current exchange rates

On Tuesday, a meeting was called at the State Bank of Pakistan (SBP), where the leading 8-10 banks were warned by the central bank at the request of the Ministry of Finance. According to a local publication house, bank treasuries were called to the SBP after the finance ministry voiced displeasure with the borrowing rates and the current exchange rates.


SBP Threatens Banks of Government Imposing Super Tax on Fixed-Income Returns


The meeting discussed bank participation in the Treasury Bills and Pakistan Investment Bonds (PIBs) auctions, and participation in capital markets, after which the SBP informed the banks to begin bidding lower in the auctions and talked about the threat of the government charging a super tax on fixed-income returns in the case banks did not bring down yields.


SBP is Asking Banks to Bring Down Borrowing Rates in the Interbank 


Banks were also warned about their Foreign Exchange (FX) activities. According to local news outlet, the SBP told banks to bring the exchange rates and borrowing rates down in the interbank even if it suggests incurring losses. The Central Bank told treasurers that it was a matter of national significance and that incurring losses was part of having the privilege of running banking businesses.


The local publisher also explained that the SBP is asking banks to sell dollars to buyers without being allowed to buy them back from the inter-bank market. This exposes banks to changes in the FX rate, which could also mean a potential loss of money for banks. Moreover, the bank treasurers present in the meeting were warned that if the banks did not comply, bank Presidents would be summoned for a one-on-one meeting for a “dressing down” by the SBP concerning the borrowing rates and current exchange rates.

Ministry of Finance is Not Satisfied by the Money Market


The central bank is able to intervene in the market because the Ministry of Finance is not satisfied by the money, although securities market is not under the SBPs ruling, especially when it is encouraging the banks it regulates to incur losses. However, according to the officials at treasury departments in banks, said that banks incur FX losses from time to time when the SBP asks them to. Therefore, the SBP is asking them to do so again may bear results.


Read more: SBP Denies Rumors of Freezing RDAs, Lockers, and Foreign Currency Accounts

Source: Profit 


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