EFFECTIVENESS OF FINANCIAL REGULATORY AUTHORITIES IN PAKISTAN A STRATEGIC APPRAISAL

EXECUTIVE SUMMARYEffectiveness of financial regulatory authorities is imperative for continuous economic development and overall macroeconomic stability. State Bank of Pakistan, being the central bank is mandated to regulate the monetary policy of the country. It is empowered to exercise supervisory control over scheduled banks, the exchange rate, foreign reserves and debt servicing etc. Monetary policy has been liberalized in line with the international practices. The local and foreign investors are allowed to maintain foreign currency accounts with local as well as foreign banks. This is a double edge sword, as it enhances compatibility with the international banking practices and at the same time, facilitates outflow of capital and tax evasion in a way. State Bank of Pakistan has introduced series of reforms to improve financial regulations and facilitate trade and investment. Computerization of banking system has taken place significantly. Online banking services are being offered by most of the domestic scheduled banks.Security and Exchange Commission of Pakistan replaced the Corporate Law Authority in 1997. It exercises supervisory control on the non-banking sector like insurance companies, corporate sector and stock exchanges etc. Corporate sector also suffers from non-documentation like other economic and financial sectors. A team of World Bank experts has carried out detailed survey and study to improve the corporate governance in Pakistan by the SECP. The mandatory requirements of internal and external auditors are not being complied with in the corporate sector.Public finances suffer from budget deficit requiring structural support from domestic as well as foreign loans from IMF and World Bank etc. Fiscal policy mainly relies on indirect taxation instead of direct taxation. Broadening of tax net and plugging of leakages in tax collection are essential for improvement of tax collection in order to bridge the widening gap of budget deficit. Discretional SROs need to be checked to avoid pilferage of revenues. Similarly, prudent financial management and prioritization of public funds are very important for development of social, economic and infrastructure schemes and improvement of service delivery for good governance. Supplementary budgetary arrangements and mid-course fiddling with approved budgets need to be discouraged strictly. Constitutional role of Auditor General of Pakistan is paramount in ensuring financial management accountability.At the moment, effectiveness of financial regulatory institutions is lax. A number of loopholes are being exploited by the banking and non-banking sectors, primarily because of non-documentation culture. Money kept in foreign banks and foreign currencies is mainly out of the taxation net. Similarly, monetary policy is not being implemented in letter and spirit to control currency exchange rates, resulting in increase in inflation and devaluation of Pak rupee viz-a-viz dollar, pound and other foreign currencies. The heads of SECP are being taken from the private sector who are not formally trained regulators. Resultantly, effectiveness of regulatory mechanism is badly affected.

In nutshell, the solution of improving the effectiveness of financial regulatory institutions lies in documentation of economy and adoption of modern technology in the regulatory institutions as well as public and private entities and ensuring serious implementation of existing regulatory regime of financial regulatory authorities i.e. SBP, SECP and Public Sector financial regulations.ABBREVIATIONS BATS:

Bond Automated Trading System

BCO:

Banking Companies Ordinance

BSAL:

Banking Sector Adjustment Loan

CCG:

Code of Corporate GovernanceCIB:

Credit Information Bureau

CLA:

Corporate Law Authority

COT:

Carry-over Transactions DFIs:

Development Finance Institutions EMG:

Employees Management Group

ESOP:

Employees Stock Ownership Plan

FBR:

Federal Board of Revenue

GATS:General Agreement on Trade in Services

IAS:

International Accounting Standards

ICAP:

Institute of Chartered Accountants of Pakistan

ICM:

Institute of Capital MarketsIFRS:

International Financial Reporting Standards

IMF:

International Monitory Fund

IPOs:

Initial Public OfferingsNBFIs:Non-bank Financial Institutions

NCBs:

National Commercial Banks

NFC:

National Finance Commission

NIBAF:National Institute of Banking and Finance

NPL:

Non-Performing Loans

PBSRPP:Pakistan Banking Sector Restructuring and Privatization Project

PTE:

Pure Technical Efficiency

SBP:

State Bank of Pakistan

SBP BSC:State Bank of Pakistan-Banking Services Corporation

SECP:

Security and Exchange Commission of Pakistan

SMC:

Single Member CompanyWTO:

World Trade Organization

CONTENTSiPREFACE

iiEXECUTIVE SUMMARY

ivABBREVIATIONS

1INTRODUCTION

2Statement of the Problem

2Significance of the Research

3Scope of the Research

3Review of Literature

4Methodology

4Organization of Paper

5SECTION 1

5STATE BANK OF PAKISTAN BANKING SECTOR FINANCIAL REGULATIONS

51.1Historical Background

61.2Regulatory Framework

101.3Assessment of Effectiveness of Regulatory Regime

14SECTION 2

14SECURITY AND EXCHANGE COMMISSION OF PAKISTAN (REGULATIONS OF NON-BANKING SECTOR)

152.1 Legal and Regulatory Framework

182.2Assessment of Regulatory Effectiveness

212.3 Competition Commission of Pakistan (CCP)

23SECTION 3

23PUBLIC SECTOR FINANCIAL REGULATORY REGIME

233.1Budget 2014/15

243.2Budgetary Problems/Issues

253.3Audit and Accounts

27CONCLUSION AND RECOMMENDATIONS

27Conclusion

29Recommendations

31BIBLIOGRAPHY

INTRODUCTION

In this paper an attempt has been made to review the effectiveness of financial regulatory authorities of Pakistan and their importance for economic growth and macroeconomic stability. Public sector finances are regulated by the Finance Division through the instrument of Annual Budget. Whereas, public funds/ revenues are primarily generated by collecting direct and indirect taxes by the Federal Board of Revenue. However, the main focus of research paper will be on the regulatory regime of two main financial sectors i.e., Banking and Non-Banking sector. The banking sector is governed by the State Bank of Pakistan (SBP) and the non-banking sector is regulated by the Security and Exchange Commission of Pakistan (SECP), the succeeding statutory body of Corporate Law Authority (CLA). Another modern institution namely Competition Commission of Pakistan has been set up in 2007 to promote competitive environment in the country, in order to protect the rights of the consumer. Part VI of the Constitution of Islamic Republic of Pakistan deals with Finance, Property, Contracts and Suits. Chapter 1 deals specifically with public finance and the National Finance Commission (NFC). Award of share to the provinces from the Federal Consolidated Fund (NFC) is decided by the NFC, which is commonly known as NFC Award. State Bank of Pakistan performs its functions according to the provisions of the State Bank of Pakistan Act, 1956. Similarly, Security and Exchange Commission of Pakistan derives legal powers from The SECP Act 1997. Article 18 of the Constitution grants all citizens freedom of trade, business or profession as a fundamental right.World has seen liberalization of regulations in the financial sector in the last few decades. Government of Pakistan has undertaken a number of reform initiatives and efforts to improve the financial regulatory regime. The focus of this paper has been on critical analysis of the assessment of effectiveness of financial regulatory regime in Pakistan for its improvement in order to have a robust regulatory regime for the financial authorities of the country. The outcome of study suggests that like other developing countries, Pakistani economy suffers from non-documentation trends which hamper the regulatory effectiveness seriously. Despite the fact that SBP has an established regulatory mechanism, but still inflation and money laundering could not be controlled effectively. SECP has more focus on facilitation than enforcement of regulations.Statement of the Problem

Modern international trends dictated by the international treaties and covenants like World Trade Organization (WTO) and General Agreement on Trade in Services (GATS) suggest and promote liberalization of financial regulatory regime. Basically, regulatory framework of financial authorities has direct effect on the economic growth and macroeconomic stability of any country. However, international financial systems having direct bearing and being prone to destabilization, necessitate a robust financial regulatory regime in Pakistan. The regulatory regime of public sector is under the auspices of Finance Division, Government of Pakistan. Banking sector is being regulated by the State Bank of Pakistan and non-Banking sector by the Security and Exchange Commission of Pakistan (SECP). The complication of situation is relatively smaller size of economy, need for up gradation and improvement of existing systems to bring them at par with the international standards and simultaneously ensuring effective implementation of regulations. Non documentation of large segment of economy has added great degree of complexity. The question is how we can improve the effectiveness of financial regulatory authorities of Pakistan and make them compatible with the international standards.Significance of the Research

In the recent past, world faced economic meltdown in 2008/9. Leading world economic powers like America, Britain and other countries of European Union along with some Middle Eastern and Asian countries were badly affected. A large number of banks and mortgage companies went bankrupt. The governments of USA and some other countries had to provide financial support packages worth hundreds of billions of dollars to mitigate the financial emergency. Similar kind of situations are apprehended by the international economic experts of and on. The best seller books of Clash of Civilizations and Clash of Economic and Political Ideas support this preposition. Luckily, Pakistan survived the adverse effects. However, the trade as well as budget deficits and non-documentation of significant portion of economy pose serious challenges. Devaluation of Pakistani currency viz a viz dollar, pound and other international currencies is direct indicator of fragility of our financial position. Under these circumstances, a robust and effective financial regulatory regime is imperative. State Bank of Pakistan is the main financial regulatory institution which issues the monetary policy. Security and Exchange Commission of Pakistan has played vital role in regulating the non-banking sector, especially the capital market. Federal Finance division is mandated with framing of annual budget, which shapes the contours of financial and economic trends. Similarly, Federal Board of Revenue has the vital assignment of collection of revenues for the government. Budget deficit allows intervention of domestic and foreign loaning. Much talked about conditionalities of IMF and World Bank come into play, which have direct bearing on the economic and financial set ups. In the complex gambit of finances, it is essential to have an efficient and effective financial regulatory institutional framework. A critical and strategic appraisal of the existing regulatory regime of financial institutions will enable us to find out the weaknesses and help in formulation of set of appropriate policy options /recommendations to be followed for further improvement, in order to attain economic self-reliance and to avoid any economic crisis in the country.Scope of the Research

Scope of study covers the financial and monetary regulations of the State Bank of Pakistan, the regulatory framework of Security and Exchange Commission of Pakistan and the legal framework of Public Sector Finances. The scope also included study and critical analysis of effectiveness of the implementation of regulations. Review of Literature

Financial provisions of the Constitution of Pakistan, Annual Budget, Fiscal and Monetary policies of the Government and related material of books, journals and internet search engines have been extensively consulted. The retired and serving heads/ office bearers of Finance Division, FBR, SBP, SECP and academia have also been consulted through the forum of NMC as primary sources. The book Financial Sector Reforms and Efficiency of Banking in Pakistan by Mr. Abdul Qayyum, Registrar PIDE, contains historical evolution, reforms and their impact on the financial sector. Another book State Bank of Pakistan: Evolution, Functions and Organization by Mr. Muhammad Farooq Arby, covers comprehensive summary of state bank. Similarly, the Security and Exchange Commission of Pakistan, annual reports give detailed progress, performance and suggestions for improvement of its regulatory framework. The quarterly reports published by the State Bank of Pakistan on The State of Pakistans Economy, encompass the impact of regulatory framework of financial institutions on the national economy. An international study carried out by consultants of the World Bank namely A Blueprint for Regulation and Development of Corporate and Financial (non-banking) Sectors, is an exhaustive study for the improvement of corporate governance in Pakistan. MethodologyAnalytical approach has been adopted on the basis of available data and the regulatory legal framework. Secondary as well as primary sources have been explored. Archives of NMC Library have provided significant theoretical material and guidance for the purpose.Organization of PaperAfter the preliminaries, the paper contains three main sections. Section 1 explains financial regulations of State Bank of Pakistan. Section 2 elaborates the regulatory regime of Security and Exchange Commission of Pakistan and its effectiveness. Section 3 deals with Public Sector financial regulatory effectiveness which is followed by conclusion and recommendations. First section deals with the banking sector, second section explains the non-banking sector and the third section elaborates the public sector finance. The highly regulated section of public sector finances, has been added to give a comparison with regulations applicable to the private sector.

SECTION 1 STATE BANK OF PAKISTANBANKING SECTOR FINANCIAL REGULATIONS1.1Historical Background

State Bank of Pakistan (SBP) has been established under the SBP Act, 1956 with retrospective effect from 1st July, 1948. Before independence, Reserve Bank of India (RBI) was the Central Bank of the subcontinent. After independence, the assets of RBI were divided between India and Pakistan with ratio of 70:30. The 30% reserve was equal to Rs. 750 million. Qaid-e-Azam Muhammad Ali Jinnah inaugurated SBP. In the beginning, the SBP was jointly owned by the government of Pakistan and private investors with capital share ratio of 51:49. The banking sector remained under the control of public sector. In 1974, all the banks were nationalized under the Nationalization Ordinance 1974. However, the Banks (Nationalization) Act, 1974 was amended in 1991 after analyzing the performance of nationalized institutions for a decade. The decision of revision of policy of nationalization was taken to encourage private sector participation, enhance efficiency and promote competition among banks. Later on almost all the national commercial banks were privatized slowly and gradually under the privatization policy of the government of Pakistan. The State Bank of Pakistan exercises control, regulation and supervision of financial system through conduct of monetary and credit policies. The SBP strictly monitors the working of all the banking companies to ensure compliance of the statutory criteria and banking rules and regulations. It is Bankers Bank, Lender of Last Resort and Banker to Government. It has monopoly over issuance of currency notes and fixation of interest rate, thus having ultimate control over inflation. SBP is lender of last resort for the commercial banks. For instance, when banks have shortage of cash reserve then the state bank rescues them from the dangerous situation and safeguard the banks from liquidation. SBP collects taxes and other payments for repaying external debts. As a banker to the government, SBP keeps government deposits, provides short term advances and foreign exchange for purchasing foreign goods and repaying external debts. The secondary functions of SBP include public debt management, management of foreign exchange, advisor to government and dealing with International Financial Institutions (IFIs). SBP is custodian of foreign exchange reserve. It manages the exchange control and fixes value of currency and also checks currencies flight in and out. It is agent of the government and Pakistans representative with IMF and World Bank. SBP maintains government deposit accounts, effects domestic and foreign currency transactions and provides advice relating financial matters. Non-traditional functions of SBP include development of financial institutions i.e. Commercial Banks, Micro Finance and Islamic banking, training bankers, development of specialized financial institutions and providing credit to private sector (Industrial, Agricultural and Exportation). 1.2Regulatory Framework

Being regulator of the banking sector SBP is empowered to issue prudential regulations. It is code of conduct or guidelines through which state bank supervises the banking institutions. The regulations show standard format for activities to decrease their risk taking. Purpose is to provide safety to depositors funds, keep financial stability and ensure uniformity in the sector. The regulatory framework of SBP comprises following laws, legislations and regulations:

State Bank of Pakistan Act, 1956

Ordinance to provide for the establishment of SBP Banking Services Corporation The Financial Institutions (Recovery of Finances) Ordinance, 2001

Banking Companies Ordinance 1962 ( As modified upto 02 April 2011)

Banks Nationalization Act,1974

Foreign Exchange Manual

Microfinance Institutions Ordinance, 2001

Payment Systems and Electronic Fund Transfer Act, 2007

Prudential Regulations

Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Regulations & Guidelines

Pakistan Coinage Act,1906

Negotiable Act,1881 Central Board of Directors

Central Board of Directors is constituted according to section 9 of the SBP Act 1956 for supervising the affairs and business of the Bank. The Central Board consists of:a) The Governorb) Secretary Financec) Eight directors, including at least one from each province: Eminent professionals from the fields of economics, finance, banking and accountancy, to be appointed by the Federal Government. The board members should not have conflict of interest with the business of the Bank.The Governor of SBP acts as the Chairman of the Central Board. All decisions of the Central Board are taken by majority of members present and voting. In the event of equality of the votes, the Governor has the authority to exercise a casting vote.Functions and responsibilities of the Central Board are as under:

i. Formulation and monitoring of monetary and credit policies in order to secure monetary stability and soundness of the financial system. ii. Determination and enforcement of the limit of credit to be extended by the Bank to the Federal, Provincial Governments and other governmental agencies. iii. Approval of the credit requirements of the private sector and intimation to the Monetary and Fiscal Policies Coordination Board. iv. Tender advice to the Federal Government on the interaction of monetary policy with fiscal and exchange rate policy. v. Analyze and advise the Federal Government on the impact of various policies on the state of the economy. vi. Submit quarterly reports to the Parliament on the state of the economy in terms of economic growth, money supply, credit, balance of payments and price developments. Monetary and Fiscal Policies Co-ordination Board

According to section 9B of the SBP Act, the Co-ordination Board, for the coordination of fiscal, monetary and exchange rate policies has been constituted with following composition:

1. Federal Finance Minister

Chairman 2. Federal Commerce Minister or (Secretary Commerce)

Member3. Deputy Chairman, Planning Commission

Member 4. The Governor SBP

Member5. Secretary Finance

Member6. Two eminent macro or monetary economists with proven record of research and teaching to be appointed by the Federal Government. The functions of the co-ordination board are as under: i. Coordination of fiscal, monetary and exchange-rate policies. ii. Ensuring consistency among macro-economic targets of growth, inflation, fiscal, monetary and external accounts. iii. To determine the extent of Government borrowings from commercial banks before the finalization of the budget.iv. To review the consistency of macro-economic policies quarterly and to revise limits and targets set at the time of the formulation of the budget, keeping in view the latest developments in the economy.v. Considering limits of the Government borrowing before and after passage of the annual budget. vi. Quarterly review of the level of Government borrowing. vii. Review of the expenditure incurred in terms of raising of loans and Government borrowing. Ministries of Finance, Commerce and Planning Commission are responsible to inform the Board regarding the impact of monetary policy adopted by the SBP on investment, growth and balance of payment.

The regulatory framework restricts banks from engaging in non-related commercial activities to avoid conflict of interest between banks and diverse businesses like securities, insurance underwriting, real estate investment, etc. Banks are also prohibited from taking any obligation or guarantees on behalf of Non-Banking Financial Institutions (NBFIs). Bank investment in any single scrip is limited to 5% of its own equity and total investment in listed shares is capped at 20%. The margin requirement against the security of shares of listed companies is 30%. The regulatory framework for banks can be categorized in the following six categories:

i. Entry requirements ii. Risk management guidelines

iii. Corporate governance framework

iv. Industry specific guidelines

v. Operational guidelines

vi. Anti-money laundering regime

The banks / DFIs are required to meet capital requirements of $100 million since 31 December 2009. SBP has invoked partial suspension of new bank licenses in order to encourage sector consolidation. The standard limits on single and group exposures of banks are limited to 30% and 50%, including 20% and 35% fund based exposures. Exposure on contingent liabilities cannot exceed 10 times of banks own equity. Similarly, clean lending to single person is limited to Rs. 0.5 million which cannot exceed the equity of the bank in aggregate. SBP has introduced a comprehensive handbook on Corporate Governance for compliance by the banks. SBP has facilitated adoption of International Financial Reporting Standards (IFRS) by banks, in collaboration with the Institute of Chartered Accountants of Pakistan (ICAP). The auditing firms are approved by the SBP for external audit of all the banks.

For effective regulation, SBP advised banks to set quarterly recovery targets, submit their progress reports and formulate strategies to improve future recoveries. In 1997, SBP directed the banks to submit their annual accounts on new format at par with international accounting practices. Two new systems were adopted by SBP to monitor and evaluate the performance of banks. First is called CAMELS (i.e. Capital adequacy, Asset quality, Management quality, Earnings, Liquidity and Sensitivity to Market Risk Systems and controls). The second is CAELS (Capital adequacy, Asset quality, Earnings, Liquidity and Sensitivity). Reforms agenda was introduced by the SBP to upgrade the banking systems in Pakistan at par with the international standard. The reforms were aimed at fostering competition and increasing efficiency; diversify products and services; strengthening supervision and regulation; and upgrading financial infrastructure. The reforms included privatization of NCBs, liberalization of foreign exchange and investment regime, reducing tax burden, e-banking, improvement in quality of human resource, consumer financing, mortgage financing, micro-financing, SME financing, Islamic banking, agriculture credit, enhanced supervision and regulatory capacity, corporate governance, capital strengthening, improving asset quality, revised prudential regulations, credit rating, improved payment systems, Credit Information Bureau (CIB) and legal reforms. According to Dr. Ishrat Hussain, Ex-Governor SBP, the reforms have helped in broadening access to credit, financial soundness and resilience, increased returns to the government and consolidation of banking sector. 1.3Assessment of Effectiveness of Regulatory Regime The State Bank of Pakistan is an established financial regulatory institution with established authority of regulatory laws and implementation mechanism. However, stringent policies and strict regulations sometimes put the banking sector in intermediate level liquidity crunch. SBP maintains regular check on the transactions of all the commercial banks.In a report submitted by SBP before the Senate Standing Committee on finance, it was reported that legal action against 300 cases of money laundering was taken including 34 big transactions made to suspected terrorists during the last five years as a follow up of Anti-Money Laundering (Amendment) Bill 2014. 270 suspected accused were arrested and investigation was undertaken. Besides, the SBP froze 200 bank accounts under the Act. Overall 5,775 money laundering cases were reported to the bank over the past five years. In order to enforce monetary regulations, SBP Banking Services Corporation (BSC) imposed penalty of fine of Rs. 9 million to the commercial banks for violating the bank regulations and non-compliance of the clean note policy of SBP. Effectiveness of Financial Regulatory Authorities have also been assessed in terms of data / indices maintained by the World Bank regarding rule of law, government effectiveness index, regulatory quality index, inflation and external debt. Pakistani indicators have also been compared with other well performing countries. The performance has been shown with the help of bar and line charts. Rule of law index: The average value for Pakistan during the period from 1996 to 2013 was -0.84 points with a minimum of -0.98 points in 2008 and a maximum of -0.67 points in 1996. Government effectiveness index: The average value for Pakistan during the period from 1996 to 2013 was -0.58 points with aminimum of -0.81 points in 2011and amaximum of -0.37 points in 2006.

Regulatory quality index: The average value for Pakistan during the period from 1996 to 2013 was -0.63 points with a minimum of -0.88 points in 2004 and a maximum of -0.45 points in 1996.

Inflation: percent change in the Consumer Price Index: The average value for Pakistan during the period from 1961 to 2014 was 8.28 percent with a minimum of -0.52 percent in 1962 and a maximum of 26.66 percent in 1974. External debt: percent of Gross National Income: The average value for Pakistan during the period from 1970 to 2012 was 40.81 percent with a minimum of 0.02 percent in 1971 and a maximum of 69.53 percent in 1973. It is amply clear from the above mentioned data and reports of World Bank that the overall quality of governance, rule of law and government effectiveness is negative in case of Pakistan as compared to the developed countries. Therefore, SBP alone cannot perform better than the overall government. However, SBP has not been able to control the inflation. Foreign debt has also soared. In nutshell, State Bank implements the monetary policy to control interest rate and money supply. Purpose is to secure monetary stability and attain fuller utilization of economys productive resources. In order to keep inflation low and price stabilization, SBP strives to strike a difficult balance among multiple and often competing considerations. These include controlling inflation, ensuring payment system and financial stability preserving foreign exchange reserves and private investment. However, a controversy regarding currency rates exists for which monetary policy of the SBP is often criticized. One is that in order to pay the foreign and domestic debt servicing, additional currency is printed. Secondly, to promote exports local currency is devalued. In both the cases, common man suffers. Due to significant decrease in the oil prices in international market, the price of local currency should appreciate and it should help in stabilization of prices of essential commodities. Natural opportunity to control soaring inflation should be gainfully utilized by the government. SECTION 2SECURITY AND EXCHANGE COMMISSION OF PAKISTAN (REGULATIONS OF NON-BANKING SECTOR)Security and Exchange Commission of Pakistan (SECP) is a financial regulatory authority in Pakistan. It has been setup under the Security and Exchange Commission of Pakistan Act 1997 and became operational in January 1999. In order to carry out reforms, SECP has been established through an Act in December, 1997 to effectively regulate the capital markets, and supervise and control corporate entities. As of 30 June 2004, there were a total of 43,728 Companies in the country. Of these, 42, 681 companies were limited by shares including 39,769 private companies, 2,768 public companies and 144 SMCs. Foreign companies in Pakistan totaled 555; of these, 39 percent belonged to European countries, 18 percent to Asian countries and 17 percent to the United States of America (USA). New companies registered during the course of the year totaled 2,207. The Karachi Stock Exchange (KSE) was pronounced as one of the best performing markets in the world in 2004. Aggregate market capitalization of KSE was recorded at Rs. 1,421 billion. The Karachi Stock Exchange 100 shares index (KSE-100 Index) reached an all-time high of 5,620.7 in 2004. SECP was initially confined to regulation of corporate sector and capital market. However, its mandate has expanded to supervision and regulation of insurance companies, non-banking finance companies and private pensioners. The vision of SECP is development of modern and efficient corporate sector and capital market, based on sound regulatory principals. Mission is to develop a fair efficient and transparent regulatory framework, based on international legal standards and best practices. Its strategy is to develop an efficient and dynamic regulatory body, ensure proper risk management procedures in the capital market, and protect investors through responsive policy measures and effective enforcement practices. The functions of SECP include regulating the issue of securities, the business in the stock exchanges and any other securities markets, prohibiting fraudulent and unfair trade practices relating to securities markets, supervising and monitoring the activities of any central depository and stock exchange clearing house; and encouraging the organized development of the capital markets and the corporate sector in Pakistan. The SECP is divided into following four divisions.

1. Securities Market Division

2. Company Law Division

3. Specialized Companies Division

4. Insurance Division 2.1 Legal and Regulatory FrameworkSECP is the successor organization of Corporate Law Authority (CLA) which was an attached department of the Federal Ministry of Industries. The legal and regulatory framework of SECP comprises following laws / statutes:1. Security and Exchange Commission of Pakistan Act, 19972. Securities and Exchange Ordinance, 1969 3. Securities and Exchange Rules, 1971

4. Brokers and Agents Registration Rules, 2001

5. Members Agents and Traders (Eligibility Standards) Rules, 20016. Insurance Ordinance7. Securities and Exchange Commission (Insurance) Rules, 2002

8. Companies Ordinance, 1984

9. Companies (Amendment) Ordinance, 200210. Code of Corporate Governance, 200211. The Central Depositories Act, 1997

12. Central Depository Companies (Establishment and Regulation) Rules, 199613. Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Ordinance, 2002

14. Margin Trading Rules, 200415. Non-Banking Finance Companies (Establishment and Regulation) Rules, 200316. Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 198017. Modaraba Companies and Modaraba Rules, 1981

18. Companies (General Provisions and Forms) Rules, 198519. Single Member Companies Rules, 2003

20. Credit Rating Companies Rules, 1995

SECP performs its functions under the legal provisions of SECP Act. The Act provides for the securities and exchange policy board as the apex policy making and regulatory body. The Act covers the composition of Commission and the securities and exchange policy Board. It provides strict checks on conflict of interest of the office bearers. There are provisions for powers and functions, finance, enforcement and investigation, cognizance and prosecution of offences, rules and regulations. The Securities and Exchange Policy Board

Securities and Exchange Policy Board is constituted in accordance with legal provision of section 12 of the SECP Act 1997, comprising nine members; five ex officio members from the public sector and four from the private sector with following composition:a. Ex Officio Members

i. Secretary Finance

ii. Secretary Law

iii. Secretary Commerce

iv. Chairman SECP v. A Deputy Governor nominated by the Governor of SBP.b. Fourmembers are appointed by the Federal Government from private sector. The member should be well-known for his integrity, expertise and experience in the spheres of commerce and industry (including in particular the securities industry), corporate law, accountancy, financial services, investment, insurance, banking, academia or other related relevant fields of expertise.

The main objective of the Policy Board is to provide policy guidelines to the Commission in all matters relating to its functions. It is responsible for advising the Government on matters falling within the purview of the SECP Act and other corporate laws. Board is mandated to express its opinion on policy matters referred to it by the Government or the Commission.

Companies Ordinance covers registration of companies, their management and administration, duties and liabilities of directors, allotment, issue, transfer of shares and regulation of the deposits. Single Member Companies Rules were framed to adopt concept of a single member company (SMC) and Code of Corporate Governance of the European Union model. SECP regulates all aspects of the capital market including licensing and coordination, regulation of secondary market and market intermediaries and public offerings. The Securities and Exchange Ordinance, 1969 provides for the protection of investors, regulation of markets and dealings in securities. There are further provision in the said ordinance prohibiting insider trading, fraudulent acts, false statements and making fictitious and multiple applications for new shares. Basic qualification for members of stock exchanges, the parameters for transactions of members business and maintenance of accounts are covered in the Securities and Exchange Rules, 1971. Book entry system replacing the manual system with a modern and efficient electronic system has been achieved through the legislation of the Central Depositories Act and Central Depository Companies (Establishment and Regulations) Rules, 1996. Margin Trading Rules, 2004 have been framed to bring trading practices in stock exchanges in line with international best practices. The Insurance Ordinance, 2000 provides for improved capitalization and administration of the insurance sector by ensuring the protection of rights of policy holders. Modaraba Ordinance, 1980 and Modaraba Rules, 1981 cover the registration of Modaraba companies and the flotation, management and regulation. Moreover, NBFCs have been allowed to function as companies. They cover the following forms of businesses:

i. Asset Management Services

ii. Discounting Services

iii. Housing Finance Services

iv. Investment Advisory Services

v. Investment Finance Services

vi. Leasing

vii. Venture Capital Investment The commission exercises supervisory / regulatory control over professional service providers like accountants, companys secretaries, administrators, receivers, liquidators, stock brokers, agents, financial analysts, insurance surveyors, intermediaries, actuaries and credit rating companies. 2.2Assessment of Regulatory EffectivenessAccording to a detailed study, A Blueprint for Regulation and Development of Corporate and Financial (non-banking) Sectors carried out by international experts, following regulatory issues have been pointed out:

i. Regulatory Policy Vacuumii. Regulatory Imbalance

iii. Regulatory Arbitrage

iv. Regulatory Costs

v. Regulatory Efficiency

vi. Regulatory Compliance

vii. Regulatory Enforcement

viii. Regulatory Capacity

ix. Regulatory Assessment

In addition, it has been highlighted in the report that following major developmental challenges are being faced by SECP:

i. Corporatization

ii. Self-regulation and Market Abuse

iii. Product Diversification and Outreach to Consumers

iv. Market Integration

v. Level Playing Field

vi. Professional Independence and Conduct

One of the resource persons stated that there is incremental increase in number of companies being registered with SECP. Capital market in Pakistan is potentially poor of investment. It is characterized by low risk returns, market capitalization and investment leverage. Pakistan has sovereign credit rating. Regulations have improved over a period of time. Companies are bound to share their quarterly accounts with SECP. Another resource person commented that capacity of regulatory human resource of SECP is limited and its impression and reputation is not good. However, the data and processes have been automated and regulations have improved. Stock exchanges have grown significantly. Badla financing has to be reported and the savings have to be disclosed. However, capacity of accountants and auditors is still limited. As far as, regulations are concerned, political will is missing to improve regulations. He further stated that judicial system just does not work. It is based on ill-conceived ideas and concepts. It practically nullifies the regulatory regime and renders it largely dysfunctional. Most of the times SECP head and members of board of directors have conflict of interest. There is need to adopt proactive approach. Formidable, fair, efficient and transparent regulatory framework and implementation mechanism should be put in place.Reports regarding surveillance and monitoring by the SECP are available in the form of press releases and subsequent publication in the print media. According to these reports, the SECP has strengthened its monitoring and surveillance of trading activity at the stock exchanges and reinforced its market surveillance and special initiatives department. It was claimed that stringent measures would be adopted to ensure integrity and fairness in the trading activity and to identify abusive, manipulative and irregular trading practices.

In the efforts regarding the protection of investors interests and checking market abuse 30 actions were taken in 2013. 9 actions were taken on insider trading/front running, 2 orders were passed under Section 22 of the 1969 Securities and Exchange Ordinance (SEO), 4 prohibitory orders under the SEO were issued, along with 15 warning letters to market participants. Three orders were passed against the KATS operators of three brokerage houses for disclosing non-public material information to their close relatives pertaining to the trading orders of the clients of the brokerage house whose trades were executed through the terminals allocated to them. A penalty of Rs700,000 was imposed on the KATS operators under Section 15E(3) of the SEO. Simultaneously, 5 orders were issued against the individuals, who traded on the basis of the inside information passed to them by the KATS operators of the brokerage houses and a cumulative fine of Rs10.603 million was imposed under Section 15E(1) of the SEO. In addition, the department also issued an order imposing a penalty of about 69 million rupees on an individual for insider trading, on the basis of trading on prior information of acquisition of a substantial amount of shares (11.24%) of a listed company by a company he was associated with. The order was issued under section 15A of the SEO, making it the largest penalty imposed by the SECP since its inception. Furthermore, two orders were passed under Section 22 of the SEO, one which involved an associated person participating in the book building process in an attempt to manipulate the Media and Corporate Communications Department/Spokesperson SECP, strike price and therefore a penalty of Rs1 million was imposed. In another case, a penalty of Rs. 100,000 was imposed on a brokerage house for lacking adequate Know Your Customer (KYC) requirements, which the SECP viewed as the key requirement to document the identity of a client and ensure no unscrupulous and/or criminal elements participate within our markets.

Corporate sector also suffers from non-documentation like other economic and financial sectors. A team of World Bank experts has carried out detailed survey and study to improve the corporate governance in Pakistan by the SECP. The mandatory requirements of internal and external auditors are not being complied with in the corporate sector. At the moment, effectiveness of financial regulatory institutions is lax. A number of loopholes are being exploited by the banking and non-banking sectors, primarily because of non-documentation culture. The heads of SECP are being taken from the private sector who are not formally trained regulators. Resultantly, effectiveness of regulatory mechanism is badly affected. International Trend towards Financial Sector Liberalization

There is international trend towards financial sector liberalization. The pace of globalization is accelerating with the implementation of international accords like World Trade Organization (WTO) and General Agreement on Trade in Services (GATS). GATS deals with financial services and lays down the right of parties for the protection of investors, deposit holders and policy holders. It further ensures the integrity and stability of the financial system. While liberalization has positive effect of stimulating capital flows, it can aggravate the problems of financial institutions in terms of confidence loss as capital flowing in can just as easily flow out. Another challenge of financial sector liberalization is to look after the risk of market abuse due to cross border transactions. Holistic Regulation In the computerized regulatory structures, it is highly important for the regulatory bodies to have cohesive policies in order to ensure smooth and efficient functioning of the financial sector. In order to achieve the objective of holistic regulation, the SECP and SBP have setup a joint Coordination Committee. The meeting of committee is held on quarterly basis to review the progress and discuss mutual concerns in the banking and financial (non-banking) sectors. It is essential that SECP and SBP should devise an appropriate regulatory mechanism to supervise the regulatory regime of banking and non-banking sectors jointly or through subsidiaries. 2.3 Competition Commission of Pakistan (CCP)CCP is relatively new authority which was established on 2 October 2007 under the Competition Ordinance, 2007. The Commission is an independent quasi-regulatory and quasi-judicial body, mandated to ensure that competitive forces are unhindered in all spheres of commercial and economic activities to enhance economic efficiency and protect consumers from exploitation by anticompetitive behavior across Pakistan. After the establishment of SECP, the regulation of non-banking financial sector was mostly supervised by the private sector. A regulatory vacuum was created which resulted in monopolies and cartelization in the open market. CCP has been setup to fill this vacuum. The Competition Act of 2010, is a modern law which checks abuse of dominant position by companies and undertakings through malpractices of monopoly and cartelization. It puts restrictions on prohibited agreements, deceptive marketing, and collusive mergers. The commission is vested with powers of civil court, entry and search of a suspected premises and forcible entry also. The commission is also empowered to impose penalty of pecuniary fine on the violating undertakings. The jurisdiction of competition commission is extended to private as well as public sector undertakings. Functions and Powers

Functionsandpowersof the Commission are to:

Initiate proceedings and make orders Conduct studies for promoting competition Conduct enquiries Give advice to any undertaking which has asked for it in relation to the consistency of its proposed actions in relation to the law Engage in competition advocacy Take all other actions necessary for implementing the Competition ActAs far as assessment of implementation effectiveness is concerned, according to a media report the CCP bench comprising Chairperson Rahat Kaunain Hassan and members Abdul Ghaffar and Dr. Joseph Wilson passed an Order on June 28, 2012, imposing heavy penalty of Rs. 770 million on the ATM service providers and the banks for uncompetitive behavior and deciding the uniform service rate. Moreover, penalties of Rs. 50 million were imposed on 1-Link Limited, Rs. 50 million each on its 11 founding member banks and Rs10 million on each of its 17 non-founding member banks for imposing uniform customer charges for Off-Us ATM cash withdrawal transactions in violation of Section 4 of the Competition Act 2010. SECTION 3

PUBLIC SECTOR FINANCIAL REGULATORY REGIME

Let us now see the effectiveness of financial regulatory authorities in the management of public finances. Part VI of the Constitution of Islamic Republic of Pakistan deals with Finance, Property, Contracts and Suits. Chapter 1 deals specifically with public finance and the National Finance Commission (NFC). Award of share to the provinces from the Federal Consolidated Fund (NFC) is decided by the NFC, which is commonly known as NFC Award. Public finance is controlled by the Finance Division, Government of Pakistan through the instrument of Annual Budget. It is meaningful what the government does and what it doesnt do. The whole regime of taxation/ fiscal policy is announced in the annual budget. Much talked about SROs have significant adverse impact on the revenue generation. Federal Board of Revenue collects the taxes on behalf of the Federal Government to meet the needs of public sector. Public funds are to be expanded in accordance with the provisions of Financial Rules. Later on, the public fund expenditures are audited by the Auditor General of Pakistan. 3.1Budget 2014/15

In order to have realistic view, lets have a look at the current budgetary allocations.Rs. In Billion

2014-15Higher than the (2013-14)

Total outlay 4,3027.9%

Resource availability4,0743,011 (2013-14)

Net revenue receipts2,22516%

Estimated provincial share in federal revenue receipts1,72014.5%

Net capital receipts69140%

External receipts86950.7%

Overall expenditure

Current

Development 4,302

3,463

839 8.3%

2.4%

Share of current expenditure in total budgetary outlay80.5%78.8%

Estimated expenditure on General Public Services2,54373.4% of the current expenditure

Size of Public Sector Development Programme (PSDP)

Provincial Allocation

Federal PSDP1,175

650

525

Other development expenditure outside PSDP162

To meet expenditure, bank borrowing228

Source: Ministry of Finance ---http://business.onepakistan.com.pk/budget/#Salient features

3.2Budgetary Problems/Issues

The major issues are soaring debt servicing and budget deficit. A significant portion of economy is undocumented. Main reliance of taxation regime is on indirect taxation. In addition, tax evasion is rampant. Without broadening the base/net of direct income tax regime the problem of budget deficit cannot be overcome. Moreover, leakages in tax collection are reported which need to be plugged. Financial liberalization has allowed foreign currency accounts in the local and foreign banks. Money laundering is also quite common. Under the circumstances, it is quite a difficult preposition to fill the gap of budget deficit. Resultantly, budget deficit is met from domestic and foreign loaning. High interest rates swell the volume of debt servicing every year.

For instance, the general sale tax was increased from 16% to 17% in the annual federal budget 2013-14. It placed burden of approximately Rs. 55 billion on consumers at large. This increased the burden on low and middle class. Prudent taxationmeasures suggest direct taxation instead of indirect taxes. So that the burden of taxes is borne by the rich. The economy is not expected to stabilize without broadening the tax net base. Similarly, for long term solution involvement of FBR in terms of corruption in collection of taxes needs to be strictly checked. Main reason of nonpayment of taxes is trust deficit of public in thegovernment. It is often said that quality of service delivery especially in social sectors is not satisfactory. Tax payers are also facing lot of problems regarding electricity,education, health, etc. Taxationproblem can be equated with electricity crisis that needs to be solved. Progressivetaxationis used to charge high taxes from high income earners to reduce social class gap in most of the countries. This practice is not being followed in Pakistan. Resultantly, rich is getting richer and poor is getting poorer. Taxes should be imposed on the production ofproductsthat produce negative externalities and subsidies should be given on production of goods with positive externalities.

One of the problems faced in public finance is of Supplementary grants. Consequently, mini budgets keep pouring in throughout the year. The annual estimates are significantly disturbed. This practice is more common in the provinces. Supplementary grants upset the Annual Development Programmes thereby affecting the social and infrastructural development adversely. One of the civil servants stated that this problem is resulting in making graveyards of development schemes. As new schemes are started without completing the ongoing schemes causing wastage of public exchequer.

3.3Audit and AccountsArticles 168, 169, 170 and 171 of the constitution of Islamic Republic of Pakistan provide for Audit and Accounts of the public sector. Post of the Auditor General of Pakistan is constitutional. The appointment is made in accordance with the provisions of Article 168. The Auditor General is empowered to perform audit of accounts of federal and provincial departments and attached bodies, according to Article 169 and 180. The Federal and Provincial public sector entities are legally bound to maintain accounts with principles and methods as prescribed by Auditor General of Pakistan. As enshrined in Article 171, the reports of Auditor General are to be submitted to the President. The President shall refer the reports of Federal entities to the parliament and reports of the provincial departments shall be sent to the respective Governors. The Governors shall cause these reports to be placed before respective provincial assemblies.

Audit paras are placed before the Parliamentary committees which take disciplinary actions against embezzlement and misuse of public funds. However, misuse of accountability mechanism for political victimization is often reported.

There is need to improve the financial accountability by improving institutional framework and efficacy of Auditor General of Pakistan and its subordinates officers, instead of coercive measures by National Accountability Bureau (NAB), Federal Investigation Agency (FIA) and Anti-Corruption Establishments (ACE). Public Accounts Committee, in return, is expected to become more effective parliamentary financial accountability institution.

Dr. Ishrat Hussain, Ex-Governor, SBP, in his chapter Retooling Institutions, has highlighted the problems of public sector institutions. He has recommended a reform agenda to improve service delivery of the public sector institutions. His main focus is on prudent management of finances by the public and private financial regulatory institutions like SBP, Auditor General, Parliamentary Committees/Accounts Committee and SECP. He has recommended that without retooling the financial regulatory authorities with modern technological aids, the journey of progress cannot be coverd. CONCLUSION AND RECOMMENDATIONS

Conclusion

State Bank of Pakistan (SBP) has formal regulatory control over banking sector which is exercised through statute of State Bank of Pakistan Act, 1956 and the subordinate legislation. Similarly, SECP established through SECP Act, 1997 exercises control over the non-banking financial sector i.e. equity market. The public finances are administered by the Finance Division of Government of Pakistan in accordance with provisions of the Constitution. Provincial shares are distributed according to National Finance Commission Award and the public finances are expanded as per provisions of Financial Rules. SBP, being the central bank is the main regulator of monetary and fiscal policies. Thus, it has control over the public and private sectors. SECP regulates the private sector and Finance Division has essential regulatory control over the public finances.

Overall, regulatory standards of SBP are reasonably effective keeping in view the world economic liberalization trends. However, control over inflation remained weak during the last decade resulting in devaluation of Pak rupee viz-a-viz international currencies and substantial increase in the Consumer Price Index (CPI). Despite the fact that SBP has tried to enforce the regulations strictly and taken punitive actions against the banks involved in violating the monetary regulations. But still lot needs to be desired to achieve satisfactory levels of monetary controls and regulations. SBP has introduced an ambitious agenda of reforms to upgrade the banking practices in Pakistan in order to bring them at par with the international standards and world best practices. Computerization/automation of processes has been carried out and most of the banks offer automatic/computerized services. For instance, transactions through Automatic Transaction Machine (ATM) have become common. Computerization of banks have not only improved the service delivery of banking sector to the clients but it has also facilitated the monitoring of bank activities by the SBP, thus improving the compliance to state regulations. However, despite all the initiatives of adoption of modern computer technology and world best practices, there is issue of money laundering. The provisions of Anti Money Laundering Act are being violated. Moreover, the regulatory standards are poor in checking the innovative ideas of money laundering. Allowing foreign currency accounts in the local as well as foreign currency accounts and money transfers through hundi or some so called banking services allow unfair transfer of black money. SECP is relatively new organization which has been established since 1999 to regulate the equity market. Its predecessor Corporate Law Authority (CLA) was an attached department of the Federal Industries Department. SECP is run by the Board of Directors. Most of the members are drawn from the private sector. The principle of conflict of interest is somewhat compromised. Moreover, the regulations are of civil nature and penalties are of minor pecuniary value which do not serve sufficient deterrence. Although, SECP keeps issuing press releases highlighting punitive actions taken, showing strict enforcement of regulations. But they seem to be eye wash as the penalties imposed are of too meagre a value as compared to the financial violations committed. A serious study was carried out by the World Bank experts to improve corporate governance by the SECP. Practically speaking, the effectiveness of regulatory regime by SECP is very poor. Something serious needs to be done to improve the regulatory mechanism/enforcement of SECP. Complication is added by the courts by staying the proceedings of SECP. Collusion of the SECP functionaries cannot be ruled out. The mandatory regulations of internal and external auditors is not being complied with resulting in almost zero regulations. Non-auditing of private companies is resulting in tax evasion as well. Public finances have also been discussed in the paper to provide holistic view of the private and public sectors. Annual budget is passed as per requirements of the constitution. Provincial shares are distributed according to NFC Award. Public funds are expanded according to the provisions of Financial Rules. The regulatory legislations are followed more strictly in the public sector. It is completely documented and audited. However, improvements in terms of prioritization of funds, mini budgets through supplementary grants and discretionary Special Regulatory Orders (SROs) need to be under taken. Budget deficit has to be met by widening the direct taxation net base. Audit of the public funds should be objective and free of political victimization. The bottom-line factor adversely affecting the effectiveness of financial regulatory institutions in Pakistan is non documentation of economy. Approximately sixty percent of the economy is undocumented. This is oftenly called parallel economy or black economy also. In order to ensure hundred percent effectiveness of the regulations of financial institutions the economy needs to be documented completely.Financial system managed by private sector can only bear fruits if certain pre-requisites like healthy competitive environment, efficiently functioning markets, sound financial infrastructure and strong and effective regulator, are met. If regulatory authority or the Central Bank is weak in implementation of regulations, lacking required skills, competencies and systems then the private sector can create serious systematic problems for the financial sector and for the economy. In Pakistan, weak capacity of regulators has resulted in centralization in goods market for sugar and cement etc. which is dominated by the private sector. World trends suggest liberalization of financial regulatory systems as laydown in the agreements of WTO and GATS. Financial systems are to be upgraded at par with international standards. Moreover, the issues of money laundering and tax evasion through innovative methods have to be simultaneously controlled. The dilemma of governance, as pointed out by Dr. Ishrat Hussain, is deteriorated effectiveness of implementation mechanism of the public sector institutions. The solution lies in retooling of the institutions. Public sector institutions have to be equipped with modern technological tools to cope up with the challenges of increased workloads and higher international standards. Recommendations First of all thorough research/study by the national and international experts/consultants need to be carried out to undertake documentation of economy. Then an integrated program/project for documentation of economy should be launched by the Finance Division, State Bank of Pakistan and SECP jointly. Existing regulatory framework should be implemented with more vigor which should be followed up and monitored through computerized management information systems. Reforms agenda of SBP for adoption of world best banking practices should be followed more vigorously for international compatibility. The banking systems should be automated. All banks, local as well as foreign, operating in Pakistan should be integrated/linked with SBP. Monetary policy should be enforced effectively to control devaluation of Pakistani currency viz-a-viz foreign currencies and Consumer Price Index. Anti-Money Laundering Act should be enforced strictly to check money laundering through hundi and other so called innovative liberal banking money transfers. Regulators from the public sector should be posted in the management of SECP for enhanced enforcement of regulations of SECP. Cases of SECP pending in courts should be pursued in the relevant courts of law by enhancing the capacity of legal wing of SECP. The regulation of internal and external auditors, to carry out annual audit of all the companies registered with the SECP should be enforced in letter and spirit.

Capacity building of the regulators of financial institutions i.e. SBP and SECP should be done according to international standards. In order to improve the efficiency of public sector finances, prioritization of resources should be done prudently. Development and social sector budget allocations should be enhanced. Malpractices of supplementary budgets and issuance of discretionary SROs should be stopped immediately. Audit of the public sector institutions should be carried out objectively and not as a tool of political victimization. Retooling of the government financial regulatory authorities/institutions is the way forward. BIBLIOGRAPHY Rs. 770m fines imposed on 1-Link, 28 banks, The Dawn, 03 July, 2012. SBP tracking cases of money laundering, committee told, Pakistan the Banker, Financial Tribune of Pakistan, http://www.thebanker.com.pk/state_bank/sbp-tracking-cases-of-money-laundering-committee-told (accessed 20-06-2015).

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Taxation Pakistans biggest problem! http://www.incpak.com/islamabad/taxation-pakistans-biggest-problem/ (accessed 29 April, 2015). The Global Economy. Com, http://www.theglobaleconomy.com/Pakistan/Inflation/ (accessed 20-06-2015). Resource Person

Dr. Omar Farooq Saqib, State Bank of Pakistan Mr. Khalid Mirza, Ex MD. SECP Mr. Javed Masud, Ex MD. SECP

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State Bank of Pakistan, http://www.sbp.org.pk/ (accessed 20 June, 2015)

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Dr. Ishrat Hussain, Paper Presented at the IMF High Level Seminar on Banking System Reforms, held at Toledo, Spain, 2-3 November, 2006.

State Bank of Pakistan, Banking System Review, (Karachi: Printing Press, 2009), 4.

SBP tracking cases of money laundering, committee told, Pakistan the Banker, Financial Tribune of Pakistan, HYPERLINK "http://www.thebanker.com.pk/state_bank/sbp-tracking-cases-of-money-laundering-committee-told" http://www.thebanker.com.pk/state_bank/sbp-tracking-cases-of-money-laundering-committee-told (accessed 20-06-2015).

HYPERLINK "http://www.brecorder.com/pages/author/rizwan-bhatti.html" \o "View Article Archive of RIZWAN BHATTI" Rizwan Bhatti, Clean note policy: Rs nine million penalties imposed on commercial banks, Business Recorder, 22 January, 2013.

The Global Economy. Com, HYPERLINK "http://www.theglobaleconomy.com/Pakistan/Inflation/" http://www.theglobaleconomy.com/Pakistan/Inflation/ (accessed 20-06-2015).

Ibid.

The Global Economy. Com, HYPERLINK "http://www.theglobaleconomy.com/Pakistan/Inflation/" http://www.theglobaleconomy.com/Pakistan/Inflation/ (accessed 20-06-2015).

Ibid.

Ibid.

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HYPERLINK "http://www.secp.gov.pk/" http://www.secp.gov.pk/ (accessed 21 June, 2015)

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Official website of Competition Commission of Pakistan, HYPERLINK "http://www.cc.gov.pk/index.php?option=com_content&view=article&id=418&Itemid=200" http://www.cc.gov.pk/index.php?option=com_content&view=article&id=418&Itemid=200 (accessed 21-06-2015).

HYPERLINK "http://www.dawn.com/news/731323/rs770m-fines-imposed-on-1-link-28-banks" Rs. 770m fines imposed on 1-Link, 28 banks, The Dawn, 03 July, 2012.

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Dr. Ishrat Hussain, Ex-Governor State Bank of Pakistan

i