0
ISLAMABAD: National Assembly Standing Committee on Finance and Revenue was informed on Thursday that government's heavy borrowing from scheduled banks was a reason for slowdown in the stock market for several months.
'The federal government borrowed more than Rs250 billion from scheduled banks during July 2011 and December 2011, which affects credit lending to business sector as well as investments in stock markets,' Chairman, Securities and Exchange Commission of Pakistan (SECP) Mohammad Ali told the NA body.
'Banks prefer to earn easy money by lending it to government rather than investing it in a risk market,' he said.
The NA body was briefed about SECP and it was proposed that the government should approve SECP's proposals to give two-year exemption on capital gains tax (CGT) for enhancing investment in stock markets.
The SECP chairman said that the CGT was also a reason for low business activity in stock markets.
Committee chairperson Fauzia Wahab inquired about the total number of companies registered with the SECP and it was told that business companies were reluctant to register in stock market as public limited companies due to heavy taxation ratio.
The committee was informed that the country had resources and place to get over one million companies but currently only 60,000 companies have been registered with SECP.
'Reduced taxes on the corporatisation would encourage companies to get registered at the SECP,' the SECP chairman said.
Mohammad Ali also requested the members of the committee to approve demutualisation bill of stock markets which is pending in standing committee since long.
He said that the demutualisation act will help SECP in better regulation of the stock market.
He complained that the finance division and the finance committee had been ignoring SECP and stock market and the SECP was not being given due attention by the government.
Meanwhile, the SECP has issued a directive to the insurance companies on antimoney laundering (AML) regime, including the customer due diligence/know your customer (CDD/KYC) policies and designation of compliance officers.
This directive is applicable to all public and private sector insurance companies, which has been issued to address the gaps related to the threat of money laundering in the insurance industry.
'In order to promote anti-money laundering practices such directions are prescribed and implemented by regulators globally in the financial sectors,' said an official of the SECP.
Many regulatory and governmental bodies have taken measures to prevent this practice and regardless of the difficulty in measurement, the amount of money laundered each year is in billions dollars and poses a significant policy concern for governments.
Though the regulatory directions on AML are already enforced and applicable by the SECP in the non-banking and finance sectors in Pakistan, such a move has been made for the first time for the insurance sector.
