yaseen anwar : developing non - bank financial models while addressing the risks of shadow banking address by mr yaseen anwar, governor of the state bank of pakistan, at the secp ( securities and exchange commission of pakistan ) conference on “ non - bank financial institutions ”, karachi, 4 march 2013. * * * mr. muhammad ali, chairman, secp, distinguished speakers, ladies and gentlemen – good afternoon! i would like to thank the secp for inviting me to join you and address this very timely conference on non - bank financial institutions ( nbfis ). i congratulate the organizers for holding this pertinent event which has gained special prominence in the aftermath of the global financial crisis. i sincerely hope that today ’ s session will give further impetus to our efforts in promoting nbfis as an alternative source of funding for businesses and also as a separate class of assets for investors in the country, adding to the financial sector ’ s diversity, stability and viability in the long - run. globally, nbfis have gained a prominent position and role in the financial sector and economy. however, the role of this sector has recently been scrutinized for its contribution to financial sector fragility during the recent global financial crises. therefore, at the november 2010 g20 seoul summit, while reviewing the new capital standards for banks ( basel iii ), the g20 leaders identified some remaining issues of financial sector regulation that warranted attention. they highlighted “ strengthening regulation and supervision of shadow banking ” as one of these issues and requested the financial stability board ( fsb ), in collaboration with other international standard setting bodies, develop recommendations to strengthen the oversight and regulation of the “ shadow banking system ”. the “ shadow banking system ” is defined as “ the system of credit intermediation that involves entities and activities outside the regular banking system ” in other words intermediation through non - banks. the term started to be used widely at the onset of the recent financial crisis. the emergence of the term reflected recognition of the increased importance of entities and activities structured outside the regular banking system that perform bank - like functions. 1 the financial sector in pakistan comprises of commercial banks, development finance institutions ( dfis ), microfinance banks ( mfbs ), non - banking finance companies ( nbfcs ) ( leasing companies, investment banks, discount houses, housing finance companies, venture capital companies, mutual funds ), modarabas, stock exchange and insurance

that a substantial number of investors and other members of the public believe there are little to no benefits from crypto. see “ letter in support of responsible fintech policy, ” june 1, 2022, https : / / concerned. tech /. robert j. shiller, narrative economics : how stories go viral and drive major economic events ( new jersey : princeton university press, 2019 ). - 5same fundamental liquidity and credit risks as traditional assets, and can be highly correlated with other traditional risks, rather than being hedges against such risks. while purveyors of crypto - assets have represented to customers that they are protected through the decentralized nature of the underlying technology, customers are often at a greater risk because those purveyors often find ways to function outside a robust supervisory and regulatory system. in the absence of regulatory compliance, customers don ’ t have the information they need to assess and mitigate their risks. investors do not have the structural protections they have relied on for many decades. as a result, many have been victims of classic cases of fraud and abuse — some appropriately classified as “ ponzi schemes ” under a high - tech veneer. moreover, while crypto - assets are hyped as “ decentralized, ” there has been an emergence of new, quite centralized intermediaries that are either not subject to or not compliant with appropriate regulation and supervision, which has perpetuated harm to consumers. complicating matters further, these entities often seek out jurisdictions with loose or less developed legal and regulatory frameworks for financial activities. and the lack of consolidated home country supervision and coordination with host country supervisors rekindles the kind of abuses that bank regulators long ago quashed. while such cross jurisdictional regulatory arbitrage is not new, the digital nature of these activities provides for greater opportunity to expand the reach of such entities to customers around the world. for example, the prominent collapse of the ftx crypto - asset trading platform has reportedly wiped out the holdings of a million people, costing them billions of dollars. 6 u. s. securities and exchange commission, “ charges samuel bankman - fried with defrauding investors in crypto asset trading platform ftx, ” news release, december 13, 2022, https : / / www. sec. gov / news / press - release / 2022 - 219. - 6unfortunately, that is not the only example. since last summer