Pakistan will be able to open National Bank of Pakistan (NBP) branch in China by next year after getting the license amid concerns by the bank management that pension case judgment may jeopardize it. While briefing to the meeting of Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla Wednesday, NBP President Saeed Ahmed said that NBP branch in China will now be opened by next year if everything goes well.
There are certain conditions to be met to open NBP branch in China regarding balance sheet of the bank. "We have to achieve Rs 200 billion bank balance sheet to open NBP branch in China. We have received approval from Beijing and it has been processed to their head office," he added.
He said some retired employees of NBP filed a pension case in Peshawar High Court, which delivered a judgment in favour of the bank. However, the petitioners also filed the case in Lahore High Court which gave the verdict in their favor. Subsequently, an appeal was filed against the LHC verdict in the Supreme Court, which also maintained the LHC judgment. He said the NBP is considering filing a review petition in the case.
The opening of branch is under threat due to decision of Supreme Court in NBP pension case which would require one time capital adjustment of Rs 47.5 billion on the bank balance sheet. "If Rs 47.5 billion are eroded, we will not meet the criteria," he said. The committee was informed if everything goes according to the plan, the branch will be opened next year after getting license.
On the issue of closing Habib Bank branch in New York, State Bank of Pakistan (SBP) officials informed the committee that HBL had been operating in New York since 1978, however, in 2006, New York's State Banking Regulator through a written agreement sought compliance from the bank on anti-money laundering (AML), suspicious activity reporting and suspicious transactions monitoring, etc. The bank rating was satisfactory till 2009-2011 but was downgraded to marginal in 2014 and below satisfactory level in 2015, they added. Additionally, the meeting was told that some transactions of the bank were also restricted and management was asked to address deficiencies of AML compliance and limitation of dollar-clearing. The SBP officials further stated that Al-Rajhi Bank whom LP Morgan Bank left on basis of high risk transactions, was made client by the HBL in 2014 and in 2015 bank rating came down below the satisfactory level.
Acting President HBL Rizwan Haider and another bank official told the meeting that they were able to bring down the penalty of $625 million imposed by regulatory to $225 million through an out of court settlement and also persuaded the regulator to withdraw charges against the bank.
He said that "to a larger extent, business with Saudi Bank Al-Rajhi was responsible for the downgrading and closure of HBL and the fine imposed on it." He contended that Al-Rajhi standing had a very good standing in Saudi Regulator and was major bank involved in remittances to Pakistan and this was the consideration of the HBL while making him a client. He also claimed that decision to allow dollar clearance through HBL New York Branch was taken after due diligence in 2014 after J.P Morgan closed doors for Al-Rajhi for being high risk transactions bank.
He further stated that before 2015 inspection, HBL rating was very satisfactory and downgrading to marginal by the New York regulator was also a surprise for the bank management. Senator Mohsin Aziz said that SBP was required to take note of what was going one in the HBL.
The meeting was informed that NBP percentage of borrowing is coming down and agriculture loans have been increased recently while borrowing by textile sector is stagnant, claimed officials of National Bank of Pakistan (NBP).
On the issue of NBP Bangladesh operation, the committee was informed that seven people involved in the scam have been arrested while one is absconder and six remaining are Bangladeshi nationals. The committee asked NAB to provide thorough details when the fraud was detected and by whom and when it was reported to head office and whether it was brought into the notice of the bank board.