ASSIGNMENT#1

Business Finance

Submitted By:
Muhtasham Abid (L1F20BBAM0672)

Submitted To:
Ma’am Noor-ul-ain-Saleem

Section:
M2

APRIL 11, 2022

Table of Contents
State Bank of Pakistan.................................................................................................................................1
Function:.................................................................................................................................................1
Subsidiaries:............................................................................................................................................1
SBP - Banking Services Corporation (SBP-BSC):..............................................................................1
National Institute of Banking and Finance (NIBAF):..........................................................................2
Deposit Protection Corporation (DPC):...............................................................................................2
Monetary Policy:.....................................................................................................................................2
Decision-Making Committee:..................................................................................................................3
SECP AND FBR.........................................................................................................................................4
Role of SECP:.........................................................................................................................................4
Main Functions:.......................................................................................................................................4
Federal Board Revenue:..........................................................................................................................5
Government of Pakistan..............................................................................................................................5
Levels of Government:............................................................................................................................5
Executive vs. Legislative vs. Judicial Branch:.........................................................................................6
Senate vs National Assembly:.................................................................................................................6
Financial Markets........................................................................................................................................7
Primary vs Secondary:.............................................................................................................................7
Money vs Capital:....................................................................................................................................8
Financial Intermediaries:.........................................................................................................................8
Reference:...................................................................................................................................................9
 State Bank of Pakistan

Function:
According to the State Bank of Pakistan Act 1956, SBP has the
authority to work as the central bank of the country providing it the
privileged control over the production and distribution of money
and credit for the country. Furthermore, SBP is responsible for
functions like monetary policy, money supply, etc.

Subsidiaries:
The SBP holds three subsidiaries which are explained in detail below,

SBP - Banking Services Corporation (SBP-BSC):

The Board Directors of SBP-BSC, chaired by the Governor SBP, comprises all members of the
Central Board of SBP and the Managing Director of SBP-BSC. It consists of 16 field offices in
Pakistan while the head office is located in Karachi. It is Established under the SBP-BSC
Ordinance 2001. The vision of SBP-BSC is to support the State Bank of Pakistan in achieving its
objective by providing the required technology and human resource. Its mission is to provide
excellent financial and banking services to stakeholders by the usage SBP policies. The functions
performed by SBP-BSC are:

 Handling currency and credit management

 Facilitating the inter-bank settlement system
 Sale/Purchase of savings instruments of the Government
 Collection of revenues
 Make payments for and on behalf of the Government
 Operation Work related to Development Finance
 Management of Public Debt

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  Foreign Exchange Operations and Export Refinance

National Institute of Banking and Finance (NIBAF):

NIBAF, located in Islamabad, is incorporated under the Companies Ordinance, 1984, and has a
separate Board of Directors. It also has an office in Karachi. NIBAF is the training arm of SBP
and provides training programs in highly interactive sessions to various levels of SBP
employees.

Deposit Protection Corporation (DPC):

DPC established under DPC Act 2016, is responsible to protect the deposits of members of
financial institutions operating in Pakistan by providing compensation to the depositors of
protected deposits in the event of failure of a member of the Financial Institution. The limit of
these protected deposits shall be determined by DPC. In the case of Islamic Banks, a separate
Shariah-compliant mechanism is placed.

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Monetary Policy:
Monetary policy involves central bank’s use of instruments to influence interest rates and/or
money supply in the economy to keep overall prices and financial markets stable. According to
the SBP Act 1956, ‘whereas it is necessary to provide for the constitution of a State Bank to
regulate the monetary and credit system of Pakistan and to foster its growth in the best national
interest with a view to securing monetary stability and fuller utilization of the country’s
productive resources.’

Thus, SBP focuses on achieving monetary stability by controlling inflation targets set by the
government. At the same time, SBP also ensures the smooth functioning of the financial market
and the payments system for financial stability.

Decision-Making Committee:
The Monetary Policy Committee in SBP is responsible to decide the monetary policy stance.
Section 9E of the SBP Act 1956 states about the powers and functions provided Monetary Policy
Committee which can be classified as:

 Formulate, support, and recommend the monetary policy, including, as appropriate,

decisions relating to intermediate monetary objectives, key interest rates, and the supply
of reserves in Pakistan, and may make regulations for their implementation
 Approve and issue the monetary policy statement and other monetary policy measures.

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 SECP AND FBR

Role of SECP:
The Securities and Exchange Commission of Pakistan (SECP) is in charge of the development of
a modern and systematic corporate sector and capital market. It provides a force/energy for high
economic growth and fosters social harmony within the country.

Main Functions:
The Securities and Exchange Commission of Pakistan (SECP) was set up in according to the
Securities and Exchange Commission of Pakistan Act 1997. Its main functions are as follows:

 Regulation of the corporate sector and capital market

 Supervision and regulation of insurance companies
 Supervision and regulation of non-banking finance companies and private pensions
schemes
 Oversight of various external service providers to the corporate and financial sectors,
including chartered accountants, credit rating agencies, corporate secretaries, brokers,
surveyors, etc.

Federal Board Revenue:

The FBR formerly known as the Central Board of Revenue (CBR) is a federal law enforcement
agency in Pakistan. It investigates tax crimes, suspicious accumulation of wealth, and money
laundering. FBR performs the role of collecting taxation in the country from all individuals and
businesses. FBR also collects intelligence on tax evasion and keeps tax evaders under
surveillance.

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Levels of Government:
Federal
Responsible for issues that
affect all citizens (National
Issues)
Example: Money, Defense
There is a single Federal
Government
The leader is called the
Premier
Executive vs. Legislative vs. Judicial Branch:
Legislative
Makes Laws
It consists of Parliament
There is a single Federal
Government
The leader is called the
Premier
Government of Pakistan
Provincial
Responsible for issues that
affect people in that province
Example: Schools, Hospitals
Each province has a separate
Provincial Government
The leader is called Chief
Minister
Executive
Administrates Laws
It consists of the Head of
State and Head of
Government
Each province has a separate
Provincial Government
The leader is called Chief
Minister
Local
Responsible for issues that
affect local communities
Example: Parks, Parking
A great number of Local
Governments in every area
The leader is called Mayor
Judicial
Interpret Laws
It consists of the Courts
A great number of Local
Governments in every area
The leader is called Mayor
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Senate vs National Assembly:

Senate National Assembly

It is the upper legislative chamber of the It is the lower legislative chamber of the
bicameral legislature. bicameral legislature.
It consists of 100 members. It consists of 342 members.
The role of the Senate is to provide equal The role of the National Assembly is to make
representation to all the federating units and laws for the federation and keep a check on
to avoid domination of one province due to its the Government to ensure that the
population. Government functions within the given
parameters set in the constitution.

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 Financial Markets
Primary vs Secondary:
Primary Market
The marketplace for initial/newly issued
shares is called Primary Market.
Example: Initial Public Offerings (IPO)
In this, the buying/selling is in between the
company and investors.
The prices of shares are fixed.
The share can be only sold once.
Money vs Capital:
Money Market
In this market, short-term financial
instruments are traded.
Example: Certificates of Deposit (CD),
Treasury Bills, etc.
The objective of investing in the money
market is to maintain wealth.
Short-term securities have smaller fluctuation
which makes the risk level low in this market.
As this market is more widely traded, it
tends to be more liquid.
Secondary Market
The marketplace for the trade of already
issued shares is called Secondary Market.
Example: Stock Exchange of Pakistan
In this, the buying/selling is in between only
investors.
Prices vary depending on the demand and
supply of the share.
The share can be sold infinitely.
Capital Market
In this market, longer-term financial
instruments are traded.
Example: Stock Shares, Bonds, etc.
The objective of investing in the capital
market is to generate wealth.
Long-term securities have greater fluctuation
which makes the risk level relatively high.
This market is comparatively less liquid due
to the limited number of traders.
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Financial Intermediaries:
In a financial transaction, the middleman between two parties present for the safety of both
entities is known as Financial Intermediary. It includes banks, insurance companies, mutual
funds, etc. In the case of banks, they act as a middleman between the savers and borrowers. The
savers place their cash within the bank and receive some percentage interest on that cash. On the
other hand, borrowers receive loans from the bank and repay those loans with some interest.
Hence, the bank uses the interest received from borrowers to pay interest to the savers. In the
case of insurance companies, the money paid by their customers for insurance is used to invest in
bonds, commercial real estate, etc. If the customers undergo any health or material loss, the
insurance company will use the money paid by the customers on them. In this way, insurance
companies are also considered financial intermediaries.

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Reference:

https://www.sbp.org.pk/about/Intro.asp

https://www.sbp.org.pk/sbp_bsc/index.asp

https://www.sbp.org.pk/m_policy/mpf-01.asp#:~:text=SBP%20focuses%20on%20achieving
%20monetary,market%20and%20the%20payments%20system.

https://www.sbp.org.pk/m_policy/mp-deci-imp.asp#:~:text=The%20monetary%20policy
%20decision%2Dmaking,May%20of%20a%20fiscal%20year.

https://jamapunji.pk/about-secp

https://www.secp.gov.pk/about-us/vision-and-mission/

https://en.wikipedia.org/wiki/Federal_Board_of_Revenue#:~:text=FBR%20performs%20role
%20of%20collection,revenue%20collection%20agency%20of%20Pakistan.

https://education.aec.gov.au/teacher-resources/three-levels.html

https://peo.gov.au/understand-our-parliament/how-parliament-works/three-levels-of-
government/the-roles-and-responsibilities-of-the-three-levels-of-government/

https://en.wikipedia.org/wiki/Senate_of_Pakistan#Appointment

https://en.wikipedia.org/wiki/National_Assembly_of_Pakistan#Composition_and_elections

https://www.educba.com/primary-market-vs-secondary-market/

https://time.com/nextadvisor/investing/money-market-vs-capital-market/

https://www.investopedia.com/terms/f/financialintermediary.asp

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