood, health, education, Infrastructure, social enterprise development, safe drinking water, poverty alleviation, youth development and environment conservation)
(b) Governance (human rights, transparency, anticorruption, business practices, stakeholder relations, responsible marketing)
(c) Product responsibility
(d) Work life balance
(e) Safety (risk management, disaster management)
(f) Climate Change
7. Twiplmantation Structure 7.1 The CSR policy is expected to be implemented through a systemized structure that measures and reflects progress of CSR goals/targets. It is imperative that the system must be able to Identify the role of the company and the extent of involvement of internal and external stakeholders for carrying out CSR plans.
7.2 The Implementation system may indicate the folloiving: '
(a) Specific goals, business plan and working model to be implemented
(b) Resources aligned for implementation of CSR goals
(c) Extent of implementation and completion of CSR activities
(d) Incorporating changes in its working model to changes in business/social needs
(e) Specifying the role and resources of partnering agencies
(f) Systemized periodic assessm ent of impact of CSR policy/goals
(g) Define systematic reporting of implementation status to internal and external stakeholders
8. Allocation of Resources The company is expected to earmark, specified resources (quantifiable), specific criteria (for e.g. Hours of service at partnering agency) or a proportion of their profit (preferably 1-2%) for selected CSR initiatives. The method of allocation of resources or identified criteria must ideally be predetermined, duly endorsed by the board and form part of CSR Policy.
9. External Assurance 9.1 The company may undertake arrangement for obtaining assurance by an external party. The external assurance is expected to be Implemented in a manner that is systematic, documented, evidence- based, and characterized by defined procedures.
9.2 External assurance[1]: * Be conducted by entities, groups or individuals external to the reporting organization, who ate demonstrably competent In the subject matter and assurance practices; Should utilize groups, or individuals who are not unduly limited by their relationship with the organization or its stakeholders to reach and publish an independent and Impartial conclusion on the report: Is implemented in a manner that is systematic, documented, evidence-based, and characterized by defined procedures; Assesses whether the CSR report of the company- provides a reasonable and balanced presentation of performance, taking into consideration the veracity of report data and the overall selection of content; Assesses the extent to which the report preparer has applied any Reporting Framework; , and Results in an opinion or . Set of conclusions that is publicly available in written form, and a statement from- the assurance provider on their relationship to the report preparer.
9.3 The assurance report may form part of Its CSR Report.
10. Dlacloaure ansi Reporting 10.1 Companies are expected to report concise and material information regarding their CSR policy and activities that may be consolidated and reported in the form of a separate CSR Report.
10.2 CSR report may prominently disclose the CSR objectives, working model, Implementation status, Impact/achievements, risks, opportunities, challenges and working partners. This may also include comparison drawn from previous year.
10.3 CSR reporting is expected to state the goals that the board has planned to set forth for 'the next year. This may be descriptive narration of the areas of concentration or any specific projects along with brief overview of source of generation of funds for said goals.
10.4 Companies are expected to prominently disclose CSR report (summarized or detailed format).
The said reports may be disseminated on its website (if any), annual reports, . Separate report and other communication media.
10.5 Notwithstanding the preparation of CSR Report, the company shall provide descriptive as well as monetary disclosures of the CSR activities undertaken by it during each financial year s in line with the requirements of Companies (Corporate Social Responsibility) Order, 2009. This may also include disclosure to the effect of compliance by companies with relevant industry/regulator guidelines or standards. - ...
CSR Committee * Terms of Reference
(a) Strategy and Policies: Review and recommend to the board of the company in forming or refining the CSR vision, strategy and policy of the company. This includes ensuring that appropriate management systems, implementation model and regulatory compliance are In place.
(b) Assessing indicators: Monitor and recommend changes in working model of CSR in line with best practices, economic indicators, social implications and stakeholder trends that may impact the company.
(c) Stakeholder Engagement: Review and monitor stakeholder relations and devise mechanism to incorporate input of partnering agencies/stakeholders into CSR plans/policies
(d) Management of Risk: Monitor, periodically review and document the major CSR risks, opportunities and impact of CSR policy. It may also recommend to the board the appropriate changes in CSR policyAmanagejtnent systems.
(e) CSR Assessm ent: Review and report impact of CSR plans/activlties on business. Further review and recommend impact of CSR policy on major business decisions.
(f) CSR Report: Determine the overall extent of reporting of CSR activities, provide input on CSR reports and recommend to the board for adoption of CSR report. This Includes ensuring CSR reports are In accordance to relevant CSR reporting framework. Cut- Corporate Social Responsibility Governance Benchmark Board of Directors is expected to develop and evaluate their governance framework w.r.t. Corporate social responsibility Initiatives. Following is a self-assessm ent table that shall complement Board of Directors In the evaluation process:-- S.N. Direction Assessm ent (please tick) Comments .
Tea No Partial Don't Know Not relevant I. Has Board developed a CSR vision and strategy?
2. Have Board and management expressly declared Its commitment to CSR?
3.. Has board communicated the company's business case for CSR to management? -
4. Do Board and' management share common CSR aspirations?
5. Does CSR Vision coincide with the vision and Code of Ethics of the Company?
6. Does the Board have clear understanding of CSR and industry practices?
7. Are CSR goals incorporated in the business plans of the business?
8. Is there a specific CSR committee?
9. Does the C$K Committee comprise of one or more CSR experts? (Indicate the number in comments section) V '
10. Is there a designated CSR committee member reporting to Board? ii. Does. CSR committee seek. Guidance with board approved CSR poUcy?
12. Does the CSR committee periodically report the progress of company on CSR goals, objectives and targets?
13. Does the CSR committee review and make recommendaUons in the Implementation model of the Company?
14. Is the CSR committee Involved In preparing implementation model for CSR' plans?
15. Is management's Incentives linked to CSR goals/targets?
16. Is CSR progress included as a factor In remuneration/ recruitment of CEO?
17. Does the CSR committee review and recommend suggestion for lncorporaUng CSR risk In Company's risk management policy? - -
18. Is CSR committee entrusted with the role of recommending major CSR risk and Its Impact prior to major business decisions?
19. Are ' CSR - risk, opportunities. Impact and Issues are considered by Board and management In approving major business decisions?
20. Is there a system of Implementation of CSR goals?
21. Are there adequate measures in place to determine the impact of CSR policies by Board and senior management?
22. Does the internal audit process include assessment of CSR commitments?
23. t Does the board hold CSR orlentaUon session and periodically review progress on CSR commitment/goals?
24. Does the CSR committee provide its Input In preparation of CSR reports?
25. Does the Board give Its input in extent of disclosure In the CSR reports? 1
26. Does the board review and approve external reporting of CSR Issues in compliance of relevant regulatory requirements? -
27. Does the board consider CSR report aa a record of company's performance on CSR goals for disclosure to Its stakeholders?
28. Does the Board approve external assurance of, CSR actlvlUes?
29. Does the Board approve the external assurance report to be made part of CSR report of the Company? # -
30. Does the Board approve of placing the CSR report on website of the Company?
STATE BANK OP PAKISTAN CIRCULARS BPRD CIRCULAR LETTER NO. 24 OF 2012 [19th October, 2012] Subject: PUBLIC HOLIDAYS The State Bank of Pakistan will remain closed from 26th to 29th October, 2012 (Friday, Saturday, Sunday and Monday) on the occasion of Eid-ul-Azha as declared by the Government of Pakistan. #TBS [C.L.D. #TBE #TBS CORPORATE LAW DECISIONS #TBE BPRD CIRCULAR LETTER NO. 25 OP 2012 (5th November, 20.161 Subject: PUBLIC HOLIDAYS The State Bank of Pakistan will remain closed on 9th November, 2012 (Friday) on the occasion of Iqbal Day as declared by the Government of Pakistan.
BPRD CIRCULAR LETTER NO. 26 OF 2012 [23rd November, 2012] Subject; PUBLIC HOLIDAYS The State Bank of Pakistan will remain closed on 24th and 25th November, 2012 (Saturday and Sunday) being 9th and 10th Moharram-ul-Harram 1434 A.H. As declared by the Government of Pakistan on the occasion of Ashura.
BPRD CIRCULAR LETTER NO. 27 OF 2012 [4th December. 2012] Subject: ASSUMING CHARGE AS DIRECTOR. BANKING POLICY AND REGULATIONS DEPARTMENT We have to advise that Mr. Shaukat Zaman 'has assumed charge as Director, Banking Policy and Regulations Department (BPRD), State Bank of Pakistan, Karachi with effect from December, 4, 2012. His specimen signatures are appended. I SPECIMEN SIGNATURE Sd/- (Shaukat Zaman)
Director, Banking Policy and Regulations Department Tel. No. 021-99213580 - 32453543 Fax No. 021-99212506 - 99212438.
BSD CIRCULAR LETTER NO. 8 OF 2012 [24th October, 2012] Subject: PANEL OF- AUDITORS MAINTAINED UNDER SECTION 35fll OF BCO. 1962 This refers Ao BSD Circular Letter No.7, dated June 18, 2012 on the cited subject.
2. It has been decided to upgrade the category of the following Chartered Accountancy firm in the Panel of Auditors of State Bank of Pakistan with immediate effect:- Name and Address of the Firm Previous Category Upgraded Category Nasir Javaid Maqsood Imran Chartered Accountants 904, 9th Floor. Q.M. House, Plot No. 11/2, Ellander Road. Opp. Shaheen Complex, off I.I. Chundrigar Road, Karachi. Category 'C' eligible to conduct audit of Banks/ DFIs having total assets (net of contra Items) below R.5 billion or number of branches below 10. Category *B' eligible to conduct audit of Banks/ DFIs hasting total assets (net of contra Items) upto Rs.50 billion . Or number of branches upto 99.
3. ,A copy of the updated Panel of Auditors is enclosed. Enel: As Above Copy forwarded for information to: Nasir Javaid Maqsood Imran-Chartered Accountants.
NAMES AND ADDRESSES OF AUDITING FIRMS fCHARTERED ACCOUNTANTS) ON PANEL OF AUDITORS MAINTAINED BY STATE BANK OF PAKISTAN UNDER SECTION 35(1) OF BANKING COMPANIES ORDINANCE.
1962.
SR. MO. AUDITING FIRMS CATEGORY "A"
A1 -A.F. Ferguson & Co.
State Life Building No. 1/C, I.I. Chundrigar Road, Karachi.
Tel: 021-2426711-5, 2426682-5 Fax: 2415007, 2427938 A2 Anjum Asim Shahid Rahman 1st & 3rd Floors, Modem Motors House. Beaumont Road, Karachi 75530 Tel: 021-5672951. 55672956 Fax: 5688834 A3 Avals Hyder Liaqiiat Nauman 407, Progressive Plaza, Beaumont Road. Karachi.
75530.
Telephone: (92-21) 565 5975-6 Fax : (92-21) 565 5977 E-mail: offlce.Khl@ahln.Com.Pk. Lzca0khl.Wol.Net.Ok A4* BDO Ebrahim & Co.
2nd Floor, Block "C" Lakson Square Building No. 1, Sarwar Shaheed Road, Karachi. Tel: 021-5683030, 5683189 Fax: 5684239 A5 Naveed Zafar Ashfaq Jaffery & Co.
1st Floor Modem Motors House Beaumount Road, Karachi.
Tel: 02 i-111-77-44-22 Fax#: (021) 5210626 E-mail: khl@shznco.Com A6 Hyder Bhlmji & Co.
Suite No. 1601, Kashif Centre.
Main Shahrah-e-Faisal Karachi - 75530 Phone: 021-35610050 - 52 Fax: 021-35640053 A7 . Ilyas Saeed & Co.
A-4 Sea Breeze Homes, Shershah Block, New Garden .Town, Lahore.
Tel: 042-5861852, 5868849 Fax: 5856145 E-mail: mllvas@bratn. Net, nk A8 M. Yousuf Adil Saheem & Co.
Cavlsh Court. ,A-35, Block 7, KCHSU. Shahrah-e-Faisal. Karachi. .Tel: 021-4541314, 111-55-2626 Fax: 021-4541314 A A9 Muniff Ziauddin Junaldy & Co.
Business Executive Centre io F/17/3, Block 8, Clifton, Karachi.
Tel: 021-35375127-29 Fax:021-35820325 E-mail: frnfo@mzhcom.Pk A10 Riaz Ahmad & Company 10-B, Saint Mary Park, Main Boulevard, Gulberg -III, Lahore-54660.
Tel: 042-5718137-39 Fax: 042-5714340 E-mail: racolhr@racoDk.Com: sm@racopk.Com All KPMG Taseer Hadl & Co. 1 1st Floor, Sheikh Sultan Trust Building No. 2, Beaumount Road, Karachi.
Tel: 021-5685847 Fax: 021-5685095 A12 Ernst & Young Ford Rhodes Sidat Hyder & Co.
Rooms Nos.601-603, Progressive Plaza, Beaumont Road, Karachi-75530 Tele: +9221 35650007-11 Fax#: +9221 35681965 E-mail: evfrsh,khi@pk.Ev.Com Web: www.Ev.Com * A13 Rahman Sarfaraz Rahim Iqbal Rafiq 54 - P, Gulberg II, P.O. Box No. 3054.
Lahore - 54660 Phone # 042-5875965-68 Fax # 042-5758621 E-mail: alnasr@wol.Net.Pk A14 Horwath Hussain Chaudhury & Co.
25/E Main Market, Gulberg-2, Lahore-54660 Tel: 042-5759223-5, 042-111-111-442 Fax:042-5759226 E- mail: hhc@horwath.Com.Pk CATEGORY"B"
B1 Hameed Ch. & Co.
H.M. House, 7 Bank Square. Lahore.
Tel: 042-7235084-7 Fax: 042-7235083 ' , B2 Ibrahim Sh. & Co.
259-260 Panorama Centre, Fatima Jinnah Road, Saddar, Karachi.
90 CORPORATE LAW DECISIONS [C.L.D.
Tel: 021-5210577-5673529 Fax: 021-5676591 B3 HLB Ijaz Tabussum & Co.
303-Sawan Road, G-10/1, Islamabad Tel: 051-210 22 13 - ,16 Fax:051-2110272 E-mail: ia@hlbitc.Com. Admin@hlbitc.Com: Web: www.Iiaztabussum.Com B4 Rahim Jan & Co.
Nelsons Chamber, 1.1. Chundrigar Road, Karachi.
Phone: 021-32629515 - 32629518 B5 Kabani & Company SKP House 321-Upper Mall, Lahore.
Phone:042-111-772-000 Fax: 042-35789182 Web: www.Kabanico.Com.Pk B6 S.M. Masood & Co 112-B/l , Block E/l, Gulberg III, Lahore Phone: 042-35712554 - 35712557-8 B7 Zahid Jamil & Co.
1st Floor, Al-Jamil, 7-Madina Town Ext.
Kohinoor Chowk off. Jaranwala Road, Faisalabad, Pakistan, Telephone: (+92 41) 8725065-68 Fax: (+92 41) 8725070 E-mail: info@zahidiamllco.Com Website: www.Zahidiamilco.Com B8 Riaz Ahmad, Saqib, Gohar & Co.
5 Nasim, C.H.S. Major Nazir Bhatti Road, Off Shaheed-e-Millat Road, Karachi Tel: 021-4945427- 4946112, 4931736 Fax: 021-4932629 B9 Haroon Zakaria & Co.
Room No. 211, 2nd Floor, Progressive Plaza, Plot No. 5-CL-10, Civil Lines Quarter, Beaumont Road, Karachi ID Tel: 021-5674741-44 Fax: 021-5674745 E-mail: info@hzco.Com.Pk BIO Mushtaq & Co.
407 Commerce Centre, Maulana Hasrat Mohani Road, Karachi.
Tel: 021-2638521-4 Fax: 021-2639843 B11 Tariq Abdul Ghani Maqbool & Co.
173-W, Block-2, P.E.C.H.S, Karachi.
Phone: +92 21 34322582-3; +92 21-34322606-7 Fax: +92 21 34522492 E-mail: info@tagglobalservices,com Website: www. Tagglobalservices. Com A BI2 F.R.A.N.T.S. & Co.
16- 11, 'N' Lane, Commercial Avenue, Phase IV. D.H.A, Karachi.
Phone: +92 (021) 35315175; +92 (021) 35315275 Fax:+92 (021) 35315276 E-mail: karachi@frants.Pk g Website: www.Frants.Pk B13 Baker Tilly Mehmood Idrees Qamar & Co.
4th Floor, Central Hotel Building, Civil Lines, Mereweather Road, Karachi.
Tel: +92 (021) 35644872-7 Fax: +92 (021) 35694573 E-mail: mlm@mimandco.Com B14 UHY-Hassan Naeem & Co, 193-A, Shah Jafhal, Lahore.
Phone: +92 (42) 37599938; +92 (42) 37599948 +92 (42) 37599640 Fax: +92 (42) 37599740 E-mail: lnfo@uhv-hnco.Com Website: www.Uhv-hnco.Com ]315 Nasir Javaid Maqsood Imran 904, 9th Floor, Q.M. House, Plot No. 11/2, Ellander Road, Opp. Shaheen Complex, Off I.I. Chundrigar Road, Karachi.
Tel: 021-32211515, 32211516, 0345-82822964 Pax: 021-32211515 E-mail: consult l@cvber.Net.Pk 3xrww.Nimi.Net CATEGORY "C"
Cl Daudally Lalani & Co.
Suit No. 901, 9th Floor, Fortune Centre, 45-A, PECHS, Block # 6, Shahrah-e-Faisal, Karachi Tel: 021-4389312-13 Fax: 021-4389315 C2 Fazal Mahmood & Co.
147 - Shadman -I, Lahore.
Tel: 042- .7576986-7580236 Fax: 042-7560971 C3 Rehman Iqbal Umar Iftikhar 121, Clifton Center, Block 5, Main Clifton Road, Karachi.
Phone: 021-35873934, 35374125-6 C4 Qavi & Co.
Suites: 717 & 718, Caesars Tower, Shahra-e-Faisal, Karachi.
Telephone: (+92 21) 32791966-8 Fax : (+92 21) 32791969 E-mail: aaviandco@cvber.Net.Pk C5 Moochhala Gangat & Co.
F-4/2, Mustafa Avenue, Block-9, Behind "The Forum", Clifton, Karachi - Pakistan.
Tel: (92 21) 35877806-09 Fax:(92 21)35877810 E-mail: advise@mgc.Com.Dk Web: www.Mgc.Com.Pk C6 Rafaqat Mansha Mohsin Dossani Masoom & Co.
1. 3rd Floor, Sharjah Centre, 62-Shadman Market, Lahore Phone: 042-7552728-29; Fax:' 042 - 7552730 E-mail: Lahore@mmdk.Com.Pk 2. Suite 113, 3rd Floor, Hafeez Centre, A/34, KCHS, Block 7 & 8, Shahrah-e-Faisal, Karachi.
Tel: 021- 4392361-62, 4396247 Fax: 021-4396247 E-mail: dossani@mmdk.Com.Pk URL: http: //www.Mmdk.Com.Pk C7 Tariq Ayub, Anwar & Co.
First Floor, 84 -B -1, Ghalib Road, Gulberg III, Lahore-54660, Pakistan Phone: 042-5872061-3 Fax: 042- 5872060 E-mail: taac@acc6untant.Com C8 Aslam Malik & Company, Suite # 18-19, First Floor, Central Plaza, Civic Centre, New Garden Town, Lahore, Pakistan.
Phone: +92 42 5858693-4; +92 42 5856819 Fax: +92 42 5856019 E-mail: info@aslammaIlk.Com C9 Mansoor Aslam Seraj Saleem Shahid Suite No. 209, Parsa Tower, '
Plot No. 31-1-A, Block 6, PECHS, Main Sharea Faisal, Karachi Tel: 3415-0811-3 Fax: 3415-0814 Email: enaulrle8Qmansooraslamseralsaleem.Com econsult@cvber.Net.Pk URL: www.Mansooraslamsera1saleem.Com CIO Feroze Sharif Tariq & Co.
4- N/4, Block - 6, P.E.C.H.S., Karachi (75400)
Phone:+92 (021) 34522734; ' +92 (021) 34540891 Fax:+92 (021) 34540891 E-mail: fstc.Ca@gmall.Com Cl 1 M/s Mudassar Ehtlsham & Co.
Chartered Accountants, 15-Birdwood Road, Lahore.
Ph: 042-37500503-4 Fax: 042-37500506 * E-mail: info@mecoca.Com '
Web: www.Mecoca.Com C12 M/s S.M. Suhail & Co.
Chartered Accountants, Suite Nos. 1001-1014, 10th Floor, Uni Centre, 1.1. Chundrigar Road, Karachi-74200 Tel: -21-32414057, 32414163, 32414419 Fax: 021-32416288 Email: sms@smsco.Pk. Www.Smsco.Ok CATEGORY DESCRIPTION (vide BSD Circular No.3 dated February 24, 2003)
Category "A" Category "B" Category "C"
Auditing Firms in Category "A" are eligible to conduct audit of all Banks/ DFIs. Auditing Firms in Category "B" are eligible to conduct audit of Banks/DFIs having total assets (net of contra items) up to Rs.50 billion or number of branches up to 99. Auditing Firms in, Category "C" are eligible to conduct audit of Banks/DFIs having total assets (net of contra items) below Rs.5 billion or number of branches' below 10.
CPD CIRCULAR NO. 2 OP 2012 [29th June, 2012] Subject: SALE OF THIRD PARTY PRODUCTS BY BANKS Over the past few years banks in Pakistan have ventured into the sale of Bancassurance and other third party products. While this initiative has been viewed as a positive development, complaints of mis-selling from' the general public indicate that the focus of the banks has largely remained on pitching sales and due attention was not given to the control and monitoring mechanism in relation to the distribution of third party products. To safeguard the interest of the depositors/general public and prevent banks from incurring operational and reputational risks, banks and DFIs offering third party products are advised to comply with the following minimum standards.
2. Banks offering third party products must establish a centralized control function entrusted with the responsibility to verify the information given in a sales proposal/application forwarded by the sales staff. It is up to the banks how to structure the requisite control function, however the , Vol.XII-2013] Sale of Third Party Products 95 by Banks underlying principle is that the person verifying the Information should not have any Incentive linked with the sales volume.
3. In addition to the existing set of documents, banks shall introduce a basic fact sheet elaborating at least the following facts:-
(i) Two liner definition of the product.
(ii) Disclaimer of the bank stating that it is only working in the capacity of a distributor. t
(iii) Return mechanism in terms of investment arid premium schedule in terms of bancassurance.
(iv) Free look pferiod in case of bancassurance.
(v) Premature encashment procedure and its repercussions.
(vi) Redressal Mechanism in case of any grievance.
(vii) Checklist of all the other documents signed or attached. The basic fact sheet shoukLbe a distinct looking document including an undertaking by the customer that he/she understands all the stated terms and conditions of the product. This document, along with all the other documents, shall be printed in both Urdu and English with a font size not smaller than 10.
4. Banks must institute a call back confirmation ^mechanism equipped with the Integrated Voice Response system whereby every customer, is contacted, briefed about the salient features of the product and his/her confirmation is obtained before approving a sales proposal.
5. To ensure that the bank has proper evidence of the fact that the investor was duly briefed about the product and related terms/conditions, the record of every call made should be retained for at least three years or until maturity of the product whichever is earlier.
6. There should be a well designed script for each product which should be followed for every verification call. The script should at least cover the contents mentioned above in para 3.
7. In bancassurance the incentive structure, if any, must . Be focused on the persistency of the policy. For instance commission earned by sales staff may be paid with a time lag of one year.
8. Banks should ensure that the personnel involved in the sales have adequate understanding of the product and are familiar with bank's policy in this regard. For the purpose, banks must impart training to their existing staff to improve their understanding and knowledge of the product.
9. The complaint management department/service quality must conduct quarterly reviews to analyze complaint trends and give feedback to the relevant businessline. The aforementioned list of controls is by no means exhaustive: Banks and DFIs are expected to establish additional control measures commensurate with the complexity and size of their operations. CPD CIRCULAR NO. 3 OF 2012 [30th June. 2012] Subject: INSTRUMENTS IN FAVOUR OF FEDERAL/ PROVINCIAL GOVERNMENTS Ml11 .. Mm n I - - - - f ' Please refer to BPD Circular No.7 dated 21st July, 2006.
It has been observed that the banks are retaining with themselves, even after elapse of more than ten years period, the amounts pertaijiing/favoring to the Federal Government, the Provincial Governments, or any agency/department/ corporation of the Federal/Provincial Governments, by way of any financial instrument (cheques, draft, bill of exchange, pay slips/pay orders/D.Ds/T.Ts/M.Ts) payable in any currency where no payment has been made in respect thereof for a period of ten years from the date of issue. All banks are advised, henceforth, to surrender an amount equal to the amount of the aforesaid Instruments as of 29th June, 2012 to the State Bank of Pakistan at the earliest after completing all the legal formalities. The reporting of the same may also be made as per attached format. Enel. As above Vol.XII-2013] List of Authorized Derivative Dealers (ADDs)
ANNEXURE Instruments in favour of Federal/Provincial Governments V As on 29th June, 2012 Name of the Banking Company ................................................. '
Name and designation of the officer submitUng the return ......
Instrument s. No. Name of Issuing office or branch of the banking company Beneficiary Name Type No. Pate of Issue Amount Name of the Applicant Remarks, if any 1 2 3 4 5 6 7 8 9 #TBS Date #TBE Signature DMMD CIRCULAR NO. 2 OF 2012 (17th January, 2012] Subject: LIST OF AUTHORIZED DERIVATIVE DEALERS (ADDs)
This refers to Financial Derivative Business Regulations (FDBR) issued by SBP vide BSD Circular No. 17 dated November 26, 2004, and DMMD Circular No. 8 dated June 17, 2011 on the captioned subject.
Please be advised that the list of Authorized Derivative Dealers is updated and henceforth following banks will be allowed to conduct financial. Derivative business as Authorized Derivatives Dealers
(ADDs) in Pakistan:--
(1) Citibank
(2) Deutsche Bank
(3) Faysal Bank Limited
(4) Habib Bank Limited s
(5) Standard Chartered Bank (Pakistan) Limited
(6) United Bank Limited The list will be duly updated as and when required. BPRD CIRCULAR NO. 1 OF 2013 [15th March, 2013] Subject: MINIMUM RATE OF RETURN ON SAVING DEPOSITS Please refer to BPRD Circular No. l dated April 13, 2012 and BPRD Circular No.7 dated May 30, 2008 on the above subject.
2. It has now been decided that effective from April 1, 2013 minimum profit rate of 6.0% p.a. On all Pak Rupee saving deposits will be paid by banks on average monthly balances. It is further clarified that this rate of profit will be applicable on all existing and new saving deposits including term deposits.
3. Other instructions on the subject shall remain the same;. Any violation of the above instruction will render the bank liable for punitive action under the relevant provisions of the Banking Companies Ordinance 1962.
BPRD CIRCULAR MO. 2 OF 2013 * [19th March, 2013] Subject: MINUTES OF THE BOARD OF DIRECTORS/ GENERAL MEETINGS Please refer to BSD Circular No. 5 of 2006 dated April 20, 2006 regarding the above.
2. In supersession of the Circular referred above, the banks/DFIs, Incorporated In Pakistan, shall submit certified copies of the minutes of meeting of their Board of Directors (BoD) and the General Meetings/Extra Ordinary General Meetings (AGMs/EOGMs), within twenty one days of the date of the meeting to the Director, Off-site Supervision and Enforcement Department, State Bank of Pakistan, Karachi. It may be ensured that the minutes also contain the details of matters decided/resolved through circulation. The minutes may be forwarded in the form of hard copies, duly certified by the company secretary along with soft copies on a floppy diskette/compact disk. BPRD CIRCULAR NO. 3 OF 2013 [6th April, 20131 Subject: OPENING OF BANKS/DFIs OFFICES ON SUNDAY APRIL 7. 2013 In order to facilitate the process of scrutiny of nomination papers of election contesting candidates in time, it has been decided that banks/DFIs should open their relevant departments/offices, branches and especially e-CIB departments for receipt of dues, issuance of clearance certificates etc. On Sunday April 7, 2013 from 8 a.m. To 12 a.m. (mid-night). It is further advised that upon receipt of dues, bank/DFIs should also immediately update the e-CIB of the concerned borrower.
2. You are, therefore, advised to make all necessary arrangements for meticulous compliance of the above instructions and please acknowledge receipt. BPRD CIRCULAR NO. 4 OP 2013 P [16th May, 20131 Subject: TREATMENT FOR INVESTMENT IN THE UNITS OF MUTUAL FUND AND AMCs FOR CAR PURPOSES Please refer to BSD Circular No. 8 of 2006 and BSD letter # BSD/BAI-1/220/452/2009 of April 27, 2009, on the subject. It has been decided that effective from June 30. 2013, the following Instructions would be applicable on banks'/DFIs' investment In units of open-ended as well as closed-ended mutual funds and Asset Management Companies for the calculation of Capital Adequacy Ratio (CAR).
A. Investment in the units of Mutual Funds/Collective Investment Schemes:
(a) Investment/holding up to 30% in a single mutual fund: Banks'/DFIs' investments in the units of mutual funds will be categorized only in the trading book and the capital charge will be calculated by any of the following methods:- Full look through Where the bank is aware of the actual underlying Investments of the mutual fund on monthly basis, the bank may calculate the capital charge on its investment as If the underlying exposure/asset class held by the mutual fund is held by the bank Itself.
Modified look through In case the bank is not aware of the underlying investment on a monthly basis, the bank may determine capital charge by assuming that the mutual fund first invests to the maximum extent in the most risky asset class (Le. Which attracts highest risk weight under existing instructions) allowed under its offering document and then continues making investments in descending order (second highest risk weighted asset) until the total Investment limit is reached.
Refer to appended Annexure-A for more details. Conservative Approach If the bank Is not in position to Implement above approaches, the bank may calculate capital charge based on the most risky asset (i.e. Assigning the highest'risk weight) category applicable to any asset the mutual fund is authorized to hold as per its offering document. For further clarity, refer to Annexure-A.
(b) Investment/holding In & single fund within the range from 30% to 50%: The investment/holding up to 30% of a mutual fund would attract capital charge based on look through approaches prescribed above and the Incremental Investment (beyond 30% benchmark) would attract a flat capital charge of 20%.
(c) Investment/holding in a single fund exceeding 50% or investment subject to lock-in clause: In case banks'/DFIs' holding in a single mutual fund exceeds 50%; then the investment/holding up to 30% of a mutual fund would attract capital charge based on look through approaches whereas the incremental amount exceeding 30% threshold would be deducted from Tier-1 capital of the bank. Furthermore, where the banks' investment is subject to any lock-in clause (irrespective of its percentage holding) under which the bank cannot liquidate its position (e.g. Seed capital), the entire Investment would be deducted from Tier-1 for capital adequacy purposes. B. Significant Investment in the capital of Asset Management Company (AMC)
Asset Management Company (AMC) is considered as a financial entity for capital adequacy purposes and any- signiflcant minority and/or majority investments in the capital of AMC is subject to the same rules as described in the Scope of Application (paragraph 1.1) of SBP Basel II instructions. Enel: Afinexure-A Annexure-A ---- :- ------- I Explanation: Modified look through Since the bank is not aware of the underlying Investment of the mutual fund oh a monthly basis, the bank may refer to the offering document of the mutual fund to determine the maximum exposure allowed against various asset classes. For example, a mutual fund Is restricted to hold net assets ranging between 30% to 70% in equity securities at all times and the remaining net assets may be invested In government securities, cash in bank account, TDRs and/or TFCs.
In this scenario, the bank would determine capital charge by assuming that the mutual fund first Invests to the maximum extent (i.e. 70%) in the equity securities (i.e. Most risky asset class category attracting highest capital charge under trading book rules). Afterwards, the bank would determine the second highest capital charge attracting asset class and apply Its capital charge on the rest of the 30% of its investment. Conservative Approach Continuing with above example. Alternatively, the bank may calculate capital charge based on the equity securities (which IS the most risky asset category) this mutual fund is authorized to hold as per its offering document.
In case the underlying asset class is commodities, real estate etc., (that have not been addressed in thie Market Risk Section of SBP Basel II instructions) then banks should apply and report the capital charge by treating their positions as Equity Risk.
BPRD CIRCULAR LETTER NO. 2 OF 2013 [1st February, 2013)
Subject: PUBLIC HOLIDAY The State Bank of Pakistan will remain closed on 5th February, 2013 (Tuesday) being public holiday as declared by the Government of Pakistan on the occasion of "Kashmir Day". - BPRD CIRCULAR LETTER NO. 3 OP 2013 [12th March, 2013] Subject: ACCEPTANCE OF PAKISTAN SMART NATIONAL IDENTITY CARD (SNIC) ISSUED BY NADRA Please refer to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Regulations and 'Branchless Banking Regulations' Issued vide BPRD Circulars No.2 date.d September 13, 2012 and March 31, 2008 respectively as amended-from time to time.
2. It is advised that consequent upon Government of Pakistan, Ministry of Interior's Notification No.F.No.I/2/2001-NADRA dated 10th January, 2013. Smart National Identity Card (SNIC) may also be treated as identity document for account opening/banklng transactions. Therefore, SNIC can be accepted in lieu of Computerized National Identity Card (CNIC) wherever required in the aforesaid regulations and other instructions. BPRD CIRCULAR LETTER NO. 4 OP 2013 [15th March, 2013] Subject: OPENING OF BANKS OF MARCH 16,. 2013 (SATURDAY)
In terms of Government of Pakistan Press Release No.2/3/2013-Public dated March 15, 2013, the State Bank of Pakistan and banks/DFIs/MFBs shall remain open on March 16, 2013 (Saturday) for usual official work.
BPRD CIRCULAR LETTER NO. 5 OF 2013 [16th March, 20131 . Subject: NOTIFICATION In terms of Federal Government's notification No.3(4)Bkg- l/2013 dated March 5, 2013 under the powers conferred vide section 10(4) of the State Bank of Pakistan Act 1956 (as amended) Mr. Ashraf Mahmood Wathra has been appointed as Deputy Governor, State Bank of Pakistan for a period of three years from the dote he assumes office. Mr. Ashraf Mahmood Wathra has assumed the office with effect from March 11, 2013. He has taken over the charge of the office of Deputy Governor (Banking) on March 15, 2013. Effective the same date Kazl Abdul Muktadir has assumed the charge of Deputy Governor (Operations).
BSD CIRCULAR NO. 1 OP 2013 [2nd January, 2013] Subject: INTERNAL CREDIT RISK RATING SYSTEM - RETAIL PORTFOLIO Please refer to BSD Circular No. 8 of October 29, 2007 regarding Guidelines on Internal Credit Risk Rating Systems in banks/DPIs.
1. It is clarified that the two dimensional rating requirement Is applicable on corporate/commercial/SME portfolios. For retail loans (including retail SMEs) defined under section 3.1.16 of BSD Circular No.8 of 2006, banks and DFIs (hereinafter referred to as banks) may follow a single rating dimension. However, rating system for retail exposure should be oriented towards both borrower and transaction risk and must capture all the relevant borrower and transaction characteristics.
2. Banks shall develop an application and behavioral scorecards. Application scorecards measure the credit worthiness of a customer specifically at the application stage, based on the application/credit initiation data. Whereas, behavioral scorecards measure the credit risk of a customer by monitoring the repayment behavior, changes in demographics and customer's compliance with the loan covenants, etc. These are more particularly used in credit management/monitoring decisions such as credit renewal/restriction, limit enhancement/reduction, re-pricing, provisioning, etc. The banks should review and update the assigned scores at regular intervals, which may range from one month to a maximum of one year.
3. The selection of default drivers to be used for the scorecard development depends on power of these drivers towards predicting the default and as such these may vary from one portfolio to another. The selection of an appropriate model is at the banks* discretion. A list of some of the default drivers that may be used for application and behavioral scorecards is annexed. However, these are suggestive default drivers and banks shall incorporate as many default drivers as they deem fit for their portfolio.
4. Banks should validate the predictive power of the default drivers and the model before putting the scorecard in use. Moreover, the predicted and actual defaults should be monitored on an ongoing basis and in case of significant deviation, scorecard should be validated. The banks should validate the scorecard on annual basis.
5. Banks need to analyze every retail loan using a set of default drivers and assign a specific score to each loan. Moreover, for advapc'e approaches of credit risk under Basel 11, the rating of retail portfolio is done on pooled basis. As such, banks shall assign each exposure that falls within the definition of retail for IRB purposes into a particular pool. Banks may use various attributes of the default drivers used in the application and behavioral scorecards as well as ranges of the assigned scores for segregating the portfolio into different pools. They must demonstrate that this process provides for a meaningful differentiation of risk, 'provides for a grouping of sufficiently homogenous exposures, and allows for accurate sftid consistent estimation of loss, characteristics at pool level.
Each obligor should be assigned a pool on the basis of its risk profile such that exposures sharing similar risk attributes should be assigned same popl. There must be a meaningful distribution of borrowers and exposures across pools and a single pool must not include an undue concentration of the banks' total retail exposure.
6. While reporting in e-CIB, the banks are required to comply with the following points:--
(a) Application scores can generally be used up to six months after underwriting the loan and after that, the banks shall use behavioral scores.
(b) Banks need to map the assigned scores to one of the twelve rating grades defined in BSD Circular No. 8 of 2007.
(c) The rating corresponding to the highest risk (lowest rating) should be reported in the e-CIB in.
Case the obligor has been assigned multiple ratings based on multiple exposures. Annexutre Annexure (BSD Circular No. 1 of 2013) ,.- List of generic default drivers for application scorecards: Age Gender t Marital Status Number of Dependents Education Type of Occupation (Employment/Business etc.)
Length of Employment/Age of Business Employment History Salary Total Income Type of Residence Collateral Debt Burden E-CIB History List of generic default drivers for behavioral scorecards: Month on Books Average Balance Average Turnover Utilization Payment History o Number of missed payments o Number of delayed payments Delinquency History o Number of times delinquent o Days overdue Change in Income Level Other Products Availed Status of Salary Account Collateral Debt Burden E-CIB History BSD CIRCULAR LETTER NO. 1 OF 2013 [8th January, 20131 Subject: PANEL OF AUDITORS MAINTAINED UNDER SECTION 3511) OF BCO. 1962 This refers to BSC Circular Letter No. 8 of October 24, 2012 on the cited subject.
2. It has been decided, to enlist the following Chartered Accountancy firm in the Panel of Auditors of State Bank of Pakistan with immediate effect:- Name of the Firm Category of the Panel Parker Randall -A.J.S., - Chartered Accountants 6C, ST Plaza, 2nd floor, Kohinoor Town. College Road, Faisalabad, Pakistan Category 'B' - eligible to conduct audit of Banks/DFIs having total assets (net of contra Items) upto Rs.50 billion or upto 99 branches.
3. A copy of the updated'Panel of Auditors is enclosed. Enel: As Above OLD NAMES AND ADDRESSES OF AUDITING FIRMS (CHARTERED ACCOUNTANTS) ON PANEL OF AUDITORS MAINTAINED BY STATE BANK OF PAKISTAN UNDER SECTION 3511) OF BANKING COMPANIES ORDINANCE.
1962.
SR. HO. AUDITING FIRMS CATEGORY "A"
A1 A.E. Ferguson & Co.
State Life Building No. 1/C, 1.1. Chundrigar Road, Karachi.
Tel: 021-2426711-5. 2426682-5 Fax: 2415007. 2427938 A2 Anjum Asim Shahid Rahman 1st & 3rd Floors, Modern Motors House, Beaumont Road, Karachi 75530 Tel: 021-5672951, 55672956 Fax: 5688834 A3 Avais Hyder Liaquat Nauman 407, Progressive Plaza, Beaumont Road, Karachi, 75530.
Telephone: (92-21) 565 5975-6 Fax : (92-21) 565 5977 E-mail: office.Khl@ahln.Com.Pk. Lzca@khl.Wol.Net.Pk A4 BDO Ebrahim & Co.
2nd Floor, Block "C" Lakson Square Building No. 1, Sarwar Shaheed Road, Karachi.
Tel: 021-5683030, 5683189 Fax: 5684239 A5 Naveed Zafar Ashfaq Jaffery & Co.
1st Floor Modern Motors House Beaumount Road, Karachi.
Tel: 021-111-77-44-22 Fax#: (021) 5210626 E-mail: khi@shznco.Com A6 . Hyder Bhimji & Co.
Suite No. 1601, Kashif Centre, Main Shahrah-e-Faisal Karachi - 75530 #TBS Phone: 021-35640050-52 Fax: 021-35640053 Ilyas Saeed & Co.
A-4 Sea Breeze Homes, Shershah Block, New Garden Town, Lahore.
Tel: 042-5861852, 5868849 Fax: 5856145 E-mail: milvas@brain.Net.Ok M. Yousuf Adil Saleem & Co.
Cavish Court, A-35, Block 7, KCHSU, Shahrah-e-Faisal, Karachi.
Tel: 021-4541314, 111-55-2626 Fax: 021-4541314 Muniff Ziauddin Junaidy & Co.
Business Executive Centre F/17/3, Block 8. Clifton, Karachi.
Tel: 021-35375127-29 Fax:021-35820325 E-mail: info@mz1.Com.Pk Riaz Ahmad & Company 10-B, Saint Mary Park, Main Boulevard.
Gulberg -III, Lahore-54660.
Tel: 042-5718137-39 Fax: 042-5714340 E-mail: racolhr@racoDk.Com: sm@racoDk.Com KPMG Taseer Had! & Co.
1st Floor, Sheikh Sultan Trust Building No. 2, Beaumount Rond, Karachi.
Tel: 021-5685847 Fax: 021-5685095 Ernst & Young Ford Rhodes Sidat Hyder &. Co. Rooms Nos.601-603, Progressive Plaza, Beaumont Road, Karachi-75530 Tele: +9221 35650007-11 Fax #: +9221 35681965 E-mail: evfrsh.Khi@pk.Ev.Com Web: tvww.Ev.Com Rahman Sarfaraz Rahim Iqbal Raflq 54 - P, Gulberg II, P.O. Box No. 3054, Lahore - 54660 Phone # 042-5875965-68 #TBE #TBS cut #TBE #TBS A13 #TBE #TBS A12 #TBE #TBS All #TBE #TBS A10 #TBE Fax # 042-5758621 E-mail: alnasr@wol.Het.Pk Horwath Hussain Chaudhury & Co.
25/E Main Market, Gulberg-2, Lahore-54660 Tel: 042-5759223-5, 042-111-111-442 Fax: 042-5759226 E-mail: hhc@horwath.Com.Pk * CATEGORY "B"
Hameed Ch. & Co.
H. M. House, 7 Bank Square, Lahore.
Tel: 042-7235084-7 Fax: 042-7235083 Ibrahim Sh. & Co.
259-260 Panorama Centre, Fatima Jinnah Road, Saddar, Karachi.
Tel: 021-5210577-5673529 Fax: 021-5676591 HLB Ijaz Tabussum & Co.
303-Sawan Road, G-10/1, Islamabad Tel: 051-210 22 13- 16 Fax:051-2110272 E-mail: ia@hlbltc.Com. Admin@hlbltc.Com: Web: www.Ilaztabussum.Com * Rahim Jan & Co.
Nelsons Chamber, I.
1. Chundrigar Road, Karachi. Phone:021-32629515- 32629518 Kabani & Company SKP House 321-Upper Mall, Lahore.
Phone: 042-111-772-000 Fax: 042-35789182 Web: www.Kabanlco.Com.Ok S.M. Masood & Co 112-B/ l, Block E/l, Gulberg III, Lahore Phone: 042- 35712554 - 35712557-8 #TBS Bl' #TBE #TBS A14 #TBE #TBS Vol.XII- #TBE #TBS B8 B9 BIO Bll B12 #TBE Zahid Jamil & Co.
1st Floor, Al-Jamil, 7-Madina Town Ext.
Kohinoor Chowk off. Jaranwala Road, Faisalabad, Pakistan.
Telephone: (+92 41) 8725065-68 Fax: (+92 41) 8725070 E-mail: lnfo@zahid1amllco.Com Website: tvww. Zahidiamllco.Com Riaz Ahmad, Saqlb, Gohar & Co.
5 Nasim, C.H.S, Major Nazir Bhattl Road, Off Shaheed-e-Millat Road, Karachi Tel: 021-4945427- 4946112, 4931736 Fax:021-4932629 Haroon Zakaria & Co.
Room No. 211, 2nd Floor, Progressive Plaza, Plot No. 5-CL-10, Civil Lines Quarter, Beaumont Road, Karachi Tel: 021-5674741-44 Fax: 021-5674745 E-mail: info@hzco.Com.Pk Mushtaq & Co.
407 Commerce Centre, Maulana Hasrat Mohani Road, Karachi.
Tel: 021- 2638521-4 Fax: 021-2639843 Tariq Abdul Ghani Maqbool & Co.
173-W, Block-2, P.E.C.H.S, Karachi.
Phone: +92 21 34322582-3; +92 21-34322606-7 Fax: +92 21 34522492 E-mail: lnfo@tagglobalservices.Com Website: www.Tagglobalservices.Com F.R.A.N.T.S. & Co.
16-11, 'N' Lane, Commercial Avenue, Phase IV, D.H.A, Karachi.
Phone: +92 (021) 35315175; +92 (021) 35315275 Fax:+92 (021) 35315276 E-mail: karachi@frants.Pk Website: rvww. Frants.Pk Vol.XII-2013] Panel of Auditors maintained under 111 section 35(1) of BCO, 1962 B13 Baker Tilly Mehmood Idrees Qamar & Co.
4th Floor, Central Hotel Building, Civil Lines, Mereweather Road, Karachi.
Tel:+92 (021) 35644872-7 Fax: +92 (021) 35694573 E-mail: mim@mimandco.Com B14 UHY-Hassan Naeem & Co.
193-A, Shah Jamal, Lahore.
Phone:+92 (42) 37599938; +92 (42)'37599948 +92 (42) 37599640 Fax: +92 (42) 37599740 E-mail: info@uhv-hnco.Com , Website: www.Uhv-hnco.Com B15 Nasir Javaid Maqsood Imran 904, 9th Floor, Q.M. House, Plot No. 11/2, Ellander Road, Opp. Shaheen Complex, Off 1.1. Chundrigar Road, Karachi.
Tel: 021-32211515, 32211516, 0345-82822964 Fax:021-32211515 E-mail: consult 1 @cvber.Net.Pk www.Nlmi.Net B16 Parker Randall -A.J.S., Chartered Accountants.
6C, ST Plaza, 2nd floor, Kohinoor Town, College Road, Faisalabad, Pakistan Tel:. 021-32621703 - 04 Fax: 021-32621701 E-mail: khi@parkerrandallais.Pk Web: www.Parkerrandall.Ajs.Pk . CATEGORY "C"
C1 Daudally Lalani & Co.
Suit No. 901, 9th Floor, Fortune Centre, 45-A, PECHS, Block #6, Shahrah-e-Faisal, Karachi Tel: 021-4389312-13 Fax: 021-4389315 OLD Fazal Mahmood & Co. #TBS C6 C7 C8 #TBE #TBS C2 C3 C4 C5 #TBE 147 - Shadman -I, Lahore.
Tel: 042- 7576986-7580236 Fax: 042-7560971 Rehman Iqbal Umar Iftikhar 121, Clifton Center, Block 5, Main Clifton Road, Karachi.
Phone: 021-35873934. 35374125-6 Qavi & Co.
Suites: 717 & 718, Caesars Tower, Shahra-e-Faisal, Karachi.
Telephone: (+92 21) 32791966-8 Fax :(+92 21) 32791969 E-mail: aaviandco@cvber.Net.Pk Moochhala Gangat & Co.
F-4/2, Mustafa Avenue, Block-9, Behind "The Forum", Clifton, Karachi - Pakistan.
Tel: (92 21) 35877806-09 , Fax: (92 21) 35877810 E-mail: advise@mgc.Com.Ok Web: www.Mgc.Com.Ok Rafaqat Mansha Mohsin Dossani Masoom & Co.
Suite 113, 3rd Floor, Hafeez Centre, A/34, KCHS, Block .7 & 8, Shahrah-e-Faisal, Karachi.
Tel: 021- 4392361-62. 4396247 Fax: 021-4396247 E-mail: dossani@mmdk. Com. Pk URL: htto: / /www.Mmdk.Com.Pk Tariq Ayub, Anwar & Co. .
First Floor, 84 -B -1, Ghalib Road, Gulberg III, Lahore-54660, Pakistan Phone: 042-5872061-3'
Fax: 042-5872060 E-mail: taac@accountant.Com Aslam Malik & Company, Suite # 18-19, First Floor, Central Plaza, Civic Centre, New Garden Town, Lahore, Pakistan. #TBS cu> #TBE Phone: +92 42 5858693-4; +92 42 5856819 Fax: +92 42 5856019 E-mail: info@aslammalik.Com C9 Mansoor Aslam. Seraj Saleem Shahid Suite No. 209, Parsa Tower, Plot No. 31-1-A, Block 6, PECHS, Main Sharea Faisal, Karachi , Tel: 3415-0811-3 Fax: 3415-0814 Email: enoulricsmansooraslamsera1saleem.Com econsult@cvber.Net.Pk URL: www.Mansooraslamseraisaleem.Com CIO Feroze Sharif Tariq & Co.
4-N/4, Block - 6, P.E.C.H.S., Karachi (75400)
Phone: +92 (021) 34522734; +92(021)34540891 Fax: +92 (021) 34540891 E-mail: fstc.Ca@gmail.Com Cll M/s Mudassar Ehtisham & Co.
Chartered Accountants, 15-Birdwood Road, Lahore.
Ph: 042-37500503-4 Fax: 042-37500506 E-mail: info@mecoca.Com Web: www.Mecoca.Com C12 M/s S.M. Suhail & Co.
Chartered Accountants, Suite Nos. 1001-1014, 10th Floor, Uni Centre, 1.1. Chundrigar Road, Karachi-74200 Tel: -21-32414057, 32414163, 32414419 Fax: 021-32416288 Email: sms@smsco.Pk. Www.Smsco.Pk CATEGORY DESCRIPTION (vide BSD Circular No.3 dated February 24, 2003) '
Category "A" Category "B" Category "C"
Auditing Firms in Category "A" are eligible to conduct audit of all Banks/ DFIs.
Auditing Firms in Category "B" are eligible to conduct audit of Banks/DFIs having . Total assets (net of contra items) up to Rs.50 billion .Or number of branches up to 99. ' Auditing Firms in Category "C" are eligible to conduct audit of Banks/DFIs having total assets (net of contra items) below Rs.5 billion or number of branches below 10.
BSD CIRCULAR LETTER NO. 2 OF 2013 [14th January, 2013] Subject: REVISED FORMS OF ANNU AL FINANCIAL STATEMENTS - MATURITY GAP REPORTING Please refer to the BSD Circular Letter No, 3 dated February 22. 2011 titled 'Maturity and Interest Rate Sensitivity Gap Reporting' wherein banks/DFIs were advised to report maturity gaps between their 'noncontractual maturity' assets and liabilities based on 'expected maturities'.
2. To further enhance disclosures on liquidity risk, it has been decided that:-
(i) banks/DFIs should report the maturity gaps of all assets and liabilities based on 'contractual maturities', in addition to the reporting based on 'expected maturities' as required in the aforesaid circular letter: and
(ii) while reporting gaps based on 'expected maturities', banks/DFIs should disclose the methodology used to determine behavioral maturity of 'non-contractual maturity' assets and liabilities.
3. The banks should report both of the above disclosures under Note 45.4.1 of the revised form of Annual Financial Statements issued vide BSD Circular No.4 dated February 17, 2006. These instructions shall become effective from December 3-1, 2012.
4. The banks shall continue to report their maturity gaps only on 'expected maturity' basis in quarterly Data File Structure under Reporting Chart of Accounts as envisaged in the above mentioned Circular letter.
5. All other instructions on the subject shall' remain unchanged. BSD CIRCULAR LETTER NO. 3 OF 2013 [22nd January, 2013] - Subject: REVISED FORMS OF ANNU AL FINANCIAL STATEMENTS , Please refer to the BSD Circular No.4 dated February 17, 2006 on the captioned subject.
Vol.XII-2013] . Revised Forms of Annual Financial 115 Statements
2. In order to streamline and standardize disclosures of Islamic Banks/Islamic Banking Branches, it has been decided to introduce following changes in the 'Statement of Financial Position' and the relevant notes:--
(i) Islamic Banks
(a) The head 'Financings' used by Islamic Banks In their Balance Sheet and the related note should be renamed as 'Islamic Financing and Related Assets'.
(b) All Financings, Advances (against Murabaha etc.), Inventories and any other related item(s) pertaining to Islamic modes of financing, presently being reported under 'Other Assets' or any other head, shall become part of the 'Islamic Financing and Related Assets'.
(c) The break-up of 'Islamic Financing and Related Assets' into Islamic modes of financing and their respective subdivision into Financings, * Advances, Inventories and any other related item(s) shall be reported in the notes t'o financial statements.
(ii) Islamic Banking Branches.
(a) The disclosure for Islamic Banking Branches contained in' Annexure-2 to the above mentioned Circular also stands amended on the above lines. The revised Annexure-2 is enclosed.
3. All Islamic Banks/Islamic Banking Branches are advised to comply with the above instructions while reporting their annual, half-yearly and quarterly financial statements.
4: These instructions shall be effective from December 31, 2012.
5. All other instructions on the subject shall remain unchanged. Enclosure: Annexure-2 #TBS [CLD #TBE Annexe - 2 ISLAMIC BANKING BUSINESS The bank is operating___ Islamic banking branches at the end of current year/half-year/quarter as compared to___ Islamic banking branches at the end of Prior ycar/half-ycar/quarter.
(Current Period) (Prior Period)
Rupees in 000 ASSETS Cash and balances with treasury banks Balances with other banks Due from Financial Institutions Investments Islamic Financing and Related Assets A-2.1 Operating fixed assets Deferred tax assets Other assets Total Assets LIABILITIES Bills payable Due to Financial Institutions Deports and other Accounts -Current Accounts -Saving Accounts Term Deposits Others Deposit from Financial Institutions -Remunerative- Deposits from Financial Institutions -Non -Remunerative Duo to Head Office Other liabilities NET ASSETS REPRESENTED BY Islamic Banking Fund Reserves Unappropriated/ Unremitted profit Surplus/ (Deficit) on revaluation of assets Rtmnnerttkra to Shariah Advisor/Board CHARITY FUND Opening Balance Additions during the period Payments/Utilization during the period Closing Balance A-2.1 Islamic Financing and Related Assets Please provide the information for each of the Islamic modes of Financing dong with break-up of Financings, Advances, Inventories and any other related item. The break-up shall be provided on the following lines A-2.1.1 Islamic Mode of Financing Financings/Investmenti/Receivables Advances Assttts/lnvetories Others (please specify)
Vol.XIl-2013] Panel of Auditors maintained under 117 section 35(1) of BCO, 1962 BSD CIRCULAR LETTER NO. 4 OF 2013 [30th January, 2013] Subject: PANEL OF AUDITORS MAINTAINED UNDER SECTION 35(1) OF BCO. 1962 This refers to BSC Circular Letter No:l, dated January 8, 2013 on the cited subject.
2. It is informed that "Muniff Ziauddin Junaidy & Co., Chartered Accountants", on the Panel of Auditors of State Bank of Pakistan has changed Its name as below:- Previous Name Changed Name Muniff Ziauddin Junaidy &, Co., Chartered Accountants (Category "A-') Muniff Ziauddin & Co., Chartered Accountants (Category "A")
3. A copy of the updated Panel of Auditors is enclosed. Enel: As Above NAMES AND ADDRESSES OF AUDITING FIRMS (CHARTERED ACCOUNTANTS) ON PANEL OF AUDITORS MAINTAINED BY STATE BANK OF PAKISTAN UNDER SECTION 35(1) OF BANKING COMPANIES ORDINANCE.
1962. ----- 9- .|T- 7----------------------------------------- SR. NO, AUDITING FIRMS CATEGORY "A"
A1 A.F. Ferguson & Co.
State Life Building No. 1/C, 1.1. Chundrigar Road, Karachi. . * Tel: Q21-2426711-5, 2426682-5 Fax: 2415007, 2427938 A2 Anjum Asim Shahid Rahman 1st & 3rd Floors, Modern Motors House, ' Beaumont Road, Karachi 75530.
Tel: 021-5672951, 55672956 Fax: 5688834 .
A3 Avais Hyder Liaquat Nauman 407, Progressive Plaza, Beaumont Road, Karachi, 75530. r.t.n Telephone: (92-21) 565 5975-6 Fax : (92-21) 565 5977 E-mail: offiee.Khl@ahln.Com.Pk. Lzca@khi.Wol.Net.Pk A4 BDO Ebrahim & Co.
2nd Floor, Block "C" Lakson Square Building No. 1, Sarwar Shaheed Road,. Karachi.
Tel: 021-5683030, 5683189 Fax: 5684239 A5 Naveed Zafar Ashfaq Jaffery & Co.
1st Floor Modern Motors House Beaumount Road, Karachi.
Tel: 021-111-77-44-22 Fax#: (021) 5210626 E-mail: khi@shznco.Com A6 Hyder Bhimji & Co.
Suite No. 1601, Kashif Centre, Main Shahrah-e-Faisal Karachi - 75530 Phone: 021-35640050-52 Fax: 021-35640053 A7 Ilyas Saeed & Co.
A-4 Sea Breeze Homes, Shershah Block, New Garden Town, Lahore.
Tel: 042-5861852, 58,68849 Fax: 5856145 E-mail: milvas@brain.Net.Pk A8 M. Yousuf Adil Saleem & Co.
Cavish Court, A-35, Block 7, KCHSU, Shahrah-e-Faisal, Karachi.
Tel: 021-4541314, 111-55-2626 Fax: 021-4541314 A9 Muniff Ziauddin & Co.
Business Executive Centre F/17/3, Block 8, Clifton, Karachi.
Tel: 021-35375127-29 Fax: 021-35820325 E-mail: info@mzi.Com.Pk A10 Riaz Ahmad & Company 10-B, Saint Mary Park, Main Boulevard, Gulberg -III, Lahore-54660.
Tel: 042-5718137-39 Fax: 042-5714340 E-mailr racolhr@racopk.Com: sm@racopk.Com All KPMG Taseer Hadi & Cq; 1st Floor, Sheikh Sultan Trust Building No. 2, Beaumount Road, Karachi.
Tel: 0? 1-5685847 Fax: 021-5685095 A12 Ernst & Young Ford Rhodes Sidat Hyder & Co.
Rooms Nos.601-603, Progressive Plaza, Beaumont Road, Karachi-75530 Tele: +9221 35650007-11 Fax #: +9221 35681965 E-mail: evfrsh.Khi@pk.Ev.Com Web: www.Ev.Com A13 Rahman Sarfaraz Rahim Iqbal Rafiq 54 - P, Gulberg II, P.O. Box No. 3054, Lahore - 54660 Phone # 042-5875965-68 Fax # 042-5758621 E-mail: alnasr@wol.Net.Pk A14 Horwath Hussain Chaudhury & Co.
25/E Main Market, Gulberg-2, Lahore-54660 Tel: 042-5759223-5, 042-111-111-442 Fax: 042-5759226 .
E-mail: hhc@horwath.Com.Pk CATEGORY "B"
B1 Hameed Ch. & Co.
H.M. House, 7 Bank Square, Lahore.
Tel: 042-7235084-7 Fax: 042-7235083 B2 Ibrahim Sh. & Co.
259-260 Panorama Centre, Fatima Jinnah Road, Saddar, Karachi, Tel: 021-5210577-5673529 Fax:021-5676591 B3 HLB Ijaz Tabussum & Co. '
303-Sawan Road, G-10/1, Islamabad Tel: 051-210 22 13 - 16 Fax: 051-2110272 E-mail: ia@hlbitc.Com. Admin@hlbitc.Com: Web: wmv.i1aztabussum.Com B4 Rahim Jan & Co.
Nelsons Chamber, LI. Chundrigar Road, Karachi.
Phone: 021-32629515 - 32629518 B5 Kabani & Company SKP House 321-Upper Mall, Lahore. Phone:042-111-772-000 Fax: 042-35789182 Web: www.Kabanico.Com.Pk B6 S.M. Masood & Co 112-B/l, Block E/l, Gulberg III, Lahore Phone: 042-35712554-3571255.7-8 B7 Zahid Jamil & Co.
1st Floor, Al-Jamil, 7-Madina Town Ext. Kohinoor Chowk off. Jaranwala Road, Faisalabad, Pakistan.
Telephone: (+92 41) 8725065-68 Fax: (+92 41) 8725070 E-mail: info@zahidiainilco.Com Website: www.Zahidlamilco.Com B8 Riaz Ahmad, Saqib, Gohar & Co.
5 Nasim, C.H.S. Major Nazir Bhatti Road, Off Shaheed-e-Millat Road, Karachi Tel: 021-4945427- 4946112, 4931736 Fax: 021-4932629 B9 Haroon Zakaria & Co.
Room No. 211, 2nd Floor, Progressive Plaza, Plot No. 5-CL:lQ. Civil Lines Quarter, . Beaumont Road, Karachi ' Tel: 021-5674741-44 Fax: 021-5674745 E-mail: info@hzco.Com.Pk BIO Mushtaq & Co.
407 Commerce Centre, Maulana Hasrat Mohani Road, Karachi. n Tel: 021- 2638521-4 Fax: 021-2639843 Bll Tariq-Abdul Ghani Maqbool & Co.
173-W, Block-2, P.E.C.H.S, Karachi.
Phone: +92 21 34322582-3; +92 21-34322606-7 Fax:+92 21 34522492 E-mail: info@tagglobalservlces.Com- Website: www.Tagglobalservices.Com B12 F.R.A.N.T.S. & Co.
16-11,'N'Lane, Commercial Avenue, Phase IV, D.H.A, Karachi.
Phone: +92 (021) 35315175; +92 .(021) 35315275 Fax: +92 (021) 35315276 E-mail: karachi@frants.Pk Website: wtvw.Frants.Pk B13 Baker Tilly Mehmood Idrees Qariiar & Co.
4th Floor, Central Hotel Building, Civil Lines, Mereweather Road, Karachi.
Tel: +92 (021) 35644872-7 Fax:+92 (021) 35694573 E-mail: mim@mimandco.Com B14 UHY-Hassan Naeem & Co.
193-A. Shah Jamal, Lahore.
Phone: +92 (42) 37599938; +92(42)37599948 +92 (42) 37599640 Fax: +92 (42) 37599740 E-mail: info@uhv-hnco.Com Website: www.Uhv-hnco.Com B15 Nasir Javaid Maqsood Imran 904, 9th Floor, Q.M. House, Plot No.Fl/2,""'. Ellander Road. Opp. Shaheen Complex, Off 1.1. Chundrigar Road, Karachi.
Tel: 021-32211515, 32211516, 0345-82822964 Fax:021-32211515 E-mail: consultl@cvber.Net.Pk www.Nimi.Net B16 Parker Randall -A.J.S., Chartered Accountants.
6C, ST Plaza, 2nd floor, Kohinoor Town, College Road, Faisalabad, Pakistan Tel: 021-32621703 - 04 Fax: 021-32621701 , E-mail: khi@parkerrandallais.Pk Web: www.Parkerrandall.Ajs.Pk CATEGORY "C"
C1 Daudally Lalani & Co.
Suit No. 901, 9th Floor, Fortune Centre, 45-A, PECHS, Block # 6, Shahrah-e-Faisal, Karachi Tel: 021-4389312-13 Fax: 021-4389315 C2 Fazal Mahmood & Co.
147 - Shadman -I, Lahore.
Tel: 042- 7576986-7580236 Fax: 042-7560971 C3 Rehman Iqbal Umar Iftikhar 121, Clifton Center, Block 5, Main Clifton Road, Karachi.
Phone: 021-35873934, 35374125-6 C4 Qavi & Co.
Suites: 717 & 718, Caesars Tower, Shahra-e-Faisal, Karachi.
Telephone: (+92 21) 32791966-8 Fax :(+92 21) 32791969 E-mail: qaviandco@cvber.Net.Pk C5 Moochhala Gangat & Co.
F-4/2, Mustafa Avenue, Block-9, Behind "The Forum", Clifton, Karachi - Pakistan.
Tel: (92 21) 3587'7806-09 Fax:(92 21)35877810 E-mail: advise@mgc.Com.Pk Web: www.Mgc.Com.Pk C6 Rafaqat Mansha Mohsin Dossani Masoom & Co. Suite 113, 3rd Floor, Hafeez Centre, A/34, KCHS, Block 7 & 8, Shahrah-e-Faisal, Karachi.
Tel: 021- 4392361-.62, 4396247 Fax:021-439624.7 E-mail: dossani@mmdk.Com.Pk URL: http://www.Mmdk.Com.Pk , C7 Tariq Ayub, Anwar & Co.
First Floor,'84 -B -1, Ghalib Road, Gulberg III, Lahore-54660, Pakistan Phone:042-5872061-3 Fax: 042-5872060 E-mail: taac@accountant.Com C8 Aslam Malik & Company, - Suite# 18-19, First Floor, Central Plaza, Civic Centre, , New Garden Town, Lahore, Pakistan.
Phone: +92 42 5858693-4; +92 42 5856819 Fax:+92 42 5856019 ( E-mail: lnfo@aslammalik,com C9 Mansoor Aslam Seraj Saleem Shahid Suite No. 209, Parsa Tower, Plot No. 31-1-A, Block 6, PECHS, Main Sharea Faisal, Karachi Tel: 3415-0811-3 Fax: 3415-0814 Email: enQuiriesiamansooraslam.Seralsaleem.Com (eonsult@cvber.Net.Pk URL: www.Mansooraslamseraisaleem.Com . CIO Feroze Sharif Tariq & Co.
4-N/4, Block - 6, P.EXC.H.S.,.Karachi (75400)
Phone: +92 (021) 34522734; +92 (021) 34540891 Fax: +92 (021) 34540891 E-mail: fstc.Ca@gmail.Com Cl 1 M/s Mudassar Ehfisham & Co.
Chartered Accountants, 15-Birdwood Road, Lahore. .
Ph: 042-37500503-4 Fax: 042-37500506 E-mail: lnfo@mecoca.Com WebLwxvw.Mecoca.Com cm C12 M/s S.M. Suhail & Co.
Chartered Accountants, Suite Nos. 1001-1014, 10th Floor, Uni Centre, I.I. Chundrigar Road, Karachi- 74200 Tel: -21-32414057, 32414163, 32414419 Fax: 021-32416288 Email: sms@smsco.Pk. Www.Smsco.Bk CATEGORY DESCRIPTION (vide BSD Circular No. 3 dated February 24, 2003)
Category "A" Category "B" Category "C"
Auditing Firms in Category "A" are eligible to conduct audit of all Banks/ DFIs. Auditing Firms in Category "B" are . Eligible to conduct audit of Banks/DFIs having total assets (net of contra items) up to Rs.50 billion or number of branches up to 99. Auditing Firms in Category "C" are eligible to conduct audit of Banks/DFIs having total assets (net of contra items) below Rs.5 billion or number of branches 'below 10.
STATE BANK OF PAKISTAN BPRD CIRCULAR NO. 6 OF 2013 . [15th August, 2013] Subject: IMPLEMENTATION OF BASEL III CAPITAL INSTRUCTIONS Please refer to instructions on the Implementation of Basel II issued vide BSD Circular No. 8 of June 27, 2006.
The State Bank of Pakistan has decided to implement the Basel III reforms issued by the Basel Committee on Banking Supervision (BCBS) to further strengthen the capital related rules. The major changes under the Basel III reform package pertain to numerator of the Capital Adequacy Ratio (CAR) i. e., eligible capital. The enclosed instructions will replace Chapter 1 of the instructions issued under the above mentioned circular pertaining to eligible capital and related deductions. The circular also Includes instructions on leverage ratio. Moreover, instructions pertaining to rest of the changes introduced under Basel III reforms will be issued separately. 4 ,.
These instructions will become effective from December 31. 2013 in a phased manner with full implementation intended by December 31, 2019. The transitional arrangements are broadly in line .With the internationally agreed timelines and intended to ensure smooth Implementation by allowing sufficient time to banks/DFIs for adjustment In their capital planning. Banks/DFIs are advised to submit their CAR returns based on the instructions contained in this circular in parallel run for 3rd quarter of 2013. However, from quarter ending December 31, 2013, the banks/DFIs will submit their CAR returns In the light of these instructions. All other instructions on the subject shall however, remain unchanged. Enel. Basel in instructions Instructions for Basel III Implementation in Pakistan Issued under BPRD Circular # 06 dated August 15, 2013 The Team Name Designation Muhammad Ashraf Khan Executive Director Banking Policy and Regulation Group Shaukat Zaman Director Banking Policy and Regulations Department Syed Jahangir, Shah Senior Joint Director Banking Policy and Regulations Department Ahsin Waqas Joint Director Banking Policy and Regulations Department Contents Preamble -/ ....................................................................................... 127 A. An Overview of Capital Instructions ............................. 128 B. Minimum Capital Requirement (MCR).......................... 128 Chapter - 1: General instructions on Capital Adequacy Framework 129 1.1. Introduction: ........................................................ 129 1.2. Measurement of Risk Weighted Assets................. 130 1.3. Scope of Application ... 130 1.4. Reporting Requirements.................. .'................. 131 1.5. Notification Requirements................................... 132 1.6. Reductions in Capital ........................................ :... 132 1.7. Penalty for Non-Compliance................................ 132 Chapter - 2: Regulatory Capital.................................... 133
2. T Components of Capital 133 2.2. Limits (Minima and Maxima).............................. 134 2.3. Eligibility Criteria - Other Elements of Capital. 136 2.4. Regulatory Capital Deductions........................... 137 Chapter - 3: Leverage Ratio.......................................... 144 3.1 Introduction and Objective....... ;............................ 144 3.2 Definition and Calculation................................... 145 '3.3 Capital Measure....................................................... 145 3.4 Exposure Measure............................................... 146 w z 3.5 Parallel Run Reporting......................................... 147 Chapter - 4: Investment in the units of Mutual Fund/Collective Investment Scheme 147 4.1 Introduction..... !................................................. 147 4.2 Look-through Approach........................................... 148 4.3 Capital Treatment.............................................
148. a 4.4 Significant investment in the capital of Asset Management Company (AMC):.......................... 140 Annexure-1: Minority Interest (For Consolidated Reporting only)............................................. 149 Annexure-2: Criteria for Additional Tier-1 Capital Instrument................................................... 152 Annexure-3: Criteria for inclusion of Debt Instruments as Tier 2 Capital.......................................... 156 Annexure-4: Capital Conservation Buffer.................... ;.. 159 Annexure-5: Minimum Requirements to. Ensure Loss Absorbency.................................................... 162 Appendix 1: Minority Interest (illustrative Example)..... 166 Appendix 2: Investment less than 10% (illustration)..... 169 Appendix 3: Significant Investment (illustrative example).................................................. 171 Appendix 4: The 15% of common equity limit on specified items........................................... 173 'R Preamble State Bank of Pakistan issued instructions for the Implementation of Basel II capital accord under BSD Circular No. 8 of.
2006. However, the existing Instructions are being revised and updated in the light of recent developments on the capital requirement as published by the Basel Committee on Banking Supervision (BCBS) under the Basel III capital reforms and clarifications issued by SBP from 2006 onward while implementing capital related instructions. These instructions will further strengthen the existing capital framework under which certain provisions of exisUng Basel II Instructions. Will be amended and some new requirements will be introduced. Keeping In view of the volume of instructions, SBP twill issue these revisions in the following two parts; [2]
(ii) Revision of Basel II instructions to cover remaining aspects of Basel III reforms; These instructions address the first part mainly -pertaining to eligible capital and related deductions. A. An Overview of Capital Instructions All banks/DFIs are required to comply with the capital adequacy framework which comprises the following three capital standards: ~
(i) Minimum Capital Requirement (MCR): The MCR standard sets the nominal amount of capital banks/DFIs are required to hold. No bank/DFI shall commence and carry on its business in Pakistan unless it meets the nominal capital requirements prescribed by SBP from time to time.
(ii) Capital Adequacy Ratio: The Capital Adequacy Ratio (CAR) assesses the capital requirement based on the risjcs faced by the banks/DFIs. The banks/DFIs are required to comply with the 'minimum requirements as specified by the State Bank of Pakistan on standalone as well as consolidated basis. * (ill) Leverage Ratio: The Tier-1 Leverage Ratio of 3% is being Introduced in response to the recently published Basel III Accord as the third capital standard (parallel run to commence from December 31, 2013) which is simple, transparent and Independent measure of risk. Refer to Chapter-3 for details. B. Minimum Capital Requirement (MCR)
The Minimum Capital Requirement (MCR) standard sets the nominal amount of capital banks/DFIs are required to hold. This requirement is set by SBP as per national discretion. No Bank/DFI incorporated in Pakistan shall commence And carry on its business unless it has a minimum paid up capital (net of losses) as prescribed by SBP from time to time. Similarly, no banking company incorporated outside Pakistan shall commence and carry on banking business in Pakistan unless it meets the minimum assigned capital1 (net of losses) requirements as prescribed by SBP from time to time. The current MCR instructions have been issued vide BSD Circular No. 19 of September 5, 2008 and BSD Circular No. 7 of April 15, 2009. '
The MCR standard consists of sum of the following elements:- Fully Paid-up Common Shares/Cash deposited* with SBP1 r Balance in Share Premium Account . Reserve for Issue of Bonus Shares - Any other type of instrument approved by the' SBP Less t .
Accumulated Losses/Discount offered on issue of shares Negative General* Reserves Chapter - 1: General instructions on Capital Adequacy Framework 1.1. Introduction: The Capital Adequacy Ratio (CAR) Is calculated by taking the Eligible Regulatory Capital as'numerator and the total Risk Weighted Assets (RWA) as denominator. __ _____________ Total Eligible Capital_______ .
CAR = Credit RWA + Market RWA + Operational RWA Currently, banks/DFIs are required to maintain a 1 minimum CAR of 10 per cent on an ongoing basis at both } standalone and consolidated level which will gradually be increased In the light of these instructions. For the purpose of capital adequacy, the. Consolidated bank means an entity that is. The parent of a group of financial entities[3] [4], where the parent entity Itself may either be a bank or a holding company. This consolidation is to ensure that risk of the whole banking group is captured. The term 'bank', wherever used throughout the document, unless otherwise specified, means all the banks and Development Financial Institutions (DFIs) under the regulatory purview of the State Bank of Pakistan (SBP).
The details of various components of Eligible Capital instruments are described in Chapter 2, 1.2. Measurement of Risk Weighted Assets Banks are required to calculate Risk Weighted Assets
(RWA) In respect of credit, market and ojperational risks. The methodologies to calculate RWA for each of these risk categories are described in detail In relevant chapters.
1.3. Scope of Application Th'e capital adequacy framework applies on all banks both at standalone as well as at consolidated level. As such, reporting bank shall comply with the capital requirements at two levels.
(i) Standalone Level: The standalone level capital adequacy ratio measures the capital adequacy of a reporting bank based on its standalone capital strength and risk profile; and
(ii) Group/Consolidated Level: The consolidated ("Group") level capital adequacy ratio measures the capital adequacy of a bank based on its capital strength .And risk profile after consolidating the assets and liabilities of all its banking group entities, except the subsidiaries which, are engaged in insurance and commercial business. All banking ar I other relevant financial activities (both regulated and u..Regulated) conducted within a group containing a bank is to be captured through consolidation. Thus, majority-owned or controlled (defined under applicable accounting standard) financial entities will be fully consolidated.
If any majority-owned or controlled financial subsidiaries are not consolidated for capital purposes, all equity and other regulatory capital investments in those entities attributable to the group will be deducted, and the assets and liabilities, as well as third-party capital investments in the subsidiary will be removed from the bank's balance sheet, Since insurance and commercial subsidiaries of the bank are not required to be consolidated, hence when measuring capital adequacy for banks, the equity and other regulatory capital investment shall be required to be deducted from common equity tier 1. .Under this approach the bank will remove from its balance sheet assets and liabilities, as well as third party capital investments In an insurance/ commercial subsidiary. In case of any shortfall in the regulatory capital requirement of unconsolidated financial subsidiary (e.g. Insurance), the shortfall shall be fully deducted from the Common Equity Tier. 1 capital (at standalone as well as consolidated level).
All Investments (which are outside thfe scope of regulatory consolidation) in the capital Instruments Issued by banking, financial and insurance entities are to be treated as per paragraph 2.4.9 of Chapter 2.
All significant equity investments in commercial entities (which exceeds 10% of the issued common share capital of the Issuing entity) or where the entity Is an unconsolidated affiliate[5] will receive a 1000% risk weight. The equity investment which is equal to or below 10% of paid-up capital of investee company will attract risk weight depending on the bank's classification in the banking book or trading book.
1.4. Reporting Requirements B.Anks are required to submit CAR statements on the reporting - formats provided by SBP within prescribed timelines. In addition to the periodic unaudited statements, banks/DFIs are also required to submit an annual CAR statement duly certified by the external auditors)
As per the timeframe specified by SBP, vide BSD circular letter No. 3 of February 6, 2010, banks/DFIs are required to submit quarterly CAR statement within 132 CORPORATE LAW DECISIONS [C.L.D. x 18 working days from the end of each calendar quarter. Whereas the annual' CAR statement, duly certified by the external auditor, is required to be submitted within three months from the close of the year as per BSD Circular No. l of January 6, 2009.
Further, to supplement risk based requirements, banks are required to calculate monthly Leverage Ratio on standalone as well as on consolidated level and report to SBP their quarterly ratio based on average of monthly calculated ratios as per timeline prescribed above. For further details, refer to Chapter-3 on Leverage Ratio.
1.5. Notification Requirements A bank must inform SBP immediately of:-
(i) Any breach of the minimum capital requirement, capital adequacy ratio or leverage ratio as set out in these instructions and the remedial measures it has taken to address those breaches.
(ii) Any concern it has about its MCR, CAR or leverage ratio, along with proposed measures to address these concerns.
1.6. Reductions in Capital Where a bank intends to reduce its paid-up/assigned capital, it must obtain SBP's prior written consent.
1.7. Penalty for Non-Compliance Any bank that fails to meet the above mentioned regulatory capital requirement within the stipulated period shall render itself liable to the following actions:-
(i) Imposition Of penalties and/or such restrictions on its business including restrictions on acceptance of deposits and lending as may be deemed fit by SBP.
(ii) De-scheduling of the bank, thereby converting it into a non-scheduled bank.
(iii) Cancellation of the banking license if SBP believes that the bank is not in a position to meet the MCR, CAR or Leverage Ratio requirements.
Chapter - 2: Regulatory Capital 2.1 Components of Capital For the purpose of calculating capital under capital adequacy framework, the capital of banks shall be classified Into two tiers. The total regulatory capital will consist of sum of the following categories: ~
(1) Tien 1 Capital (going-concern capital)
(i) Common Equity Tier 1 .
(ii) Additional Tier 1
(2) Tier 2 Capital (gone-concern capital)'
2.1.1. Common Equity Tier 1 (CET1)
Common Equity Tier 1 shall consist of sum of the following items: ~
(i) Fully paid up (common shares) capital/assigned capital
(ii) Balance in share premium account
(iii) Reserve for Issue of Bonus Shares t Jr
(iv) General/Statutory Reserves as disclosed on the balance-sheet
(v) Minority Interest (in case of CAR .Calculated on a consolidated basis) i.e. .Common shares issued by consolidated subsidiaries of the bank and held by third parties meeting eligibility criteria, as mentioned under paragraph A-1-1 of Annexure-1. ^
(vi) Un-appropriated/un-remitted profits (net of accumulated losses, if any)
(viij Less regulatory adjustments applicable on CET1 as mentioned in paragraph 2.4.
2.1.2. Additional Tier 1 Capital (ATI)
Additional Tier 1 capital shall consist of the following Items:-
(i) Instruments issued by the banks that meet the qualifying criteria for ATI as specified at Annexure-2.
(ii) Share premium resulting from the issuance of ATI instruments.
(iii) Minority Interest I.e. ATI issued by consolidated subsidiaries to third parties (for consolidated reporting only); Refer to paragraph A-1-2 of Annexure-1 for further details.
(iv) Less regulatory adjustments applicable on ATI Capital as mentioned in paragraph 2.4.
2.1.3. Tier 2 Capital (Gone Concern Capital or Supplementary Capital)
The Tier 2 capital (or gone concern capital) shall include the following elements:-
(i) Subordinated debt/Instruments (meeting eligibility criteria as specified in Annexure-3).
(ii) Share premium resulting from the issue of instruments included in Tier 2.
(ili) Minority Interest Le. Tier-2 issued by consolidated subsidiaries to tlilrd parties as specified at A- 1-3 Annexure-1
(iv) Revaluation Reserves (net of deficits, if ajiy) - for details refer to point 2.3.1.
(v) General Provisions or General Reserves for loan losses - details at 2,3.2.
(vi) Foreign Exchange Translation Reserves.
(vii) Undisclosed Reserves - details at 2.3.3.
(viii) Less regulatory adjustments applicable on Tier-2 capital as mentioned at paragraph 2.4.
2.2. Limits (Minima and Maxima)
These instrtictions/rules will be adopted in a phased manner starting from the end year 2013, with full implementation of capital ratios by the year-end 2019, as per table 2.2.1 below. All banks will be required to maintain the following ratios on an ongoing basis:-
(i) Common Equity Tier 1 of at least 6.0% of the total RWA.
(ii) Tier-1 capital will be at least 7.5% of the total RWA which means that Additional Tier 1 capital can be admitted maximum up to 1.5% of the total RWA.
(iii) Minimum Capital Adequacy Ratio (CAR) of 10% of the total RWA i.e. Tier 2 capital can be admitted maximum up to 2.5% of the total RWA.
(iv) Additionally, Capital Conservation Buffer (CCB) of 2.5% of the total RWA is being introduced which will be maintained in the form of CETI. Details regarding CCB framework and transitional arrangements are appended in Annexure-4.
(v) The excess additional Tier 1 capital and Tier-2 capital can only be recognized if the bank has CETI ratio in excess of the minimum requirement of 8.5% (i.e. 6.0% plus capital conservation buffer of 2.5%).
(vl) For the purpose of calculating Tier 1 capital and CAR, the bank can recognize excess Additional Tier 1 and Tier 2 provided the bank has excess CETI over and above 8.5%. Further, any excess Additional Tier 1 and Tier 2 capital will be recognized in the same proportion as stipulated above i.e. The recognition of excess Additional Tier 1 (above 1.5%) is limited to the . Extent of 25% (1.5/6.0) of the CETI in excess of 8.5% requirement. Similarly, the excess Tier 2 capital (above 2.5%) shall be recognized to the extent of 41.67% (2.5/6.0) of the CETI in excess of 8.5% requirement.
(vii) SBP has prescribed CAR level higher than the BCBS requirements. A part of the cushion may be utilized for meeting the countercyclical capital buffer. Instructions on operational aspects . For , the implementation of the countercyclical capital buffer- will be issued separately.
2.2.1 Phase-in Arrangement and full implementation of ' the minimum capital requirements: Tear End As of Dec 31 Sr. # Ratio 2013 2014 2018 2016 2017 201a 2010
1. CETI 5.0% 5.5% 6.0% 6.0% 6.0% .
6.0% 6.0%
2. ADT-I 1.5% 1.5% i.5% 1.5% 1.5% 1.5% 1.5%
3. Tier I 6.5% 7.0% 7.5% .: 7.594' .
7.5% ' 7.5% .7.5%
4. Total Capital 10.0% 10.0% 10.0% 1.0.0% 10.0% 10.0% 10.0%
5. CCB (Consisting of CET 1 only) 0.25% 0.25% , 1.275% 1.900% 2.5%
6. Total Capital plus CCB 10.0% 10.0% 10.25% 10,65% Tl.275% Uc90% 12.5% 2.3. Eligibility Criteria - Other Elements of Capital 2.3.1 Revaluation Reserves Revaluation Reserves will form part of Tier-2 capital. Revaluation Reserves may be created by revaluation of fixed assets and available for sale (AFS) securities held by the bank. The assets and investments must be prudently valued fully taking into account the possibility of price fluctuations and forced sale value. The net surplus/(deficit) on Available for Sale Instruments and revaluation of fixed assets will be calculated on portfolio basis. If net amount (after tax) is surplus it will be included in Tier-2 capital, and if the net amount is deficit (after tax) it will be deducted from the CET I.
2.3.2 General Provisions or General Reserves for Loan Losses General Provisions or General Reserves for loan losses will be limited up to l'.25 jper cent of the credit risk-weighted assets under standardized approach. Undep IRB approach, where the total expected loss amount is less than the total provisions held, banks can recognize this difference in tier-2 capital up to maximum of 0.6% of the credit risk weighted assets.
2.3.3 Undisclosed Reserves Undisclosed Reserves may be included In Tier-2 despite being unpublished, provided they appear in the internal accounts of the bank. Only those reserves can be included that have been passed through the profit and loss account of the bank. The undisclosed reserves should satisfy the following:--
(a) Undisclosed reserves should be set aside from the institution's earnings duly certified by the External Auditors. Undisclosed Reserves should not be encumbered by any provisio n or known liability and should be freely availattie to 'meet unforeseen losses.
(b) SBP will express in writing appropriateness of undisclosed reserves for Inclus ion in Tier-2 capital.
2.4. Regulatory Capital Deductions In order to arrive at the eligible regulatory capital for the purpose of calculating CAR, ban ks are required to make the following deductions from CE7T1.
2.4.1 Book value of GoodwUl and aU other Intangible Assets The book value of goodwill an d other Intangible assets like software, brand value etc., will, be deducted net of any associated deferred tax liabilities w'hlch will be extinguished if the intangible assets become Impaired or derecognized under the relevant accounting standards. This Includes any goodwill in the valuation of significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation[6].
2.4.2 Shortfall in. Provisions required against classified assets r Shortfall in provisions against classified assets will be deducted from CET1. Under IRB approach, shortfall in provisions from expected losses will also be deducted from CET1. The full shortfall amount will be deducted without considering/netting any tax effects that could be expected to occur if provisions were to rise.
2.4.3 Deficit on account of revaluation The net deficit (after tax) on account of revaluation (i.e. Available for Sale category and on fixed assets) shall be deducted from CET1. Refer to explanation provided in section 2.3.1 above.
2.4.4 Deferred tax assets (DTA)
Deferred tax assets (DTA), which rely on future profitability of the bank to be ' realized, will be deducted from CET1. DTAs may be netted with associated deferred tax liabilities (DTLs) if both relate to tax levied by the same taxation authority and offsetting is permitted by the relevant tax authority. . c For DTA pertaining to temporary differences' (e.g. Allowance for credit losses), the amount to he, deducted is explained in the "threshold deductions" section 2.4.10 below. \ . . -. ?> All other DTAs (e.g. Assets relating to operating losses, such as the carry forward of unused tax losses, or unused tax credits) will be deducted in full net of DTLz as described above. The DTLs permitted to be netted against DTAs will exclude the amounts that ' have been netted against the deduction of goodwill, intanjgibles and defined benefit pension assets, and will be allocated on a pro rata basis between DTAs subject to the threshold deduction treatment and DTAs that will be deducted in full. An over-installment of tax or any receivable from the local tax authority which is classified as current tax assets for accounting purposes and recovery of such receivable do not rely on the future profitability of the bank will be assigned the relevant sovereign risk weighting.
2.4.5. Defined benefit pension fund assets Defined benefit pension fund liabilities, as included on the balance sheet, must be fully recognized in the calculation of CET1 (i.e. . CET1 cannot be increased through derecognizing these liabilities), For each defined benefit, pension fund that is an asset on the balance sheet, the asset will be deducted from CET1 net of any associated deferred tax liability which would extinguish if the asset becomes impaired or derecognized under the relevant accouriting standards. However, where the bank has unrestricted/free access to these assets of the fund, with supervisory approval, offset the deduction. Such offsetting assets will be given the risk weight as if they were owned directly by the bank.
2.4.6 Gain on sale related to securitization transactions Bank will derecognize in the calculation of CET1, any increase in equity capital resulting from securitization transactions, such as that associated with expected future margin income resulting in a gain on sale.
2.4.7 Cash flow hedge reserve < . ( The cash flow hedge reserve onlylreflects one half of the picture, the fair value of the derivative but not the changes in fair) value of hedged future cash flow. Therefore the; amount of cash flow hedge reserve that relates to the hedging of items that are not fair valued on the balance sheet (including.Projected cash flows), if positive will be deducted,. Howeyer, negative amount under cash flow hedge will be added back to calculate CETl (In case a batik adds gain to tier-2 capital then .The tier-2 Will be adjusted accordingly).
2.4.8 Investmentinown shares Lt-Vt.-;-. -bib-tA-- : F-; V, , All of a bank's investment in its own common shares, held directly or indirectly wylll be deducted from CETl to avoid the-- double counting of a bank's own capital. The treatment described will apply irrespective of the location of the exposure in the banking book or the trading book.
Moreover, banks should . Look through holdings of index/mutual fund securities to deduct exposures to own shares. Following the same approach, bank must deduct any investment In their own additional tier 1 or tier 2 instruments. ' : . i 2.4.9 Investments in the Capital of Bankings Financial and Insurance Entities Corresponding Deduction Approach Under the corresponding deduction approach, banks will deduct investments \tn the capital of other banks, financial institutions and insurance entities from the respective tier of their own capital. This means the deduction will be applied to the same component of capital for which the capital will qualify if it was issued by the bank itself. .If, under the cprresponding deduction approach, a bank is required to make a deduction from a particular tier of capital and it does not have enough of that tier of capital to satisfy the deductfon, the shortfall will be deducted from the next higher tier of capital (e.g. If a bank does not have enough additional tier-1 capital to satisfy the deduction, the shortfall will be deducted from CETlg Banks will make the following corresponding deductions:-*- ( .
2.4.9.1 Reciprocal crossholdings of capital designed to art ificially inflate the capital position of banks will be deducted. For this purpose, a holding Is considered to be a reciprocal crossholding if the lnvfistee entity has also invested in any .Type of bank's capital Instrument which may necessarily * nett be the same instrument as the bank is hi aiding.
2.4.9.2 I nvestments' in the capital of Banking, 'Financial and Insurance Entities (outside the scope of regulatory consolidation): [where the bank does not own more than 10% of the issued common share capital of the entity] The regulatory adjustments described in this paragraph applies to Investment In the capital of banking, financial and insurance entitles that are outside the scope of regulatory consolidaition and where the bank does not own more than 10% of the issued common share capital of the entity.
In addition:
(a) Investments Include all holdin.Gs l.e. Direct,, indirect, synthetic holdings of capital instruments (e.g. Bank will look through holdings of mutual fiind/index securities to determine the'tr underlying holdings of capital). Holdings in both 'the banking book and the trading book are to be included.
Capital includes common stock and all other types of cash and synthetic capita] instruments (e.g. Subordinaited debt). Moreover, investmentfj also include underwriting positions held for longer than .Three months (as stipulated In prudential regulations). SBP may consider requests to exclude temporarily certain investments where; these investments are made In the context of resolving or providing support to a distressed instit ution.
(b) If the total of all holdings (mentioned at polnt-a) in aggregate exceed 10% of the bank's common equity (paid-up capital plus reserves mentioned under CET1 less all regulatory adjustments mentioned up to point 2.4.9.1 above) then the amount above 10% of a bank's common equity will be deducted under the corresponding deduction approach.
(c) The amount to be deducted from common equity will cut be calculated as the total of all holdings which in aggregate exceed 10% of a bank's common equity multiplied by the common equity holdings as a percentage of the total capital holdings. This would result in a common equity deduction which ' _ corresponds to the proportion of total capital holdings hteld in common equity. Similarly, the amount to be deducted from Additional Tier 1 or Tier 2 capital will be calculated as the total of all holdings which in aggregate exceed 10% of the bank's common equity multiplied by the Additional Tier 1 or Tier 2 capital holdings as a percentage of the total capital holdings;
(d) Amounts below the threshold,, which are not deducted, will continue to be risk weighted. Thus, instruments in the trading book will be treated as per the market risk rules and instruments in the banking book will be treated as per the standardized approach or internal ratings-based approach (as applicable). For the application of risk weighting the amount of the holdings will be allocated on a pro rata basis between those below and those above the threshold.
(e) Detailed illustration of paragraph 2.4.9.2 is provided at Appendix-2.
2.4.9.3 Significant Investments in the capital of Banking, Financial and Insurance Entities (outside the scope of regulatory consolidation)
The regulatory adjustments described in this paragraph applies to Investment In the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation where the bank owns more than 10% of the Issued common share capital of the issuing entity or where the entity Is an affiliate of the bank. In addition: ~
(a) Investments include all holdings i.e. Direct, indirect, synthetic holdings of capital instruments (e.g. Bank will look through holdings of mutual fund[7]/index securities to determine their underlying holdings of capital). Holdings In both the banking book and the trading book are to be included. Capital includes common stock and all other types of cash and synthetic capital instruments (e.g. Subordinated debt). Moreover, investments also include underwriting positions held for longer than three months (as stipulated in prudential regulation?). SBP may consider requests, to exclude temporarily certain investments where these investments are made in the context of resolving or providing support to a distressed institution.
(b) All investments (mentioned at point-a) which are not common share (e.g. Subordinated debt etc.) will be fully deducted following a corresponding deduction approach.
(c) Investments (mentioned at point-a) in common shares will be subject to "Threshold Deduction" treatment described in next paragraph.
(d) A detailed illustration of paragraph 2.4.9.3 is provided at Appendix-3.
2.4.10 Threshold Deductions Instead of full deduction, the following Items may each receive limited recognition' when calculating CET 1, with recognition capped at 10% of the bank's common equity {after application of all the regulatory adjustments mentioned upto 2.4.9.3 (b)} Significant investments in the common shares of unconsolidated financial institutions (banks, insurance and other financial entities) as referred to in paragraph 2.4.9.3 (c).
DTAs that arise from temporary differences (i.e. Credit provisioning etc.)
Moreover, the amount of the above* two items that remains recognized after the application of all the regulatory adjustments must not exceed 15% of CET1 calculated after all regulatory adjustments. Refer to Appendix-4 for an illustration. The amount of fhe two items which are not deducted in the calculation of CET1 will be risk weighted at 250% and are subject to full disclosure.
2.4.11 Transitional Arrangements for Capital Deductions In the light of Basel III proposals, SBP has harmonized deductions from capital which will mostly be applied at the level of common equity tier 1. The transitional arrangement for implementing the new standards are intended to ensure that banking sector can meet the higher capital standards through reasonable earnings retention arid cajgtal raising, while still supporting lending to the economy. In this regard, the following transitional arrangements are prescribed:- Phase-in of all deductions from CETl .Year End ; * ' . i: ; ' As of Dec 31 (in percentage terms) 2012 2013 2014 2015 2016 2017 2018 - - 20% 40% 60% 80% 1.00% Explanation: The regulatory capital adjustment will start in a phased manner December 31, 2014 @ 20 percent per annum with full deduction from CETl w.e.f. December, 2018. During the transition period, the part which is not deducted from CETl/Additional Tier 1 /Tier 2 will attract existing treatment.
In the year 2013, the banks will not apply the additional deductions proposed under .The Basel III rules and Will apply existing treatment. For example, DTA will not be deducted but risk weighted.
The treatment for the year 2014 (w.e.f. December 31, 2014) ... o If an item is to be deducted under new Basel III rules and 'is currently risk weighted under the exiting regime then it will require 20% deduction from CETl . And rest of the 80% will be subject to risk weight as applicable under the existing rules. o If an item is required to be deducted under the existing framework (suppose from Tier 2) and Basel III rules prescribe deduction from CETl; in that case, 20% of the amount will be deducted from CETl and the rest will be deducted from current tier of deduction (i.e. Tier 2). o In case of Minority Interest, If such capital is not eligible for inclusion in CET1 but is included under the existing guidelines in Tier 1 then 20% of the amount will be deducted from the relevant component of capital (Tier 1).
2.4.12 Phase out of Non Qualifying Capital Instruments: Capital instruments (e.g. Subordinated debt/TFCs) issued before January . 1, 2013 which meets the Basel III criteria, except that they do not meet the loss absorbency clause requirements, will be considered non-qualifying capital Instruments and will be subject to the following phase-out arrangement. Reporting Period Year End (Dec. 31)
Cap {% of base amount that may be included in Tier-2 capital under phase out arrangements} 2013 2014 2015 2016 2017' 2018 2019 2020 2021 2022 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The amount of these transitional instruments that may be included in regulatory capital will be determined by reference to the base amount. The base amount will be fixed at the outstanding amount which is eligible to be'included in the tier-2 capital under the existing framework (Basel II) applicable as on December 31, 2012. The recognition will be capped at 90% (of the base amount) from December 31, 2013, with the cap reducing by 10 percentage points in each subsequent year.
Where a Tier-2 instrument is subject to regulatory amortization, the Individual instrument eligible to be included In tier-2 capital will continue to be amortized at a rate of 20% per year during the transition period In 4addition to the aggregate cap reducing at a rate of 10% per annum. Capital instruments issjaed after January 1, 2013 must meet all of the Basel III criteria for regulatory capital (including the loss absorbency clause requirements) to qualify as regulatory capital. , Chapter - 3: Leverage Ratio 3.1 Introdiuction and Objective In order to avoid building-up excessive on arid off- . Balance sheet leverage in the banking system, a simple, transparent and non-risk based Leverage Ratio is being introduced with the following objectives:- constrain the build-up of leverage in the banking sector which can damage the broader financial system and the economy: and reinforce the risk based requirements with an easy to understand and a non-risk based measure.
3.2 Definition and Calculation .
Tier 1 Capital (after related deductions)
Leverage Ratio------------------------------------------ 3.2.1 A minimum Tier 1 leverage ratio of 3% is being prescribed both at solo and consolidated level.
3.2.2 The banks will maintain leverage ratio on quarterly basis. The calculation at the end of each calendar quarter will be submitted to SBP showing the average of the month end leverage ratios based on the following definition of capital and total exposure.
3.3 Capital Measure 3.3.1 The capital measure for the leverage ratio will be based on the new definition of Tier 1 capital as specified in Chapter 2, section 2.1.
3.3.2 Items which are deducted completely from capital do not contribute to leverage and will therefore also be deducted from the measure of exposure. This means that deductions from Tier 1 capital specified in section 2.4 (Chapter 2) will also be made from the exposure measure.
3.3.3 According to the treatment outlined In section 2.4.9.3, where a financial entity is included in the accounting consolidation but not in the regulatory consolidation, the Investments in the capital of these entities will be deducted to the extent they exceed 10% of the bank's common equity (paid-up capital plus reserves). To ensure that the capital and exposure are measured consistently for the purposes of 'leverage ratio, the assets of such entities included In the accounting consolidation will be excluded from the exposure measure in proportion to the capital that is excluded under section 2.4.9.3. .3.4 Exposure Measure 3.4.1 General Measurement Principles The exposure measure for the leverage ratio will generally follow the accounting measure of exposure, In order to measure the exposure consistently with financial accounts, the following will be applied by the, bank: ~
(1) On balance sheet, non-derivative exposures will be net of specific provisions and valuation adjustments (e.g. , surplus/deficit on AFS/HFT positions).
(ii) Physical or financial collateral, guarantee or credit risk mitigation purchased is not allowed to reduce on- balance sheet exposure.
(iil) Netting of loans and deposits is not allowed.
3.4.2 On-Balance Sheet Items Banks will include items using their accounting balance sheet for the purposes of the leverage ratio. In addition, the exposure measure will include the following treatments for Securities Financing Transactions (e.g. Repo, reverse repo etc.) and derivatives:
(i) Repurchase Agreements and Securities Financing: Securities Financing Transactions (SFT) are a form of secured funding and therefore an important source of balance sheet leverage that will be included in the leverage ratio. Therefore banks should calculate SFT for the purposes of leverage ratio by applying The accounting measure of exposure: and Without netting various long and short positions with the same counterparty
(ii) Derivatives: Derivatives create two types of exposures: an on- balance sheet present value reflecting the fair value of the contract (often zero at the outset but subsequently positive or negative depending on the performance of the contract), and a notional economic exposure representing the underlying economic interest of the contract. Banks will calculate derivatives exposure, Including where* a bank sells protection using a credit . derivative,. For the purposes of leverage ratio by applying: A The accounting measure of exposure (positive mark to > market value) plus an add-on for potential future exposure calculated according to the Current Exposure Method as per instructions prescribed in the Chapter for Credit Risk. . Without netting the mark .To market values and T potential future exposure regarding long and short positions with the same counterparty.
3.4.3 Off-Balance Sheet Items Banks will calculate the off-balance sheet (OBS) items specified in Credit Risk chapter under the section of "Risk Weights Off-Balance Sheet Exposure" 'by applying a uniform 100% credit conversion factor (CCF). For any commitments that are unconditionally cancellable at any time by the bank without prior notice, a CCF of 10% will be applied.
3.5 Parallel Run Reporting The parallel run period for leverage ratio will commence from December 31, 2013 to December 31, 2017. During this period, the leverage ratio and Its components will be tracked to assess whether the design and calibration of the minimum tier 1 leverage ratio of 3% is appropriate over a credit cycle and for different types of business models, Including its-behavior relative to the risk based requirements. * Bank level disclosure of the leverage ratio and its components will start from December 31, 2015.
However, banks will report their Tier 1 leverage ratio to the State Bank on quarterly basis from December 31, 2013.
Based on- the results of the parallel run period, any final adjustments to the definition and calibration of the leverage ratio will be made by SBP before the first half of 2017, with a view to set the leverage ratio requirements,as a separate capital standard on December 31, 2018.
Chapter - 4: Investment in the units of Mutual Fund/Collective Investment Scheme 4.1 Introduction This chapter provides various options/approaches to determine capital requirement for banks' investment in the units of mutual funds/collective Investment schemes. The choice of option will depend on the availability of information on the underlying exposure of each/indivldual mutual fund/collective investment scheme at all times.
4.2 Look-through Approach The look through treatment is designed to capture the risks of an indirect holding of the underlying assets of the investment fund. Full look through Where the bank Is aware of the actual underlying investments of the mutual fund pn daily basis, the bank may calculate the capital charge on its investment as If the underlying exposure/asset class held by the mutual fund is held by the bank itself. Modified look through In case the bank is not aware of the underlying investment on a daily basis, the bank may determine capital charge by assuming that the mutual fund first Invests to the maximum extent in the most risky asset class (I.e. Which attracts highest risk weight under existing instructions) allowed under its offering document and then continues making investments in descending order (second highest risk weighted asset) until the total investment limit is reached. Conservative Approach If the bank is not in a position to implement the above approaches, the bank may calculate capital charge based on the most risky asset (i.e. Assigning the highest risk weight) category applicable to aunt asset the mutual fund is authorized to hold as per Its offering document.
4.3 Capital Treatment Banks'/DFIs' investments, in the units of mutual funds will be subject to Market Risk and hence will be categorized in the Trading Book. The capital charge will be calculated in the following manner. - 4.3.1 Investment/holding upto 30% in a single mutual fund: If a bank's holding in a single fund does not exceed 30% then the bank may apply any of the approaches described in section 4.2 above: 4.3.2 Investment/holding in a single fund within the range from 30% to 50%: For such investments, the capital charge will be the sum of (i) capital charge calculated based on look through approach for investment up to 30%, as described In point 4.3.1 above, and (ii) an additional capital charge of 20% on incremental investment beyond 30% benchmark.
4.3.3 Investment/holding in a single fund exceeding 50% or investment subject to lock-in clause: In case banks' holding/investment in a single mutual fund exceeds 50%; then the investment up to 30% of a mutual fund will attract capital charge based on look through approaches whereas the incremental amount exceeding 30% threshold will be deducted from Tier-1 capital of the bank.
Furthermore, where the banks' investment is subject to any lock-in clause (irrespective of its percentage holding) under wjiich the bank cannot liquidate its position (e.g. Seed capital), the entire investment will be deducted from Tier-1 for CAR.
4.4 Significant investment in the capital of Asset Management Company (AMC): Asset Management Company (AMC) is considered as a financial entity for capital adequacy purposes and any significant minority and/or majority Investments in the capital of AMC is subject to the same rules as described in the Scope of Application (chapter 1) and Investments in the Capital of Banking, Financial and Insurance Entities (section 2.4.9).
Annexure-1: Minority Interest (For Consolidated Reporting only)
Banks should recognize minority interests that arise from consolidation of less than wholly owned banks, securities or other financial entities in CAR on consolidated basis to the extent specified below: A-1-1: Common shares issued by consolidated subsidiaries. Minority interest arising from the issue of common shares by a fully consolidated subsidiary of a bank may receive recognition in CET1 only if: (1) the instrument giying rise to minority interest is common share, and (2) the subsidiary that issued the Instrument is itself a bank[8]. The amount of minority interest recognized in CET1 capital will be calculated as follows.:- Total minority interest meeting the two criteria above minus the amount of the surplus CET1 of the subsidiary attributable to the minority shareholders.
(i) Surplus CET1 of the* subsidiary.Is calculated as the CET1 of the subsidiary minus the lower oft
(a) The minimum CET1 requirement of the subsidiary plus the capital conservation buffer (i.e. 8.5% of risk weighted assets). -
(b) The portion of the consolidated minimum CET1 requirement plus the capital conservation buffer (i.e. 8.5% of consolidated risk weighted assets) that' relates to the subsidiary.
(11) The amount of the surplus CET1 that is attributable to the minority shareholders is calculated by multiplying the surplus CET1 by the percentage'of CET1 that Is held by minority shareholders. A-l-2 Her 1 qualifying- capital issued by consolidated subsidiaries Tier 1 capital instruments issued by a fully consolidated subsidiary of a bank to third party investors (including. Amounts under paragraph A-1-1) may receive recognition in Tier 1 capital only if the instruments, if Issued by the bank, meet the criteria for classification as Tier 1 capital. The amount of capital that will be recognized in Tier 1 capital wlll be calculated as follows:- . Total Tier 1 capital of the-subsidiary issued to third parties minus the amount of surplus Tier 1 capital of the subsidiary attributable to the third party investors.
(1) - Surplus Tier 1 capital of the subsidiary is calculated as Tier 1 capital of the subsidiary minus lower of:
(a) The minimum Tier 1 requirement of the subsidiary plus the capital conservation buffer (i.e. 10.0% of risk weighted assets)
(b) The portion of consolidated mfnimum Tier 1 capital requirement plus the capital conservation buffer (f.e.
10.0% of consolidated risk wefghted assets) that relates to the subsidiary.
(ii) The amount of surplus Tier 1 capital that is attributable to third party investors is calculated by multiplying the surplus Tier 1 capital by the percentage of Tier 1 capital that is held by third party investors. The amount of Tier 1 capital that will be recognized in Additional Tier 1 will exclude the amounts recognized in CET1 as mentioned in point A-1-1 above. A-1-3 Tier 1 and Tier 2 qualifying capital issued by consolidated subsidiaries Total capital instruments (i.e. Tier 1 and Tier 2 capital instruments) issued by a fully consolidated subsidiary of the bank to third party investors (including amounts under paragraph A-1-1 and A-1-2) may receive recognition in Total Capital only if the instruments would, if issued by the bank, meet all of the criteria for classification as Tier 1 or Tier 2 capital. The amount of this capital that will be recognized in consolidated. Total Capital will be calculated as follows:- Total capital instruments of the subsidiary issued to third parties minus the amount of the surplus Total Capital of the subsidiary attributable to the third party investors.
(i) Surplus Total Capital of the subsidiary is calculated as the Total Capital of the subsidiary minus the lower of:
(a) the minimum Total Capital requirement of the subsidiary plus the capital conservation buffer (i.e, 12.5% of risk weighted assets)
(b) the portion of the consolidated minimum Total Capital requirement plus the capital conservation buffer (i.e. 12.5% of consolidated risk weighted assets) that relates to the subsidiary. Ii. The amount of the surplus Total Capital that is attributable to the third party investors is calculated by multiplying the surplus Total Capital by the percentage of Total Capital that is held by third party investors. The amount of the Total Capital that will be recognized in Tier 2 will exclude amounts recognized in CET1 under paragraph A-1-1 and amounts recognized in Additional Tier under paragraph A-1-2 above.
Note: An illustrative example for calculation of minority interest and other capital issued out of consolidated subsidiaries that is held by third parties is furnished as Appendix-1.
Annexure-2: Criteria for Additional Tier-1 Capital Instrument The instruments (e.g. Perpetual non-.Cumulative preference shares - PNCPS) meeting the following criteria will be considered for inclusion as Additional Tier-1 Capital.
(i) The instrument is issued, fully paid-up, perpetual, unsecured and permanently available to absorb losses.
(ii) The instrument should rank junior to all other claims except common shares.
(iii) Dividends/Coupons:
(a) Unpaid \ dividends/coupons should be non- cumulative.
(b) The issuer should have full discretion over the amount and timing of. Dividend/coupon distribution i.e. The ability to waive any dividends/coupons and failure to pay should not constitute event of default.
(c) No compensation should be available to preference shareholders other than the dividends/coupons.
(d) The dividend/ coupon rate or formulae should be known at the time of issuance of instruments and not linked to the credit standing-of the issuer.
(e) The rate can be fixed or floating (with reference to any benchmark rupee rate but spreads/margin cannot be changed during the Rfe of instrument).
(f) No step-up feature in Instruments should be allowed.
(g) The dividends/coupons should Only be paid from current year's earnings and will be subject to condition that any payment on such instruments should not result in breach of regulatory MCR and CAR requirements set by SBP from time to time.
(h) All instances of non-payment of dividends/coupons should be notified to the Bunking Policy .
And Regulations Department.
(Iv) Optionality:
(a) No put option should be available to the holders of the instruments.
(b) Issuer can exercise call option but after five years from issuance date with the prior approval from SBP. Bank should clearly indicate to the prospective investors that bank's right to exercise the option is subject to written approval of SBP. Banks shall not exercise a call unless they replace the called instrument with capital of same or better quality. Call premium (when issue is redeemed) is not allowed. Bank should also demonstrate that capital position is well above the minimum capital requirement after the call is exercised.
(v) Redemption/Repurchase:
(a) No redemption shall be allowed in'first five years of issuance. Any repayment of principle must be with the approval of SBP and bank must not create market expectation that supervisory approval will be granted. ,
(b) There should not be any sinking fund requirements on issuer for retirements of the Instrument.
Further terms and conditions of the issue should not be such as to force the issuer to redeem the Instruments at any point in time.
(vl) Neither the bank nor a related party over which the bank exercise control or significant Influence should purchase the instrument, nor should the bank directly or indirectly have funded the purchase of the instrument. Banks are not allowed to grant advances against the security of the capital Instruments issued by them.
(vil) The Instrument should not have any features that hinder recapitalization, such as provisions that require the issuer to compensate Investors If a new Instrument is issued at a lower price during a specified time frame.
(vlii) The features of instrument should be transparent, easily understood and publicly disclosed.
(lx) For disclosure in the Balance Sheet, Perpetual Non- cumulative preference shares (PNCPS) will be classified as "Capital" under the heading of "Additional Tier 1" instrument subject to SBP approval, while perpetual cumulative preference shares/perpetual debt instruments will be classified as "Liabilities" in the Balance Sheet.
(x) Loss Absorption Features
(a) The instrument should be able to absorb losses incurred by the issuer on a going concern and gone concern (point of non-viability) basis.
(b) Instruments must have principal loss absorption through either
(1) Conversion to common shares at an objective prespecified trigger point, or
(ii) A write-down mechanism which allocates losses to the instrument at a pre-specifled trigger point. The writedown would reduce the claim of the instrument in liquidation, reduce the amount to be re-paid when a call Is exercised and partially or fully reduce dividend payments on the instrument.
(c) A detailed criteria for loss absorption are furnished in Annexure-5. In order for an instrument issued by a bank to be included in Additional Tier 1, it must meet or exceed minimum requirements to ensure loss absorbency set out in the Annexure-5.
(xi) Conversion of Instruments into Ordinary Shares
(a) The instruments issued by the banks may contain conversion feature based either on a price fixed at the time of issuance or pricing formula applicable at the time of conversion. However, to quantify the maximum dilution and to ensure that prior shareholder approval for any future issue of the required number of shares is held, the maximum conversion raitlo based on 20 per cent of the ordinary share price at the time of issue is being prescribed. Adjustments may be made for subsequent share splits, bonus issues and similar transactions.
(b) In case of unlisted banks, the conversion price may be determined based on the fair value of banks' common shares which may be estimated as per mutually acceptable methodology.
(c) To avoid breach of any statutory ceilings, banks are required to keep all prior approvals such as sufficient room in their.Authorized capital for the conversion of additional tier 1 capital Into common shares.
(d) In case of convertible instruments, the conversion into ordinary shares will be allowed subject to approval of SBP and shareholders holding 5% or more of paid-up shares (ordinary or preferred) shall fulfill the fit and proper criteria of SBP.
(xii) Issuance of Additional Tier 1 Capital Instruments
(a) Banks Interested to Issue these Instruments should submit terms of the issue (in the light of this* annexure) for the ln-prlnclple approval of SB?.
(b) The issuing bank should submit a report to SBP giving details of the Instrument along with a copy of offering document within one month from the date of Issue.
(c) The proceeds of rupee denominated debt Instruments offered/issued to non-residents will have to be repatriated to Pakistan and converted into rupees by the bank concerned and the Proceeds Realization Certificate will be furnished to SBP. The bank concerned will be allowed to remit the principal amount of debt Instruments at maturity as well as the profit/interest thereon from the interbank market. Hedging will not be available on such Instruments. Banks should comply with all the terms and conditions, if any set out by SECP, stock exchange or under any law in the country with regard to Issue of the instruments.
(xiii) Bank's Investment in Additional Tier 1 capital instruments issued by other banks/financlal Institutions will be subject to following:
(a) Attract risk weight as per Section 2.4.8 and Credit Risk/Market Risk Chapter of this document.
(b) For the purpose of prudential regulation (R-6), investment in additional tier. 1 capital Instruments will be considered as exposure against shares.
(c) Bank's investment in a single issue of such additional tier 1 capital of any other bank will not at any time exceed 15% of the total size of the issue. Annexure-3: Criteria for inclusion of Debt Instruments as Tier 2 Capital The subordinated debt Instruments (e.g. TFCs etc.) issued by banks should meet the following terms and conditions to qualify for inclusion as Tier 2 'Capital for capital adequacy purposes. Subordinated debt will also include rated and listed subordinated debt instruments i.e. TFCs etc. The terms of issue for these debt Instruments are as under:
(1) Should be fully paid up, unsecured.
(ii) Subordinated to all other indebtedness of the bank including depositors, however, senior to the claims of investors in instruments eligible for Inclusion in -Tier 1 capital.
(iii) Should have a minimum original fixed term maturity of five years.
(iv) Recognition in regulatory capital (Tier-2) in the remaining five years before maturity will be amortized on a straight line basis.
(v) In case of staggered principal repayments, for inclusion as supplementary capital, the outstanding amount less any scheduled repayment must be discounted by 20% a year as Indicated In the table below i.e. 20% of the original amount less any redemption) during the last five years to maturity. Remaining Maturity of Instrument Rate of Discount Less than or equal to one year 100% More than one year but less than or equal to two years 80% More than two years but less than or equal to three years 60% More than three years but less than or equal to four years 40% More than four years but less than or equal to five years 20%
(vi) The instruments should be rated separately by a credit rating agency recognized by SBP - Minimum rating should be equivalent to '2' as per SBP rating grid.
(vil) The instruments should be 'vanilla'.
(viil) The issuer shall decide rate of profit. The rate of profit should be known at the time of issuance of subordinated debt instruments and not linked to the credit standing of the issuer.
(lx) The rate can be fixed or floating (with reference to any benchmark rupee rate), however, spreads/margin cannot be changed during the life of the instrument.
(x) All instances of non-payment of profits should be notified to the Banking Policy and Regulations Department.
(xi) Should not be redeemable before maturity without prior approval of SBP
(xii) Should be subject to a lock-in clause, stipulating that neither interest nor principal may be paid (even at maturity) if such payments will result in shortfall in bank's MCR or CAR or increase any existing shortfall in MCR and CAR.
(xiii) No put option should be allowed to investor and there should not be any step-up feature in such instruments.
(xiv) The instrument may be callable at the initiative of the issuer after a minimum period of five years with prior approval of SBP.
(xv) Neither a bank nor a related party, over which the bank exercise control or significant influence can purchase the instrument, nor can the bank directly or indirectly have funded the purchase of .The instrument.
(xvi) The banks before issuing any subordinated debt instruments for Inclusion in Tier-2 capital will be required to obtain prior approval of SBP.
(xvii) The issuing bank must clearly disclose In the offer documents that the instrument is unsecured, subordinated as to payment of principal and profit to all other Indebtedness of the bank, including deposits and is not redeemable before maturity without prior approval of SBP. Moreover, the investors should be intimated that they have no right to accelerate the repayment of future scheduled payments (interest or principal) except in bankruptcy and liquidation.
(xviii) Banks should indicate the amount/details of subordinated debt raised as supplementary capital by way of explanatory notes in their annual audited accounts and quarterly Statement of Capital Adequacy Return, as submitted to SBP.
(xix) In order for an instrument issued by a bank to be included in Tier 2 capital, it must meet or exceed minimum requirements to ensure loss absorbency set out in the Annexure-5.
(xx) Bank should not grant advances against the security of their own subordinated debt Issue.
While granting loans/advances against subordinated debt instruments of other banks, the margin requirement prescribed under Prudential Regulations shall be maintained, however, the bank's total financing against subordinated debt instruments issued by a bank should should not exceed its total Tler-I capital less deductions. Further, the bank shall not provide any accommodation to finance purchase of its subordinated debt instrument.
(xxi) Bank's investment In a single issue of such TFCs of any other bank will not at any time exceed 5% of its own CET1 less deduction or 15% of the total size of the Issue, whichever is less. Anything in excess of these thresholds will be deducted from CET1.
(xxii)Bank's Investment in subordinated debt Issued by other banks/financlal Institutions'
(a) Will attract risk weight as per Section 2.4.8 and Credit Risk/ Market Risk Chapter of this document.
(b) Will be treated as exposure against shares/TFCs for the purpose of prudential regulation ceilings proposed in R-6.
(xxiii) The issuing bank should submit a report to SBP giving details of the subordinated debt, such as cut
1. Derived from GRI's key qualities for external assurance
2. Reforms/amendments mainly pertaining to regulatory capital and related deductions;
3. In the case of foreign banks operating in branch mode in Pakistan
4. Financial entities mean banks, DFIs, Exchange Companies, Investment banks, leasing companies, Modarabas, Discount houses, brokerage firms. Mutual funds and Asset Management Companies and Insurance but do not .Include Commercial entities.
5. An affiliate of a bank is defined as a company that controls, or is controlled by, or is under common control with, the bank. Control of a company is defined as (1) ownership, control, or holding with power to vote 20% or more of a class of voting securiUes of the company: or (2) consolidation of the company for financial reporting purposes
6. Investments In enUUes that are outside of the scope of regulatory consolidaUon refers to investments in entities that have not been consolidated at till or have not been consolidated In Such a way as to result in their assets being included in the calculation of consolidated risk- weighted assets of the group. Cut
7. Refer to chapter-4 for detailed instructions on bank's investment In the units of mutual funds.
8. Here the term "bank" means all financial institutions including NBFCS regulated by SBP and SECP amount raised, maturity of the instrument, rate of profit etc. Within one month from the date of issue,
(x) The proceeds of rupee denominated debt instruments offered/issued to non-residents will have to be repatriated to Pakistan and converted into rupees by the bank concerned and the Proceeds Realization Certificate will be furnished to SBP. The bank concerned will be allowed to remit the principal amount of debt instruments at maturity as well as the proflt/interest thereon from the interbank market. Hedging will not be available on such instruments. Banks should comply with all the terms and conditions, if any set out in any law in the country with regard to issue of such instruments. Annexure-4: Capital Conservation Buffer A-4-1 Introduction and Objective
(i) The banks shall buildup capital conservation buffer (CCB) in good/normal times which can be used as * losses are Incurred during stressed period. The requirement is based on simple capital conservation rules designed to avoid breaches of minimum capital requirements.
(11) Outside of periods of stress, banks should hold buffers of capital above the regulatory minimum.
(iii) When buffers have been drawn down, the banks shall. Limit discretionary distributions of earnings. This could include reducing dividend payments, share buybacks and staff bonus payments. Banks may also choose to raise new capital from the existing or new sponsors/investors as an alternative to conserving Internally generated capital.
(iv) In the absence of raising capital from the private sector, the share of earnings retained by banks for the purpose of rebuilding their capital buffers should increase as their actual capital levels approach near the minimum capital requirement. Ft
(v) The capital conservation framework reduces the discretion of banks which have depleted their capital buffers to further reduce them through generous distributions of earnings. In doing so, the framework will strengthen their ability to withstand adverse economic environments. Implementation of the framework will help increase sector resilience both going into a downturn, and provide the mechanism for rebuilding capital during the early stages of economic recovery. Retaining a greater proportion of earnings during a downturn will help ensure that capital remains available to support the ongoing business operations of banks through the period of stress. In this way the framework should help reduce procyclicality. A-4-2 The Framework
(i) Banks are required to maintain a capital conservation buffer of 2.5% comprising of CET1, above the regulatoiy minimum CAR requirement of 10%. Capital distribution constraints will be imposed on a bank when capital levels fall within this range (i.e. Between 10% to 12.5%). Banks will be able to conduct business as normal when their capital levels fall into the conservation range as they experience losses. The constraints imposed only relate to distributions, not the operation of the bank.
(11) The distribution constraints imposed on banks when their capital levels fall into the range increase as the banks' capital levels approach the minimum requirements. The table below shows the minimum capital conservation ratios a bank must meet at various levels of the CET1 capital ratios. III CETI Min. Capital Conservation Ratios (as a percentage of RWA) (expressed .As a percentage of' earnings) <6.0% - 6.5% 100% >6.5% - 7.0% 80% >7.0% - 7.5% 60% >7.5% - 8.5% 40% >8.5% 0%
(ill) For example, a bank with a CET1 ratio in the range of 6.5% to 7.0% is required to retain 80% of its earnings in the subsequent financial year (i.e. Payout no more than 20% in terms of dividends, share buybacks and discretionary bonus payments). The CET1 ratio Includes amounts used to meet the 6.0% minimum CET1 requirement, but excludes any additional CET1 needed to meet the 7.5% Tier 1 and 10% Total Capital requirements. For example, a bank with 10% CET1 and no Additional Tier 1 or Tier 2 capital will meet all minimum capital requirements, but will have a zero conservation buffer and therefore will be subjected to 100% constraint on capital distributions by way of cash dividends, share-buybacks and discretionary bonuses.
(iv) Following are the other key aspects of the capital conservation buffer requirements:
(a) Elements subject to the restriction on distributions: Cash dividends, share buybacks, discretionary payments on other Tier 1 capital instruments and discretionary bonus payments to staff are the items which will be considered as distributable. Payments that do not result in a depletion of CET1, which may for example include certain scrip dividends (bonus shares) are not considered distributions.
(b) Definition of earnings: Earnings are defined as distributable profits calculated prior to the deduction of elements subject to the restriction on distributions. Earnings are calculated after the tax which would have been reported had none of the distributable Items been paid. As such, any tax impact of making such distributions are reversed out. Where a bank does not have positive earnings and has a CET1 ratio less than 8.5%, it will be restricted from making positive net distributions.
(c) Standalone or consolidated application: CCB is to be applicable both at standalone level as well as at the consolidated group level.-Moreover, application of CCB will be made on the lower of the CET1 ratio arrived at on a standalone or consolidated basis. A-4-3 Transitional Arrangements
(i) The CCB will be phased in from December 31, 2015 to year-end 2019.
(11) Banks that already meet the minimum ratio requirement (6.0%+0.25%) from December 2015 (during the transition period) should maintain prudent earnings retention policies so as to meet the conservation buffer as soon as reasonably possible. Annexure-5: Minimum Requirements to Ensure Loss Absorbency A-5-1 Introduction and Objective
(1) The terms and conditions[1] of all non-equity Capital instruments (l.e. Additional Tier 1 and Tier 2) issued by banks will have provision that requires such instruments at the option of the supervisor to be either written-off[2] or converted into common equity upon occurrence of a certain trigger event.
(2) In order for an instrument issued by a bank to be recognized in Additional Tier 1 or in Tier 2 capital, it must meet the criteria mentioned in the following paragraphs in addition to the criteria specified in Annexure 2 or 3.
A-5-2 Loss Absorption of Additional Tier-1 Instruments at a Pre-specified Trigger:
(i) The additional Tier-1 capital instruments (classified as other than equity at issuance) must hove loss absorption clause whereby these instruments will be permanently converted to common shares when the bank's CET1 ratio falls to or below 6.625% of RWA [i.e. Minimum CET1 of 6.0% plus 25% of capital ' conservation buffer of 2.5% (0.625%)}. Moreover, the bank should Immediately notify SBP upon reaching the trigger point.
(ii) A bank will have full discretion to determine the amount of Additional Tier-1 instruments to be converted Into common shares subject to following conditions:
(a) Where a bank's CET1 reaches the loss absorption Vol.XII-2013] Implementation of Basel III Capital 163 Instructions t trigger point, the aggregate amount of Additional Tier-1 capital to be converted must at least be' the amount sufficient to immediately return the CET1 ratio to above 6.625% of total RWA (if possible).
(b) The converted amount should not exceed the amount needed to bring the CET1 ratio to 8.5% of RWA (i.e. Minimum CET1" of 6.0% plus capital conservation buffer of 2.5%).
(ill) The contractual teiins and conditions of Additional Tier-1 instruments must also include a clause requiring full and permanent conversion of the Instrument Into common shares at the point of nonviability (mentioned below In Section A-5-3).
(iv) The conversion method will describe and follow the order (hierarchy of claims) In which they will absorb losses in llquidatlon/gone concern basis. These terms must be clearly stated in the offer documents.
(v) In case, conversion of Additional Tier-1 capital instrument is not possible following the trigger event, the amount of the instrument must be written off in the accounts resulting in increase in CET1 of the bank.
(vi) Where the additional tier-1 capital instrument includes write-off provisions, the mechanism must state:
(a) The claim of the instrument on liquidation of the Issuer is reduced to (or below) the value of the written- off instrument.
(b) The amount of the instrument to be paid in case of a call is reduced by the written-off amount of the instrument.
(c) The distributions (dividends/ profit) payable on the instrument must be permanently reduced.
A-5-3 Loss Absorbency of Non-Equity Capital Instruments at the Point of Non-ViabUity
(i) The terms and conditions of all non-CETl and Tier 2 instruments issued by banks must have a provision In their contractual terms and conditions that the instruments, at the option of the SBP, will either be fully and permanently converted into common share or immediately written off upon the occurrence of a non-viability trigger event called the Point of Non- Viability (PONV) as described below;
(11) The PONV trigger event is the earlier off
(a) A decision made by SBP that a conversion or temporary/ permanent write-off is necessary without which the bank would become non-rviable.
(b) The decision to make a public sector injection of capital, or equivalent support, without which the bank would have become non-viable, as determined by SBP.
(ill) The issuance of any new shares as a result of the trigger event must occur prior to any public sector injection of capital so that the capital provided by the public sector is not diluted.
(Iv) The amount of non-equity capital to be converted/wrltten-off will be determined by the SBP.
(v) Where an Additional Tier-1 capital instrument or Tier-2 capital instrument provides for conversion into ordinary shares, the terms of the Instruments should Include provision that upon a trigger event the Investors holding 5% or more of paid-up shares (ordinary or preferred) will have to fulfill fit and proper criteria (FPT) of SBP.
(vl) The conversion terms of the instruments must contain . Pricing formula linked to the market value of common equity on or before the date of trigger event. However, to quantify the maximum dilution and to ensure that prior shareholder/ regulatory approvals for any future issue of the required number of shares is held, the conversion method must also Include a cap on the maximum number of shares to be issued upon a trigger event.
(vii) The conversion method should describe and take Into account the order (hierarchy of claims) in which the instruments will absorb losses in liquidation/ gone concern basis. These terms must be Clearly stated In the offer documents. However, such hierarchy should not impede the ability of the capital instrument to be immediately converted or to be written off.
(vlii) There should be no impediments (legal or other) to the conversion l.e. The bank should have all prior, authorizations (sufficient room in authorized capital etc.) including regulatory approvals to issue the common shares upon conversion.
(ix) The' contractual terms of all Additional Tier 1 and Tier 2 capital instruments must state that SBP will have full discretion in decidlng/declaring a bank as a non- viable bank. SBP will, however, form its opinion based on financial and other difficulties by which the bank may no longer remain a going concern on its own unless appropriate measures are taken to revive its operations and thus, enable it to continue as a going concern. The difficulties faced by a bank should be such that these are likely to result in financial losses and raising the CET1/ MCR of the bank should be considered as the most appropriate way to prevent the bank from turning non-viable. Such measures will Include complete write-off/ conversion of non-equity regulatory capital into common shares in combination with or without other measures as considered appropriate by the SBP.
A-5-4 Group Treatment
(i) As the capital adequacy is applicable both on standalone and consolidated levels, the minority interests In respect of (non-equity) capital instruments issued by subsidiaries of the.Banks Including overseas subsidiaries can be included in the consolidated capital of the banking group only if these Instruments have pre-specified trlggers/loss absorbency at the PONY. In - addition, where a bank wishes the instrument issued by its subsidiary to be included in the consolidated group's capital, the terms and conditions of that instrument must specify an additional trigger event. The additional trigger event is the earlier of:
(a) A decision that a conversion or temporary/permanent write-off, without which the bank or the subsidiary would become non-viable, is necessary, as determined by the SBP; and
(b) The decision to make a public sector injection., of capital, or equivalent support, without which the bank or the subsidiary would have become nonviable, as determined by the SBP. Such a decision would invariably imply that the write-off or issuance of any new shares as a result of conversion or consequent upon the trigger event must occur prior to any public sector Injection of capital so that the capital provided by the public sector is not diluted. The additional Tier 1 instruments with write-off clause will be permanently wrltten-off when there is public sector injection of funds.
(11) The subsidiaries need to obtain necessary approval/ NOC from their respective regulators for allowing the capital Instrument to be converted/ written off at the additional trigger point referred above. Moreover, the instrument may also provide for conversion or writeoff should the host authority of subsidiary determines a loss absorption event in respect of the subsidiary. Appendix 1: Minority Interest (Ulustration)
A banking group consists of two legal entities that are both banks. Bank P is the parent and Bank S Is the subsidiary and their unconsolidated balance sheets are as given below. Bank P Balance Sheet Bank S Balance Sheet Assets Assets Loan to Customers too Loan to Customers 150 Investment in CET 1 of Bank S 7 Investment in ATI of Bank S 4 Investment in the T2 of Bank S 2 Total 113 Total 150 Liabilities and Equity Liabilitiea and Equity Depositors 70 Depositors 127 Tier 2 10 Tier 2 8 Additional T 1 7 Additional T 1 5 Common Equity 26 Common Equity 10 Total 113 Total 150 The balance sheet of Bank P shows that in addition to loans to its customers, It owns 70% of the common shares of Bank S, 80% of the additional Tier 1 capital of Bank S and 25% of the Tier 2 capital of Bank S. The ownership of the capital of Bank S is therefore as follows:-- Capital Issue by Bank S Amount issued to Parent (Bank P) Amount issued to third parties (Minority Interest) Total Common Equity 7 3 10 Additional Tier 1 4 1 5 Tier 1 11 4 15 Tier 2 2 1 6 8 Total Capital 13 10 23 Consolidated Balance Sheet Assets Loan to customers * 250 Liabilities and equity '
Depositors 197 Tier 2 issued by subsidiary to third party 6 Tier 2 Issued by parent 10 Additional Tier 1 issued by subsidiary to third party 1 Additional Tier 1 issued by parent 7 Common Equity issued by subsidiary to third party (I.e. Minority interest) 3 Common equity issued by parent 26 T .250 In consolidated accounts, the CET1 of Rs. 7, ATI of Rs. 4 arid Tier-2 of Rs. 2 of Bank S Issued to Parent P netted against similar amount of Investment reflected in the asset side of Parent Ps' balance sheet.
For illustrative purposes Bank S is assumed to have risk weighted assets of 100 against the assets valuing 150. In this example the minimum capital requirements of Bank S ^and the subsidiary's contribution to. The consolidated ntr requirements are the same since Bank S does not have any loans to Bank P. This means that it is subject to the following minimum plus capital conservation buffer requirements and has the following surplus capital. Minimum and surplus capital of Bank S Minimum plus capital conservation buffer Capital available Surplus (Point 2a of annexure)
CET1 8.5 10 1.5 (6.0+2.5=8.5) (=8.5% of 100) (=10-8.5)
T1 10 15 5 (=10% of 100) (=10 + 5) (=15-5)
Total capital 12.5 23 10.5 (=12.5% of 100) (=10+5+8) (=23-12.5)
The following table illustrates how to calculate the amount of capital issued by the Bank S is to be included in consolidated capital, following the calculation procedure set out in Annexure-1.
Bank S: Amount of capital issued to third parties included in V consolidated capital Total amount issued (a) Amount' issued to third parties (b) Surplus Cc) Surplus attributable to third parties (l.e. Amount excluded from consolidated capital) d=(c)*(b)/(a) Amount Included in consolidated capital e=(b) - (d)
CET 1 10 3 1.5 0.45 2.55 TI 15 4 5 1.33 2.67 TC 23 10 10.5 4.56 5.44 The following table summarizes the components of capital for the consolidated group based on the amounts calculated in the table above. Additional Tier 1 is calculated as the difference between CET1 and Tier 1. While Tier 2 is the difference between total capital and Tier 1.
Total amount issued by parent (all of which is to be included in consolidated capital) Amount issued by subsidiaries to third parties to be included in consolidated capital a Total Issued amount (by parent and subsidiary) to be included in consolidated capital CET 1 . 26 2.55 28.55 Additional Tier 1 7 0.12 7.12 Tier 1 33 2.67 35.67 Tier 2 10 2.77 12.77 Total capital 43 5.44 48.44 #TBS Appendix 2: Investment less than 10% (illustration)
Investment in the capital of banking, financial and Insurance entitles (that are outside the scope of regulatory consolidation) where the bank does not own more than 10%' of the issued common shares of the entity Suppose;
(A) Regulatory Capital Structure of a Bank (PKR in #TBE millions)
Paid-up equity 300 Eligible Reserves and Profit 200 Total common equity 500 Eligible Additional capital 15 Total Tier 1 capital 515 Eligible Tier 2 capital 100 #TBS 615 #TBE Total Eligible capital
(B) Bank Investment in Entity A and B (where the bank does not own more than 10% of the issued common share capital of the entity).
Entity Capital Structure of the Investee entity Investment of bank in the entity Common Equity Additional Tier 1 Tier 2 Total . Common Equity Additional Tier 1 Tier 2 Total Investment A 300 10 0 310 15 10 0 25 B 400 0 50 450 25 0 10 35 40 10 10 60 Working: Check-1: Bank's total holding of capital instruments is not more than 10% of the issued common share of the entity. Entity A - total investment of 25 is less than 30 (10% of 300)
Entity B - total investment of 35 is less than 40 (10% of 400)
Check-2: The aggregate of the total investment is 60; which is more than 50 (10% of 500 - total common equity of the bank). Hence the excess amount from 10% of banks common equity I.e. 10 (60 minus 50) is required to be deducted. In order to calculate proportional deductions, we need to calculate the following:--
(I) Proportion of total capital holdings held in common equity, additional tier 1 and tier 2. The proportion of bank's investment in the common equity of these entities = 40/60 = 0.666 The deduction from common equity of bank = 0.666 * 10 = 6.66 Likewise, The proportional deduction from Additional tier 1 = 10/60* 10 = 1.67.
The proportional deduction from tier 2 -10/60* 10 = 1.67
(fti) Proportion of Investment held in the banking book and the trading book Supposing that the bank has kept Its investment into the trading book and banking book in the following manner: Common Equity Additional Tier 1 Tier 2 Total Total investment In A and B held In the banking book .30 6 3 39 Total investment in A and B held in the trading book 10 4 7 21 Total 40 10 10 60 Common equity Investments of the bank In A & B which are to be risk weighted 40-6.66 33.34 Banking book exposure subject to risk weight = (30/40P33.34 25 Trading book exposure to be risk weighted = (10/40) * 33.34 = 8.34 Similarly Additional Tier 1 and Tier 2 capital investments would be risk weighted, i.e. t For Additional Tier 1 Investment to be risk weighted = 10-1.67 = 8.33 Banking book exposure subject to risk weight = (6/10)^8.33 = 5.0 Trading book exposure to be risk weighted = (4/10) * 8.33 = 3.33 For Tier 2 investment to be risk weighted = 10-1.67 = 8.33 Banking book exposure subject to risk weight = (3/10)*8.33 = 2.5 Trading book exposure to be risk weighted = (7/10) * 8.33 = 5.83 Appendix 3: Significant Investment (illustration) where the bank owns more than 10% of the issued miUions) #TBS common share capital of the issuing entity or where the entity is an affiliate in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation Suppose;
(A) Regulatory Capital Structure of a Bank (PKR in #TBE Paid-up equity 300 Eligible Reserves and Profit 200 Total common equity BOO Eligible Additional capital 5 Total Tier 1 capital 505 Eligible Tier 2 capital 100 Total Eligible capital 605
(B) Significant Investment In Entity A and B (where the bank owns more than 10% of the luued common share capital of the entity).
Entity Capital Structure of the Investee entity Investment of bank in the entity Common Equity Additional Tier 1 Tier 2 Total Common Equity Additional Tier 1 Tier 2 Total Investment A 100 100 10 220 35 10 5 50 B 200 0 20 220 35 0 s 40 70 10 10 90 Working: Check-1: Bank's total holding of capital instruments is more than 10% of the issued common share of both the entitles. Entity A - total investment of 50 is more than 10 (10% of 100)
Entity B - total investment of 40 is more than 20 (10% of 200)
Deductions (other than common equity): All investment in Additional Tier 1 (in A & B) to be deducted =10 All investment in Tier 2 (in A & B) are to be deducted =10 Since the bank does not have adequate additional tier 1, hence the shortfall (10-5 = 5) will be deducted from the higher category of capital l.e. CET1.
After the above deductions, the Bank will show following position:- Capital Structure of a Total common equity 495 (less by 5, due to shortfall deduction) ATI Eligible Additional capital ' 0 (less by 5, due to deduction) ATI Total Tier 1 capital 495 Eligible Tier 2 capital 90 (less by 10, due to deduction) T2 Total Eligible capital 885 Deduction for common equity: Banks common equity = 495 10% of banks common equity 10% * 495 = 49.5 Hence the amount to be deducted from CET1 = 70 - 49.5 = 20.5 The exposure subject to risk weight of 250% = 49.5 (Irrespective of position held in the banking or trading book)
Appendix 4: The 15% of common equity limit on specified items This Annex is meant to clarify the calculation of the 15% limit on significant investments in the common shares of unconsolidated financial institutions (banks, insurance and other financial entities), and deferred tax assets arising from temporary differences (collectively referred to as specified items).
The recognition of these specified items will be limited to 15% of CET1, after application of all deductions. To determine the maximum amount of the specified items that can be recognized[3], banks will multiply the amount of CET1[4] (after all deductions, including after the deduction of the specified items In full) by 17.65%. This number is derived from the proportion of 15% to 85% (l.e.
15%/85% = 17.65%).
As an example, take a bank with PKR 85 of common equity (calculated net of all deductions, Including after the. Deduction of the specified Items In full).
The maximum amount of specified items that can be recognized by this bank in its calculation of CET1 capital Is PKR 85 x 17.65% PKR 15. Any excess above PKR 15 must be deducted from CET1. If the bank has specified Items (excluding amounts deducted after applying the individual 10% limits) that In aggregate sum up to the 15% limit, CET1 after inclusion . Of the specified items, will amount to PKR 85 + PKR 15 = PKR 100. The percentage of specified items to total CET1 will equal 15%.
' CPD CIRCULAR NO. 2 OF 2013 [9th May, 2013] '
Subject: REQUISITION FOR CHEQUE BOOK It has been brought to SBP notice that while applying for cheque book(s) account holders are being insisted by some branch officials of schedules banks to sign the acknowledgment receipt portion of the requisition slip in advance, prior to the cheque book delivery. This practice on the part of such branch officials has been viewed seriously as the same can increase the chances of frauds besides exposing the scheduled banks to potential operational risk.
2. Scheduled banks are therefore advised to desist from adopting such practice immediately by ensuring to obtain account holder signature on the acknowledgment receipt Vol.XII-'20131 Surrendering of Unclaimed Deposits/ 175 Instruments for the Year 2012 portion of the requisition slip only at the time of cheque book delivery.
3. Any deviation or non-compliance of above instructions may attract punitive action against the delinquent bank under the relevant provisions of Banking Companies Ordinance, 1962.
CPD CIRCULAR NO. 3 OF 2013 [21st May, 2013] Subject: SUBMISSION OF ZAKAT DECLARATION FORM CZ-50 State Bank of Pakistan has been receiving complaints from financial consumers that banks/DFls generally do not provide them acknowledgement receipts while depositing a copy of Zakat- Declaration Form (CZ-50) at branch counters in terms of Zakat and Ushr Ordinance 1980, amended from time to time. This tendency on the part of branch officials of such banks/DFIs has been viewed seriously as the acknowledgement receipt is considered prime evidence whenever any dispute on Zakat deduction subsequently arises between the parties.
2. All banks/DFIs are hereby advised to invariably provide acknowledgement to their customers on submission of Zakat Declaration Form (CZ-50) by properly affixing branch stamp, date and signature on its photocopy.
3. Accordingly, necessary instructions must be Issued to ^11 branches for ensuring meticulous compliance with above 'Instructions In letter and spirit. Any breach of above instructions may attract penal action under the Banking Companies Ordinance, 1962.
CPD CIRCULAR LETTER NO. 1 OF 2013 [16th January, 2013J Subject: SURRENDERING OF UNCLAIMED DEPOSITS/ INSTRUMENTS FOR THE YEAR 2012 Please refer to BPD Circular No.7 dated July 21, 2006 and subsequent instructions issued vide BPRD Circular Letter No, 16 dated May 27, 2009 and CPD Circular No. 3 of June 30, 2012 on the captioned subject.
2. It has been decided that henceforth the banks/DFIs shall provide unclaimed deposits/instruments data for Pak Rupee (PKR) and Foreign Currencies (FCY) as per formats circulated vide BPRD Circular Letter No. 16 of May 27, 2009. Similarly, unclaimed instruments data favouring federal/provincial governments shall also be provided separately as per revised format.
The banks/DFIs shall submit requisite data in database format (DBF) flies through Data Acquisition Portal-4 (EXAP4) within thirty days after the close of each calendar year.
3. , The banks/DFIs shall surrender to the State Bank an amount equal to the amount of unclaimed PKR and FCY deposits/instruments and instruments in favour of federal and provincial governments, duly Including interest, if any, in accordance with the terms of the debt or instrument by April 15, or by next working day if the due date happened to be a holiday, each calendar year along with a list of unclaimed deposits/instruments as per procedure defined for the purpose.
4. Other instructions on the subject . Shall remain unchanged.
5. Any irrelevant/inconsistent information in violation of the provision of law and laid down procedure shall attract penal provision of the law. Enclosure: Annexure-D ANNEXURE-D Instruments in favour of Federal/Provincial Governments As on Name of the Bank/DFI ................................................................
Name and Designation of the officer submitting the return ...... s. No. Name of Issuing officer or branch of the Bank/DFI Federal/ Provincial (Specify the name of Province) Beneficiary Name 1 2 3 4 Vol.XII-2013] Forward Cover Facilities '! 177 against Imports Instrument I Type No. Date of Issue Amount Name of the Applicant Remarks, If any 5 6 7 8 9 10 Date............................ Signature Valid List for Column No.3 Province PB ' Punjab SD Sindh KPK Khyber Pakhtunkhwa BL Balochistan AJK Azad Jammu and Kashmir FED Federal Valid List for Column No. 5 Instrument Type DD Demand Draft PQ Purchase Order/Payment Order PS Payment Slip FDD Foreign Demand Draft TT Telegraphic Transfer.
MT Mail Transfer CO Cash Order OT Others BPD CIRCULAR LETTER NO. 1 OP 2013 [19th February, 2013] Subject: FORWARD COVER FACILITIES AGAINST IMPORTS Attention of Authorized Dealers is invited to F.E. Circular No. 6 dated December 21, 2011 in terms of which instructions on the forward cover facility provided by Authorized Dealers against imports were further streamlined. In -this regard, certain queries have been raised which are clarified as under: ~
(1) In all . Cases the maturity of the forward contract against import should coincide with the maturity of the underlying letter of credit. In case of a usance(sic.) L/C which requires payment to be made after a given umber of days of shipment and the shipment date has been determined on or before the L/C expiry date, the forward contract can be rolled over on forward maturity date to coincide with L/C payment date, subject to the condition that the roll over is not for less than one month. In case the shipment period is not determined on the L/C expiry date, forward cover cannot be rolled over and has to be closed out at the prevailing exchange rate on the L/C expiry date.
(2) Where L/C payment Is due before L/C explry/forward maturity, forward contract would have to be taken up on the date when the payment Is due for delivery to the customer.
(3) Even in cases where partial shipments are allowed, the forward contract against Import should coincide with the maturity of the underlying letter of credit. In case of partial payment prior to the L/C expiry date, the forward contract can be taken up to the extent of the partial payment. In case of partial payments after the L/C expiry date please refer to our clarification at S.No. 1 above. BPD CIRCULAR LETTER NO. 2 OF 2013 [22nd February. 2013)
Subject: ISSUANCE OF OFFICIAL RECEIPTS TO THE CUSTOMERS Attention of the Exchange Companies is invited to FE Circular No.9 of 2002, FE Circular No.6 of 2004 and FE Circular No. 3 of 2012 and other instructions issued from time to time.
Vol.XII--2013] Clarification Regarding Operations 179 of Private Foreign Currency Accounts It is reiterated as under:--
(1) All dealings between an Exchange Company and its customers shall be supported by official receipts. Such receipts shall be prepared for every transaction in duplicate, one of which shall be provided to the customer and the other shall be kept In record for a period to be specified by SBP.
(2) Every receipt provided to the customer shall be sequentially numbered and also bear the name of the Exchange Company, date, nature of transaction i.e., sale/purchase transfer, currency dealt, exchange rate and initials of dealer/authorlzed employee.
(3) Exchange Companies shall obtain from customers information as to the purpose and Intended nature of transaction which should also be clearly mentioned on the receipt. Please bring the contents 6f the above to all your constituents for meticulous compliance. BPD CIRCULAR LETTER NO. 3 OF 2Q13 [27th February, 2013] Subject: CLARIFICATION REGARDING OPERATIONS OF PRIVATE FOREIGN CURRENCY ACCOUNTS Attention of Authorized Dealers is Invited to Chapter VI of Foreign Exchange Manual (FEM) in terms of which Authorized Dealers may, (without prior approval of the State Bank, open with them foreign currency accounts as detailed therein and other applicable SBP rules and regulations. In this respect. Authorized Dealers are advised to strictly observe the following:--
(a) All applicable SBP instructions Including Prudential Regulations regarding AML/KYC should be strictly followed.
(b) As already advised in Para l(iii), Chapter VI of FEM, the Corporate Bodies/Letgal entities cannot generate funds from the kerb market for deposit in their foreign currency accounts.
(c) It Is reiterated that personal foreign currency accounts of any nature should not be used for commercial and business purposes.
(d) Further, In case of any deposit of foreign currency notes of more than USD 10,000 (or equivalent in other currencies) in single day, the account holder shall be required to present the original receipt of acquisition. The Authorized Dealer shall keep on record the copy of such receipt. Please bring the above contents to the knowledge of all your constituents. BPD CIRCULAR LETTER NO. 4 OF 2013 ' [8th March, 20131 Subject: EXPORT TO AFGHANISTAN AND THROUGH AFGHANISTAN TO CENTRAL ASIAN REPUBLICS Attention of Authorized Dealers Is Invited to EPD Circular Letter No.3 dated March 12, 2002 on the subject containing therewith SRO No. 137(l)/2002 dated March 7, 2002 issued by the Ministry of Commerce, Government of Pakistan.
In this regard, it is clarified that as per FE Regulations, the export made against convertible currencies is subject to Form 'E' certification by the Authorized Dealers. Accordingly, the export proceeds received as per sales terms as required to be surrendered in the inter-bank market for which the concerned Authorized Dealer will issue Proceeds Realization Certificate (PRC) at the prevailing busting exchange rate anti credit the equivalent rupees in the PKR account of the concerned exporter. In view of peculiar nature of trade with Afghanistan, It is emphasized that the Authorized Dealers will accept the cash convertible currencies brought over their counter by the exporters and convert the same at the prevailing buying rate applicable for normal export proceeds for credit to the PKR account of the exporter. Further, the banks will ensure that the said proceeds are backed by proper export documents as per prescribed Vol. XII-2013] Amendment In Exchange Companies 181 Rules and Regulations procedure and terms and conditions issued from time to time. Please bring the above to the notice of all your constituents. BPD CIRCULAR LETTER NO. 6/EPP.l (51)-Sugar-2012 OP 2013 [2nd August, 2013] 1 Subject: REVIEW/UPDATE ON SUGAR SITUATION-SUGAR EXPORT - Attention of Authorized Dealers Is Invited to FE Circular Letter No. 11 dated December 18, 2012. On the subject. In this regard, ECC in Its meeting held on July 18, 2013 has decided as follow:- * Cancel all those sugar export quotas which were not utilized by the sugar mills within their respective prescribed time. * Award all cancelled as well as fresh quotas of the sugar export to the prospective exporters on first come first served basis subject to production of an irrevocable Letter of Credit (L/C) within 60 days shipment time. Now all approvals for sugar export will be issued as per the above decision of ECC. Other terms and . Conditions/procedure as mentioned in the FE Circular Letter No. 11 dated December 18, 2012 will remain unchanged. Authorized Dealers are advised to bring the same to the notic'e of all their constituents. BPD CIRCULAR LETTER NO. 7 OF 2013 [7th August, 2013] Subject: AMENDMENT IN EXCHANGE COMPANIES RULES AND REGULATIONS Attention of Exchange Companies of both categories is invited to instructions contained in FE Circular No.4 dated 23rd July, 2013 in terms of which certain restrictions on sale/purchase and outward remittances were imposed. It has been decided to partially modify the instructions issued under Paras (b) and (c) of above referred Circular. Henceforth, all sale and outward transactions of USD 35,000 or above (or equivalent) shall be conducted by the exchange comapnels through Crossed Cheque/DD/PO issued from the personal account of the customer and instrument number and issuing bank's name shall be mentioned on the transaction receipt along with CNIC/Identification Number of the customer.
Furthermore, the requirement of obtaining National Tax Number (NTN) has been withdrawn. All other terms and conditions on the subject shall remain unchanged. FD CIRCULAR NO. 3 OF 2013 [23rd July, 2013] Subject: ISSUANCE OF FRESH BANKNOTES As per practice, SBP Banking Services Corporation makes arrangements for issuance of -fresh notes to commercial banks for onward Issuance to the general public on Elds and other occasions. In this connection, banks are advised not to issue bundles of small denominations (Rs.10 to Rs.100) of fresh banknotes as these tend to be sold In the market on premium. Branches of banks will issue only one packet each of Rs. 10 and Rs. 20 per person to visiting general public/account holders on presentation of original CNIC along with photocopy to be retained by the bank for record. However, for corporate clients banks may issue fresh notes maximum of 5 packets each of Rs. 10 and Rs.20 denominations on receipt of request on company's letter head singed by the authorized representative. If bundles/packets of fresh notes are found on sale in the market, the bank to which they were Issued will be VoLXII-2013] Securities and Exchange Commission 183 of Pakistan (Amendment) Act, 2013 penalized at the rate of Rs, 100,000 per bundle found in the market and Rs. 50,000 for 5 packets found in serial.
Besides, action under the relevant provisions of law will also be initiated against the concerned branch manager. All banks are advised to ensure strict compliance of the above mentioned instructions as any violation thereof would attract punitive action under the relevant provisions of the Banking Companies Ordinance,.
1962.
ACT XVIII OF 2013 SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN (AMENDMENT) ACT, 2013 An Act further to amend the Securities and Exchange Commission of Pakistan Ad, 1997 [Gazette of Pakistan, Extraordinary, Part I, - 26th March. 2013} F. 9(11)/2013-Legis, dated 26-3-2012.-The following Act of Majlis-e-Shoora (Parliament) received the assent of the President on 22nd March, 2013, is hereby published for general information:-- Whereas it is expedient ' further to amend the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997) for the purposes hereinafter appearing; It is hereby enacted as under:--
1. Short title and commencement.-(1) This Act may be called the Securities and Exchange Commission of Pakistan (Amendment) Act, 2013.
(2) It shall come into force at once.
2. Amendment of section 5, Act XLII of 1997.-In the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), hereinafter referred to as the said Act, in section 5, for subsection (5) the following shall be substituted, namely:- "(5) No act, proceeding or decision of the Commission shall be invalid only by reason of the existence of a vacancy or defect in the constitution of the Commission.".
3. Amendment of section 7, Act XLn of 1997.-In the said Act. In section 7, for subsection (2) the following shall be substituted, namely:-- "(2) At the end of each term, initial or further, or at the end of the cumulative period of five years, in case of the Term A Commissioners, or six years, in case of Term B Commissioners, as provided for in subsection (1), the relevant number of Commissioners shall cease to hold office and any vacancy thus arising shall in each case be filled by the appointment - of the requisite number of qualified persons as Commissioners, each for a term of three years starting from the. Date of appointment: Provided that a Commissioner shall be deemed to have retired at the end of such three-yeaf unless, being eligible for re-appointment, he is re-appointed.".
4. Validation.-Anything done, actions taken, orders passed, instruments made, notifications issued, agreement made, proceedings initiated, processes or communications issued, powers conferred, assumed or exercised by the Commission as defined in clause (g) of section 2 of the said Act or its employees as defined in clause (k) of section 2 thereof in terms of amendments made through this Act, on or after the 19th December, 1997 and before the commencement of this Act, shall be deemed to have been validly done, made, Issued, taken, initiated, conferred, assumed and exercised and Hie provisions of this Act shall have and shall be deemed to have had effect accordingly.".
ACT II OF 2013 TRADE ORGANIZATIONS ACT, 2013 An Act to provide for the registration and regulation of trade organizations [Gazette of Pakistan, Extraordinary, Part I, 22nd February, 20131 No. F.9( 15J/2012-Legts, dated 22-2-2013.-The following Act of Majlis-e-Shoora (Parliament) received the assent of the President on 20th February, 2013, is hereby published for general information:- Whereas it is expedient to ensure appropriate representation of all genders and business sectors at all levels In trade organizations and that they play significant role in developing policy framework for improving business environment and economic growth; And Whereas it is imperative to define the purpose, role, responsibilities and operational framework including code of corporate governance for trade organizations and for matters connected therewith and incidental thereto; It is enacted as follows:- CHAPTER-1 PRELIMINARY
1. Short title, extent, application and commencement.-(1) This Act may be called the Trade Organizations Act, 2013.
' (2) It extends to the whole of Pakistan.
(3) It shall apply to trade organizations whose objects and business are not confined to one province.
(4) It shall come into force at once.
2. Definitions.-In this Act, unless there is anything repugnant in the subject or context,-
(a) "Administrator" means an Administrator appointed under this Act;
(b) "articles" mean the articles of association of a trade organisation;
(c) , "district" means an administrative district notified by the Provincial Governments from time to time;
(d) "division" means an administrative division notified by the Provincial Government from time to time;
(e) "Executive Committee" means the Board of Directors, the Managing Committee or any other body, by whatever name called, of a registered trade organisation responsible for the management or conduct of the affairs of such trade organisation;
(f) "existing trade organisation" means an organisation licensed under the Trade Organisations Ordinance, 1961 (XLV of 1961);
(g) "licence" means a licence granted to a trade organisation under section 3;
(h) "member -of the Executive Committee" includes a Director where the Executiye Committee is a Board of Directors and the Chairman, Senior Vice-Chairman, Vice-Chairman, President, Senior Vice-President and Vice-President of a trade organisation licensed, under this Act;
(1) "member of a trade organisation" means a firm and includes a proprietorship, an association of persons, a partnership, a company or a multinational corporation, engaged in trade, Industry or services and enrolled as a member of a trade organisation licensed under this Act;
(j) "memorandum" means the memorandum and the articles of association of a trade organisation;
(k) "office bearers" means President, Senior Vice- President, Vice-President, Chairman, Senior Vice- Chairman and Vice-Chairman of a trade organization;
(l) "Ordinance" means the Companies Ordinance, 1984 (XLVII of 1984):
(m) "prescribed" means prescribed by rules made under this Act;
(n) "register" means the Register of Compales required to be kept under section 147 of the Ordinance;
(o) "registered trade organisation" means a trade organisation registered under the Ordinance;
(p) "Regulator" means . Regulator of the Trade Organisations appointed by the Federal Government and includes an officer empowered by the Federal Government to perform functions of the Regulator under this Act; . (q) "repealed ordinance" means the Trade Organizations , Ordinance 1961 (XLV of 1961); l' . (r) "trade organisation" means an organization, which-
(1) Is capable of being formed as a limited company within meaiilng of the Ordinance; nrj) l
(ii) is formed or Intended to be formed with the object of promoting any trade, industry or service or any combination thereof;
(iii) prohibits payment of any profits to its members; and
(iv) applies its income and profits for achieving its objects; *
(s) "small traders and small business" means a member of trade organization whose number of employees is less than twenty, annual business turnover ranges between two million rupees to twenty million rupees, all utility bills do not exceed one million rupees per annum and neither such small trader or small business is owned or controlled by a Provincial Government nor it carries on trade or business confined to only one Province; and
(t) "small industry" means a member of trade organization which is a manufacturing concern having an industry less than twenty employees, whose annual turnover ranges between two million rupees to twenty million rupees, utility bills do not exceed one million rupees per annum and is neither- owned or controlled by a Provincial Government nor carries on trade or business .Confined to only one Province.
3. Licensing and registration of trade organisations.-(1) Notwithstanding anything contained in the Ordinance or in any other law for the time being in force relating to registration of societies, bodies or associations of persons, no trade organisation shall be registered under the Ordinance or such other law unless it holds a licence granted by the Federal Government authorizing it to be so registered.
(2) No licence shall be granted for registration under the Ordinance to a trade organization unless it is-
(a) a Federation of Chambers of Commerce and Industry, organized on all Pakistan basis, to represent Chambers and Associations referred to in clauses (b),
(c) , (d) and (f): Provided that a licence for registration as a Federation of Chambers of Commerce and Industry shall not be granted to more than one trade organisation:
(b) a Chamber of Commerce and industry organized to represent trade, industry and services In a district. Such a Chamber representing less than the prescribed number of persons shall not be granted licence. Where the number of persons desiring to form a Chamber is less than the prescribed number of persons, they may join a licensed Chamber of the adjoining district: Provided that the Federal Government may, by notification in official Gazette, combine one or more districts for the purpose of grant of only one licence. In such a case the Federal Government may allow the districts so combined to form a Town Association under clause (e);
(c) a Women's Chamber of Commerce and Industry organized to represent the women entrepreneurs engaged in trade, industry or services In each administrative division but such a Chamber representing less than the prescribed number of women entrepreneurs shall not be granted licence and where the number of women entrepreneurs desiring to form a Chamber is less than the prescribed number, they may join an adjoining Women's Chamber of Commerce and Industry: Provided that nothing contained in this clause shall debar a woman entrepreneur to become member of a Chamber in clause (b) if such woman entrepreneur otherwise fulfills the criteria of membership of the respective chamber: Provided further that nothing contained in this clause shall debar the required number of women entrepreneurs to form district women Chambers! Of Commerce if they otherwise fulfill the criteria or formation of a district chamber.
(d) an association with membership on all Pakistan basis organized to represent a specific trade, industry or service or any combination thereof: Provided that a licence for registration as an all Pakistan association shall not be granted to more than two trade organisations in the same sector, one of which must be an organization representing small business, small traders or small industry: Provided further that the question whether a specific activity in trade, industry or service is an Independent sector or only a sub-sector, shall be determined by the Government, whose decision in this, respect shall be final;
(e) a Town Association, organized to represent trade, Industry and services In a town, tehsll, taluka or a district where there is no chamber and such Town Association shall be affiliated with the Chamber of the concerned district: Provided that when a town, tehsll or taluka is upgraded as a district or is granted licence under clause (b), the Town Association in that town, tehsll, taluka or district shall cease to exist with Immediate effect; and
(f) a Chamber of Small Traders organized to represent small businesses small traders and small industry, in * each district, provided that they otherwise qualify to form a chamber under this Act.
(3) Notwithstanding the provisions of clauses (b) and (d) of subsection (2), where the membership of a chamber in a district attains the minimum prescribed number for grant of licence to a chamber under this Act, such persons shall be entitled to form and apply for grant cf licence as a chamber.
(4) On grant of licence to a Chamber under subsection (3), the firms and companies, which had obtained membership in the Chamber of an adjoining district, shall be deemed to have been deregistered from membership register of the adjoining Chamber.
(5) Application for grant of licence of a trade organisation shall be made to the Federal Government in the prescribed application form.
(6) A trade organisation shall be granted licence on such terms and subject to such conditions as may be prescribed. Nt jn
(7) Licence shall be granted to a trade organisation for a period of five years.
(8) A trade organisation holding a licence shall be registered under the Ordinance as a company with limited liability without the addition rifle word "limited" to its name and on such registration shall enjoy all the privileges of a limited company and be subject to all its obligations except those of-
(a) using the word "limited" as any part of its name;
(b) publishing its name; and
(c) sending lists of members to the registrar.
(9) The Federal Government may, by notification in the official Gazette, grant exemption to any trade organisation from any provision of this Act and such exemption may be for such pferiod and subject to such conditions as may be specified in the notification: Provided that no such exemption shall be granted to a trade organisation unless the Federal Government is satisfied that it would be in the public interest to do so. t
4. Revocation of licences of existing trade organisations.-(1) Except as hereinafter provided and notwithstanding anything in any other law for the time being in force and memorandum and articles of association of tiny trade organisation, any licence granted under section 3 of the repealed ordinance to an existing trade organisation shall stand revoked with effect from the 30th December, 2006 and such trade organisation shall be required to apply for grant of licence under this Act by the date notified by the Federal Government:-- Provided that revocation of licence of a trade organisation shall not prevent its members from assuming office, subject to section 11, consequent upon elections under the repealed ordinance.
(2) The Federal Government shall decide the application for grant of licence within such period of its filing as- notified by the Federal Government.
(3) An existing trade organisation which has applied for grant of licence within the time notified by the Federal Government shall continue to function as a trade organisation until the Federal Government decides Its application for grant of licence arid until the first elections are held according to rules made, under this Act.
5. Privileges and obligations of trade organisations.-
(1) A licensed and registered trade" organisation shall be a body corporate 3vith perpetual succession and a common seal and may site and be sued in its own name and, subject to and for the purposes of this Act, may enter into contracts and may acquire, purchase, take, hold and enjoy movable and immovable property of every description and may convey, assign, surrender, yield up, charge, mortgage, demise, reassign, transfer or otherwise dispose of or deal with, any movable or immovable property or any interest vested in It. Upon such terms as it deems ft.
(2) The liability of members of a licensed and registered trade organisation shall be limited to their membership subscription.
(3) No trade organisation other than a licensed and registered trade organisation shall use in its name of title the word "Federation" or "Chamber" or "Association" except an existing trade organisation which has applied for grant of licence under this Act: Provided that nothing in subsection (3) shall apply to a company, association or body of persons formed for promoting art, science, religion, charity, sports, any profession other than trade, commerce, industry, service or any other subject which the Government may, by notification in the official Gazette specify in this behalf.
6. Renewal of . Licence.-(1) A licensed trade organisation shall require renewal of its licence every five years.
(2) Application for-j-enewal of licence shall be made to the Regulator ninety days prior to the expiry of licence: Provided that the Regulator, on sufficient cause being shown by an ortler in writing, may extend the period not exceeding thirty days.
(3) Annual accounts and performance of a trade organisation shall be audited by a firm of chartered accountants and the reports thereof shall be submitted to the Regulator along with the renewal application.
(4) The Regulator, on receipt of the application for renewal of licence, shall endeavour to decide it before expiry of the licence.
7. Cancellation of licence ant) exemption.-(1) The licence granted to a trade organisation shall be cancelled by the Federal Government, where-
(a) a trade organisation fails to apply for renewal of the .Licence granted under section 3 of this Act within the prescribed or extended period allowed by the Regulator;
(b) a trade organisation fails to apply for membership of the Federation of Pakistan Chambers of Commerce and Industry within one month of grant of licence;
(c) a trade organisation fails to get registration under the Ordinance;
(d) a trade organisation is found to be non-existent at the registered address or Is non- operatlonal;
(e) a trade organisation is not holding elections or operating according to the provisions of the memorandum within the prescribed period;
(f) a trade organisation is not complying with the orders and directions of the Federal Government or Regulator issued under this Act of the prescribed rules;
(g) a trade organisation is not discharging statutory obligations as a limited company incurred under the Ordinance;
(h) a trade organisation is not discharging statutory obligations under this Act or prescribed rules;
(1) a trade organisation fails to pay the penalties imposed under this Act within the prescribed period;
(j) the Federal Government cancels any exemption granted to a trade organization, under subsection (9) of section 3; - (k) the trade organisation is engaged in activities other than those for which It was established;
(l) the trade organisation has lost Its representative character or its membership remains below the prescribed threshold over a period of. Two years; and ,
(m) the financial or performance audit report of a trade organisation states that-
(1) the income and profits of the trade organisation are spent for purposes other than those for- which it was established;
(ii) the trade organisation does not remain financially viable.
(2) Where the Federal Government Intends to cancel the licence of a trade organisation, granted- under, section 3 of this Act, it shall issue a show cause notice to such trade organisation specifying the grounds for Its Intention to cancel the* licence and provide adequate opportunity of being heard before deciding the matter. '
(3) The Federal Government shall notify, in the official Gazette, cancellation of licence of a trade organisation.
(4) Where the licence is cancelled on any ground mentioned in clauses (d), (e), (I), (g), (h), (i), (k),
(1) and
(m) of subsection (1) members of the trade organisation concerned found responsible by the Federal Government for the grounds of cancellation shall be debarred from sponsoring the .
Proposal for grant of licence or de novo licence to a trade organisation or becoming member of or holding any office of any trade organisation for a period not exceeding three years.
(5) Where the licence of a trade organisation has been cancelled under subsection (1) and a member or member of executive committee or employee of such trade organisation continues to Impersonate as member, member of executive committee or employee of the trade organisation, such person shall be liable to penalties under section 24.
8. Cancellation of registration.-(1) Notwithstanding CI.D anything contained in the Ordinance or any other law for the time being in force,--
(a) the registration of a trade organisation under the Ordinance shall be deemed to have been cancelled with Immediate effect if the licence granted to such trade organisation has been cancelled by the Federal Government under section 7;
(b) the registration of an existing trade organisation shall stand cancelled with immediate effect if such a trade organisation has failed to apply for grant of fresh licence within the time notified by the Federal Government;
(c) the registration of an existing, trade organisation under the Ordinance shall stand cancelled qn 1st July, 2008, unless it has been granted licence by the Federal Government under section 3.
(2) The Registrar shall strike off the register, and publish in the official Gazette, the names of all such trade organisations whose registration has been cancelled under subsection (1).
(3) All affairs of a trade organisation whose registration stands cancelled under subsection (1) shall be wound up in a manner as determined by the Federal Government.
9. Grant of licence de novo.-(1) Where licence of a trade organisation is cancelled under section 7.
The Federal Government may consider grant of licence de novo after a period of one year from the date of cancellation of licence: Provided that where the licence of a trade organisation was cancelled under clause (a) of subsection (1) of section 7, the Federal Government may consider the grant of licence de novo at an earlier date.
(2) The trade organisation seeking licence under subsection (1) shall be required to make an application in such form and. Manner as may be prescribed.
10. Membership of trade organisations.-(1) Chambers and sector specific associations on all Pakistan .Basis, granted licence under this Act, shall apply for membership of the Federation of Pakistan Chambers of Commerce and Industry within thirty days of grant of licence under this Act.
(2) Upon an application by a trade organization under subsection (1), the Federation of. Pakistan Chambers of Commerce and Industry shall enroll such trade organisation as its member within thirty days and where such an enrolment is not decided within thirty days, the matter shall be referred to the Regulator along with the reasons for not allowing enrolment and the Regulator shall decide the matter within thirty days.
(3) A chamber or an association which Is a member of the Federation of Chambers of Commerce and Industry shall be eligible to vote In the election of office-bearers and committees of the Federation on completion of two years of grant of licence: Provided that the existing trade organisations, on grant of licence under this Act. Shall be deemed to be members of the Federation and shall be entitled to vote.
(4) Proprietorships, associations of persons, partnerships, companies or multinational corporations engaged In trade, industry or services shall be entitled to enrolment as members of chambers and associations on fulfillment of the prescribed conditions.
(5) Notwithstanding anything contained in any other law for the time being in force any person engageid in trade. Industry or service, or any combination thereof, shall be entitled to be enrolled as a member of a registered trade organisation except where such person Is otherwise disqualified for any of the reasons as may be prescribed. , (6) Where a person, qualified to be enrolled as a member of a trade organisation, is refused enrolment or the- enrolment is unduly delayed, on a complaint by the aggrieved person, the Regulator may direct (he trade organisation concerned to enroll such person' as a member on fulfillment of the prescribed requirements.
(7) New members of the chambers and associations shall 196 CORPORATE LAW DECISIONS [C.L.D. be eligible to vote on completion of two years of their enrolment and payment of all dues: Provided that old members of the chambers and associations at the time of renewal of membership which has been discontinued due to non payment of subscription dues shall be eligible to vote on completion of one year of their re-enrolment and payment of all dues.
(8) Except for the membership and office-bearers provided under this Act or prescribed rules, there shall not be any other position by any nomenclature in a trade organisation. , 111 Organisation . And tenure of office-bearers and executive committee of trade organisations.-
(1) Notwithstanding anything in any other law for the time being in force and memorandum and articles of association of any existing trade organisation the tenure of office-bearers of all trade organizations shall be one year,-
(a) In the case of the Federation of Pakistan Chambers of Commerce and Industry from the 1st day of January to the 31st day of December;
(b) in the case of fall other trade organisations, from the 1st day of October to the 30th day of September.
(2) The organisational structure of trade organisations including composition and tenure of Executive Committees and the manner of their elections shall be such as prescribed.
12. Uniformity in structure and autonomy of trade organizations.-(1) The Federal Government shall propose to and obtain approval from the Standing Committee on Commerce in the National Assembly for a minimum, basic template of Memorandum for all trade organisations to be registered under this Act;
(2) The said template shall be in compliance with the Ordinance and shall ensure integrity, transparency . And efficiency in maintaining the roll of voting members, election of office bearers, fiduciary responsibility and right of the individual members of the trade organization.
(3) After approval, the Federal Government shall publish - in the official Gazette the basic template of Memorandum for all trade organisations to be registered under this Act.
(4) Apart from adherence to the basic template, the registered trade organisations shall be autonomous to make changes in its Memorandum in compliance with the Ordinance.
13. The Regulator,.-(1) The Federal Government may, by notification in the official Gazette, appoint or empower an officer to perform functions of Regulator of trade organisations under this Act.
(2) The Federal Government may appoint or empower such other officers with such designations as it deems fit for performing under the superintendence and direction of the Regulator, such functions of the Regulator, under this Act as he may, from time to time, authorise them to discharge.
(3) The Regulator may, by order In writing,- ,
(a) review any function, matter, case or decision of any officer; or
(b) withdraw any function, matter or case from any officer or staff and deal with such function, matter or case himself either de novo or from the stage it was so withdrawn, or transfer the same to another officer or staff at any stage. '
14. Powers and. Functions of the Regulator.-(1) All acts and proceedings of a registered trade organisation shall be subject to control of the Federal Government and, subject to such control, the affairs of such trade organisation shall be managed and conducted in such manner as the Regulator may, from time to time, direct.
(2) the' Regulator shall, for the purpose of this Act, have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (Act V of 1908) in respect of the following matters, namely:-
(a) summoning and enforcing attendance of any person. And examining him on oath;
(b) compelling production of documents;
(c) receiving evidence on affidavit; and
(d) issuing commission for examination of witnesses.
(3) Notwithstanding anything contained in any law for the time being in force or in the articles or memorandum of association of a registered trade organisation and without prejudice to the generality of the foregoing provisions, the Regulator shall exercise the powers tola) conduct enquiries Into the affairs of a trade organisation as 'may be necessary for the purposes of this Act;
(b) Inspect, with or without prior notice, any office of such trade organisation including any of its branch or regional, circle, zonal or liaison office, or any record or document found therein;
(c) attend any meeting of the general body or the Executive Committee of such trade organisation or of any committee or other body set up or appointed to transact any business, or to conduct any affair of such trade organisation;
(d) watch and supervise, or cause to be watched and supervised, any election held by or for the purpose of electing persons to the Executive Committee or other body including a region, circle or zone or any such trade organisation;
(e) act as a final forum of appeals against the decisions of any person, committee, or office- bearers of a trade organisation In matters relating to electoral process before the conduct of election; and
(f) annul the results of any election held by any trade organisation if he is satisfied-
(i) upon his own knowledge and after such investigation he may think fit to make; or
(II) upon a report made by a person authorised by him to make Investigation for the purpose; or
(ill) upon a complaint filed by an aggrieved person in this behalf within thirty days of the announcement of the results of such election, that the irregularities in the conduct of such election justify such cut annulment and, by order in writing, direct fresh election to be held within such period as may be specified in the order;
(g) give directions to persons or trade organisations in matters concerning this Act or any rules or directive made thereunder;
(h) impose and collect penalties and fines under section 25; and (ij such other powers as are provided by this Act.
15. Powers to enter and search the premises.-(1) The Regulator or any officer authorized In this behalf may, for the purpose of making any investigation, enter any premises, where the Regulator or such authorized officer, as the case may be, has reasons to believe that any article, books of account, computer hardware or software, data recording devices or other document relating to the subject matter of investigation may be found and may- fa) search such premises and Inspect any article, books of account, computer hardware or software, data recording devices or other document;
(b) take extracts or copies of such articles, books of account or any software data;
(c) impound or seal such books of account, computer hardware or software, data, recording devices or other . Documents; and
(d) make Inventory of such articles, books of Recount, computer hardware or software, data recording devices or other documents found in such premises.
(2) All searches made under subsection (1) shall be carried out, mutates mutandis, in accordance with provisions of the Code of Criminal Procedure, 1898 (Act V of 1898).
(3) Before taking any action under this section, the Regulator shall submit to the Federal Government In writing the evidence and reasons for taking the said action.
16. Supersession of Executive Committee, officebearers and appointment of Administrator.-(1)
Where the Federal Government is in receipt of the findings of an investigation by the Regulator, that the affairs of a registered trade organisation are not being properly managed and that the interests of trade, industry or service so require, it may, by order in writing, suspend or supersede the Executive Committee of such trade organisation for such period, not exceeding six months as may be specified in the order: Provided that no such order shall be made unless the Executive Committee, intended to be suspended or superseded, has been given a notice in writing of and afforded an opportunity to make a representation against, the intended supersession.
(2) Where-
(a) an Executive Committee is superseded under subsection (1);
(b) in the opinion of the Federal Government, It is not possible for any reason to reconstitute the Executive Committee at the due time of such reconstitution; or
(c) the Executive Committee is debarred by an order of any court, from discharging its functions, the Federal Government may appoint, for such period, not exceeding six months, an Administrator to take over functions of such Committee and to manage and conduct affairs of the trade organisation: Provided that when the period of supersession is terminated or the Executive Committee is reconstituted or the order of the court is vacated before eXplry of the period for which the Administrator shall have been appointed, the Federal Government may direct the Administrator to relinquish the functions taken over by him In favour of the Executive Committee.
(3) Upon appointment of an Administrator under clause (a) or clause (b) of subsection (2), the members of the Executive Committee shall be deemed to have vacated their respective offices.
17. Administrator to act under control of the Regulator.-(I) The Administrator shall manage and conduct affairs of the trade organisation under supervision and control of the Regulator and In accordance with the rules, if any, made in this behalf by the Federal Government and, until such rules are made, in accordance with such directions as the Regulator may, from time to time, give.
(2) The rules and directions referred to In subsection (1) may provide for-
(a) the appointment of an Advisory Committee consisting of persons selected from members of the trade organisation to assist the Administrator in discharge of his functions; jb) holding of elections for the purpose of reconstitution of the Executive Committee at any time considered appropriate before expiry of term of appointment of the Administrator;
(c) compliance with provisions of the Ordinance to the extent applicable to the trade organisation except those relating to laying of the income and expenditure account and reading of the auditor's report in general meeting;
(d) withholding, during the period of supersession of the Executive Committee, of the general meeting of the trade organisation other than the meeting to hold elections for reconstituting the Executive Committee;
(e) conduct of any business, during the period the general meeting remains withheld, which requires approval or assent of the members at a general meeting;
(f) the pay, allowances, remuneration and other privileges, of the Administrator and members of the advisory committee; and
(g) such other matters as are necessary for efficient management of affairs of the trade organisation.
(3) Any expenditure incurred in connection with management of a trade organisation by the Administrator, including pay, allowances and remuneration of the Administrator and members of the Advisory Committee, shall be met as expenses, and be a charge oh the income of the trade organisation: Provided that the Federal Government may allow remuneration, honorarium to and reimbursement of cm actual expenses incurred by the Administrator in connection with performance of his functions to be met from the Trade Organisations Fund.
18. Restriction on suits against trade organisations.- Notwithstanding anything contained in any law for the time being in force or in the articles or memorandum of a registered trade organisation, no suit or other legal proceedings relating to affairs of a trade organisation shall be instituted or commenced in any court except High Court. $
19. Compulsory membership of trade organisations.-
(1) Notwithstanding anything contained In any other law for the time being in force or in the articles or memorandum of association of any trade organisation or other company or in any agreement or other instrument, the Federal Government may,-
(a) subject to any rules made in this behalf, by order In writing, direct any firm, company or other concern engaged In any trade, commerce, industry or service to be a member of registered trade organisation specified in the order; or
(b) If it considers expedient in the Interest of trade, commerce, industry, or service, by notification in the official Gazette, direct all such firms, companies or concerns or any class thereof engaged in trade, commerce, industry or service, as may be specified in the notification subject to exception if any, to be members of the registered trade organisation or organisations specified in this behalf in such notification.
(2) Upon the issue of an order or notification under subsection (1), the registered trade organisation concerned shall admit as its member any firm, company or concern directed to be its member by such order or notification.
20. Restriction on membership.-(1) No person shall be a member of more than such number of trade organisations as the Federal Government may, by notification in the official Gazette, specify In this behalf.
(2) A person convicted for any offence under this Act shall not hold, or be eligible for holding, any office in ai registered trade organisation unless a period of five years has elapsed.
21. Appeal.-(1) Any person or trade organisation aggrieved by any decision or order of the Administrator may, within -fourteen days of communication of such decision or order, prefer appeal to the Regulator.
(2) Any person or trade organisation aggrieved by any decision or order of the Regulator may, within fourteen days of communication of such decision or order, prefer appeal to the Federal Government whose decision; subject to subsection (4), shall be final.
(3) On appeal under subsection (1) the Regulator or, as the case may be, under subsection (2) the Federal Government may suspend the operation or execution of the decision or order appealed against until the disposal of such appeal.
(4) Any person aggrieved by the final order or decision of the Federal Government, involving a question of law, may, within thirty days of such order or decision, prefer appeal to the High Court.
22. Delegation of powers.-(1). The Federal Government may, by notification in the official Gazette, direct that all or any of its powers under this Act shall, in relation to such matters or subject to such conditions as may be specified therein, also be exercisable by the Regulator.
(2) The Regulator may, by order In writing, authorise the Administrator or any other officer to exercise and perform any of his powers and functions under this Act.
23. Federal Government may carry out functions of the Regulator.-Notwithstanding anything contained in any other provision of this Act, the Federal Government may, by notification in the official Gazette, direct that powers and functions of the Regulator shall, under such circumstances or in such cases, as may be specified in the notification, be * exercised and performed by the Federal Government and upon such notification reference to the Regulator in the relevant provisions of this Act shall be construed as reference to the Federal Government and such provisions shall have effect accordingly.
24. Power to levy fee etc.-The Federal Government may levy and charge prescribed processing fee for grant of licence or renewal of licence to a trade organisation and for examining performance reports, audited accounts, and other documents submitted to the Federal Government or the Regulator.
25. Penalty.-Where a person contravenes any provision of this Act or any rule or order made or any direction or instruction given thereunder or obstructs any officer or person acting under or in pursuance of any such provision, rule, order, direction or instruction, shall be liable to penalty which may extend to one hundred thousand rupees.
26. Contravention by companies, etc.-Where a person contravening or failing to comply with, any provision of this Act or any rule, order or direction made or issued thereunder is a company or other body corporate, every managing director, director, manager, secretary or other officer or agent thereof shall, unless he proves that the offence was committed without his knowledge or that he exercised due diligence to prevent Its commission, shall be liable to the penalty as provided for such contravention or failure.
27. Trade Organisations Fund.-(1) There shall be established a fund to be known as the Trade Organisations Fund which shall consist of -
(a) grants made by the Federal Government and the Provincial Governments;
(b) fees and penalties collected by the Regulator: and
(c) contributions from local and foreign donors or agencies.
(2) The Federal Government shall make rules and regulations for utilizing and incurring expenditures from the Fund.
(3) For the purpose of maintaining the Fund the Federal Government may open and maintain accounts at such scheduled banks as it may from time to time determine.
28. Presumption as to orders.-Where an order purports to have been made or signed by an authority or person in exercise of any power conferred by or under this Act, a court shall presume that such order was so made by that authority or person.
29. Mode of recovery.-Any sum imposed as penalty under this Act shall be recoverable as an arrear of land revenue.
30. Indemnity.-No suit, prosecution or other legal proceedings shall lie against any person for anything which is, in good faith, done or intended to be done in pursuance of this Act or any rule or order made or any direction given thereunder.
31. Power to make rules.-The Federal Government may, by notification in the official Gazette, make rules for carrying out purposes of this Act.
32. Act to override other laws.-The provisions or this Act shall have effect notwithstanding anything to the contrary contained in any other law, for the time being in force.
33. Merger of trade organisations.-Notwithstanding anything contained In any other law for the time being In force or provisions contained In memorandum and articles of association of any trade organisation, the Federal Government may, by notification in official Gazette, direct any number of trade organisations to merge if each of them is involved In the same or significantly similar trade, Industry or services or any combination thereof: Provided that if two or more trade organisations are Involved in the same or significantly similar trade, industry or services or any combination thereof their merger shall be determined by the Federal Government whose decision in this regard shall be final.
34. Transitional provisions.-(1) All existing trade organistions, before making application for grant of licence under this Act, shall alter their memorandum and articles of association or any existing arrangement and shall take such other , actions as are necessary to bring the constitution, working and procedures of the existing trade organisations in conformity with provisions of this Act.
(2) Notwithstanding anything contained in this Act or any other law, for the time being in force, or provisions contained in the memorandum and articles of association of any trade organisation, in order to bring the composition of the Federation of Pakistan Chambers of Commerce and Industry, chambers and associations in conformity with the provisions of this Act, the Federal Government may, within six months of the commencement of this Act, pass any orders deemed appropriate for this purpose. Such orders may Include, but not limited to, extension of tenure of the office bearers and committees or supersession of Executive Committee or appointment of administrator or annulment of elections of any trade organisation Including the Federation of Pakistan Chambers of Commerce and Industry, held under the repealed ordinance or the order of the court.
Simultaneously, with the passing of such order, the Federal Government shall issue schedule of election for the respective trade organisation.
35. Repeal and savings.-On commencement of this Act,-
(a) the Trade Organisations Ordinance, 1961 (XLV of 1961), in its application to trade organisations with objects and business not confined to one Province, shall stand repealed with effect from the 30th December, 2006; and
(b) save as otherwise expressly provided, nothing in this Act or any repeal effected thereby, shall affect or deemed to affect anything done, action taken, investigation and proceedings commenced and orders, rules, regulations, appointment, documents or agreements made, directions given, proceedings taken and instruments executed or Issued under or In pursuance of the repealed ordinance and any such thing, action, investigation, proceedings, orders, rules, regulations, appointments, deeds, documents, directions, proceedings shall, if in force at the commencement of this Act and not inconsistent with any of the provisions of this Act, continue to be in force and have effect as If it were respectively done, taken, commenced, made, directed, given, executed or issued under corresponding provision of this Act.
36. Validation of actions etc.-Anything done, actions taken, orders passed, instruments made, proceedings initiated, processes or communications issued, powers out conferred, assumed, exercised by the Federal Government or Regulator on and after the 4th October, 2007 and before the commencement of this Act shall be deemed to have been validly done, made, issued, taken, initiated, conferred, assumed and exercised and the provisions of this Act shall have, and shall be deemed always to have had, effect accordingly. STATE BANK OF PAKISTAN BPRD CIRCULAR NO. 3 OF 2013 [6th April, 2013] Subject: OPENING OF BANKS/DFIs OFFICES ON SUNDAY APRIL 7, 2013 In order to facilitate the process of scrutiny of nomination papers of election contesting candidates in time, it has been decided that banks/DFIs should open their relevant departments/offices, branches and especially e-CIB departments for receipt of dues, issuance of clearance certificates etc. On Sunday April 7, 2013 from 8 am to 12 am (mid night). It is further advised that upon receipt of dues, bank/DFIs should also immediately update the e-CIB of the concerned borrower.
2. You are, therefore, advised to make all necessary arrangements for meticulous compliance of the above instructions and please acknowledge receipt. BPRD CIRCULAR NO. 4 OF 2013 [16th May, 2013] Subject: TREATMENT FOR INVESTMENT IN THE UNITS OF MUTUAL FUND AND AMCs FOR CAR PURPOSES Please refer to BSD Circular No.8 of 2006 and BSD letter # BSD/BAI-1/220/452/2009 of April 27, 2009, on the subject. It has been decided that effective from June 30, 2013, the following instructions would be applicable on banks'/DFIs' investment in units of open-ended as well as closed-ended mutual funds and Asset Management Companies for the calculation of Capital Adequacy Ratio (CAR).
A. Investment in the units of Mutual Funds/Collective Investment Schemes:
(a) Investment/holding up to 30% in a single mutual fund: Banks'/DFIs' investments in the units of mutual funds will be categorized only in the trading book and the capital charge will be calculated by any of the following methods:-- Full look through Where the bank is aware of the actual underlying investments of the mutual fund on monthly basis, the bank may calculate the capital charge on its investment as if the underlying exposure/asset class held by the mutual fund is held by the bank itself. Modified look through In case the bank is not aware of the underlying investment on a monthly basis, the bank may determine capital charge by assuming that the mutual fund first invests to the maximum extent in the most risky asset class (i.e. Which attracts highest risk weight under existing instructions) allowed under its offering document and then continues making investments in descending order (second highest risk weighted asset) until the total investment limit is reached. Refer to appended Annexure-A for more details. Conservative Approach If the bank is not in position to implement above approaches, the bank may calculate capital charge based on the most risky asset (i.e. Assigning the highest risk weight) category applicable to any asset the mutual fund is authorized to hold as per its offering document. For further clarity, refer to Annexure-A.
(b) Investment/ holding in a single fund within the range from 30% to 50%: The investment/holding up to .30% of a mutual fund would attract capital charge based on look through approaches prescribed above and the incremental investment (beyond 30% benchmark) would attract a flat capital charge of 20%.
(c) Investment/holding in a single fund exceeding 50% or investment subject to lock-in clause: In case banks'/DFIs' holding in a single mutual fund exceeds 50%; then the investment/ holding up to 30% of a mutual fund would attract capital charge based on look through approaches whereas the incremental amount exceeding 30% threshold would be deducted from Tier-1 capital of the bank. Furthermore, where the banks' investment is subject to any lock-in clause (irrespective of its percentage holding) under which the bank cannot liquidate its position (e.g. Seed capital), the entire investment would be deducted from Tier-1 for capital adequacy purposes. B. Significant Investment in the capital of Asset Management Company (AMC)
Asset Management Company (AMC) is considered as a financial entity for capital adequacy purposes and any significant minority and/or majority investments in the capital of AMC is subject to the same rules as described in the Scope of Application (paragraph 1.1) of SBP Basel II instructions. Enel: Annexure-A Annexure-A #TBS Since the bank is not aware of the underlying investment of the mutual fund on a monthly basis, the bank may refer to the offering document of the mutual fund to determine the maximum exposure allowed against various asset classes. For example, a mutual fund is restricted to hold net assets ranging between 30% to 70% in equity securities at all times and the remaining net assets may be #TBE #TBS Modified look through #TBE Explanation: invested in government securities, cash in bank account, TDRs and/or TFCs.
In this scenario, the bank would determine capital charge by assuming that the mutual fund first invests to the maximum extent (i.e. 70%) in the equity securities (i.e. Most risky asset class category attracting highest capital charge under trading book rules). Afterwards, the bank would determine the second highest capital charge attracting asset class and apply its capital charge on the rest of the 30% of its Investment.
Conservative Approach Continuing with above example. Alternatively, the bank may calculate capital charge based on the equity securities (which is the most risky asset category) this mutual fund is authorized to hold as per its offering document.
In case the underlying asset class is commodities, real estate etc., (that have not been addressed in the Market Risk Section of.SBP Basel II instructions) then banks should apply and report the capital charge by treating their positions as Equity Risk.
BPRD CIRCULAR NO. 5 OF 2013 [29th July, 20131 Subject: IMPLEMENTATION OF TLS CERTIFICATE ON E-MAIL GATEWAYS State Bank of Pakistan has decided to implement Transport Layer Security (TLS) certificates on its e-mail gateways with the aim to protect confidentiality and integrity of its e-mail communication with banks and other financial institutions in Pakistan and to mitigate information security risks. TLS is a protocol that provides communication security over the internet by encrypting e-mail messages between servers at both ends of a communication channel and reduces risks like spoofing and tampering associated with e-mail communication.
Vol.XII-20131 Implementation of TLS Certificate on 211 E-Mail Gateways
2. In order to ensure end-to-end e-mail communication security, financial institutions are advised to implement TLS certificates on their e-mail gateways so that e-mail communication between banks and with SBP is carried out in a secure environment. Financial institutions shall report compliance of the same to BP&RD as per the timelines given at Annexure A.
3. It may be noted that TLS Is a standard protocol; therefore, financial institutions can opt for any standard- compliant brand of TLS certificate available in the market depending on their feasibility and convenience. BPRD CIRCULAR NO. 7 OF 2013 [27th September, 2013] Subject: MINIMUM RATE OF RETURN ON SAVING DEPOSITS AND SBP REPO RATE Please refer to BPRD Circular No. 1 dated April 13, 2012, BPRD Circular No.l dated March 15, 2013 and DMMD Circular No. 19 dated September 13, 2012.
2. In this regard, it has been decided to make following modifications regarding the payment of minimum rate of return on deposits raised by the banks:--
(i) With effect from October 1, 2013, the Minimum Profit Rate to be paid on all Pak Rupee Saving Deposits, as defined In the above mentioned Circulars, will be 50 basis points below the prevailing SBP Repo Rate (Interest Rate Corridor - Floor).
(ii) Change in the Minimum Profit Rate, following any change in the SBP Repo Rate, will be applicable with effect from 1st day of the subsequent month.
(iii) It is further clarified that this rate of profit will be applicable on average monthly balances on all existing and new saving deposits including term deposits. .
(iv) Other instructions on the subject shall remain the same. Any violation of the above instructions will render the bank liable for punitive action under the relevant provisions of the Banking Companies Ordinance, 1962.
3. Payment of profit on saving deposits raised by Islamic Banks including Islamic banking branches/windows would continue to be governed under the instructions notified vide IBD Circular No.3 dated November 19, 2012.
BPRD CIRCULAR LETTER NO. 16 OF 2013 [9th July, 20131 Subject: BANK HOLIDAY The State Bank of Pakistan will remain closed for public dealings on 1st Ramzan-ul-Mubarak 1434 A.H., which will be observed as Bank Holiday for deduction of Zakat, as usual.
2. All Banks/DFIs/MFBs shall, therefore, remain closed for public dealing on the above day. However, all officers/staff of the banks/DFIs/MFBs will attend the office on 1st Ramzan-ul-Mubarak treating it as a normal working day (except for public dealings).
BPRD CIRCULAR LETTER NO. 17 OP 2013 [9th July, 2013] Subject: DEDUCTION OF ZAKAT AT SOURCE IN RESPECT OF SAVING BANKS/PROFIT AND LOSS SHARING AND SIMILAR BANK ACCOUNTS (ASSETS CODE NO. 101) AND DEPOSIT THEREOF IMMEDIATELY AFTER DEDUCTION DATE Please refer to BPRD Circular No. 16 dated July 9, 2013 regarding Bank Holiday.
2. We are enclosing herewith a copy of the Notification No.CE3 1001(36)/NISAB/1433-34/2013 dated July 5, 2013, issued by Ministry of Religious Affairs and Inter-Faith Harmony, on the above subject for immediate necessary action. Accordingly the Zakat shall be deducted as per instructions contained in the enclosed Notification.
Enel: As above cuts No.CE3 1001(36)/NISAB/1433-34/2013 Islamabad, the 5th July, 2013 S. Hasnain Akhtar, Assistant Director, State Bank of Pakistan, SBP Banking Services Corporation (Bank)[ Head Office, I.I. Chundrigar Road, Karachi.
(For all Banks/Financial Institution) * Subject: DEDUCTION OF ZAKAT AT SOURCE IN RESPECT OF SAVING BANKS/PROFIT AND LOSS SHARING AND SIMILAR BANK ACCOUNTS (ASSET CODE NO. 101) AND DEPOSIT THEREOF IMMEDIATELY AFTER DEDUCTION DATE.
Sir.
I am directed to say that the Administrator General Zakat has notified the "Nisab of Zakat" for the Zakat year 1433-34 A.H. At Rs.41.872 (Rupees Forty one thousand eight hundred seventy two only).
No deduction of Zakat at source shall be made, in case the amount standing to the credit of an account in respect of the assets mentioned in column 2 of Serial No. 1 of the first schedule of Zakat and Ushr Ordinance, 1980, is less than Rs. 41,872 (Rupees Forty one thousand eight hundred seventy two only) on the first day of Ramzan-ul-Mubarak, 1434 A.H. He has also notified first day of Ramazan-ul-Mubarak 1434 as the "deduction Date" likely to fall on 10th or 11th July, 2013 (subject to appearance of moon) for deduction of Zakat from Saving Bank Accounts, Profit and Loss Sharing Accounts and other similar Accounts having credit balance of Rs.41,872 (Rupees Forty one thousand eight hundred seventy two only).
2. All the Zakat Collection Controlling Agencies (ZCCAs) are requested to deduct the Zakat accordingly. A copy of the return on form CZ-08A may please be provided to this Ministry Immediately after depositing Zakat in Central Zakat Account No.CZ-08 being maintained with the State Bank of Pakistan. cut BPRD CIRCULAR LETTER NO. 18 OF 2013 [9th July, 2013)
Subject: OFFICE AND BUSINESS HOURS DURING THE MONTH OF RAMZAN-UL-MUBARAK During the ensuing holy month of Ramzan-ul- Mubarak, the following office hours will be observed in the State Bank of Pakistan, which will also be followed by all banks/DFIs/MFBs:- Days Office Hours Monday to Thursday 8-00 a.m. To 2-15 p.m. (Without any break)
Friday 8-00 a.m. To 1-00 p.m. (Without any break)
However, the banks are advised to observe the following business (banking) hours for public dealing: ~ Days Business (Banking) Hours for Public Dealings Monday to Thursday 8-00 a.m. To 1-45 p.m.
(Without any break)
Friday 8-00 a.m. To 12-30 p.m. (Without any break)
After the holy month of Ramzan-ul-Mubarak, the above timings will automatically be reverted to pre Ramzan- ul-Mubarak timings. BPRD CIRCULAR LETTER NO. 19 OF 2013 [26th July, 2013] Subject: PANEL OF AUDITORS - UNDER SECTION 35(11 OF BANKING COMPANIES ORDINANCE. 1962 This refers to BPRD Circular Letter No. 12 dated May 8, 2013, on the cited subject.
1. It is informed that: "Messrs Nauman Rafique & Co.", Chartered Accountants, (Category "C") have changed the name of their firm to "Messrs Suriya Nauman Rehan & Co." Chartered Accountants, (Category "C").
2. A copy of updated Panel of Auditors is enclosed. Enel: As Above NAMES AND ADDRESSES OF AUDITING FIRMS 1 CHARTERED ACCOUNTANTS) ON PANEL OF AUDITORS MAINTAINED BY STATE BANK OF PAKISTAN UNDER SECTION 3511) OF BANKING COMPANIES ORDINANCE.
1962.
SR. NO. AUDITING FIRMS CATEGORY "A"
A1 A.F. Ferguson & Co.
State Life Building No. 1/C, 1.1. Chundrigar Road, Karachi.
Tel: 021-2426711-5, 2426682-5 Fax: 2415007, 2427938 A2 Anjum Asim Shahid Rahman 1st & 3rd Floors, Modern Motors House, Beaumont Road, Karachi 75530 Tel: 021-5672951, 55672956 Fax: 5688834 A3 Avais Hyder Liaquat Nauman .
407, Progressive Plaza, Beaumont Road, Karachi.
Telephone: (92-21) 565 5975-6 Fax : (92-21) 565 5977 E-mail: oiTice.Khi@ahln.Com.Pk. Lzca@khi.Wol.Net.Pk A4 BDO Ebrahim & Co.
2nd Floor, Block "C" Lakson Square Building No. 1, Sarwar Shaheed Road, Karachi.
Tel: 021-5683030, 5683189 Fax: 5684239 A5 Naveed Zafar Ashfaq Jaffery & Co.
1st Floor Modern Motors House Beaumont Road, Karachi.
Tel: 021-111-77-44-22 Fax#: (021) 5210626 E-mail: khi@shznco.Com A6 Hyder*Bhimji & Co.
Suite No. 1601, Kashlf Centre, Main Shahrah-e-Faisal Karachi - 75530 Phone: 021-35640050-52 Fax: 021-35640053 A7 Ilyas Saeed & Co.
A-4 Sea Breeze Homes, Shershah Block, New Garden Town, Lahore.
Tel: 042-5861852, 5868849 Fax: 5856145 E-mail: milvas@brain. Net. Pk A8 M. Yousuf Adil Saleem & Co.
Cavish Court, A-35, Block 7, KCHSU, Shahrah-e-Faisal, Karachi.
Tel: 021-4541314, 111-55-2626 Fax: 021-4541314 A9 Muniff Ziauddin & Co.
Business Executive Centre F/17/3, Block 8, Clifton, Karachi.
Tel: 021-35375127-29 Fax: 021-35820325 E-mail: info@mzi.Com.Pk A10 Riaz Ahmad & Company 10-B, Saint Mary Park, Main Boulevard, Gulberg -III, Lahore-54660.
Tel: 042-5718137-39 Fax: 042-5714340 E-mail: racolhr@racopk. Com: sm@racopk. Com A11 KPMG Taseer Hadi & Co.
1st Floor, Sheikh Sultan Trust Efuilding No. 2, Beaumont Road, Karachi.
Tel: 021-5685847 Fax: 021-5685095 A12 Ernst & Young Ford Rhodes Sidat Hyder & Co.
Rooms Nos.601-603, Progressive Plaza, Beaumont Road, Karachi.
Tele: +9221 35650007-11 Fax #: +9221 35681965 E-mail: evfrsh.Khl@pk.Ev.Com Web: tvtvw.Ev.Com A13 Rahman Sarfaraz Rahim Iqbal Rafiq 54 - P, Gulberg II, P.O. Box No. 3054, Lahore.
Phone # 042-5875965-68 Fax # 042-5758621 E-mail: alnasr@wol.Net.Pk A14 Horwath Hussain Chaudhury & Co.
25/E Main Market, Gulberg-2, Lahore.
Tel: 042-5759223-5, 042-111-111-442 Fax: 042-5759226 E-mail: hhc@horwath.Corri.Pk - CATEGORY "B"
B1 Hameed Ch. & Co.
H.M. House, 7 Bank Square, Lahore Tel: 042-7235084-7 Fax: 042-7235083 B2 HLB Ijaz Tabussum & Co.
303-Sawan Road, G-10/1, Islamabad Tel: 051-210 22 13 - 16 Fax:051-2110272 E-mail: ia@hlbitc.Com. Admln@hlbltc.Com: Web: www.Iiaztabussum.Com B3 Zahid Jamil & Co.
1st Floor, Al-Jamil, 7-Madina Town Ext., Kohinoor Chowk off. Jaranwala Road, Faisalabad.
Telephone: (+92 41) 8725065-68 Fax: (+92 41) 8725070 E-mail: info@zahidiamilco.Com Website: www.Zahidiamilco.Com B4 Riaz Ahmad, Saqlb, Gohar & Co.
5 Naslm, C.H.S. Major Nazir Bhatti Road, Off Shaheed-e-Millat Road, Karachi Tel: 021-4945427- 4946112, 4931736 Fax: 021-4932629 B5 Haroon Zakaria & Co.
Room No. 211, 2nd Floor, Progressive Plaza, Plot No. 5-CL-10, Civil Lines Quarter, Beaumont Road, Karachi Tel: 021-5674741-44 Fax: 021-5674745 E-mail: info@hzco.Com.Pk B6 Mushtaq & Co.
407 Commerce Centre, Maulana Hasrat Mohani Road, Karachi.
Tel: 021- 2638521-4 Fax: 021-2639843 B7 Tariq Abdul Ghani Maqbool & Co.
173-W, Block-2, P.E.C.H.S, Karachi.
Phone: +92 21 34322582-3; +92 21-34322606-7 Fax: +92 21 34522492 E-mail: lnfo@tagglobalservices.
Com Website: www. Tagglobalservices. Com B8 F.R.A.N.T.S. & Co.
16-11, 'N' Lane, Commercial Avenue, Phase IV, D.H.A, Karachi.
Phone: +92 (021) 35315175; +92 (021) 35315275 Fax: +92 (021) 35315276 E-mail: karachi@frants.Pk Website: www.Frants.Pk B9 Baker Tilly Mehmood Idrees Qamar & Co.
4th Floor, Central Hotel Building, Civil Lines, Mereweather Road, Karachi.
Tel: +92 (021) 35644872-7 Fax: +92 (021) 35694573 E-mail: mim@mimandco.Com BIO UHY-Hassan Naeem & Co.
193-A, Shah Jamal, Lahore Phone: +92 (42) 37599938; +92 (42) 37599948 +92 (42) 37599640 Fax: +92 (42) 37599740 E-mail: info@uhv-hnco.Com Website: www.Uhv-hnco.Com Bll Nasir Javald Maqsood Imran 904, 9th Floor, Q.M. House, Plot No. 11/2, Ellander Road, Opp. Shaheen Complex, Off 1.1. Chundrigar Road, Karachi Tel: 021-32211515, 32211516, 0345-82822964 Fax:021-32211515 E-mail: consultl@cvber.Net.Pk www.Nimi.Net B12 Parker Randall -A.J.S., Chartered Accountants. * 6C, ST Plaza, 2nd floor, Kohinoor Town, College Road, Faisalabad, Pakistan Tel: 021-32621703 - 04 Fax: 021-32621701 E-mail: khi@parkerrandallais.Pk Web: www.Parkerrandall.Ajs.Pk CATEGORY "C"
Cl Fazal Mahmood & Co.
147 - Shadman L Lahore Tel: 042- 7576986-7580236 , Fax: 042-7560971 C2 S.M. Masood & Co 112-B/l, Block E/l, Gulberg III, Lahore Phone: 042-35712554 - 35712557-8 C3 Ibrahim Sh. & Co.
259-260 Panorama Centre, Fatima Jinnah Road, Saddar, Karachi Tel: 021-5210577-5673529 Fax: 021-5676591 C4 Qavi & Co.
Suites: 717 & 718, Caesars Tower, Shahra-e-Faisal, Karachi Telephone: (+92 21) 32791966-8 Fax :(+92 21) 32791969 E-mail: aaviandco@cvber.neLpk C5 Moochhala Gangat & Co.
F-4/2, Mustafa Avenue, Block-9, Behind "The Forum", Clifton, Karachi - Pakistan Tel: (9221) 35877806-09 CORPORATE LAW DEOISIONS [C.L.D. s Fax: (9221) 35877810 E-mail: advise@mgc.Com.Pk Web: www.Mgc.Com.Pk #TBS Cll #TBE #TBS CIO #TBE #TBS j , C8 #TBE Rafaqat Mansha Mohsin Dossani Masoom & Co. Suite 113, 3rd Floor, Hafeez Centre, A/34, KCHS, Block 7 & 8, Shahrah-e-Faisal, Karachi Tel: 021- 4392361-62, 4396247 Fax: 021-4396247 E-mail: dossanl@mmdk.Com.Pk URL: http: / /www.Mmdk.Com.Pk Aslam Malik & Company, Suite # 18-19, First Floor, Central Plaza, Civic Centre, New Garden Town, Lahore, Pakistan Phone: +92 42 5858693-4; +92 42 5856819 Fax:+92 42 5856019 E-mail: lnfo@aslammallk.Com Mansoor Aslam Seraj Saleem Shahid Suite No. 209, Parsa Tower, Plot No. 31 -1 -A, Block 6, PECHS, Main Shahrah-e- Faisal, Karachi Tel: 3415-0811-3 Fax: 3415-0814 Email: enaulrles@mansooraslamseralsaleem.Com econsultQcvber.Net.Nk URL: www.Mansooraslamsera1saleem.Com Feroze Sharif Tariq & Co.
4-N/4, Block - 6, P.E.C.H.S., Karachi (75400)
Phone: +92 (021) 34522734; +92 (021) 34540891 Fax: +92 (021) 34540891 E-mail: fstc.Ca@gmail.Com M/s Mudassar Ehtisham & Co.
Chartered Accountants, 15-Birdwood Road, Lahore Ph: 042-37500503-4 Fax: 042-37500506 E-mail: info@mecoca.Com Web: www, mecoca.Com M/s S.M. Suhail & Co.
Chartered Accountants, Suite Nos. 1001-1014, 10th Floor, Uni Centre, 1.1. Chundrigar Road, Karachi.
Tel: 021-32414057, 32414163, 32414419 Fax: 021-32416288 Email: sms@smsco.Pk. Www.Smsco.Pk C12 M/s Khalid Majid Rehman & Co.
Chartered Accountants, 3rd Floor, A1 Malik Centre, 70, West, G-7/F7, Jinnah Avenue, Islamabad.
Phone: 051-2821504-05, 2821533-34 Fax: 051 2270227 Email: info@kmr.Com.Pk Kmhrisb@comsats.Net.Pk Web: www.Kmr.Com.Pk C13 Uzair Hammad Faisal & Co.
Chartered Accountants, 37-Main Gulberg, Lahore.
Tel: -42 35877470 - 042-35879310 C14 Suriya Nauman Rehan & Co.
Chartered Accountants, No.02, Street # 2, F-7/3 Islamabad Tel: 051-2610931 ; Fax: 0512610954 Email: nauman_73@yahoo.Com C15 Kabani & Company SKP House, 321-Upper Mall, Lahore.
Phone: 042-111-772-000 Fax: 042-35789182 Web: www.Kabanico.Com.Pk CATEGORY DESCRIPTION (vide BSD Circular No. 3 dated February 24, 2003)
Category "A" Category "B" Category "C"
Auditing Firms in Category "A" are eligible to conduct audit of all Banks/ DFIs. Auditing Firms in - Category "B" are eligible to conduct audit of Banks/DFIs having total assets (net of contra items) up to Rs.50 billion or number of branches up to 99. Auditing Firms in Category "C" are eligible to conduct audit of Banks/DFIs having total assets (net of contra items) below Rs. 5 billion or number of branches below 10.
BPRD CIRCULAR LETTER NO. 20 OF 2013 [6th August, 2013] Subject: PUBLIC HOLIDAYS The State Bank of Pakistan will remain closed on 8th, 9th and 10th August, 2013 (Thursday, Friday and Saturday) on the occasion of Eid-ul-Fitr as notified by the Government of Pakistan.
BPRD CIRCULAR LETTER NO. 22 OF 2013 [19th August, 2013] Subject: ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM fAML/CFT)
REGULATIONS.
Please refer to the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
Regulations issued vide BPRD Circular No. 2 dated September 13, 2012.
2. Based on the feedback received from the Pakistan Banks Association/banks, the amendments as per attached Annexure are made in the aforesaid Regulations.
3. Moreover, the above changes are effective from the implementation date of 'AML/CFT Regulations' i.e. 31st October, 2012 and implementation deadline in respect of following areas of the subject Regulations fs extended till September 30, 2013: * Review of banks' internal Policies /Procedures and Compliance Programs: and * System enhancement for capturing originator information In case of outline transactions or other new areas which can only be Implemented through system enhancement.
4. All other instructions on the subject shall, however, remain unchanged. Enel: Annexure Vol.XII-2013] Anti-Money Laundering and Combating 223 the Financing of Terrorism (AML/CFT)
Reglns.
Annexure to BPRD Circular Letter No.22 of 2013 A. REGULATION-1: CUSTOMER DUE DILIGENCE (CDD)
The paragraph 4 of the above Regulation shall be replaced as under: ~ Existing Provision Amended Provision The Bank/DFI shall verily identity documents of the customers from relevant authorities/document issuing bodies and where necessary using other reliable, independent sources and retain on record copies of all reference documents used for identification and verification. The verification shall be the responsibility of concerned bank/DFI for which the customer should neither be obligated nor the cost of such verification be passed on to the customers. The Bank/DFI shall verify identities of the customers (natural persons) and in case of legal persons, identities of their natural persons from relevant authorities or where necessary using other reliable, independent sources and retain on record copies of all reference documents used for identification and verification. The verification shall be the responsibility of concerned bank/DFI for which the customer should neither be obligated nor the cost of such verification be passed on to the customers.
The paragraph 13 (CDD Measures for Occasional Customers/Walk-in Customers) of the above Regulation shall be replaced as under:- Existing Provision Amended Provision Banks/DFIs shall;
(a) obtain copy of. CNIC from occasional customers/walk- in customers conducting cash transactions above rupees 1.0 million whether carried out in a single operation or in multiple operations that appear to be linked;
(b) obtain originator information along with copy of CNIC while carrying out online transactions (regardless of threshold) by occasional customers/walk-incustomers or where such person is conducting transaction on behalf of an account holder; in relation to Para 13 (b) above, name and CNIC No. Of CDD Measures for Occasional Customers/Walk-in Customers and Online Transactions Banks/DFIs shall;
(a) in case of occasional customers/walk- in-customers:
(i) obtain copy of CNIC while conducting cash transactions above rupees 0.5 million; and
(ii) obtain copy of CNIC while issuing remittance instruments e.g. POs, DDs and MTs etc.
(b) obtain copy of CNIC (regardless of threshold) while conducting online transactions by occasional customers/walk-in-customers (except deposits through #TBS The paragraph 25 of the above Regulation shall be replaced as under:- #TBE #TBS The paragraph 18 of the above Regulation shall be replaced as under: ~ #TBE #TBS Cash Deposit Machines or cash collection/management services). If transaction exceeds Rs.
100,000 the name and CNIC No, shall be captured in system and made accessible along with transaction details at beneficiary's branch. #TBE #TBS originator shall be captured in system and made accessible along with transaction details at corresponding branch if online transaction exceeds Rs. 100,000; and transaction is taking place between two branches of different cities.
(d) obtain copy of CNIC from occasional customers/walk- in-customers who wish to purchase remittance instruments e.g. POs, DDs and MTs etc. #TBE #TBS Existing Provision Amended Provision Banks/DFIs shall not provide any banking services to proscribed entities and persons or to those who are associated with such entities and persons, whether under the proscribed name or with a different name. The banks/DFIs should monitor their relati'onships on a continuous basis and ensure that no-such relationship exists. If any such relationship is found, the same should be immediately reported to Financial Monitoring Unit (FMU) and other actions shall be taken as per law. Banks/DFIs shall not provide any banking services to proscribed entities and persons or to those who are known for their association with such entities and persons, whether under the proscribed name or with a different name. The banksIDFIs should monitor their relationships on a continuous basis and ensure that no such relationship exists. If any such relationship is found, the same should be immediately reported to Financial Monitoring Unit
(FMU) and other actions shall be taken as per law. #TBE #TBS Existing Provision Amended Provision In relation to Para 17 above, in order to avoid the risk where front-end staff do not follow the desired procedures and update the KYC/CDD form of the customer based on their personal knowledge/perception rather than interviewing the customer, banks/DFTs shall obtain sign-off from the customer on every revision of KYC/CDD form. In relation to Para 17 above, customers' profiles should be revised keeping In view the spirit of KYC/CDD and basis of revision shall be documented and customers may be consulted, if necessary. #TBE #TBS The paragraph 27 of the above Regulation shall be #TBE #TBS eplaced as under:- Existing Provision Amended Provision For customers whose accounts are dormant or in-operative,.
Bank/DFIs may allow credit entries without changing at their own,, the dormancy status of such accounts. Debit transactions/withdrawals shall not be allowed until the account holder requests for activation and produces afresh attested copy of his/her CNIC and bank/DFI is satisfied with CDD of the customer. For customers whose accounts are dormant or in-operative, bank/DFIs may allow credit entries without changing at their own, the dormancy status of such accounts. Debit transactions/ withdrawals shall not be allowed until the account holder requests for activation and produces attested copy of his/her CNIC if already not available and bank/DFI is satisfied with CDD of the customer. #TBE #TBS B. REGULATION-2: CORRESPONDENT BANKING The paragraph 1 of the above Regulation shall be #TBE #TBS eplaced as under:- Existing Provision Amended Provision In addition to measures required under Regulation 1 (as necessary), banks/ DFIs shall take the following measures for providing correspondent banking services- In addition to measures required under Regulation 1 (as deemed necessary by the bank/DFI), banks/ DFIs shall take the following measures for providing correspondent banking services- #TBE The paragraph 30 (c) of the above Regulation shall be replaced as under:- Existing Provision Amended Provision establish, by appropriate means, the sources of wealth or beneficial ownership of funds; including obtaining a self-declaration to this effect; and establish, by appropriate means, the sources of wealth or beneficial ownership of funds, as appropriate: including bank/DFI's own assessm ent to this effect; and The paragraph 1 (a) (ill) of the above Regulation shall be replaced as under:- Existing Provision Amended Provision assess the respondent bank's AML/CFT systems and ascertain that they are adequate and effective, having regard to the AML/CFT measures of the country or jurisdiction in which the respondent bank operates; assess the respondent bank in the context of sanctions/embargoes and Advisories about risks; cu> C. REGULATION-3: WIRE TRANSFERS/FUND TRANSFERS The paragraph 3 of the above Regulation shall be replaced as under: ~ Existing Provision Amended Provision Bank/DFI shall include the following information in the message or payment instruction which should accompany or remain with the wire transfer throughout the payment chain:
(a) the name of the wire transfer originator;
(b) the wire transfer originator's account number - (or unique reference number assigned by the ordering institution where no account number exists);
(c) the wire transfer originator's address, CNIC/passport number, date or place of birth or where originator is a legal person, necessary details such as registration number, date and place of incorporation: and a System Track Audit Number (STAN) Bank/DFI shall include the following information in the message or payment instruction which should accompany or remain with the wire transfer throughout the payment chain:
(a) the name of the originator:
(b) the originator's account number (or unique reference number which permits traceability of the transaction); and
(c) the originator's address or CNIC/passport number; The paragraph 4 of the above Regulation shall be replaced as under:- Existing Provision Amended Provision Beneficiary institution shall adopt risk-based Internal policies, procedures and controls for identifying and handling incoming wire transfers that are not accompanied by complete originator Information. The incomplete originator information may be considered as a factor in assessing whether the transaction is suspicious and whether it Beneficiary Institution shall adopt risk-based internal policies, procedures and controls for identifying and handling in-coming wire transfers that are not accompanied by complete originator information. The incomplete originator Information may be considered as a factor in assessing'whether the transacUon is suspicious and whether it merits #TBS reporting to FMU or termination thereof is necessary. Banks/DFIs shall remain cautious when entering into relationship or transactions with institutions which do not comply with the standard requirements set out for wire transfers by limiting or even terminating business relationship. #TBE #TBS merits reporting to FMU or termination thereof is necessary. Banks/DFIs as for possible, shall determine that cross border transactions on behalf of customers are in compliance with the regulations of other country (originator's country). Banks/DFIs shall remain cautious when entering into relationship or transactions with institutions which do not comply with the standard requirements set out for wire transfers by limiting or even terminating business relationship. #TBE In the context of Regulation-3 (Wire Transfers/Fund Transfers), it is clarified that the requirements may not apply to domestic fund transfer transactions through e-banking channels (e.g. ATM, internet banking & mobile banking etc) and RTGS provided bank/DFI has put in place appropriate controls. D. REGULATION-4: REPORTING OF TRANSACTIONS (STRS/CTRS)
The paragraph 5 of the above Regulation shall be replaced as under:-.- Existing Provision Amended Provision Banks/DFIs are advised to make use of technology and upgrade their systems and procedures in accordance with the changing profile of various risks.
Accordingly, all banks/DFIs are advised to implement automated Transaction Monitoring Systems
(TMS) capable of producing meaningful alerts in real time, based on pre-defined parameters/thresholds and customer profile, for analysis and possible reporting of suspicious transactions. Further. Banks/DFIs shall establish criteria in their AML/CFT Policies for management of such alerts. Banks/DFIs are advised to make use of technology and upgrade their systems and procedures in accordance with the changing profile of various risks. Accordingly, all banks/DFIs are advised to implement automated Transaction Monitoring Systems (TMS) capable of producing meaningful. Alerts based on predefined parameters/thresholds and customer profile, for analysis and possible reporting of suspicious transactions. Further, banks/DFIs shall establish criteria in their AML/CFT Policies and/or Procedures for management of such alerts.
E. ANNEXURE-1: MINIMUM DOCUMENTS TO BE OBTAINED FROM VARIOUS TYPES OF CUSTOMERS UNDER AML/CFT REGULATIONS , The documents required at S. No. 4 for 'Limited Companies/Corporations' shall be replaced -as under:- Existing Provision Amended Provision Certified copies from Company Secretary/Public Notary of:
(I) Resolution of Board of Directors for opening of account specifying the person(s) authorized to open and operate the account.
(ii) Memorandum and Articles of Association.
(iii) Certificate of Incorporation.
(iv) Certificate of Commencement of Business, wherever applicable.
(v) Photocopies of identity documents as per Sr. No. 1 above of all the directors and persons authorized to open and operate the account.
(vi) List of Directors on 'Form- A/Form-B' issued under Companies Ordinance 1984, as applicable.
(vii) Form-29, ' t wherever applicable:
(viii) For individual (natural person) shareholders holding 5% or above stake in cpmpany/corporation, photocopies of idenUty document as per S. No.
1. Above; and For legal persons holding shares equal to 5% or above, in addition to any other relevant document including certificate of incorporation, photocopies of identity document as per S. No. 1 above of their individual shareholders holding 5% or more stake. (I) Certified copies of:
(a) Resolution of Board of Directors for opening of account specifying the person(s) authorized to open and operate the account.
(b) Memorandum and Articles of Association.
(c) Certificate of Incorporation.
(d) Certificate of Commencement of Business. Wherever applicable.
(e) List of Directors on Form- A/Form-B' issued under Companies Ordinance 1984, as applicable; and
(f) Form-29, wherever applicable;
(ii) Photocopies of identity documents as .Per Sr. No. I above of all the directors and persons authorized to open and operate the account.
(iii) For Individual (natural person) shareholders holding 20% or above stake (10% or above in case of EDD) in an enUty, identification and verification of such natural persons; and
(iv) For legal persons holding shares equal to 20% or above in an entity, identification and verification of individual (natural person) shareholders holding shares equal to 20% or above of that legal person.
BPRD CIRCULAR LETTER NO. 23 OF 2013 [27th September, 2013] Subject: OPENING OF BRANCHES/OFFICES FOR FACILITATION OF TAX COLLECTION It is informed that SBP-BSC field offices and authorized branches of National Bank of Pakistan will remain open for extended hours on September 30, 2013 for collection of Taxes. Further NIFT will provide special clearing facility after 5-00 p.Nf. On September 30, 2013 (Monday) in order to ensure that all receipts collected on September 30, 2013 are credited to Government Accounts on the same date.
2. In order to facilitate collection of taxes, banks are advised to open such branches and other offices on September 30, 2013 (Monday) till such time that is necessary to facilitate special clearing by NIFT to be held after 5-00 p.m. BPRD CIRCULAR LETTER NO. 21 OP 2013 (7th August, 2013] Subject: PUBLIC HOLIDAY The State Bank of Pakistan will remain closed on 14th August, 2013 (Wednesday) on the occasion of "Independence Day" as declared by the Government of Pakistan.
THE END
1. Under the Basel III'rules (reference BIS press release dated (January 13, 2011)
2. The BCBS Basel III rules permit naUonal discretion with respect to nonequity capital Instruments to be written off or converted to common shares upon a trigger event Accordingly, SBP will prefer the .Option of conversion to common shares.
3. The actual amount that will be recognized may be lower than this maximum, either because the sum of the three specified Items are below the 15% limit'set out in this appendix, or due to the application of the 10% limit applied to each item.
4. This Is hypothetical amount of CET1 and is used only for the purposes of. Determining the deducUon of the specified items.