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Financial Regulatory Reforms: Striking a Balance

  • Anand Sinha
Chapter

Abstract

Regulatory reforms undertaken in the aftermath of global crisis have generated a serious debate regarding their adequacy, efficacy and also of their need and relevance. Some argue that the reforms are a case of overkill comprising onerous measures such as enhanced capital and liquidity requirements which will adversely affect economic growth and profitability of banks. The structural measures such as prohibition under the Dodd-Frank Act on proprietary trading by US banks, bank holding companies and their affiliates, or moving OTC derivatives to the central counterparties are also criticised to be negatively impacting market liquidity and financial firms’ ability and willingness to innovate. The proponents of reforms, however, aver that the reforms are imperative to put the crisis battered financial system back on track, restore systemic stability and facilitate long-term growth. This paper, analyzing both the arguments, suggests that the answer lies in striking the right balance by devising a regulatory framework which ensures stability, encourages innovation and promotes growth.

Keywords

Regulatory Framework Capital Requirement Leverage Ratio Regulatory Reform Financial Innovation 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. BCBS-Basel Committee on Banking Supervision (2013) The Regulatory Framework: Balancing risk sensitivity, simplicity and comparability. Discussion paper. http://www.bis.org/publ/bcbs258.pdf
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Copyright information

© Springer India 2014

Authors and Affiliations

  1. 1.Reserve Bank of IndiaMumbaiIndia

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