DRAFT BANKING ACT, 2006 - State Bank of Pakistan

165 Pages·2006·0.38 MB·English

DRAFT
BANKING ACT, 2006

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Contents of the revised Banking Act 2005

Arrangement of Sections

Part I - Preliminary

Section 1 - Short Title and Date of Operation.

Section 2 - Definitions.

Section 3 - Application of Companies Ordinance, 1984.

Section 4 - General powers, functions and duties of State Bank.

Section 5 - This Act to override constituent documents, memorandum, articles
etc.

Section 6 - Reports by State Bank to Federal Government.

Section 7 - Power of State Bank to specify form and manner of keeping or
maintaining book, accounts and records.

Section 8 - Electronic filing of information, documents or returns.

Section 9 - Amendment of Schedules.

Part II - Licensing of banks

Section 10 - Prohibition to carry on banking business without license and dis-
application.

Section 11 - Provisions in relation to banking licenses.

Section 12 - Application for banking license.

Section 13 - Requirement for supplemental information relating to an
application made under Section 12.

Section 14 - Approval or rejection of application.

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Section 15 - Power to impose new restrictions or conditions and to vary or
revoke restrictions or conditions imposed on license.

Section 16 - Cancellation of license

Section 17 - Publication of list of banks.

Section 18 - Annual license fees.

Part III - Business of Banks

Section 19 - Forms of business which banks may engage in.

Section 20 - Prohibition of the words “bank” , “banking”, “banker”, “Islamic
bank”, or any of their derivatives.

Section 21 - Changes of memorandum or articles of banks.

Section 22 - Restrictions on carrying on of trade and dis-application.

Section 23 - Advertisement for deposits.

Section 24 - Unsolicited calls.

Section 25 - Fraudulent inducement in relation to deposits.

Section 26 - Co-operation and co-ordination between State Bank and Securities
and Exchange Commission of Pakistan.

Part IV - Provisions in relation to banks carrying on business based on
Shariah Principles

Section 27 - Requirements on banks for carrying on business that conforms to
Shariah principles.

Section 28 - Report of Shariah adviser.

Section 29 - Shariah Board.

Section 30 - Relationship between a bank and its customers in relation to
transactions or arrangements that are in conformity with Shariah
principles.
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Section 31 - Publication of a list of banks which carries on business in any of
the ways described in sub-Section (1) of Section 27.

Section 32 - Tax neutrality of transactions or arrangements that conform to
Shariah.

Part V - Ownership, control and management of banks

Section 33 - Prior approval of State Bank required for acquisition of substantial
interest in a bank.

Section 34 - Prior approval of State Bank for acquisition of qualifying holdings
in a domestic bank.

Section 35 - Dis-application.

Section 36 - Regulations on maximum permissible holdings in domestic banks

Section 37 - Power of State Bank in respect of contravention of section 33,
Section 34 and section 35 and any regulations made thereunder.

Section 38 - Board of Directors and Audit Committee.

Section 39 - Fit and Proper Criteria

Section 40 - Appointment, election and nomination of directors of domestic
banks.

Section 41 - Appointment of chief executive of a bank.

Section 42 - Prohibition of common directors.

Section 43 - Removal of directors or chief executive.

Section 44 - Disclosure of Interests.

Section 45 - Prohibition of employment of managing agents and restrictions on
certain forms of employment.

Section 46 - Liability of directors, chief executive and officers.

Section 47 - Prosecution of directors, chief executive and officers.

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Part VI - Financial and Operational Requirements of Banks

Section 47 - Responsibility of State Bank and prudential requirements.

Section 48 - Regulation of paid up capital and authorized
capital of domestic banks.

Section 49 - Requirements relating to minimum paid-up capital and reserves
etc.

Section 50 - Reserve fund.

Section 51 - Payment of dividends and transfers.

Section 52 - Cash reserve.

Section 53 - Maintenance of liquid assets.

Section 54 - Maintenance of assets in Pakistan.

Section 55 - Prohibition of charge on unpaid capital and on assets.

Section 56 - Restrictions on acquisitions of immovable property by banks .

Section 58 - Bank holidays.

Section 59 - Establishment of correspondent banking relationship.

Section 60 - Restrictions concerning establishment of office etc.

Section 61 - Restrictions concerning subsidiaries.

Section 62 - Restrictions on investments by domestic banks in other enterprises.

Section 63 - Credit facilities and limits.

Section 64 - Requirements relating to credit facilities.

Section 65 - Submission of information, reports etc. relating to credit facilities
to State Bank.

Section 65 - Power of State Bank in relation to the granting and recovery of
loans and advance by banks.

Section 66 - Restrictions on removal of records and documents.
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Section 68 - Records of transactions and commitments.

Part VII - Reporting, Inspection and Audit

Section 69 - Maintenance of accounts and records etc.

Section 70 - Preparation of financial statements.

Section 71 - Financial statements to be submitted to the State Bank.

Section 72 - Submission of statistics and returns to State Bank.

Section 73 - Publication and display of audited balance sheet and profit and loss
accounts.

Section 74 - Copies of balance sheet and profit and loss accounts to be sent to
Registrar.

Section 75 - Reporting of financial difficulties and material events to State
Bank.

Section 76 - Inspection.

Section 77 - Inspection by foreign supervisory authority.

Section 78 - Inspection Report.

Section 79 - Audit.

Section 80 - Audit Report.

Section 81 - Additional requirements for auditors etc.

Part VIII - Powers of State Bank in relation to Illegal Banking Business,
Illegal Deposit Taking and other Contraventions of this Act

Section 82 - Power to call for certain information.

Section 83 - Special provisions.

Section 84 - Power to make declaration.
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Section 85 - Consequences of a declaration made under Section 83.

Section 86 - Deposit of cash and preservation of assets, etc.

Section 87 - Statement of assets and liabilities to be submitted to State Bank.

Section 88 - Consequential provisions for winding up, etc.

Section 89 - Obstruction to exercise of powers by authorized persons.

Part IX - Enforcement and Secrecy

Section 90 - Power of State Bank to collect, publish and furnish credit
information.

Section 91 - Reporting of suspicious transactions.

Section 92 - Banking secrecy.

Part X - Corrective actions and bank resolution measures

Section 93 - Power of State Bank to take corrective actions and institute bank
resolution measures.

Section 94 - Circumstances under which corrective actions may be taken by the
State Bank.

Section 95 - Warning notice to be issued by State Bank.

Section 96 - Power of State Bank when a bank fails to comply with sub-Section
(2) of Section 95.

Section 97 - Effect of taking control.

Section 98 - Powers of Administrator to take remedial measures.

Section 99 - Other measures available to the State Bank.

Section 100 - Shareholder Representations.

Section 101 - Capital reduction and cancellation of shares.

Section 102 - Vesting of assets and liabilities.

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Section 103 - Conditions for Vesting.

Section 104 - Effect of Vesting Order.

Section 105 - Vesting Orders not subject to appeal.

Section 106 - Moratorium

Section 107 - Procedure of Amalgamation

Part XI - Liquidation

Division I - Liquidation of bank

Section 108 - General

Section 109 - State Bank’s permission required for the winding-up and
liquidation of a bank.

Section 110 - Rules of voluntary liquidation.

Section 111 - Compulsory liquidation.

Section 112 - Representative of Owners in liquidation proceedings.

Section 113 - Petition for commencing liquidation proceedings.

Section 114 - Rejection of petition.

Section 115 - Rejection of frivolous petition.

Section 116 - Appointment of Liquidator.

Section 117 - Terms and conditions of service of Liquidator.

Section 118 - Duties and powers of Liquidation.

Section 119 - Set off and netting.

Section 120 - Secured claims.

Section 121 - Priority of payment.

Section 122 - No re-captalization of banks in liquidation with public funds.

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Section 123 - Negotiated settlements.

Section 124 - No compromise with creditors.

Section 125 - General meeting and committee of creditors.

Section 126 - Immediate advances to depositors.

Section 127 - Distribution.

Section 128 - Cross border insolvency of banks.

Division II - Special Provisions for Speedy Disposal of Winding Up
Proceedings

Section 129 - Part XI to override other laws.

Section 130 - Transfer of pending proceedings.

Section 131 - Settlement of list of debtors.

Section 132 - Documents of bank to be evidence.

Section 133 - Report by Liquidator on conduct of promoters of a banks etc.

Section 134 - Public examination of directors and auditors.

Section 135 - Special provisions for assessing damages against delinquent
directors, etc.

Section 136 - Duty of directors and officers of a bank to assist in the realization
of property.

Section 137 - Special provisions for punishing offences in relation to banks
being wound up.

Section 138 - Appeals.

Section 139 - Special period of limitation.

Section 140 - State Bank to tender advice in winding up proceedings.

Section 141 - District magistrate to assist Liquidator in taking charge of property
of bank wound up.

Section 142 - Enforcement of orders and decisions of High Court.
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Section 143 - Power of High Court to make rules.

Section 144 - References to directors, etc., shall be construed as including
reference to past directors, etc.

Section 145 - Validation of certain proceedings.

Part XII - Banking Mohtasib

Section 146 - Appointment of Banking Mohtasib.

Section 147 - Terms and conditions of the Banking Mohtasib.

Section 148 - Reference to Banking Mohtasib by Court.

Section 149 - Procedure for making complaints.

Section 150 - Recommendations for implementation.

Section 151 - Power to call for information.

Section 152 - Report of Banking Mohtasib.

Part XIII - Provisions relating to Deposit Protection Fund

Section 153 - Interpretation in Part XIII.

Section 154 - Establishment of Deposit Protection Fund.

Section 155 - Objective of the Fund.

Section 156 - Moneys paid into the Fund.

Section 157 - Deposit Protection Board.

Section 158 - Functions of the Board.

Section 159 - Payments out of the Fund.

Section 160 - Financial Accounts of the Fund.
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