state bank of final)

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Presentation on:STATE BANK OF PAKISTAN

Presented to:

Riaz Ahmed Mian


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GROUP MEMBERS

WAQAR BUTT MI10BBA004

HASSAN JAVED MI10BBA061

M. AZEEM MI10BBA019

AWAIS TAHIR MI10BBA061

HUSSAIN IJAZ MI10BBA057


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WHAT IS STATE BANK:

State Bank is financial institutionwhich regulates the banking

system of a country.


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INTRODUCTION AND HISTORY In May, 1948 Muhammad Ali Jinnah took

steps to establish the State Bank of Pakistan

immediately.

These were implemented in June 1948

The State Bank of Pakistan commencedoperation on July 1, 1948


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"We must work our destiny in our own way and present to the

world an economic system based on true Islamic concept of

equality of manhood and social justice."

Quaid-e-Azam Mohammad Ali JinnahFounder of Islamic Republic of Pakistan

On the Occasion of the Opening Ceremony of The State Bank of Pakistan on July 1, 1948


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CONTuu

In the beginning the state bank of Pakistan

was charged with the duty to "regulate theissue of bank notes and keeping of reserves

with a view to securing monetary stability

in Pakistan and generally to operate the

currency and credit system of the country toits advantage".


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CONTuu On January 21, 1997, this autonomy was further

strengthened when the government issued threeAmendmentOrdinances

which were approved by the Parliament in May 1997

Those included were the State Bank of Pakistan Act,1956, Banking Companies Ordinance, 1962 and BanksNationalization Act, 1974.

These changes gave full and exclusive authority to theState Bank to regulate the banking sector, to conduct anindependent monetary policy and to set limit ongovernment borrowings from the State Bank of Pakistan.


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GOVERNING BODYOFSBP


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CENTRAL BOARD OF

DIRECTORS 1. Governor (Chairman)

2. Mr. Salman Siddique (Member) 3. Mr. Kamran Y. Mirza (Member)

4. Mr. Zaffar A. Khan (Member)

5. Mirza Qamar Beg (Member)

6. Mr. Asad Umar (Member)

7. Mr. Waqar A. Malik (Member)

8. Mr. Aftab Mustafa Khan (Corporate Secretary)


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Our Mission is to promote soundness andOur Mission is to promote soundness and

stability of the Banking System throughstability of the Banking System through

proactive offproactive off--site supervision and promptsite supervision and prompt

enforcement actions.enforcement actions.


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Our Vision is to transform OffOur Vision is to transform Off--SiteSite

Supervision & Enforcement DepartmentSupervision & Enforcement Departmentinto a highly professional and dynamicinto a highly professional and dynamic

department fully equipped to proactivelydepartment fully equipped to proactively

supervise banks and other financialsupervise banks and other financial

institutions under purview of the SBP andinstitutions under purview of the SBP and

initiate prompt enforcement actions.initiate prompt enforcement actions.


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OBJECTIVES OF SBP

Efficient Currency Management

Customers Oriented Banking Services toGovernment Institutions, Financial Institutions

and public

Effective Management of payment system

Successful Implementation of State Banks

polices


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AUTOMATION OBJECTIVES To automate the existing manual systems

(Banking Operations)

To develop a local and wide area network,connecting various departments and field offices

To establish an Enterprise Resource Planningsystem

To design and implement a Data Warehousewherein the data is stored, retrieved, upgradedand extracted for analytical purposes

To develop a Management Information System


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|


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PRIMARYFUNCTIONS

1. Monopoly of Note Issue:

All the notes are issued by SBP whereas the coins are

issued by the federal government.

The bank issues notes under the exchange management

method.

In this system SBP keeps 33% gold, foreign currency or

account in foreign banks of the total value of note

issued.


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2. Controller of credit:

The monetary policy of the bank helps to control

credit in Pakistan. For this purpose the State Bank of

Pakistan use

i. Quantitative controls

ii. Qualitative controls

PRIMARYFUNCTIONS


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i. Quantitative tools

Quantitative tools are used to affect the

supply of credit in the whole economy.These are

a) Bank rate

b) Open market operation

c) Cash reserve ratio

d) Credit targets

PRIMARYFUNCTIONS


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ii. Qualitative tools

Qualitative weapons are selective and

mandatory in nature. They influence creditsin selective sectors only. These are

a) Moral persuasion

b) publicity

PRIMARYFUNCTIONS


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3. Regulation and Supervision of the FinancialSystem:

To perform this crucial role effectively and efficiently,State Bank of Pakistan has been given vast powersunder the State Bank of Pakistan Act, 1956,BankingCompanies Ordinance, 1962, Banks Nationalization(Amendment) Act, 1974 and MicrofinanceInstitutions Ordinance 2001 to regulate andsupervise the activities of Banks.

State Bank to systematically monitor theperformance of every banking company to ensure itscompliance with the statutory criteria, and bankingrules &regulations.

PRIMARYFUNCTIONS


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4. Bankers bank: if a commercial banks liquidity decreases, State

Bank of Pakistan extends loans to it.

These loans are given by rediscounting their eligiblebills.

5. Lender of last Resort: If a bank reaches at verge of default, SBP takes over

the bank and pays its all the liabilities to thedepositors.

in the history of Pakistan, Bank of Bahawalpurbecame bankrupt, SBP helped it and merged thebank in Allied Bank of Pakistan after paying all itsliabilities.

PRIMARYFUNCTIONS


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6. Bank to the Government: SBP keeps deposits of federal and provincial

governments.

Salaries and pensions of the government employees

are given by SBP. SBP keeps foreign reserves and manages exchange

rates of the currency.

It takes receipts on the behalf of the government.

It keeps records of imports and exports.

PRIMARYFUNCTIONS


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SECONDARYFUCTIONS1. Public debt management:

Act 1944 defines the responsibilities of SBP for public

debt management. The following actions are involvedin this regard:

Subscribing Federal and Provincial governments

securities at the time of their issue. Sale/purchase of such securities in the Money Market.

Payments of interest to holders of public debt

instruments.


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2. Management of Foreign Exchange:

Being responsible for maintaining the external value

of the currency, the State Bank of Pakistan assumed

the charge of management and administration of theexchange system of the country in line with the

Foreign Exchange Regulation Act.

As an agent to the Government, the Bank has been

authorized to purchase and sell gold, silver or foreignexchange and transactions of special drawing rights

with the IMF.

SECONDARYFUCTIONS


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3. Advisor to Government: The State Bank of Pakistan, also acts as an advisor to the

Government on financial and economic matters particularly

with reference to their monetary aspects like

i. Agricultural creditii. Cooperative credit

iii. Industrial finance

iv. Exchange regulations

v. Banking and credit controlvi. Mobilization of savings

vii.State Bank of Pakistan also tenders advice to the

Government on debt management issues.

SECONDARYFUCTIONS


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4. relationship with international financialinstitutions:

The State Bank of Pakistan deals with other internationalfinancial organizations including

i. Bank for International Settlement

ii. The World Bank

iii. Central Banks of foreign countries, etc

Almost all the agreements of Provincial and FederalGovernment with International Financial Institutions(IFIs) are executed through the State Bank of Pakistan.

SECONDARYFUCTIONS


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1. Risk Management & Analysis Division

This Division is responsible for

monitoring different risks

faced/assumed by individual

Banks/DFIs & prescribespolicies/issues guidelines etc for

managing/mitigating these risks.


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2. Basel Accord & Core Principles Division

The primary objective of this division is

to implement the Basel II Accord in thebanking sector. This involves

participating in capacity building of the

banking industry to understand, adapt &implement the Basel Accord & then to

also monitor compliance in this regard.


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3. Banking Sector Assessment Studies Division

This division is primarily responsible

for reviewing and assessing, on

periodical basis, the banking system

performance and its future outlook. The

division also conducts various stresstesting exercises to assess the resilience

of the banking sector to various shocks.


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4. Credit Information Bureau

CIB Collects & disseminates credit data

from & to financial institutions tofacilitate their credit appraisal process. It

maintains database of all borrowers who

avail credit facilities from financialinstitutions & provides online access to

financial institutions to submit monthly

credit data & to generate CIB reports.


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5.Banking Inspection

Department


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Banking Inspection Department

(BID) is one of the core departments

at SBP. Its mission is to strive forsoundness & stability of the financial

system and safeguard interest of

stakeholders through proactiveinspection, compatible with best

international practices


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BID plays a pivotal role in meetingSBPs main responsibility of

supervising the financial institutions

to maintain soundness of the systemand protection of the interest of

depositors, thereby ensuring public

confidence in the system.


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In order to assess a financialinstitution, BID conducts regular

on-site inspection of all scheduledbanks inclusive of the foreignbanks & DFIs.


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6.Financial Markets

Strategy & ConductDepartment (FSCD)


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is one of the three new Departments

constituted on restructuring of

Exchange & Debt Management Department and Investment Services

Cell on September 14, 2006.


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The Department is responsible toformulate Policies & Regulate

conduct of Domestic Money,

Exchange, Securities, and Derivatives

Markets as well as to disseminate

market data/analysis & to set-up

strategies/ products for market

development.


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FINANCIAL ANALYSIS


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FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS

(Issue Department)(Issue Department)

PARTICULARS 2010

Amount in

billions

Rs

2009 2008

Gold Reserves 220 158 131

Foreign currency

reserves

473 378 439

Investments 672 675 458

Total assets 1377 1224 1046

Total liabilities

(Bank Notes

Issued)

1377 1224 1046


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FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS

(Issue Department)(Issue Department)

0

200

400

600

800

1000

1200

1400

1600

Gold

Reserves

Foreign

currency

Investments Total Assets Total

Liabilities

2010

2009

2008


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FINANCIAL HIGHLIGHTS (Cont.)FINANCIAL HIGHLIGHTS (Cont.)

Banking DepartmentBanking DepartmentParticulars 2010

Amount in

billions

Rs

2009 2008

Total assets 1700 1378 1127

Net equity 416 377.4 304

Net assets 416 377.4 304

particulars 2010Amount in billions

Rs

2009Amount in billions

Rs

Profit for the year 186.7 201.7

Profits EarnedProfits Earned


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0

200

400

600

800

1000

1200

1400

1600

1800

Total assets Net assets Net Equity

2010

2009

2008

FINANCIAL HIGHLIGHTS (Cont.)FINANCIAL HIGHLIGHTS (Cont.)

Banking DepartmentBanking Department


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0

50

100

150

200

250

Net profit

2009-102008-09

2007-08

2006-07

2005-06

2004-05

Profits AnalysisProfits Analysis


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STRENGTHS

Established through an Ordinance (2001)

which provides regulatory powers to

the Board of Banking Services

Corporation.

Existing Departmental setup and strong

branches/field offices network.

Centralization of authority.

Motivated, dedicated, honest and

experienced employees.

Sole Authority to issue currency notes


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STRENGTHS(Contd.)

Professional competency.

Automation of several business activitiesthrough HRMS and Oracle.

Availability of proper BusinessContinuation Plan (BCP).

SBP has its offices in almost all big cities ofthe country.

Audit Charter duly approved by theGovernor State Bank of Pakistan.

Timely problem solving approach.

Liberalization of foreign exchange policies. Market based approach.


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WEAKNESSES

Manuals not fully compliant with automatedsolutions.

Absence of instructions at various levels.

Massive retirement created shortage ofexperienced, qualified and knowledgeablestaff and middle managers.

Lack of IT skills and functional exposure.

Low computer literacy.

Lack of information sharing and routineapproach of branches.

Lack of data base mechanism for foreignexchange operations.


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OPPORTUNITIES

Improvement in services and reduction

in turn around time for public services.

Adoption of I.T. technology, rapid and

complete computerization of manual

work.

office automation to increase efficiency

and effectivenes

Innovations in Currency Management

System.


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THREATS

Employees demand for proxyreference letters & proxy medicinesfrom banks dispensary.

Possible implications of WTO, E-commerce, etc. on the processes of thedepartment.

External pressures/ frequent changesin Government policies.

Sudden collapse /breakdown ofcomputer system (Power breakdownproblem).


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POLITICAL FACTORS

Political instability

Influence of Government

Fluctuation in rules andregulations of regulatory

authorities like IMF and

WORLD BANK


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ECONOMIC FACTORS

Rate of interest

Inflation

Economic crisis prevailing inthe international market

Unstable foreign exchange

rates

Irregular capital market


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SOCIAL FACTORS

Consciousness about

services

Corruption

Bribery

High rate of crimes

High illiteracy rate


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TECHNOLOGICAL FACTORS

Dramatic Role of Technological

Advancement

Rate of change of Technology has greatly

affected the Rate of growth of Economy

Technology can increase the quality ofservices rendered

Channel of distribution is highly

affected by technology

Technology is offering new way to

communicate with the commercialbanks


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SUGGESTIONS

State bank should make its

monetary policy in favor of

economy

Discount rate and interest rate

should be stable one

Strict islamic banking policies

should be observed

Innovation in IT sector

Strict check and balance of

commercial banks


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CONCLUSION

State Bank of Pakistan is the

regulator of financial and

economic sector in the country.Through its rules and regulation

its trying to stabilize the economic

situation in Pakistan. Its

implementing Islamic injunctionsin day to day banking. Whereas its

trying to improve the balance of

trade and balance of payment.

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