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Management of Financial Institutions

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Management of Financial Institutions - MGT 604
VU
Lecture # 9
STATE BANK OF PAKISTAN - VARIOUS DEPARTMENTS (Contd.)
Banking Surveillance Department
Health of an economy depends on the degree of safety and stability of its banking and
financial system. A sound, stable, and robust banking and financial system is a pre-requisite
for economic well being of a country and its populace. In Pakistan, ensuring the stability
and soundness of the banking system is a statutory responsibility of State Bank of Pakistan.
The banking supervision departments viz. Banking Policy and Regulations Department
(BP&RD), Banking Surveillance Department (BSD), Off-Site Supervision and Enforcement
Department (OSSED) and Banking Inspection Department have been assigned this
important function to work jointly and severally to ensure the soundness of individual banks
and of overall banking industry. The Department is responsible to supervise financial
institutions in the country. The department ensures effective adherence to regulatory &
supervisory policies, monitors risk profiles, evaluate operating performance of individual
banks/DFIs & the industry as a whole while issuing guidelines for managing various types
of risks. It also ensures that banks are adequately capitalized & have policies & systems in
place to assess various risks. The department is also responsible for the implementation of
the Basel II Accord in Pakistan. The function & activities of Credit Information Bureau also
falls within the domain of Banking Surveillance Department. The CIB collect credit data,
under section 25A of the Banking Companies Ordinance 1962, maintain its database &
disseminate credit information to financial institutions online to facilitate their credit
appraisal process.
Main Objectives
To ensure effective regulatory and supervisory oversight of Banks and DFIs.
To assess and review, periodically, performance and future outlook of banking
system.
To monitor risk profiles of banks, to prescribe guidelines etc requiring banks & DFIs
to put in place adequate Risk Management Systems
Developing detailed understanding of New Basle Capital Accord.
To ensure compliance with Basel Core Principles of Banking Supervision.
To provide online collection & dissemination of credit related information to
financial institutions in order to facilitate their credit appraisal process.
Structure of the Department
1.
Risk Management & Analysis Division
This Division is responsible for monitoring different risks faced/assumed by individual
Banks/DFIs & prescribes policies/issues guidelines etc for managing/mitigating these risks.
2.
Basel Accord & Core Principles Division
The primary objective of this division is to implement the Basel II Accord in the banking
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. The other objective is to ensure compliance with Basel Core principles of banking
Supervision.
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Management of Financial Institutions - MGT 604
VU
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
stress testing exercises to assess the resilience of the banking sector to various shocks.
4.
Credit Information Bureau (CIB)
Collects & disseminates credit data from & to financial institutions to facilitate their credit
appraisal process. It maintains database of all borrowers who avail credit facilities from
financial institutions & provides online access to financial institutions to submit monthly
credit data & to generate CIB reports.
5.
Coordination & Administration Unit
The primary objective of this division is to provide necessary support services to the
Department's staff and officers to facilitate them in effective & efficient discharge of
assigned functions/ responsibilities. It coordinates with other departments & external
organizations for timely provision of support services and technological assistance.
It is also responsible for receipt/dispatch of correspondence & records of inward & outward
mail, besides preparing a consolidated business plan for the department & its monitoring &
follow up for effective implementation. The Division also coordinates on various training
activities for imparting training to the staff/officers.
Training Programs by SBP
This much coordination among supervisory departments attempts to ensure stable &
efficient banking system.
Economic Policy Department
Economic Policy Department is primarily engaged in eight fundamental activities. These
include:
·
Preparation of Monetary Policy Statement
·
Preparation of Monetary Surveys
·
Preparation of Annual Credit Plan
·
Consultations with the IMF
·
Computation of REER index;
·
Computation of domestic public debt
·
Analysis of financial markets
·
Empirical research papers
The Department also deals with external sector issues and references on money, credit, and
exchange rates management. For operational purposes, the Department has been divided
into the following four groups:
1.
Monetary Survey & IMF Consultations Group
·
This group is responsible for preparation of Monetary Survey, details of
Government budgetary borrowings, commodity operations, bank credit to private sector,
public sector enterprises including (major autonomous bodies) and other items separately
for SBP and Scheduled banks.
·
This group is responsible for preparation of Monetary Survey, details of
Government budgetary borrowings, commodity operations, bank credit to private sector,
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Management of Financial Institutions - MGT 604
VU
public sector enterprises including (major autonomous bodies) and other items separately
for SBP and Scheduled banks.
In addition to this, the group is also assigned the task of preparation of material for IMF
Consultations, World Bank and Ministry of Finance, monitoring of Performance Criteria
and disposal of queries and references.
2.
Money, Credit & Prices Group
·
The group is responsible for preparing credit plans, working papers & performs
Secretariat work. Other assignments include credit targeting, credit monitoring, banking
issues & reforms, Inflation watch, analysis of lending rates, large scale manufacturing
developments & disposal of references on credit allocation.
·
The group also prepares periodic reports/reviews on Credit assessment of Private
sector, credit assessment of govt. sector, analysis of tax revenue, domestic debt, & impact
analysis of various policy initiatives. The group also intends to initiate work on micro credit
and SMEs.
3.
Financial Market & Exchange Rates Group
·
This group is responsible to keep constant watch & analyze developments in the
financial markets. It prepares and supplies variety of background information for circulation
in meetings.
·
Further, it is also assigned the task of dealing with the matters relating to exchange
rate and foreign exchange reserves.
4.
External Sector Group
The group deals with the matters relating to Pakistan's relationship with International
Financial Institutions like
·
IMF: International monetary fund.
·
IBRD: International Bank for Reconstruction & Development.
·
ADB: Asian development Bank.
·
The issues of WTO and SAARC FINANCE.
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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,