12th Meeting of the FSDC Sub-Committee at New Delhi: Set up a High Powered Inter Regulatory Committee to explore ways to comply with Basel-III capital norms

At the 12th  sub-committee meeting of the Financial Stability and Development Council (FSDC), headed by RBI Governor Raghuram Rajan, held at New Delhi, it was decided to set up a High Powered Inter Regulatory Committee to explore ways of enabling banks to meet these requirements.
Objective: To find ways for the banking sector to comply with Basel-III capital norms.
Discussions during the 12th Meeting of the FSDC Sub-Committee:

• The implementation of non-legislative recommendations of FSLRC and setting up of a repository for investors with a single view of all financial asset classes.
• The ways for setting up an effective resolution regime for the financial sector. Issues of greater harmonisation of regulations across sectors for similar activities were also taken up.
• The report of the working group on ‘Resolution Regimes’ in India, chaired by RBI Deputy Governor Anand Sinha and Economic Affairs Secretary Arvind Mayaram.

Listed below is the present structure of FSDC along with its Sub-committee and various Working Groups/Technical Groups constituted under the aegis of the Sub-committee:
1) Financial Stability and Development Council (FSDC):

• Apex-level body constituted by government of India
• Idea to constitute such a super regulatory body was first given by Raghuram Rajan Committee in 2008

Objective(s) of Financial Stability and Development Council (FSDC):

• Financial Stability
• Financial Sector Development
• Inter-Regulatory Coordination
• Financial Literacy
• Financial Inclusion
• Macro prudential supervision of the economy including the functioning of large financial conglomerates
• Coordinating India’s international interface with financial sector bodies like the Financial Action Task Force (FATF), Financial Stability Board (FSB)and any such body as may be decided by the Finance Minister from time to time.

Composition of Financial Stability and Development Council (FSDC):

• Chairperson: The Union Finance Minister of India

Other Members:

• Governor Reserve Bank of India (RBl),
• Finance Secretary and/ or Secretary, Department of Economic Affairs (DEA),
• Secretary, Department of Financial Services (DFS),
• Chief Economic Advisor, Ministry of Finance,
• Chairman, Securities and Exchange Board of India (SEBI),
• Chairman, Insurance Regulatory and Development Authority (IRDA),
• Chairman Pension Fund Regulatory and Development Authority (PFRDA),
• Joint Secretary (Capital Markets), DEA, will be the Secretary of the Council,

**The Chairperson may invite any person whose presence is deemed necessary for any of its meeting(s).
2) Financial Stability and Development Council (FSDC) Sub-Committee:

• The FSDC Sub-committee has also been set up under the chairmanship of Governor, RBI. It meets more often than the full Council. All the members of the FSDC are also the members of the Sub-committee. Additionally, all four Deputy Governors of the RBI are also members of the Sub Committee.
• Executive Director, RBI (in charge of financial Stability) is the Member Secretary, while the Financial Stability Unit (FSU) of RBI is the Secretariat for the Sub-committee. 

3) Working Groups/Technical Groups under FSDC Sub-Committee:

• 3.1) Inter regulatory technical group (IR-TG): For inter-regulatory coordination among the financial sector regulators. The Group is headed by ED in charge of Financial Stability, RBI and members being ED/CGM level officers of the other regulators.
• 3.2) Technical Group on financial inclusion and financial literacy: Chaired by DG, RBI in charge of financial stability and has representatives from all regulators (at the level of ED/CGM) as well as from DEA and DFS (at the level of Joint Secretary).
• 3.3) Inter regulatory forum for monitoring financial conglomerates (IRF-FC): Headed by the Deputy Governor, RBI (in-Charge of the Department of Banking Supervision) and other Members are senior representatives of all the sectoral regulators at the level of Executive Directors (RBI, SEBI, IRDA and PFRDA).
• 3.4) Early Warning Group: To coordinate the response of GOI/Regulators in the time of a crisis situation. It is chaired by DG, RBI in-charge of Financial Markets Department. It has Joint Secretary level representative from DEA & DFS as members. It is represented by Member/ED level officers from financial sector regulators.
• 3.5) Working Group on resolution regime for financial institutions: To examine the existing resolution regime/ framework for the entire financial sector as a whole and identify the current gaps in the national resolution regime/ framework vis-à-vis the FSB Key Attributes. With this background, the Group would recommend changes in the legal framework to facilitate the required resolution regime including cross border resolution. Was constituted in January 2013 under the Co-Chairmanship of Shri Anand Sinha, DG, RBI, and Secretary (DEA). The Financial sector regulators at the level of Executive Director/General Manager/Joint Director/Principal Legal Adviser are members of this group.  

4) Macro Financial and Monitoring Group (MFMG): Chaired the Chief Economic Adviser. It has representation from all the Departments of the Ministry of Finance. It aims at keeping track of the macroeconomic and financial developments, identifying vulnerabilities, and providing early warning signals.

Month: Current Affairs - March, 2014