KARACHI: The State Bank of Pakistan (SBP) on Friday introduced a Conduct Assessment Framework (CAF) for self-assessment by banks. The SBP has advised all Banks and Microfinance Banks (MFBs) to adopt the CAF from 1st January 2017 and undertake its assessment as of 31st December on an annual basis.

According to BC&CPD circular No 3 2016 issued on November 4, 2016, previously, all banks were advised to develop and implement their own Fair Treatment of Consumers (FTC) Framework, duly approved by their board of directors by July 1, 2015. While now, in order to promote concept of responsible banking, a CAF, after test run, is being formally introduced for self assessment by the banks. The purpose to quantify conduct is to develop a periodic, reliable, diagnostic and comparable mechanism which will help banks to deliver their commitment to Fair Treatment of Customers (FTC) in an optimum manner and manage their Conduct Risk.

With current directives all banks and MFBs will adopt the CAF from 1st January 2017 and will be required to undertake its assessment as of 31st December on an annual basis. The said annual assessment, duly approved by board of directors of banks, will be submitted to Director, Banking Conduct and Consumer Protection Department latest by 31st March every year as per the format described by the SBP, the circular said.

According to SBP, CAF is a self assessment conduct tool for the banks that will measure bank’s state of conduct. The purpose of quantify conduct is to develop a periodic, reliable, diagnostic and comparable mechanism which helps bank deliver their commitment to FTC in the most optimum way. This will not only indicate the grey areas but will also help banks set measurable and realistic FTC goals and maintain the track of their progress on the same. The quantification in CAF remains indicative only signalling safe, cautious and dangers state of conduct. The tool consist three modules including cultural, products/services and consumer grievances handling mechanism.

The SBP said that conduct risk is the risk of banks’ conduct having a detrimental impact on customer, its own growth or the market stability. It may also be termed as the non execution/ delivery of FTC by the banks. The SBP has re-branded consumer protection as a success proposition for banks rather than being a compliance issue and has ensured adoption of self conceived FTC frameworks by the banks based on the following principles.

Banks need to continue to monitor their adherence to FTC central themes/principles on an ongoing basis and demonstrate how culture, strategies and controls deliver fair treatment to their customers through FTC framework. However, the effectiveness of the self conceived FTC framework to avoid or manage conduct risk needs to be continuously checked without which implementing FTC is merely a statement of intentions, it added.

In order to deliver consumer protection, assessment criteria indicating the state of conduct needs to be adopted by the banks. The SBP expected that while implementing FTC banks must have adopted internal as well as external mandatory and specialised training modules explaining and embedding features of FTC in their staff members.

Secondly, research tools to evaluate the perceptions of customers and their own staff regarding bank’s delivery of FTC. The research methodologies described in CAF are only indicative. Banks may choose research methodology as deemed appropriate by them to extract such information. In addition, a relevant function/team as deemed appropriate by the bank management/BoDs is entrusted with the responsibility to oversee, own FTC as well as liaise with the SBP.


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