SECP mulls single licence for all NBFC activities

KARACHI: Dr Tariq Hassan, Chairman Securities and Exchange Commission of Pakistan (SECP) disclosed on Thursday that the SECP is examining the merits of having a single licence for all activities of Non-Banking Financial Corporations (NBFCs) which fall within the same risk class provided the capital adequacy requirements and professional management criteria are met.

Addressing the 11th Annual General Body Meeting of Leasing Association of Pakistan (LAP), he said: “The requirement for investing 70 per cent of assets in the core business activity for leasing companies naturally needs to be revisited if we move towards a universal licence system.”

He also hinted at the possibility of enhancing the minimum capital requirements for NBFCs by saying: “Gradual enhancement of the capital adequacy limits needs to be addressed particularly when State Bank of Pakistan (SBP) has increased the minimum capital requirements for commercial banks”.

He said the importance and significance of a strong equity base could not be ignored. With regard to allowing NBFCs, engaged in the leasing business, to be eligible for membership of the LAP, he said: “These amendments in the bye-laws of LAP that allow membership of NBFCs, engaged in other business like investment banking, are an excellent move towards consolidating the non-banking sector”.

He said there is a need for improving the internal governance of leasing companies and monitoring their infrastructure, particularly when they are moving fast towards risk-oriented unorganised sectors, like SMEs.

He was of the view that the leasing sector is exposed to the interest rate mis-match as most of the borrowings of leasing companies are based on floating KIBOR-plus rates whereas the leasing rate is mostly determined on fixed rate basis.

He said, “we are receiving complaints from SBP that some leasing companies are not sending timely and correct data to the CIB of the SBP”.

Earlier, Basheer A Chowdry, retiring Chairman of LAP while welcoming chairman SECP said the total assets of the leasing companies have swollen to Rs77 billion as at June 30, 2004 compared to Rs71 billion, last year.

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