The cancellation of a hearing at the Senate Finance Committee on accounting irregularities at the Bank of Punjab (BOP) and the National Bank of Pakistan (NBP) has left some committee members suspecting an attempted cover-up of illicit activity.
The Senate Committee on Finance and Revenue had been due to convene to discuss the draft of an investigation into the accounts of the Bank of Punjab which had been prepared by the State Bank of Pakistan as well as review the loan portfolio of the National Bank of Pakistan, where it is suspected that the bank has been hiding troubled assets on its balance sheet.
“The decision to cancel the meeting was jointly taken by State Bank Governor Shahid Hafiz Kardar and the chairman of the Senate’s standing committee on finance, Senator Ahmed Ali,” said a spokesman for the central bank, when contacted by The Express Tribune.
Sources inside the Senate secretariat say that the meeting is likely to be cancelled completely. If committee members insist on addressing the issue, then the chairman is likely to call for a closed-door session of the panel. The Senate finance committee has previously never met behind closed doors.
“The cancellation of such an important meeting indicates that the higher authorities have ganged up to save the skin of those who are responsible for financial irregularities in the Bank of Punjab and the NBP,” said a member of the committee who wished not to be named.
When requested to supply the draft report, the central bank claimed that it contained information that was “too sensitive” to be revealed to the media, according to Senate sources.
The State Bank, however, did offer to allow senators to visit SBP headquarters in Karachi and view the report personally.
While both the Bank of Punjab and the National Bank of Pakistan are majority-owned by the provincial government of Punjab and the federal government respectively, they are both also publicly listed entities that trade on the Karachi Stock Exchange. Both banks are required under the Companies Ordinance of 1984 to disclose their accounts to the public every quarter. The Bank of Punjab, however, has failed to do since September 2008.
According to sources familiar with the matter, the gap between assets and liabilities at the Bank of Punjab may be between Rs50 billion and Rs80 billion. Some senators are adamant that they want to find out how such a monumental loss could occur at the bank.
“We have to get to the bottom of this, as it is a matter of grave public concern,” said Senator Haroon Akhtar Khan of PML-Q, a member of the finance committee. He said there were also some serious problems at the National Bank, with some reports suggesting that it was heading towards a crisis similar to the one at the Bank of Punjab.
Haroon suggested that NBP may be extending loans while accepting substandard collateral , compromising its own financial integrity.
People close to the committee chairman, Senator Ahmed Ali, said that the chairman did not cancel the meeting but rather postponed it. They said the decision was taken after Senator Ishaq Dar, another committee member, went on a foreign tour. Nonetheless, the Senate website states the meeting has been “cancelled”.
NBP stock closed at Rs78.91 in trading on the Karachi Stock Exchange on Thursday, up 5 per cent for the day. The Bank of Punjab’s stock closed at Rs7.37 per share, down 1.8 per cent for the day.
Published in The Express Tribune, March 4th, 2011.