The
Presidents/Chief Executives
All Banks/DFIs
Dear
Sirs / Madam,
Held
to Maturity Securities
Please
refer to BSD Circular No. 14 dated September 24, 2004 wherein
the banks and DFIs, interalia, were required to classify
their existing investment portfolio into “Held-for-Trading”,
“Available-for-Sale” and “Held-to-Maturity”
categories by 30th September, 2004.
2) To classify the securities under Held-to-Maturity, the
banks and DFIs should have the intention and ability to
hold them till their maturities. It has, however, been observed
that some of the banks and DFIs have moved their risky portfolio
to the Held-to-Maturity category to avoid booking revaluation
deficit and categorized their good portfolio in rest of
the two i.e. Held-for-Trading and Available-for-Sale categories.
At the same time they are using Held-to-Maturity securities
for managing liquidity by entering into repo transactions
in the inter-bank market. This implies that they have categorized
their securities as Held-to-Maturity without taking into
consideration their ability to hold such securities till
maturity.
3)
To discourage the banks and DFIs from such practices, SBP
has decided that the securities classified as Held-to-Maturity
by the banks and DFIs should neither be sold nor used for
entering into repo transactions in the inter-bank market
or borrowing under SBP repo facility/discount window with
effect from July 01, 2006. However, the banks and DFIs are
allowed for a one time reclassification of their securities
so that they can rationalize the distribution of their investments
in the three categories as per their liquidity requirements
and holding capacity. This process of reclassification should
be completed by June 15, 2006. The banks and DFIs shall
also ensure that the securities acquired/ purchased after
June 15, 2006 shall at the time of their acquisition/purchase
be categorized into any of the three categories i.e. Held-for-Trading,
Available-for-Sale or
Held-to-Maturity and the decision taken to that effect shall
be recorded in writing on the investment proposal/deal ticket.
4)
Other instructions on the subject shall remain unchanged.
Please
acknowledge receipt.