Banking Law and Financial Regulation in Pakistan
The Role of Lender of Last Resort

This book offers an analysis of the contemporary significance of the practice of Lender of Last Resort (LOLR) in Pakistan. Aiming to identify deficiencies in current financial system legislation, the book details the role of LOLR and its essential presence in establishing a resilient banking and financial system.

Beginning with an assessment of the emergence of Central Banks as domestic financial regulators, the book draws from the principles of Walter Bagehot and Henry Thornton for LOLR rescue operations. Examining the International Monetary Fund?s (IMF) role as an international lender of last resort and scrutinising its rescue efforts, the book uses case studies of the Central Banks in the United Kingdom and the United States to suggest reforms for Pakistan?s system. It explores the causes of financial crises and evaluates the factors that have made LOLR an integral part of Central Banks? responsibilities. It compares LOLR operations in the cases of AIG and Lehman Brothers in the United States and Northern Rock in the United Kingdom, comparing these two cases in Pakistan to pinpoint key gaps in the State Bank of Pakistan?s LOLR operations. Furthermore, it discusses the Basel Accord I, II, and III: the key international regulations for the banking sector.

The book will be of interest to scholars and students in the field of financial and banking law.

Preface vii

Acknowledgements viii

1 Introduction 1

2 Conceptual Underpinning of the Lender of Last Resort 8

3 Banking Regime of Pakistan, Basel Accord and LOLR 18

4 Case Study of Pakistan 49

5 Appraisal of the Financial Systems of the UK, USA and Pakistan 57

6 Regulatory Reform Proposals and Conclusion 98

Index 111

Muhammad Hassan Idrees is a dynamic legal attorney with an enthusiasm for learning contemporary legal issues. He has a profound interest in international banking and financial laws, alternative dispute resolution, civil and criminal litigation, corporate and taxation laws. He has completed a B.A.LL.B (Hons) from the University of the Punjab, Lahore, Pakistan; LL.M in International Business and Corporate Law with Distinction from the University of Bedfordshire, UK; and a PhD in Law, from Canterbury Christ Church University, UK. Hassan Idrees is also a member of the Honourable Society of Lincoln’s Inn. Currently, he is working as a legal consultant for the Federal Board of Revenue, Pakistan, and a barrister/advocate in the High Courts of Pakistan.