muhammad kamran shehzad : combating corruption in the banking sector keynote address by mr muhammad kamran shehzad, deputy governor of the state bank of pakistan, at the seminar on collaboration of banking sector and financial institutions with the national accountability bureau ( nab ) in combating corruption, karachi, 5 october 2010. * * * ladies and gentlemen, it is my pleasure and privilege to address this august gathering of eminent bankers, financial experts and other stakeholders. let me first state clearly that coordination & co - operation of the banking sector as well as regulator with national accountability bureau is of prime importance in combating corruption and corrupt practices in the banking sector. the majority of banking cases are white color crimes done in such a professional manner that their detection and subsequent preparation of strong cases is an uphill task. even in the developed economies prevention of white colour crimes, remains a big issues to tackle. in pakistan corruption is a major cause of concern in majority of public sector organizations which has weakened their strength and efficiency and thus they have become a burden on the exchequer. the critical factor behind such failures are mis - management, bad human resource management, immorality, in efficiency and greed. corruption reduces the welfare activities of the society due to loss of efficiency and effectiveness, reduction of the revenue available for development work and thus weaken the system. ladies and gentlemen, the behavior and culture of banking sector has altogether been changed in the last two decades. it has transformed itself from 85 % in public sector in 1990 ’ s, to present more than 80 % in private sector. this quantum change has been taken positively & supported by the state bank. the newly transformed private banking sector is performing responsibly and cooperating with regulators and investigating agencies for eradication of banking crimes. sbp and nab since its inception in collaboration with each other had agreed on a joint mechanism through which information required for investigation purposes from banking sector, under section 19 of national accountability ordinance, 1999, are obtained through sbp in the greater interest of the fragile economic conditions of the country. although nab has absolute powers to obtain these information directly from the banking company yet the collaboration was made to repose confidence in banking community. a dedicated nab cell at sbp was established which effectively coordinates with banks / dfis to ensure expeditious supply of information. the whole process is aimed at facilitating the bureau in discharge of its responsibility of vital national interest, without unduly disrupting the financial institutions

& creating any sort of panic amongst the borrowers or the clients of the banks. several cases of delicate in nature were dealt with in close cooperation amongst sbp, nab & concerned banking company in a professional way. sbp has been forwarding complaints received from the banks / dfis to bureau for initiating investigation, under the provisions of nao, against those entities / persons which had cheated / deprived the public of their hard earned money through illegal brokerage and banking business. sbp, in collaboration with secp, has been advertising a message titled “ public warning ” in print media to keep the general public aware of the fake schemes / scams launched by the fraudulent companies / noncorporate entities / individuals. state bank of pakistan has also been playing its role in facilitating the banking sector in their efforts to recover from borrowers their long outstanding defaulted loan amounts by referring such cases of willful loan default to nab for inquiry, investigation and proceedings against them wherever required. about 100 such cases amounting to rs. 17. 5 billion approximately were processed & referred to nab under section 31 - d of national accountability ordinance, 1999. i appreciate the role of nab in speedy processing of these cases which helped not only in recovery of defaulted amount but also saved depositors money. the names of the corrupt persons convicted by nab under the provisions of nao, 1999 are also shared with the banking industry. the persons convicted under 25 ( b ) of nao, 1999 are debarred from obtaining any fresh loans from banking sector for a period of ten year from the date of conviction. such weeding out of corrupt elements, from the potential clientele of banking sector, has lead to more prudent lending decisions other than developing a critical data base for the sector. ladies and gentlemen, development of human resource in the banking industry on sustainable basis is a continuous process. taking lead in this front on an ongoing basis and conducting workshops, seminars, awareness programs, training sessions internally as well as for the benefit of the banking industry has become an integral part of our efforts to curb corrupt practices, money laundering and countering the financing of terrorism. the financial institutions are now less proned to be used as “ the safe heavens ” for the corrupt persons owing to the effective coordination mechanism developed amongst the financial institutions, sbp and nab. the introduction of compliance culture and establishment of a separate compliance department manned with skilled and professional officers has also helped in eradication of unlawful and