It has been decided to substitute Para 5 of Prudential Regulation R-8 as under to bring it inline with the instructions separately issued by SBP on the subject:.


INVESTMENTS AND OTHER ASSETS:

5. The banks shall classify their investments into three categories viz. ‘Held for Trading’, ‘Available for Sale’ and ‘Held to Maturity’. However, investments in subsidiaries and associates shall be reported separately in accordance with International Accounting Standards as applicable in Pakistan and shall not be subject to mark to market.

Investment portfolio in ‘Held for Trading’ and ‘Available for Sale’ and other assets will be subject to detailed evaluation for the purpose of their classification keeping in view various subjective and objective factors given as under

Quoted Securities:

Government Securities will be valued at PKRV (Reuter Page). TFCs, PTCs and shares will be valued at their market value. The difference between the market value and book value will be treated as surplus/deficit.

Un-quoted Securities:

PTCs and TFCs will be classified on the evaluation/inspection date on the basis of default in their repayment in line with the criteria prescribed for classification of medium and long-term facilities. The shares will be classified on the basis of break-up value. The difference between the break up value and the book value will be treated as surplus/deficit.

The ‘Held to Maturity’ securities shall be carried at amortized cost and shall not be required to be revalued.

Treatment of Surplus/deficit:

The measurement of surplus/deficit shall be done on portfolio basis. The surplus/deficit arising as a result of revaluation of ‘Held for Trading’ securities shall be taken into Profit & Loss Account. Furthermore, the surplus/deficit on revaluation of ‘Available for Sale’ category shall be taken to “Surplus/Deficit on Revaluation of Securities”. However, any impairment in the value of ‘Available for Sale’ or ‘Held to Maturity’ securities will be provided for by charging it to the Profit and Loss Account.

Other Assets:

Classification of Other Assets and provision required there-against shall be determined keeping in view the risk involved and the requirements of the International Accounting Standards.

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