SBP takes supervisory enforcement
actions against those institutions that fail
to comply with legal or regulatory requirements.
These actions may range from imposition of penalties,
administrative & financial sanctions and
reference to concerned law enforcement/prosecution
agencies.
The enforcement actions depend
upon the nature, severity and continuity of
regulatory breaches and risks posed to the institution
and may range from mild to severe. The nature
of intervention or corrective actions also takes
into consideration behavior and ability of the
institution’s management and sponsors,
and the previous record of dealing with deficiencies.
Supervisory enforcement actions, inter alia,
include meetings with the relevant Key Executives,
Chief Executive or Board of Directors of the
institutions by SBP’s team.
In the mild supervisory and
enforcement actions, SBP advises the institution
to submit Commitment Letter, Board Resolutions
/Undertaking in which management/Board of the
institution resolves to correct the identified
deficiencies or weaknesses within a given time.
The failure to implement corrective
actions by the institutions leads to initiation
of severe corrective measures. Severe actions
may include:-
- Following any particular policy in relation
to advances, deposits etc
- Maintenance of higher level of liquid assets
- Increasing the capital level by a specified
amount
- Removal of any key executive/ board of directors
- Reconstruction/amalgamation of the institution
- Cancellation of the licenseWinding up the
institution through High Court
The guiding principles for
resolution of problematic institutions include
early identification of the problems, early
intervention, cost-efficiency, objectivity and
consistency of criteria, avoidance of moral
hazard, and transparency. Over the years, SBP
has resolved banking crisis and failures through
the option which provides the greatest safeguard
of depositors’ interest.
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