More than half of financial sector becomes dysfunctional!
KARACHI: More than 50 percent of country’s financial sector has virtually become dysfunctional as institutions without Chairmen and Boards of Directors due to withdrawal of amendment in the BCO 1952.
Piqued by poor lending to Small and Medium Enterprises as well as to agriculture sectors, State Bank of Pakistan had issued a note to Ministry of Finance, Islamabad, asking for the withdrawal in the amendment, which was granted by minister without any impact analysis.
Most big network banks will be impacted by this notification as they would need to function and take major decisions after due confidential communication between respective Chairmen and Presidents of banks.
SBP is of the opinion that banking ownership laws need to change in the country to achieve a higher level of banking assets as prevalent in the region.
Complacency has crept in these big institutions which needs to be replaced with more dynamism, says the SBP. Even though the notification says “with immediate effect”, the affected banks are expected to seek extension to implement the MoF decision.
The MoF’s decision could also have a negative impact on privatisation prospects, as the amendment in the BCO 1952 was made in August 2000 because the private sector felt it could not change directors after two terms on the bank, since they would continue to be major shareholders in the privatised institutions.
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