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| SECP imposes Rs205m penalty on PBA, 7 banks |
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Wednesday, April 16, 2008
ISLAMABAD: The Competition Commission of Pakistan (CCP) has found seven banks along with the Pakistan Banking Association (PBA) guilty of cartel-like behaviour. The CCP, thus, imposed a penalty of Rs205 million on them on Tuesday.
This action has been taken for the first time against the influential banking sector, which had earned billions of rupees by fleecing voiceless clients for having a huge spread (gap between lending and deposit rates), during the Musharraf and Aziz regime. The CCP imposed a penalty of Rs175 million on seven banks, while it also slapped a fine of Rs30 million against the PBA.
The seven banks which have been fined Rs25 million each include Habib Bank Limited, Allied Bank Limited, MCB Bank Limited, United Bank Limited, Saudi Pak Bank Limited, Atlas Bank Limited and National Bank Limited.
The Competition Commission of Pakistan (CCP) announced its decision here on Tuesday after its inquiry against 42 commercial banks and PBA.
Finding them guilty of cartel like behaviour, CCP has imposed penalty on seven banks along with the PBA, giving benefit of the doubt to remaining scheduled banks and members of the PBA.
The decision was taken regarding the suo-motu notice by the CCP, in response to the advertisement to introduce Enhanced Savings Account (ESA), made by the Pakistan Banking Association (PBA) on behalf of its member banks. The advertisement indicated collusive or cartel like behavior.
The order issued states that the subject advertisement falls within the purview of prohibitions prescribed by Section 4 of the Ordinance. Section 4 of the Ordinance in its relevant parts reads as follows.
“Prohibited agreements, (1) No undertaking or association of undertakings shall enter into any agreement or, in the case of an association of undertakings, shall make a decision in respect of the production, supply, distribution, acquisition or control of goods or the provision of services which have the object or effect of preventing, restricting or reducing competition within the relevant market unless exempted under section 5 of this Ordinance.”
The Commission’s order has noted in the enquiry and hearings held in the matter, that the PBA and several of the banks asserted that the ESA scheme was introduced in consultation with the SBP. It has been importantly noted that this, apart from being inaccurate, misses the fundamental point.
The issue before the Commission was not the introduction of a saving scheme by a bank pursuant to a SBP circular, but whether the terms and conditions of the ESA scheme prominently advertised by PBA is tantamount to a breach of Section 4 of the Ordinance.
While the Commission was fully aware of its statutory duties and the scope of its functions, it was also duly familiar with the role of SBP as the apex regulator of the Banking Sector. The Commission does not encourage PBA or any bank to suggest that the SBP was, directly or indirectly, a party to any practice deemed anti-competitive under the Ordinance.
No evidence had been placed on record by PBA to support that the ESA scheme had the approval/blessings of SBP.
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ISSN 1563-9479 
