K.C.Chakrabarty, a Deputy Governor at the Reserve Bank of India, on January 16 said despite the overhaul of crisis management systems, central bankers and regulators must be prepared to manage the next crises. "The increasing interconnectedness of global markets, economies and institutions have only added to the potential of a crisis anywhere in the world to trigger contagion in the rest of the world," Chakrabarty told attendees of the Programme on Crisis Preparedness in Interconnected Markets in Hyderabad, India. "All this has only underscored the importance of anticipating such low-probability and high-impact events, taking pre-emptive action for preventing crises and responding effectively to such events, once they have set in – all key components of any effective framework for crisis management." Chakrabarty said recent experiences have demonstrated that resolving a financial crisis is complex and costly, regardless of what caused the crisis and the solution. He said while the best crisis management framework is one that prevents crises, no financial system can be completely immune from episodes of financial instability from time to time and there will be a need to manage crises. Chakrabarty said the best service central bankers and regulators carrying the responsibility of fostering financial stability can do is to remain prepared to manage crises. "There are important lessons to be learnt from each crisis. Yet, we can count on each crisis to be sufficiently different from every other crisis so as to make their identification a challenge," he said.
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