It has been decided to substitute the instructions issued vide
BPRD Circular No. 40 and BPRD Circular letter No. 58 dated 17th
November 1999 and 4th December 1999 respectively on the above
subject as under:
With
a view to bring about operational improvements in the money
market transactions, to strengthen the repurchase market and
to ensure transparency the banks/NBFIs were required to enter
into Master Repo agreement with the counter party by 15th
January 2000.
2. In
respect of REPO transactions, banks/NBFIs are required to
ensure the following:
i) Any
transaction involving government securities or other approved
securities, either for repurchase or as collateral, will be
accompanied by the same day movement of securities through
SGLA or physical delivery of security, as the case may be,
along with full movement of funds.
ii) To
ensure proper monitoring of cash flow, and interest rate risk,all
REPO transactions will continue to be for fixed maturity.
3. Banks/NBFIs
will also continue to revalue their security holdings (both
balance sheet as well as off-balance sheet items) on weekly
basis as advised earlier and properly reflected in their books
of accounts. The rate used for valuation of government securities
will be PKRV (Reuters Page) whereas in case of quoted securities
closing rates of Karachi Stock Exchange will be used. However
in case of unquoted securities where active market does not
exist, the securities will be shown at cost. Further any surplus/deficit
arising on revaluation of securities will not be taken to
profit and loss account except when actually realized and
instead will be kept in a separate account called “Surplus/Deficit
on Revaluation of Securities” which will be shown below
equity and its breakup in (i) Govt. Securities (ii) Quoted
Shares (iii) Other Securities may be given in the notes to
the financial statements. While reporting in the Weekly Statement
of Position (WSP) the “Surplus/Deficit on Revaluation
of Securities” may be clubbed with the equity and the
break-up of same may be shown by way of footnote to WSP as
under:
Surplus/Deficit
on Revaluation of : Code No.
(i) Government
Securities 58.03
(ii) Quoted
Shares 58.04
(iii)
Other Securities 58.05
4. Moreover,
all securities related transactions having a maturity / settlement
date other than ready e.g. outright forward sale/purchase,
forward leg(s) of a Repo agreement (both ready against forward
and forward against forward) should also continue to be reflected
in bank’s/NBFI’s account on the same date when
the transaction was entered into.
5. Any
bank/NBFI found violating the above instructions shall render
itself liable to penalties under the provisions of Banking
Companies Ordinance, 1962 and may be prohibited to undertake
REPO transactions for such period as the State Bank may determine
on case to case basis.
Please
acknowledge receipt.
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