HBFCL condemns defamatory campaign by vested interests

Karachi, April 24, 2012: The House Building Finance Company Limited (HBFCL) strongly condemns the concerted campaign being carried out by unscrupulous vested interests, to defame the country’s leading housing finance institution and its management through the media. Recent news reports appearing in various newspapers and an online portal bear highly defamatory and malicious allegations that distort facts and aim at spreading mistrust and confusion.

It is surprising that an organization like Transparency International Pakistan (TIP) which projects itself as the protector of public interest, has also become a party to the nefarious campaign by releasing statements to the media, without even exercising basic transparency itself by first seeking HBFCL’s viewpoint on these issues.

While HBFCL reserves the right to take legal action against all those who are publicly maligning its good reputation, it wishes to set the record straight for the information of the public by stating the facts as these are.

Regarding the appointment of the Managing Director, HBFCL has clarified that the appointment of the MD/CEO of HBFCL is governed by Article 72 of Association of HBFCL which states that “There shall be a Chief Executive of the Company who shall be appointed by the Board with the prior approval of the Federal Government. The Chief Executive shall be appointed from amongst persons having knowledge and experience in banking, preferably in the field of finance and economics in accordance with the Fit and Proper criteria as laid down by the State Bank of Pakistan from time to time.”

From the above it can be seen that the requirements spelt out in the relevant Article of Association do not list Pakistani citizenship as an eligibility criterion. Further, the ‘Fit and Proper’ criteria mentioned in the said Article and as laid down by the State Bank of Pakistan, requires that fitness & propriety of a candidate for the office of the Chief Executive Officer of a Bank or a Development Financial Institution, be assessed on the following broad elements: a) Integrity, Honesty & Reputation; b) Track Record; c) Solvency & Integrity; d) Qualification & Experience; e) Conflict of Interest.

Thus neither the Incorporation Documents of HBFCL nor the governing law and regulations impose any condition to the effect that the Chief Executive Officer of the Company must be a Pakistani national. In spite of this, it is to be noted that before his appointment, the HBFCL Managing Director has clearly and in writing declared his nationality and in Annexure 1 of SBP’s Fit & Proper Test proforma, and the authorities were fully aware of his status before his appointment.

Regarding the continuance of the MD in office after the expiration of his contract in January 2012, HBFCL has referred to Section 199 (3) of the Companies Ordinance which clearly states that “The chief executive retiring under section 198 or this section shall continue to perform his functions until his successor is appointed unless non-appointment of his successor is due to any fault on his part or his office is expressly terminated.”

HBFCL has further clarified that since January 2012 letters have been written to the Ministry of Finance seeking its direction on the extension of the MD’s tenure or the appointment of a new MD and till date the decision of the Ministry is awaited.    

HBFCL also condemns the allegation by Transparency International that the appointment of HBFCL Group Head, Legal, Strategy & Marketing and of legal advisor Awan Raza were not proper. It has clarified that in the case of the Group Head, the position was not only advertized but PPRA was strictly followed. Further the Group Head recruited was previously serving in the Competition Commission of Pakistan and was not a partner in M/S Awan

& Raza as TIP has wrongly stated. In the case of Awan Raza, it is to be noted that they are just one of several law firms which are on the legal advisors panel of HBFCL, which includes amongst others, Hafiz Rehman,  Mohsin Tayebaly, Haidermota, Faisal Ghani, Nafis Siddiqui and other relevant legal specialists and firms as needed..

Regarding TIP’s false allegations that the HBFCL MD granted himself millions of rupees as bonus (a grossly exaggerated amount), HBFCL has stated that TIP has not only stated something that is factually incorrect but has also demonstrated its non-transparency and lack of knowledge about the rules governing such matters. The HBFCL MD is not authorized to grant himself bonuses and all bonuses have to be approved by the board of directors, which includes a nominee director of the Ministry of Finance. The bonus given is thus based on performance and duly approved by concerned authorities.

The malicious statements issued to the media by unscrupulous vested interests, including TIP, have also tried to paint a wrong picture of HBFCL’s efficiency by stating that loan disbursements have greatly reduced during the tenure of the present managing director. It is a matter of record that prior to the present management of HBFCL taking control of affairs, the organization was widely regarded as a corrupt, inefficient, loss-making and over-staffed institution that had been chalking up substantial losses every year and had become a white elephant for the government. The present management under the leadership of the current Managing Director and backed by the present government, has introduced strong financial discipline that has done away with the past practice of disbursing loans on questionable and uncreditworthy grounds, knowing that these will not be paid. The clear proof of this is the significant reduction in Non-performing Loans granted between 2009 and 2011 compared to previous years.  

Further, the success of the management in turning around the organization is clearly evident from the fact that in financial year 2007 and 2008 HBFCL reported a loss of Rs. 959 million and Rs. 414 million respectively, whereas in 2009 and under the new management, the loss was reduced to Rs. 109 million, followed by a profit of Rs. 113 million in financial year 2010 for the first time in several years. Now for financial year 2011 a profit of over Rs 100 million is expected to be declared.