Banks allowed to set up asset management subsidiaries

KARACHI (October 23 2003): The State Bank of Pakistan on Wednesday allowed commercial banks to establish their own 'Asset Management and Financial and Investment Advisory Services'.

The SBP issued a circular carrying decision for withdrawing the Prudential Regulation, which deals with the establishment of subsidiaries under the non-banking financial companies rules.

“It has been decided to allow commercial banks to establish subsidiaries for the purpose of Asset Management and Financial and Investment Advisory Services under the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003,” said the circular.

However, the banks may establish any subsidiary with prior permission of the State Bank.

“Commercial banks desirous of establishing a subsidiary for any activity mentioned in the NBFC Rules, 2003 shall strictly observe the guidelines,” said the circular.

Banks desiring to set up any NBFC under the NBFC Rules will do so through a separate subsidiary after obtaining prior approval from the State Bank.

The subsidiary to be set up for the purpose will be a public limited company.

The transactions undertaken or services provided by the subsidiary set up under the NBFC Rules should not create any financial obligation, whether contingent or otherwise, on the balance sheet of the holding company or otherwise.

Bankers said that the new step would bring more activity in the market.

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