State Bank shoots back at NAB

The Newspaper's Staff Reporter Published October 7, 2017

KARACHI: The State Bank of Pakistan (SBP) on Friday strongly reacted over National Accountability Bureau’s (NAB) decision to investigate its officials for alleged misuse of authority in terms of amalgamation of KASB Bank into BankIslami.

The NAB decision was termed disappointing since the inquiry report did not incorporate all the details provided by SBP. The SBP decided to amalgamate KASB Bank into BankIslami in 2015 after a moratorium was imposed by the federal government.

“Such one-sided views lead to misjudgment about the authority of SBP as a guardian of the financial sector in general and the interest of depositors in particular. Further, it negatively impacts the motivation of SBP staff to discharge its duties without fear or favor,” said a press release issued by the SBP.

The SBP said all stakeholders of the defunct KASB Bank were well aware of the poor financial and operating conditions of the bank, which was facing severe capital shortfall since 2009.

As of September 30, 2014, capital (free of losses) of the defunct KASB Bank was only Rs0.958 billion against requirement of Rs10bn. Moreover, its Capital Adequacy Ratio (CAR) was negative 4.63 per cent against the required 10pc, said the SBP. “It was the only bank which had a negative CAR.”

“Besides capital shortfall, the bank and its sponsors were found engaged in fraudulent practices and siphoning off more than Rs3bn from the bank, for which separate complaints have been lodged with NAB,” said the SBP. The SBP said all of its actions in the resolution and amalgamation of defunct KASB Bank were in accordance with the law; none of the SBP officials misused authority nor were involved in any kind of corrupt practices.

“All the actions taken were permissible under the law and were duly approved by the Ministry of Finance and SBP’s Board of Directors,” said the SBP.

Published in Dawn, October 7th, 2017

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Rizwan

Oct 07, 2017 10:31am

Which ever angle you look at this sweeping and hastily done amalgamation it lacks transparency and neutrality of SBP. what stopped SBP from openly offering it for sale to the highest bidder. It was sold for a mere 1000 rupees ? Beats common sense and defies all logic that a functioning bank with 100+ countrywide branches sold for just 1000 rupees. The new owner did not pump in any money rather SBP lent them a huge soft loan of 20 Billion rupees. This is the first ever and most controvercial action of SBP in decades as a regulator where many serious questions are raised and todate remain unanswered. So instead of makng hue n cry, come clean with elaborate answers simply because 1000 Rs is no sum at all even for a near collapsing bank.

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Anjum

Oct 07, 2017 02:02pm

The KASB bank issue is not an ordinary matter and raises eyebrows. The SBP contends that all rules were followed and they were approved by the Finance ministry. It goes without saying that this must have happened as the SBP is de facto under the ministry. The SBP is not an autonomous institution and it's Governors have been fired for not towing the line. NAB should also investigate whether the SBP exercised all due diligence in the case of billions of rupees of loss to the national exchequer by the now disgraced ex President of National Bank of Pakistan, Syed Ali Raza. It is also well known that NBP has written of billions of rupees of bad loans of important people. Loan write offs don't happen for free and involve economic rents for bank officials. The SBP and NAB should open up the NBP books and thoroughly investigate its Chief of Credit and the ex President. Many a rat would be unearthed from such investigations. The tax payers need to be protected.

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Zafar Ahmed

Oct 07, 2017 03:19pm

It (KASB) was sold for a mere 1000 rupees !

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ananymus

Oct 07, 2017 03:36pm

http://www.sbp.org.pk/press/2017/Pr-NAB-Inv-06-Oct-17.pdf @ anjum and rizwan please read this press release of SBP... may this clear your confusion. And so huge bank was sold for 1000 rupees, i think you dont know about vlauation of business concept. Do you know the hostiry of Barrings Bank (the best bank of UK) was sold for mere 100-150 pak rs (1 pound). The KASB bank was in pathetic condition and SBP being responsible for the depositors did all things for them and not for the investors. the issue is just of the investors and no one else. you forget the depositors which get all their money back due to liquidity support given by the SBP. Further, SBP has shared then and again with NAB of the activities KASB was inlvoded in and also about the NBP Bangladesh scam, which was unearthened by the SBP and all was shared with NAB. NAB is taking all the praise of NBP bangladesh but actually it was all the efforts of SBP. i know what will happen. NAB will loose the case.

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Hashmat Baig

Oct 07, 2017 03:36pm

What rubbish. It was an expensive purchase for BankIslami which paid Rs 1000 for a bankrupt bank and undertook to pay Rs 60 billion to depositors. The Rs 20 billion were given to pay off depositors which were paid back. What is NAB doing on the corruption cases of former owners? Such stupid cases only proves how stupid and incompetent NAB is

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Anjum

Oct 07, 2017 04:25pm

@ananymus you are missing the central point that I raised regarding loan write offs in Pakistan and I am NOT referring to the NBP Bangladesh issue. Should these not be thoroughly investigated? Therein hides much corruption of NBP top brass and on whose Board of Directors the Federal Secretary of Finance also occupies a seat. As far as the court case between NAB and SBP is concerned let the matter be decided on merit and if NAB loses the case then it deserves it and owes an apology to SBP for maligning it.

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Shazia

Oct 07, 2017 04:59pm

SBP has far more credibility than NAB, and this credibility is "earned"

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Shahid_raja

Oct 07, 2017 07:19pm

It is immaterial why it was sold for 1000 rupees because its financial condition merited its closure or selling off for a token money of Rs. 1. Real issue is of transparency and fair dealing. Why it was not sold through open bidding? Secondly,why it was extended 20 billion loan after its sale to the new owners. SBP should answer only these two questions

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S.M.Samiullah

Oct 08, 2017 04:09am

The selling of a bank at a meager Rs 1000 was just not fair. SBP must be punished & a fair price must be given to its shareholders. Lastly in a notification dated 14th NOV 2014 regarding imposing moratorium on KASB, SBP clearly states that a cap of 300 k withdrawal per account will enable a total 93% of the account holders of KASB Bank to withdraw their money as such keeping this statement in view during the moratorium KASB had not been given any soft loan by SBP for the purpose of liquidity hence KASB had enough liquidity to pay off 93% of the depositors. SBP is not autonomous at all and a corrupt institution.

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Syhttps://www.dawn.com/news/1362377/smes-losing-ground-to-imports-from-chinaed Ali

Oct 08, 2017 12:26pm

@Anjum Yes in national interest, independent audit of NBP by the Auditor General of Pakistan should be conducted vis-a-vis.,the role of regulators i.e.,the SBP and SECP. to unearth true state of affairs.Over and above the role of Statutory Auditors of Big Audit Firms charging the bank heavily, should also be probed as they conduct both on and off site audit of NBP of not only its controlling offices but also of branches including foreign branches at the time of periodical financial accounts including Annual Report, they verify and sign the Annual A/cs of the Bank and their report is incorporated in Bank Annual Report every year. Further it has also been seen with dismay from the past that SBP required to be functioned independently but unfortunately instead of serving independently as guardian of monetary policy & financial system of country rather acted to serve some others. Uncalled for repeated decline in interest rates in economy plagued with inflation is an example out of several.

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