Editorial: Left hand doesn’t know what the right hand is doing!


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The federal government on a summary moved by State Bank of Pakistan of May 4, 2017 has once again decided to restore the amendment in the Banking Companies Ordinance (BCO) 1952, made in 2001, withdrawing the two-term limit on directorship of banks. The decision to withdraw the limit was approved by the Parliament and the Government – two years after SBP summary was moved to this effect.

The Ministry of Finance (MoF) sent its approval to Ministry of Law, which in turn sent it to the Cabinet Division for a decision, which later sent it to Parliament after due approval by the Federal Cabinet but without any impact analysis. Moreover, the two houses of Parliament approved it without carrying out any discussion on the subject; and it was silently issued in the official gazette May 4, 2017.

While the Prime Minister and Finance Minister on a recent visit to China to attend the Silk Road summit introduced to the prospective Chinese investors the Chairman of country’s largest bank HBL who, as per notification of May 4, 2017, has to stand down. This just goes to show that the left hand doesn’t know what the right hand is doing in this government.

All this will end in litigation as the privatised banks were sold under a compulsion by the Government of Pakistan – under specific rules and regulations. The rational behind the change was that the new buyers would recapitalize these privatised banks accordingly. The new owners will have no recourse to government revenue in case of any shortfall.

Now a mess has been created which needs to be sorted out. Embarrassment all around which could have been avoided. The question to be asked is what was SBP trying to achieve by such a move? Previously, nationalized banks were falling head over heels to please the government of the day without giving a thought to what their lending policy was doing to depositors’ savings. SBP has always been forced to meet the capital shortfall as regulators around the world demanded for branches in their respective regions to do so.

Governments are elected to serve people; they have no right to expose depositors’ money to any risk. Nawaz Sharif caused a massive harm to the national kitty through his yellow cab scheme in his first tenure as prime minister. Now he in his third tenure as prime minister is mulling going after depositors’ savings in banks to carry out his populist schemes such as Prime Minister’s Youth Loan Programme. Privatised banks as well as private banks after due risk analyses have shied away from pouring money into the scheme despite official pressure.

The amendment will not bring about the desired change in the attitude of these banks. The move is patently wrong. Under no circumstances will it meet the legal test. Perhaps a more cogent move was to implement a Chinese wall between management and the boards of directors in real terms. -Business Recorder