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May 4, 2006

Foreign banks urged to offer new financial solutions

May 4, 2006

KARACHI: Governor State Bank of Pakistan (SBP) Dr Shamshad Akhtar asked foreign banks, operating in Pakistan, to offer “unique and new financial solutions” to provide customers an integrated solution that caters to the emerging consumer and industry requirements.

Delivering her keynote speech at Global Transaction Banking seminar, organised by Deutsche Bank (DB) here on Wednesday she said financial industry of Pakistan has to catch up fast with global developments and achieve better financial diversification and strengthen its risk management system.

Welcoming the DB global team in Pakistan she said banking assets of Pakistan stands at over $60 billion and Pakistani bank’s profitability is at an all-time high and un-precedented reaching close to Rs93 billion by 2005.

She cautioned that in the period ahead the financial industry, however, has to be positioned for more competitive environment and has to cater for more diverse and complex requirements of Pakistan’s consumers and infrastructure.

She said Pakistan like the rest of Asia growing fast and rise in per capita income emergence of the middle-income group and relative wealth increases all together bring with them new demands for the retail banking industry.

She said among others, both investors and industry are seeking better investments and financing alternatives and solutions with demand for private debt, asset based and mortgage based securities, credit derivatives and hedge products now emerging from different segments of economy and population.

She said central bank by moving to next level of development encouraging banks to invest in technology and improve their payment and settlement system infrastructure, internal controls and move to e-banking.

Giving latest implementation position with regard multi-million dollar project of Real Time Gross Settlement project she disclosed that this project is expected to be “live by the 3rd quarter of


According to her, it will automate the current inter-bank settlement system for large value payments at SBP and will minimise the risks like credit, liquidity and settlement risk inherent in the end of day settlement system. Its implementation will make the payments systems much more efficient and resilient, offering transactional features which are hard to achieve under the current settlement systems.

She said the second project PRISM will start settlement of securities between the participants on delivery versus payment basis thus reducing the risk in securities trading by minimising the settlement lag.

The SBP will also be able to settle the open market operation transaction through PRISM.

This system will bring more efficiency in inter-city and intra-city clearing between the banks as the NIFT will be doing clearing on multilateral basis and these clearing results will be settled on real time basis in PRISM.

PRISM will also facilitate the commercial banks in making time critical third party funds transfer on behalf of its customers.

She said SBP also framing the required rules and regulations of the proposed system and Electronic Funds Transfer Act, 2005.