Loading...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 News - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ----
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ----
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ----
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    J-K parties oppose hike in power tarrif
    IAS officer Gangwar not ‘missing’, away in UP over father’s health: Karnataka minister
    J-K Dy CM terms ED case against his brother 'selective targeting'
    T'gana HC CJ calls for timely, expert dispute resolution in telecom, broadcasting, airport sectors
    Latur CA booked for issuing certificates to facilitate remittance of hundreds of crores abroad
    Stock Market for Beginners: How to Start Investing Without Feeling Overwhelmed
    CGST Zone detects clandestine pan masala, tobacco unit, detects tax evasion of Rs 160 cr
    Korea Industry Expo (KoINDEX) 2026 Opens at Yashobhoomi on 27 August
    Protection in predicate offence doesn't automatically extend to PMLA case: Delhi HC
    DFS Concludes Two-Day Workshop on Enhancing Accessibility of Financial Services for Divyangjans
    National Financial Reporting Authority (NFRA) conducts sixth outreach programmes with focus on small and medium auditors under the theme “Creating a...
    CCI imposes monetary and non-monetary sanctions on Agro Input Dealers Association, Agro Input Welfare Association for indulging in anti-competitive co...
    India-Finland cooperation takes centre stage at circular economy forum
    CCI imposes penalty on Rekha Agencies and SS Marketing for indulging in anti-competitive conduct in respect of Himachal Pradesh Tender 2013 for the pr...
    US is set to impose 50% tariffs on $20 billion worth of Canadian products
    Rupee settles 3 paise higher at 95.71 against US dollar
    29 FDI Investments Worth ₹4,895.65 Crore Reported Under Revised Framework
    India and ADB sign $230 million loan to modernise water supply and sanitation in Chennai
    DGGI unearths clandestine pan masala and tobacco manufacturing network in Uttar Pradesh; 27 undeclared pouch-packing machines seized, evasion of about...
    Mission SAKSHAM: Scaling Capability through Co-operation - Keynote Address by Shri Swaminathan J, Deputy Governor at Mission SAKSHAM Programme for Dir...
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
August 22, 2026
Show AI Summary
Power tariff revision faces political opposition over increased consumer electricity costs and conflict with prior free-electricity commitments.
Power tariff regulation in Jammu and Kashmir and Ladakh has been revised through approval of an average tariff increase, effective from 1 September 2026. Political representatives have opposed the increase on the ground that it adds to consumer hardship amid unemployment, inflation, and sectoral difficulties. The criticism also contrasts the revised tariff with prior commitments concerning free domestic electricity and gas.
August 22, 2026
Show AI Summary
Recruitment examination integrity prompted enforcement scrutiny and proposed disciplinary inquiry, while an officer's absence was attributed to family emergency.
Reported absence of an IAS officer was attributed to a family medical emergency and a pending leave request, rather than enforcement searches concerning an alleged recruitment-examination scam. The officer denied any connection with those searches and expressed willingness to face an inquiry. Enforcement searches at the Karnataka Public Service Commission concerned a money-laundering investigation into alleged recruitment irregularities. The State Cabinet decided to advise suspension of the commission chairperson and initiation of an inquiry after an earlier suspension was set aside for lacking the Cabinet's aid and advice.
August 22, 2026
Show AI Summary
Money-laundering and benami asset allegations prompt enforcement proceedings, while the accused officer's brother calls the action selective targeting.
Enforcement proceedings under the Prevention of Money Laundering Act concern allegations that suspended police officer Vijay Choudhary managed numerous assets through benami transactions and engaged in money laundering. An Anti-Corruption Bureau FIR had already been registered in relation to the allegations. Surinder Choudhary characterised the action as selective targeting but maintained that investigating agencies and the judiciary should address and decide matters concerning his family.
August 22, 2026
Show AI Summary
Specialised dispute resolution requires technical expertise, timely proceedings, mediation support, and human oversight to safeguard natural justice.
Specialised, timely and effective dispute-resolution mechanisms are necessary for technically complex disputes in telecom, broadcasting, airport tariffs and cyber sectors. Technology may assist legal reasoning but cannot replace judicial reasoning, requiring verification, professional responsibility and meaningful human oversight. Effective specialised adjudication should combine domain expertise with judicial discipline, respond to technical complexity, and protect natural justice, transparency and reasoned decision-making. Mediation and other consensual mechanisms can support dispute resolution.
August 22, 2026
Show AI Summary
Form 15CB certification faces scrutiny where inadequate verification allegedly enables foreign remittances through shell companies and false certificates.
Alleged misuse of Form 15CB certification has resulted in criminal proceedings concerning certificates issued for foreign remittances without verification of underlying documents. Form 15CB requires certification of applicable taxability and tax-deduction particulars for specified remittances to non-residents before processing by an authorised dealer. The allegations concern certificates that potentially enabled cross-border transfers through shell or non-existent companies, involving cheating, false certification, false evidence and common intention.
August 22, 2026
Show AI Summary
Beginner stock market investing requires regulated accounts, risk-aware financial planning, diversification and informed company assessment before purchasing securities.
Beginner stock market investing requires a bank account, a trading or broking account with a SEBI-registered broker, and a Demat account for electronic holding of securities. Investments involve risk of loss and should align with financial goals, time horizon and loss-bearing capacity. Investors should understand primary and secondary markets, distinguish long-term investing from short-term trading, assess companies before purchase, diversify holdings, consider charges, maintain records and avoid borrowed-money investing, rumours and momentum-driven decisions.
August 22, 2026
Show AI Summary
Capacity-based tobacco taxation targets undeclared packing machinery used for clandestine production and clearance without indirect tax payment.
Clandestine manufacture and clearance of pan masala, scented jarda and tobacco products without registration or payment of GST, HSNS Cess and central excise duty was detected through an intelligence-led search. Undeclared Form-Fill-Seal packing machines, workers, finished goods, raw materials, transport vehicles, packing materials and records indicated unaccounted production and clearance. Capacity-based monthly HSNS Cess for pan masala is computed according to the number, type and capacity of installed packing machines, while a corresponding capacity-based central excise levy applies to chewing tobacco, jarda and gutkha.
August 22, 2026
Show AI Summary
Trade exhibition connects Korean exporters with Indian buyers through sector-specific consultations and certification guidance for market entry.
KoINDEX 2026 is a business-to-business trade exhibition bringing Korean manufacturers and exporters together with buyers in India and South Asia. It focuses on beauty and personal-care products, processed and functional foods, and construction, building and safety products. Commercial engagement includes pre-matched export consultations with project owners, contractors, distributors, wholesalers, e-commerce platforms and food distribution businesses. A seminar addresses Bureau of Indian Standards certification and market-entry requirements for Korean products entering the Indian market.
August 22, 2026
Show AI Summary
Independent PMLA proceedings require separate anticipatory bail assessment; predicate-offence protection alone cannot establish pre-arrest protection.
Protection in a predicate-offence FIR does not automatically extend to independent PMLA proceedings. Anticipatory bail in a money-laundering investigation must be assessed under the applicable PMLA condition and on the material connecting the applicant to alleged proceeds of crime. Relevant considerations include the financial trail, recorded statements, bank-account analysis, compliance with summonses, cooperation with inquiry, and the need for personal participation in evidence collection and confrontation with documentary and digital material.
August 22, 2026
Show AI Summary
Financial accessibility for Divyangjans requires compliance standards, practical implementation measures and stronger institutional capacity across financial services.
Accessibility of financial services for Divyangjans was examined through a workshop focused on public sector banks, insurance companies, regulators and public financial institutions. Discussions covered accessibility standards, compliance requirements, legal provisions, practical implementation challenges and institutional best practices under the Sugamya Bharat initiative. Participants considered operational measures to strengthen institutional capacity, inclusivity and equitable access to financial services.
August 22, 2026
Show AI Summary
Audit quality enhancement for small and medium auditors emphasises technology, global standards, inspection insights and stronger financial reporting.
Audit quality and financial reporting reliability were the focus of NFRA's outreach programme for small and medium audit firms. The programme promoted professional capacity-building, alignment with contemporary global standards, adoption of appropriate audit technology, and the public-interest role of the accountancy profession. Technical sessions covered audit strategy documentation, risks of material misstatement, and practical lessons from audit-firm oversight to support improved day-to-day audit practice and high-quality financial reporting.
August 22, 2026
Show AI Summary
Cartelisation by agro-input dealer associations attracted monetary sanctions, cease-and-desist directions, and mandatory competition-compliance training for responsible officials.
Cartelisation by the two agro-input dealer associations and named individuals contravened Section 3(3)(b) read with Section 3(1) of the Competition Act, 2002. Monetary sanctions were imposed, and association office-bearers were held liable under Section 48. The parties and liable officials were directed to cease and desist from future anti-competitive conduct and to organise competition-compliance training to promote awareness and compliance within the associations.
August 22, 2026
Show AI Summary
Circular economy partnerships promote resilient value chains, resource efficiency and sustainable growth alongside evolving India-EU trade integration.
India-Finland circular economy cooperation is being developed through business, technology, investment and commercial partnerships supporting resource-efficient and sustainable growth. Discussions focused on competitive and resilient value chains based on circularity, traceability, resource efficiency and sustainable business practices. Circular economy principles extend beyond waste management into product design, value chains, resource use, skills development and new business models. The India-EU free trade agreement remains subject to legal review and formal ratification and is not yet in force.
August 22, 2026
Show AI Summary
Bid rigging through pre-bid exchange of sensitive price information attracted penalties and cease-and-desist directions in tyre procurement.
Bid rigging in tyre procurement was established where Rekha Agencies and SS Marketing exchanged commercially sensitive price-bid information before submitting bids for the Himachal Pradesh Tender 2013. The concerted conduct contravened the prohibition on anti-competitive agreements and bid rigging. Monetary penalties and cease-and-desist directions were imposed on both enterprises. An official of Rekha Agencies was also penalised for liability arising from the contravention, while proceedings against the official of SS Marketing stood abated following his death.
August 22, 2026
Show AI Summary
Import tariffs on Canadian products trigger potential retaliatory levies after bilateral negotiations fail to reach agreement.
Import tariffs on Canadian products are set to be imposed by the United States at a 50% rate after bilateral negotiations did not produce an agreement. The measures cover products including hockey sticks and tongue depressors and affect a limited share of Canada's annual exports to the United States. Canada has indicated possible retaliatory levies, intensifying the bilateral trade dispute.
August 21, 2026
Show AI Summary
Rupee exchange-rate movement reflected geopolitical tensions, crude oil conditions and market intervention, while export payment rules expanded rupee invoicing.
Foreign Trade Policy amendments facilitate export invoicing and receipt of payments in Indian rupees. For exports to countries outside the Asian Clearing Union, export contracts and invoices may be denominated in Indian rupees or any foreign currency. The earlier general requirement that export earnings be received in a freely convertible currency is thereby eased, while applicable rules continue to vary according to destination.
August 21, 2026
Show AI Summary
Non-controlling land-bordering country ownership permits eligible foreign investment through the automatic route, subject to sectoral conditions and reporting.
Foreign direct investment may use the automatic route where non-controlling beneficial ownership from a land-bordering country in the investor entity does not exceed 10%, subject to sectoral caps, entry routes and other applicable conditions. The beneficial ownership test applies at the investor-entity level. Eligible investors need not obtain separate prior Government approval after reporting relevant information to the Government. The framework replaces the earlier approval requirement applicable even to minimal beneficial ownership from land-bordering countries.
August 21, 2026
Show AI Summary
Climate-resilient urban water security modernises Chennai's supply and sanitation systems through ring-main infrastructure, digital monitoring, and safer sewer operations.
Chennai Climate-Resilient Water Security and Sewerage Project modernises and expands water supply and sanitation infrastructure through a loan arrangement between the Government of India and the Asian Development Bank. Measures include new pipelines, upgraded pumping stations, performance-based utility operations, and a comprehensive ring-main system to improve water-pressure balance, distribution efficiency, reliability and climate resilience. Digital monitoring and advanced blockage-detection technology are intended to improve operational decisions, customer responsiveness and worker safety while eliminating hazardous manual sewer inspections.
August 21, 2026
Show AI Summary
Capacity-based taxation targets undeclared pouch-packing machinery used for clandestine pan masala and tobacco production and untaxed clearances.
Capacity-based taxation of pan masala and specified tobacco products is determined by the number, type and capacity of installed pouch-packing machines. Searches at interconnected manufacturing and trading premises detected unregistered operations using undeclared machinery for clandestine manufacture and clearance of pan masala, scented jarda and gutkha without payment of GST, HSNS cess and central excise duty. Finished goods, raw materials, packing materials and machinery were seized. The manufacturing firm's proprietor was prima facie identified as managing the operation and was arrested under the applicable cess and central excise laws.
August 21, 2026
Show AI Summary
Technology risk oversight requires Urban Co-operative Banks to retain accountability while building shared and role-specific capabilities.
Urban Co-operative Banks must strengthen digital and risk-management capabilities as technology dependence exposes them to cyber threats, fraud, service-provider failures and common-platform vulnerabilities. Outsourcing critical systems does not transfer the bank's responsibility for oversight, safeguards and continuity. Boards and senior management must retain sufficient knowledge to supervise external providers effectively. Mission SAKSHAM supports role-specific, continuous capability building through physical and online learning, while collective infrastructure and shared expertise can supplement individual institutional capacity.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Back

All News

Showing Results for : Reset Filters

Financial regulation and economic policies for avoiding the next crisis (Urjit R. Patel, Governor, Reserve Bank of India - October 15, 2017 - at the 32nd Annual G30 International Banking Seminar, Inter-American Development Bank, Washington, D.C.)

October 25, 2017

Contents
Summary
Note

Note

-

Bookmark

Print

Print

1. Let me start by reminding ourselves of some numbers that are a key backdrop for today’s panel discussion. Total global external liabilities have grown from 30 per cent to 190 per cent of global GDP between 1980 and 2015, far outpacing the growth in global trade (from 19 per cent to 28 per cent of GDP over the same period). The main vehicle of this new globalisation has been cross-border banking flows, which constituted a third of global capital flows in the decade prior to the financial crisis. In parallel, the global trade network has become increasingly interconnected through supply chains that transcend national borders, and by the advent of new players, especially from the developing world. China now accounts for about 11 per cent of global trade and emerging market and developing countries (EMDCs) taken together contribute 37 per cent (up by about 15 percentage points since 2000).

2. During the global financial crisis, the explicit pre-crisis assignment of policy instruments to objectives became blurred. The experience demonstrated that macroeconomic policymaking is expected to do a fine balancing act to achieve multiple and, at times, conflicting objectives of monetary stability, fiscal stability and financial stability. Within these trade-offs, financial stability has assumed some seniority, entailing for national authorities the constant need to monitor, identify and minimise the build-up of systemic risks in financial systems and reduce spill overs in the most efficient and effective way. This involves a fine dovetailing of the objectives of market efficiency into consumer protection and the management – even pre-emption – of systemic risks.

3. In my remarks today, I would focus on the following issues in the role of financial regulation in averting the next crisis:

  • Globalisation and adherence to global rules/standards - synergies and challenges.
  • Financial regulation and suddenness of crisis incidence - regulatory intervention needs to be more anticipatory and data-based.
  • Backward-looking versus forward-looking risk-based supervision - need for global systemically important banks to disclose their internal rating models.
  • Too-big-to-fail and moral hazard.
  • Adequacy of global financial safety nets (GFSNs) in the context of the size and speed of crises - gaps and discriminatory practices in the international financial architecture.

(i) Globalisation and global rules/standards.

4. Emerging market economies (EMEs) have undoubtedly benefited from globalisation, but they are also more exposed than before to vulnerabilities that come with globalisation. As we access markets abroad and spread our activities on a global scale, our financial systems are also required to embrace global norms, especially on capital, risk recognition and accounting standards; monetary policy based on some rule relating to a nominal anchor such as inflation; fiscal policy based on a budget or expenditure rule; and market-based exchange rate regimes, complemented by strong and effective financial sector regulation and supervision, corporate governance and enforcement rules, and bankruptcy and resolution architecture.

5. Markets inherently impose these exacting standards of discipline when they allow access to banks and corporates. For example, international capital tends to punish monetary and fiscal indiscipline severely. Even as some shocks tend to be impervious to fundamentals, economies with sound, prudent, transparent and accountable macro-policy frameworks have demonstrated success in containing negative externalities as well as in restoring normalcy faster. In this context, prudent policy frameworks tie down policy actions to final goals. Some of us may think that rules are a cost imposed on us in the form of sacrifice of independence and sovereignty. While all rules may not best fit us, the ones that I will highlight, specifically, monetary, fiscal and accounting, are widely accepted by reasonable people as a basic minimum.

First, fiscal rules are institutionalised or legally binding rules that credibly commit authorities to fiscal discipline. By restraining expenditure or overall deficits, they enhance the credibility of macroeconomic policies, by keeping public debt within sustainable levels improving thereby the credibility of the fiscal authority as a participant in financial markets.

Second, a transparent and predictable monetary policy framework is, almost by definition, rule-based.

Third, while regulation is imposed from outside, corporate governance is internal to firms and is more in the nature of self-regulation with safeguards that principles and rules laid down by the regulations are followed conscientiously. Nevertheless, regulation and corporate governance have to complement each other.

Fourth, with globalisation, operations of large firms have become transnational, and massive cross-border movement of capital requires adoption of uniform accounting standards, such as the International Financial Reporting Standards (IFRS). When these standards are applied rigorously and consistently, investors, regulators and other stakeholders all benefit with higher quality information to make decisions.

6. With globalisation, it is imperative for banks in EMEs to adhere to standards emanating from the global standard setting bodies. While challenges remain in adopting standards like IFRS in EMEs, we welcome the forward looking provisioning framework. Banks generally tend to delay provisioning for bad loans until cyclical downturns have already set in and it is too late, possibly magnifying the impact of the economic cycle on banks’ income and capital. In such circumstances, providing for and recognising actual and potential loan losses at an earlier stage in the credit cycle could potentially reduce procyclicality and foster financial stability.

(ii) Financial regulation and suddenness of crisis incidence: Need for regulatory intervention to be more anticipatory and data-based.

7. In the context of financial stability, acceptable regulation should have three broad characteristics: Firstly, regulation ought to be predictable. A regulation susceptible to forbearing instincts carries the concomitant chance of risk inducing behaviour by stakeholders. Second, regulation should aim to shoehorn internal governance mechanisms of the regulated entities in an incentive compatible way. Finally, it should aim to address information asymmetry between the key stakeholders since the lack of information often leads to herd behaviour, thus precipitating crises.

8. Backward looking regulation attempts to address gaps in regulation in one sector, region, and nation; but given the complexity and inter-connectedness of the financial system, activity swiftly shifts to another sector, region or nation and builds financial excesses. However, the next threat to financial stability may come from quarters that regulators are completely unaware of. Thus, forward-looking regulations are required to tackle such unforeseen risks. With the advent of big data analytics, cloud computing and artificial intelligence, we are at a stage where data can be used to model future events with certain confidence intervals, and our regulations can potentially be structured to deal with such events. The recent thrust on two areas - cybersecurity and FinTech - is a case in point. A decade back, few bankers or policymakers talked about this threat. Today these are identified as major risks to the financial system.

9. The allergy to intrusive regulation pre-crisis has been overturned into a necessity in the post-crisis period across advanced economies (AEs) and EMEs. In the post-crisis hyper-active regulatory environment, it is possible to develop detailed dos and don’ts to potentially avert a crisis. In such a milieu, certain basic characteristics of a regulatory framework, coupled with a supervisory regime that is responsive to investors’ and other stakeholders’ concerns, has the best chance of inducing prudential behaviour among regulatees. Regulators have been slapping record fines on major banks and financial institutions for making undue profits or masking their problems by fraudulently rigging rates. A lot of mis-selling of products by banks in certain jurisdictions has also raised serious concerns among regulators, which is attracting more intrusive regulation with a significant bearing on banks’ compliance costs.

(iii) Reliance on internal rating-based risk assessment by global banks: Black-box requires reasonable disclosure and transparency.

10. The last financial crisis has prompted doubts that the internal ratings based (IRB) approach may have been used opportunistically to minimize capital requirements, thus helping banks to disguise credit bubbles by keeping their risk weighted assets (RWAs) artificially low. The evidence suggests that internal risk estimates employed for regulatory purposes systematically under-predict actual default rates. Supervisory confidence in risk weights is critical to the success of the regulatory framework. The BCBS’s work on the implementation of the Basel capital framework has gathered evidence that significant variations in capital outcomes generated by internal models (with respect to portfolios with similar risk profiles) may be unwarranted. Thus, there is a need to improve transparency and comparability across internal models to ensure that internal ratings are built and validated on the basis of a set of common standards. A reasonable degree of transparency and disclosure will help establish the credibility of the risk assessment models used currently by many large global banks. “Sunlight is said to be the best of disinfectants”.

(iv) Too-big-to-fail (TBTF) and moral hazard.

11. There are concerns related to the implicit government guarantee for TBTF institutions. These concerns derive from the belief that the TBTF status gives large banks a competitive edge and incentives to take on additional risks. If investors believe that the largest banks are too big to fail, they will be willing to offer them funding at a discount. Together with expectations of rescues, this discount gives the TBTF banks incentives to engage in riskier activities. This, in turn, could drive smaller banks that compete with them to take on further risks, exacerbating the riskiness of the entire financial system.

12. Regulatory labelling of systemically important financial institutions/banks (SIFIs/SIBs) may convey the promise of implicit taxpayer-sponsored bailouts for uninsured deposits in case of insolvency. While they also bring in additional regulatory capital prescriptions to act as a loss absorbent, in a competitive capital market, the possibility of SIFIs/SIBs taking additional risks to earn the additional returns on capital and thereby negating the role of additional capital can never be ruled out. Hence, the nature of supervisory oversight of SIFIs/SIBs ought to be a lot more intrusive relative to other financial institutions. The bank bailouts experience in Europe shows that political economy of bailouts is more important than regulatory labelling.

 (v) Inadequacy of global financial safety nets (GFSNs) and discriminatory central bank swap lines force EMEs to self-insurance.

13. Monetary policy stances of systemic central banks, geo-political developments and uncertainty surrounding the direction of macroeconomic policies in AEs have been the main push factors driving the influx of capital flows to EMEs. For these recipient economies, this has translated into heightened financial market volatility with adverse implications for their growth prospects and for macroeconomic and financial stability. By and large, EMEs have absorbed the shocks by maintaining fairly open capital accounts and by strengthening their macro fundamentals through prudent policies. Yet, as high intensity events starting with the taper tantrum have shown, macroeconomic fundamentals do not matter in the face of these large and sudden movements of capital, and their economies remain vulnerable to rapid materialization of risks.

14. So far, our quest for a robust, equitable and quickly deployable global financial safety net (GFSN) has remained elusive. As a consequence, EMEs have had to buffer themselves by maintaining reserves and managing financial volatility through a combination of policy instruments, including a macro-prudential/capital flow management toolkit, which are essentially pre-emptive in nature. Given the “stigma” attached to the IMF facilities and their quest for “self-insurance”, EMEs have resorted to building foreign exchange reserves as the “first line of defence” to calm volatility in financial markets and to provide adequate liquidity buffers for “sudden stop” and reversals. Second, regional financial safety nets have emerged to complement the agenda of financial stability.

15. In the post global financial crisis era, the GFSN has grown significantly with increased accumulation of reserves by countries, and increase in various bilateral and multilateral swap arrangements. Global reserves grew from about US$2 trillion in 2000 to about US$12 trillion by the end of Q2 of 2017 about 60 per cent of which are held by EMEs. However, according to the Fund’s Assessing Reserves Adequacy (ARA) metric, many EMEs (especially in Eastern Europe and Latin America) fall short of the range of 100–150 per cent of the composite metrics that are considered adequate for precautionary purposes. Bilateral swap lines between central banks expanded dramatically during the crisis and have further increased since then. The bilateral swaps are dominated by China’s extensive network of renminbi swap lines - 30 swap lines in place at end-2015 valued at US$500 billion. BRICS countries have established a US$100 billion multilateral currency swap arrangement aiming to provide regional short-term liquidity and to address balance of payments difficulties. Other regional financing arrangements (RFAs) that have emerged are Eurasian Fund for Stabilization and Development (EFSD) with contributions of US$8.5 billion, Arab Monetary Fund (AMF) and the Latin American Reserve Fund (FLAR).

16. With every new tail event, however, the churn becomes larger, the volatility ever higher, threatening to overwhelm the modest defences that EMEs are able to muster. It is in this context that I would draw your attention to the stark asymmetry prevailing in the provision of swap lines by systemic central banks. In fact, I would go as far as describing the situation as a virtual “apartheid” by which systemic central banks protect themselves and their self-interest. Meanwhile, EMEs that are at the receiving end of global financial turbulence are systematically denied access. The time has come to end this sectarian approach and the access to swap lines be equally available. While EMEs have shown a degree of resilience to the turmoil of recent years, they are vulnerable to liquidity and bridge financing gaps that are transitory but debilitating. Access to swap lines will help them manage these risks better and prevent them from assuming systemic proportions, thereby threatening global financial stability. We must learn from the lessons of the global financial crisis and act expeditiously and comprehensively to establish a broader swap network. In its absence, the macroeconomic environment of each country will inform the choice of policy instruments. In such a milieu, there cannot be any common code or uniform approach to capital account liberalization.

17. There has been considerable focus on macro-prudential measures (MPMs) in the recent period. However, while legitimacy of MPMs has been well established, the same legitimacy for capital flow measures (CFMs) has not been universally accepted despite an explicit endorsement by the IMF for selective use of CFMs. It is important to recognize that amid global financial cycles and the inexorability of the trilemma, corner solutions are not feasible. So soft capital account management becomes a necessity – keeping external debt within practicable limits and prudence regarding the external sector help strengthen financial and macroeconomic stability.

18. The challenge before us is to identify what is going to strike us next? Hence, any regulation of the financial system should take a pre-emptive approach, and consider the potential fragility of banks alongside all other elements of the financial system. This would prevent regulatory arbitrage and help to ex ante determine the supervisory “guide rails/rules of the game” for the system.

Topics

Acts Income Tax