The proposed State Bank of Pakistan (SBP) Act, 2021 will increase the functional and administrative autonomy of the State Bank… Read More
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The proposed State Bank of Pakistan (SBP) Act, 2021 will increase the functional and administrative autonomy of the State Bank of Pakistan (SBP) to achieve its objectives, strengthen its accountability and improve transparency in the operations of SBP.
According to the key features of the proposed State Bank of Pakistan (SBP) Act, 2021 issued by the Ministry of Finance on Thursday, the proposed amendments in the State Bank of Pakistan Act, 1956 seek to clearly define the objectives of the SBP, improve its functional and institutional autonomy to achieve its objectives, and strengthen its accountability in achieving its objectives.
It is important to note that the proposed amendments are not only based on international best practices in central bank legislation but also take into account ground realities in Pakistan.
In a tweet, Financial analyst Javed Hassan stated that the SBP autonomy will expose the government to market imperatives and place external fiscal discipline that should discourage governments from fueling unsustainable growth on the back of excessive borrowing”, which will be an excellent development, he added.
Under the proposed State Bank of Pakistan (SBP) Act, 2021, no suit, prosecution, or any other legal proceeding including for damages shall lie against the Bank, Board of Directors or member thereof, Governor, Deputy Governors, member of any Board committee and monetary policy committee, officers and employees of the Bank for any act of commission or omission done in exercise or performance of any functions, power or duty conferred or imposed by or under this Act upon such persons or any rules and regulations made thereunder or any legislation administered by the Bank unless such act is done in bad faith and with mala fide intent.
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The Governor, Deputy Governors, Directors, members of any Board committee and monetary policy committee, officers and employees of the Bank shall not be liable in their personal capacity for any act of commission or omission done in their official capacity in good faith and in case of any such proceedings as mentioned, they shall be indemnified by the Bank which shall bear all the expenses thereof, till the final decision of the case.
Moreover, no action, inquiry, investigation, or proceedings shall be taken by NAB, FIA, or Provincial Investigation Agency, bureau, authority, or institution by whatever name called without the prior consent of the Board of Directors of State Bank.
The proposed law revealed that by defining objectives more specifically, SBP accountability is being enhanced and second, in order to achieve these objectives, SBP functions are being suitably aligned and SBP is being provided with sufficient financial resources;
Instead of the Monetary and Fiscal Policies Coordination Board, the Governor and the Finance Minister shall establish a close liaison with each other and shall keep each other fully informed on all matters which jointly concern the Bank and the Finance Division.
Under the proposed law, administrative autonomy is being strengthened in terms of appointment. President on the recommendations of the government would appoint non-Executive Directors of the Board and Secretary Finance no longer ex-officio member of the SBP Board.
President on the recommendation of the government would appoint Governor SBP. The federal government from a panel of three recommended by the Governor following consultation with the Finance Minister would appoint Deputy Governors. Three Deputy Governors would be appointed.
The law proposed further, administrative autonomy is being strengthened in terms of office.
The administrative autonomy is being strengthened in terms of removal. The law proposed that President inter alia for serious misconduct as determined by a court of law can remove non-Executive Directors of the Board and government, inter alia for serious misconduct as determined by a court of law can remove External Members of MPC.
Likewise, President inter alia for serious misconduct as determined by a court of law can remove Governor and Federal Government inter alia for serious misconduct as determined by a court of law, on the recommendation of the Governor with approval of the Board can remove deputy governors.
The law further revealed that the transparency and controls are being enhanced through Executive Committee that would make policy decisions related to Bank’s core functions as well as administration and management matters, it will be consisting of Governor, Deputy Governors, Executive Directors and other officers as needed and only Governor and Deputy Governors have right to vote.
There is a comprehensive provision for the appointment of external auditors by the Audit Committee and their responsibilities. Audit Committee comprising of three or more non-executive Board members would be constituted by the Board. Responsibilities, duties, and terms of reference will be defined by the Board (to include some mandatory functions) Chief Internal Auditor to be appointed by the Board as an employee of the Bank on the recommendation of the Audit Committee.
No person appointed under section 10A shall act as a representative of any commercial, financial, agricultural, industrial, or other interest, or receive or accept directions therefrom, in respect of duties to be performed under this Act.
Every such person shall fully and promptly disclose to the Board any interest, whether personal, commercial, financial, agricultural, industrial or other, which he or any dependent member of his family may directly or indirectly hold or be connected with and which becomes the subject of consideration by the Board and shall recuse themselves from any Board deliberations and voting-related thereto.
The Governor shall submit an annual report before the Parliament regarding the achievement of the Bank’s objectives, the conduct of monetary policy, state of the economy, and the financial system.
In addition, the Parliament may require any senior official to attend at such additional times as may be required. The Bank shall, not less than twice a year, publish and submit to the Parliament and the Minister of Finance a state of the economy report, the draft of the State Bank of Pakistan (SBP) Act, 2021 added.
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25/03/2021 04:56 PM
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