It
has been decided to substitute with immediate effect the existing
Prudential Regulation-XXI as under:-
PRUDENTIAL
REGULATION-XXI
1. ASSET MANAGEMENT:
For the purpose of this Regulation the Asset
Management will constitute the following:
- Cash or portfolio management.
- All forms of collective investment management,
and
- Custodial and Depository Services.
Banks desiring to undertake
asset management services shall be allowed to do so through
subsidiary company to be formed by them under the laws of
Pakistan for the exclusive purpose of undertaking such activities.
The minimum paid-up capital of such a subsidiary shall by
not less than Rs. 100 million. The companies to be set up
for the purpose shall be public limited companies which may
commence business with a banks equity holding of 51%
in the companys paid-up capital. The balance 49% share
capital shall be offered to the general public.
2. Banks which have been consistently
meeting the liquid assets requirement and other credit disciplines
during the latest 52 weeks shall only be eligible to set up
such subsidiaries after obtaining prior clearance of the Articles
& Memorandum of Association of the proposed company from
the State Bank. Subsequent amendments in the Articles &
Memorandum of Association of such companies will also require
similar prior clearance from SBP.
3. The transactions undertaken/services
provided by the subsidiaries set up for asset management purposes
should not create any financial obligation whether contingent
or otherwise on the balance sheet of the holding company or
otherwise. The said subsidiaries shall not be permitted to:
- invest in real estates;
- grant credit in any form whatsoever;
- hold and invest in more than 1% (one
percent) of the paid-up shares of any bank or financial
institution;
- invest in the securities of such companies
which failed to earn net profit for two financial years
out of the preceding three financial years.
4. The holding company shall
ensure that subsidiaries do conduct their operations an d
publish their accounts in accordance with the internationally
accepted accounting standards and disclosure requirements,
besides meeting the standards set by the domestic regulatory
authorities.
5. Before accepting funds
from a client, the subsidiary shall notify to the client the
avenues of investments available to it for the purpose of
deployment of funds. Each asset management deal to be undertaken
by the subsidiary shall be documented in the form of a written
contract to be called "Asset Management Contract"
expressly stating all the terms and conditions of the deal
and duly authenticated by the company and the provider of
funds. Each subsidiary shall be required to obtain prior approval
of the format of its stander Asset Management Contract from
the State Bank of Pakistan.
6. Banks which are already
engaged in fund management business if any are directed to
forthwith disclose the total amount of funds provided to them
for fund management as "asset Management Liabilities"
under the head "other Liabilities" in the balance
sheet. Simultaneously, the corresponding assets acquired against
the Management Liabilities shall be shown as "Assets
Management Assets" under the head "Other Assets"
in the balance sheet. All related returns to be submitted
to the State Bank must also carry a similar disclosure regarding
Assets Management Liabilities & Assets.
7. Banks are further directed
to ensure that all existing fund management contracts must
be settled on due dates and no bank shall be allowed to undertake
any fresh deal for asset management other than through a subsidiary
formed for the purpose
11. FINANCIAL AND INVESTMENT
ADVISORY SERVICES:
Banks desiring to undertake Financial and Investment
Advisory Services shall be allowed to do so through subsidiary
company to be formed by them under the laws of Pakistan for
the exclusive purpose of undertaking such activities. The
paid-up capital of such a subsidiary shall be not less than
Rs 100 million. The companies to be set up for the purpose
shall be public limited companies which may commence business
with a banks equity holding upto 100% but not less than
51% in the companys paid-up capital.
2. Banks which have been
consistently meeting the liquid assets requirements and
other credit disciplines during the latest 52 weeks shall
only be eligible to set up such subsidiaries after obtaining
prior clearance of the Articles & Memorandum of Association
of the proposed company from the State Bank. Subsequent
amendments in the Articles & Memorandum of Association
of such companies will also require similar prior clearance
from State Bank.
3. The contracts executed/services
provided by the subsidiaries set up for Financial and Investment
Advisory Services purposes should not create any financial
obligation whether contingent or otherwise on the balance
sheet of the holding company or otherwise.
4. The holding company shall
ensure that subsidiaries do conduct their operations and
publish their accounts in accordance with the internationally
accepted accounting standards and disclosure requirements.
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