NCCPL's settling banks: SECP tightens credit rating criterion

The Securities and Exchange Commission of Pakistan (SECP) has revised the eligibility criterion for the settling banks of National Clearing Company of Pakistan Limited (NCCPL). "The minimum short term credit rating criterion for settling banks has been prescribed as A1," said an NCCPL notice made by the Karachi Stock Exchange Monday.
"The long term credit rating criterion has been deleted," said the notice which the NCCPL notified to the clearing members and settling banks by the NCCPL on April 30. The SECP amended Section 5.10 of the NCCPL regulations that deals with eligible criteria for the admission of settling banks. Sub-section 5.10.1 of the relevant clause says the company may admit a bank as a settling bank if, one, it was duly licensed to carry on banking business in Pakistan under the Banking Companies Ordinance, 1962 or being a statutory corporation, it is otherwise entitled to carry on banking business under the law by which it is created.
Two, it had been allocated minimum short-term credit rating of Al. Three, it complied with minimum paid up capital (free of losses) requirement as prescribed by State Bank of Pakistan from time to time. Four, it had designated bank branches having physical presence in the premises or building in which Stock Exchange(s) were located or in the vicinity of Sock Exchange(s). However, the Board may relax such condition from time to time.
Five, it had designated a bank branch located in Karachi and acceptable to the company as its main contact branch. Six, it was capable of maintaining online linkage with NCSS. Seven, it had signed or agreed to sign with the company a settling bank agreement in the form prescribed by the company whereby it undertakes to perform money settlement services for the benefit of the company and those clearing members who become customers of the designated branch (es) and have entered into tripartite agreements with the company and such clearing members. "Provided that the banks admitted as settling banks pursuant to these Regulations, shall continue to remain as settling banks as if such settling banks fulfil the requirements mentioned in Regulation 5.10.1 above," the law said. It said in case any settling bank failed to comply with the above requirements, it shall be terminated from being a settling bank after giving notice of 15 days to market participants. The law further provides that all settling banks comply with any additional or modified admission requirements as were presently or in future set out in these regulations.