Other enforcement actions depend upon the nature, severity, continuity of regulatory breaches and risks posed to the institution and may range from mild to severe. The nature of interventions or corrective actions also takes into consideration behavior, ability of the institution’s management & sponsors, and the previous record of dealing with deficiencies.
OSED’s responsibilities are aligned with international standards which are, primarily based on Bank for International Settlements (BIS)’s Core Principles for Effective Banking Supervision and Financial Stability Board’s key standards. Proactive supervision and prompt enforcement actions are the corner stone of OSED’s activities. Currently, 53 Banks, Development Finance Institutions (DFIs), Microfinance Banks (MFBs) and Exchange Companies are being supervised by State Bank of Pakistan (SBP).
To effectively discharge its functions, the department has prescribed returns of varied frequencies for regular submission by the above institutions. Based on these returns, the department monitors risk profiles of individual institutions, evaluates their operating performance and checks their compliance with the prescribed parameters (i.e. ratios, levels, etc.) on quarterly basis. The risk profiles of individual Banks, DFIs and MFBs are formed under CAELS (Capital, Assets, Earnings, Liquidity and Sensitivity) framework. The assessment takes into account current financial performance, future outlook, compliance history, on-site inspection results, key performance indicators under different stressed scenarios, credit rating reports of External Credit Rating Agencies, peer review etc. This assessment enables OSED in early recognition of risky areas and in designing appropriate corrective actions for problematic regulated l institutions. OSED also closely monitors Statutory Cash Reserve and Liquidity Requirements of Banks DFIs and MFBs.
To bring in efficiency for data intensive assignments, Banks, DFIs and MFBs submit data on a standardized Reporting Chart of Accounts (RCOA) by uploading both quantitative and qualitative data on Data Acquisition Portal of SBP.
The department also keeps itself vigilant with emerging trends in supervisory regime globally and focuses more on directing prudential interventions in areas which pose potentially greater risk to an entity’s financial soundness, thus also ensuring efficient allocation of onsite supervisory resources.
In addition to ensuring compliance of issues highlighted in the on-site inspection reports, OSED is empowered to take enforcement actions against regulated institutions based on on-site these reports and other supervisory concerns. Such enforcement actions may range from imposition of penalties, administrative & financial sanctions and references to concerned law enforcement/prosecution agencies.
Banks, DFIs, MFBs are allowed to make appeals for refund/waiver of penalties. These appeals are thoroughly assessed after considering the reason(s) presented by Bank/DFI. Latest instructions on this matter can be found at (http://www.sbp.org.pk/osed/2015/C4.htm).