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Lecture Legal and regulatory aspects of banking supervision – Chapter 31

The following will be discussed in this chapter: After the successful completion of this course, students will have: Knowledge and understanding of: importance of banking supervision, banking sector in pakistan, role of the supervisor/regulator,. | MBF-705 LEGAL AND REGULATORY ASPECTS OF BANKING SUPERVISION OSMAN BIN SAIF Session: THIRTY ONE Key Learning Outcomes After the successful completion of this course, students will have: Knowledge and understanding of: Importance of Banking Supervision Banking sector in Pakistan Role of the Supervisor/ Regulator 2 Key Learning Outcomes (Contd.) Laws which govern banking sector Prudential Regulations Banking Companies Ordinance Other Banking Laws 3 How a Bank earns Profit? Just like any other business, a bank earns money so that it can run its operations and provide services. First, customers deposit their money in a bank account. The bank provides safe storage and pays interest on customers’ deposits. The bank is required to keep a percentage of deposits in reserve as cash in its vault or in an account at The State Bank. 4 How a Bank earns Profit? (Contd.) The bank can lend the rest to qualified borrowers. Potential borrowers may wish to buy a house or a new car; However, they may not . | MBF-705 LEGAL AND REGULATORY ASPECTS OF BANKING SUPERVISION OSMAN BIN SAIF Session: THIRTY ONE Key Learning Outcomes After the successful completion of this course, students will have: Knowledge and understanding of: Importance of Banking Supervision Banking sector in Pakistan Role of the Supervisor/ Regulator 2 Key Learning Outcomes (Contd.) Laws which govern banking sector Prudential Regulations Banking Companies Ordinance Other Banking Laws 3 How a Bank earns Profit? Just like any other business, a bank earns money so that it can run its operations and provide services. First, customers deposit their money in a bank account. The bank provides safe storage and pays interest on customers’ deposits. The bank is required to keep a percentage of deposits in reserve as cash in its vault or in an account at The State Bank. 4 How a Bank earns Profit? (Contd.) The bank can lend the rest to qualified borrowers. Potential borrowers may wish to buy a house or a new car; However, they may not have enough money to pay the full price at one time. Instead of waiting to save the money to pay for a new house, which could take years, they take out a loan from a bank. Borrowers are charged interest on the loan – a bank’s primary source of income. Banks also make money from charging fees for other financial services, such as debit cards, automated teller machine (ATM) usage and overdrafts on checking accounts. 5 Safety and Soundness Two major focuses of banking supervision and regulation are the safety and soundness of financial institutions and compliance with consumer protection laws. 6 What are Banking Regulations? Bank Regulations are a form of government regulations which subject banks to certain requirements, restrictions and guidelines. 7 Key Objectives of Bank Regulation The objectives of bank regulations, and the emphasis, varies between jurisdiction. The most common objectives are: Prudential—to reduce the level of risk bank creditors are exposed to (that is, to protect .