Please
refer to BPRD Circular No. 36 dated the 4th November 1997
(hereinafter referred to as the said circular) on the above
subject.
2 In the light of queries received from various
banks the following amendments/clarifications in the said
circular are issued:
i) In terms of Para 5 of the said circular
each margin and Government securities held are eligible for
deduction from certain items before applying risk weights/credit
conversion factors. A question has arisen whether the deposits
held as collateral are also eligible fro deduction. In this
connection, it is clarified that the deposits of the party
held under lien with flawless documentation shall also be
eligible for deduction from exposure to such party, on the
lines of each margins, before applying risk weights/credit
conversion factors. The amounts of each margins, deposits
and government securities so deducted shall be shown by way
of foot-notes under parts ‘B’ and ‘C’
of the prescribed return to be submitted to the State Bank
of half-yearly basis.
ii) In terms of the existing instructions
the outstanding foreign exchange contracts are assigned a
credit conversion factor of 3% and a uniform risk weight of
100% . The matter has been reviewed and it has been decided
that foreign exchange contracts with SBP may be subjected
to “Zero” risk weight and those with banks to
20% risk weights. All outstanding sale and purchase contracts
will, however, be taken into account and no netting off will
be done. The outstanding foreign exchange contracts with SBP
and banks will be shown separately against item 6, Part C,
of the prescribed return. Therefore, the format of the return
may be amended accordingly.
iii) “G-10 Countries” as referred
to in the said circular include the following countries:
1. U.S.A 2. United Kingdom 3. Japan 4. France
5. France 6. Canada 7. Italy 8. Netherlands.
9. Belgium 10. Sweden
iv) The banks shall keep their expansion plans
within such limits as can be accommodated by the size of their
capital. For this purpose, banks shall constantly monitor
the adequacy of their capital so that at in point of time
that capital actually maintained by the falls short of the
minimum requirement as laid down the said circular.
Please
acknowledge receipt.
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