SBP Tightens Oversight on Foreign Currency Accounts

SBP Tightens Oversight on Foreign Currency Accounts

Karachi, July 3, 2024 – The State Bank of Pakistan (SBP) on Wednesday issued a directive to all banks, requiring detailed submissions of transactions conducted through foreign currency accounts (FCA).

This move aims to enhance the transparency and accuracy of financial reporting, especially concerning international transactions.

In a circular sent to all banks, the SBP referenced its Exchange Policy Department’s Circular Letter No. 14, dated December 07, 2016. This letter mandated that banks maintaining Special Purpose Foreign Currency Accounts, both onshore and offshore, must submit a monthly statement to the Core Statistics Department (CSD) of the State Bank of Pakistan by the 5th of the following month. The statement should include data in formats A to E, as specified in the original circular.

To ensure further clarity and classification of certain international transactions—such as trade in services, debt amortization, and trade credits—the SBP has revised the code list for Statement A. This revised code list pertains specifically to Special Purpose Foreign Currency Accounts (Onshore/Offshore) and is now available on the SBP Data Acquisition Portal (DAP) Knowledge Centre.

Effective from the data of July 2024, banks are required to submit reports on Special Purpose Foreign Currency Accounts using the revised code list for Statement A and the existing formats for Statements B to E through the DAP, instead of via email. This change aims to streamline the reporting process and improve the efficiency and accuracy of data submission.

The SBP emphasized that reporting institutions must develop mechanisms to verify the accuracy of the data before submission. This verification process is crucial to ensure compliance with the guidelines issued by the SBP. The central bank warned that any erroneous reporting would attract punitive action under the relevant provisions of law.

This directive is part of the SBP’s ongoing efforts to strengthen the country’s financial system by ensuring that all international transactions are accurately recorded and reported. The move is expected to provide better insights into the flow of foreign currency in and out of the country, thereby aiding in more effective economic planning and policy-making.

Banks are now under pressure to enhance their reporting mechanisms and ensure strict adherence to the new guidelines. This initiative is anticipated to foster greater accountability and transparency within the banking sector, ultimately contributing to the stability and integrity of Pakistan’s financial system.