KARACHI: State Bank of Pakistan (SBP) Governor Dr Reza Baqir on Monday said that the central bank and the Pakistan Stock Exchange (PSX) had been working together for the deepening of debt and capital markets and improving financial intermediation.
Speaking at a gong ceremony, Mr Baqir said that SBP had revised the rules governing appointment of primary dealers for the government’s debt securities. “This will expand the list of institutions eligible to work as primary dealers, including security depositories and clearing institutions,” he said and added that the aim was to widen the investor base of government securities, improving liquidity, enhancing transparency and promoting market development.
In addition, he said the SBP had also relaxed the selection and performance criteria for development finance institutions (DFIs), investment banks and brokerage houses to encourage them to become part of the primary dealer system, which is currently dominated by banks.
Hence, among other privileges offered to primary dealers, a larger and more diverse group of institutions would now have direct access to primary auctions, Mr Baqir remarked.
He said that while the government debt market in Pakistan is well developed and liquid, participation of capital market clients has historically been limited and SBP wanted to encourage wider ownership of government securities among retail investors.
He noted that the revised primary dealer rules will cater to the needs of a diverse group of investors, including capital market clients, corporates and individuals, and would attract a new clientele to the government securities market.
Mr Baqir shared that this measure had been taken after detailed discussions with stakeholders and a comprehensive review of international best practices.
The governor said that SBP had also made changes to its prudential regulations to facilitate the sponsors, shareholders and companies in raising more financing against the security of shares of their group companies. He highlighted that this amendment would help sponsors and companies in raising liquidity for further investment in new business opportunities and ventures.
He apprised the participants that SBP and PSX were jointly working on expanding the scope of know your customer (KYC) information sharing arrangements between banks and Central Depository Company of Pakistan (CDC) or National Clearing Company of Pakistan Ltd (NCCPL) for existing bank account holders.
He said that tangible progress had been made and was hopeful that this important initiative would be successfully rolled out by the end of the next month.
PSX Managing Director Farrukh Khan said that he was confident that the visit of the SBP governor would mark the beginning of a new collaborative journey dedicated to greater coordination between PSX as the frontline regulator of the capital market and SBP as the regulator for the banking industry.
Published in Dawn, April 13th, 2021