Pakistan’s inclusion on ‘grey list’ is credit negative for banks — Moody’s

Islamabad has until February 2020 to fully implement the given action plan.. (Photo courtesy: FATFNews/ Twitter)
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Updated 27 February 2020

Pakistan’s inclusion on ‘grey list’ is credit negative for banks — Moody’s

  • Pakistan’s compliance with global rules had improved, Moody’s said
  • FATF said last week that Pakistan would remain on the list, expressing concern it had not completed an agreed-upon action plan

ISLAMABAD: Pakistan’s banking system faces credit risk from the country’s continued inclusion on an international “grey list” of nations falling short of global money-laundering rules, rating agency Moody’s said on Thursday.
Global watchdog Financial Action Task Force (FATF) said last week that Pakistan would remain on the list, expressing concern it had not completed an agreed-upon action plan, and giving it until June to do so.
“The announcement is credit negative for Pakistani banks because it raises questions about potential additional restrictions relating to banks’ foreign-currency clearing services, as well as their foreign operations,” Moody’s said, adding that increased compliance costs would also hamper banks’ profitability.
Though Pakistan’s compliance with global rules had improved, Moody’s said, its weakness risked banks losing access to foreign currency-clearing services, crucial for cross-border payments used to fund imports and exports.
“This risk has so far not crystallized in the jurisdictions that have been placed on the increased monitoring list,” the agency said.
If Pakistan does not meet FATF’s requirements to curb any chances of the financial system to be used for terror financing or money laundering, it could join Iran and North Korea on the global watchdog’s blacklist.
That would lead to Pakistan being shunned by international financial institutions.
The UAE’s central bank announced this month that it was investigating whether Pakistan’s largest lender Habib Bank had violated laws against money laundering and terrorism financing.


Pakistani banks to offer home cheque pickup services to contain coronavirus 

Updated 10 min 57 sec ago

Pakistani banks to offer home cheque pickup services to contain coronavirus 

  • Central bank has allowed banks to facilitate customers through doorstep and drop box cheque collections 
  • Businessmen and bankers have hailed the decision as efficient and timely 

KARACHI: As most of Pakistan undergoes near complete lockdown to combat the spread of the coronavirus pandemic, the central bank has allowed commercial banks to start ‘Doorstep Cheque Collection’ and ‘Direct Cheque Deposit’ facilities to limit social interaction, a circular issued by the State Bank of Pakistan said on Saturday.

Bankers and businessmen say the central bank’s move will minimize the risk of the virus spreading and ensure the timely supply of liquidity to industries in the South Asian country where over 1,500 people have so far tested positive for the virus with at least 13 deaths. 

Eastern Punjab province is leading the tally of total cases with 570 cases, followed by Sindh with a reported 469 cases on Sunday.

For the continued supply of food, medicine and other necessities, the government has declared banking among “essential services,” permitted during the lockdown. 
Under the ‘Doorstep Cheque Collection Facility,’ commercial banks and Micro Finance Banks (MFBs) may make arrangements to collect cheques from the registered addresses of customers upon request, the state bank circular said, while addressing the presidents and CEOs of commercial banks.

It added that as part of the service, a crossed cheque may be presented by the payee/beneficiary directly into the paying/drawee bank, instead of their bank branches.
In order to minimize footfall in banks, the central bank has also allowed banks and MFBs to offer drop box cheque collection facilities under which customers can simply drop their cheques into drop boxes installed in select bank branches.

“Banks may allow their Corporates/Priority customers to send them the scanned image of the cheque along with relevant details of the Beneficiary either through registered emails or through mobile Apps of their banks to push funds from their accounts to the payee bank,” the circular further said.

Bankers say the central bank’s move will expedite the cheque clearance process that normally takes at least two days. 
“It will lead to sort of real time transactions and will minimize the time of cheque clearance. It will also ensure ease of dealing with customers with limited person to person interaction, ”Ahmed Ali Siddiqui, senior banker and director for the Center for Excellence in Islamic Finance (CEIF) at the Institute of Business Administration in Karachi, told Arab News.

 

Businessmen say the move is expected to quicken the process of cheque clearance, which is the need of the hour for industries and traders.
“In the current situation, this move of central bank will ensure the supply of much needed liquidity to the industries at fast pace,” Shaikh Amjad Rashid, a convenor at the Federation of Pakistan Chambers of Commerce and Industry, told Arab News.