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A greater regulatory oversight and additional safeguards against any crisis situation may be underway for the country’s large financial sector entities, which are considered to be ‘too big’ in size in terms of their exposure and market share in the entire system.
The additional regulatory and capital adequacy requirements for ‘too big to fail’ banking and other financial sector conglomerates of the country are being mulled over after such steps were being actively considered on international platforms like G-20 and Financial Stability Board (FSB).
In India, the issue is currently being discussed by the top two financial sector regulators RBI and SEBI, in consultation with the union finance ministry, said a senior regulatory official.
However, India will wait for any firm guidance from the international community and the implementation of the same for biggest financial institutions of the world later this year, he added.
The final guidelines would rely on a study of potential systemic risks posed by large banks and financial institutions of the country during crisis time, and an assessment of their potential to withstand any possible problems in the financial system, the official said.
The regulators are so far confident about the robustness of Indian financial institutions, especially after their experience with the recent global economic crisis, which could not dent the Indian financial system, he said. But they still want to go ahead with the assessment to avoid any sense of complacency, the official added.
A sub-committee of the Financial Stability Development Council in its meeting last week also discussed existing arrangements for financial corporations’ supervision, and global developments in terms of policies for systemically important financial institutions and their probable impact here.
The sub-committee is chaired by the RBI Governor Dr D Subbarao and comprises of deputy governors of RBI, capital market regulator SEBI Chairman Mr U K Sinha, insurance regulator IRDA Chief Mr J Hari Narayan, pension sector watchdog PFRDA Chairman Mr Yogesh Agrawal and top officials of Finance Ministry.
This sub-committee was formed to assist inter-regulatory body FSDC and has replaced the government’s High Level Coordination Committee on Financial Markets.
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