ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Evolving International Supervisory Framework

At a time when, despite the flagship work done by the Basel Committee of Banking Supervision (BCBS), there is still limited information as to what constitutes international best practice and few internationally agreed standards, it remains a moot question whether sophistication in these standards could impair their universal application. The national supervisors continue to look upon the Basel Committee to set standards which will be universally relevant and take into account the differences in the stages of development of the banking systems and supervisory capabilities in the developing world. While the BCBS has walked this tightrope with elan till now, there is a greater need than ever before for a greater say of the non G-10 members in the setting of international standards in bank supervision.

Bank Supervisory Arrangements

The purpose of this paper is to examine the choice of location of prudential supervision of banks. Should central banks assume this role or should there be a unified regulator covering all financial institutions? With the growing concern among central banks about the need to maintain financial stability, can such problems be effectively tackled if regulation/ supervision is vested with the central banks? The evidence.

Bank Response to Capital Requirements

The increased emphasis on capital regulation has raised a number of interrelated questions. First, is focusing on capital an efficient way of regulating banks? Secondly, what is the best way to structure capital regulation? Thirdly, how do banks respond to different types of capital regulation? This paper focuses on the last two questions, examining bank responses and the costs associated with these responses to capital requirements. The discussion draws heavily on international experience and concludes with an attempt to bring to bear empirically these experiences in the Indian context.

Determinants of Net Interest Margin under Regulatory Requirements

Using data for the period 1995-96 to 1999-2000, this paper seeks to identify the factors influencing spreads of Scheduled Commercial Banks in India. Among the explanatory variables, we incorporate, in addition to the standard set of variables, regulatory requirement variables. Our analysis reveals that (i) size does not necessarily correlate with higher spread, and (ii) higher fee income enables banks to tolerate lower spreads. With regard to regulatory requirement variables, it is found that (i) capital plays an important role in affecting spreads of public sector banks, and (ii) non-performing assets is uniformly important across all bank groups in influencing spreads.
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