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3- Define and explain objectives, functions and management of central

depository company (CDC)?

Definition of CDC

CDC is to operate and maintain the Central Depository System (CDS), an electronic book-entry
system used to record and maintain securities and to register the transfer of securities.

The system changes the ownership of securities without any physical movement or endorsement
of certificates and execution of transfer instruments. CDS facilitates equity, debt and other
financial instruments in the Pakistani Capital Market. It manages Ordinary & Preference shares,
TFCs, WAPDA Bonds, Sukuk, Open-End & Closed-End funds and Modaraba Certificates.
Objectives of CDC
CDC was primarily established to operate the Central Depository System (CDS) for
equity, debt and other financial instruments that are traded in the Pakistani Capital
To provide secured and dependable services to the capital and financial market.

To operate as a central securities depository on behalf of the financial services industry so as

to contribute to the countries ability to support an effective capital market system

Function of CDC
Pakistan provides following main services to its clients in financial and capital market:
1. Investor Account Services.
This service allows investors to directly open and maintain accounts in Central Depository System
(CDS) for electronic settlement of securities. Before IAS to settle the securities through Central
Depository System, investors had to open client accounts (sub accounts) with the Participants (brokers
& financial institutions). Before IAS to settle the securities through Central Depository System,
investors had to open client accounts (sub accounts) with the Participants (brokers & financial

2. Trustee & Custodial Services.

Central Depository Company started Trustee & Custodial Services in 2002, initially with two open-
ended mutual funds having net asset value of Rs. 500 million.CDC currently provides T&C Services to
more than 77 mutual funds managed by various Asset Management Companies (AMCs) with an
aggregate fund size of approximately Rs. 200 billion. The prime responsibility of CDC as the
trustee/custodian is to take into its custody all the assets of the Collective Investment Scheme and hold
them in trust on behalf of the unit or certificate holders. They also carry out the instructions of the asset
management company/investment adviser in respect of the investment portfolio and the
units/certificates held by the investors,

3. Customer Support Help Desk.

4. Account Statement Verification.
5. Global Terminal Facility
6. CDC E-mail Facility.
7. Training

Management of CDC
Management of CDC consist of a chairman , chief executive officer along with 9
member board of directors
The chief executive officer is the head of a company and all the departments and
board of directors report to him.
Mr. Muhammad Hanif is the CEO of the company.

Q.No.4- Define and explain objectives, functions and management of national

clearing company (NCC)?


National Clearing Company of Pakistan Limited (NCCPL) was incorporated on July 03, 2001
to manage and operate the National Clearing & Settlement System (NCSS) in a fully automated
electronic settlement system. National Clearing Company of Pakistan Limited (NCCPL) is a
significant institution of Pakistan's Capital Market providing clearing and settelment services to
all three stock exchanges in the country.

Objectives of NCC
The main objective was to develop and establish NCSS to provide centralized clearing and
settlement services to the three Stock Exchanges namely Karachi, Lahore and Islamabad Stock
Exchanges Pakistan Stock Exchange (PSX).
After Integration of these stock exchanges into single stock exchange Pakistan Stock Exchange
(PSX) in January, 2016, NCCPL provides Clearing and Settlement Services for all
trades/transactions executed at PSX trading systems.
All three core systems namely Trading Systems, Clearing system (NCSS) and the Depository
system (CDS) are linked in such a manner that UIN is serving as the Primary Key.

Functions of NCC
NCCPL provides a centralized platform for the registration of investor's by with specific Unique
Identification Numbers (UIN) in NCSS so as to maintain centralized UIN Database of each and
every investors of capital market.
Risk Management Functions
Central Counter Party (CCP) Role
Establishment and Maintenance of Settlement Guarantee Fund (SGF)
Regulatory Reporting of Net Capital Balance (NCB) Certificates
Market-wise Trading Limits
Enhanced Requirements for Client Registration

Management of NCC

Mr. Muhammad Lukman

Chief Executive Officer

Mr. Imran Ahmed Khan

Chief Financial Officer & Company Secretary

Mr. Kashif Alam Khan

Chief Internal Auditor

Mr. Shafiq Ur Rehman

Chief Information Officer

Mr. Amir Mobin

Chief Compliance & Risk Officer

Mr. Muhammad Asif

Head of Operations

Mr. Rehan Saif

Head of PD & CSS
Q.NO.6- Write a detail note on monetary policy. Also explain the factors affecting
credit supply and monetary policy impact on system liquidity?

Monetary policy is the process by which the monetary authority of a country, like the central
bank or currency board, controls the supply of money, often targeting an inflation rate or interest
rate to ensure price stability and general trust in the currency.
Further goals of a monetary policy are usually to contribute to economic growth and stability, to
lower unemployment, and to maintain predictable exchange rates with other currencies.
Monetary economics provides insight into how to craft an optimal monetary policy. Since the
1970s, monetary policy has generally been formed separately from fiscal policy, which refers
to taxation, government spending, and associated borrowing.
Monetary policy is referred to as either being expansionary or contractionary. Expansionary
policy is when a monetary authority uses its tools to stimulate the economy. An expansionary
policy increases the total supply of money in the economy more rapidly than usual. It is
traditionally used to try to combat unemployment in a recession by lowering interest rates in the
hope that easy credit will entice businesses into expanding. Also, this increases the aggregate
demand (the overall demand for all goods and services in an economy), which boosts growth as
measured by gross domestic product (GDP). Expansionary monetary policy usually diminishes
the value of the currency, thereby decreasing the exchange rate.
The opposite of expansionary monetary policy is contractionary monetary policy, which slows the
rate of growth in the money supply or even shrinks it. This slows economic growth to
prevent inflation. Contractionary monetary policy can lead to increased unemployment and
depressed borrowing and spending by consumers and businesses, which can eventually result in
an economic recession; it should hence be well managed and conducted with care.

Credit supply

From a policy perspective it is important to gauge the relative contributions of credit supply and
credit demand forces to developments in loans to the private sector. Unfortunately, the impact of
these forces is difficult to isolate and estimate. However, some indications can be gleaned from
survey data and model-based estimates. For example, according to the results of the euro area
bank lending survey for the fourth quarter of 2011, both supply and demand developments may
continue to weigh adversely on lending. In particular, credit standards for both loans to
households and loans to enterprises are expected to have tightened further in the fi rst quarter of
2012, although to a lesser extent than in the fourth quarter of 2011, while demand is expected to
have fallen signifi cantly further.1 At the same time, following the three-year LTROs, loan supply
may be less dependent on the availability of market funding and more closely linked to the risk-
bearing capacity of banks and thus their capital positions. However, the supportive impact of the
easing of funding strains on lending conditions and loans to the private sector may take time to
unfold. This picture is backed by other survey data relating to NFCs. For example, according to
the European Commission survey on limits to production in the fi rst quarter of 2012, fi nancial
constraints remained broadly unchanged as a factor limiting production for euro area enterprises
operating in services or manufacturing, while a slight increase in the impact of this factor was
recorded for construction. However, overall, fi nancial constraints constitute only a minor factor
limiting production for all sectors, similarly to a shortage of labour, space, equipment and/or
material, with insuffi cient demand remaining by far the most important factor. Model-based
estimates suggest that credit supply factors played a relatively limited role in explaining the
growth of loans to both households and NFCs up to the fourth quarter of 2011. However, looking
ahead, the impact of recent credit supply shocks may be yet to materialise. For example,
according to a structural vector autoregressive (VAR) model which identifi es credit supply
shocks with sign restrictions, series for loan supply shocks show that in the fourth quarter of 2011
new adverse shocks appeared (see Chart A). According to the model, the impact of these shocks
would appear only gradually and become fully visible only from mid-2012. However, the impact
of such contractionary forces on the broader economy is likely to be mitigated by the non-
standard monetary policy measures taken in late 2011. The level of indebtedness of both
households and NFCs is also likely to affect loan demand, as well as the creditworthiness of
potential borrowers as assessed by banks. Levels of indebtedness as a ratio to nominal GDP are
very high by historical standards and while fi rms have managed to reduce this ratio, households
have only stabilised it (see Chart B). This is likely to be a further factor weighing on loans to
households, particularly in some countries, given the strong heterogeneity in the extent of
household indebtedness across euro area countries

Monetry policy

Monetary policy involves decisions taken by a government or central bank to attempt to influence
the economy by influencing the availability of money and the cost of credit. There is an ongoing
debate about the inherent effectiveness of monetary policy and its fundamental limitations. There
are also practical issues that affect the effectiveness of monetary policy such as interaction with
other currencies and the nature of the banking sector in the country concerned.
There are three main areas of monetary policy. The first is controlling the amount of money in
circulation, whether this involves literally printing money, or more technical measures such as
quantitative easing, which involves creating money in the form of credit. The second measure is
using interest rates to influence what people and businesses pay to borrow or receive for saving,
which can affect their spending and investment levels. The third measure is attempting to
influence the exchange rate between the national and foreign currencies, which can involve fixing
or restricting exchange rates, or buying and selling currency to influence the market rate.
Measures such as government spending and taxation fall into the separate category of fiscal

The basic question of how effective monetary policy is compared with fiscal policy is one of the
major debates in economics. Most economic views can crudely be divided into the pro-fiscal
control position advocated by economists such as John Maynard Keynes and the pro-monetary
controls position of economist such as Milton Friedman. As a very gross simplification,
monetarists believe monetary policy is inherently effective and its role is to allow markets to be
as free as possible. Keynesians believe that economic cycles can cause hitches in free markets,
meaning that fiscal policy is often needed to "kick-start" the economy. Such debates often have a
political element based on people's view of the role of government in society.

Another inherent limit on the effectiveness of monetary policy is that two of its main aims can be
contradictory. Monetarists often seek to keep both inflation and interests rates low and under
control. The problem is that low interest rates mean homeowners pay less for their mortgages and
have more spare cash, which can contribute to rising inflation.

There are also specific practical factors affecting the effectiveness of monetary policy. How
successfully governments or banks can control exchange rates depends on economic and political
arrangements. For example, the individual countries that all use the Euro have limited monetary
policy powers over its exchange rate. Meanwhile attempting to influence the exchange rate by
buying or selling currency can be dependent on the financial strength of the government or bank,
along with that of other countries and even large individual and corporate traders.

The effectiveness of interest rate controls is also variable. In most capitalist, free-market
economies, the government or central bank does not directly control the interest rates banks
charge to customers. Instead the government or central bank determines the rate commercial
banks pay to borrow overnight to deal with the variations in cashflow caused by deposit and loan
levels varying from day to day. In theory this rate makes up a major cost for commercial banks
and influences the rates they must charge on loans to maintain profits. In practice, the rates
charged to customers can depend largely on how competitive the banking market is.

Q.NO.8-Write a detailed note on different market based risk management


Business risk comes in a variety of tangible and intangible forms over the course of the
business life cycle. Some risks occur during the ordinary course of business operations, while
others are due to extraordinary circumstances that are not easily identified. Regardless of a
company's business model, industry or level of earnings, business risks must be identified as a
strategic aspect of business planning. Once risks are identified, companies take the appropriate
steps to manage them to protect their business assets. The most common types of risk
management implemented in business include avoidance, mitigation, transfer and acceptance.

Avoidance of Risk

The easiest way for a business to manage its identified risk is to avoid it altogether. In its most
common form, avoidance takes place when a business refuses to engage in activities known or
perceived to carry risk of any kind. For instance, a business could forgo purchasing a building for
a new retail location as the risk of the location not generating enough revenue to cover the cost of
the building is high. Similarly, a hospital or small medical practice may avoid performing certain
procedures known to carry a high degree of risk to the well-being of the patient. Although
avoiding risk is a simple method to manage potential threats to a business, the strategy also
results in lost revenue potential.

Risk Mitigation

Businesses can also choose to manage risk through mitigation or reduction. Mitigating business
risk is meant to lessen any negative consequence or impact of specific, known risks, and is most
often used when business risks are unavoidable. For example, an automaker mitigates the risk of
recalling a certain model by performing research and detailed analysis of the potential costs of
such a recall. If the capital required to pay buyers for losses incurred through a faulty vehicle is
less than the total cost of the recall, the automaker may choose to not issue a recall. Similarly,
software companies mitigate the risk of a new program not functioning correctly by releasing the
product in stages. The risk of capital waste can be reduced through this type of strategy, but a
degree of risk remains.

Transfer of Risk

In some instances, businesses choose to transfer risk away from the organization. Risk transfer
typically takes place by paying a premium to an insurance company in exchange for protection
against substantial financial loss. For example, property insurance can be used to protect a
company from the financial losses incurred when damage to a building or other facility takes
place. Similarly, professionals in the financial services industry can purchase errors and
omissions insurance to protect them from lawsuits brought by customers or clients claiming they
received poor or erroneous advice.

Risk Acceptance

Risk management can also be implemented through the acceptance of risk. Companies retain a
certain level of risk brought on by specific projects or expansion if the anticipated profit
generated from the business activity is far greater than its potential risk. For
example, pharmaceutical companies often utilize risk retention or acceptance when developing
a new drug. The cost of research and development does not outweigh the potential for revenue
generated from the sale of the new drug, so the risk is deemed acceptable.

Q.NO.9 Q.NO.9- Define and explain different lending types?

A lender is an individual, a public group, a private group or a financial institution that makes
funds available to another with the expectation that the funds will be repaid, in addition to any
interest and/or fees, either in increments (as in a monthly mortgage payment) or as a lump sum.
Lenders may provide funds for a variety of reasons, such as a mortgage, automobile loan or small
business loan. The terms of the loan specify how the loan is to be satisfied, over what period and
the consequences of default.
One of the largest loans consumers take out is a mortgage. Below are examples of lenders for
such loans.

Types of lending
Loan types vary because each loan has a specific intended use. They can vary by length of time,
by how interest rates are calculated, by when payments are due and by a number of other

Student Loans

Student loans are offered to college students and their families to help cover the cost of higher
education. There are two main types: federal student loans and private student loans. Federally
funded loans are better, as they typically come with lower interest rates and more borrower-
friendly repayment terms.


Mortgages are loans distributed by banks to allow consumers to buy homes they cant pay for
upfront. A mortgage is tied to your home, meaning you risk foreclosure if you fall behind on
payments. Mortgages have among the lowest interest rates of all loans.

Auto Loans

Like mortgages, auto loans are tied to your property. They can help you afford a vehicle, but you
risk losing the car if you miss payments. This type of loan may be distributed by a bank or by the
car dealership directly but you should understand that while loans from the dealership may be
more convenient, they often carry higher interest rates and ultimately cost more overall.

Personal Loans

Personal loans can be used for any personal expenses and dont have a designated purpose. This
makes them an attractive option for people with outstanding debts, such as credit card debt, who
want to reduce their interest rates by transferring balances. Like other loans, personal loan terms
depend on your credit history.

Loans for Veterans

The Department of Veterans Affairs (VA) has lending programs available to veterans and their
families. With a VA-backed home loan, money does not come directly from the administration.
Instead, the VA acts as a co-signer and effectively vouches for you, helping you earn higher loan
amounts with lower interest rates.

Small Business Loans

Small business loans are granted to entrepreneurs and aspiring entrepreneurs to help them start or
expand a business. The best source of small business loans is the U.S. Small Business
Administration (SBA), which offers a variety of options depending on each businesss needs.

Payday Loans

Payday loans are short-term, high-interest loans designed to bridge the gap from one paycheck to
the next, used predominantly by repeat borrowers living paycheck to paycheck. The government
strongly discourages consumers from taking out payday loans because of their high costs and
interest rates.

Borrowing from Retirement & Life Insurance

Those with retirement funds or life insurance plans may be eligible to borrow from their
accounts. This option has the benefit that you are borrowing from yourself, making repayment
much easier and less stressful. However, in some cases, failing to repay such a loan can result in
severe tax consequences.

Consolidated Loans

A consolidated loan is meant to simplify your finances. Simply put, a consolidate loan pays off all
or several of your outstanding debts, particularly credit card debt. It means fewer monthly
payments and lower interest rates. Consolidated loans are typically in the form of second
mortgages or personal loans.

Borrowing from Friends and Family

Borrowing money from friends and relatives is an informal type of loan. This isnt always a good
option, as it may strain a relationship. To protect both parties, its a good idea to sign a basic
promissory note.

Cash Advances
A cash advance is a short-term loan against your credit card. Instead of using the credit card to
make a purchase or pay for a service, you bring it to a bank or ATM and receive cash to be used
for whatever purpose you need. Cash advances also are available by writing a check to payday

Home Equity Loans

If you have equity in your home the house is worth more than you owe on it you can use that
equity to help pay for big projects. Home equity loans are good for renovating the house,
consolidating credit card debt, paying off student loans and many other worthwhile projects.

Home equity loans and home equity lines of credit (HELOCs) use the borrowers home as a
source of collateral so interest rates are considerably lower than credit cards. The major difference
between the two is that a home equity loan has a fixed interest rate and regular monthly payments
are expected, while a HELOC has variable rates and offers a flexible payment schedule. Home
equity loans and HELOCs are used for things like home renovations, credit card debt
consolidation, major medical bills, education expenses and retirement income supplements. They
must be repaid in full if the home is sold.