KARACHI - The State Bank of Pakistan is planning to introduce 'Consumer Protection Bill' soon with an objective to improve banks' services towards consumers as well as to guarantee their protection in an increasingly market-oriented financial system. The laws, regulations and codes of the said bill will be framed in line with international best practices, which would among others provide guidance on issues of transparency, confidentiality, availability of statements, account servicing, protection against fraud, unfair contracts and lending practices, methods of debt collection, arbitrary penalties, etc. For this purpose, an appropriate dispute settlement mechanism will be established by SBP under its Consumer Protection Department which had already established last year. The CPD is expected to monitor compliance with such new laws and regulations. According to the sources in the Ministry of Finance, SBP will be making consumer protection infrastructure to supplement and reinforce these laws. The SBP on its part is focusing on effective compliance with customer service regulations and following it up with proper enforcement to motivate banks to render good service and deal fairly with customers, sources said. In the coming years, the financial sector will increasingly be deregulated so as to increase competition. The challenge is to ensure that this deregulation does not disrupt the level or reliability of service to consumers. The government's strategy in this area includes policy recommendations to secure consumer rights in an ever-growing highly liberal financial system. Meanwhile, according to a document titled Poverty Reduction Strategy Papers II prepared by Ministry of Finance, the government is very much inclined to strengthen the supervisory regime of the SBP. The main focus of the strategy is the further refinement of regulations and the supervision framework. The govt wants to encourage Pakistan Banks' Association (PBA) to adopt a Banking Code to commit banks to fairness, disclosure and ethical standards. In a specific chapter of PRSP-II themed "Capital and Finance for Development", SBP is set to transform and strengthen the role and functioning of banking ombudsman, which will remain an independent body from the regulators, to be better aligned with the above developments and a long-term campaign to enhance financial literacy will be launched in rural and urban areas both by commercial banks and the SBP with the support of the IBP, NIBAF and PBA. The key features of this strategy designed for the banking sector, include: Depositor Protection Scheme: Since private banks, which form the bulk of the financial system are outside the Banks' (Nationalisation) Act, 1974, the SBP is developing a blue print for a limited deposit protection schemes (DPS) to protect small depositors. Strengthening risk management: Pakistan has instituted an all-embracing framework viz. the Institutional Risk Assessment Framework (IRAF) to further strengthen the supervisory mechanism and for mitigation of the variety of risks. Consolidation of supervision: The significant challenges posed by universal banking, large financial groups and holding company structures now warrant a matching legal framework to avoid any major disruptions in the economy and in the process of financial intermediation. Recognizing these challenges, SBP has sought in principle approval from the requisite forums for amendments in the Banking Companies Ordinance (BCO) to enable it to supervise banks, groups and financial holding companies in line with international trends. Basel II implementation: The SBP has initiated the implementation of the new Basel II minimum capital adequacy requirements. Banks have made major advances in implementation of the new framework though many face challenges in areas like integrated risk management policy, collateral management and the limited availability of credit ratings for counterparts. Electronic credit information bureau: The SBP will further develop operational software for borrower analysis and credit scoring which will help in credit analysis of banks under eCIB. Corporate rating agencies: The incentive framework for the services provided by private rating agencies needs to be analysed with a view towards identifying measures and incentives that will result in more company ratings which would also help facilitate listings of private debt securities. Land and Property registries: The SBP is exploring ways to facilitate pilot studies and efforts to develop off the shelf systems and make it affordable for local and provincial governments to introduce new registries and systems over the medium term. The judicial system: The specialized courts will be established to deal with financial matters.