Case for a single regulator for financial services in India
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Case for a single regulator for financial services in India



Case for a single regulator for financial services in India

Case for a single regulator for financial services in India



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Case for a single regulator for financial services in India Case for a single regulator for financial services in India Presentation Transcript

  • Case for a single regulator for financial services in India
    Presented by:
    NitinMaurya (2010140)
    PallaviAgarwal (2010142)
  • Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system.
    This may be handled by either a government or non-government organization.
    Financial Regulation
  • The motivations for developing the frameworks:
    • Political pressure following financial collapses.
    • The need to create a new organisational culture within a recently formed regulatory body.
    • The need to bring supervisory practices in line with developments in financial institutions’ operations and risk management practices.
    • The need to deliver ‘integrated’ financial regulation.
    • A need to improve internal managerial control, to prioritize resources and shift regulation onto a more proactive footing.
    • A concern to manage the expectations politicians and the wider public had of what regulation could and should achieve.
  • The regulators:
    The markets
    Commodities, equity, debt, foreign exchange
    The players
    Brokers, firms, banks, financial institutions, foreign institutional investors, mutual fund managers, investors, exchanges, depositories, custodians, registrars.
    Financial Sectors in India
  • Set up under the RBI Act, 1934 on April 1, 1935.
    Central office was initially in Calcutta but was moved to Mumbai in 1937.
    Initially it was privately owned but since nationalization it is owned by GoI.
    Monetary authority.
    Issuer of currency.
    Banker and debt manager to government.
    Banker to banks.
    Manager of foreign exchange reserves.
    Regulator and Supervisor of Payment and Settlement Systems.
    Regulator of deposit-taking agencies.
    Developmental role.
  • The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act,1992.
    Regulator of anything that is exchange–traded.
  • Forward Markets Commission (FMC) headquartered at Mumbai, is a regulatory authority which is overseen by the Ministry of Consumer Affairs, Food and Public Distribution, Govt. of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952.
     Regulator of commodity derivative markets, commodity derivative brokers.
  • Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance.
    Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance.
  • PFRDA was established by Government of India on 23rd August, 2003.
    The mandate of PFRDA is development and regulation of pension sector in India.
     Government of India moved from a defined benefit pension to a defined contribution based pension system.
  • Plays a role in creating regulators
    Legislative work.
    Big picture policy questions that go beyond the agenda of any one regulator.
  • High Level Coordination Committee on Financial and Capital Markets (HLCC).
    Co-ordination between regulators.
    Governor, RBI
    Chairman, SEBI
    Chairman, IRDA
    Finance Secretary, MoF
    Member secretary: Joint Secretary, capital markets, at MoF
  • Failure to exploit economies of scale.
    Turf conflicts.
    Inhibits products and markets when they involve multiple regulators.
    Lack of clarity regarding the domains of various regulators.
    Problems with current Regulatory Structure
  • Overlapping of regulaory System
  •  Improving coordination between regulators without having a super-regulator
    Use of fast-track courts to ensure quick resolution of conflicts
    Ensuring a level playing field between regulators
    Developing a consensus-building approach within the various sections of the financial markets, and finally harmonizing regulations across markets.
    Changes in Multiple Regulation
  • Integrated regulation as in UK, Japan, Korea
    Improve the present system by removing decades-old design decisions and clarify the mandate.
    Need better harmonisation of principles of regulation across the various regulators.
    Alternatives to multiple regulation
  • When the regulatory authorities are converged on a national scale creating a national marketplace for financial products and making financial institutions more competitive.
    Single Regulatory Authority system
  • Single regulator mirrors market environment
    Single regulator is efficient
    Commonality of knowledge
    Clarity of accountability
    Information sharing
    Pros of a single regulatory system
  • Diversity of objectives
    Diseconomies of scale
    Minimal synergy gains
    Cons of single regulatory system
  • Owned by UK government
    Regulator of financial service industry
    Statutory Objectives:
    Market confidence
    Public awareness
    Consumer protection
    Reduction of financial crime
    Financial Services Authority(FSA)
  • Reactive than a proactive regulator
    Weak enforcement program
    No representative of consumer group in FSA Board
    Deviation from the prime responsibility of protecting consumers
    Problems faced by FSA
  • Should India have a sole regulator??
  • A single market regulator clearly has its own advantages over multiple regulators. But it is more suitable for well-developed and mature markets which are smaller in size, like the UK. Even the United States, which is supposed to have the most mature financial markets in the world, has multiple regulators