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CCP to impose harsh penalty on banks operating in groups

ISLAMABAD — Pakistani banks are operating in a group to fleece their depositors and this needs to be effectively discouraged, says a senior official of the Competition Commission of Pakistan (CCP).

"Prima facie banks are involved in a group for which the investigation is being conducted by the Competition Commission", Chairman CCP Khalid Mirza told a news conference yesterday.

He said that in case banks were found to be involved in promoting groupism, action will be taken against them. There was a Rs50 million fine but under the competition law executives of the banks could also be individually penalised, Mirza said.

He said that Ghaffar, who is one of the senior members of the Commission, was investigating the issue and was expected to give his decision in a month's time. Mirza pointed out that it was very difficult to establish groupism of banks or companies as it required forensic evidence. He agreed with a reporter that banks themselves landed in trouble by collectively giving an advertisement in the newspapers about their new saving products.

Responding to a question, he said there were harsher punishments in the developed countries against cartalisation. In the United States the offence for this punishment was 14 years imprisonment while in some European countries, it was up to 25 years. "In the foreign world, forming a group was a criminal offence while it is considered a civil offence in our country", Mirza said.

He said that there was a lacuna in the competition law which needed to be severed so that anybody found guilty of promoting group could be removed from the directorship of any company.

Mirza also said that his organisation has decided to set up a "Competition Consultative Group" with a view to institutionalise its inclusive approach of seeking advice and suggestions to promote competition in Pakistan.

The Group, he said, will comprise eminent persons essentially drawn from sector-specific regulatory agencies, relevant professional bodies and the private sector. There will be about 15 member group which will be meeting periodically to discuss and deliberate on issues pertaining to competition. The objective, he said, was to provide a platform for informal feedback and guidance with respect to the Commission's ongoing actions and proposed initiatives.

Mirza said that the government has eventually provided him Rs50 million seed money to start running the affairs of the Commission. He said he was hoping to get Rs100 million as a seed money.

However, he said that he was seeking "tied sourcing" of funding to effectively run his organisation. "I need Rs200 million annually on account of tied sourcing which could be provided by different official agencies".

For capacity building, he expressed hopes that international donor agencies particularly the World Bank would be providing some funding.

The Commission has initiated an inquiry into the complaint lodged by the Islamabad Stock Exchange (ISE) against the Karachi Stock Exchange (KSE) alleging contravention of the provisions of Section 3 of the Competition Ordinance, 2007. He said that ISE wanted access to the KSE which the officials of the KSE maintained were already providing through brokers.

Similarly, he said that Fauji Fertilizer and Fauji Bin Qasim which were having 60 per cent of the market domination were also allegedly involved in cartalisation for which certain investigation was being conducted. The Commission was not dealing with the issue of prices and that its job was to discourage anti competition behaviour and unfair trade practices. He said if the aim was to make the private sector an engine of growth, then the role of the three bodies — central bank, SECP and Competition Commission has to be very effective. The real purpose, he said, was to ensure productive efficiency.