This document provides an overview of financial services and institutions in Pakistan. It discusses various types of financial intermediaries and the structure of Pakistan's banking sector. It also summarizes various banking services including universal banking, correspondent banking, retail banking, private banking, loan syndication, bridging loans, credit cards, and consumer credit. Additionally, it covers credit rating agencies and the credit rating process, money laundering, merchant banking, underwriting, stock brokers, development financial institutions, venture capital, private equity, and other financial concepts.

1. Financial
Services &
Institutions
Presented By: Salwa Imam Bukhsh
Class: MBA/4th Semester
Teacher: Sir Umair Baig

2. Financial Intermediaries:
Lender Financial Market Borrower
It is a sort of indirect financing in which savers
deposit funds with financial institutions who
lends them to the ultimate borrowers.

3. Ministry Of Finance
State Bank Of
Pakistan(SBP)
Scheduled Banks
Commercial Banks
Public
sector
Banks
Private
Sector
Banks
Foreign
Banks
Specialized
scheduled
Banks
Structure of Banking Sector In Pakistan

4. BANKING SERVICES:
1- UNIVERSAL BANKING:
2-CORRESPONDENT
BANKING:
Universal banking is a banking
system in which banks provide a
wide variety of financial services,
including commercial, investment
services & other financial services
such as insurance.
Universal banking is common in
some European countries & US.
It is a financial institution that
provide services on behalf of
another.
It works through an agreement
between a foreign & domestic bank
where a correspondent account is
established at one bank for the other
bank.
Bank alhabib limited has
correspondent banks in Canada
Bahrain,France,China ,Kuwait, Oman

5. BANKING SERVICES(CONT.)
3- Retail Banking 4-PRIVATE BANKING:
A retail banking provide banking
services for individuals, this
includes deposit taking, home
finance, consumer finance &credit
cards services.
MCB
HBL
UBL
Private banking refers to the
personalized services provided to
elite customers, it focus more on
high net worth individuals
UBS
Merrill Lynch
Morgan Stanley
Credit Suisse
ed Bank

6. BANKING SERVICES(CONT.)
4- LOAN SYNDICATION:
Loan syndication most often
occurs in situations where a
borrower requires a large
sum of capital that may be
too much for a single lender
to provide.
Thus, multiple lenders work
together to provide the
borrower with the capital
needed.
• In consortium lending, several banks(Or
Financial Institutions) finance a single
borrower.
• The bank which takes a higher risk(by giving a
higher amount of loan) will act as a leader & as
an intermediary between consortium &the
borrower.
• There is a common documentation, joint
supervision& follow up exercises between all
banks/financial institutions.
• Minimum two lenders.
4- CONSORTIUM FINANCING:

7. BANKING SERVICES(CONT.)
5-:BRIDGING LOANS:
• Short term loans used to provide quick financing to an
individual or a company until permanent financing is
arranged.
• Bridge loan bridges the gap between time period of
financing since an individual/company needs cash
immediately.
• In case of individuals bridge loans are more popular in real
state.

8. BANKING SERVICES(CONT.)
6-CREDIT CARDS: 7-CONSUMER CREDIT:
A card issued by a
bank/financial company
giving the holder an option to
borrow funds, usually at
point of sale.
Credit card charges interest
and are primarily used for
short term financing.
Short-term loans made to
enable people to purchase
goods or services primarily
for personal, family, or
household purposes.
Hire purchase
Conditional sale

9. CREDIT RATING:
It indicates the credit worthiness of the borrower.
The companies raising funds from the capital
market in the form of long term debts, bonds, fixed
deposits& commercial papers will obtain credit
rating which indicate the quality of debt
instrument and the risk involved.
Credit Rating Agencies In Pakistan:
Pakistan Credit Rating Agency Limited (PACRA)
JCR-VIS Credit Rating Company Limited (JCR-VIS)
International
credit Rating
Agencies:
S&p
Moody’s
Fitch

10. TYPES OF CREDIT RATING:
• BOND RATING
• EQUITY RATING
• COMMERCIAL PAPER RATING
• RATING THE BORROWER
• SOVEREIGN RATING
Credit Rating Scores:
• AAA:(highest degree
safety)
• AA: (high degree of
safety)
• A: (Adequate degree
safety)
• BBB:(moderate credit risk)
• BB:(moderate risk of default)
• B: (high risk of default)

11. BENEFITS OF CRIDET RATING:
• Investors can get superior information at low cost
• Investors can calculate the risk involved in their investment
• Companies with good rating can raise capital at comparatively low rates
• Can be used as marketing tools
• The existence of credit rating companies depends upon their performance
• FAIE RATINGS WILL MOTIVATE THE PUBLIC TO INVEST THEIR SAVING IN
COMPANIES SHARES & DEBENTURES THUS, THE IDLE SAVINGS OF THE
PUBLIC ARE CIRCULATED FOR PRODUCTIVE USE

12. CREDIT RATING PROCESS:
Rating
request
(mandate)
from entity
received by
PACRA
Preliminary
evaluation
(public
information
+financial
accounts)
Questionnair
e sent to
entity to seek
critical
information
Team
collates
information
with the
entity & form
initial view
Site/Plant
Visit ( to
understand
and assess
related
risks)
Notification&
public
discrimination
of rating
opinion
Pre
publication
review
Rating
committee
review & vote
Management
meeting with
senior
management
Detailed
Draft rating
report is
sent for
completenes
s and factual
accuracy

13. CAMEL MODEL OF CREDIT RATING
CAMEL
Capital
Adequacy
Asset
quality
Management
Earnings/
profitability
liquidity

14. Money laundering
The conversion or transfer of property knowing that such
property is derived from any(drug trafficking )offense or an
act of participating in such offense for the purpose of
concealing of disguising the illicit origin of the property or
of assisting any person who is involved in the commission of
such an offense to evade the legal consequences of his
action.
Steps In Money Laundering:
1. Placement
2. Layering
3. Integration

15. MERCHANT BANKING:
• A merchant bank’s function is the provision of long
term loan and loan finance for industrial and other
companies.
• The merchant bank acts as an intermediary.
• Must be registered in SECP
• Merchant banking is the combination of banking and
consultancy services, it provides consultancy to its
clients for financial marketing, managerial and legal
matters.

16. Underwriting:
It is the type of contract whereby responsibility is taken or guarantee is
given to take-up shares not subscribed for by the investing public.
• The consideration to the underwriting contract is the underwriting
commission payable to them for the risk assured.
• To act as underwriter certificates of registration shall be obtained from
SECP
Bankers to the issue carry activities as acceptance of application with
cheques/drafts/cash from investors, acceptance of allotment, refund of
application monies

17. STOCK BROKERS:
A stock broker is a member of recognized stock exchange who involve in
buying, selling or dealing in securities on behalf of clients
Market maker:
Market makers intermediate between the end user and the
financial system but unlike general intermediaries, they do not act
as agent for the end user. Instead they act as principals, buying and
selling securities for their own account
Primary dealer:
Primary dealers act as an underwriter in the primary market and as
a market maker in the secondary market for the government
instruments

18. DEVELOPMENT FINANCIAL INSTITUTIONS:
A Financial Development Institution (DFI) cater the
need of business sector by term lending with different
schemes of finances and contributing to the growth of
national economy through industrial development.
• House building finance company limited
• Pak Brunei investment company limited
• Pak china investment company limited
• Pakistan Kuwait investment company limited
• Pak Oman investment company limited

19. VENTURE CAPITAL:
• The venture capital is a long term commitment of
investment in business which displays potential for
significant and financial returns.
• The venture capital is not done based on past records but
on the credibility of the project’s success.
investor
Start up
company
funds
Belief of potential
growth
Submit plans to investor
Well managed plan
Developed business plan
Familiar plan

20. PRIVATE EQUITY:
Private equity firms buy stakes in private companies with
hope of making a profit by later selling those stakes for more
than was initially invested.

21. Non recourse loan:
A non recourse loan is a type of loan secured by collateral
which is usually property. If the borrower defaults, the issuer
can seize the collateral but can not seek out the borrower for
any other compensation .
Even if the borrower does not cover the full value of
defaulted amount

22. Off balance sheet financing
It is a form of financing involves huge capital expenditure kept out of
the company’s balance sheet to keep the debt to equity ratio low.
Examples:
• Operating lease
• Factoring with recourse
• Joint venture
• Unconsolidated subsidiaries

23. Special Purpose Vehicle:
• A special purpose vehicle is a legal entity created to fulfil
narrow, specific or temporary objectives .
• SPV are typically used by companies to isolate the firm
from financial risk