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SECP warning for government

ISLAMABAD - The government has been warned by the Securities and Exchange Commission of Pakistan (SECP) that the government's proposal to bring Non-Bank Financial Companies (NBFCs) under the regulatory control of State Bank would turn the central bank into a corporate and securities regulators and will result in overlap of jurisdictions for financial and non-financial entities.

Sources said that the SECP, which at present regulates the NBFCs, has termed as piece-meal solution a proposal raised on Tuesday at a meeting here to empower the State Bank of Pakistan (SBP) to regulate NBFCs as well as business groups owning both financial and commercial concerns.

The meeting was held over a proposal to amend the Banking Companies Ordinance and was presided over by Finance Minister Naveed Qamar.

The SECP is also of the view that the proposal has not been discussed with the stakeholders and could hurt the market, it learnt.

The commission, sources said, has conveyed to the Finance Ministry that the supervision of the NBFCs has been transferred just five years ago to the SECP and that the reasons for transfer needed to be studied before any reversal of the decision. Leasing companies, in fact, have always been under the SECP. And the commission now wants the federal government to carry out regulatory impact assessment before any decision and that all the market players should be consulted.

However, the the Investment Bank Association of Pakistan has convened a meeting to discuss the pros and cons of the proposal. The association's chairman, Rashid Mansur, when contacted, said that he would hold meetings with individuals and members in order to come with a joint view point.

Responding to a question, he said," the timing of the proposal is a bit strange and odd". He said this was not an issue which could be resolved overnight and needed a lot of time. He said that the SBP had rationale while deciding to handover the regulation of the NBFC to the SECP in the past and there was a need to study that rationale now.

He said that keeping in view the timing of the proposal and the micro economic situation, the proposal could not be in the interest of the economy and the capital markets.

Meanwhile, The Leasing Association of Pakistan also held a meeting over the issue.

An amendment to Banking Companies Ordinance based on the proposal will enable SBP supervisors to oversee the banking group on a consolidated basis. The central bank will be able to monitor risks in their entirety and appropriately apply prudential norms to all aspects of the business conducted by the group world-wide.

The SECP yesterday also approved six Pension Funds under the Voluntary Pension System to promote and regulate development of Private Pension Schemes and Funds in the country.

The SECP proposed to allow the subscriber of a Recognised Provident Fund to transfer funds to a Voluntary Pension Fund so as to create linkages between these Voluntary Pension Funds with the existing occupational savings schemes. For this purpose amendment in Rules 103, 104, 105 and 106 of the Income Tax Rules, 2002 have been made through the new SRO issued on Wednesday.

A senior official of the SECP explained that pension funds should be invested in stock market for which the newly appointed economic advisory council was preparing recommendations. However, he said that new Voluntary Pension System (VPS) under the VPS rules 2005 provides a comprehensive framework for the employed and self employed individuals to contribute into a pension fund during their working life to provide regular income after retirement.