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The Core Principles (CPs)
for effective Banking Supervision developed by the Basel Committee
on Banking Supervision (BCBS), have become a global standard
for prudential regulation and supervision. Their implementation
is being emphasized by the banking supervisors around the
world. Most of the CPs pertains to the legal/regulatory framework
and supervision methodology adopted by the central banks,
which have to be implemented by the State Bank. However, some
of the CPs pertains to formulation of/adherence to various
policies, procedures and systems by the banks. In view of
the importance given to the CPs around the world, it has been
decided to carry out an independent and objective assessment
of their compliance in the light of the Core Principles Methodology
developed by the BCBS.
2.
Banks are advised to engage any of the audit firms placed
in Category-I of the Panel of Auditors maintained by the State
Bank for assessing the status of compliance with Core Principles
No.8, 9, 11, 12, 13, 14, 15 and 21. The Core Principles Methodology
containing the CPs and the criteria to be taken into account
while forming an assessment by the auditors is enclosed as
Annexure-I (the said paper can also be obtained from the BIS
website: www.bis.org).
Moreover, a list of audit firms placed in Category-I of the
Panel is also enclosed as Annexure-II. The auditors shall
carry out the compliance assessment in respect of each of
the above-mentioned CPs only in accordance with the criteria
and the manner prescribed under the Core Principles Methodology
and shall, interalia, present a qualitative assessment of
the degree of compliance with the given Core Principle as
per the following grades:
I.
Compliant, implying full compliance or only insignificant
shortcomings.
II.
Largely Compliant, where only minor shortcomings are observed,
and which do not raise doubts about the authority’s
ability to achieve the objectives of the principles.
III.
Materially non-compliant, where the shortcomings raise doubts
about the ability to achieve compliance, but substantive progress
has been made in rectifying the deficiencies; and
IV.
Non-compliant, when, in the judgment of the assessors, no
substantive progress toward compliance has been achieved.
(A SAMPLE ASSESSMENT is given at Page 50 of the Core Principles
Methodology, which shall be followed by the auditors in presentation
of their assessment).
3) Banks shall engage any of the auditors from Category-I
within 15 days of the date of this Circular Letter and the
auditors so engaged will be required to submit their report
within 30 days from the date of their engagement directly
to the Director, Banking Policy & Regulations Department,
State Bank of Pakistan, Karachi. All costs to be incurred
in this regard shall be borne by the banks.
4)
You are requested to take necessary steps to ensure the engagement
of auditors for the purpose and completion of the assignment
by them within the stipulated time. A copy of this Circular
Letter alongwith its enclosures shall also be provided to
the auditors engaged for carrying out this assignment.
5)
Please acknowledge receipt.
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