Swedish Magnus Lind, an internationally reputed scholar & closely connected
with me- in international fora-, is the Chair & Founder of the Global
Treasury Peer Network as also the central banking policy expert. A great &
credible commentator, who writes as under :
"
Evidence worldwide shows that catastrophes like the collapse of Lehman
Brothers, the explosion of the Deepwater Horizon oil rig in the Gulf
of Mexico, the meltdowns at the Fukushima Daiichi nuclear plant in Japan, and
the fatal grounding of the cruise ship Costa Concordia in Italy come
not from a lack of laws and regulations, but from deliberate non-enforcement of
the laws and regulations that already exist. Parties that are deemed
“too big to fail” (or “too big to jail”) feel free to continue with illegal
practices up until the point that a disaster occurs. The root cause the
regulators’ nonfeasance is clearly “regulatory capture”: the regulators are
protecting the industry instead of policing it. The response to this
by lawmakers has been not to fire or jail inefficient regulators, but to add
new and more onerous regulations.
Other
examples include the ECB being managed by governors having had the bank
supervisory responsibilities in the home countries at time of the crisis and
now they are supposed to become the bank supervisor of the whole of the EU.
What ensures they will succeed this time? Yet another example is the
constant meat scandals, beef lasagne contains horse meat instead. Why did all
the food supervisors not discover it a long time ago? Since many more examples
of meet fraud have surfaced. It’s quite clear that supervisors were sleeping
on the post.
Does
hiring more regulators and supervisors really add any value? How come they are
not being scrutinized for their failures? Maybe it’s because they are civil
servants and don’t have any personal responsibility? Political governance
does not at all reach the same standards as corporate governance. Far from.
Effectively any political administration can bankrupt any country and live
happily ever after. There is no transparency where the tax payers’ money is
spent. There is no percussion for financial crime in the political
world. Genocide is the only thing an administration should avoid. That may
lead to a conviction in The Hague. But impoverish a whole nation and putting
the global financial system at risk is ok. The Basel framework encourages
speculation in sovereign risk! We should acknowledge the largest financial
crashes are caused by political failure. But, the Govts. & Regulators are keen to spread the notion that politics is
low risk. "
Although
my colleague, Magnus Lind has been forthright and highly critical of Law
Enforcement agencies and Regulators of mainly G 7, the more Advanced Nations, I
do believe that the quality and role
definitions as also the performances of Law Enforcement Agencies and Regulatory
Bodies in all other geo-political jurisdictions, should not be measured with
the same set of yardsticks and parameters but aligned suitably to meet with domestic
ground realities. However, none of them can escape their mandated
responsibilities.. !!
In
this context, we do come across in our country, Bharat, time and again in
periodic succession disturbing instances of failure to detect, arrest or
prevent some major scams- economic or pure financial crimes due to lack of
oversight by the Govt machinery and or Regulators concerned. In majority of
frauds and scams of mind-boggling proportions, they are assigned and labelled
conveniently 'Systemic'. Frequent occurrences cannot go under the umbrage as
purely systemic ones. Then, what name one would categorise & assign to rare
earthquakes, flash floods, tsunamis, inter-galactical flares (solar ones are
common & routine..!), 9/11, 26/11 terrorist attacks, etc. Super-systemic..
? We will be fooling ourselves but end up in ceaseless miseries. We are already
in. not out of such disaters.
TRAI
failed .. 2G surfaced, Let us leave out the past ones like Harshad Mehtha
centered scam. or many other similar ones. Recent cases of MF sector crisis,
Drought relief and loan waiver scam, KYC related huge 'cash depositing’ scam
are not to be swept under the carpet easily. Compliance and internal control
failures were wide spread and not to be treated as a summer temporary skin
eruption in a finger. Such trends have been rampant, given the nature of Indian
polity, loose morals followed by a large segment of the society and tax
evaders. I dont slap my criticism on just present day rulers or regulators. All
those involved in the past two to three decades and all governing political
parties in the Centre or in the States as also Regulatory failures have to be
reckoned on this score. I agree that the Regulators in India, especially RBI,
and to a lesser extent, SEBI or infant IRDA (who have little or insignificant
presence) have acquitted themselves with great aplomb and accomplishments and especially
in the recent past, despite the onslaught of global crisis. The crisis, which
broke out in US financial sector, took multi-dimensions, has battered and
ruined many other jurisdictions beyond repairs since 2007. In all fairness, G 7
nations are the cause for global ruins. Regulatory nexus or failures are
empirically established and codified now. They are in the public domain.
RBI
singularly has come in for unbiased praise and is 'talked about' or cited as
the merited example. Globally, wherever I visited and participated in
international conferences, and other meets or as part of business promotion or
academic related visits, good words of praise coming from the region's highest
quarters, were ringing as sweet melody to my ears as Ex-RBI man. But, I do hear
not comforting feedback from the captains of industry & commerce or the
unwary common public at large across the length and the breadth of this
sprawling nation that, despite technological advances and modernisation of
Indian banking, customer service is far from satisfactory in many respects.
They do say, RBI is sitting in the ivory tower and their supervisory
oversight is 'Global' at just Macro levels and totally out-dated. They neither
have the time, machinery or resources to look into nano events at retail
ordinary customer points. RBI has steadily over the decades, withdrawn itself
from micro inspections but graduated to Inspection more of very large branches
and corporate Office. Ordinary common public have nothing to do with large
branches and corporate office.
RBI
inspection reports still seem to reflect the much abused phrase, " leave much
scope for improvement", whatever worth it has, when taken to the
Members of the Supervisory Board. Frankly speaking, the eyes and ears of RBI
have to be sharply fine-tuned. CAMELS and GOATS are good carriage medium but modern
'Risky' environs under globalisation and the instant impacts of technologically
& digitally connected coupling and decoupling of Markets beset with
dangerous covert weaknesses, call for radical and more innovative departures.
Training
of human resources 'leaves great scope for improvement'. Routine pep up inputs
are just not enough to face massive tsunami like disasters. RBi needs to relook
inwardly at the highest levels on its oversight functions. Regulations are not
enough. Compliance and in right spirits in banks, are required to be dug out carefully
with eagle’s eyes. One major area of concern, Corporate Governance, especially
in private sector banks, which is highly opaque but critically talked about
within well-informed circles, has not been seemingly 'adequately addressed'.
Red signals are visible and aired in the public media and by whistle-blowers.
External interference apart and the lacking sharp supervisory tools
as also the right fearless attitudes to swift cheese from the chalk, appear to
be the hurdles to detect 'conflict of interest and nexus' syndromes. The tip of
the iceburg is visible but collapse may not be far off, if stringent steps in
supervisory frameworks are not addressed with focus & attention required
thereof.
Everyone knows the squares, angles, corners and invisible needles,.. !!
Camels
& Goats are also fodders for gullible & crooks..
chameaux
et les chèvres sont fourrage pour les crédules
I
have activated the sirens.. Is any one in the right quarters listening..
May be, but
the train has to be sighted.. Sometimes will..
With
Love, only Love and Love ever
German
‘Prof.Subramanian, the Global Consultant’ Subbu
Retd. RBI Senior Executive - (+91 9845809857)
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