The Senate Standing Committee on Finance and Revenue was informed on Wednesday that commercial banks were given a clean chit in the exchange rate manipulation inquiry undertaken by the State Bank of Pakistan (SBP) last year.
The committee met under the chairmanship of Senator Saleem Mandviwalla. Briefing the committee, SBP Deputy Governor Dr. Inayat Hussain said that the upcoming budget may tax the profits of banks making extra profits on the exchange rate.
The deputy governor said that the central bank gave a clean chit to the banks after the completion of the investigation as no illegal activity was observed. However, he said that the role of banks was irresponsible in the depreciation of the rupee and profiteering.
The committee was apprised that the SBP has moved to a market-based foreign exchange (FX) regime in which the spread charge on FX sale/purchase transactions is generally determined by the banks based on market conditions like (FX) liquidity and short Net Open FX positions of the banks were the main reasons of charging higher spreads by the banks during May to August 2022.
It was apprised that SBP has conducted a limited-scope inspection of the matter and furnished its report to Finance Division.
It was observed that the overall increase in FX income of the banks was mainly driven by higher spreads due to heightened volatility. However, in some cases, the banks charged higher spreads.
It was also apprised that the SBP has initiated enforcement action against the banks involved in accordance with its supervisory framework.
Moreover, in order to ensure that the banks follow a reasonable and transparent approach in pricing their transactions and to improve the market conduct in the future, SBP held meetings with the banks and warned them about their practices and advised them to rationalize the spreads being charged to the customers. The committee sought a report in black and white and decided to drop the agenda item.
Earlier in the meeting, a detailed briefing was presented on cryptocurrency. The chairman committee remarked that we should not out rightly object to the mechanism of cryptocurrency and bring it to the country’s advantage and regulate it by drafting legislation.
Federal Minister of State for Finance Aisha Ghaus Pasha said that cryptocurrency is not a legal tender and the Financial Action Task Force (FATF) is not in favor of it. SBP deputy governor said that the rules of crypto are such that no government can control it.