1. Indian Merchants’ Chamber
The Global Financial Crisis and the Indian Financial Sector - What Have We Learnt and How Have We Responded?
Indian Merchants’ Chamber
Mumbai
June 5, 2013
Dr. Duvvuri Subbarao
Governor
Reserve Bank of India 1

2. Our World View of the Crisis2 2 2

3. Lessons of the Crisis
Price stability and macroeconomic stability do not guarantee financial stability.
No country is an island.
Financial markets are not self correcting.
It is difficult to detect signs of pressure building up in real time.
A collection of rational financial institutions does not necessarily imply a rational financial sector. 3 3 3

4. Converting Lessons into Policies4 4 4

5. Emerging Economies and Global Reforms5 5 5

6. Specific Reform Issues
(Three Questions)
(i) What have we leant at the global level?
(ii) What has been the global response?
(iii) How have we, in India, responded? 6 6 6

7. Five Specific Issues (i) Migration to BASEL - III
(ii) Shadow banking - extending the perimeter of regulation
(iii) Subsidiarization of foreign banks
(iv) OTC derivatives market
(v) Safeguarding financial stability 7 7 7

8. Migration to BASEL - III
Five Specific Issues
1st Issue
Migration to BASEL - III
What have we learnt?
What has been the global response?
How have we, in India, responded? 8 8 8

9. Basel-III Capital Requirements of Banks
(As % of RWA)
Basel-III Basel-III
(International) (RBI)
Common Equity
Minimum
Capital Conservative Buffer (CCB)
Total
Tier I Capital
Minimum
Minimum + CCB
Total Capital
Minimum
Minimum + CCB

10. Extending the Perimeter of Regulation
Five Specific Issues
2nd Issue
Shadow Banking
Extending the Perimeter of Regulation
What have we learnt?
What has been the global response?
How have we, in India, responded? 10 10 10

11. Subsidiarization of Foreign banks
Five Specific Issues
3rd Issue
Subsidiarization of Foreign banks
What have we learnt?
What has been the global response?
How have we, in India, responded? 11 11 11

12. OTC Derivatives Market
Five Specific Issues
4th Issue
OTC Derivatives Market
What have we learnt?
What has been the global response?
How have we, in India, responded? 12 12 12

13. Five Specific Issues Safeguarding Financial Stability 5th Issue
What have we learnt?
What has been the global response?
How have we, in India, responded? 13 13 13

14. Safeguarding Financial Stability
Five Specific Issues
5th Issue (contd.)
Safeguarding Financial Stability
The role of the Reserve Bank in safeguarding financial stability
Financial Stability and Development Council (FSDC)
FSLRC recommendation on systemic risk management in India 14 14 14

15. What we learnt from the crisis about the financial sector?
Conclusion
What we learnt from the crisis about the financial sector?
Efforts at the global level on financial sector reforms
Five specific reform areas
Global response
Indian response 15 15 15