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Management of Financial Institutions

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Management of Financial Institutions - MGT 604
VU
Lecture # 7
STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS
Agricultural Credit Department
Established under Section 8(3) of SBP Act 1956, is mainly responsible to meet credit needs
of agriculture that being the mainstay of Pakistan's economy generates nearly one fourth of
the total out put and 44% of total employment and is the major source of foreign exchange
earning.
To operate as a focal point in SBP for all agriculture and rural finance policies,
programs and projects.
To assess/estimate the credit needs of farm & non farm sector in rural areas.
To review the issues and challenges faced and developments taking place in agriculture and
rural finance both in the country and elsewhere to develop an adequate knowledge and
information base for policy formulation etc
To formulate agri & rural finance policies in consultation with stakeholders to
ensure adequate flow of institutional credit in rural areas.
To monitor growth and trends in agri /rural finance portfolio of banks & financial
institutions.
To collect periodical agri/rural finance data for analysis, policy formulation and
dissemination to general public.
To advise Federal and Provincial Governments, Banks, Cooperative Banks &
agriculture chambers on agri & rural finance issues.
To initiate and undertake information dissemination and awareness building
programs for farmers and special training programs for commercial banks.
To build SBP rural and agriculture finance capacity
To operate as a Secretariat for Agriculture Credit Advisory Committee (ACAC)
The organization of the Department is spread over the following Divisions: -
1. Division ­ I Agriculture Credit Estimation & Target Monitoring Division
2. Division ­ II Agriculture Financing Policy Division
3. Division ­ III Services, Training & Development Division
Banking Inspection Department
(BID) is one of the core departments at SBP. Its mission is to strive for soundness &
stability of the financial system and safeguard interest of stakeholders through proactive
inspection, compatible with best international practices. BID plays a pivotal role in meeting
SBP's main responsibility of supervising the financial institutions to maintain soundness of
the system and protection of the interest of depositors, thereby ensuring public confidence
in the system. In order to assess a financial institution, BID conducts regular on-site
inspection of all scheduled banks inclusive of the foreign banks & DFIs. The present
supervisory structure at the department is institution focused whereby concerned Desk In-
charges have been assigned specific institutions for effective monitoring through on-site
examination, off-site reports from Banking Supervision Department and various market
reports. The regular on-site inspection is conducted on the basis of CAMELS Framework.
(Capital, Asset Quality, Management, Earnings, Liquidity, Sensitivity and System
Controls). CAMELS are an effective rating system for evaluating the soundness of
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Management of Financial Institutions - MGT 604
VU
financial institutions on a uniform basis and for identifying these institutions requiring
special attention or concern. Here the focus of inspection is generally on risk assessment
policies & procedures of the banks and control environment to keep attached risks within
acceptable limits and compliance with laws, regulations, and supervisory directives.
Risk Assessment Polices
In continuation of the inspection process, discussions are held with external auditors to
review banks' internal controls, compliance with legislation & prudential standards and
adequacy of provisions. Here it would be important to mention that BID works in close
coordination with Off-Site Surveillance Desk at Banking Supervision Department and other
departments in SBP. BID conducts the regular full scope examination of banks pursuant to
an inspection schedule; however, flexibility exists in policy for frequency of inspections
depending upon the need to maintain safety & soundness. CAMELS rating are criteria to
determine the frequency of inspection of banks as weak institutions are given greater
attention. Special investigations (targeted inspections) are also conducted as and when
circumstances so warrant on the basis of complaints or market reports about specific
institution.
Financial Markets Strategy & Conduct Department (FSCD)
FSCD is one of the three new Departments constituted on restructuring of Exchange & Debt
Management Department (EDMD) and Investment Services Cell (ISC) on September 14,
2006. The Department is responsible to formulate 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.
Functions:-
To fulfill above, the Department has been divided into three Divisions, each Division is sub-
divided into different units.
Markets Policy & Regulations
Review & formulate Market related Policies/Regulations vis-à-vis FEEL, CRR/SLR,
o
Dealers Code of Conduct, Public Debt Act, Market Settlement Issues, PD System, Interbank
Brokerage monitoring etc.
Secretariat for the Derivatives Approval & Review Team (DART).
o
Review & coordinating with Banking Inspection Department on enforcement of
o
Treasury specific inspection comments viz existing regulations governing FX, Derivatives
& Debt Markets.
Policy issues pertaining to other departments etc.
o
Coordination with relevant Market Associations, Committees & Players e.g., Sub-
o
Committee on Treasury & Capital Markets, etc.
Market Analysis & Forecasting
a)
Exchange Rate & FX Market Analysis
b)
Analysis of Money and Debt Markets
c)
Derivatives market analysis.
d)
Preparation of monthly market update/ Quarterly Financial Market Review.
e)
Liquidity Forecasting & Data base Management of Permanent & Floating Debts
f)
Assist in formulation of Sovereign Domestic Debt plan.
g)
External Debt maturity Profile.
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Management of Financial Institutions - MGT 604
VU
h)
External Debt maturity Profile.
Market & Product Development Strategies
Product development initiatives for Sovereign Debt instruments. Derivatives
o
products/strips, Islamic Instruments.
Market Development projects like...Listing of GOP Securities. Automated
o
Auction/Payment System. IFSB Standards & Islamic market Development. Market
Systemic Issues and Market Benchmarks.
Market Publications.
o
Foreign Exchange /Money Market, Derivatives Market Analysis.
o
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Table of Contents:
  1. Financial Environment & Role of Financial Institutions:FINANCIAL MARKETS &INSTITUTIONS
  2. FINANCIAL INSTITUTIONS:Non Banking Financial Companies
  3. CENTRAL BANK:Activities and responsibilities, Interest Rate Interventions
  4. POLICY INSTRUMENTS:Open Market Operations, Capital Requirements
  5. BALANCE OF TRADE:Balance of Payments Equilibrium, Public Policy and Financial Stability
  6. STATE BANK OF PAKISTAN:History, Regulation of Liquidity, Departments
  7. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS:Banking Inspection Department
  8. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Debt Management
  9. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Training Programs by SBP
  10. STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.):Human Resources Department
  11. MAJOR DRIVERS OF FINANCIAL INDUSTRY:GLOBAL FINANCIAL SYSTEM, The World Bank
  12. INTERNATIONAL FINANCIAL INSTITUTIONS:ADB Projects in Pakistan, Paris Club
  13. PAKISTAN ECONOMIC AID & DEBT:Macroeconomic Stability, Strengthening Institutions
  14. INCREASING FOREIGN DIRECT INVESTMENT:Industrial Sector, Managing the Debt
  15. ROLE OF COMMERCIAL BANKS:Services Typically Offered by Banks, Types of banks
  16. ROLE OF COMMERCIAL BANKS:Types of investment banks, The Management of the Banks
  17. ROLE OF COMMERCIAL BANKS:Public perceptions of banks, Capital adequacy, Liquidity
  18. ROLE OF COMMERCIAL BANKS:Problem bank management, BANKING SECTOR REFORMS
  19. ROLE OF COMMERCIAL BANKING:Private Deposit Insurance,
  20. BRANCH BANKING IN PAKISTAN:Remittances, Online Fund Transfer
  21. ROLE OF COMMERCIAL BANKS IN MICRO FINANCE SECTOR
  22. Mutual funds:Types of international mutual funds, Mutual funds vs. other investments
  23. Mutual Funds:Criticism of managed mutual funds, Money Market Fund
  24. Mutual Funds:Balanced Funds, Growth Funds, Specialized Funds, Measuring Risks
  25. Mutual Funds:Cost of Ownership, Redemption Fee, Reports to Shareholders
  26. Mutual Funds:Internet Fraud, The Pyramid Scheme, How to Avoid Investment Fraud
  27. Mutual Funds:Investing In International Mutual Funds, How to Pre-Select a Mutual Fund
  28. Role of Investment Banks:Recent evolution of the business, Possible conflicts of interest
  29. Letter of Credit:Elements of a Letter of Credit, Commercial Invoice, Tips for Exporters
  30. Letter of Credit and International Trade:Terminology, Risks in International Trade
  31. Foreign Exchange & Financial Institutions:Investment management firms, Exchange Traded Fund
  32. Foreign Exchange:Factors affecting currency trading, Economic conditions include
  33. Leasing Companies:Basic Purpose of Leasing, Technological Benefits
  34. The Leasing Sector in Pakistan and its Role in Capital Investment
  35. Role of Insurance Companies:Indemnification, Insurer’s business model
  36. Role of Insurance Companies:Life insurance and saving
  37. Role of financial Institutions in Agriculture Sector:What is “Revolving Credit Scheme”?
  38. Agriculture Sector and Financial Institutions of Pakistan:What is SMEs
  39. Can Government of Pakistan Lay a Pivotal Role in this Sector?:Business Environment
  40. Financial Crimes:Process of Money Laundering, Terrorist Financing
  41. DFIs & Risk Management:Managing Credit Risk, Managing Operational Risk
  42. Banking Fraud & Misleading Activities:Rogue Traders, Uninsured Deposits
  43. The Collapse of ENRON:Auditing Issues, Corporate Governance Issues, Corrective Actions
  44. Classic Financial Scandals:Corruption, Discovery, Black Wednesday
  45. RECAP:FINANCIAL INSTITUTIONS, CENTRAL BANK,