Archive for March 16th, 2018

Creating a world-class financial sector workforce with a strong Singapore core

March 16, 2018

Ms Indranee Rajah, Senior Minister of State for Law and Finance in Singapore in this speech says need to invest in workforce to maintain Singapore financial centre. They have prepared a tripartite plan to address the challenges:

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Myths and truths of cryptocurrency: Philippines edition

March 16, 2018

Another central bank joins in the cryptocurrency debate. This one is  Mr Nestor A Espenilla, Jr, Governor of Central Bank of Philippines (Bangko Sentral ng Pilipinas).

In his speech he points to the truths and myths around the matter from the central bank perspective. The central bank has taken a different position than other central banks. It has not banned the cryptocurencies but at the same time has expressed cautions against its usage. Infact, it  wants markets to

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Is the Reserve Bank of India toothless?

March 16, 2018

Prof M.S Sriram of IIM Bangalore who has deep knowledge of institutional matters in banking space has a piece. He responds to the recent speech by RBI Governor:

So, having identified that the framework for regulating public sector banks is different, can the governor cry victim, and does this let the RBI off the hook? Not really. How about exercising autonomy by suo motu recommending corrective action to the government if it has a problem with a specific bank? The government may not accept it, as it has not been accepting many of the recommendations of the central bank, but it would have at least done its duty.

Second, the governor is treading an even more dangerous path by pinning the blame on limited powers. Very much like the government exercising control through the board and through circulars, even the RBI has a board position in each public sector bank. Further, the RBI representative is on the management committee (that approves loans beyond a certain ticket size), the audit committee, the committee of directors (for reviewing vigilance cases) and the remuneration committee of each of these banks. So, not only does the RBI have regulatory oversight, it has board and sub-committee presence in each public sector bank, which should give the RBI much greater insights than it would get into a private bank. 

Also, the RBI is party to the selection of the whole-time directors of the bank through the selection committee and through its membership on the Banks Board Bureau. The RBI has powers to remove the non-official directors appointed by the Union government as well as the shareholder directors if they do not fulfil the fit-and-proper criteria— section 3AB and 3B of the Banking Companies (Acquisition and Transfer of Undertakings) Act. 

Moreover, the RBI has powers to appoint an additional director as per section 9A of the above Act. Theoretically, the RBI has a significant say in the constitution of the board of a public sector bank.

While there is a great deal of reform to be undertaken in the governance and management of public sector banks, the line that the governor has taken, of inadequate powers to act, may be untenable. The framework for the exercise of powers in private sector banks is different from the framework for public sector banks. This has to be recognized. 

In the current instance, it would have been more honourable for the governor to own up the failure, and use this opportunity for deep reform, than play victim. That there is a crying need for reforming the governance structure of public sector banks is a valid point—but that is a matter for a separate debate.

Not very different from what this blog also said..


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