1 responsible innovation and regulation in the financial sector institute for development &...
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Responsible Innovation and Regulation
in the Financial Sector
Institute for Development & Research in Banking Technology
Hyderabad
August 2, 2013
Dr. Duvvuri SubbaraoGovernor
Reserve Bank of India 1
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Impressive Performance by IDRBT
Last Five Years
•Evangelizing IT Strategy to Bank Directors
•Development of Common Standards for IT Banking
•Established Unique CISO forum
•Formidable reputation for the quality of its teaching
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My Topic Today
Responsible Innovation and Regulation
in the Financial Sector
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What is Responsible Regulation?
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Innovation and RegulationFive Questions
(i) In what ways are financial markets different from other markets?
(ii) What do these differences imply for responsible innovation and regulation in the financial sector?
(iii) Is financial innovation good or bad?
(iv) What is the Reserve Bank’s approach to responsible financial regulation?
(v) Does financial regulation have a role in promoting equity?
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Innovation and RegulationFirst Question
In what ways are financial markets different from other markets?
•They are not self correcting
• They are highly leveraged & interconnected
• They are procyclical
• They are reflexive6
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Innovation and RegulationSecond Question
What do these differences imply for
responsible innovation and regulation in the
financial sector?
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Innovation and Regulation
Third Question
Is financial innovation good or bad?
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Innovation and Regulation
Question: Is Financial Innovation Good or Bad?
Answer: Financial innovation is good only as long as it adds value to economic
growth and societal welfare
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Innovation and Regulation
Fourth Question
What is the Reserve Bank’s approach
to responsible financial regulation?
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Innovation and RegulationFourth Question
Reserve Bank’s approach to Regulation
has been to preserve financial stability,
promote consumer protection and
develop financial markets.
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Reserve Bank’s Approach to
Responsible Regulation
Proactive Macroprudential Policy
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Reserve Bank’s Approach to
Responsible Regulation
Basel III
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Reserve Bank’s Approach to
Responsible Regulation
New Bank Licenses
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Reserve Bank’s Approach to
Responsible Regulation
OTC Derivatives
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Reserve Bank’s Approach to
Responsible Regulation
Futures Market
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Reserve Bank’s Approach to
Responsible Regulation
Benchmark Rates
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Innovation and Regulation
Fifth Question
Does financial regulation have a
role in promoting equity?
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Innovation and RegulationFive Questions
(i) In what ways are financial markets different from other markets?
(ii) What do these differences imply for responsible innovation and regulation in the financial sector?
(iii) Is financial innovation good or bad?
(iv) What is the Reserve Bank’s approach to responsible financial regulation?
(v) Does financial regulation have a role in promoting equity?
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RBI Awarded the
Dufrenoy Prize in 2012
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Innovation and RegulationConclusion
•Regulation and Innovation must go hand in hand
•Regulation - Responsibility of RBI
•Innovation - Driving force for IDRBT & banks
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