Nouriel Roubini :"....A gradual and progressive liberalisation of the financial system will allow the operations of foreign financial institutions in any economy, including India.
It is a good idea. Of course, you have to do it to make sure that these institutions are well supervised and regulated. That they have enough of their own capital and liquidity . And they operate on a fair basis compared to domestic financial institutions.The problem seems to be that finance is global, but regulation is still national. Is there anyway nations can cooperate and coordinate sufficiently to ensure that regulation also becomes global?
That is necessary. The Basel 3 criteria will apply to a large range of financial institutions in a large number of countries . In some sense, even Basel 2 was a global agreement about regulation. The problem was not that it was not global enough, it was that the criteria of Basel 2 were not actually appropriate.
In practice, excess reliance on market disciplines, self regulation and internal risk management , pro-cyclical kind of capital standards. It is not just enough to have global rules, but the rules about regulation and supervision should be appropriate. ...."
via www.economictimes.indiatimes.com
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