Off-site Supervision & Enforcement Department  

 


Mission Statement

Our Mission is “to promote soundness and stability of the Banking System through proactive off-site supervision and prompt enforcement actions”.

Vision Statement

Our Vision is “to transform Off-Site Supervision & Enforcement Department into a highly professional and dynamic department fully equipped to proactively supervise banks and other financial institutions under purview of the SBP and initiate prompt enforcement actions.

About Us

Off-Site Supervision & Enforcement Department (OSED) is one of the newly created departments emerging in the wake of re-organization of former Banking Supervision Department under recent SBP restructuring. OSED is responsible for off-site supervision of the financial institutions coming under regulatory purview of the State Bank of Pakistan (SBP). The department also ensures effective enforcement of regulatory and supervisory policies, monitors risk profiles, evaluates operating performance of individual banks/DFIs and takes necessary enforcement actions against institutions for their non-compliance (with laws of the land and regulations put in place by the SBP) as identified by, the inspection teams of BID during their onsite examination, and/or by the supervisors of this department based on submitted returns, interaction with financial institutions and market information.

Currently, over 50 financial institutions are supervised by the State Bank of Pakistan. These include banks, Development Finance Institutions (DFIs), and Microfinance Banks/institutions. Banks operating in the country include locally incorporated public and private sector banks and branches of foreign banks. The nature of business is becoming diversified overtime.

To effectively discharge its functions, the department has prescribed returns of varied frequencies for regular submission by the financial institutions. Based on these returns, the department monitors risk profiles of individual institutions, evaluates their operating performance under CAELS/IRAF frameworks, and checks their compliance with the prescribed parameters (i.e. ratios, levels, etc) on quarterly basis. The CAELS is an off-site supervisory framework used for assigning banks, on quarterly basis, a composite rating on a scale of 1 (best) to 5 (worst) comprising of Capital (C), Asset Quality (A), Earning (E), Liquidity (L) and sensitivity to other Risk (S). Besides, the department has instituted an all-embracing technology driven Institutional Risk Assessment Framework (IRAF) for continuous monitoring of banks by integrating off-site assessment, on-site assessment, self-assessment by banks’ board of directors/ management, assessment by the external auditors and rating agencies and market information.

The Department also monitors the Cash Reserve Requirement (CRR), and Statutory Liquidity Requirement (SLR) of the banks and DFIs on weekly basis and takes corrective measures and imposes penalty.

Moreover, supervising officers at OSED examine the violations of institutions under its purview as contained in the inspection reports prepared by the BID inspection teams, and take necessary enforcement actions against concerned financial institutions including imposition of penalties, enforcement letters, signing MOUs, advising immediate compliance and submission of time bound action plans. Besides, the supervising officers keep close watch on the banks’ operating performance in the interim period between onsite examinations for any violation and takeover the issues/ violations with the concerned institutions. Further, a report, on the condition of banks inspected in a particular quarter, is prepared on quarterly basis and submitted to Ministry of Finance. In addition, the department facilitates other departments of SBP as and when required through provision of bank-related or consolidated information and coordinate on Reported Chart of Account (RCOA) with Data ware House project team for automation and rationalization of returns submitted to SBP.

To achieve operational efficiency in the discharge of entrusted functions, the Department has been structured into divisions and units.

Monitoring Division

The Monitoring Division is responsible for monitoring Liquidity Risk through overseeing Cash Reserve Requirement (CRR), Statutory Liquidity Requirement (SLR), Weekly Statement of Position, and NPLs related matters.

Key Result Areas of the Division are:

  • Ensuring continuous monitoring of CRR, SLR and other related information to assess the level and trends of liquidity risk in the market
  • Ensuring that Weekly Statement of Position of all banks / DFIs is timely received, consolidated and sent to relevant stakeholders.
  • Ensuring timely imposition of penalty on default in maintenance of CRR/SLR, non/late submission of returns/ mis-reporting of data.
  • Ensuring that NPLs of banks and DFIs are properly monitored and disseminated.

Supervision & Enforcement Division

The main responsibilities of the four Supervision & Enforcement (S & E) Divisions include off-site risk assessment of banks’ on the basis of CAELS/ IRAF framework, early detection of problems through review of various information received directly  from banks, interaction with banks’ management/ board of directors and review of  market reports, taking enforcement actions for various violations identified by         examiners during their onsite examination including imposition of penalties, dealing with requests for waiver of penalties and continuous follow-up for compliance by the concerned institutions. Supervisory staff in each division monitors a certain number of  banks assigned to its division.

Key Result Areas of these divisions include:
  • Ensuring timely receipt of financial data from banks & DFIs and authorizing imposition of penalty on late submission or incomplete/incorrect data.
  • Compiling financial data of banks and DFIs, analyzing it developing recommendations and finalizing off-site surveillance reports as well as IRAF ratings and circulating these to designated recipients.
  • Reviewing Inspection Reports received from Banking Inspection Department (on-site), taking up the issues highlighted in the report with bank/ DFIs for their resolution/ compliance.
  • Monitoring progress of enforcement actions through status reports and ensuring that copies of resolved issues are forwarded to BID for information and unresolved issues for on-site verification of the Compliance Report received from the respective banks for the forthcoming inspection.
  • Reviewing violations of various laws / regulations pointed out in the inspection report and imposing monetary penalty where warranted.
  • Reviewing appeals of bank regarding refund/ waiver of penalty, assessing the reason(s) presented by bank and other related issues and recommending refund/ waiver of penalty.
  • Arranging formal discussions with board of directors/ management of banks/ DFIs to resolve serious issues and agree on course of action for corrective measures and developing Memorandum of Understanding.
  • Identifying such financially distressed banks, which cannot be recovered, obtaining approval from superior to initiate/ forward its liquidation in to Banking Policy & Regulations Department.
  • Keeping abreast of emerging policy and supervisory issues; participate in developing new policy and supervisory framework or recommend changes in the existing policy and supervisory framework.

The Internal Control Unit (ICU) ensures the accuracy/ authenticity of both the imposition and waiver of penalties and the amount so worked out by aforesaid S&E Divisions. It also carries out other pre-audit review functions and ensures compliance of the internal audit findings. The Support & Services Unit facilitates the department officers in the discharge of their functions through provision of needed services including administrative matters.

Institutional Risk Assessment Framework (IRAF)


 

 


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State Bank of Pakistan
I.I. Chundrigar Road, Karachi, Pakistan.
Phone: (+9221-24450298, Fax: (+9221) 9212440
www.sbp.org.pk