New Thoughts

Financial Re regulation is the need of the hour in the context of the meltdown of the financial sector worldwide. Though the rate of interest has been brought down by various central banks along with the needed capital infusion I feel that there is lot to be done to bring the sector on track. Present volatile nature of the capital markets and the increasing delinquency rate in the recovery front with declining capital base of the banks has rather made such thinking for a financial re regulation as a must.

As a banker I am certain that this is the high time that the financial institutions are brought under proper supervision and control by the various governmental organizations and the central banks. Again, it is imperative that an international consensus arrived to formulate certain policies to ensure proper monitoring of the functioning of the financial institutions on certain common frame of rules. Financial institutions should embark upon the dynamic provisioning against the eventuality by carving a portion of their profit. This will come to their rescue at the time of crisis and the liquidity will be curtailed to that extent to arrest the unhealthy credit expansion.

During good times the banks should accumulate substantial buffers and reduce the risk of bank failure at the time recession. An international agreement may be thought of in this line to increase the capital to maintain the health of the financial institutions. The risk management aspect should be given adequate importance in the matter of conducting the business. Capital requirement frame works for the banks must be taken for a revision taking into consideration of many banks in the USA, UK and Europe.

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