A new section on lender of last resort has been introduced in the Bill to provide legal certainty to the support that is already being provided by State Bank of Pakistan (SBP) to the troubled banks. Another new section on regulatory powers has been introduced in the Bill, to provide explicit powers to the SBP for issuing directives, imposing and recovering penalties which are already being exercised by the SBP under the Banking Companies Ordinance 1962.
In order to further the role of Islamic Banking in Pakistan, it is necessary for the Bank to engage in Shariah Compliant Instruments. For this purpose, an amendment has been introduced whereby; the Bank is allowed to hold property for the purposes of use of Shariah-Compliant Instruments. Consequently various sections in the Bill have been amended in order to secure the independent statutory role of the Monetary Policy Committee.
The role of the SBP has been strengthened further by substituting the federal government''s approval wherever required, with the Board''s approval. This is reflected in various amendments including but not limited to establishing offices, agencies or branches outside Pakistan, approved declaration or approved foreign currency, total amount of assets and the value of such assets, forms of weekly returns submitted to federal government.
According to clause 19 of the Bill, after section l7F of Act 1956, the following new sections, shall be inserted, namely: "17G. "Lender of last resort.- Where the circumstances so warrant and a scheduled bank approaches the Bank for financial facility to improve its liquidity and where the bank, in the opinion of the Bank, is solvent and can provide adequate collateral to support the financial facility, the Bank may provide the financial facility, in accordance with the regulations made by the Bank in relation thereto.
17H. Regulatory powers.- (1) The Bank shall have power to issue such directives, instructions and regulations in whatsoever form as may be necessary for carrying out the functions of the Bank under this Act or any other law and shall be binding and enforceable. (2) The Bank may take any enforcement action including imposition and collection of pecuniary penalties upon legal and natural persons for contravention of this Act, any law being administered by the Bank and exercise of any power under sub-section (1)."
The clause 20 described the Bill that in the said Act, in section 18, in sub-section (2), for the word" Board", the words" Monetary Policy Committee", shall be substituted. According to clause 21 of the Bill, in the said Act, for section 19, the following shall be substituted, namely:-
"19. Declaration of approved foreign exchange.- The Board may declare the currency of any country or any monetary unit of account to be approved foreign exchange for all or any of the purposes of this Act.". Clause 26 of the Bill says that in the said Act, for section 42, the following shall be substituted, namely:-
"42. Allocation of surplus- After making provision for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds, such other contingencies or appropriations as are usually provided for by Central Banks in matters respecting unrealised gains on foreign exchange reserves, properties, gold, long-term investments and other similar assets and certain losses directly charged to equity of the Bank, there shall be paid to the shareholders out of the net annual profit a dividend on the shares at a rate to be fixed by the Federal Government, from time to time. Any surplus remaining thereafter shall be paid to the Federal Government."
According to clause 27 of the Bill, in the said Act, for section 43, the following shall be substituted, namely: "43. Auditors- (I) The Board shall not appoint less than two auditors and .the remuneration of such auditors shall be fixed by the Board. A director of the Board or external member of the Monetary Policy Committee or other officer of the Bank shall not be eligible during his continuance in office to be so appointed or for a period of one year after leaving his office. Any auditor so appointed shall, on vacating office, be eligible for re-appointment."