Central Bank set to launch 3rd FICF tomorrow
State Bank of Pakistan (SBP) will form inspection teams to conduct regular visit of commercial, microfinance Islamic banks and Direct Finance Institutions (DFIs) for assessing their records related to Institutional Risk Assessment Framework.
The central bank has previously received surveys and questionnaire of IRAF from commercial banks and DFIs on half yearly basis, however, it has decided to review the results of questionnaire through inspection team.
In this regard, it issued an instruction to banks, microfinance bank and Islamic banks to fill in IRAF Self Assessment Questionnaires on half yearly basis, obtaining the approval of Board of Directors within forty-five days of the cutoff date, and keep these questionnaires for their own record.
The central bank introduced IRAF Questionnaire in 2004 and then revised with additional questions in 2008 for ensuring proactive monitoring of the risks the banks/DFIs are exposed to and to further strengthen the existing supervisory mechanism of the State Bank of Pakistan.
The framework envisages a collaborative and seamless supervisory focus amongst the various supervisory departments within the SBP. The banking companies provided details relating to four areas including compliance with standards, codes and guidelines; supervisory and regulatory information; financial performance and condition and market information and intelligence. It was the responsibility of the Board of Directors to fill out these questionnaires and submit them to Banking Inspection Department on half yearly basis, within forty-five days of the cutoff date, which would be June 30th and December 31st. In case of banks incorporated outside Pakistan, with branches operating in Pakistan, the country manager would be authorized to fill out the forms and submit the same.
From now onward, the inspections team will visit banks' headquarters and its branches to assess input of IRAF which include compliance related to know your customers details such as true identity of the beneficial owners of all accounts opened by a person, entity etc,; the real party in interest or controlling person/entity of the account(s) in case of nominee or minors account? the monitoring system in Bank/DFI to check customers accounts and transactions on regular basis.
The assessment will be checked whether the banking companies and DFI get itself credit rated by a credit rating agency, which is on the approved panel of the State Bank of Pakistan. Whether the Bank/DFI update its credit rating for the last financial year within six months from the date of close of the financial year and with regard to suspicious transactions, the bank/ DFI correspondent with central bank to inform all complex, unusually large transactions as mentioned in the PRs.
Besides the review will provide analysis of banks related to Bank/DFI measure from adopting any practices through which an ostensibly different position of the accounts could be depicted in financial statements with particular reference to the deposits, MCR, non-performing loans/assets, provisioning, profit, inter-branch and inter-bank accounts. Do Banks/DFIs meet the minimum conditions as pre- scribed by SBP before taking exposure including Borrower's basic fact sheet, loan application form, financial accounts and CIB report, it said.
Meanwhile, The State Bank of Pakistan will launch the 3rd Financial Innovation Challenge Fund (FICF) round tomorrow in Islamabad.
The Finance Minister Ishaq Dar will preside over the launching ceremony. FICF is a component of the larger Financial Inclusion Program (FIP) being implemented by State Bank of Pakistan under the funding assistance of the UK Aid.
The challenging round is being unveiled to promote Islamic financial services to meet the latent demand for Shariah compliant financial services in Pakistan. This round aims to develop education and research infrastructure for promoting Islamic Finance in partnership with leading higher education institutions. The initiative will develop the industry's human capital base in the form of Islamic finance professionals, specialists including Shariah scholars, economists and researchers to meet the growing demands for Shariah compliant products and services in Pakistan.