KARACHI, March 12: The State Bank of Pakistan on Wednesday issued guidelines to structure and discipline due diligence process for merger/amalgamation or local incorporation of financial institutions/banks.

As per guidelines, “the parties/ financial institution(s), one of which is a bank, interested in amalgamation/merger or local incorporation, shall request SBP’s prior clearance/approval to commence the due diligence by submitting its credentials (business background, resources including net worth, etc.) and its proposed team (lawyers, advisors, chartered accounting firm, etc.) for conducting due diligence.

After getting SBP’s clearance, the intending group of sponsors/financial institution, shall submit an “undertaking” (as per specimen attached) to SBP confirming that all information, particularly all non-public information, and documents, etc., shall be kept strictly confidential and shall not be divulged to any person/organization not included in the due diligence team as advised to the SBP. The due diligence can then start. In case of any breach of the “undertaking”, the clearance/approval given by the State Bank shall be withdrawn with immediate effect.

The due diligence team shall also be bound under the aforesaid “Undertaking” to keep the information, documents, etc., confidential and shall not divulge any information that they come across during the course of the due diligence. The party conducting the due diligence shall not demand, from the other party, any information given by the SBP or the SBP inspection report, either in part or full.

On completion of the due diligence, the party conducting the due diligence shall inform in writing to the State Bank that the process of due diligence has been completed.—APP