internship report sbp karachi

State Bank of Pakistan

Internship Report

Date: 8 April 2023

Karachi

Hailey College of CommerceUniversity of the Punjab

Presented to:Dr. Liaqat Ali

PrincipalHailey College of

CommerceUniversity of the

Punjab

Presented By:Abubakar RiazB.Com HonorsRoll No.: 478

Section: “G” MorningSession: 2006-2010

S t a t e B a n k o f P a k i s t a n – K a r a c h i

April 8, 2023

Prof. Hafiz Abdul Rasheed

Hailey College of Commerce,

University of the Punjab,

Lahore.

SUBJECT: REQUEST FOR THE SUBMISSION OF INTERNSHIP REPORT

Respected Sir,

I conducted my internship at State Bank of Pakistan, Karachi. During this

internship I prepared a report on “Reserve Management Framework” and

Selected International Markets and investment Department (IMID).

I worked in this department with full concentration and hard work. Now at

the completion of this internship I request you please accept my internship report.

Yours obediently,

Abubakar Riaz

B.Com Honors

Roll No. 478

Section “G” Morning

Hailey College of Commerce,

University of the Punjab, Lahore.

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ACKNOWLEDGEMENT

All the acclamation and appreciation is for Almighty Allah the most merciful,

gracious and beneficent who is entire source of all the knowledge and wisdom

endowed to mankind. All the thanks to the name of Almighty Allah, who helped

me in setting goals and objectives and blessed me to reach the destination.

Without His assistance none is capable of accomplishment.

I would be doing injustice without mentioning the name of the person who

helped me through out the report and made me understand the major concepts of

Reserve management framework. So my special thanks go to

Miss. Asma Yousaf.

Heartiest gratitude and compliments to my Parents, without their

continuous love and encouragement I could not complete this task and in the end

I would like to thank our worthy coordinator Mr. Mubashir without him I would not

be able to complete this task. The report in your hand is the collection of my

observations and research.

The source of information for the preparation of report includes a thorough

research conducted on the internet, SBP website, IMF publications, and Central

bank of Australia.

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TABLE OF CONTENTS

Acknowledgement...................................................................................................2

List of illustrations...................................................................................................5

Executive summary.................................................................................................6

Introduction of SBP.................................................................................................9

History.....................................................................................................................9

Core Functions of State Bank of Pakistan.........................................................11

Regulation of Liquidity.......................................................................................11

Regulation and Supervision...............................................................................12

Exchange Rate Management and Balance of Payments..................................13

Developmental Role of State Bank....................................................................14

Statutory Obligations.........................................................................................15

Vision Statement...................................................................................................18

Mission Statement................................................................................................18

Core Value............................................................................................................18

Organizational Structure.......................................................................................19

Central Board of Directors.................................................................................20

Ratio Analysis.......................................................................................................21

Current Ratio.....................................................................................................21

Debt ratio...........................................................................................................22

Interest Coverage Ratio.....................................................................................23

Operating Profit Margin......................................................................................23

Net Profit Margin................................................................................................24

Return on Assets...............................................................................................25

Trend Analysis......................................................................................................26

Horizontal Analysis Interpretation......................................................................32

SWOT Analysis.....................................................................................................42

Strengths...........................................................................................................42

Weakness..........................................................................................................44

Opportunities.....................................................................................................45

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Threats..............................................................................................................46

SBP Report...........................................................................................................47

Australia.............................................................................................................47

Framework.........................................................................................................48

Objectives of reserves management.................................................................48

Organizational and decision-making structure...................................................48

Institutional Framework......................................................................................48

Organizational Structure....................................................................................48

Decision Making................................................................................................50

Transparency and accountability.......................................................................51

Capacity to Assess and Manage Risk...............................................................53

Benchmark Portfolios.........................................................................................53

Conclusion............................................................................................................60

Recommendations................................................................................................62

Glossary................................................................................................................64

Appendix...............................................................................................................67

Training certificate.............................................................................................67

Letter of authorization........................................................................................68

Latest annual financial statements....................................................................69

Bibliography..........................................................................................................73

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LIST OF ILLUSTRATIONS

FiguresFigure 1 Organogram............................................................................................19

Figure 2 Current ratio............................................................................................21

Figure 3 Debt Ratio...............................................................................................22

Figure 4 Net Profit Margin.....................................................................................24

Figure 5 Return on Assets....................................................................................25

Figure 6 Net Assets..............................................................................................34

Figure 7 Total Assets............................................................................................38

Figure 8 Assets and Liabilities..............................................................................40

Figure 9 Organizational Structure of RBA.............................................................49

Figure 10 Decision Making Structure....................................................................50

Figure 11 Horizon Analysis...................................................................................54

TablesTable 1 Current Ratio............................................................................................21

Table 2 Debt ratio.................................................................................................22

Table 3 Interest Coverage Ratio...........................................................................23

Table 4 Operating Profit Margin............................................................................23

Table 5 Net Profit Margin......................................................................................24

Table 6 Return on Assets.....................................................................................25

Table 7 Horizontal Analysis: Balance Sheet of Issuing Department.....................26

Table 8 Horizontal Analysis: Balance Sheet of Banking Department...................27

Table 9 Horizontal Analysis: Profit and Loss Account...........................................30

Table 10 Vertical Analysis: Balance Sheet of Issuing Department.......................33

Table 11 Vertical Analysis: Balance Sheet of Banking Department......................35

Table 12 Vertical Analysis: Profit and Loss Account.............................................39

Table 13 Official Reserve Assets of Australia.......................................................47

Table 14 Currency, Asset, and Duration Benchmarks..........................................53

Table 15. Composition of Individual Portfolio Benchmarks...................................55

Table 16 Balance Sheet Issuing department........................................................69

Table 17 Balance Sheet Banking department.......................................................70

Table 18 Profit and Loss Statement......................................................................72

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EXECUTIVE SUMMARY

In order to be able to cope with the changing environment it is necessary to

have some practical experience. As the students of Commerce & Business we

have to pass through a series of various managerial techniques. During this

practical course we are provided with an opportunity to learn that how the

theoretical knowledge can be implemented in practical grounds.

I selected to do my internship in State Bank of Pakistan, Karachi. I worked

there for six weeks & it gave me a greater practical knowledge about the

operations of the bank. The objective of this Internship was to explore the issues

relating to Finance and to find out problems regarding the theoretical concepts

with practical experience working in an organization during the internship and

study the system of State Bank of Pakistan Karachi. There are many possible

improvements, which we can make positive changes in the system.

The report includes the history of State Bank of Pakistan products and

services offered by the bank, its financial analysis, assignments handled at the

bank and some suggestion on the basis of my experience about the bank.

State Bank of Pakistan was inaugurated by Quaid e Azam on 1st July 1948

at Karachi. He said in his first address at that occasion that the bank will serve the

economy and bank will be responsible for issuing note and regulate the whole

monetary system the role and responsibilities of the bank was widened by State

Bank Act 1956.

SBP is performing traditional and non traditional functions for the banking

sector of Pakistan and is taking steps towards islamization of banking system.

The primary functions including issue of notes, regulation and

supervision of the financial system, bankers’ bank, lender of the last

resort, banker to Government, and conduct of monetary policy.

The secondary functions including the agency functions like

management of public debt, management of foreign exchange, etc.,

and other functions like advising the government on policy matters

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and maintaining close relationships with international financial

institutions.

State Bank is performing different kind of functions like regulation of liquidity it

controls the money supply in the county to avoid inflation and uses various tools

to control the supply of money e.g. it uses open market operation, discount rate. If

it wants to decrease the money supply it increased the discount rate and sells the

T-bills that are safer investment and the situation is reverse then it purchases the

T-Bills from banks and reduces the discount rate.

State bank is also a regulator and supervisor it devices various policies for

commercial banks and supervise whether they are complying the rules and

regulations for this purpose SBP has a separate dept that is inspection and

banking surveillance dept which ensures the compliance.

SBP is responsible for exchange rate management now the Govt of

Pakistan has adopted the floating exchange rate system balance of payment also

controlled by the SBP it provides the reserves to the government for the payment

of loans because it is custodian of reserves.

Being the controller of financial system it maintains certain type of reserves

from the commercial banks as statutory liquidity requirements(SLR) and cash

reserve requirements(CRR) it has placed restrictions on the of minimum capital

requirement(MCR).

State Bank has some core values that poses the major theme of work and

add uniqueness in image of Bank.

Trust

Openness

Team work

Courage

Commitment to excellence

Problem solving approach

Mr. Yaseen Anwer is the acting Governor of the bank after the resignation

Mr. Syed Saleem Raza. SBP has 33 departments which are housed in 10 stories

building.

After that there is trend analysis in the report in which different years

financial statements are compared in horizontal and vertical analysis. Different

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charts are also included in the report to enhance the understanding of the users.

All the results of analysis are compiled in tabular form and pie, bar charts. SWOT

analysis is also given in which different strengths are explained which the central

bank owns different problematic areas are also discovered which hinder the work

smoothness. Different opportunities that can improve the performance and system

of the bank.

At my stay at SBP a project was also assigned to me which I had

completed namely “Reserve Management Framework” and supervised by Miss

Asma Yousaf (Fund Manager) and presented in a joint session.

At the end of report some recommendations are also given based on my

observation and study of system of SBP.

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INTRODUCTION OF SBP

State Bank of Pakistan is the Central Bank of the country. While its

constitution, as originally lay down in the State Bank of Pakistan Order 1948,

remained basically unchanged until 1st January 1974 when the Bank was

nationalized, the scope of its functions was considerably enlarged. The State

Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its

operations today.

Under the State Bank of Pakistan Order 1948, the Bank was charge with

the duty to "regulate the issue of Bank notes and keeping of reserves with a view

to securing monetary stability in Pakistan and generally to operate the currency

and credit system of the country to its advantage". The scope of the Bank’s

operations was considerably widened in the State Bank of Pakistan Act 1956,

which required the Bank to "regulate the monetary and credit system of Pakistan

and to foster its growth in the best national interest with a view to securing

monetary stability and fuller utilization of the country’s productive resources".

Like a Central Bank in any developing country, State Bank of Pakistan

performs both the traditional and developmental functions to achieve macro-

economic goals. [8]

HISTORY

Before independence on 14 August 1947, the Reserve Bank of India

(central bank of India) was the central bank for what is now Pakistan. On 30

December 1948 the British Government's commission distributed the Bank of

India's reserves between Pakistan and India - 30 percent (750 M gold) for

Pakistan and 70 percent for India.

The losses incurred in the transition to independence were taken from

Pakistan's share (a total of 230 million). In May, 1948 Muhammad Ali

A b u b a k a r R i a z ( 4 7 8 )

http://en.wikipedia.org/wiki/Muhammad_Ali_Jinnah

http://en.wikipedia.org/wiki/Gold

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/1948

http://en.wikipedia.org/wiki/December_30

http://en.wikipedia.org/wiki/December_30

http://en.wikipedia.org/wiki/Reserve_Bank_of_India


http://en.wikipedia.org/wiki/August_14

http://en.wikipedia.org/wiki/Independence


Jinnah (Founder of Pakistan) took steps to establish the State Bank of Pakistan

immediately. These were implemented in June 1948, and the State Bank of

Pakistan commenced operation on July 1, 1948.

Under the State Bank of Pakistan Order 1948, the state bank of Pakistan

was charged with the duty to "regulate the issue of bank notes and keeping of

reserves with a view to securing monetary stability in Pakistan and generally to

operate the currency and credit system of the country to its advantage".

A large section of the state bank's duties were widened when the State

Bank of Pakistan Act 1956 was introduced. It required the state bank to "regulate

the monetary and credit system of Pakistan and to foster its growth in the best

national interest with a view to securing monetary stability and fuller utilization of

the country’s productive resources". In February 1994, the State Bank was given

full autonomy, during the financial sector reforms.

On January 21, 1997, this autonomy was further strengthened when the

government issued three Amendment Ordinances (which were approved by

the Parliament in May 1997). Those included were the State Bank of Pakistan Act,

1956, Banking Companies Ordinance, 1962 and Banks Nationalization Act, 1974.

These changes gave full and exclusive authority to the State Bank to regulate the

banking sector, to conduct an independent monetary policy and to set limit on

government borrowings from the State Bank of Pakistan. The amendments to

the Banks Nationalization Act brought the end of the Pakistan Banking Council

and allowed the jobs of the council to be appointed to the Chief Executives,

Boards of the Nationalized Commercial Banks (NCBs) and Development Finance

Institutions (DFIs). The State Bank having a role in their appointment and

removal. The amendments also increased the autonomy and accountability of the

chief executives, the Boards of Directors of banks and DFIs.

The State Bank of Pakistan also performs both the traditional and

developmental functions to achieve macroeconomic goals. The traditional

functions may be classified into two groups:

1. The primary functions including issue of notes, regulation and supervision

of the financial system, bankers’ bank, lender of the last resort, banker to

Government, and conduct of monetary policy.

A b u b a k a r R i a z ( 4 7 8 )

http://en.wikipedia.org/wiki/Macroeconomic

http://en.wikipedia.org/wiki/Developmental

http://en.wikipedia.org/w/index.php?title=Pakistan_Banking_Council&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Banks_Nationalisation_Act&action=edit&redlink=1

http://en.wikipedia.org/wiki/Monetary_policy

http://en.wikipedia.org/wiki/Parliament_of_Pakistan


http://en.wikipedia.org/wiki/January_21

http://en.wikipedia.org/wiki/Autonomy

http://en.wikipedia.org/w/index.php?title=State_Bank_of_Pakistan_Act_1956&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=State_Bank_of_Pakistan_Act_1956&action=edit&redlink=1

http://en.wikipedia.org/wiki/Pakistan

http://en.wikipedia.org/wiki/Pakistani_rupee

http://en.wikipedia.org/w/index.php?title=State_Bank_of_Pakistan_Order_1948&action=edit&redlink=1


http://en.wikipedia.org/wiki/July_1

http://en.wikipedia.org/wiki/Muhammad_Ali_Jinnah


2. The secondary functions including the agency functions like management

of public debt, management of foreign exchange, etc., and other functions

like advising the government on policy matters and maintaining close

relationships with international financial institutions.

The non-traditional or promotional functions, performed by the State

Bank include development of financial framework, institutionalization of savings

and investment, provision of training facilities to bankers, and provision of credit to

priority sectors. The State Bank also has been playing an active part in the

process of islamization of the banking system.

Based on the specialization of functions all departments of SBP were

divided into the following four clusters.

1. Economic policy and research cluster

2. Banking cluster

3. Corporate services cluster

4. Financial markets and reserve management cluster

Each cluster contains groups and different groups include different

departments. [8]

Core Functions of State Bank of Pakistan

Regulation of LiquidityBeing the Central Bank of the country, State Bank of Pakistan has been

entrusted with the responsibility to formulate and conduct monetary and credit

policy in a manner consistent with the Government’s targets for growth and

inflation and the recommendations of the Monetary and Fiscal Policies Co-

ordination Board with respect to macro-economic policy objectives. The basic

objective underlying its functions is two-fold i.e. the maintenance of monetary

stability, thereby leading towards the stability in the domestic prices, as well as the

promotion of economic growth.

To regulate the volume and the direction of flow of credit to different uses

and sectors, the Bank makes use of both direct and indirect instruments of

monetary management. Until recently, the monetary and credit scenario was

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http://en.wikipedia.org/wiki/State_Bank

http://en.wikipedia.org/wiki/State_Bank


characterized by acute segmentation of credit markets with all the attendant

distortions. Pakistan embarked upon a program of financial sector reforms in the

late 1980s. A number of fundamental changes have since been made in the

conduct of monetary management which essentially marked a departure from

administrative controls and quantitative restrictions to market-based monetary

management. A reserve money management program has been developed. In

terms of the program, While use in now being made of such indirect instruments

of control as cash reserve ratio and liquidity ratio, the program’s reliance is mainly

on open market operations.

Regulation and Supervision One of the fundamental responsibilities of the State Bank is regulation and

supervision of the financial system to ensure its soundness and stability as well as

to protect the interests of depositors. The rapid advancement in information

technology, together with growing complexities of modern banking operations, has

made the supervisory role more difficult and challenging. The institutional

complexity is increasing, technical sophistication is improving and technical base

of banking activities is expanding. All this requires the State Bank for endeavoring

hard to keep pace with the fast-changing financial landscape of the country.

Accordingly, the out dated inspection techniques have been replaced with the new

ones to have better inspection and supervision of the financial institutions. The

banking activities are now being monitored through a system of ‘off-site’

surveillance and ‘on-site’ inspection and supervision. Off-site surveillance is

conducted by the State Bank through regular checking of various returns regularly

received from the different banks. On other hand, on-site inspection is undertaken

by the State Bank in the premises of the concerned banks when required.

To deepen and broaden financial markets as also to diversify the sources

of credit, a number of non-bank financial institutions (NBFIs) were allowed to

increase substantially. The State Bank has also been charged with the

responsibilities of regulating and supervising of such institutions.

The "Prudential Regulations" for banks, besides providing for credit and

risk exposure limits, prescribe guide lines relating to classification of short-term

and long-term loan facilities, set criteria for management, prohibit criminal use of

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banking channels for the purpose of money laundering and other unlawful

activities, lay down rules for the payment of dividends, direct banks to refrain from

window dressing and prohibit them to extend fresh loan to defaulters of old loans.

The existing format of balance sheet and profit-and-loss account has been

changed to conform to international standards, ensuring adequate transparency of

operations. Revised capital requirements, envisaging minimum paid up capital of

Rs.5 billion have been enforced. Effective December, 1997, every bank was

required to maintain capital and unencumbered general reserves equivalent to 8

per cent of its risk weighted assets.

The "Rules of Business" for NBFIs became effective since the day NBFIs

came under State Bank’s jurisdiction. As from January, 1997, modarbas and

leasing companies, which are also specialized types of NBFIs, are being

regulated/ supervised by the Securities and Exchange Commission (SECP),

rather than the State Bank of Pakistan.

Exchange Rate Management and Balance of Payments

One of the major responsibilities of the State Bank is the maintenance of

external value of the currency. In this regard, the Bank is required, among other

measures taken by it, to regulate foreign exchange reserves of the country in line

with the stipulations of the Foreign Exchange Act 1947. As an agent to the

Government, the Bank has been authorized to purchase and sale gold, silver or

approved foreign exchange and transactions of Special Drawing Rights with the

International Monetary Fund under sub-sections 13(a) and 13(f) of Section 17 of

the State Bank of Pakistan Act, 1956.

The Bank is responsible to keep the exchange rate of the rupee at an

appropriate level and prevent it from wide fluctuations in order to maintain

competitiveness of our exports and maintain stability in the foreign exchange

market. To achieve the objective, various exchange policies have been adopted

from time to time keeping in view the prevailing circumstances. Pak-rupee

remained linked to Pound Sterling till September, 1971 and subsequently to U.S.

Dollar. However, it was decided to adopt the managed floating exchange rate

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system w.e.f. January 8, 1982 under which the value of the rupee was determined

on daily basis, with reference to a basket of currencies of Pakistan’s major trading

partners and competitors. Adjustments were made in its value as and when the

circumstances so warranted. During the course of time, an important development

took place when Pakistan accepted obligations of Article-VIII, Section 2, 3 and 4

of the IMF Articles of Agreement, thereby making the Pak-rupee convertible for

current international transactions with effect from July 1, 1994.

After nuclear detonation by Pakistan in 1998, a two-tier exchange rate

system was introduced w.e.f. 22nd July 1998, with a view to reduce the pressure

on official reserves and prevent the economy to some extent from adverse

implications of sanctions imposed on Pakistan. However, effective 19th May 1999,

the exchange rate has been unified, with the introduction of market-based floating

exchange rate system, under which the exchange rate is determined by the

demand and supply positions in the foreign exchange market. The surrender

requirement of foreign exchange receipts on account of exports and services,

previously required to be made to State Bank through authorized dealers, has

now been done away with and the commercial banks and other authorized

dealers have been made free to hold and undertake transaction in foreign

currencies.

As the custodian of country’s external reserves, the State Bank is also

responsible for the management of the foreign exchange reserves. The task is

being performed by an Investment Committee which, after taking into

consideration the overall level of reserves, maturities and payment obligations,

takes decision to make investment of surplus funds in such a manner that ensures

liquidity of funds as well as maximizes the earnings. These reserves are also

being used for intervention in the foreign exchange market. For this purpose, a

Foreign Exchange Dealing Room has been set up at the Central Directorate of

State Bank of Pakistan and services of a ‘Forex Expert’ have been acquired.

Developmental Role of State BankThe responsibility of a Central Bank in a developing country goes well

beyond the regulatory duties of managing the monetary policy in order to achieve

the macro-economic goals. This role covers not only the development of

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important components of monetary and capital markets but also to assist the

process of economic growth and promote the fuller utilization of a country’s

resources.

Ever since its establishment, the State Bank of Pakistan, besides

discharging its traditional functions of regulating money and credit, has played an

active developmental role to promote the realization of macro-economic goals.

The explicit recognition of the promotional role of the Central Bank evidently

stems from a desire to re-orientate all policies towards the goal of rapid economic

growth. Accordingly, the orthodox central banking functions have been combined

by the State Bank with a well-recognized developmental role.

The scope of Bank’s operations has been widened considerably by

including the economic growth objective in its statute under the State Bank of

Pakistan Act 1956. The Bank’s participation in the development process has been

in the form of rehabilitation of banking system in Pakistan, development of new

financial institutions and debt instruments in order to promote financial

intermediation, establishment of Development Financial Institutions (DFIs),

directing the use of credit according to selected development priorities, providing

subsidized credit, and development of the capital market.

Statutory Obligations

Statutory Cash ReserveIn terms of Section36(1) SBP Act, 1956, every scheduled bank is required

to maintain with State Bank a balance the amount of which shall not at the close

of business or any day be less than such percentage of Time & Demand Liabilities

in Pakistan as may be determined by State Bank.

Presently the requirement is 5% on weekly average basis subject to daily

minimum of 4% of Time & Demand Liabilities (reference BSD Circular No.29

2008).

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Statutory Liquidity Requirement In terms of Section 29(1) of Banking Companies Ordinance, 1962 every

banking company shall maintain in Pakistan in cash, gold or un-encumbered

approved securities valued at price not exceeding "the lower of cost or the current

market price" an amount which shall not at the close of business in any day be

less than such percentage of the total of its time & demand liabilities in Pakistan,

as may be notified by State Bank from time to time.

Presently the requirement is 9% (excluding CRR) of the total of its time and

demand liabilities in Pakistan (BSD Circular No.26 of 2008).

Maintenance of Liquidity against Certain LiabilitiesIn terms of Rule 6 of NBFIs Rules of Business, all NBFIs are required to

invest 14% of their liabilities defined in the Rule, in Government Securities, NIT

Units, and shares of listed companies or listed debt securities in the prescribed

manner. For the purpose of this rule, liabilities shall not include NBFIs equity,

borrowings from financial institutions including accruals thereon, lease key money,

deferred taxation not payable within 12 months, dividend payable within two

months, advance lease rentals and deposits from financial institutions. In addition,

they are also required to maintain cash balance with State Bank, which shall not

be less than 1% of their liabilities as defined above.

Submission of Annual Audited Accounts by NBFIsUnder Rule 17 of NBFIs Rule of Business, all NBFIs are required to invest

to submit their annual audited accounts within a period of 6 months after the close

of their accounting year.

Annual AccountsAt the expiration of each calendar year every banking company

incorporated in Pakistan, in respect of all business transacted by it, and every

banking company incorporated outside Pakistan, in respect of all business

transited through its branches in Pakistan, shall prepare with reference to that

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year a balance-sheet and profit and loss account as on the last working day of the

year in the prescribed forms (Section 34 of Banking Companies Ordinance, 1962).

Submission of ReturnsThe accounts and balance-sheet referred to in section 34 together with the

auditor’s report as passed in the annual General Meeting shall be published in the

prescribed manner, and three copies thereof shall be furnished as returns to the

State Bank within three months of the close of the period to which they relate

(Section 36 of Banking Companies Ordinance, 1962).

Minimum Capital RequirementsIn terms of Section 13 of Banking Companies Ordinance, 1962 no banking

company shall commence business unless it has a minimum paid up capital as

may be determined by the State Bank or carry on business unless the aggregate

of its capital and unencumbered general reserves is of such minimum value within

such period as may be determined and notified by the State Bank from time to

time for banking companies in general or for a banking company in particular.

As present, all banks operating in Pakistan are required to maintain capital

and unencumbered general reserve, the value of which is not less than 8% of

their risk weighted assets. Additionally they are also required to maintain a

minimum paid up capital of Rs.5 billion.

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VISION STATEMENT

To transform the SBP into a modern and dynamic central bank, highly

professional and efficient, fully equipped to play a meaningful role on sustainable

basis in the economic and social development of Pakistan.

MISSION STATEMENT

To promote monetary and financial stability and foster a sound and

dynamic financial system, so as to achieve sustained and equitable economic

growth and prosperity.

CORE VALUE

1. Trust

2. Openness

3. Team work

4. Courage

5. Commitment to excellence

6. Problem solving approach

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ORGANIZATIONAL STRUCTURE

A b u b a k a r R i a z ( 4 7 8 )Figure 1 Organogram


ORGANIZATIONAL STRUCTURE

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Central Board of Directors

1. Yaseen Anwar Acting Governor Chairman

2. Mr. Salman Siddique Member

3. Mr. Kamran Y. Mirza Member

4. Mr. Zaffar A. Khan Member

5. Mirza Qamar Beg Member

6. Mr. Asad Umar Member

7. Mr. Waqar A. Malik Member

8. Mr. Aftab Mustafa Khan Corporate Secretary

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RATIO ANALYSIS

Current Ratio

Current ratio=Current AssetsCurrent Liabilities

Table 1 Current Ratio

Current Assets Current Liabilities Current Ratio

2008 212,566,111 81176181 2:61

2009 470,360,068 71152175 2:98

20082009

2.4

2.5

2.6

2.7

2.8

2.9

3

Current Ratio

Figure 2 Current ratio

Interpretation

The current ratio is one of the most used ratios that measure the solvency

of firm and its ability to pay the short term obligation. As shown in the table in

2008 the bank has 2:61 ration which means that if it has two rupee it has to pay

61 paisa as liability that is pretty much good ratio in banking sector. If we look at

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the 2009 the ration has increased to 2:98 means for every two rupee it has to pay

98 paisa as liability. This ratio is adverse as compared to 2008 because the

liabilities have increased due to IMF loan and other conditional foreign loans.

Debt ratio

Debt ratio=Total LiabilitiesTotal Assets * 100

Table 2 Debt ratio

Total Liabilities Total Assets Debt Ratio

2008 803,915,612 1,126,761,585 71.34%

2009 979,089,234 1,377,964,974 71.05%

20082009

70.90%70.95%71.00%71.05%71.10%71.15%71.20%71.25%71.30%71.35%

Debt Ratio

Figure 3 Debt Ratio

Interpretation

The debt ratio measures the proportion of assets financed by the outsider’s

money. The higher the ratio the greater the amount of other people’s money being

used to generate the revenue. The bank has almost same ratio in the two years

that shows its assets are financed up to 71% by the credit money that is not a

good sign because it reduces the confidence of investors and this is acceptable

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up to 60% only. This ratio shows that bank has taken so many loans to run its

affairs.

Interest Coverage RatioTimes Interest earned ratio=

Operating IncomeInterest Expense

Table 3 Interest Coverage Ratio

Operating Profit Interest Expense Int coverage Ratio

2008 165,235,507 3,748,759 44.07

Interpretation

This ratio shows either the firm is able to meet its contractual interest

payment. The higher the ratio the higher the ability to make its interest payment

the state bank has well figure that shows it can easily meet its interest obligations

in 2008. On the other hand it has also good current ratio that depict that it is able

to meet its obligations.

Operating Profit Margin

Operating profit margin=Operating profitRevenue (interest )

Table 4 Operating Profit Margin

Operating Profit Revenue O.P Margin

2008 165,235,507 180,054,065 91.76%

Interpretation

The operating profit margin shows the percentage of each rupee remain as

profit after the deduction of costs and all expenses except interest and taxes. The

91.76% shows that bank is earning almost 92 paisa and 8 paisa is going under

the head of expenses. The higher the ratio better the firm is earning.

A b u b a k a r R i a z ( 4 7 8 )


Net Profit MarginNet profit Margin=

Net ProfitRevenue

* 100

Table 5 Net Profit Margin

Net Profit Revenue Net Profit Margin

2008 164,793,359 180,054,065 91.52%

2009 204,212,004 222,428,693 91.81%

20082009

80%82%84%86%88%90%92%94%96%98%

100%

Net Profit Margin

Figure 4 Net Profit Margin

Interpretation

The net profit margin shows the percentage of each rupee remain as profit

after the deduction of costs and all expenses including interest and taxes. Higher

net profit margin is preferable. The SBP net profit margin has increased in 2009

as compared to 2008 which shows that bank has greater profit in the year of

2009.

A b u b a k a r R i a z ( 4 7 8 )


Return on AssetsReturn on Assets=

Net ProfitTotal Assets

* 100

Table 6 Return on Assets

Net Profit Total Assets Return on Assets

2008 164,793,359 1,126,761,585 14.62%

2009 204,212,004 1,377,964,974 14.81%

2008 200914.50%

14.55%

14.60%

14.65%

14.70%

14.75%

14.80%

14.85%

Return on Assets

Figure 5 Return on Assets

Interpretation

This ratio measures the effectiveness of management that how it uses the

available assets to generate revenue. Higher the ratio better is the position. In

case of SBP it is also increased from 14.62 %to 14.81% in the FY of 2009 which

shows the good indicator of bank performance.

A b u b a k a r R i a z ( 4 7 8 )


TREND ANALYSIS

Table 7 Horizontal Analysis: Balance Sheet of Issuing Department

Balance Sheet

State Bank of Pakistan: Issuing department

Horizontal

Analysis in %age

based on year

2007

Balance Sheet

Items(Rupees in ‘000’)

2007 2008 2009 2008 2009

Assets

Gold reserves held

by the Bank81,277,106 130,970,552 157,543,551 61.14 93.84

Foreign currency

reserves685,468,587 439,104,769 378,121,392 -35.94 -44.84

Special Drawing

Rights of the IMF12,383,051 11,632,215 6,318,150 -6.06 -48.98

Notes and coins:

Indian notes

representing

assets receivable

from the Reserve

Bank of India

638,249 683,678 727,665 7.12 14.01

Coins 3,012,270 2,718,036 2,496,236 -9.77 -17.13

Total: notes

and coins3,650,519 3,401,714 3,223,901 -6.82 -11.69

Investments 108,830,311 458,259,765 675,410,375 321.08 520.61

Commercial

papers held in 78,500 78,500 78,500 0.00 0.00

A b u b a k a r R i a z ( 4 7 8 )


Bangladesh

(former East

Pakistan)

Assets held with

the Reserve Bank

of India

1,740,325 2,591,897 3,021,743 48.93 73.63

Total Assets 893,428,399 1,046,039,412 1,223,717,612 17.08 36.97

LIABILITY

Bank notes issued 893,428,399 1,046,039,412 1,223,717,612 17.08 36.97

Table 8 Horizontal Analysis: Balance Sheet of Banking Department

Balance Sheet

State Bank of Pakistan: Banking department

Horizontal

Analysis in %age

based on year

2007

Balance Sheet

Items(Rupees in ‘000’)

2007 2008 2009 2008 2009

Assets

Local currency 135,646 181,913 196,449 34.11 44.82

Foreign currency

reserves162,815,117 197,206,165 430,086,636 21.12 164.16

Earmarked foreign

currency balances56,822,188 952,112 33,959,461 -98.32 -40.24

Special Drawing

Rights of the IMF418,534 3,137,123 6,117,522 649.55 1361.65

220,191,485 201,477,313 470,360,068 -8.50 113.61

A b u b a k a r R i a z ( 4 7 8 )


Reserve tranche with

the IMF under quota

arrangements

10,881 13,286 15,048 22.10 38.30

Securities purchased

under agreement to

resale

33,715,973 -100.00 -100.00

Current account of

the Government of

Punjab

40,915,860

Current account of

the Government of

Baluchistan

4,820,407 13,908,793 7,127,734 188.54 47.87

Current account of

the Government of

Azad Jammu and

Kashmir

0 518,564 0

Investments 373,066,806 635,739,865 495,348,215 70.41 32.78

Loans, advances and

bills of exchange288,091,460 242,880,410 331,853,796 -15.69 15.19

Balances due from

the Governments of

India and Bangladesh

(former East

Pakistan)

4,677,500 5,033,592 5,416,132 7.61 15.79

Property and

equipment19,019,433 18,522,284 18,073,733 -2.61 -4.97

Intangible assets 163,769 120,923 116,393 -26.16 -28.93

Other assets 15,433,411 17,605,450 8,630,077 14.07 -44.08

Total assets 959,191,125 1,135,820,480 1,377,964,974 18.41 43.66

LIABILITIES

Bills payable 571,942 1,224,446 827,785 114.09 44.73

Current accounts of

the Governments142,197,558 70,823,348 66,621,868 -50.19 -53.15

A b u b a k a r R i a z ( 4 7 8 )


Current account with

SBP Banking

Services Corporation-

a subsidiary

2,369,636 3,702,522

Securities sold under

agreement to

repurchase

61,816,757 6,758,751 -89.07 -100.00

Deposits of banks

and financial

institutions

305,168,576 424,549,382 273,739,781 39.12 -10.30

Other deposits and

accounts104,135,996 145,601,026 167,779,189 39.82 61.12

Payable to the IMF 85,063,742 91,263,686 419,003,041 7.29 392.58

Other liabilities 72,229,063 60,279,837 43,016,815 -16.54 -40.44

771,183,634 800,500,476 974,691,001 3.80 26.39

Deferred liability -

staff retirement

benefits

11,484,789 12,183,991 4,204,684 6.09 -63.39

Capital grant rural

finance resource

centre

59,431 59,430 0.00 -100.00

Deferred liability -

staff retirement

benefits

3,939,778 4,204,684

Deferred income 340,845 206,244 193,549 -39.49 -43.21

Total liabilities 783,068,699 812,950,141 979,089,234 3.82 25.03

Net assets 176,122,426 322,870,339 398,875,740 83.32 126.48

REPRESENTED BY

Share capital 100,000 100,000 100,000 0.00 0.00

Allocation of special

drawing rights of the

IMF

1,525,958 1,525,958 1,525,958 0.00 0.00

A b u b a k a r R i a z ( 4 7 8 )


Reserves 67,138,769 76,288,533 172,704,657 13.63 157.24

Unappropriated profit 9,139,871 96,440,491 49,025,682 955.16 436.39

77,904,598 174,354,982 223,356,297 123.81 186.70

Unrealized

appreciation on gold

reserves

79,440,921 129,768,343 156,772,429 63.35 97.34

Surplus on

revaluation of

property and

equipment

18,747,014 18,747,014 18,747,014 0.00 0.00

Minority interest 29,893 0 -100.00 -100.00

176,122,426 322,870,339 398,875,740 83.32 126.48

Table 9 Horizontal Analysis: Profit and Loss Account

Profit and Loss Account

State Bank of Pakistan

Horizontal Analysis

in %age based on

year 2007

Income

Statement items(Rupees in ‘000’)

2007 2008 2009 2008 2009

Discount, interest /

mark-up and / or

return earned

92,513,195 104,882,577 183,029,210 13.37 97.84

Less: Interest /

mark-up expense5,289,092 3,748,759 8,085,169 -29.12 52.86

87,224,103 101,133,818 174,944,041 15.95 100.57

Gross Margin 656,268 720,289 1,667,375 9.76 154.07

Commission

income1,957,806 61,973,254 34,725,139 3065.44 1673.68

Exchange gain-

net4,286,628 6,594,079 9,733,352 53.83 127.06

A b u b a k a r R i a z ( 4 7 8 )


Dividend income 140,043 192,481

Other operating

income - net30,181,241 9,631,073 1,114,285 -68.09 -96.31

Other income /

(charges) - net -442,148 52,020

124,306,046 179,611,917 222,428,693 44.49 78.94

Less: Direct

operating

expenses

Bank notes printing

charges3,087,214 3,097,868 4,193,032 0.35 35.82

Agency

commission2,576,382 2,710,017 3,614,261 5.19 40.28

(Provision) /

reversal of

provision for:

loans, advances

and other assets-73,964 -451,726 -100.00 510.74

diminution in

value of

investments

-98,687

- other doubtful

assets212,057 122,543 62,615 -42.21 -70.47

138,093 122,543 -487,798 -11.26 -453.24

118,504,357 174,122,085 215,109,198 46.93 81.52

Less: General

administrative and

other expenses

9,210,501 8,888,130 10,897,194 -3.50 18.31

OPERATING

PROFIT109,293,856 173,681,489 215,109,198 58.91 96.82

PROFIT FOR THE

YEAR108,732,613 164,793,359 204,212,004 51.56 87.81

A b u b a k a r R i a z ( 4 7 8 )


Horizontal Analysis InterpretationIn the above Horizon analysis of balance sheet and profit and loss

statement we have used 2007 year as our base year and different heads of

balance sheet and profit and loss account are compared to know the performance

of current year as compared to the base year. As in balance sheet the gold

reserves are increasing from 2007 to 2009 but the currency reserves are

continuously decreasing total assets are also increasing in the issuing

department. The total assets of banking dept increasing in fact because of better

performance. The overall performance of the bank is continuously becoming

better of restructuring of bank in 2002.

If we talk about the profit and loss account the interest income is increasing

but the interest expense is negative in 2008 but it reaches to almost 52% in the

2009 because of IMF loans and other foreign loans that are taken by the

government to its position, profit of the bank also showing the positive trend and

reaches to the level of 2.4 trillion rupees and that is almost 88% higher than 2007.

A b u b a k a r R i a z ( 4 7 8 )


Table 10 Vertical Analysis: Balance Sheet of Issuing Department

State Bank of Pakistan:

Issuing department

Vertical Analysis in

%age based on Total

Assets

Balance Sheet Items (Rupees in ‘000’)

2008 2009 2008 2009

Assets

Gold reserves held by the

Bank130,970,552 157,543,551 12.52 12.87

Foreign currency reserves 439,104,769 378,121,392 41.98 30.90

Special Drawing Rights of

the IMF11,632,215 6,318,150 1.11 0.52

Notes and coins: Indian

notes representing assets

receivable from the

Reserve Bank of India

683,678 727,665 0.07 0.06

Coins 2,718,036 2,496,236 0.26 0.20

Total: notes and

coins3,401,714 3,223,901 0.33 0.26

Investments 458,259,765 675,410,375 43.81 55.19

Commercial papers held

in Bangladesh (former

East Pakistan)

78,500 78,500 0.01 0.01

Assets held with the

Reserve Bank of India2,591,897 3,021,743 0.25 0.25

Total Assets1,046,039,412

1,223,717,61

2100.00 100.00

LIABILITY

Bank notes issued1,046,039,412

1,223,717,61

2100.00 100.00

A b u b a k a r R i a z ( 4 7 8 )


A b u b a k a r R i a z ( 4 7 8 )

Figure 6 Net Assets


Table 11 Vertical Analysis: Balance Sheet of Banking Department


Banking department


%age based on

Total Assets

Balance Sheet Items (Rupees in ‘000’)

2008 2009 2008 2009

Assets

Local currency 181,913 196,449 0.02 0.01

Foreign currency

reserves197,206,165 430,086,636 17.36 31.21

Earmarked foreign

currency balances952,112 33,959,461 0.08 2.46

Special Drawing Rights

of the IMF3,137,123 6,117,522 0.28 0.44

201,477,313 470,360,068 17.74 34.13

Reserve tranche with the

IMF under quota

arrangements

13,286 15,048 0.00 0.00

Securities purchased

under agreement to

resale

0.00

Current account of the

Government of Punjab 40,915,860


Government of

Baluchistan

13,908,793 7,127,734 1.22 0.52


Government of Azad

Jammu and Kashmir

518,564 0

Investments 635,739,865 495,348,215 55.97 35.95

Loans, advances and 242,880,410 331,853,796 21.38 24.08

A b u b a k a r R i a z ( 4 7 8 )


bills of exchange

Balances due from the

Governments of India

and Bangladesh (former

East Pakistan)

5,033,592 5,416,132 0.44 0.39

Property and equipment 18,522,284 18,073,733 1.63 1.31

Intangible assets 120,923 116,393 0.01 0.01

Other assets 17,605,450 8,630,077 1.55 0.63

Total assets 1,135,820,48

01,377,964,974 100.00 100.00

LIABILITIES

Bills payable 1,224,446 827,785 0.11 0.06

Current accounts of the

Governments70,823,348 66,621,868 6.24 4.83

Current account with

SBP Banking Services

Corporation- a subsidiary

2,369,636 3,702,522

Securities sold under

agreement to repurchase6,758,751 0.60 0.00

Deposits of banks and

financial institutions424,549,382 273,739,781 37.38 19.87

Other deposits and

accounts145,601,026 167,779,189 12.82 12.18

Payable to the IMF 91,263,686 419,003,041 8.04 30.41

Other liabilities 60,279,837 43,016,815 5.31 3.12

800,500,476 974,691,001 70.48 70.73

Deferred liability - staff

retirement benefits12,183,991 4,204,684 1.07 0.31

Capital grant rural

finance resource centre59,430 0.01 0.00

Deferred liability - staff

retirement benefits3,939,778 4,204,684 0.35

Deferred income 206,244 193,549 0.02 0.01

A b u b a k a r R i a z ( 4 7 8 )


Total liabilities 812,950,141 979,089,234 71.57 71.05

Net assets 322,870,339 398,875,740 28.43 28.95

REPRESENTED BY

Share capital 100,000 100,000 0.01 0.01

Allocation of special

drawing rights of the IMF1,525,958 1,525,958 0.13 0.11

Reserves 76,288,533 172,704,657 6.72 12.53

Inappropriate profit 96,440,491 49,025,682 8.49 3.56

174,354,982 223,356,297 15.35 16.21

Unrealized appreciation

on gold reserves129,768,343 156,772,429 11.43 11.38

Surplus on revaluation of

property and equipment18,747,014 18,747,014 1.65 1.36

Minority interest 0 0.00 0.00

322,870,339 398,875,740 28.43 28.95

A b u b a k a r R i a z ( 4 7 8 )


A b u b a k a r R i a z ( 4 7 8 )

Total Assets

Gold reserves

Foreign currency reserves

SDRs

Total: notes and coins

Investments

Assets held with the

Reserve Bank of India

Gold reserves

Foreign currency reserves

SDRs

Total: notes and coins

Investments

Commercial papers held in Bangladesh (former East Pakistan)

Assets held with the Reserve Bank of IndiaFigure 7 Total Assets


Table 12 Vertical Analysis: Profit and Loss Account


Banking department


%age based on

interest Income

Income Statement

items(Rupees in ‘000’)

2008 2009 2008 2009

Discount, interest /

mark-up and / or return

earned

104,882,577 183,029,210 100.00 100.00

Less: Interest / mark-up

expense3,748,759 8,085,169 3.57 4.42

101,133,818 174,944,041 96.43 95.58

Gross Margin 720,289 1,667,375 0.69 0.91

Commission income 61,973,254 34,725,139 59.09 18.97

Exchange gain- net 6,594,079 9,733,352 6.29 5.32

Dividend income 140,043 192,481 0.13 0.11

Profit earned through

subsidiaries

Other operating income

- net9,631,073 1,114,285 9.18 0.61

Other income /

(charges) - net-442,148 52,020 -0.42 0.03

179,611,917 222,428,693 171.25 121.53

Less: Direct operating

expenses

Bank notes printing

charges3,097,868 4,193,032 2.95 2.29

Agency commission 2,710,017 3,614,261 2.58 1.97

(Provision) / reversal of

provision for:

loans, advances and -451,726 0.00 -0.25

A b u b a k a r R i a z ( 4 7 8 )


other assets

diminution in value of

investments -98,687 0.00 -0.05

- other doubtful assets 122,543 62,615 0.12 0.03

122,543 -487,798 0.12 100.00

174,122,085 215,109,198 166.02 117.53

Less: General

administrative and other

expenses

8,888,130 10,897,194 8.47 5.95

OPERATING PROFIT 173,681,489 215,109,198 165.60 117.53

PROFIT FOR THE

YEAR164,793,359 204,212,004 157.12 111.57

Assets & Liabilities

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

2007 2008 2009years

Ru

pe

es

Liabilities

Assets

Figure 8 Assets and Liabilities

A b u b a k a r R i a z ( 4 7 8 )


Vertical Analysis Interpretation

In the vertical analysis we use the total assets as base to know the

performance of different heads of balance sheet we use only one base to know

the overall assets and liabilities performance. In the profit and loss account

interest income is used as base to measure the performance of different

expenses. All the expenses heads and other heads are compared to the interest

revenue. Assets and liabilities are also depicted in the bar chart that shows that

liabilities are less than the assets it means the assets are financed with debts are

less and bank is in the position of solvency. The main reason behind the greater

return is investments that the bank has in major currencies and deposits of foreign

countries the good profit also shows the excellent performance of the banks fund

managers even then they have no latitude to deviate from benchmark. I think if

they were allowed to deviate from benchmark they can perform better.

A b u b a k a r R i a z ( 4 7 8 )


SWOT ANALYSIS

SWOT analysis is an acronym that stands for strengths, weakness,

opportunities, and threats SWOT analysis is careful evaluation of an

organization’s internal strengths and weakness as well as its environment

opportunities and threats.

“The overall evaluation of a company strengths, weaknesses, opportunities

and threats is called SWOT analysis.”

In SWOT analysis the best strategies accomplish an organization’s mission by:

1. Exploiting an organizations opportunities and strength.

2. Neutralizing it threats.

3. Avoiding or correcting its weakness.

SWOT analysis is one of the most important steps in formulating strategy

using the organization mission as a context, managers assess internal strengths

distinctive competencies and weakness and external opportunities and threats.

The goal is to then develop good strategies and exploit opportunities and

strengths neutralize threats and avoid weaknesses.

Strengths

Premier InstitutionSBP in one of the premier bank of Pakistan that is responsible for

regulation of banking and monetary system of Pakistan since its inception. It

provides some guidelines time to time for proper working of financial and

monetary system in Pakistan.

Agent to GovernmentThe SBP performs additional services for government by providing loans

and managing the government accounts as well as the other banks.

A b u b a k a r R i a z ( 4 7 8 )


Reserve custodianSBP is privileged to hold the reserves of the whole economy no other bank

is authorized to hold the reserves except they can deal in reserves but the

ultimate holder is SBP. It is also responsible to manage and control the exchange

rate in the country.

Employee BenefitThe employers at SBP are offered reasonable monetary benefit. Normally

bonuses are given. Employees also enjoy the interest free loans free medical care

of family and insurance of life. These serve as a benefit and competency for the

bank and a source of motivation for the employees.

Broad NetworkThe bank has another competency i.e. it has two subsidiaries one is the

NIBAF and second one is the BBP-Banking Services Corporation. SBP has 33

departments that are performing their own separate functions.

Strictly follows Rules & RegulationsThe employees at SBP are strict followers of rule & regulation imposed by

bank. The disciplined environment at SBP bolsters its image and also enhances

the over all out put of the organization.

Professional CompetenceThe employees at SBP here have a good hold on their descriptions, as

they are highly skilled Professionals with better training programs in business

administration, banking, economics etc. These professional competencies enable

the employees to understand and perform the function and operation in better

way.

A b u b a k a r R i a z ( 4 7 8 )


Healthy EnvironmentThe working condition in the SBP Karachi is very good each and every

employee has its own cabin to work with devotion without any disturbance and its

office environment can be compared to any multinational organization. There is

canteen for employees that cover a large area.

LRCSBP has its own training department known as Learning Resource

Center(LRC) all the training programs are held over their even the international

seminars and meetings conducted over their.

Online NetworkThe bank has the strength of being powered by the network of computers,

which have saved time, energy and would have lessened the mental stress, the

employees have. This would add to the strength that is powered by network of

computers.

Weakness

Lack of Marketing EffortsThe bank does not promote its corporate image, services, etc on a

competitive way. Hence lacks far behind in marketing effort .A need for

aggressive marketing in there in the era marketing in now becoming a part of

every organization.

Political PressureThe strong political hold of some parties and government and their

dominance is affecting the bank in a negative way. They sometime have to

provide loan under the pressure, which leads to uneven and adjusted feeling in

the bank employees.

A b u b a k a r R i a z ( 4 7 8 )


Favoritism and NepotismThe promotions and bonuses etc in the bank are often powered by senior’s

favoritism or depends upon their wills and decision. This adds to the negative

factors, which denominate the employees thus resulting in affecting their

performance negatively.

Uneven Work DistributionThe workload in SBP is not evenly distributed and the workload tends to be

more on some employees while others abscond away from their responsibilities,

which server as a demotivation factor for employees performing above average

work.

Opportunities

Electronic BankingThe world today has become a global village because of advancement in

the technologies, especially in communication sector. More emphasis is now

given to avail the modern technologies to better the performances. SBP can utilize

the electronic banking opportunity to ensure on line banking 24 hours a day. This

would give a competitive edge over others.

Micro FinancingBecause of the need for micro financing in the market, there are lot of

opportunities in this regard. Now the time has arrived when the SBP must realize

it and take on step to cater an ongoing demand and the Micro finance dept should

device policies to strengthen the micro finance network.

A b u b a k a r R i a z ( 4 7 8 )


Threats

Political Pressure by Elected GovernmentThe ongoing shift in power in political arena in the country effects the

performance of the bank has to forward loans to politically powerful persons which

create a sense of insecurity and demoralization in the customer as well as

employees.

Data theftThe bank is currently dealing from data theft and the present technology in

Pakistan is not that effective and others are very costly in providing a safe place

on internet away from domestic and international hacks which threaten the

environment of the bank

Customer ComplaintsThere exists no regular and specific system of the removal of customer

complaints. Now a day a need for total customer satisfaction is emerging and in

their demanding consequences customer's complaints are ignored.

A b u b a k a r R i a z ( 4 7 8 )


SBP REPORT

Australia Australia’s foreign currency reserves are managed by the Reserve Bank of

Australia (RBA). Its Head office1 is in Sydney the value of gross reserves

portfolios is USD36, 342 Million on May 2010 [7]

Table 13 Official Reserve Assets of Australia

In Million of US Dollars May 2010 Official reserve 36,341.71

(1) Foreign currency reserves (in convertible foreign currencies)

27,237.72

(a) Securities of which: issuer headquartered in reporting country but located abroad

21,349.60

(b) total currency and deposits with: 5,888.12

(i) other national central banks, BIS and IMF of which: located abroad

580.18

(ii) banks headquartered outside the reporting country of which: located in the reporting country

5,307.93

(2) IMF reserve position 1,031.15(3) SDRs 4,585.92(4) gold (including gold deposits and, if appropriate, gold swapped)

3,112.53

-volume in millions of fine troy ounces

2.57

(5) other reserve assets (specify) 374.39 -financial derivatives -0.14 -other 374.54

1 Australia has three dealing centers; New York(US), London(UK), Sydney(AUS)

A b u b a k a r R i a z ( 4 7 8 )


Framework

Objectives of reserves managementAustralia’s Reserves are held for intervention purpose. The primary role of

the reserves portfolio is to fund foreign exchange market operations that arise as

part of the Bank’s broader monetary policy function.

Analysis:

The reserves are managed in such a manner that it gives priority

to low levels of credit risk, limited exposure to market risk, while

maintaining a high degree of liquidity. They are managed to achieve the

highest returns within defined risk parameters taking into account the

need to ensure funds at short notice when required for intervention.

Organizational and decision-making structure

Institutional FrameworkThe RBA’s responsibility to manage Australia’s foreign exchange reserves

is given through broad legislative powers that allow the Bank to buy, sell, and

otherwise deal in foreign exchange to achieve monetary policy objectives.

Responsibilities are not shared with other government agencies, reflecting the role

of reserves as a source of intervention capital. The RBA acts independently in its

management decisions.

Organizational StructureResponsibility for management of reserves is delegated by the Governor of

the Bank to the Financial Markets Group (FMG). Firstly international department

was responsible for both middle and front office function and back office was also

located in it. As the scale of operations increased RBA made flexibility in

investment operations. [160]

A b u b a k a r R i a z ( 4 7 8 )


Figure 9 Organizational Structure of RBA

A b u b a k a r R i a z ( 4 7 8 )

Governor

Assistant GovernorFinancial Markets Group (FMG)

Head of International Department

Responsible for operation in markets for freign exchange,

gold and offshore assets.

Assistant Governor

Payment settlements (back Office)

Provides standered settlements and

communicational Services and responsible for final approval

of transactions


Decision MakingEarly every transaction in reserves management had to be approved by

higher management. Later it was devised that day-to-day management of

reserves should be delegated to an Investment Committee within the Financial

Markets Group. The Committee, made up of senior managers from units involved

in reserves management, had discretion to take sizable positions in currency and

asset allocation subject to limits approved by the Governor. The Investment

Committee meets regularly and takes positions largely based on assessments of

the medium-term macroeconomic outlook of countries in which the reserves were

invested. [166]

Figure 10 Decision Making Structure

The Governor requires that reserves are accounted for in line with best practice and that

the level of transparency is consistent with that in other parts of the RBA’s monetary policy

operations. Senior managers overseeing front office operations are now responsible for day-to-

day management of currency and asset allocation, maintaining the portfolio close to benchmark.

They report directly to the Assistant Governor of the Financial Markets Group. [167]

A b u b a k a r R i a z ( 4 7 8 )


Analysis:

Approval of transaction from higher management means it

maximized control over the management process, but it makes decision

making unwieldy and, therefore, poorly suited to a more active risk

management framework. It also constrained initiative at manager levels.

So in order to move to more active management above system was

devised and a small and qualified amount of trading discretion was

delegated to managers in trading centers.

Active ManagementNo – More passive management is observed. Close to benchmark.

Analysis:

Before 2000, Short term investment decision made a positive

return from market. Whereas investment position in medium term

macroeconomics development also made positive returns in some years

but negative returns in others leaving a small positive returns from this

activity overall. This significantly reduced the importance of discretionary

management. [158]

Transparency and accountabilityThe RBA publishes statistical information on its reserves and foreign

currency transactions in its monthly Bulletin. Also, since 1992, the Bank has

provided an overview of reserves management operations and return relative to

benchmark in its Annual Report. It is SDDS subscriber; Special data

dissemination standards, as an IMF member country it observes the standards

and reserves data template approved by IMF’s executive board.

A b u b a k a r R i a z ( 4 7 8 )


Procedure ManualA key element in the control of operational risk has been the development

of manuals detailing investment and risk management procedures. [170]

The manuals specify;

The kinds of instruments in which investments can be made

The risk parameters for each portfolio, and

The responsibilities of various positions associated with reserves

management.

They also specify how risks and returns are calculated and how office

systems should be used in specific circumstances. Procedures manuals also exist

for middle and back office staff.

Staffing policyStaffing policy is another key element. The RBA has found considerable

benefit in specialization of professional staff in operational areas. Frequently

rotating staff in and out of these areas in order to provide a breadth of experience

was felt to be a significant constraint on maintaining adequate levels of

experience and knowledge. Over the past ten years, efforts have been made to

maintain a core of experience at senior levels within the operational areas while,

at the same time, allowing rotation at junior levels in order to build a foundation of

experience. Compensation is reviewed regularly to ensure competitiveness with

other organizations and staff is encouraged to participate in a range of courses. [171]

StatementsThe RBA’s annual financial statements are prepared in accordance with

Australian Accounting Standards and other mandatory reporting requirements

contained in the Commonwealth Authorities and Companies Act. The statements

are scrutinized by an external auditor, the Australian National Audit Office, to

ensure that they comply with relevant standards. [173]

A b u b a k a r R i a z ( 4 7 8 )


AuditReserves management functions are audited internally each year in

accordance with recommended control frameworks published by the Bank for

International Settlements and requirements set out by the Australian Financial

Markets Association. The internal audit reports on compliance with controls and

seeks to strengthen management processes where it sees potential for loss

through inadequate control.

Capacity to Assess and Manage Risk

Benchmark PortfoliosThe benchmarks represent the risk-return trade-off acceptable to the RBA

over the long term. Statistical, practical, and judgmental factors relevant to the

RBA are important in deciding the appropriate composition and they are

periodically reviewed for optimal risk/return trade off. Mean-variance analysis in

addition to judgmental factors is used in deciding on the weights assigned to the

three currencies in the benchmark portfolio.

The choice of a duration benchmark of 30 months for each of the asset

portfolios was made on the basis of factors specific to the RBA in its responsibility

for managing reserves and analysis of risk and return for each asset. [176]

Table 14 Currency, Asset, and Duration Benchmarks

United States Europe Japan

Currency allocation (%) 45 45 10

Asset allocation (%) 45 45 10

Duration (Months) 30 30 30

Analysis:

With the aim of maximizing the Bank’s capacity to intervene,

that’s way it’s decided that a trade weighted basket of currencies would

be an appropriate currency. The decision was taken to spread the

composition across the three major reserve currencies—the U.S. dollar,

deutschemark (later the euro), and Japanese yen. This also provided a

A b u b a k a r R i a z ( 4 7 8 )


diversified portfolio and meant, too, that the RBA’s assets would be

invested in capital markets that are liquid and highly rated.

30 month duration represents the maximum price risk that the

RBA will allow itself while keeping the probability of capital loss to an

acceptable level over the Bank’s investment horizon. An example of this

analysis is given in Figure 3.

Figure 11 Horizon Analysis

Horizon Analysis [178]

The RBA’s investment horizon is of twelve months. This is based

on the Bank’s investment objectives and the period in which it reports on

its operations to the Australian Parliament. Over a twelve-month period,

the RBA expects the return on the portfolio to fall within a 95 percent

confidence band around the mean return, and will accept a negative

return on only 2.5 percent of occasions. On this basis, return is

maximized at point A in Figure 3, where the lower boundary of the

confidence band crosses the horizontal axis.

A b u b a k a r R i a z ( 4 7 8 )


Composition of BenchmarksThe RBA has established benchmarks for the composition of each of the

three asset portfolios. These benchmarks are set out in Table 3. Like the other

benchmarks, practical and judgmental factors, combined with the liquidity

characteristics in each market, are important in deciding the appropriate asset

structure of the portfolios.

Table 15. Composition of Individual Portfolio Benchmarks [179]

United States Europe Japan

Asset Class % of

Total

Asset Class % of

Total

Asset Class % of

Total

Deposits 22 Deposits 30 Deposits 22

Treasury bills 21 Treasury bills 15 Treasury bills 33

Treasury

Notes

57 Bonds 55 Bonds 45

Analysis:

The desire to maintain a liquid and secure portfolio led the RBA to

limit its benchmark investments to government securities and cash

instruments. Typically, some 75 to 80 percent of the RBA’s benchmark

foreign investment portfolios are held in government paper.

For the European portfolio, the RBA has decided on a

combination of French and German government securities as the best

structure to satisfy requirements for credit risk and liquidity. In order to

limit exposure to price risk, the maximum maturity of securities holdings

is restricted to 10 ½years in each portfolio.

Cash RepoCash invested under repurchase agreements (repo) and deposits with

highly rated banks make up the balance of the asset benchmarks.

A b u b a k a r R i a z ( 4 7 8 )


Analysis:

The RBA has found the short duration offered by deposits to be

attractive in markets where access to short-term government debt was

limited. They have also been a good, immediate source of liquid funds

during episodes of currency intervention. That said, the proportion of

foreign exchange reserves invested in deposits has declined in recent

years, reflecting tighter credit constraints and changes in cash

management practices. The RBA now makes greater use of cash repo,

which has the security advantage of being collateralized with

government securities. [181]

InstrumentsIn addition to the assets held in the benchmark portfolios, the RBA’s

dealing centers have discretion to hold a small range of other highly rated

instruments.

These include the [183]

U.K. Gilts,

Dutch and Swiss government paper,

Deposits and medium-term notes issued by the Bank for

International Settlements.

Analysis:

With the exception of BIS deposits, these investments have

accounted for a negligible share of total holdings. Discretion to hold

U.K., Dutch, and Swiss paper is a remnant of a period in the 1980s

when the composition of Australia’s official foreign currency liabilities

influenced the composition of the reserves portfolio. Discretion also

exists to hold U.S. Federal Agency debt in the U.S. portfolio as a source

of return enhancement. Total holdings are restricted to a maximum of

US$500 million. [183]

A b u b a k a r R i a z ( 4 7 8 )


Futures ContractsIn 1994, the Bank began trading interest rate futures contracts. Futures

trading have been concentrated in the European and Japanese portfolios. The

RBA does not use any over-the-counter or exchange-traded options in its

reserves management activities.

Analysis:

The decision for futures trading was driven by a desire to improve

management of market risk and, in particular, to provide a liquid hedging

instrument to minimize the risk of capital losses when interest rates were

rising. An additional attraction of using futures was the greater liquidity

and flexibility that they provide in some markets when implementing

investment strategies. Some futures markets are more liquid than their

underlying physical bond markets in that the bid-offer spread is usually

much narrower. [184]

Stock LendingStock lending is also an activity undertaken by the dealing centers.

Analysis:

As stock lending, particularly from the U.S. portfolio has risen to

be a major component of return enhancement. Though the back office

workload associated with this activity can be large. The RBA sees this

activity as relatively low risk.

A b u b a k a r R i a z ( 4 7 8 )


Risk and performance measurementMarket risk and return enhancement are measured relative to the

benchmark portfolios. For currency and asset allocation, Currency and asset

positions are managed separately within the discretionary band through the use of

foreign currency swaps. The cost/benefit of these swaps is taken into account

when measuring the performance of the asset and currency positions relative to

benchmark. Foreign exchange dealers in each of the three dealing centers have a

small amount of discretion set in terms of a maximum open position that falls

within the ±1 percent discretionary limit on currency allocation. Breaches of the

limit are reported to Assistant Governor on the day they occur. The dealing

centers are also required to report daily losses that exceed US$1 million to senior

management in the Financial Markets Group.

Analysis:

Risk measurement and trading discretion around the duration

benchmark for each asset portfolio are based on the concept of “dollars-

at risk.” This is the change in portfolio value arising from a one basis

point change in yield. Within each of the portfolios, the dealing centers

are required to maintain dollars-at-risk to within US$70,000 per basis

point at all times. This limit applies to the aggregate position of the

portfolio and to the position undertaken in each maturity bucket of the

portfolio in order to control the amount of curve risk. [187]

Value at Risk (VaR)The VaR number represents the portfolio loss the RBA could incur once

every 20 business days in normal market conditions. Two VaR measures are

calculated each day—one based on the correlation method and the other based

on historical simulation methodology. The assumptions underlying these VaR

methodologies are reviewed periodically and their performance is tested regularly.

In accordance with best practice, the RBA also stress tests the portfolio. This

involves simulating and evaluating the impact of extreme market movements on

the value of the portfolio. [189]

A b u b a k a r R i a z ( 4 7 8 )


Analysis:

The “dollars-at-risk” measure also forms the basis of the Value-at-

Risk (VaR) methodology, which the RBA has used since 1995 to

estimate the consolidated exposure of the Bank’s foreign currency

reserves to market risk. Though the overall limits to control market risk—

i.e., the discretionary trading bands around the benchmark—are not

defined in terms of VaR, the RBA has found that it nonetheless provides

a useful tool for conveying information about the overall portfolio

exposure to senior management and staff involved in reserves

management.[189]

Information SystemAll international transactions entered into by the RBA are processed

through a main-frame electronic Global Trading and Settlement System (GTS).

This system has been developed by an external software provider to their

specifications. [190]

A b u b a k a r R i a z ( 4 7 8 )


CONCLUSION

State Bank of Pakistan is a unique financial institution in Pakistan as it is

central bank of our country as well as a regulatory authority.

One of the fundamental responsibilities of the State Bank is regulation and

supervision of the financial system to ensure its soundness and stability as well as

to protect the interests of depositors. The rapid advancement in information

technology, together with growing complexities of modern banking operations, has

made the supervisory role more difficult and challenging. The institutional

complexity is increasing, technical sophistication is improving and technical base

of banking activities is expanding. All this requires the State Bank for endeavoring

hard to keep pace with the fast-changing financial landscape of the country.

Accordingly, the out dated inspection techniques have been replaced with the new

ones to have better inspection and supervision of the financial institutions. The

banking activities are now being monitored through a system of ‘off-site’

surveillance and ‘on-site’ inspection and supervision. Off-site surveillance is

conducted by the State Bank through regular checking of various returns regularly

received from the different banks. On other hand, on-site inspection is undertaken

by the State Bank in the premises of the concerned banks when required.

To deepen and broaden financial markets as also to diversify the sources

of credit, a number of non-bank financial institutions (NBFIs) were allowed to

increase substantially. The State Bank has also been charged with the

responsibilities of regulating and supervising of such institutions. Moreover, in

order to safeguard the interest of ultimate users of the financial services, and to

ensure the viability of institutions providing these services, the State Bank has

issued a comprehensive set of Prudential Regulations (for commercial banks) and

Rules of Business (for NBFIs).

The "Prudential Regulations" for banks, besides providing for credit and

risk exposure limits, prescribe guide lines relating to classification of short-term

and long-term loan facilities, set criteria for management, prohibit criminal use of

banking channels for the purpose of money laundering and other unlawful

A b u b a k a r R i a z ( 4 7 8 )


activities, lay down rules for the payment of dividends, direct banks to refrain from

window dressing and prohibit them to extend fresh loan to defaulters of old loans.

The existing format of balance sheet and profit-and-loss account has been

changed to conform to international standards, ensuring adequate transparency of

operations. Revised capital requirements, envisaging minimum paid up capital of

Rs.500 million have been enforced. Effective December, 1997, every bank was

required to maintain capital and unencumbered general reserves equivalent to 8

per cent of its risk weighted assets.

The "Rules of Business" for NBFIs became effective since the day NBFIs

came under State Bank’s jurisdiction. As from January, 1997, modarbas and

leasing companies, which are also specialized type of NBFIs, are being

regulated/supervised by the Securities and Exchange Commission (SECP), rather

than the State Bank of Pakistan

A b u b a k a r R i a z ( 4 7 8 )


RECOMMENDATIONS

State Bank of Pakistan is performing well as all of its operations are well

planned, organized and foolproof. However the micro finance activities are not still

satisfactory and need improvements. Followings are suggestion to enhance the

performance of State Bank of Pakistan.

At the very highest level, the decision-making AUTHORITY for the

investment of reserves should be clearly defined. This hierarchy would

normally be established by the Governor or Board of Directors and would

include the overall objectives of reserves management.

Senior management needs to specify a strategic long-term portfolio that

represents the best available trade-off between the different risks that the

reserve management entity is facing.

There should be latitude for fund managers to deviate from benchmark in

foreign placements as provided by the RBA and BCRP (Peru).

If SBP don’t want to do so then it can transfer the authority to the treasurer

to assign extra limit to their fund managers if they can provide the solid

reason to invest so they can invest in the best interest.

The benchmarks should not short-term market expectations, but their

appropriateness should be reviewed regularly.

Investment benchmarks are an important tool for assessing performance

and accountability. Where managers should be permitted to deviate from

the benchmark portfolio, performance and accountability will occur through

the comparison of performance of the actual portfolio and benchmark.

Reserve management authorities should also subdivide their reserves

portfolio into "tranches" according to liquidity and investment objectives and

policy requirements.

The risk management framework should apply the same principles and

measures to externally managed funds as it does to those managed

internally.

A b u b a k a r R i a z ( 4 7 8 )


Sound risk management of externally managed funds begins with the

careful selection of reputable external managers, which is the task of

middle office.

It is necessary to establish a separate unit, or assign a position within the

middle office, to enable the reserve management entity to fully monitor the

activities of the external manager.

Risk exposures should be monitored continuously to determine whether

exposures have been extended beyond acceptable limits. Monitoring is

essential in identifying and limiting any cumulative losses associated with

either deviation from the benchmark.

Reserve managers should be aware of potential financial losses and other

consequences of the risk exposures they should be prepare to accept.

Risk mitigation could involve the use of standardized documentation and

the performance of periodic reviews of documentation.

The eligibility criteria for the selection of trading counterparties should be

clearly defined

There should be a framework for determining the maximum credit

exposures permitted with each counterparty.

Active risk management is good approach to mitigate the risk than passive

risk management practices.

Use of e-CIB and its extension to cover data about micro finance borrowers

of all MFIs should be allowed.

Allocation of funds for credit lines in commercial banks for MFIs

The most effective way of delivering institutional support is to focus on

selected sectors with growth potential and make it time-limited.

SME policy must set up an effective mechanism to address the distinct

requirements of micro (informal), small and medium firms in addition to

meeting the general needs of the sector.

A b u b a k a r R i a z ( 4 7 8 )


GLOSSARY

Back office. The area of reserve

management operations responsible

for confirmation, settlement and in

many cases, reconciliation of reserve

management transactions.

Benchmark. The mix of currencies,

investment instruments, and duration

that reflect the reserve manager’s

tolerance for exposure to liquidity,

credit, and market risks.

Benchmark portfolio. A preset list of

securities to be used to compare the

performance of an actual portfolio. [3]

Cash repo. A Repurchase

agreement (also known as a repo or

Sale and Repurchase Agreement)

allows a borrower to use a financial

security as collateral for a cash loan

at a fixed rate of interest. In a repo,

the borrower agrees to sell

immediately a security to a lender

and also agrees to buy the same

security from the lender at a fixed

price at some later date. A repo is

equivalent to a cash transaction

combined with a forward contract. [4]

Credit risk. Probability of loss from a

debtor's default. In banking, credit

risk is a major factor in determination

of interest rate on a loan: longer the

term of loan, usually higher the

interest rate. Also called credit

exposure. [3]

Foreign exchange reserves. Those

external assets that are readily

available to and controlled by

monetary authorities for direct

financing of payments imbalances,

for indirectly regulating the

magnitudes of such imbalances

through intervention in exchange

markets to affect the currency

exchange rate, and/or for other

purposes.

Front office. The area responsible

for initiating investment transactions

in accordance with approved

delegations, limits, and benchmarks

and the prompt and accurate entry of

transactions into the investment

management system.

Futures contracts. A contractual

agreement, generally made on the

A b u b a k a r R i a z ( 4 7 8 )

http://en.wikipedia.org/wiki/Forward_contract

http://en.wikipedia.org/wiki/Lender

http://en.wikipedia.org/wiki/Security_(finance)

http://en.wikipedia.org/wiki/Interest

http://en.wikipedia.org/wiki/Loan

http://en.wikipedia.org/wiki/Collateral_(finance)



http://en.wikipedia.org/wiki/Borrower


trading floor of a futures exchange, to

buy or sell a particular commodity or

financial instrument at a pre-

determined price in the future.

Futures contracts detail the quality

and quantity of the underlying asset;

they are standardized to facilitate

trading on a futures exchange. Some

futures contracts may call for physical

delivery of the asset, while others are

settled in cash. [2]

Middle office. Located between the

front and back offices, the middle

office’s role is to monitor that all

transactions have been performed

properly, that risks are being

monitored and limits observed, and

that relevant information is available

for management.

Reserve management. The process

by which public sector assets are

managed in a manner that provides

for the ready availability of funds, the

prudent management of risks, and

the generation of a reasonable return

on the funds invested.

Stock lending. The act of loaning a

stock, derivative, or other security to

an investor or firm. Securities lending

requires the borrower to put up

collateral, whether cash, security, or

a letter of credit. The completion of

this transaction requires a security

lending agreement, which states,

among other things, how long the

loan lasts, what fee the lender

receives, and the amount and type of

collateral. [5]

SDDS. The Special Data

Dissemination Standard (SDDS) was

established by the International

Monetary Fund (IMF/Fund) to guide

members that have, or that might

seek, access to international capital

markets in the provision of their

economic and financial data to the

public. Both the General Data

Dissemination System (GDDS) and

the SDDS are expected to enhance

the availability of timely and

comprehensive statistics and

therefore contribute to the pursuit of

sound macroeconomic policies; the

SDDS is also expected to contribute

to the improved functioning of

financial markets. [6]

Stress Testing. A simulation

technique used on asset and liability

portfolios to determine their reactions

to different financial situations. Stress

tests are also used to gauge how

A b u b a k a r R i a z ( 4 7 8 )

http://financial-dictionary.thefreedictionary.com/collateral

http://financial-dictionary.thefreedictionary.com/Lender

http://financial-dictionary.thefreedictionary.com/Fee

http://financial-dictionary.thefreedictionary.com/Transaction

http://financial-dictionary.thefreedictionary.com/Letter+of+Credit

http://financial-dictionary.thefreedictionary.com/Security

http://financial-dictionary.thefreedictionary.com/Cash

http://financial-dictionary.thefreedictionary.com/collateral

http://financial-dictionary.thefreedictionary.com/Investor

http://financial-dictionary.thefreedictionary.com/Security

http://financial-dictionary.thefreedictionary.com/Derivative

http://financial-dictionary.thefreedictionary.com/Stock

http://financial-dictionary.thefreedictionary.com/Loan


certain stressors will affect a

company or industry. They are

usually computer-generated

simulation models that test

hypothetical scenarios. Stress testing

is a useful method for determining

how a portfolio will fare during a

period of financial crisis. The Monte

Carlo simulation is one of the most

widely used methods of stress

testing. [2]

Value at Risk – VaR. A technique

used to estimate the probability of

portfolio losses based on the

statistical analysis of historical price

trends and volatilities. VaR is

commonly used by banks, security

firms and companies that are

involved in trading energy and other

commodities. VaR is able to measure

risk while it happens and is an

important consideration when firms

make trading or hedging decisions. [2]

A b u b a k a r R i a z ( 4 7 8 )


APPENDIX

Training certificate

A b u b a k a r R i a z ( 4 7 8 )


Letter of authorization

A b u b a k a r R i a z ( 4 7 8 )


Latest annual financial statements

Table 16 Balance Sheet Issuing department

Balance Sheet Items

2009

Assets

Gold reserves held by the Bank 157,543,551

Foreign currency reserves 378,121,392

Special Drawing Rights of the IMF 6,318,150

Notes and coins: Indian notes representing

assets receivable from the Reserve Bank of

India

727,665

Coins 2,496,236

Total: notes and coins 3,223,901

Investments 675,410,375

Commercial papers held in Bangladesh (former

East Pakistan)78,500

Assets held with the Reserve Bank of India 3,021,743

Total Assets 1,223,717,612

Liability

Bank notes issued 1,223,717,612

A b u b a k a r R i a z ( 4 7 8 )


Table 17 Balance Sheet Banking department

Balance Sheet Items

2009

Assets

Local currency 196,449

Foreign currency reserves 430,086,636

Earmarked foreign currency balances 33,959,461

Special Drawing Rights of the IMF 6,117,522

470,360,068

Reserve tranche with the IMF under quota

arrangements15,048

Securities purchased under agreement to resale

Current account of the Government of Punjab 40,915,860

Current account of the Government of Baluchistan 7,127,734

Current account of the Government of Azad Jammu

and Kashmir0

Investments 495,348,215

Loans, advances and bills of exchange 331,853,796

Balances due from the Governments of India and

Bangladesh (former East Pakistan)5,416,132

Property and equipment 18,073,733

Intangible assets 116,393

Other assets 8,630,077

Total assets 1,377,964,974

LIABILITIES

Bills payable 827,785

Current accounts of the Governments 66,621,868

Current account with SBP Banking Services

Corporation- a subsidiary3,702,522

Securities sold under agreement to repurchase

Deposits of banks and financial institutions 273,739,781

A b u b a k a r R i a z ( 4 7 8 )


Other deposits and accounts 167,779,189

Payable to the IMF 419,003,041

Other liabilities 43,016,815

974,691,001

Deferred liability - staff retirement benefits 4,204,684

Capital grant rural finance resource centre

Deferred liability - staff retirement benefits 4,204,684

Deferred income 193,549

Total liabilities 979,089,234

Net assets 398,875,740

REPRESENTED BY

Share capital 100,000

Allocation of special drawing rights of the IMF 1,525,958

Reserves 172,704,657

Unappropriated profit 49,025,682

223,356,297

Unrealized appreciation on gold reserves 156,772,429

Surplus on revaluation of property and equipment 18,747,014

Minority interest

398,875,740

A b u b a k a r R i a z ( 4 7 8 )


Table 18 Profit and Loss Statement

Income Statement items

2009

Discount, interest / mark-up and / or return

earned

183,029,21

0

Less: Interest / mark-up expense 8,085,169

174,944,04

1

Gross Margin 1,667,375

Commission income 34,725,139

Exchange gain- net 9,733,352

Dividend income 192,481

Profit earned through subsidiaries

Other operating income - net 1,114,285

Other income / (charges) – net 52,020

222,428,69

3

Less: Direct operating expenses

Bank notes printing charges 4,193,032

Agency commission 3,614,261

(Provision) / reversal of provision for:

loans, advances and other assets -451,726

diminution in value of investments -98,687

- other doubtful assets 62,615

-487,798

215,109,19

8

Less: General administrative and other

expenses10,897,194

OPERATING PROFIT 215,109,19

8

PROFIT FOR THE YEAR204,212,00

4

A b u b a k a r R i a z ( 4 7 8 )


A b u b a k a r R i a z ( 4 7 8 )


BIBLIOGRAPHY

[156 -190] refers to the paragraph numbers from the “Guidelines for

foreign exchange reserves management: Accompanying document”.

[1] International Reserves and Foreign Currency Liquidity IMF

http://www.imf.org/external/np/sta/ir/IRProcessWeb/data/aus/eng/

curaus.htm#I

[2] http://www.investopedia.com/

[3] http://www.businessdictionary.com/

[4] http://en.wikipedia.org/wiki/Main_Page

[5] http://financial-dictionary.thefreedictionary.com/

[6] Special Data Dissemination Standard IMF

http://dsbb.imf.org/Pages/SDDS/Overview.aspx

[7] Wikipedia http://en.wikipedia.org/wiki/List_of countries by foreign

exchange reserves

[8] State Bank of Pakistan Website link: www.sbp.org.pk

Guidelines for foreign exchange reserves management.

http://www.bcentral.cl/eng/financial-operations/pdf/Guidelines%20for

%20Foreign%20Exchange%20Management%20FMI%202004.pdf

Guidelines for foreign exchange reserves management:

Accompanying document.

http://www.bcentral.cl/eng/financial-operations/

Issues in reserves Adequacy and Management.

Link: http://www.imf.org/external/np/pdr/resad/2001/101501.pdf

A b u b a k a r R i a z ( 4 7 8 )

http://www.imf.org/external/np/pdr/resad/2001/101501.pdf

http://www.bcentral.cl/eng/financial-operations/

http://www.bcentral.cl/eng/financial-operations/pdf/Guidelines%20for%20Foreign%20Exchange%20Management%20FMI%202004.pdf

http://www.bcentral.cl/eng/financial-operations/pdf/Guidelines%20for%20Foreign%20Exchange%20Management%20FMI%202004.pdf

http://en.wikipedia.org/wiki/List_of%20countries%20by%20foreign%20exchange%20reserves

http://en.wikipedia.org/wiki/List_of%20countries%20by%20foreign%20exchange%20reserves

http://dsbb.imf.org/Pages/SDDS/Overview.aspx

http://financial-dictionary.thefreedictionary.com/

http://en.wikipedia.org/wiki/Main_Page

http://www.imf.org/external/np/sta/ir/IRProcessWeb/data/aus/eng/curaus.htm#I

http://www.imf.org/external/np/sta/ir/IRProcessWeb/data/aus/eng/curaus.htm#I

internship report sbp karachi

Documents

punjab internship

abubakar riaz b

report management framework

preparation of report

ratio analysis

state pakistan

central bank of australia

trend analysis