KARACHI: A Chinese company’s request to acquire KASB Bank was turned down mainly because of its low investment capacity and refusal to provide sufficient information, said the State Bank on Thursday.

The case of Khadim Ali Shah Bokhari (KASB) Bank became complicated when the Chinese offer was refused, attracting criticism on the State Bank. Pakistan and China recently signed agreements worth $46 billion.

“The Chinese company taking interest in the KASB Bank was not ready to provide sufficient information about their balance-sheet while the offer was also meagre,” said a spokesman for the central bank, Abid Qamar. The SBP held a press briefing to clarify its position in the case.

The SBP said the KASB Bank had been facing severe capital shortfall in terms of both Minimum Capital Requirement (MCR) and Capital Adequacy Ratio (CAR) since 2009. As of Sept 30, 2014 the bank MCR (free of losses) was in the amount of Rs0.958 billion with a CAR of negative 4.63 per cent against the required levels of Rs10bn and 10pc, respectively.

However, neither the capital was injected by sponsors, nor any serious effort was made to resolve the problem, said the SBP, adding that the KASB Bank failed to comply with the limitations imposed by SBP.

Because of the weak financial health of the bank and inability of its sponsors to meet capital requirement, the State Bank had to request the federal government to place the bank under moratorium.

The federal government imposed the moratorium in November 2014 for six months while the State Bank was directed to prepare a scheme of reconstruction or amalgamation in accordance with the law. The moratorium will expire on May 13.

However, the SBP categorically said the Chinese company was not eligible to buy the KASB Bank. The Chinese company Cybernaut Investment Group (CIG) had requested for a due diligence approval.

“On receipt of a formal request, the SBP formally requested for complete information on the group to establish its credentials which was not provided after which their request for a formal due diligence was declined.” The SBP said the Chinese investors need to realise the fact that it is just not about $50m or $100m, the mandatory requirements have to be met.

“The SBP realises the importance of the apparent FDI to be brought to Pakistan but it cannot compromise on safeguarding depositor’s interest (in this case Rs57bn or more than 150,000 depositors are at stake).

The SBP said that four banks, including Askari Bank, Sindh Bank, JS Bank and BankIslami, approached for due diligence and BankIslami remained in the field to acquire the KASB Bank.

Published in Dawn, May 1st, 2015

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