March 31, 2010, higher RW and / or provisioning requirement for exposure to sectors with high credit growth. Institutions should also share data and information with other regulators and supervisors both nationally and internationally to better assess risks emanating from various sources and regions. Regulators need to improve their understanding of systemic risk, strengthen their ability to detect it and devise tools to mitigate it. Striking the right balance between financial supervision and overregulation is a challenge for Indian financial market regulators. STRATEGIC OPTIONS AND CHOICES The future global economic landscape, which is likely to be characterized by disconcerting defaults, financial repression measures and inflation, seems shrouded in extreme fear and uncertainty. The world economy is likely to experience an extended period of contraction and deleveraging. While leverage can be a catalyst for growth, “overleverage” can have dangerous consequences as clearly driven home by the global financial meltdown. In this overarching context,
strengthening of the financial system requires the design and implementation of coordinated and concerted preventive measures and refocused strategies with a sense of urgency to address the weaknesses. The traditional face of banks as mere financial intermediaries has altered and risk management has emerged as their defining attribute. Accordingly, risks need to be mitigated by improving risk management techniques, adequate capital provision, sound supervisory and regulatory practices, transparency and macroeconomic stability. These changes could be helpful in bringing about this structural transformation – a transformation that is visible, measurable and quantifiable. This assumes importance because while we cannot change the direction of the wind, we can certainly adjust our sails to facilitate move to our destination - the destination being a high growth economy with a broad-based and sustained pattern of economic development. Thank you. (Paper was presented at the GL-UB Finance Conference, 27th August, 2012)
February 2013
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