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SECP not merging 3 small Islamic investment entities after KASB put in 6mth SBP moratorium

SECP not merging 3 small Islamic investment entities after KASB put in 6mth SBP moratorium

KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has clarified a press report that the Commission is considering merging three small Islamic investment entities after the State Bank of Pakistan (SBP) took control of KASB Bank Limited and said that no such proposal is under consideration.

The SECP said the Frist Prudential Modaraba by KASB was being managed by Prudential Capital Management Limited (PCML), while Royal Management Services (Pvt) Limited (RMSL) was managing First Pak Modaraba.

On the charges of mismanagement and misappropriation of funds reported in the enquiry reports, the Registrar Modarabas, SECP, had transferred the management of both modarabas to KASB Invest (Pvt) Limited, formerly KASB Modaraba Management (Pvt) Limited, on October 28, 2010 in exercise of powers under section 20 of the Modaraba Ordinance. Both PCML and RMSL filed constitutional petitions against these orders, and the Sindh High Court vide order dated November 5, 2010, suspended the operation of the orders.

Earlier, the SBP clarified that the operations of the KASB Bank had not been suspended, so the offices and branches of the bank will remain open.

The SBP said it had already advised the KASB Bank to begin making payments of up to Rs300,000 to its account holders.

Initially, the federal government, on the recommendation of SBP, put KASB Bank Limited under moratorium for six months, however it was clear that more than 92.33 per cent of total account holders and depositors having balance of up to Rs300,000 in their accounts would not be affected.

A senior government official said KASB was falling short of capital adequacy ratio by Rs6 billion. The government took the step on the advice of the SBP. It has suspended all kinds of payments from the bank but allowed the account holders having up to Rs300,000 balance to withdraw their amounts.

The Central Bank, keeping the interest of depositors and other stakeholders and due to financial health and other circumstances of KASB Bank Limited in view, appealed the federal government to take this decision. The SBP, exercising the powers conferred upon it under the Section 47 of the Banking Companies Ordinance, 1962, placed the bank under moratorium for a period of six months with effect from November 14, 2014.

Consequently, the payment of certain debts and obligations from the bank would be suspended while it would continue to receive all payments/ recoveries due to the bank. The federal government has directed the State Bank of Pakistan to consider reconstruction or amalgamation of the bank as per the provisions of the Banking Companies Ordinance, 1962 within six months.

It is the endeavour of the SBP to ensure smooth functioning of banks in the best interest of depositors. Keeping this in view, payment to the depositors of the bank having account balance of up to Rs. 300,000/- per depositor per account on the date of placing of the bank under moratorium will not be affected.

In this manner, more than 92.33pc of total account holders will be able to operate their accounts. The account holders with balance of more than Rs 300,000 as of effective date, however, would be able to withdraw up to the above permitted threshold only.  The State Bank of Pakistan has always worked to safeguard the interests of depositors as well as the banking system of the country. The overall banking system is well capitalised and functioning smoothly. KASB Bank Ltd. consists of just 0.6pc of the total assets of all banks and the State Bank of Pakistan will ensure a resolution of the same in the best interest of the depositors and the banking system.