The Authorized Dealers in Foreign Exchange
And all the Investment Banks,

Dear Sirs,

LOCAL BORROWING BY FOREIGN CONTROLLED INVESTMENT BANKS

In terms of Section 18(2) of the Foreign Exchange Regulation Act, 1947 except with the general or special permission of State Bank, no person resident in Pakistan shall lend any money or security to any company, not being a banking company, which is by any means controlled by persons resident outside Pakistan. SBP has given general permission for lending to foreign controlled manufacturing companies including oil distributing companies, semi-manufacturing/construction companies and trading companies for meeting their working capital requirements to the extent of their entitlement as laid down in Para 4 Chapter XIX of the Foreign Exchange Manual. A question has been raised about the local borrowing entitlement of foreign controlled investment banks which re not banking companies. The matter has been examined and it has been decided to permit local borrowings by the foreign controlled investment banks provided the total accommodation availed of by a foreign controlled investment bank, from banks/financial sector does not exceed 100% of its paid up capital, reserves, un-distributed profits and un-remitted dividends, and that all other NBFIs Rules of Business are observed. It will be the responsibility of the lending banks/DFIs to report lending to such investment banks as a foot note to the weekly statement of position being submitted to the Banking Policy & Regulations Department under Section 36(3) of SBP Act, 1956.

2. Consequently, the following amendment in Paragraph 4, Chapter XIX of the Foreign Exchange Manual is made:-

"Add the following –

(iv) Investment Banks - 100% of paid-up capital, reserves, undistributed profits and un-remitted dividends as disclosed by their last audit annual Balance Sheet."