The Senate Standing Committee on Finance is at odds with its counterpart in the National Assembly on the question of licensing of Credit Information Bureaus, which at present are licensed by the Securities and Exchange Commission of Pakistan (SECP) and operated by the private sector. The bill under discussion in the Senate seeks to place these four licensed companies under the regulatory framework of SBP, which in turn would like these companies to raise their paid-in capital under the oversight of SBP. The reason why non-banks do not want to be regulated by SBP is because they feel they receive a step-motherly treatment at the hands of the central bank which, according to non-banks, treats the banks as the ‘favourite son’. Therefore, SBP does not need to be so intrusive as there are no public deposits involved in these companies and it needs to have a separate framework for companies that do not solicit public savings. Even the framework for Development Financial Institutions (DFIs) needs to be different from the one for banks since the investor class which purchases Certificates of Investment (CoIs) is considered to be more knowledgeable and savvy than the average ‘Joe’.
This does not necessarily mean that these ‘credit bureaus’ that do play a role in advising banks prior to disbursement of loans in the financial sector need not be regulated by SBP – indeed they ought to be. But SBP’s regulatory touch also needs to be softer and more meaningful. Raising the paid-in capital will raise the bar for entry into this business which through competition could result in reducing the fee to clients for obtaining their services.
In the past also leasing companies and modarabas were hesitant to come under the regulatory framework of SBP. The then Governor SBP, Dr Shamshad Akhtar, and the then Chairman SECP, Razi-ur-Rehman Khan, also had different opinions. Both the leasing companies and modarabas were willingly handed over by their predecessors, ie, the then Governor SBP, Dr Ishrat Husain, to the then Chairman SECP, Khalid Mirza, on grounds that SBP does not have the expertise and the capacity to effectively regulate them.
The results of differing views of these regulatory bodies are for everyone to judge. Has the dependence for funding of leasing companies or modarabas – upon shifting from SBP to SECP – reduced on commercial banks? What has been the operational and financial performance of leasing companies and modarabas since their regulators have changed from SBP to SECP? Is the availability of credit to the borrowers in the market increased or decreased? These are the touchstones on which the legislators need to judge and make up their minds. And, not involve themselves in the battle for the turf or self interest. After all, the electorate has sent them to Islamabad to protect their interests and not blindly follow whatever is suggested by the executive branch. In true essence, the executive is accountable to them. And, they in turn are accountable to voters.