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Clients'

interests

to be looked

after: Yaqub

RECORDER REPORT

KARACHI: The decision to take over the United Bank Limited is to aimed to reassure the depositors that the Government of Pakistan guarantee is now doubly backed with a State Bank of Pakistan guarantee and the placement of the bank in capable hands will ensure that the interests of UBL clients will be looked after, said SBP Governor Dr. Mohammad Yaqub.

Making an announcement to the media on Saturday, the SBP Chief said that during the last couple of years everyone had heard him complain loudly about the mismanagement in the government operated banks and development financial institutions, manifested in the form of pressure and collusion lending, high administrative cost, excessive perks and over-employment.

While several steps were initiated, he went on, to reform the financial system by way of autonomy of SBP, privatisation of NCBs and DFIs, improving the supervision and enforcement of Prudential Regulation, a clear backing from the top was constantly lacking. Now the Prime Minister and the Federal Cabinet had approved a plan to stop the misuse of these institutions and also make their staff accountable for lending and expenditure and have a computerized monitoring system linking the bankers' advancement with the evaluation of their performance in respect of stuck-up loans.

For the first time, Yaqub said, a process has now been initiated to change management and the board of a bank in the larger interest of the institution. It was in this context that SBP wrote a note on UBL to the Ministry of Finance, to which the Ministry agreed and the Prime Minister approved the change of management in UBL which becomes effective from tomorrow, (Sunday), he added.

He said SBP's Deputy Governor, Operations, Sibghatullah will issue instructions to the new management to enforce vigorously prudent lending, make special efforts for recovery of overdue loans and take all measures to reduce expenditure. Structural reforms will be undertaken to improve profitability, to control waste and to give a clear message to those "who are working in their own interest to stop or else we shall stop them". The changes at the helm of UBL would also give a message to all other NCBs and DFIs to reform or face action, said Governor Yaqub.

He assured all concerned on behalf of SBP that UBL would continue to function effectively and the process of privatization would continue.

Answering queries from newsmen, he parried a direct answer to whether there existed the political will to cut down the over-staffing in public sector financial institutions, by saying that the Prime Minister stood by the steps the new management would undertake.

On the question of a similar move in Habib Bank, he did not give a direct reply and said that the new steps would facilitate privatization and not hamper it. He said SBP had only given technical help to the Privatization Commission and was grateful that its views were incorporated in the criteria governing the process but the final decision and responsibility would remain with the commission. He clarified that the Bank of England's letter on UBL was a routine communication to obtain information about the management change and had not been properly understood by the media.

He affirmed that SBP would not be "sleeping on the sidewalk" and would continue to emphasise prudent lending, reduced redundancy, recovery of the overdues and control on extravagant expenditure. SBP's duty was not prosecutional in nature, he pointed out, and it had succeeded in making improvement in Agricultural Development Bank, and PICIC was undergoing a similar process and pruning down of specialised credit scheme had been effectively undertaken.