Banking system has potential for substantial growth: Raza

[LahoreEstate]

RECORDER REPORT
KARACHI (June 01 2009): Governor State Bank of Pakistan (SBP) Syed Salim Raza on Sunday said that foreign investors (Orascom) were keen to acquire RBS operation, which reflects that Pakistan banking system still has great potential to grow more and attract foreign investment.

Talking to newsmen at a ceremony held here in Karachi for the launching of Silkbank Limited, formerly Saudi Pak Commercial Bank Ltd, Salim Raza said Federal Board of Revenue (FBR) tax notice to SBP was insignificant to the central bank, as its profit was already being transferred to national exchequer on annually basis.

He said that FBR had imposed 15 per cent withholding tax on the fee paid to foreign fund managers and notice had sent to the central bank for the payment of said tax amount. He said that credit rating of banks had been cut globally by the foreign credit rating agencies due to economic recession world-wide. However, Pakistani banks have still great potential to grow more and attract foreign investment, he added.

Governor said that the performance of country's financial sector, largely dominated by banks, has been outstanding throughout the current economic situation. "Pakistan's banking system has great potential for further investment," he added.

He said the banking sector has over the years nurtured itself in a way that it has been able to withstand some of the shocks it faced in the last 18 months or so. 'The banking system is on strong footing and has long term potential, a feature which has served to attract a substantial amount of Foreign Direct Investment (FDI) in the sector, with established global financial institutions now active participants in the domestic financial sector,' he said and added that the banking industry is well-governed and has witnessed outstanding financial performance during the last few years.

"With strong regulatory oversight, there has been a significant enhancement of capital and risk-weighted capital adequacy," he said and added that stringent loan provisioning requirement has built sufficient reserves against the Non Performing Loans' (NPLs') portfolio. Raza said that SBP has always encouraged customers focus & service standards, hoping that Silkbank would provide better services to its customers.

"We have no doubts in the ability of the management of Silkbank in delivering high level service through innovative products and a proactive service attitude," he added. Governor appreciated the sponsors of Silkbank ie International Finance Corporation from the World Bank Group, Bank Muscat and Nomura for their interests 'in our market and their commitment to Silkbank, which adds stability to our economy'.

"As a regulator, it is clear to us that the direction of Silkbank's strategy is positive and measured, and we believe that Silkbank will deliver on its commitment to its stakeholders," he added. The central bank has followed the restructuring of Silkbank about which its management has kept SBP fully aware at all levels, he said and added "we believe that Silkbank's efforts will yield very strong results in the long run".

Earlier, Azmat Tarin, President Silkbank in this remarks thanked the State Bank for its support during the restructuring process. He said that Saudi Pak Commercial Bank acquired last year by a consortium of foreign investors comprising bank of Muscat, Nomura and IFC (world Bank Group) and announced the re-branding of the bank as Silkbank effective from June 1, 2009. The ceremony was attended among others by senior officials of State Bank, Silkbank and executives of other banks.

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