SBP’s role in BankIslami-KASB bank merger was “breaches of statutory duty”: SHC

-State Bank of Pakistan ordered to reconduct valuation of defunct KASB Bank if it is more than what was determined in the audit report, it would be required to compensate the shareholders -Sindh High Court in its judgement directed the central bank to release the 'confidential' auditor's report

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LAHORE: The Sindh High Court (SHC) has directed the State Bank of Pakistan (SBP) to re-examine the valuation of the defunct KASB Bank and labelled its role in the merger as “breaches of statutory duty.”

According to SHC’s order, it was observed the central bank had not given adequate time to KASB Bank for meeting the obligatory requirements.

Only two days had been given to KASB Bank to parley with its members, depositors and other shareholders in response to the merger proposal with BankIslami.

SHC lambasted the central bank for its incapacity to comply with regulations and termed it a failure on its part and agonizingly insufficient which it maintained was unreasonable.

Taking this into consideration, SHC in its decision directed the SBP to issue a notice to those individuals who were members of KASB Bank as on 27th April 2015, asking for complaints to the negative valuation of the entity as laid out in the scheme of the merger, within 30 days of this judgement.

Also, the central bank has been ordered to undertake efforts to find the details of the persons mentioned above from the stock exchange, central depository company and BankIslami.

A time of fifteen days has been given to the central bank by SHC from the publication on its website, as the time in which the objections can be received.

The auditor’s report regarding the valuation which was termed ‘confidential’ by the central bank would now be disclosed as per directives of SHC.

SBP has been ordered to release the auditor’s report in full, alongside the notice and its disclosure is mandatory for acquiescence with the judgement.

However, the SHC has made it clear the central bank is under no compulsion for providing any additional data beyond the disclosure of the full auditor’s report.

After these directives, the central bank would need to publish a reasoned and speaking order within 30 days after the final day for filing objections.

If the fresh valuation conducted by the central bank of defunct KASB bank is different to the one determined originally in the auditor’s report, it would need to fully compensate the shareholders within four months of the judgement.

Earlier, at beginning of April, the central bank published a press release in response to media reports regarding AGP’s report on defunct KASB Bank which said “SBP would like to clarify that all the audit observations raised from the office of the AGP have been duly responded.

Although the AGP observation is still at the stage of draft para, the entire reporting in both print and electronic media has distorted to give the impression as if the observation had attained finality.”

“Further, they are one-sided and does not reflect the SBP’s point of view. It is reiterated that the SBP being the regulatory and supervisory authority of the banking system has legal mandate to safeguard the interest of the depositors and to ensure the stability and soundness of the banking system.

The decision concerning defunct KASB Bank has been taken on merit and in the valid exercise of jurisdiction under the Banking Companies Ordinance, 1962. Media is, therefore, advised to refrain from speculative reporting on audit paras that are yet to attain finality.”

Earlier, a recently released report of the Auditor General of Pakistan (AGP) office again alleged the BankIslami-KASB bank merger caused around Rs3.5 billion in losses to the national exchequer in addition to the already Rs6.6 billion reported in August 2017.

A recent audit conducted on the accounts of the State Bank of Pakistan by the AGP’s office for the audit year 2017-18 revealed this anomaly, according to tv anchor Kamran Khan.

This disclosure was made in a live telecast of “Dunya Kamran Khan Ke Saath” on March 29th and said that a recently released AGP office report alleged State Bank of Pakistan hid losses to the tune of Rs3.5 billion and the amalgamation of these two banks was very dubious.

Also, Kamran Khan during the show told the loan had been given without approval of the central bank’s board of directors.

The National Accountability Bureau (NAB) is also conducting a probe into the BankIslami-KASB bank merger.

1 COMMENT

  1. Islamic banks are upholding tremendous growth in Assets, Deposits and Equity participation funds.All the Islamoc banks have ample opportunities in Agri Segments and they must book advances in this sector.

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