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Risk management guidelines to replace prudential regulations

ISLAMABAD (February 28 2004): The new Prudential Regulations will gradually be replaced with the Risk Management Guidelines. The Risk Management Guidelines are of advisory nature, cover the broader and policy parameters, and allow bankers greater discretion in all areas of operations, said SBP officials.

A Workshop/Seminar on new Prudential Regulations was held at State Bank of Pakistan, SBP BSC(Bank) Islamabad on February 27, 2004.

All local banks/DFIs, members of local business chambers of Islamabad/Rawalpindi and stock exchange attended the seminar.

After the inaugural address by Chief Manager, State Bank of Pakistan (BSC), Islamabad, Muhammad Ashraf Khan and Shaukat Zaman, Senior Joint Director, Banking Policy Department & Banking Supervision Department, delivered detailed and comprehensive lectures on the new Prudential Regulations.

They said that State Bank of Pakistan has issued three new Prudential Regulations – for Corporate Commercial Banking, SME and Consumer Financing – effective January 1, 2004. New Prudential Regulations have been developed/reviewed keeping in view the changes/development in the financial market.

Besides, these provide great flexibility and authority to the banks/DFIs. It was also said that these Regulations had been finalised after extensive and intensive consultations with all major stakeholders, particularly the banks. Previous Prudential Regulations had co-mingled different requirements.

Therefore, these had been segregated into 4 different sections in the new Prudential Regulations, which are 'Risk Management', 'Corporate Governance', 'Know Your Customer' and 'Anti Money Laundering Operations, they added.

They said that the State Bank of Pakistan has recently issued detailed guidelines on Risk Management for banks which are broader in nature and are meant to guide banks and help build up their internal capacity to prepare for Basle II Accord.

These Prudential Regulations will gradually be replaced with the Risk Management Guidelines.

The Risk Management Guidelines are of advisory nature, cover the broader and policy parameters, and allow bankers greater discretion in all areas of operations.

Banks/DFIs have been advised that non-compliance of these regulations would lead to punitive action under the provisions of law.

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