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

based competitive process at all levels. for example, 11000 applications were received for entry level banking officers ’ positions. about 2600 qualified at the written exam and 50 were finally selected after interview. those selected receive a 9 months extensive training at nibaf and 6 months on - the - job training in commercial banks and various departments of the sbp. middle level managers have also been recruited through the same competitive process. we have hired more than 20 chartered and management accountants, more than 100 high level it professionals including three from wall street to fill in our skill gap. higher educational opportunities are available to staff to improve their academic qualifications or upgrade their professional skills. foreign training and attachment with central banks in england, australia, malaysia, singapore and federal reserve keep the staff abreast with the recent developments and techniques of central banking. the sbp provides full scholarships to young pakistanis who can obtain admission to ph. d. program in economics and finance at any of the top 20 universities of the world. the bank has also set up endowed chairs at economics departments of five pakistani universities to upgrade the quality of economics education. another element of sbp reform program is business process re - engineering under which the existing procedures, processes and reporting requirement are being streamlined, simplified and redundancies eliminated. with the commissioning of the data warehouse project the banks will no longer need to earmark dozens of their employees to fill in the various forms and reports required by the sbp. delegation of authority has empowered officials at the various rungs of hierarchy to take decisions and dispose of the cases. as part of its organizational restructuring the sbp has set up an independent subsidiary - the banking services corporation ( bsc ) to handle all retail banking functions. all the 16 field offices have been transferred to the control of the bsc which is run by a managing director. this arrangement has allowed the governor and senior management to concentrate their attention and energies on the core central banking functions. despite the above achievements we are fully aware that there is no room for complacency. the world around us is changing rapidly and we have to keep up with these changes and adapt ourselves constantly to the new requirements. a dynamic organization cannot afford to stand still we will be faced with unforeseen events. but if the sbp is transformed into a flexible, agile and competent organization the chances of meeting the new challenges successfully will be high. we have still a long and arduous path to travel.