tag:blogger.com,1999:blog-19649274.post3321455031551369999..comments2024-03-29T12:03:50.891+05:30Comments on The Leap Blog: Movement on FSDCAjay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-19649274.post-78247830241358838632011-02-21T13:32:25.997+05:302011-02-21T13:32:25.997+05:30Dear Professor Shah;
On financial stability, it se...Dear Professor Shah;<br />On financial stability, it seems that we are moving in opposite direction to the world. In United Kingdom, latest developments indicate that the financial stability mandate is clearly given to the Bank of England. An interim Financial Policy Committee (FPC) has been established on February 17, 2011 as a committee of the Bank of England’s Court of Directors. This is expected to be formalised through legislation as outlined in the Government’s consultation document ‘A new approach to financial regulation: building a stronger system'.[Document available at http://www.hm-treasury.gov.uk/d/consult_newfinancial_regulation170211.pdf ]<br />The Government's consultative document clearly gives mandate of financial stability to Bank of England. <br />Para 1.13 of consultative document says 'The FPC will create the locus for macro-prudential regulation that is missing from the current framework. Responsibility for financial stability will be clearly located in the Bank of England, with macro-prudential policy the preserve of the FPC, and micro-prudential regulation the responsibility of the PRA (Prudential Regulation Authority, [to be a subsidiary of Bank of England]), alongside the Bank’s current responsibilities under the special resolution regime and as a lender of last resort. By locating these distinct but complementary functions within the Bank of England group, the Government will ensure that systemic and firm-specific regulation are coordinated, and that the market knowledge and economic expertise of the central bank is fully brought to bear on financial stability'.<br />The Government envisages that the FPC will contribute to the Bank’s financial stability objective by identifying, monitoring, and taking action to remove or reduce, systemic risks with a view to protecting and enhancing the resilience of the UK financial system. <br />In India, FSDC appears to be a retrograde step with regard to financial stability.Rheoleiddiwrnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-56819489562597584672010-10-16T10:44:47.239+05:302010-10-16T10:44:47.239+05:30"Monetary stability" is interpreted as p..."Monetary stability" is interpreted as price stability. That is indeed the fundamental role of a central bank. Financial stability is a wholly different territory.Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-81324733512354327782010-10-14T15:58:04.937+05:302010-10-14T15:58:04.937+05:30"monetary stability": In terms of Sectio..."monetary stability": In terms of Section 42 (1) of the Reserve Bank of India Act, 1934 the Reserve Bank having regard to the needs of securing the monetary stability in the country, prescribes the CRR for Scheduled Commercial Banks (SCBs) without any floor or ceiling rate.<br />The Merriam Webster dictionary (http://www.merriam-webster.com/dictionary/monetary)say "monetary" means "of or relating to money or to the mechanisms by which it is supplied to and circulates in the economy". I think this looks like financial stability. Can there be financial stability without instability in money or to the mechanisms by which it is supplied to and circulates in the economy???Anonymousnoreply@blogger.com