[sbinews] RISK
- From: sbistcbangalore@xxxxxxxx
- To: sbinews@xxxxxxxxxxxxx
- Date: Sat, 13 Dec 2003 07:55:36 +0500
RBI turns to internal risk analysis, control systems to up efficiency
TIMES NEWS NETWORK[ FRIDAY, DECEMBER 12, 2003 12:08:45 AM ]
MUMBAI: The Reserve Bank of India (RBI) is likely to rely less on detailed
prescriptive rules and focus on internal risk analysis, management and control
systems in order to maximise its overall effectiveness and efficiency of bank
regulation in the country.
Chairing the session `regulatory issues: unshackling the past’, Shyamala
Gopinath, executive director, Reserve Bank of India, said that the speed with
which portfolios can change through banks trading in derivatives, and the
increased complexity of banking business have created a fundamentally new
environment in which regulation and supervsion are undertaken. If regulation
has to be more effective, it must also constantly respond to changes in the
market environment in which regulated firms operate.
In some areas externally imposed regulation in the form of prescriptive and
detailed rules may become increasingly ineffective. Risk becomes too complex
and volatile an issue to be adequately covered by a simple set of prescriptive
rules, she said. Market discipline and market monitoring of financial firms
need to be strengthened within the overall regime, she said.
Speaking at the session, KBL Mathur, economic adviser (banking division), said
the state still had a role to play in a globalising environment. He pointed out
that according to a recent survey, the state had an active role in 16 out of
the 25 core regulatory principles involving various regulators, while it played
a supportive role in two of them. The financial sector alone cannot move
towards globalisation unless the whole economy moves in that direction and to
that extent the role of the state cannot be undermined.
While there has been deregulation in the business environment for banks, MBN
Rao, chairman and managing director, Indian Bank said that banks have not been
able to make their incremental businesses very profitable. In the context of
globalisation, he said the yield differential on overnight and ten-year paper
is 250 basis points in the US as compared to only 80 basis points in India .
And this calls for a realistic assessment of the interest rate scene.
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