ISLAMABAD, Aug 8: Investment banks, leasing companies and mutual funds have asked the finance ministry not to act over a proposal that seeks transfer of powers to the State Bank to regulate some of the non-banking finance companies (NBFCs).

In separate letters sent to the ministry, the Leasing Association of Pakistan, Investment Banks Association and the Mutual Funds Association have expressed their concern over the proposal and warned of overlapping of jurisdiction for the financial and non-financial sector.

According to the proposal, 12 leasing companies, eight investment banks and three housing finance companies (total 23) shall be regulated by the SBP, while the remaining 98 NBFCs, mostly modarabas and leasing companies, will continue to be regulated by the Securities and Exchange Commission of Pakistan (SECP).

The powers proposed to be given to the SBP also include the powers to conduct inspections, take enforcement actions, and make regulations for the entire group of companies, which would primarily include non-financial companies.

The SECP has already opposed the proposal and said that the move would not only detract SBP from its primary role of supervision of the monetary policy and the banking sector, but would also result in overlapping of jurisdictions. This in turn would cause confusion, ambiguity and regulatory arbitration.

The associations expressed their reservations over what they termed a move being taken in “undue haste”.

They have conveyed to the finance ministry that the proposal goes against the current global trend of reducing the supervisory role of central banks, particularly in respect of NBFCs.

The associations believed that commercial banks and NBFCs were primarily geared towards different markets and their regulatory requirements and the sectoral challenges were totally different from each other.

If implemented, the proposed powers of SBP will create duplicity of jurisdiction with some entities regulated by SBP and others by the SECP.

The associations said that SECP, over the last five years, has facilitated and created an enabling environment for the emerging and diversified NBFC sector. The letters say that the SECP has been effective in ensuring that NBFC’s management and boards conduct their business in conformity with prescribed rules and regulations.

The associations have asked the finance ministry to spare the mutual fund industry from any new experimentation of management by the SBP or of having two regulators – SBP and the SECP – simultaneously.