Professional Documents
Culture Documents
Presentation by:
Hassan Jawwad
Sr. Joint Director
Finance Department
SBP Financial Statements
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SBP Financial Statements
• Decisions by lenders about providing or settling loans and other forms of credit
depend on the principal and interest payments or other returns that they expect.
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SBP Financial Statements
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SBP Financial Statements
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SBP Financial Statements
Financial Statements
viz-a viz Central Bank
o Balance sheet and profit & loss account may not provide ready answers
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SBP Financial Statements
o Provide critical information regarding the foreign exchange reserves, nature and
extent of relation with Govt, the extent of Bank lending to commercial banks etc
o The other side of equation NDA and NFA are also derived from SBP financial
statements
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SBP Financial Statements
Seigniorage income
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SBP Financial Statements
Non Traditional
Development of financial framework (SBP BPRG/FSD/EPD, Operations BSC
Field Offices)
Institutionalization of savings and investment (BSC Field Offices)
Training facilities to bankers (NIBAF, SBP DFG, BSC DFSD)
Credit to priority sectors – Quasi Fiscal Function (Policy DFG/FD SBP,
Operations DFSD/Field Offices)
Investments on behalf Govt. – Quasi Fiscal Function (FD SBP)
Islamization of Banking System (Policy IBD SBP, Operations DFSD/ Field
Offices BSC)
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SBP Financial Statements
FY 1999-2000: First time issued full fledge (with complete notes) financial
statements.
FY 2011-12: Merged Issue Department and Banking Department Balance Sheets
FY 2013-14: Adopted full IFRS as its accounting framework
FY 2018-19: Adoption of IFRS 9, first entity in Pakistan to adopt IFRS 9
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SBP Financial Statements
Issue Department
o Why separate Issue Department ?
- a relic of extinct Gold standard
o What is Gold standard ?
o Bank of England Act 1844
- First legislation which created a separate Issue Department
o Creation of separate issue department was not necessary even under the
Gold standard
o It is more reflective of British’s traditional conservative attitude to money
matters than that of any economic necessity
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SBP Financial Statements
(1) The Bank shall have the sole right to issue bank notes made payable to
bearer on demand in Pakistan in accordance with the provisions hereinafter
made, provided that the currency notes of the Government of Pakistan
supplied to the Bank by the Government may be issued by it for a period
which shall be fixed by the [Federal Government] on the recommendations of
the Central Board.
(2) Any person contravening this authority or committing any other offence
specified in Section 35, shall be liable to the penalties therein mentioned.
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SBP Financial Statements
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SBP Financial Statements
o Historically, it was essential for central banks to hold gold because under a
‘gold standard’ the value of a unit of currency was defined in terms of a
certain weight of gold and issued banknotes could be redeemed for gold.
Although the gold standard is no longer in use today, central banks are still,
in aggregate, amongst the world’s largest holders of gold, even though the
amount of gold held varies widely by bank.
o Under the current fiat money standard and floating exchange rate regime,
the backing of Currency in Circulation by gold is not required
o Gold Revaluation Reserves
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SBP Financial Statements
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SBP Financial Statements
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SBP Financial Statements
o Repo and Reserve Repo are the tools for liquidity management in the banking
system. SBP conducts open market operations to ensure that the overnight repo
rate remains in close proximity with its policy rate. For this purpose it sell/buy
government securities through Repo and Rev. Repo transactions.
o Under Repo, securities are sold with agreement to repurchase at the specified
rate and date. Repos drain liquidity from the banking system
o Under Reverse Repo, securities are purchased with concurrent agreement to
resell at future date and pre-specified rate. Reverse Repos make available
liquidity to the banking system
o Notwithstanding the use of terms purchase and sale, these are in substance
borrowing and lending transactions and accounted for as such
o Two legs of Repo & Reverse Repo are simply extension of credit and its
repayment at the specified date
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SBP Financial Statements
Deficit Financing
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SBP Financial Statements
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SBP Financial Statements
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SBP Financial Statements
o The Central Bank acquires GoP/ Treasury securities equal to the amount
of base money it creates
o The interest paid on the GoP/ Treasury securities is a main source of
income for the Central Bank
o For all intent and purpose, the GoP/ Treasury securities on the balance
sheet of Central Bank stand retired form the prospective of public sector
as a whole
o Retiring GoP/ Treasury securities in this way eliminate a cost to the
treasury
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SBP Financial Statements
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SBP Financial Statements
THANKS
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