SECP begins revising NBF regulatory framework

Equity market regulator seeks to build an alternative financial system.

ISLAMABAD: The equity market regulator – the Securities and Exchange Commission of Pakistan (SECP) – has initiated the process of revising the non-bank financial (NBF) sector’s regulatory framework to reform the entire financial sector.

According to a press release, keeping in view the inherent risks in the present composition of the financial sector, SECP Commissioner for Specialised Companies Division Imtiaz Haider said that the equity market watchdog rolled out a roadmap for the revision in the form of a report in March 2013.

In the report, the SECP has suggested the development of an alternative financial system by way of promoting the NBF sector to diversify the inherent systemic risk and provide different asset classes to promote savings as well as meet the specific needs of participants. Other recommendations included some macro-level suggestions regarding the taxation regime, encouraging long-term savings and channeling these savings to underserved segments.

Haider further went on to say that a good number of market professionals, industry participants and financial institutions provided comments on the report. Moreover, some new ideas were also received. The SECP analysed the feedback given by the public on the suggested reforms.

The proposed way forward can be categorised into two parts. The first part requires a longer time period for implementation as it requires the consent of different stakeholders such as the State Bank of Pakistan, Ministry of Finance and Federal Board of Revenue as well as amendments to various statutes. Prior to considering the implementation of the first phase, the SECP will consider the State Bank’s feedback on the way forward suggested in the report.

The second part, on the other hand, can be implemented in the shorter run as it requires changes to the existing regulatory framework without the involvement of any external stakeholder. The SECP has initiated the process and the requisite amended framework would be implemented during 2014 after completing the public consultation process.

Published in The Express Tribune, September 10^th,  2013.

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