State Bank of Pakistan Amendment Act 2021
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| State Bank of Pakistan Amendment Act 2021 |
Significant proposed changes in
State Bank of Pakistan Act, 1956
background
* International experience and economic literature have
shown that countries with an independent and accountable central bank have long
had lower inflation and higher financial stability.
This is because independent central banks clearly define
their objectives and are accountable for their actions in achieving their
objectives. In general, in modern central banks, these goals prioritize
maintaining price and financial stability, which is a key requirement for
improving people's livelihoods and sustainable economic growth.
the role of state bank defined in state bank of Pakistan act
1956.
Since then, the SBP The act has been amended several times to reflect changes in global economic
thinking, including its advocacy. The independent role of central banks.
Significant changes to the SBP Act took place in 1994, 1997, 2012, and 2015. The
introduction of the SBP Amendment Act 2021 in Parliament is a continuation of
this process to modernize the central bank.
The proposed amendments to the Act seek to clarify the
objectives of the SBP, improve its operational and institutional autonomy to
achieve its objectives, and strengthen its accountability in achieving its
objectives. It is important to note that the proposed amendments are not only
based on international best practices in central bank legislation but also take
into account the ground realities in Pakistan. 2
Purpose of the edit
The SBP's legal framework is being revised in the light of
international best practices and domestic experience.
I. Clarify the objectives of the SBP to improve its
accountability ii. Outline the functions of SBP according to its purpose
iii. Provide the necessary financial resources to help
achieve the goals
iv. Enhancing the active and managerial autonomy of the SBP
v. Improving transparency in SBP operations
vi. Strengthen accountability by strengthening oversight
functions and reporting requirements
3
First, further clarifying the objectives, SBP accountability
is being enhanced
Current:
Offer: Secure economic stability and full utilization of the
country's productive resources
Proposed:
• Main purpose: stability in the domestic price
مقصد Secondary purpose:
financial stability
ti Tertiary Objective: Support government economic policies
to promote resource development and utilization.
4
Second, to achieve these goals, SBP functions are being
properly configured;
Current:
Scattered
Proposed:
Purification of certain functions (e.g. and quasi-financial
operations) and subsequent submission under a new section
5
کافی and sufficient
financial resources are being provided to the SBP (1) share capital
Current:
• Authorized and Payable Capital: Rs. 100 Million
Recommended:
authorized capital: five hundred billion
aid paid-up capital (initial): one hundred billion
6
sufficient financial resources are being provided to the SBP (2) lack of capital and reserves
Current:
• No one
Proposed:
Payment of capital and common reserves to increase the
financial liabilities of the bank up to 8% by maintaining 20 distributed
dividends per year.
• General reserves should be used only to increase capital
or increase deficit
کافی and substantial
financial resources are being provided to the SBP (3) restoration of capital
Current:
• No one
Proposed:
if capital and general reserve fall below zero (-ve_
causes board to prepare a report on the causes and extent of
the deficiency
The federal government will transfer the required amount to
the bank in cash or exchange instruments to recover the paid-up capital.
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And sufficient financial resources are being provided to the
SBP. (4) Distribution of Profits
Current:
No special formula. To be decided with the prior approval of
the government's proposal:
Based on the formula to be incorporated in SBP law;
Government approval is not required
9
The functional/institutional autonomy of the SBP is also
being strengthened. (1) Borrowing from the government
Current:
Limited government loan (ie zero net quarterly loans)
proposed:
No new government is borrowing
10
SBP's functional/institutional autonomy is also being strengthened.
(2) Post-Financial Operations
Current:
The SBP intends to provide rural credit, industrial credit,
export credit, credit guarantees, and housing loans.
Proposed:
The quasi-financial operations described by the government
as financial measures will be stopped
However, financial assistance facilities, which the SBP has
supported access to credit in the following sectors:
11
The functional/institutional autonomy of the SBP is also
being strengthened. () The modified mechanism for coordination between the SBP and
the Government.
Current:
Fiscal and Fiscal Policy Coordination Board
Proposed:
Governor and Finance Minister to liaise. The Governor and
the Finance Minister will liaise closely with each other and keep each other
fully informed on all matters relating to the Bank and Finance Division
jointly.
12
SBP's functional/institutional autonomy is also being
strengthened.
Current:
Every person [in the service] of the bank will be considered
a civil servant in the sense of Section 21 of the Pakistan Penal Code
Proposed:
Additional: Compensation for any lawsuit, litigation, or any
legal action including damages against the bank, board of directors or its
members, governors, deputy governors, members of any board committee and
monetary policy committee, bank officers, and employees. Can't lie. Any act,
power or duty performed by or under this Act, or any of the duties, powers, or
duties performed under it, the Commission Act or any rules and regulations made
under it. Or any legislation administered by the bank unless such action is
taken in good faith. And rosary with purpose
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SBP's functional/institutional autonomy is also being
strengthened ()) Goodwill and Compensation Process کارروائی Ongoing
Proposed:
Additions… Continued:
Governors, deputy governors, Directors, Members of any board
committee and monetary policy committee, officers, and employees of the bank in
good faith in the competence of those in charge of their personal competence
and any commission or duties performed in their official capacity. Will not be
responsible for. In case of any such action, as mentioned in sub-section (1),
they will be compensated by the bank which will bear all its expenses till it
bears all the expenses till the final decision of the case. Will
NAB NAB, FIA or Provincial Investigation Agency, Bureau,
Authority or Institution will not take any action, inquiry, inquiry, or action
under any name without the prior approval of the SBP Board of Directors.
Direct also applies to former directors, governors, deputy
governors 14
Furthermore, administrative autonomy is being strengthened.
(1) Appointment
Position
available
Proposed
Non-executive
Board of Directors
Government
The president On the recommendations of the government, the
Secretary Finance will no longer be a member of the SBP Board
External members of the Monetary Policy Committee (MPC)
Federal Government on the recommendation of the Board
no change
Governor
President
On the recommendation of the President
Deputy Governors
Government. Number of deputies
Governors are not specified.
The federal government, in consultation with the finance minister, recommended a three-member panel through the governor. Three Deputy Governors should be appointed.
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Furthermore, administrative autonomy is being strengthened.
(2) Office conditions
Position
available
Proposed
Non-executive
Board of Directors
3 years Capable of
Reappointment
5 years Two conditions
External members of the MPC
3 years Two conditions
5 years Two conditions
Governor
3 years Eligible for another 3-year term
5 years Eligible for another 5-year term
Deputy Governors
Up to 5 years; Multiple terms
5 years Eligible for another 5-year term
Furthermore, administrative autonomy is being strengthened
(3)
Position
available
Proposed
Non-executive
Board of Directors
Board; For other countries
Abuse Breach of trust
The president Intermediary on serious mismanagement as
determined by the court
External members of the MPC
Board; For other countries
Abuse Breach of trust
Government, to be serious
Court-ordered mismanagement
Governor
The president For other countries
Corruption or breach of trust
The president Intermediary on serious mismanagement as
determined by the court
Deputy Governors
No provision
federal government; With the approval of the Board, on the recommendation of the Governor, the court ruled in favor of serious mismanagement at the international level
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Third, transparency and control are being enhanced. (1)
Executive Committee
* Executive Committee which will make policy decisions
related to the basic functions of the bank as well as management and
administrative matters
, As required, consisting of Governors, Deputy Governors,
Executive Directors and other officers
• Only governors and deputy governors have the right to vote
Third, transparency and control are being enhanced. (2)
External audits
Current:
Appointment of Auditors by the Board
Proposed:
Comprehensive provision for the appointment of external
auditors and their responsibilities through the Audit Committee
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Third, transparency and control are being enhanced. (3)
Audit Committee and Chief Internal Auditor
Current:
There is no current supply
Proposed:
An audit committee consisting of three or more non-executive
board members. Responsibilities, Duties, and Terms of Reference are stated by
the Board (to include some mandatory functions).
For complete Act.
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