Seminar on ‘Effective Bank Supervision: A Necessity More than Regulation’
Date: 29th August 09
Speaker – Mr. Manoj Kumar Poddar, CFA
Manager, Reserve Bank of India
Venue: Mahatma Aswini Datta Memorial Committee, Kolkata
Time: 6:00 pm
The CFA Council is organizing an evening seminar on the topic “Effective Bank Supervision: A Necessity More than Regulation’’.
Banks are deposit-taking institutions. Banking is defined in Section 5(b) of BR Act 1949, as "accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise"
Banks are the most important part of the payment and settlement system. They are also conduits of effective monetary policy mechanism. Since banks are entrusted with public money, supervision of them becomes a necessity rather than a regulatory requirement. Banks are the most important financial intermediaries and they deploy the savers’ money into productive uses by lending and investing. However, inappropriate or indiscriminate lending and investing may lend them in trouble. The collapse of a bank has a very different and often much deeper impact than the firms belonging to other sectors of the economy. While the bankruptcy of a company normally benefits other companies in the same industry by giving them an opportunity to take over its customer base, the collapse of a bank can seriously damage its competitors. Moreover, the reaction of a wider public often unable to differentiate between ‘good’ and ‘bad’ banks to a major bank collapse or banking scandal can lead to a ‘bank run’. Massive withdrawal of money from accounts by depositors may lead to knock-on effects on both healthy and unhealthy banks. We have seen such phenomenon in the case of ‘Northern Rock’ in UK.
All things considered, the collapse of a bank can have catastrophic consequences for an entire banking industry and even a country’s economic performance as a whole. Moreover, the credit system could come under threat in such a situation, leading to potentially crippling financial and ultimately social turmoil.
In view of the foregoing, this is evident that bank supervision is not only an economic but also a social necessity. My presentation will cover this topic in a framework given below:
I. Necessity of bank supervision.
II. Major bank failures.
III. Challenges of bank supervision.
IV. Bank supervision in India.
V. Overview of a commercial bank.
For further information, on this seminar please contact
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