KARACHI, Dec 29: The State Bank on Monday launched the Banking Sector Strategy (BSS) formulated for next decade mainly carrying intensive banking reforms.

SBP Governor Dr Shamshad Akhtar called upon presidents of all commercial banks to make concerted efforts to increase access to financial services in the country. She was chairing a meeting in which she launched the future banking sector strategy paper.

The strategy paper for banking reforms over the next decade has been formulated by the State Bank after intensive consultation with the stakeholders, including valuable feedback from the renowned foreign experts.

The banking sector strategy is centered on reforms involving the SBP and commercial banks, which constitute not only the core of the financial system in Pakistan but is also central to the monetary and financial stability responsibilities of the SBP. The BSS focuses on reforms, that the SBP has the power and resources to implement or substantially influence and highlights a set of priority areas in which progress needs to be made in the next ten years.

The ten key priority areas for the BSS are to implement a financial inclusion programme for banks to meet the needs of underserved economic sub-sectors, including the outreach programmes to meet the requirements of the agriculture, housing, SME and microfinance sectors.

Salient features of the strategy are:

* Strengthen consumer protection through new legislation, codes of conduct and new institutional arrangements and improve financial education through academic outreach programmes.

* Strengthen competition and efficiency in the banking sector with more transparency, more diversification with new products and delivery channels as well as measures to reduce the market distortions created by the large banks in rural areas.

* Further strengthen and consolidate the banking sector by continued efforts to raise governance and risk management standards, higher capital requirements and resolution of underperforming commercial and specialised banks.

* Strengthen prudential regulations and supervision by updating banking legislation and regulations, methods of supervision, and stricter enforcement of prudential rules for all banks, including the state-owned ones.

* Introduce a framework for consolidated supervision and reorganise the regulatory architecture to allow better regulation and supervision of financial groups and conglomerates.

* Develop a financial safety net of protection for small depositors, clearly structured lender of last resort facilities, an updated framework for market exit and resolution of unviable banks, and coordination arrangements with the government for dealing with systemic banking problems.

* Strengthen the powers of SBP to maintain monetary and financial stability by updating the half-century-old SBP Act in accordance with best international practices for central bank independence, accountability and governance structures.

* Deepen financial intermediation by developing not only the banking sector but also NBFIs, private and government debt markets and the stock market.

* Develop the financial infrastructure, especially payment systems, but also human resources, credit information, credit ratings, land and property registries and minimise procedural delays in the legal system to improve the efficiency of financial sector transactions.

Most of the above reforms are already in process, while others are at various stages of planning and preparation or pending implementation subject to changes in certain legislation.

The governor also pointed out that over the last year, SBP has been working on an ambitious and strong legal reform programme with a number of stakeholders.

A number of draft laws have been submitted to the ministry of finance, which includes: a) Banking Act, b) Amendment for Consolidated Supervision, c) Deposit Protection Fund Act, and d) SBP Act.

She also advised the central bank team to launch work on modernising the foreign exchange manual.