State Bank Of Pakistan To Follow Standard Protocols For Exchange Of Information, Clarifies Finance Ministry

The Finance Ministry Wednesday dispelled the misconception that State Bank of Pakistan (SBP) would be empowered unabatedly, through State Bank Amendment Act 2021, to share financial or non-financial private information with any entity, particularly outside the country

ISLAMABAD, (UrduPoint / Pakistan Point News - 17th Mar, 2021 ):The Finance Ministry Wednesday dispelled the misconception that State Bank of Pakistan (SBP) would be empowered unabatedly, through State Bank Amendment Act 2021, to share financial or non-financial private information with any entity, particularly outside the country.

Responding to recent media reports related to the proposed act, the ministry in a statement issued here said that certain protocols were followed for exchange of information.

The statement said that exchange of information through mutual Memorandum of Understandings (MoUs) was a common international practice and central banks enter into MoUs for sharing of information both with domestic and foreign regulatory bodies.

Such sharing is necessary for effective supervision of subsidiaries and overseas operations of the financial institutions across jurisdictions.

Importantly, the proposed amendments allow SBP to enter into MoUs with domestic and international supervisory authorities, only after prior approval of the Federal Government.

It is pertinent to mention that the SBP already has longstanding MoUs / arrangements with several international regulatory bodies/central banks, after approval of the Federal Government.

Similarly, Indemnity (protection against loss or other financial burden) to the officials and staff members of the Central Bank from legal challenges on actions taken in good faith is quite common in the central bank laws, is considered an international best practice, and such an indemnity is an important aspect to ensure functional autonomy of the central bank officials and staff.

Such provisions also exist in other domestic laws. Further, laws of several central banks specify that action or proceedings cannot be instituted in any court for the purpose of securing the review or revocation of order of the central bank.

A review of 20 central bank laws across the globe including SAARC countries (India, Bangladesh, Sri Lanka, Bhutan, Nepal and Maldives) shows that specific provision of indemnity to the senior officials and staff against actions taken in good faith is aligned with international standards.

Furthermore, it is incorrect to say that bodies like NAB and FIA etc will not have jurisdiction in the case of SBP officials. The only change is the requirement of approval of the SBP Board to initiate proceedings.

Also 14 central bank laws explicitly prohibit government to instruct central bank in order to provide an autonomous legal framework to achieve their set objectives.

Therefore, it is misleading to assert that the proposed SBP Act envisions no accountability for SBP.

It is important to note that the proposed SBP Amendments Act 2021 clarifies the objectives of the SBP and therefore also makes the SBP more accountable to achieving those objectives.

The proposed amendments also have a specific new clause on accountability, which ensures that SBP is answerable to the Parliament.

Under this clause, the Governor shall submit annual report before the Parliament regarding the achievements of the bank's objectives, conduct of monetary policy, state of the economy and the financial stability.

In addition, as part of the accountability process, the Parliament may require any senior official of the central bank to attend at such additional times as may be required.

A number of other central banks have also adopted similar accountability mechanisms requiring submission of report of economy and appearing of the Governor or other senior officials before the Parliament.