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August 30, 2017

State Bank to bolster vigilance on foreign banking operations

Business

 
August 30, 2017

KARACHI: State Bank of Pakistan (SBP) on Tuesday said it will strengthen its vigilance mechanism to monitor international operations of local financial institutions. 

“We will adopt proactive approach in monitoring foreign branches of local banks,” said Tariq Bajwa, governor of SBP. Bajwa, addressing a meeting with the office bearers of Karachi Chamber of Commerce and Industry (KCCI) said the latest Habib Bank Limited’s happening is not good for Pakistan. “It is a concern for us.”

Governor SBP said HBL informed the central bank that it had not done anything wrong. Bajwa said New York State Department of Financial Services shared some confidential information with the State Bank of Pakistan a month ago.

On proposed amnesty scheme for foreign assets of Pakistanis, he said there is no moral ground for amnesty.  “But, we have to adopt a pragmatic approach,” he said. Globally, automatic exchange of information would be implemented from January 1, 2018 and it would be difficult for Pakistanis to hide money in foreign financial institutions.

The Governor State Bank of Pakistan said in the past only specific information was available on request. But, all the financial information will automatically be exchanged from the next year.

In June, Pakistan signed Organization for Economic Cooperation and Development for the multilateral convention to implement tax treaty related measures. Around 70 countries simultaneously signed the convention to exchange financial information between the signatories. 

On 100 percent import cash margin to arrest decline of foreign reserves, Bajwa said the economy is facing certain challenges. He said the country’s macroeconomic conditions of the country are improving as growth numbers are impressive.

Lending agencies forecast growth for Pakistan at around 6 percent in the next fiscal year. Private sector’s credit off-take was significant during the last fiscal year.

Imports sharply increased, but 32 percent of imports were related to capital goods. Bajwa assured the Karachi Chamber of Commerce and Industry members of reviewing the list of non-essential items on which 100 percent import margin was imposed.

On the KCCI’s proposal to include a chamber’s member into the monetary policy committee, governor said it is difficult to include members any more. He said finance secretary is no more part of the committee.

On issue of money changers accepting old dollar bills on lower rates, the governor said he had issued instructions to banks to exchange such foreign currency notes on prevailing rates. Bajwa said the central bank had furnished a report related to a sudden fluctuation of exchange rate with the finance ministry.

Siraj Kassem Teli, chairman of Businessmen Group and former president Karachi Chamber of Commerce and Industry said past amnesties discouraged genuine taxpayers. 

Teli said new amnesty should be meant for good. Shamim Ahmed Firpo, president of Karachi Chamber of Commerce and Industry said small traders would be wiped out due to 100 percent cash margin, which was imposed in February 2017. Firpo urged SBP not to relocate its departments to other places as Karachi is the country’s hub of commercial activities.