ISLAMABAD, April 15: The Pakistan Banking Association (PBA) was formally penalised on Tuesday for acting beyond its mandate by playing a ‘lead role’ in forming a seven-bank cartel while the seven banks which introduced ‘enhanced savings scheme’ have also been fined, says the Competition Commission Pakistan (CCP).

Each of the banks is liable to pay Rs25 million while the PBA has been fined Rs30 million.

In its detailed verdict issued on Tuesday, the commission said that the PBA has been directed to desist and comply with the law.

CCP’s Chairman Khalid Mirza warned banks if they were caught in a cartel-like activity again, they would face tougher action.

He said the banks were being given ample opportunity to defend themselves.

He said the banks could file an appeal against the verdict before a two-member bench of the commission. According to him, its decision could be challenged in the Supreme Court.

The seven banks which have been penalised are: Habib Bank Limited (HBL), Allied Bank Ltd (ABL), Muslim Commercial Bank (MCB), United Bank Ltd (UBL), Saudi-Pak Bank, Atlas Bank Ltd and National Bank of Pakistan (NBP).

The decision was announced in response to a suo motu action taken by the CCP in response to a Pakistan Banking Association advertisement to introduce the Enhanced Savings Account (ESA) scheme on behalf of its members, indicating a cartel-like behaviour.

The order stated that the advertisement fell within the purview of prohibitions prescribed by the relevant law.

The commission contested the position taken by the PBA and several of the banks that the SBP was, directly or indirectly, a party to any practice deemed anti-competitive under the law. “No evidence had been placed on record by the PBA to support that the ESA scheme had the approval or blessings of SBP.”

The order stated that the PBA had decided to introduce the scheme; a fact that had not been denied by the banking association.

The order stated that it had become “abundantly clear that the PBA decision vis-a-vis the ESA Scheme had the object or effect of preventing, restricting or reducing competition in the banking sector,” hence a violation of the law. The PBA was careless to the extent that it advertised the ESA scheme in the national press and held a question-and-answer session, without regard to the impact of such decision on the market. The advertisement in itself “reflects a declared understanding reached between the members of the PBA”.

The order explained that the scheme’s purpose was stated to be “in the public interest thus clouding the real intent.”