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ISLAMABAD: The Competition Commission of Pakistan (CCP) Chairperson Rahat Kaunain Hassan has approached the Senate Standing Committee on Finance to direct the State Bank of Pakistan (SBP) to assist the CCP by providing data during an ongoing inquiry into treasury bills.

The CCP is suspecting cartelisation by primary dealers (PDs) including banks in the auctions of Market Treasury Bills (T-bills) carried out by the government of Pakistan.

In this connection, the CCP chairperson has formally requested Saleem Mandviwalla, chairman Senate Standing Committee on Finance to intervene and direct the SBP to assist the CCP for timely completion of the said inquiry. After repeated requests, the CCP is unable to get the requisite information from the SBP and requested the parliamentary panel to facilitate the CCP in the completion of the inquiry.

Auction for MTBs: Rs1.57trn raised against Rs1.8trn target

Last year, the CCP has initiated an inquiry into the suspected cartelisation by primary dealers (PDs) including banks in the auctions of Market Treasury Bills (T-bills) carried out by the government of Pakistan.

The CCP chairperson has informed the committee that the commission is doing a very critical inquiry on treasury bills. We have written 4-5 letters to the State Bank of Pakistan seeking data on the issue.

The CCP has repeatedly requested the SBP to assist in the inquiry and also provide the necessary information on the matter. The CCP want to take up the issue with the committee. Senate Standing committee on Finance should direct the SBP to cooperate with the CCP in the ongoing inquiry of treasury bills, she added.

The chairman of the committee, Mandviwalla, asked the CCP chairperson to give us details in writing and we will direct the SBP in this regard,

Last year, a preliminary probe was undertaken due to various concerns raised with respect to the significant rise in the yields for all tenures (three, six, and 12 months) of T-bills issued by the government in auctions. The scheduled banks, DFIs, investment banks, and listed brokerage houses are eligible to become PDs of government securities.

The State Bank of Pakistan (SBP) in its Monetary Policy Statement issued on December 14, 2021, also termed the rise in yields unwarranted. Concerns were also expressed that since the government could no longer borrow directly from the SBP, thus, it was reliant on commercial banks for meeting its funding requirements, which placed the commercial banks in a position to dictate terms.

A preliminary analysis shows that since MTBs are risk-free, their yields generally remain 25 to 50 basis points above the policy rate. However, from September to December 2021, the average difference between the policy rate and cut-off yield for 3-month MTBs rose to 114 basis points. The highest cut-off yields were witnessed in the auction on 15th December 2021.

The commission after reviewing the bidding data in its meeting formed an opinion that the common trend in the bidding pattern needs to be further probed as it raises suspicion of collusive bidding by PDs. From the initial examination of the bidding data, it was observed that there were instances where PDs have submitted similar/identical bids, and common bidding patterns were also followed by some of the PDs. Moreover, there was an indication of rotation among the PDs and the increase in rates quoted was also simultaneous.

It was also noted that in most of the bids, the major chunk of the bid was won by or awarded to, one single bidder.

The said factors required further scrutiny for any possible collusive bidding on part of the primary dealers and/or also required to enquire into the factors, if any, that may have contributed to the quoting/charging of higher rates than before. The above circumstances warranted the initiation of enquiry under Section 37(1) of the Act.

The commission has also required the SBP to appoint a focal person and to assist the enquiry officers and to help understand the processes in place to ensure free market operation in the bidding process. Bid rigging or any form of coordination during the bidding process by the parties is prohibited under Section 4(2)(e) of the Competition Act, 2010.

Copyright Business Recorder, 2023


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