Needed, more debate
Posted on August 11, 2010 | View 266 | Comment : 6
On the regulatory structure of finance.
Dissent and discussion on the finance ministry’s discussion paper on a new Financial Stability and Development Council have been coming out in dribs and drabs. We need more wholesome debate. The discussion paper has been made available, so far, to the financial sector regulators, but not to the public at large. This is rather strange.
The recent global financial crisis was helped along, if not created, by failure to regulate finance properly. This testifies to the stake every citizen has in sound financial regulation. So, it is absurd for the finance ministry to behave as if regulation of finance is something that primarily concerns the incumbent regulators.
In fact, entrenched regulators are likely to resist any change and giving undue weight to their views could prove inimical to the goal of designing an optimal regulatory structure.
The discussion paper should be released for public debate, the ministry should get some premier university departments and think tanks to organise seminars on the subject, closely follow the global discourse on the subject, evolving at a healthy clip, thanks to the keen desire to avoid or at least delay another crisis, and draw upon the ideas that come up to finally formulate its views for submission to Parliament for its approval. What the crisis has made clear is pretty simple.
The stability of the financial system as a whole is not a concern that can be addressed by those who regulate individual segments of the financial sector. How the linkage between macroprudential regulation and microprudential regulation is to be institutionalised in a coherent fashion is far from clear.
It is unlikely that there is a single model that will suit all countries. Depending on the degree of development of individual market segments, institutionalised information flows and completeness of transmission mechanisms, not to speak of behavioural codes of ethics and maturity, the appropriate regulatory structure would vary from country to country and evolve over time.
The finance ministry should waste no time and set the ball rolling on a wider consultation on the regulatory structure that would suit India.
Comment
Comments (6)
- The proposal to constitute a Financial stability and Development Council is to be viewed in the context of the global financial crisis which had its roots in global imbalances, U.S sub prime mortgage crisis, excessive and indiscriminate use of securitization of loans and complex derivative products, excessive leveraging and so on. It is not as if the U.S regulatory authorities were totally unaware of the underlying risks in the derivative products. It still needed a crisis of such a magnitude for shaking up the U.S.Government and the regulatory authorities to address the problem with the seriousness with which it is now being done. It has been the global experience that most of the serious financial crises of the past had been due to inaction or inadequate timely action or inability to ...See More
Posted by Parthasarathi Kumar | 21 Aug, 2010
- Leader – definition of leader among intellectuals perhaps different from the picture common man has in his mind and that is“ representative of group of people “ ( Neta)
To me Leader is always a team leader or an officer in command who is sharp enough to anticipate consequences, and capable of delegating work to his team members, has the power of making decisions independently, his strategy is like a convex lens that he holds in his hand firmly and make the team members look at the focal point ( goal )through it .Now if any member/s complain about not been able to see the object clearly he shift them from their existing position to comfortable position, but he does not over rule the possibility of lens getting dirtier which he knows he can clean it with a soft tissue and ...See More
Posted by ashok sehgal , president at GMECG | 14 Aug, 2010
- Yes people should be involved at various forums to gather a wider view . Afterall all regulatory systems aim to benefit and protect the small investor (read common man ) . That the country is still languishing in poverty and there is vast disparity in wealth among segments of society shows that there are gaping loopholes in the exzisting set-ups and a more democratic participation is reqd.
Posted by kanti shah | 12 Aug, 2010
- It is quite absurd. For one, Indian financial sector is fairly well regulated and that's the main reason why we did not land into serious trouble in the last year's global financial crisis. Secondly the proposed reforms in the financial sector will be circulated to the stakeholders first. Immediate stakeholders are the banks, other financial institutions, industry, trade and service sector associations, professional bodies like ICA, ICWA and ACS, and the govt. No doubt the people are the ultimate stakeholders here, but we cannot afford, nor will it be feasible, to have a public debate on the subject and every view taken on board. The media and professionls are supposed to play that part here. I observe that the govt and RBI have provided a reasonable time frame and forum to the public to ...See More
Posted by Ramani S V,Freelance consultant at freelance consultant|11 Aug, 2010
- yes rightly said by renewed Economists is Financial strength of any country depends on Financial stability of a common person who's per capita income is in good health ie,. he should carry more purchasing power for capital goods to keep indian economy in rotation. producing more revenue to government there by infrastructure can be developed and can be in reach of public, as we observe right from 1955, budget allocations were more on Agriculture than any other projects, and in present scenario it is changing, govt concentrating on software and infrastructure facilities, as it is invited we need a uniform indirect taxation throught india and that government is working on those lines. and government is trying to reduce its burden on cash deposit ratios in the way of interest payouts on NSS ...See More
Posted by srinivas kompella | 11 Aug, 2010
- Liberalism in Financial regulation has always thrown the economy in to big turmoil once in 20 -30 years so much so that it takes another 10 years to restore status quo.
New ideas are required to make the markets more vibrant but always under some kind of a check.
So called great Institutions like Citi, Lehmann (when it existed) brought innovation and also a lot more misery.
Access to credit to deserving people , in a straightforward way is better than innovations
Posted by srikanthan santhanam | 11 Aug, 2010
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