File photo of the State Bank of Pakistan. PHOTO: EXPRESS
In a clear violation of the State Bank of Pakistan (SBP) Act of 1956, the House Building Finance Company Limited (HBFC) has appointed the central bank’s deputy governor, Saeed Ahmed, as its chairman.
Taking notice, a parliamentary committee on Wednesday termed the decision a violation of law, stating that a regulator cannot sit on the board of a banking company.
It is a misguided decision to appoint the deputy governor as chairman of the HBFC, which is also a clear case of conflict of interest, said Senator Saleem Mandviwalla, the chairman of Senate Standing Committee on Finance.
HBFC Chief executive Officer (CEO) Pervez Said told the committee that Ahmad was the chairman of the Board of Directors.
According to the SBP Act of 1956, “the governor and deputy governor shall devote their whole time to the affairs of the Bank”. It further states that no person shall hold office as governor or a deputy governor, who is a director, officer or employee of any other bank or of a financial concern or has an interest as a shareholder in any other bank or financial concern. It further clarifies eligibility by stating that nothing in this clause shall apply where the governor or deputy governor is entrusted with additional duties.
Sharif Akbar Peerzada, the additional finance secretary of Ministry of Finance, did not defend the appointment of Ahmed as chairman of the HBFC. Minister for Finance, Ishaq Dar and Secretary Finance, Dr Waqar Masood did not attend the committee meeting.
Shortcomings of HBFC
The additional secretary revealed that the company also did not submit its audited financial statements of the last three years to the Securities and Exchange Commission of Pakistan and was a defaulter on this account.
The committee exhibited disapproval over the day-to-day running of the HBFC. The entity that was incorporated to give small and medium-sized loans has invested Rs11 billion in the government papers instead of extending credit to the lower middle segments of the society.
“It invested the money in government security papers by borrowing from the SBP,” said the CEO.
“The company’s affairs are pathetic to say the least and it is struggling to perform basic functions,” said Senator Mohsin Aziz of PTI.
The company was not fulfilling its basic responsibilities and has extended only 54,000 housing loans valuing Rs13.4 billion. Out of this lending portfolio, roughly one-third of Rs4.2 billion was non-performing loans, said the CEO.
The government has kept managerial posts in the company vacant and key positions such as chief finance officer, heads of human resources and business groups are also unfilled.
“Qualified individuals have severe reservations and are not ready to work with the HBFC”, admitted the CEO. He said the existing workforce was highly overpaid and at the current cost structure, the company will never be financially viable.
First Women Bank
The standing committee was also briefed on issues of the government-owned First Women Bank Limited.
Much like HBFC, the bank is also facing problems of capital shortages, weak credit rating and missing of independent members of the Board of Directors.
First Women Bank President Tahira Raza said that under a special arrangement, the central bank has reduced the minimum capital requirement from Rs10 billion to Rs3 billion for the bank. “However, the bank is still short of this revised requirement by Rs768 million.”
Raza said there was no clarity about the exact role of the bank, as it can either be a commercial bank or a specialised bank. “The Women Bank has been put for failure from the very beginning”, said Raza.
Published in The Express Tribune, August 27th, 2015.
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