Apropos 'A tactless central bank' carried by Business Recorder on November 26, one needs to commend the articulation of writer Mian Asif Said in relation to his deep insights into monetary policymaking and regulatory processes.
He, for example, argues: "For the past four years, the central bank has done precious little except exhort these banks to recapitalize. For the interim, it has made do with repeated extensions on MCR compliance. Your scribe would like to argue that even the PKR 10 billion MCR desired by SBP is a long cry for the four commercial banks highlighted in the foregoing list. In short, two accounting legerdemain grossly overstate the reported capital of these banks. For a realistic picture of capitalisation, one needs to adjust the capital accounts of these banks for the varying amounts of unprovided Non-Performing Loans and deferred tax assets on their balance sheets. These are intangible assets that contribute nothing to the liquidity and operational funding of the institutions. They only promote an unhealthy complaisance in the minds of stakeholders."
The writer has raised a profound point. The central bank is therefore required to look deeper into the situation caused by its action against a bank. No doubt, SBP is equipped with the required wherewithal and wisdom to boost its regulatory oversight in an effective and meaningful manner.
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