KARACHI: The State Bank of Pakistan (SBP) on Friday strongly reacted over National Accountability Bureau’s (NAB) decision to investigate its officials for alleged misuse of authority in terms of amalgamation of KASB Bank into BankIslami.

The NAB decision was termed disappointing since the inquiry report did not incorporate all the details provided by SBP. The SBP decided to amalgamate KASB Bank into BankIslami in 2015 after a moratorium was imposed by the federal government.

“Such one-sided views lead to misjudgment about the authority of SBP as a guardian of the financial sector in general and the interest of depositors in particular. Further, it negatively impacts the motivation of SBP staff to discharge its duties without fear or favor,” said a press release issued by the SBP.

The SBP said all stakeholders of the defunct KASB Bank were well aware of the poor financial and operating conditions of the bank, which was facing severe capital shortfall since 2009.

As of September 30, 2014, capital (free of losses) of the defunct KASB Bank was only Rs0.958 billion against requirement of Rs10bn. Moreover, its Capital Adequacy Ratio (CAR) was negative 4.63 per cent against the required 10pc, said the SBP. “It was the only bank which had a negative CAR.”

“Besides capital shortfall, the bank and its sponsors were found engaged in fraudulent practices and siphoning off more than Rs3bn from the bank, for which separate complaints have been lodged with NAB,” said the SBP. The SBP said all of its actions in the resolution and amalgamation of defunct KASB Bank were in accordance with the law; none of the SBP officials misused authority nor were involved in any kind of corrupt practices.

“All the actions taken were permissible under the law and were duly approved by the Ministry of Finance and SBP’s Board of Directors,” said the SBP.

Published in Dawn, October 7th, 2017