Burj Bank makes Rs416m artificial transactions SHAHID IQBAL Published 2013-03-09 02:24:36 KARACHI, March 8: The Burj Bank was found involved in artificial increase in its trading volume and showing inflated profit through overstated transactions of Rs416 million during the year 2012. The central bank issued a letter to the Burj Bank on Feb 25, warning it of strict action and asking it to refrain from such practices. “Upon review of unaudited financial statements (Dec 31, 2012) of the Burj Bank Ltd during the ongoing onsite inspection as on Dec 31, 2012, it transpired that the bank posted a gain on sale of securities of Rs416.417 million on a total of 31 sukuk transactions carried out during the year,” said the State Bank in a letter issued to the president of the bank. This is first time that an Islamic bank has been found involved in this kind of activity as against any conventional bank. As per findings, the bank entered into inter- bank money market, particularly intraday trades ie selling and buying back securities on the same day, approximately at the same time and at the same price, said the State Bank letter. The letter further stated that the deals were risk-free trades which cancelled each other out, and had no legitimate or commercial reason except to artificially increase the trading volume and show inflated profits. The transactions show that the bank violated rules and law for corporate and commercial banking, said the letter. The State Bank ordered the bank to clarify its poison as to why enforcement action should not be taken against it. The letter did not mention what kind of action can be taken by the State Bank. The SBP also asked the Burj Bank to reverse the overstated income and make necessary adjustments through real market value of sukuks which can be obtained from an independent source. The State Bank asked the bank to apprise the SBP names of the personnel involved (in hierarchical order) and role of the bank’s president for approval of such transactions. “Apprise us of the total amount of the commission paid and tax impact on these transactions,” said the SBP letter. The bank was warned to refrain from such type of practices in future, whereby income is artificially overstated. The bank was also advised to comply with the instructions given in the letter, and asked to submit all information within three days from the date of recipient of the letter. When asked, a senior banker said that this kind of practice to artificially increase profits is adopted to enable the top officials of banks to benefit from higher bonuses and other perks. Despite financial crisis, top bankers on Wall Street did not forget to draw millions of dollars as bonuses and perks. The situation in most of the country is not different from the Wall Street, but the case of Burj Bank is first in Islamic banking in Pakistan.
Posted on: Sun, 29 Sep 2013 06:51:12 +0000
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