SBP suspends authorisation of 2 currency exchange companies

The State Bank of Pakistan (SBP) announced it has suspended the authorisation of M/s Orient Exchange Company-B (Pvt) Limited and M/s Best Way Exchange Company-B (Pvt) Limited, with immediate effect.

The central bank's suspension will apply for three months "due to serious violations of regulatory instructions". The SBP also advised both companies to strengthen internal control functions and submit a report of corrective measures.

"Both ECs, their head offices, all branches/outlets have been restricted from undertaking any kind of business activity during the suspension period," the central bank added.

The development comes as SBP also expanded its scope of investigation into alleged exchange-rate manipulation beyond eight banks with the inspection team working towards the end of the month as its deadline.

"Our inspection team is working on this (investigation against banks for manipulating exchange rates) and we have given it the end of the month as the deadline," SBP Governor Jameel Ahmad had said while talking to reporters earlier this week.

Last month, the SBP had said it will soon complete an investigation into alleged manipulation by commercial banks of foreign exchange operations in the country. The investigation came after Pakistan's rupee fluctuated wildly, particularly recently, hitting record lows against the US dollar in September before suddenly rising towards the end of that month, leading authorities to suspect manipulation by banks and exchange companies.

Recently, the rupee has remained largely stable in the inter-bank market. Last month, the SBP suspended, with immediate effect, the authorization of 'B' Category Exchange Company M/s Mega Currency Exchange Company Limited till further orders due to serious violations of the State Bank's regulations and instructions.

Meanwhile, Pakistan's central bank has expanded its scope of investigation into alleged exchange-rate manipulation beyond eight banks with the inspection team working towards the end of the month as its deadline, said State Bank of Pakistan (SBP) Governor Jameel Ahmad.

"Our inspection team is working on this (investigation against banks for manipulating exchange rates) and we have given it the end of the month as the deadline," Ahmad said while talking to reporters after the inauguration of the Institute of Business Administration (IBA), Karachi's Finance Lab at the School of Business Studies (SBS), an event where he was the chief guest.

Last month, the SBP had said it will soon complete an investigation into alleged manipulation by commercial banks of foreign exchange operations in the country. The investigation came after Pakistan's rupee fluctuated wildly this year, particularly recently, hitting record lows against the US dollar in September before suddenly rising towards the end of that month, leading authorities to suspect manipulation by banks and exchange companies. In recent weeks, the rupee has remained largely stable in the inter-bank market.

In October, SBP chief spokesperson Abid Qamar had said results might come soon, but refrained from giving an exact date for the completion. However, he said that the probe had started some time back during the tenure of the previous finance minister, Dr Miftah Ismail.

SBP chief Ahmad, who was appointed in August, said regulatory action will be taken after the investigation is complete. Ahmad refrained from taking names, but clarified the scope of the investigation had expanded after initial scrutiny. "We are focusing on banks that were active in foreign exchange (trading), based on volume of the business."

Meanwhile, the governor said pending Letters of Credit (LC) of up to $100,000 will be cleared by this week. "Moreover, businesses that have projects near completion have also been facilitated." Ahmad also placed confidence over the country's foreign exchange reserves that have fallen $956 million on a weekly basis, clocking in $7.96 billion as of November 4, 2022, according to latest data.